TradeTheNews.com Weekly
Market Update: Stocks Weather a Breakout in Treasury Yields and Burgeoning
Dollar Momentum
Fri, 18 May 2018 16:12 PM EST
Equity markets leaned into several stiff headwinds this week, but ultimately
held up relatively well. Indices experienced some turbulence on Tuesday when US
Treasury yields finally broke out to fresh multi-year highs highlighted by the
benchmark 10-year surpassing the 2014 high of 3.03%. Tuesday also saw the May
Empire manufacturing data jump and solid April retail sales figures solidify
expectations that the Fed remains on a gradual path to normalization despite
another soft first quarter. Subsequently, the greenback saw upside momentum
accelerate, which continued to result in pain for a host emerging market currencies
and relative weakness in their regional stock markets. European Union jitters
re-emerged with the formation of a more populist government in Italy, which
once again manifest in the widening of peripheral bond spreads, hearkening back
to the Greek crisis earlier this decade. The trade news out of Washington DC
wasn’t particularly positive, either: House Speaker Ryan’s imposed NAFTA
deadline came and went without any concrete agreements to speak of, while
President Trump himself noted he was doubtful China trade talks would be
successful just hours before meeting Vice Premier Liu He at the White House.
Nevertheless, the Russell 2000 was the first of the US indices to retake fresh
all-time higher territory, and for the week the Dow fell 0.5%, S&P lost 0.5%,
and the Nasdaq dropped 0.7%.
In corporate news, optical names rallied early in the week on a potential
about-face by President Trump to perhaps loosen US sanctions against China’s
ZTE. CBS sought to prevent Shari Redstone’s National Amusements from blocking a
shareholder vote to dilute her voting power in the company, but a judge denied
CBS’s motion for a temporary restraining order, sending CBS shares sharply
lower Thurs. Home Depot earnings surprised to the upside, but revenue was
weaker than expected, hampered by a long winter. Macy's jumped on an earnings
beat and raised guidance, while Nordstrom fell on disappointing outlook. Deere
beat and raised its net income outlook amid strengthening demand. Abaxis surged
on a $2B Zoetis offer to buy the veterinary point of care instrument
manufacturer for $83/shr. Kroger shares popped after inking a partnership deal
with the UK’s Ocado Group.
MON MAY 14
(IQ) Nationalist cleric Moqtada al-Sadr (rival to PM Abadi) is leading in
Iraq’s parliamentary election (surprise comeback for a Shi’ite leader who had
been sidelined by Iran-backed rivals)
(US) No NAFTA meetings are reportedly scheduled before the May 17th deadline
set by US Congress - press
TUES MAY 15
TKA.DE Reports Q2 Net €253M v -€870M y/y, adj EBIT €500M v €500Me, Rev €10.8B v
€10.7Be
ACA.FR Reports Q1 Underlying Net €788M v €880Me, Rev €4.91B v €5.02Be
VOD.UK Reports FY17/18 Adj EBIT €4.83B v €3.97B y/y, adj EBITDA €14.74B v
€14.62Be, Rev €46.6B v €47.6B y/y
*(UK) MAR AVERAGE WEEKLY EARNINGS 3M/Y: 2.6% V 2.6%E; WEEKLY EARNINGS
(EX-BONUS) 3M/Y: 2.9% V 2.9%E
(UK) APR JOBLESS CLAIMS CHANGE: 31.2K V +15.7K PRIOR; CLAIMANT COUNT RATE: 2.5%
V 2.4% PRIOR
*(UK) MAR ILO UNEMPLOYMENT RATE: 4.2% V 4.2%E
(EU) EURO ZONE Q1 PRELIMINARY GDP Q/Q: 0.4% V 0.4%E; Y/Y: 2.5% V 2.5%E
(DE) GERMANY MAY ZEW CURRENT SITUATION SURVEY: 87.4 V 85.2E; EXPECTATIONS
SURVEY: -8.2 V -8.2E
HD Reports Q1 $2.08 v $2.06e, Rev $24.9B v $25.2Be
(US) MAY EMPIRE MANUFACTURING: 20.1 V 15.0E
(US) Atlanta Fed raises Q2 GDP forecast to 4.1% from 4.0% prior
(KR) North Korea cancels Weds high-level talks with South Korea; threatens to
cancel Trump-Kim summit over US-South Korea military drills - Korean press
(US) MAR TOTAL NET TIC FLOWS: -$38.5B V $44.7B PRIOR; NET LONG-TERM TIC FLOWS:
$61.8B V $49.0B PRIOR
(JP) JAPAN Q1 PRELIM GDP Q/Q -0.2% V % 0.0%E; ANNUALIZED Q/Q: -0.6% V -0.1%E
(first contraction in 9 quarters)
WEDS MAY 16
(IT) Italy Five-Star Movement and League Party said to urge a rethink of EU
economic governance - financial press
700.HK Reports Q1 (CNY) Net 23.3B v 17.4Be; Rev 73.5B v 70.8Be
M Reports Q1 $0.42 v $0.36e, Rev $5.54B v $5.43Be; raises outlook, ends China
JV
(US) APR HOUSING STARTS: 1.287M V 1.310ME; BUILDING PERMITS: 1.352M V 1.350ME
(US) APR INDUSTRIAL PRODUCTION M/M: 0.7% V 0.6%E; CAPACITY UTILIZATION: 78.0% V
78.4%E
CSCO Reports Q3 $0.66 v $0.65e, Rev $12.5B v $12.4Be
(BR) BRAZIL CENTRAL BANK (BCB) LEAVES SELIC TARGET RATE UNCHANGED AT 6.50%; NOT
EXPECTED (1st pause in its year-long easing cycle)
THURS MAY 17
(ID) INDONESIA CENTRAL BANK (BI) RAISES 7-DAY REVERSE REPO RATE BY 25BPS TO
4.50%, AS EXPECTED (1st hike since Nov 2014)
*(US) INITIAL JOBLESS CLAIMS: 222K V 215KE; CONTINUING CLAIMS: 1.707M V 1.78ME
(US) MAY PHILADELPHIA FED BUSINESS OUTLOOK: 34.4 V 21.0E (12 month high)
CBS Judge denies motion for temporary restraining order in CBS v National
Amusements
(US) Pres Trump: doubts China trade talks will be successful
AMAT Reports Q2 $1.22 v $1.13e, Rev $4.57B v $4.41Be
(CN) Reportedly China trade delegation offers package to reduce US trade
deficit by $200B annually - press
FRI MAY 18
AZN.UK Reports Q1 Core EPS $0.48 v $0.58e, Rev $5.18B v $5.34Be
(IT) Italy 5-Star Movement leader Di Maio: Confirms agreement on govt contract
with League
(US) Weekly Baker Hughes US Rig Count: 1,046 v 1,045 w/w (+0.1%) (7th straight
rise)
