Live Markets U.s.: Energy exposed banks outperform broader sector

Crossfirst Bankshares

03/01/2020 16:32

* Major averages fall, but off lows
    * Materials, financials take biggest hits; defensives
outperform
    * Crude, gold rally; U.S. 10-yr T-Note yield ~1.81%

    Jan 3 - Welcome to the home for real-time coverage of U.S.
equity markets brought to you by Reuters stocks reporters and
anchored today by Terence Gabriel. Reach him on Messenger to
share your thoughts on market moves:
terence.gabriel.tr.com@reuters.net
    
    ENERGY EXPOSED BANKS OUTPERFORM BROADER SECTOR (1105 EST/
1605 GMT)
    Bank stocks sharply underperformed a declining broader
market on Friday, after a U.S. air strike in Iraq killed a top
Iranian commander, sharply escalating Middle East tensions.
 urn:newsml:reuters.com:*:nL4N2980U5
    Since the biggest U.S. banks outperformed S&P 500 gains for
the full year 2019, Keefe, Bruyette & Woods analyst Brian
Gardner wrote that these stocks were at the most risk compared
with small and mid-cap (SMID) banks. As a result, he reiterated
his portfolio model which underweights the bigger banks and
overweights the SMIDs. Energy sensitive bank stocks could also
outperform, according to Gardner.
    The firm's latest note on the subject, from Sept. 18, cites
six energy sector lenders with TCE (tangible common equity) over
50%. These are Bank7 Corp  BSVN.O , BOK Financial Corp  BOKF.O ,
Cadence Bancorp  CADE.N , Crossfirst Bancshares  CFB.O , Texas
Capital Bancshares  TCBI.O , Cullen/Frost Bankers  CFR.N . Of
the group, Bank7 was the only stock in positive territory on
Friday with a 0.9% gain. CFR, CADE and CFB were down almost 1%,
while TCBI and BOKF were both down more than 1%.
    In comparison, the S&P 500 bank subsector  .SPXBK  was down
1.5% and the S&P 500  .SPX  benchmark was down 0.7%.
    
    (Sinéad Carew)
    *****
    
    FRIDAY DATA: MANUFACTURING SHRINKS TO RECESSION-ERA LEVELS
(1055 EST/1555 GMT)
    The U.S. manufacturing sector shrank in December at its
fastest pace since the end of the great recession, according to
a report released on Friday.
    The Institute for Supply Management's (ISM) purchasing
managers index (PMI)  USPMI=ECI  came in at 47.1, worse than the
reading of 49 that analysts expected and hitting its lowest
level since June 2009.  urn:newsml:reuters.com:*:nN9N27Z024
    It marked the troubled sector's fifth straight month of
contraction, weighed down by the new orders subcomponent
dropping to an 11-year low.
    A PMI number above 50 indicates expansion; below 50 shows
contraction.
    "Overall...this is a seriously weak report, and we see
little chance of a sustained near-term recovery," writes Ian
Shepherdson, chief economist at Pantheon Macroeconomics. 
    Manufacturing, which contributes about 11% of U.S. GDP,
faced headwinds in the latter half of 2019 as the
market-bruising trade war between Washington and Beijing threw a
monkey wrench into the global economy.
    "Global trade remains the most significant cross-industry
issue, but there are signs that several industry sectors will
improve as a result of the phase-one trade agreement between the
U.S. and China," said  Timothy R. Fiore, chair ISM's
Manufacturing Business Survey Committee. 
 
    On a less dire note, U.S. expenditures on construction
 USTCNS=ECI  increased by 0.6% in November according to the
Census Bureau, twice the rate expected by economists and a solid
acceleration from October's 0.1% increase.  urn:newsml:reuters.com:*:nLNS3CEGG1
    The growth was driven by a 1.9% jump in private home
building as lower mortgage rates helped ease affordability in a
sector strapped with tight supply and cost increases.
    However, the gain was capped by a 1.2% drop in spending on
private non-residential structures, which includes manufacturing
and power plants, as companies held off on capital expenditures
amid brewing geopolitical uncertainties.
 
    Investors were already in a selling mood on the first Friday
of the new year, but the grim PMI data helped fuel their
pessimism.
    All three major U.S. stock averages were firmly in the red.
    
    (Stephen Culp)
    *****
    
    
    ASSESSING THE LATEST MIDDLE EAST TENSIONS (1006 EST/1506
GMT)
    Ian Shepherdson, Chief Economist at Pantheon Macroeconomics,
is out with a comment on the latest Middle East tensions.
Shepherdson's bottom line is that "Iran will respond; the how
and when is uncertain but full-scale war is unlikely."
    According to Shepherdson, the geopolitical importance of
Friday's assassination of Qassem Soleimani cannot be
understated. He adds that the question is how, not whether, Iran
will respond, and that for markets, the key issue is the impact
of the Iranian response on oil prices.
    Shepherdson's base case is that "a full-blown war between
the U.S. and Iran is unlikely." However, he cautions that it is
reasonable to think that the Iranian leadership will seek to use
the assassination to divert attention from that country's grim
economy. Therefore, he says a premium on oil prices for the next
few months, at least, is likely.
    Shepherdson argues that the wild card is whether turmoil in
the Middle East triggers a sustained sell off in equities,
depressing business and consumer confidence to the point where
labor market and inflation concerns become secondary. He says he
would be surprised if Friday's early plunge in S&P futures turns
into more than just an initial knee-jerk response — but if Iran
takes more drastic action than he is expecting, it will become a
real risk.
    In that event, he says the Fed might have no choice but to
ease, especially if credit markets seize-up too. In the
meantime, Shepherdson expects defensive stocks to outperform,
with downward pressure on Treasury yields and gains for
safe-haven currencies, until Iran's response becomes clear.
    
    (Terence Gabriel)
    *****

    S&P 500: VULNERABLE GIVEN EXTENDED POSITION (0915 EST/1415
GMT)
    CME E-Mini S&P 500 futures  EScv1  are pointing to a sharply
lower open for the S&P 500  .SPX . That said, futures have come
off their worst levels. Nevertheless, given the broad-market
average's extended position, there is risk for more than just a
one-day dip. (Click on chart below)
    Of note, the S&P 500 ended Thursday 9.7% above its rising
200-day moving average (DMA). That is its greatest disparity vs.
this long-term moving average since just after the January 2018
market top.  urn:newsml:reuters.com:*:nL1N29708X  urn:newsml:reuters.com:*:nL1N290057
    Indeed, an SPX break of its Dec. 31 low (3,212.03) can add
to the potential for a trend change.  urn:newsml:reuters.com:*:nL1N29506T The next
support is at the Nov. 27 high (3,154.26), and the still open
Dec. 6 and Dec. 4 gaps (which require 3,119.45 and 3,094.97 for
fills) could be magnets on a deeper decline.
    The Dec. 3 trough (3,070.33) is still seen as especially
significant. Meanwhile, the rising 200-DMA ended Thursday at
2,969.98.
    Resistance in the 3,247.93/3,258.14 area, including the
December and January highs, may now be a stiff barrier on
strength.
    
 
 
    (Terence Gabriel)
    *****
   
    
    STOCKS POISED TO SLIDE ON MIDDLE EAST TENSIONS (0823
EST/1323 GMT)
    Stock futures suggest the major averages are poised to open
sharply lower. This after a U.S. strike killed an Iranian
commander.  urn:newsml:reuters.com:*:nL4N2981OH That said, the futures are off their
worst levels.
    Perhaps not surprisingly, oil shares  XLE.P , precious
metals miners  GDX.P  and aerospace & defense stocks  ITA.Z  are
quoted up in premarket. Airline stocks  JETS.P  are weak.
    Here is your premarket snapshot:
    
 
 
    (Terence Gabriel)
    *****
    

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premarket01032020    https://tmsnrt.rs/39BmSij
SPX01032020    https://tmsnrt.rs/2QkVKwr
ISM PMI Image    https://tmsnrt.rs/2uhJR1R
Construction spending Image    https://tmsnrt.rs/2Ql0Etr
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