Mid Day Outlook: April 3, 2018

Scott GreenDaily Market Report

Mid-Morning Look
Tuesday, April 3, 18
Equities bouncing back after yesterday broad based decline that saw the S&P 500 snap its streak of 442-consecutive days above its 200 day moving average (technical level), while the tech heavy Nasdaq dropped over 3% as pressure in large cap-tech stocks such as AMZN, TSLA, FB, NFLX. China’s previously announced retaliatory measures on American imports also had an impact. Markets are once again volatile, trading higher but well off best levels, with the S&P cash fighting to get back above its 200-day resistance of 2,590, as tech shares led the recovery and automakers advanced on better-than-expected March sales. The Nasdaq Composite erased gains of as much as 63 points to turn negative (high of day 6,933), led lower by the large cap Internet names again, but has since moved higher. Auto stocks leading markets early, after healthy March US auto sales data beats from GM, F, FCAU and HMC thus far, while TSLA provides upbeat production update, lifting the recently battered shares. After trade war fears, tech sell-off the last week or so, attention will turn to jobs data with monthly ADP private payroll data tomorrow, jobless claims Thursday and the Nonfarm Payroll report (and wages) Friday. Treasuries are lower, sending yields higher while the dollar rebounds.
Treasuries, Currencies and Commodities
·      In currency markets, after trading mixed yesterday vs. major counterparts, the U.S. dollar gains early, with the dollar index (DXY) up about 0.2% at 90.20, leading vs. the euro and, yen, while little changed vs. the Pound; the dollar falls over -0.6% against the Canadian dollar as fears of trade wars diminished after reports that the Trump administration is pushing for a preliminary Nafta deal to announce at a summit in Peru next week (Mexican peso also gained). In crypto currency, Bitcoin prices rise more than 5% topping the $7,300 level
·      Commodity prices; Precious metals slip as gold prices give back part of yesterday’s strong gains after investors rotated into defensive asset classes on a broad stock pullback; Energy futures getting a little lift after prices fell over 3% yesterday, biggest 1-day decline in 7-weeks
·      Treasury market’s slide as yields rebound, with the 10-yr yield topping the 2.77% level after lows around 2.72% late yesterday; the Treasury bond roll comes as stocks rebound following yesterday’s sharp market decline; no major economic data today moving bond markets, but attention turns to jobs data this week (ADP tomorrow and Nonfarm payroll Friday)
Sector Movers Today
·      Auto sector; monthly auto sales data released today: 1) GM March US sales rose 15.7% vs. est. 5.1% after saying it will cease monthly sales reports/Chevy sales jumped 15.6%; GMC sales rose 11.4%; Buick sales soared 28%; Cadillac sales up 12.7%; 2) Ford (F) March U.S. Light-vehicles sales rose 3.46% vs. an estimated gain of 0.8% as truck sales up 6.7%, SUV sales up 7.5%, car sales down 8.1%; 3) FCAU March US auto sales rose 13.6% vs. estimate up 1.9%; 4) HMC March US sales rose 3.8% vs. est. 2.1%
·      Oil services; SLB was upgraded to buy at SunTrust saying weakness has created an attractive entry point and company is typically one of the best stocks to own in down markets” to maintain exposure to oil-field service; Piper upgraded BHGE to Overweight driven by a combination of relative valuation, balance sheet strength, capital light business model, and FCF generation, while the firm downgraded WFT to neutral driven by a prodigiously heavy balance sheet (~$7B in net debt, ~$2B in equity market cap, ~$580M in annualized interest expense) and the diminishing likelihood of a decisively satisfying resolution to its financial inflexibility in the foreseeable future
·      Staffing sector; Barclay’s said they think RHI’s outperformance over MAN YTD (+3.4% vs. -9.8%; SPX -3.5%) will continue and upgraded RHI to outperform given its accelerating revenue growth trajectory and leverage to an improving US economy while cut MAN to underweight given a likely deceleration in growth rates, uncertainty surrounding CICE changes in France and uninspiring margin targets that might take longer to achieve
·      Medical Devices and Equipment; ANGO upgraded to Outperform at Raymond James citing attractive valuation, inflection in gross margins, and view that management should engage in more active portfolio management; EXAS was upgraded to buy at BTIG noting shares have fallen 35% which provides an attractive entry point
·      E&P sector; Seaport Global said the sector mismatch between rebounding operational performance and sliding equity performance seen as more of an opportunity vs. a threat as the firm upgraded OAS to buy while downgraded PE and REN to neutral citing limited NAV upside and cut RRC to neutral citing lower debt-adjusted production growth outlook. Seaport said top 5 large-cap picks: COG, PXD, FANG, MRO, DVN
·      ALNA +11%; up for a 12th straight day – yesterday Roth Capital initiated buy and $61 tgt
·      FLXN +12%; after Wells Fargo said they got a “big win” with its Zilretta billing code from CMS, which will become effective July 1
·      GM +2%; on stronger than expected March US auto sales data (15.7% vs. 5.1% est.)
·      LSTR +1%; boosted its Q1 revenue outlook to $1.03B-$1.05B. above consensus of $963M citing continued strength in truckload volume and pricing
·      MGI +7%; announced the launch of Walmart2World, a new money transfer service that allows customers to send money from U.S. WMT stores to MoneyGram locations in 200 countries
·      NVDA +1%; added to Bank America US1 list saying the company is levered to growth markets in artificial intelligence, gaming, virtual reality and autonomous cars
·      UNH +2%; managed care stocks outperform; Jefferies noted CMS 2019 Medicare Advantage Final Notice indicates a rate increase of 6.5%, which is better than the February Advance Notice of 4.9% and an acceleration from 3% in 2018 (+ for MA-exposed MCOs (HUM, WCG, UNH, AET)
·      CELG -2%; after announcing that COO Scott Smith is leaving the company
·      ISCA -4%; dropped after mixed Q1 results as EPS beat but revenue
·      LFIN -28%; as the company last night disclosed an SEC probe, while also reporting material weaknesses in financial controls
·      RIGL -21%; said Phase II proof-of-concept study assessing fostamatinib, branded as Tavalisse, in patients with IgA nephropathy failed to achieve the primary endpoint
·      SIG -3%; maintained its FY outlook but posted well-below consensus 1Q impacted by previously closed stores
·      SWCH -12%; reported a wider-than-expected Q4 loss, while revenue was in line, while one analyst noted cap-ex was higher in Q4
·      VIAB -2%; CBS plans to make an all-stock offer for VIAB that values the U.S. media company below its current market valuation, Reuters reported late Monday https://goo.gl/3HUDjr
·      WU -2%; after MGI launches service with WMT


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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