Mid Day Outlook: March 28, 2018

Scott GreenDaily Market Report

Mid-Morning Look
Wednesday, March 28, 18
  
Equities can’t hold early gains, as another downdraft in technology stocks, specifically the Internet space (FB, GOOGL, AMZN, and NFLX) and semiconductors (NVDA, INTC) creating early panic, and dragging down the broader S&P 500 and Dow Industrial Averages. The volatility, specifically in the NASDAQ continue, as the Composite posts a sharp bounce off the lows, rising more than 100-points off the lows early (6,925) to highs (7,027) before reversing again to fresh lows just above the 6,900 level (down around -1.3%). Shares of technology companies were under increased pressure on Tuesday after reports that the Trump administration is considering measures against Chinese investments in U.S. technologies. The comments, pared with negative stories on FB (data leak), NVDA (suspending self-driving car tests), TWTR (short call Citron) and TSLA (NTSB investigation after crash) sent markets plunging. Add AMZN to the mix today, falling after Axios reported President Trump is obsessed about going after Amazon, has those shares in a tailspin (though lifting retailers and mall REITs). The weakness in tech is overshadowing a stronger than expected Q4 GDP reading and possible easing tensions w/China. Coming into today, the stock market is on track to post big monthly losses with the Dow down 4.7% in March, and it is off 3.5% so far this year. The S&P is down 3.7% so far this month, while the NASDAQ is down 3.6% in March (those numbers just got worse!)
 
Treasuries, Currencies and Commodities
·      In currency markets, the dollar rebounds for a second straight session, as the dollar index (DXY) rises about 0.5% to 89.80 (off recent 5-week lows) after a stronger than expected GDP reading for Q4, rising 2.9% vs. est. 2.7% growth; the euro falls to 1.235 (-0.45%)
·      Precious metals falling for a 2nd day (after having its 4-day win streak snapped yesterday) as the dollar index (DXY) surges for a second session (after falling 4-straight recently); gold prices are recently falling from 5-week highs on global trade fears
·      Energy futures lower, but solid bounce after inventory data; WTI crude $64.50 level down around 80c; Inventory data: overnight, the API reported that U.S. crude supplies rose by 5.3M barrels for the week ended March 23, showed a drop of -5.8M barrels in gasoline stockpiles, while inventories of distillates shed -2.2M barrels last night. This morning, the EIA said weekly crude inventories rose 1.643M barrels vs. est. for build of 850K (Cushing build of 1.8M barrels), while gasoline stockpiles fell -3.4M vs. est. -2.37M and distillates were in-line, down -2.0M barrels
·      Treasury markets add to recent gains despite better GDP reading today, as the recent volatility in stocks, with big downdrafts over the last 2-weeks on tech fears as well as global trade war concerns with China, trump the continued rising rate environment; the 10-year yields still weak – trading down slightly around 2.76%…well off its last month highs of above 2.95%
 
Economic Data
·      Growth for the U.S. rises, as Q4 GDP was boosted to 2.9% from 2.5% second estimate (and above estimates of 2.7%, reflecting the biggest increase in consumer spending in three years and higher investment in business inventories (GDP rose 3.2% in prior quarter and 3.1% in Q2). Personal consumption rose 4.0% in 4Q after rising 2.2% prior quarter, while GDP price index rose 2.3% in 4Q after rising 2.1% prior quarter; core PCE q/q rose 1.9% in 4Q after rising 1.3% prior quarter
·      Advanced Goods trade deficit for February widened to (-$75.4B) from (-$75.3B) and compared to est. (-$74.4B); report on wholesale inventories found a 1.1% increase in February while advanced retail inventories rose 0.4%; Imports rose 1.4% in Feb. to $211.899B and exports rose 2.2% in Feb.
·      Pending home sales for February rise 3.1% MoM vs. est. up 2%; Northeast up 10.3%, Midwest up 0.7%, South up 3%, and West up 0.4%; Unadjusted pending homes fell 4.4% YoY after falling 1.9% y/y in January
   
Sector Movers Today
·      Semiconductors; Philly semi index moves to lows, as the SOX falls nearly 2% to around the 1,300 level before paring losses; group already pressured by NVDAon suspending its self-driving car testing…this morning AAPL suppliers falling after few analysts take down iPhone estimates (Goldman) and Craig Hallum said believes Apple orders deteriorated late in Q1 and are likely coming in below what companies had expected…notes top suppliers with the most exposure to Apple include CRUS, QRVO, SWKS, SYNA and KN under coverage
·      Internet; AMZN shares fall early, dropping below its 50-day moving average support, after reports President Trump is obsessed about going after Amazon, according to Axios https://goo.gl/qCUKz9 ; reports yesterday that the Trump administration is considering measures against Chinese investments in U.S. technologies really weighing as well on the high-beta sector, along with the privacy issues after FB data leak last week (GOOGL, NFLX, TWTR, BIDU active); FBwill delay the unveiling of its upcoming smart speaker with a digital assistant, Bloomberg News reported late Tuesday; FB also revamped its privacy settings menu today
·      Retailers; LULU reported stronger-than-expected Q4 EPS, beating by 6c as comp growth of 11% beat the 6-7% estimate, largely driven by an impressive acceleration in e-commerce (+42%), with store comps (+1%) also accelerating on top of its raised 4Q17 EPS outlook; retailers in general (M, KSS, JCP, URBN, TGT) or “brick and mortar” names benefit from AMZN weakness following an Axios report that President Trump is setting his sights on nemesis Jeff Bezos’s company (mall REITs SPG, MAC, KIM, REG also benefitting)
·      Auto sector; TSLA weak again after falling 8.2% yesterday as questions swirl about what caused a crash involving a Model X crossover in California on Friday, an accident that killed the driver; BMW AG and Daimler AG have agreed to combine their mobility-services business units, which include car sharing, ride hailing and other new services, in a new joint venture, they said, as both will own 50% in the venture
 
Stock GAINERS
·      BB ; posted record quarterly software revenue of $218M, while total revs of $239M topped the $215.5M estimate. While earnings also beat
·      LULU +10%; reported stronger-than-expected Q4 EPS, beating by 6c as comp growth of 11% beat the 6-7% estimate, largely driven by an impressive acceleration in e-commerce (+42%), with store comps (+1%) also accelerating
·      PLT +3%; agreed to buy privately held communication company Polycom in a cash and stock deal valued at $2.0B https://goo.gl/2SXKdP
·      RH +24%; as EPS handily topped consensus as stronger GM offset a modest revenue shortfall, while guidance was mixed
·      RSPP +15%; to be acquired by CXO for an equity value of about $8B in an all-stock deal, with RSPP holders to get 0.320 of CXO shares valued at $50.24 per share, a 29% premium to yesterday close https://goo.gl/nFva61
·      SHPG +15%; confirms that it has NOT received an approach from Takeda Pharmaceuticals; shares jumped overnight on reports Takeda said that it is considering making an offer for Shire and the proposal is at a “preliminary and exploratory” stage https://goo.gl/FgKSDu
·      SPG +3%; as Mall Reits benefit from AMZN weakness (see below)
 
Stock LAGGARDS
·      AMZN -6%; after report President Trump is “obsessed” about going after Amazon, a source said, according to Axios https://goo.gl/qCUKz9
·      ATVI -1%; weakness continues, falling to lows around 200-day MA support at $64.90 per barrel (increased competition from TTWO’s Fortnite)
·      CXO -8%; after agrees to acquire RSPP for about $8B in stocks (more above)
·      EDGE -90%; after an independent data monitoring committee recommended a phase 3 study stopped because data showing the trial had a “low probability” of meeting its primary endpoint
·      PTCT -12%; announces offering of 4M shares of common stock
·      SONC ; reported Q2 results marked by disappointing comps (-2.9% vs +0.5% Street), while EPS came in above estimates aided by a favorable rate
·      TSLA -7%; after falling 8.2% yesterday as questions swirl about what caused a crash involving a Model X crossover in California on Friday, an accident that killed the driver
 
Syndicate
·      At Home Group (HOME) 6M share Secondary priced at $30.00
·      Bilibili (BILI) prices 42M ADS IPO at $11.50 per ADS
·      Dominion (D) 20M share Spot Secondary priced at $67.85
·      General Mills (GIS) 22.7M share Secondary priced at $44.00
·      Homology Medicines, Inc. (FIXX) priced 9M shares IPO at $16.00 per share
·      Invitae (NVTA) 7.1M share Secondary priced at $4.50
·      MacroGenics (MGNX) 4.5M share Secondary priced at $21.25
·      OneSmart Education (ONE) 16.3M share IPO priced at $11.00
·      OP Bancorp (OPBK) 2M share IPO priced at $11.00

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Market commentary provided by Hammerstone Markets, a division The Hammerstone Group, a firm separate from and not affiliated with Regal Securities L.P.  Regal Securities L.P. has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.
 

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