Thursday, December 27, 2018
Equity Market Recap
· Stock market volatility indescribable as the Dow Industrial Average rose as much as 1.1% late session (or over 250-points) in a massive surge after trading down 2.7% or off 611 points, while the S&P 500 turned positive after falling as much as 2.8%. One could chalk it up to light volumes, or possibly month/quarter/year-end rebalancing, but wasn’t a result of any one specific market related headline late day with the Fed and President Trump relatively quiet today. The Nasdaq Composite also rebounded more than 240 points off its session lows of 6,336.96. The late day spike comes just a day after the index booked the sharpest single-session point rally in its history. There still remain several market concerns such as anxiety over global growth, trade tensions between the U.S. and China and uncertainty out of Washington related to the government shutdown (currently into a 6th day of shutdowns). The late day rebound was certainly a welcome sight for market investors that have seen confidence shaken over the last few weeks. Earlier, the Stoxx Europe 600 Index extended losses to 1.7%, the lowest level since November 2016, after reversing opening gains of 0.5%. Oil prices slipped over 3%, failing to benefit from the late day stock rally, while gold ended at 6-month highs and Treasury prices erasing gains late.
· Weekly Jobless Claims fell 1K to 216K, in-line with estimates while the 4-week moving average fell 4,750 to 218K in the latest week; prior week claims revised up to 217K from 214K; Continuing claims fell 4k to 1.701m in the week ending Dec. 15
· Consumer confidence in December fell to 128.1 from 136.4 in prior month and was also below the 133.5 estimate; the present situation confidence fell to 171.6 vs 172.7 last month while the consumer confidence expectations fell to 99.1 vs 112.3 last month
· The 30-Yr fixed mortgage rate fell to 4.55% from 4.62%, Freddie Mac said; the 15-year rate avg 4.01%, down from 4.07% a week earlier
· Oil prices end lower, as WTI crude slipped -3.5% to finish at $44.61 per barrel, just a day after the biggest one-day rally for futures in more than two years. WTI crude has ended lower four of the past five sessions and seven of the past nine with today’s drop coming alongside weakness in stocks early on (before the late day rally pared losses).
· February gold finishes higher by over $8, or 0.6% to $1,281.10 an ounce, rising to 6-month highs and rising a 3rd straight day as the dollar eased and U.S. stocks retreated. Gold ended Thursday’s session at around its highest since late June, following the dollar dip which makes dollar-denominated assets (such as gold) more attractive to buyers using other monetary units. In other metals trade, March silver closed up 18.7c, or 1.2%, at $15.310 an ounce. March copper fell 3.2c, or 1.2%, to settle at $2.6680 a pound.
Currencies & Treasuries
· The U.S. dollar was widely lower vs. rival currencies, falling vs. the yen and euro (though pared losses late in the day), though gained vs. the Canadian dollar following another decline in oil prices. The euro lifted as high as 1.1454 vs. the dollar up shy of 1% and well off yesterday’s nine-day low at 1.1343. Disappointing data out of China (industrial profits) led to some currency weakness. Meanwhile, Treasury prices advanced, sending yields lower amid the risk aversion, with the 10-yr yield hitting lows around 2.72% before paring losses as stocks bounced late session. The U.S. Treasury sold $32B in 7-year notes at a yield of 2.68%, below the 2.688% when issued prior, with the bid-to-cover (demand) at 2.46 vs. 2.55 last auction and indirect bidders awarded 64.7% on the auction and 14.6% to directs. After the late day market rally, Treasury yield pared losses with the 10-yr back near the 2.77% level.
Sector News Breakdown
· Retail paced the gains yesterday with a little give back today: Optimism about retail spending yesterday, helped by Amazon which reported a record-breaking holiday season lifted the sector yesterday. MasterCard SpendingPulse reported that US holiday retail sales (Nov 1st through Dec 24th) grew 5.1% YoY to over $850B, the strongest in six years, including a 19.1% YoY increase in online sales.
· Energy stocks dropped with broader stock markets and riskier assets as oil prices gave up yesterday’s one day bounce WTI prices hit an 18-month low at $42.36 on Christmas Eve, which completed a near 45% decline from the trend high seen in early October. At current levels, WTI benchmark prices are down 9.5% on the month, and by 24.7% on the year-to-date
· ESV shares fell after Piper Jaffray suggests RDC shareholders might be less likely to approve the deal after the recent selloff
· SLCA falls over 10% as frac sand names lead decline in the energy sector; HCLP, EMES also lower
· Few headlines: financials dropped near the lows early afternoon as stocks failed to bounce a second day and as yields once again moved lower: C, WFC, JPM among decliners
· JPM agreed to pay $135 million to settle claims that it improperly handled thousands of transactions involving foreign companies’ shares (ADR’s) that weren’t in the bank’s custody
· Visa Inc. (V) is paying 198M pounds ($250.6M) to buy Earthport Plc, a British firm that facilitates international transactions for banks and businesses
· AXSM advanced after announcing in a year-end update that Phase 3 results of AXS-05 in treatment resistant depression are on track for 1Q19.
· BTAI rises as its investigational drug BXCL501, for the treatment of acute agitation – has been granted Fast Track Designation by the FDA
· FMI reports Japan’s Ministry of Health, Labour and Welfare has approved the FoundationOne CDx genetic profiling test for all solid tumors and as a broad companion diagnostic for individuals living with advanced cancer
· HZNP received FDA approval of a supplemental new drug application for Ravicti oral liquid to include infants under two months of age with urea cycle disorder.
· KALA two positive analyst comments (HC Wainwright and Wedbush) after saying its new drug application for KPI-121 0.25% has been accepted for review by the FDA, with a Pdufa target date in August; HC Wainwright maintains buy rating and $15 price target
Industrials & Materials
· Defense stocks holding up well in the mkt downdraft with RTN, LMT, NOC were mostly higher; in industrials, WATT shares jumped after announcing its first customer product approval from the FCC/new wirelessly charged personal sound amplification products from Delight are now certified to be sold in the U.S. and expected to be available in 1Q
· Transports fell over 2%, failing to hold back above the 9,000 level earlier (highs 9,013.63) – but off the 12/24 lows 8,636.79 – all 20-components in the Transport index were lower led by declines in CAR and MATX as well as airlines UAL, AAL, JBLU and ALK
Technology, Media & Telecom
· Donald Trump is considering an executive order in the New Year effectively barring U.S. companies from using Huawei or ZTE equipment, Reuters reported. China responded by saying a “certain country” should produce facts to justify cybersecurity concerns
· Verizon Fios, a division of VZ said its TV customers could lose access to ESPN, the Disney Channel and local ABC stations if a new deal can’t be reached with DIS before the end of the year. Fios said Disney has proposed that “Verizon pay hundreds of millions of dollars more for its programming, despite the fact that many of its key networks show declining viewership.”
· Semiconductors; NVDA and AMD estimates lowered at RBC Capital on more cautious gaming view (cut NVDA to $200 from $230) to reflect observation of a reduction in average selling prices for GPUs of both companies in the secondary market, particularly for Nvidia’s GTX 1070 chip