Market News – March 30 2016
Economic Events
Payroll company ADP reported that private sector employment increased by 200,000 jobs from February to March vs. 195,000 jobs consensus forecast. In Asia, Japan’s industrial production dropped 6.2% in February after rising in January, the drop is in-line with the forecast. European Commission reported that an index of executive and consumer confidence declined to 103.0 in March from a revised 103.9 the previous month. The reading was below economists expectation for a reading of 103.8.
Energy Action
Front month NYMEX crude rallied to intra day highs of $39.85 from $39.40 following the EIA inventory data which showed a 2.3 M bbl rise vs. a 3.5 M bbl expected increase in crude stocks. The early rally was lost and oil drifted to $38,14. Gasoline supplies fell 2.5 M bbls, in-line with expectations. Refinery usage rose to 90.4% from 88.4%. Currently the markets are non trending and a close above $40 is needed for establishing a new trend direction.
After a 6 month investigation into the global oil industry it was revealed that billions of dollars of government contracts were awarded as the direct result of bribes paid on behalf of companies including Halliburton, its former subsidiary KBR, Rolls-Royce and Samsung. They counted on Unaoil to funnel the bribes and to secure lucrative contracts in Iraq, Kazakhstan, Libya, Syria, Tunisia, and other countries in Africa, the Middle East, and the former Soviet Union. The Huffington Post and its Australian partner Fairfax Media, citing leaked documents and emails. Other companies involved in Unaoil’s Middle East operations: Cameron (CAM), Weatherford (WFT), Eni (E), Saipem (SAPMY), Honeywell (HON) and Siemens (SIEGY), FMC Technologies (FTI) said the report.
Fed Policy Outlook
Yellen as many analysts have thought closed the door on an April hike. Her remarks were not really new nevertheless they had considerable bite coming in the context of comments from several other Fed officials who had talked up the fact that all meetings are live. A 25 bp tightening at the June 14/15 FOMC is still our forecast, the Fed chair did raise the bar as she stressed caution amid worries over global growth. She warned the central bank will “proceed cautiously” as it continues to assess the economic landscape in relation to future rate hikes.
The Fed has damped quarter end volatility in funds market. This reduced volatility is a result of the stimulus measures that have boosted reserves massively, as well as by the fact interest is now being paid on excess reserves. Prior to the financial crisis, the Fed funds rate would deviate an average of 6 bps on the last day of the quarter versus the target, and 8 bps on the subsequent day. On the more “typical” days, the funds rate generally would be within 1 bp of the target. The rate would often spike due to increased demand for reserves in order to back higher transactional flows (window dressing).
FX Market
USD-JPY:The risk-on backdrop and firmer yields have provided a minimum of support, USD-JPY gains continue to be a struggle. The Fed threw a wrench in dollar bull’s plans on Tuesday, with Yellen’s dovish speech. Further BoJ easing measures are expected. The 111.00 – 114.00 trading range will hold up for the forseeable future.
Stock News
- Sarepta April weekly call option implied volatility is at 88, April is at 90, May is at 187; compared to its 52-week range of 65 to 288, suggesting May price movement into FDA’s PCNS to review NDA for eteplirsen on April 25. Perceptive’s Edelman ‘bullish’ on Sarepta, says hard to see FDA denying approval. While appearing earlier on CNBC, Joseph Edelman, founder of Perceptive Advisors, said he is “very bullish” on Sarepta (SRPT).
- Shares of Verint (VRNT) are falling after the company reported weaker than expected fourth quarter results last night. Credit Suisse and Deutsche Bank responded to the results by downgrading the stock, with Credit Suisse cutting its rating on the shares to Underperform. Verint develops actionable intelligence solutions, including security intelligence products and fraud, risk and compliance solutions.Verint reported Q4 earnings per share of 90c, versus analysts’ consensus estimate of $1.17. The company’s revenue came in at $281M, compared with the consensus outlook of $318M. For fiscal 2017, Verint predicted that its EPS would be little changed from its fiscal 2016 EPS of $3.04. Analysts’ consensus estimate was $3.54. Weakness may stem from shifts to the cloud, share losses, and weak demand.
- FDA approves Jazz Pharmaceuticals Defitelio. U.S. Food and Drug Administration approved Defitelio to treat adults and children who develop hepatic veno-occlusive disease with additional kidney or lung abnormalities after they receive a stem cell transplant from blood or bone marrow called hematopoietic stem cell transplantation. This is the first FDA-approved therapy for treatment of severe hepatic VOD, a rare and life-threatening liver condition, the regulator noted.
- SandRidge Energy may seek restructuring under Chapter 11. Stock is down over 40%. Earlier today, in a regulatory filing, SandRidge Energy said: “As a result of the impacts to the Company’s financial position resulting from declining industry conditions and in consideration of the substantial amount of long-term debt outstanding, the Company has engaged advisors to assist with the evaluation of strategic alternatives, which may include, but not be limited to, seeking a restructuring, amendment or refinancing of existing debt through a private restructuring or reorganization under Chapter 11 of the Bankruptcy Code. However, there can be no assurances that the Company will be able to successfully restructure its indebtedness, improve its financial position or complete any strategic transactions. As a result of these uncertainties and the likelihood of a restructuring or reorganization, management has concluded that there is substantial doubt regarding the Company’s ability to continue as a going concern as it is currently structured. As a result, the report of the Company’s independent registered public accounting firm that accompanies these consolidated financial statements for the year ended December 31, 2015 contains an explanatory paragraph regarding the substantial doubt about the Company’s ability to continue as a going concern, which under the terms of the Company’s senior secured revolving credit facility may result in an event of default.