U.S. equities rebounding from Friday’s plunge, as the Trump Administration played down the threat of a trade war with China that sent investors searching for safer assets last week. Bonds reverse lower as yields climb (10-year above 2.81%), while investors put the weaker jobs report from Friday to the back-burner and turn their attention to the CPI report and FOMC Minutes, as both are expected Wednesday. Oil prices edge up and gold slips as the dollar strengthens slightly. Russian markets took a hit on Monday in the aftermath of the U.S. sanctions imposed on Russia last Friday. Busy week of potentially market moving catalysts including: the China Boao Forum underway (President Xi speaks tomorrow), President Donald Trump, Mexican President Enrique Pena Nieto and Canada Prime Minister Justin Trudeau meet at the Summit of the Americas in Peru at the end of the week, FB’s Zuckerberg before Congress, and the start of earnings season with financials out later this week.
Treasuries, Currencies and Commodities
· In currency markets, the euro rises to best levels f day, up over 0.35% at 1.2325 as the ECB annual report underscores the central bank’s message of strong economic expansion expected to continue in 2018 and, despite uncertainties, policy makers are confident that inflation will converge toward medium-term goals; yen little changed vs. greenback, while the Russian ruble tanks following sanctions against them last Friday by the U.S. The Canadian dollar notches 6-week high vs. US dollar at 1.2728
· Commodity prices: gold prices little changed, though energy futures advance, with WTI crude up more than 2% after Friday’s sharp, 2.3% fall that capped its worst week in two months and left prices at a nearly three-week low. Oil prices rising in sympathy with U.S. stocks
· Treasury market’s slip as yields rebound with the 10-year rising around 3 bps as it retakes the 2.80% level ahead of a catalyst rich week for bonds. We get the consumer-price index (CPI) Wednesday, and the minutes of the Federal Reserve’s March meeting as well (which comes after the softer jobs payroll report last Friday)
Sector Movers Today
· Large Cap banks rise ahead of a potentially busy week, with FOMC minutes out mid-week and the start of earnings for banks Friday (JPM, C, WFC); CMAupgraded to outperform at Wedbush. Brokers and investment managers; bank America said increasing volatility, risk of trade wars, rising geopolitical tensions, and high valuations are all raising red flags for investment managers as they downgraded BEN and JHG to neutral and underperform respectively, while upgraded AMTD to buy amid a fast moving market, deregulation, and higher interest rates
· Aerospace & Defense; Defense stocks gained on market expectations a military strike by U.S. forces against Syrian targets remains a likely response (GD, BA, LMT, NOC); AAL ordered 47 BA 787 Dreamliners for long-range flying/AAL canceled an order for 22 of Airbus’s twin-aisle A350 jets/Boeing deal is worth a total of $12.3 billion before customary discounts
· Metals & Mining; aluminum prices rise (CENX and AA) as investors weighed the impact of U.S. sanctions on Rusal, the world’s biggest supplier of the metal outside of China and a major producer of alumina/on expectations aluminum market may tighten quickly due to possible tariffs on Chinese imports and U.S. sanction on Rusal; SocGen with a few changes in space, upgrading BHP to buy keeps GLNCY as top pick and downgraded Anglo on price
· MLP sector; KMI threatened on Sunday to scrap its proposed expansion of the Trans Mountain pipeline if Canada’s provincial and federal governments cannot resolve their differences over the project by May 31; Seaport Global upgraded EQM/EQGP to buy and downgraded WES/WGP to Neutral in front of needed restructuring and downgrade AM/AMGP on strategy concerns. SunTrust upgraded both PAA/PAGP to buy amid view there is room left for further outperformance despite the move last week.
· AA +5%; and CENX also surges on expectations aluminum market may tighten quickly due to possible tariffs on Chinese imports and U.S. sanction on Rusal
· APOP +13%; said it successfully completed proof-of-concept testing of ApoTainer, a new scalable method for manufacturing stem cells
· AVXS +78%; to be acquired by NVS for $8.7 billion, saying its holders will get $218 for each share, an 88% premium https://on.mktw.net/2ICKtRw
· HEAR +68%; Q1 pre-announced revenues of $39.5M-$40.5M and adjusted EBTIDA of $3.5-$4.5M above views, likely benefiting from demand for its headsets driven by Fortnite gameplay
· MRK +3%; blockbuster cancer drug, Keytruda, met the main study goal of helping previously untreated lung cancer patients live longer
· NFLX +3%; amid broad strength in tech, Internet names as sector rallies
· RGNX +28%; rises in sympathy with AVXS takeout (partners with AVNX on gene delivery platform)
· ACAD -20%; CNN report noted “several hundred adverse event reports” that questioned whether the company’s lead drug, Nuplazid, played a role in the deaths of already sick and elderly patients
· BMY -3%; declined in reaction to positive MRK trial news on Keytruda
· MNLO -70%; after announced that Serlopitant missed the primary endpoint and a key secondary endpoint for the phase 2 pruritus associated with atopic dermatitis (AD) study
· MTG -15%; said it is cutting borrower-paid premiums by 11% (RDN, ESNT fall as well)
· NLNK -3%; extends losses from Friday when it fell over 42% after announced a decision to review its clinical programs after disappointing ECHO-301 study in melanoma from INCY
· YNDX -8%; amid weakness in Russian related stocks as Russian markets fell amid concerns over U.S. sanctions (QIWI, VEON also weak)
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.