Daily Commentary (3/16/2017)

Summary

Major equity indices managed to open higher than yesterday’s close, but retraced to close flat or slightly lower amid investor concern about the strength of the economy and the pace of interest rate hikes. The Russell 2000, however, posted its second consecutive gain. Market participants are still waiting to see some economic policy promises turn into legislation, with tax reform and deregulation high on the list.  S&P -0.2% NASDAQ Flat ,Dow -0.1%  Russell +0.2%

Trump’s budget proposal was released this morning, and it aims to heavily cut various agencies while increasing the military budget. News that the budget cuts HHS by 23%, which includes cuts to medical research, sent life sciences and tool-makers lower, though the budget is seen as highly unlikely to get approval from Congress in its current form.

Housing starts jumped more than expected, increasing by 1.288 million; last month’s number also revised up from 1.246 to 1.251 million. Supply continues to pick up: Homes under construction rose 1.091 million, its highest reading since October 2007.

10-year notes opened the European trading session on a high, with yield reaching a low of 2.48% before the reflation trade picked up speed again and sent prices lower. 10-year yield rose 4bps on the day to close at 2.53%.

(UK) BoE kept rates on hold today at their scheduled policy meeting; however, one member of the board of directors voted for a hike. The Pound rallied to a two-week high on the back of a possible change of sentiment at the central bank, and the FTSE reached a new all-time high. Stocks were also spurred by a subdued Fed statement and a win for centrist candidates in the Dutch parliamentary election.

(PO) As emerging markets got a boost from the less-hawkish-than-expected language from the Fed, Poland said it will offer bonds for the first time this year. The Finance Ministry said it will be offering EU1B in 10-year paper and re-tapping EU500M of a January 2036, 2.375% coupon. The 10-year & 20-year papers will be priced at around 50bps & 83/85bps above mid-swaps respectively.

(NL) Dutch elections showed the far-right anti-EU party garnered less support than polls had implied, but still managed to gain 33% more seats than the previous election. Despite a much higher turnout, the center-right candidate Rutte lost seats, while holding on as the most voted party. No clear coalition is in sight for the still fragmented Netherlands politics, but the Euro benefited further as it continued to rise against the US dollar.

After Market Movers
-VRX ValueAct bought 3M shares from $10.81-10.88/shr on March 14th, adding to existing position (stake increased to 5.2% from 4.4%); +5.4% afterhours
-VSLR Reports Q4 -$0.41 v -$0.42e, R$41.8M v $39.2Me; Guides Q1 MW installed 43-46 MWs- Guides FY17 MW installed 210-230 MWs; +3.6% afterhours
-VRAY Reports Q4 -$0.25 v -$0.34e, R$16.1M v $13.7Me- Guides FY17 Rev $45-50M, primarily from 7 to 8 MRIdian Linac Systems; -4.4% afterhours
-CAL Reports Q4 $0.33 v $0.40e, R$639.5M v $632Me; Guides initial FY17 $2.10-2.20 v $2.39e, Rev $2.7-2.8BB v $2.71Be; -7.1% afterhours

Sector Signals

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