Friday, February 2, 2018

Rates Rise and Equities Contemplate Correction

TradeTheNews.com Weekly Market Update: Rates Rise and Equities Contemplate Correction
Fri, 02 Feb 2018 16:09 PM EST

The long overdue healthy correction may have finally begun this week as equities pulled back as aggressively as we have seen in almost two years. Many pointed to the continuing rise in interest rates while others blamed the political rumblings out of Washington, month end portfolio rebalancing, and the liquidity offered by the heart of Q4 earnings season all as factors inducing a sell off. Even as the stock market selloff accelerated on Friday, volumes were not particularly robust given the deluge of high profile earnings reports, leading some commentators to speculate that the downdraft was largely a buyers strike from overbought conditions. Nevertheless, many stock indices traded off about 4% from recent highs and the VIX popped above 17, touching levels not seen in more than a year. For the week the S&P500 dropped 3.9%, the DJIA fell 4.1%, and the Nasdaq sank 3.5%.

The Greenback probed fresh 3-year lows despite various US inflation readings that ran significantly hotter than expected. Friday’s January payrolls report saw annual wage gains reach 2.9% for the first time in 8-years. Janet Yellen's final FOMC statement signaled a March rate hike is on track and markets appear willing to debate the merits for four total hikes in 2018. Treasury yields moved up globally, highlighted by the US 10-year breaking above 2.75% and the German Bund retaking 75 bps. The dollar was unable to gain any traction until Friday's carnage in equity and cryptocurrency markets. Many noted the 3-4 rate hike Fed trajectory is all but priced in and Tuesday's quarterly refunding announcement served as a reminder the US government is set to embark on bringing more supply to a market where the Fed is going to be taking a step back.

In corporate news this week, Apple missed iPhone sales expectations but the market was assuaged by strong ASPs, indicating iPhone X sales were solid. Amazon’s quarterly earnings blew away expectations, demonstrating again that the online retailer has the market power to ratchet up its margins at will. The healthcare sector was roiled again by another Amazon disruption story, this time when the retail giant announced it would team with Berkshire and JPMorgan on an employee healthcare initiative. Metlife got slammed after disclosing it discovered a material weakness in internal control over financial reporting. PayPal shares dipped after eBay announced that it would be replacing its primary payments processing partner, though eBay users will still be able to make transactions with PayPay’s digital wallet until 2023. Dr Pepper Snapple announced it would be acquired by Keurig Green Mountain for $103.75/share via a special cash dividend, though it will retain 13% of combined company.



SUNDAY JAN 28
(US) Trump team considers nationalizing 5G network in order to counter China – Axios
MONDAY JAN 29
ABLX.BE To be acquired by Sanofi for €45 in cash for EV €3.9B
DPS To be acquired by Keurig Green Mountain for $103.75/shr via a special cash dividend, and retain 13% of combined company
LMT Reports Q4 $4.30 v $4.06e, Rev $15.1B v $14.8Be
(US) Atlanta Fed forecasts initial Q1 GDP at 4.2%
(US) Trade Rep Lighthizer: Canada has made a massive attack on US trade laws
MET Reports prelim Q4 $0.61-0.66 v $1.10e; discovered material weakness in internal control over financial reporting; to see $135-165M FY17 net income impact; to increase reserves by $525-575M; to postpone earnings

TUESDAY JAN 30
SAP.DE Reports prelim Q4 Non-IFRS Net €2.14B v €1.83B y/y, non-IFRS Op profit €2.36B v €2.39Be, Rev €6.81B v €6.84Be
(FR) FRANCE Q4 ADVANCE GDP Q/Q 0.6% V 0.6%E; Y/Y: 2.4% V 2.3%E
(JP) BOJ have taken appropriate steps in spirit of global FX code - press
(ES) SPAIN Q4 PRELIMINARY GDP Q/Q: 0.7% V 0.7%E; Y/Y: 3.1% V 3.1%E
(EU) EURO ZONE Q4 ADVANCE GDP Q/Q: 0.6% V 0.6%E; Y/Y: 2.7% V 2.7%E (fastest annual pace since 2007)
(EU) EURO ZONE JAN BUSINESS CLIMATE INDICATOR: 1.54 V 1.68E; CONSUMER CONFIDENCE (FINAL): 1.3 V 1.3E
AMZN Amazon, Berkshire Hathaway and JPMorgan Chase & Co. to partner on U.S. employee healthcare
PCAR Reports Q4 $1.67 v $1.12e, Rev $5.12B v $4.84Be
(DE) GERMANY JAN PRELIMINARY CPI M/M: -0.7% V -0.6%E; Y/Y: 1.6% V 1.7%E
(US) JAN CONSUMER CONFIDENCE: 125.4 V 123.0E

WEDNESDAY JAN 31
SIE.DE Reports Q1 Net €2.21B v €1.90Be, industrial business profit €2.21B v €2.57B y/y, Rev €19.8B v €19.9Be
MT.NL Reports Q4 $1.02 v $0.80e, EBITDA $2.14B v $2.07Be, Rev $17.7B v $18.3Be
BA Reports Q4 $4.80* v $2.91e, Rev $25.4B v $24.8Be
SAN.ES Reports Q4 Net €1.54B v €1.46Be, Rev €12.06B v €12.3B q/q
(DE) GERMANY JAN NET UNEMPLOYMENT CHANGE: -25K V -17KE; UNEMPLOYMENT CLAIMS RATE: 5.4% (record low) V 5.4%E
(US) JAN ADP EMPLOYMENT CHANGE: +234K V +185KE
(US) JAN CHICAGO PURCHASING MANAGER: 65.7 V 64.0E
(US) Conference Board Jan Total online job ads 4.90M v 4.90M m/m v 4.89M y/y; New ads 2.15M v 2.01M m/m v 2.24M y/y
(US) Association of American Railroads weekly rail traffic report for week ending Jan 27th: 543.5K carloads and intermodal units, +4% y/y
MSFT Reports Q2 $0.96 v $0.86e, Rev $28.9B v $28.4Be
PYPL EBAY: Adyen to become primary payments processing partner, replacing PayPal as primary payments processor
X Reports Q4 $0.76 v $0.68e, Rev $3.13B v $3.07Be
992.HK Reports Q3 Net loss $288.8M* v profit $98Me; Rev $12.9B v $12.5Be
(HK) Macau Jan Gaming Rev MOP26.3B, +36.4% v 27%e (largest gain since 2014)

THURSDAY FEB 1
NOKIA.FI Reports Q4 adj EPS €0.13 v €0.11e,, adj Op €1.0B v €940M y/y, Rev €6.70B v €6.44Be
ROG.CH Reports FY17 (CHF) Core EPS 15.34 v 15.53e, Core operating profit 19.0B v 19.4Be, Rev 53.3B v 53.2Be
VOD.UK Reports Q3 Rev £11.8B v £12.2B y/y, Service Organic Rev +1.1% v +1.2%e
UNA.NL Reports FY17 Core EPS €2.24 v €2.21e; Op €8.86B v €7.80B y/y, Rev €53.7B (inc spreads) v €52.7B y/y
RDSA.NL Reports Q4 adj Net $4.3B v $4.12Be, basic CCS EPS $0.52 v $0.50e, Rev $85.4B v $64.8B y/y
(UK) JAN MANUFACTURING PMI: 55.3 V 56.5E (18th month of expansion but lowest since Jun)
BX Reports Q4 adj $0.71 v $0.70e, Rev $1.88B v $1.81Be; Raises Quarterly dividend 93.2% to $0.85 from $0.44 (indicated yield 9.3%)
(CZ) CZECH CENTRAL BANK (CNB) RAISES REPURCHASE RATE BY 25BPS TO 0.75%; AS EXPECTED
UPS Reports Q4 $1.67 v $1.65e, Rev $18.8B v $18.2Be
(US) Q4 PRELIMINARY NONFARM PRODUCTIVITY: -0.1% V 0.7%E; UNIT LABOR COSTS: 2.0% V 0.9%E
(CL) CHILE CENTRAL BANK (BCCH) LEAVES OVERNIGHT RATE TARGET UNCHANGED AT 2.50%; AS EXPECTED
AMZN Reports Q4 $3.75 v $1.85e, Rev $60.5B v $60.0Be
GOOGL Reports Q4 $9.70 adj** v $10.12e, Rev $25.8B (ex $6.45B TAC) v $25.7Be; authorizes $8.6B repurchase of Class C capital stock
(JP) BOJ AGAIN CONDUCTS A FIXED-RATE JGB PURCHASE OPERATION (4th time performed): Offers to buy unlimited amount of 10-year JGBs at 0.11%

FRIDAY FEB 2
DBK.DE Reports Q4 Net -*€2.18B v -€2.24Be, Pretax -€1.34B v -€2.42B y/y, Rev €5.71B v €5.90Be
AZN.UK Reports Q4 Core EPS $1.30 v $0.84e, Rev $5.78B v $5.49Be
(US) Fed announces plan for tougher big-bank stress tests in 2018, as speculated (update)
MRK Reports Q4 $0.98 v $0.94e, Rev $10.4B v $10.4Be; To invest $12B over 5-years in US capital projects
(US) JAN CHANGE IN NONFARM PAYROLLS: +200K V +180KE
(US) Pres Trump authorizes release of memo written by Rep Nunes amid FBI objections today - press
(CA) Canada Prime Min Trudeau: Canada is willing to walk away from NAFTA