Stocks and Securities

U.S. stock futures dropped on Friday as the U.S. government stepped up its trade war with China. The losses came after media reports said that the U.S. is getting ready for a second wave of tariffs on China, having nearly finished a second list of levies on $100 billion worth of Chinese goods. Additionally, U.S President Donald Trump has reportedly approved the first round of $50 billion tariffs on Chinese goods, although it wasn’t clear when the move would take effect.

Yesterday, S&P 500 [stock_quote symbol=”SPY”] drifted within a pretty tight range eventually settling with a modest gain of 0.3%. Investors were still wrestling with the Fed’s upped rate-hike forecast and received another central bank policy decision, this time from the ECB. The Dow  (-0.1%) struggled to keep pace, but the tech-heavy Nasdaq (+0.9%) outperformed, hitting a new all-time high.

As expected, the European Central Bank left its key policy rate unchanged and announced a plan to end its asset purchase program. The ECB in September will cut its monthly purchases in half, from EUR30 billion to EUR15 billion, and then end purchases altogether three months later although it will continue to reinvest the principal from maturing securities. As for interest rates, the ECB said they will remain at their present levels “at least through the summer of 2019.”

The euro dove sharply following the ECB’s policy release and was down about 1.7% against the U.S. dollar at the closing bell in New York. The yield on Germany’s 10-yr bund also slid, going from 0.50% to 0.42%, but U.S. Treasury yields were mostly lower even before the ECB decision. The yield on the benchmark 10-yr Treasury note slid three basis points to 2.95%, but the 2-yr yield bucked the trend, rising two basis points to 2.58%. That left the 2-10 spread at its lowest level in more than a decade.

Banking stocks, which make money on the difference between what they charge for loans and what they pay on deposits, dropped with the 2-10 spread, sending the S&P 500’sfinancial sector to the bottom of the sector standings. The financial group  lost 0.9% and was one of only three groups — industrials [stock_quote symbol=”DIA”] (-0.4%) and energy  (-0.2%) being the others — to close in the red.

On the flip side, eight sectors advanced on Thursday. The lightly-weighted utilities group(+1.2%) was the top performer, continuing to rebound after a poor start to the month, and the consumer discretionary sector] (+1.0%) was also a notable outperformer. Within the consumer discretionary space, media names were in focus once again after Comcast (CMCSA 33.82, +1.50, +4.6%) outdid Disney’s [stock_quote symbol=”DIS”] (DIS 108.75, +2.44, +2.3%) all-stock bid for the bulk of 21st Century Fox’s (FOXA 44.58, +0.92, +2.1%) assets, offering $65 billion in cash.

Meanwhile, in the tech sector (+0.6%), Twitter  [stock_quote symbol=”TWTR”] (TWTR 46.76, +2.69) added another 6.1% and is now up 16.6% since being added to the S&P 500 [stock_quote symbol=”SPY”] on June 7. Social media peer Facebook  (FB 196.81, +4.40) also did well, adding 2.3%, but Oracle[stock_quote symbol=”ORCL”] (ORCL 45.90, -2.37) struggled, losing 4.9% after being downgraded to ‘Neutral’ from ‘Overweight’ at JP Morgan.

 

Cryptocurrencies and Blockchain

The cryptocurrency market rebounded in the past 24 hours, as the US Securities and Exchange Commission (SEC) clarified that Bitcoin and Ethereum are not considered as securities under the laws of the US. William Hinman Director, Division of Corporation Finance at SEC, emphasized during his speech that Ether, the native cryptocurrency of the Ethereum network, and Bitcoin, are not securities as they do not benefit a single organization or a company.

After the speech was released, the price of Ether jumped by 12 percent, from $464 to $524. The clarification of the SEC regarding the regulatory state of Bitcoin and Ethereum provided the market with a boost. While bitcoin has been making lower lows for a month now, mainstream media coverage of the industry is escalating as regulatory scrutiny heats up. Many bitcoin bulls say regulation is good for the market because it legitimizes the industry and will promote more widespread adoption.

The most interesting tidbit we found in yesterday’s crypto news was from Tom Lee of Fundstrat.  In a recent note, Lee, the firm’s head of research, wrote that since the launch of Cboe bitcoin futures in December, prices have plunged leading up to expiration.

“Bitcoin sees dramatic price changes around CBOE futures expirations. This was something flagged by Justin Saslaw at Raptor Group. We compiled some of the data and this indeed seems to be true,” Lee wrote Thursday. “Overall, bitcoin has fallen 18 percent in the 10 days prior to CBOE contract expiration.”

Lee added the two exceptions were in February when prices ran up nearly 15 percent into expiration (he attributes this to tax selling), and April when prices were up 16 percent.

 

Stocks on the radar

Sarepta Therapeutics (SRPT) –  initiated with a Buy at BTIG Research. Target $120. We have been keeping an eye on this higher-risk equity.

 

Alnylam (ALNY) – will be presenting Phase 3 study of patisiran, an investigational RNAi therapeutic for the treatment of hereditary ATTR (hATTR) amyloidosis at the 4th Congress of the European Academy of Neurology (EAN), held June 16-19. Expect volume to pick up heading into the presentation.