Monday, November 26, 2018
Equities start the week off with a strong start, helping the S&P 500 rebound after falling into correction territory (10% drop from recent highs) late last week, with all 11 S&P sectors kicking off the week in positive territory. Expected developments this week in Europe helping lift sentiment for those markets after Parliament is said to vote on Brexit deal in week of December 10, while ECB President Draghi said the ECB still on track to halt QE scheme in December. Meanwhile, market hopes are high into the G20 meeting where President Trump and Chinese leader XI are expected to meet and talk trade. Gains are broad based early as energy prices rebound with the bounce in oil prices off more than 1-year lows, while retailers steady after solid online weekend sales. Tech also a nice recovery with semi’s, software and Internet names recovering from their recent selling pressure. Treasury markets slip as investors rotate back into riskier assets to start the week, with the 10-yr yield up 3 bps to 3.07%. Between trade (with China), rate hike increase fears from the Fed (meeting in 2-weeks), ongoing concerns in Europe (Brexit and Italy debt fears), and markets looking to recover after breaking down the last month, there is plenty for investors to focus on heading into the final month of trading for 2018. With today’s early surge, the Nasdaq Comp moves back above 7,000 and the Russell 200 back above 1,500.
Treasuries, Currencies and Commodities
· In currency markets, the U.S. dollar starts the week lower, but has since pared those declines with the dollar index (DXY) down slightly after rising about 0.4% last week; the euro and pound with early gains ahead of key developments this/next week while the greenback rises vs. the Japanese yen; the Canadian dollar recovers from multi-month lows as oil rebounds. Bitcoin fell as low as $3,475 yesterday before recovering some of those losses to trade at $3,700 (down -12%)
· Commodity prices mostly higher as the dollar slips from last week highs; precious metals with modest gains above the $1,220 an ounce market, while oil rebounds after last week’s plunge that saw prices drop as much as 7% late last week. WTI crude rises back near $52 per barrel after earlier testing $50 to the downside.
Sector Movers Today
· Biotech movers; ZFGN shares drop as the FDA placed a clinical hold on its investigational new drug application (IND) for its first U.S. clinical trial of its type 2 diabetes treatment, citing the possibility of cardiovascular safety risk; gene editing stocks (CRSP, NTLA, EDIT) that utilize Crispr technology active after a Chinese researcher claimed to have produced the world’s first genetically-edited babies using the technology
· Pharma movers; LLY was downgraded to neutral at Citigroup saying 40% outperformance versus the sector over the last 10 months, the stock is now trading close to their NPV; AZN said the FDA has granted orphan drug destination status to Fasenra, which is aimed at treating EGPA, a rare autoimmune disease;NVS was upgraded to outperform at Cowen; in managed care, the AET/CVS deal should be completed in the next two days as NY Insurance Dept approves deal
· Retailers; Online sales rose more than 23%, crossing $6 billion on Black Friday, according to data from Adobe Analytics, which tracks transactions at 80 of the top 100 U.S. retailers. On Thanksgiving, it estimated sales grew 28% to $3.7 billion. Preliminary data from analytics firm RetailNext showed net sales at brick-and-mortar stores fell 4%-7% over the two days, while traffic fell 5%-9%; AEO was upgraded to buy at Deutsche Bank as they expect the apparel retailer’s third quarter results to beat guidance and satisfy elevated expectations; GME was upgraded to neutral at Bank America as the proposed sale of the spring mobile business gives the retailer a significant amount of new capital to deploy towards buybacks
· BOLD +7%; after being initiated overweight and $35 tgt at JPMorgan saying risk/reward is attractive after the recent pullback
· FCAU +4%; after Bloomberg reported the auto maker is considering options for its robotics arm Comau, including a potential sale at a value of 1.5B-2B euros ($1.7B-$2.3B USD)
· GME +6%; upgraded to neutral at Bank America as the proposed sale of the spring mobile business gives the retailer a significant amount of new capital to deploy towards buybacks
· JKS +15%; reacts favorably to quarterly earnings results this morning
· NVDA +2%; rebound in semiconductors stocks, while Credit Suisse initiated with an outperform rating as see the reset and ~50% decline in shares an extremely compelling entry point
· SCG +4%; after agreeing to settle a class action lawsuit tied to a failed nuclear power project if its $7.9B merger with Dominion Energy (D) goes through
· WYNN +3%; after Bernstein boosted its Macau November gross gaming revenue (GGR) estimate to grow 7%-8% y/y to 24.5b-25b patacas vs prior view of up 2%-4% to 23.5b-24b patacas
· CAG -1%; general weakness in several food related stocks (CPB, CAG, SJM, GIS) as investors rotate out of defensive Staples stocks (tobacco names (PM, MO)also weaker
· CPB -1%; and Third Point LLC are close to settling a bitter proxy contest by adding two of the hedge fund’s nominees to the U.S. food company’s board and giving the activist investor a say in selecting Campbell’s next CEO, Reuters reported
· PLT -5%; after LOGI ended discussions to acquire the U.S. maker of Bluetooth earpieces and gaming headsets
· ZFGN -45%; FDA placed a clinical hold on its investigational new drug application (IND) for its first U.S. clinical trial of its type 2 diabetes treatment, citing the possibility of cardiovascular safety risk
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.