Market 2018-01-30 (interest rate, health insurers, and more)

The main reasons of selloff today are probably: (a) fear of high interest rate; (b) profit taking. 

 FED is holding regular meeting today and tomorrow. We will learn more tomorrow noon. Street in general is expecting 3 interest hikes in 2018. The new chairman Jerome Powell is considered dovish. However, FED is under the pressure to hike 4 times as treasury yields keep going higher (2.73% now, was below 2.1% 5 months ago). A hawkish may trigger more selloff.

 Crude oil prices sank for 2nd straight session amid today's broad selloff: March WTI -1.5% to settle at $64.5/bbl and March Brent -0.6% at $69.

 The biggest news today: Amazon/Berkshire/JPMorgan team up to form a healthcare venture, which provides health insurance to their own employees. This shocks health insurers: Cigna (CI -7.1%), UnitedHealth (UNH -4.8%), Aetna (AET, -2.9%), Anthem (ANTM -5.2%), Express Scripts (ESRX -2.8%), Humana (HUM -2.9%), and drug retailers such as CVS (-5.6%), Walgreens Boots Alliance (WBA, -5.1%). However, some analysts think the market is over-reacting. Health insurance is no easy job. The new company needs to work from state to state, and as a small player now, they may not have the leverage to negotiate with health providers to bring down the cost. Big pharma also face pressure: ABBV -5.2%, AMGN -3.4%, PFE -3.1%, LLY -1.7%, GILD -1.7%, BIIB -1.6%, CELG -1.6%, MRK -1.6%, ABT -1.4%...

 Bitcoin drops -10%, hovering around $10K. According to Bloomberg, Bitfinex and Tether last week were sent subpoenas by the CFTC (Commodity Futures Trading Commission). Both companies have the same CEO, with Bitfinex being Hong Kong's largest cryptocurrency exchange, and Tether claiming its tokens are backed with dollars on a 1:1 basis. Tether a few days ago confirmed it's broken off its relationship with its auditor. Facebook bans ads promoting cryptocurrencies, ICOs.

 More on news:

 Needham raises its Alphabet (GOOG, GOOGL, -1%) PT from $1,150 to $1,350 ahead of Thursday’s ER.

 The U.S. Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) are investigating Apple’s (AAPL) slowing of older iPhone models, according to Bloomberg sources.

 NetEase (NTES -1.2%) and Mattel (MAT -0.9%) are forming a joint venture to collaborate on digital products, focused on mobile games. The project, called Mattel163, will be divided 50-50 and develop content based on toy franchises including Barbie, Hot Wheels and Fisher-Price, and starting with a game based around Mattel's Uno card game early this year. The move might bring a digital breakthrough for Mattel after previous tries; NetEase's online game division last year drew about $5.5B in sales, more than Mattel's total revenue of $5.1B.

Winners

WYNN +4.9% bounces back after the recent selloff amid CEO scandal.

 UAL +1.8% also bounces back a little.

Losers

Chipotle (CMG -3.1%) plunges again with some reports of food poisoning making their way around.

 MCD -3% despite ER beats. Investors were expecting more share buybacks and dividend hike.

 Harley-Davidson (HOG -8.1%) slides after 2018 shipment guidance of 231K-236K fell short of the expected 240K. During the quarter retail motorcycles sales fell 11.1% in the U.S. and 11.8% in Asia Pacific. The company is closing Kansas City plant.

 Cornings (GLW -5.6%) despite ER beats, boosted by healthy Gorilla Glass. GAAP net sales +8%, by segment: Display Technologies, $745M (down 10%); Optical Communications, $928M (up 13%); Environmental Technologies, $291M (up 19%); Specialty Materials, $393M (up 17%); Life Sciences, $225M (up 9%). It starts to look attractive to me.

 AKS -13% plunges amid investor concerns that rising costs. X -6.2%, NUE -3.2%, MT -1.7%, STLD -1.1%.

 CHK (-5.3%) says it will lay off ~13% of its workforce, or ~400 workers, primarily at its Oklahoma City headquarters.

 Metlife (MET -8.6%) postpones ER amid finding a material weakness in internal controls in a review of its annuity reserves.

 TEVA -4.4% on planning to raise $5B debt.

AH Earnings

Advanced Micro Devices (AMD): Q4 EPS of $0.08 beats by $0.03. Revenue of $1.48B (+33.3% Y/Y) beats by $70M. Shares -0.4% in AH.

 ILMN beats. Q4 results: Total revenue: $659M (+25.5%); Service & other: $119M (+26.6%). non-GAAP net income: $212M (+68.3%); non-GAAP EPS: $1.44 (+69.4%); cash flow ops: $294M (+12.2%). 2018 Guidance: Revenue growth: 13-14%; non-GAAP EPS: $4.50-4.60. 

 Electronic Arts (EA) Q3 EPS of -$0.60 vs consensus of $2.19 (176M tax overhaul). Net revenue was $1.16B: digital net revenue of $780M (+14%) and packaged goods/other net revenue at $380M (-18%). Shares +6% in AH.

 Juniper Networks (JNPR): Q4 EPS of $0.53 beats by $0.01. Revenue of $1.24B (-10.8% Y/Y) beats by $10M. Shares -8% in AH amid disappointing guidance: revenues of $1.02B-$1.08B (light of expectations for $1.156B) and EPS of $0.22-$0.28 (below consensus for $0.42).

 Chubb (CB): Q4 EPS of $3.17 beats by $0.88. Net written premium of $6.5B (+1.7% Y/Y) misses by $120M.

My Trades Today


  • Sold 1/3 GME @ $17.2.
  • Added CELG, NTES, BOTZ, RUBI, FIT. Initiate AMAT @ $53.4  

Earnings Tomorrow

  • pre-market: BA, DHI, SIRI, SLAB
  • post-market: AGNC, EBAY, FB, MAA, MSFT, PYPL, QCOM, T, TSCO, X

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