Picks of the Day Friday, March 3, 2017

What Goes Up Must Come Down!

Wall Street paused for breath as the IPO of Snapchat (SNAP) soared 44% on its first trading day.

Stocks suffered their worst trading day yesterday since January, while the huge issue of SNAP commanded investors’ attention on Wall Street with a market cap of $24 billion. That’s a lot of money for a company, self-described as a “camera company,” one that provides users with filtering possibilities for the pictures they snap. All-in-all, investors’ approach changed drastically after the market’s colossal rise on Wednesday which pushed the Dow past the 21,000 level for the first time in history.

Besides the issue of SNAP, more headlines about Russia’s influence on the White House weighed on investor sentiment as did the heightened chances of more Fed remarks about monetary tightening, with Fed Chair Janet Yellen speaking today. Less than two weeks now remain until the Federal Open Market Committee (FOMC) meeting and future interest rate contracts are pricing in chances of over 90% of a rate hike.

A more aggressive rate hike pace is likely to be a marked change in monetary policy, which truth be told isn’t getting the attention it deserves from investors.

In summary for the day, the Dow Jones fell 0.5%, the S&P 500 falling 0.6%, the NASDAQ relinquishing 0.7%. The Russell 2000 led the losses with a retreat of 1.3%. Gold shed 1.4%, crude tumbling 2.3%. There’s a chance that crude is vulnerable to further weakness when considering the fact that yesterday it closed beneath its 50 period EMA for the first time since November ’16.

The defensive stocks in utilities (XLU) and the communications sector led the winners with gains of 0.7% and 0.1% respectively. Financial stocks (XLF) and the basic materials sector (XLB) were the laggards, falling 1.5% and 1.1% respectively.

The fashion retailer for young consumers, Abercrombie & Fitch (ANF) soared 13.9% on the heels of a lower than expected drop in chain sales and the confidence investors had drawn from the board’s guidance. Monster Beverage (MNST) took off 12.8%, propelled higher by its solid Q4 earnings report featuring strong sales and higher profit margins.

On the negative side, Barnes & Noble (BKS) fell 9.1% on the background of an earnings miss that was coupled by an 8.3% drop in chain sales and low store traffic (with the store’s weakest holiday season since 2005). Likewise, the company expects a 7% sales drop in 2017. Caterpillar (CAT) fell 4.3% after reporting that federal agencies had a search warrant in hand to investigate the company’s offshore tax practices. The N.Y. based hamburger chain, Shake Shack (SHAK) fell 2.6% on the background of slower than expected sales growth.

When considering the tone used by Fed bankers in their latest speeches – Dudley, the N.Y. Fed president, Williams, the president of the San Francisco arm and lastly Powell, who told CNBC yesterday that the chances of a rate hike in March go hand in hand with the chances of 3 rate hikes this year – we’re expecting a similar tone on the part of Fed Chair Janet Yellen and Vice Chair Fischer. The pair will be speaking today.

On the S&P 500, 40 stocks rose to new 52-week highs, 3 dipping to new yearly lows; on the NASDAQ, 126 stocks recorded new 52-week highs, 39 falling to new yearly lows.

About 7.4 billion shares changed hands on U.S. exchanges, compared to the 6.9 billion average over the last 20 trading days.

Friday: After having hiked rates just twice in the last 10 years, the Fed is now racing towards the next hike. Fed bankers are already conveying a clear and unequivocal message about the chances of a March rate hike, while Wall Street’s expectations just a little while ago were that the next hike would be in June. Janet Yellen will be speaking today at 13:00 N.Y. time at the Executives’ Club of Chicago, Stanley Fischer expected to share a similar message.

A rate hike now in less than 2 weeks is likely to drive expectations for a quarterly Fed rate hike from hereon in and when considering bankers’ latest rhetoric, we can’t rule out 4 hikes this year.

Besides speculation about the Fed, the market today will keep its eyes peeled on the Supply Managers’ ISM service sector index at 10:00. Before that, the Markit Supply Managers’ service sector index will be released at 9:45.

By: Shlomo Cooper, Senior Analyst at Tradenet

Friday’s Hot Stocks: AOBC, NTNX, SNAP, COST, ADSK

IPOs: None

Have a great trading day!

3.3.2017

Today’s Picks – Day Trading!

New York Strategy Swing

 Today’s Picks – Swing “New-York Strategy

 No.1 –  LBTYK

No.2 – HAIN