Post by Admin/YBB on Jun 19, 2021 6:46:55 GMT -6
Pg M1, TRADER. The WORST week since October (for DJIA, R2000) and it may get worse. The FOMC hinted on timing of rate hikes and QE reductions – no more warm-and-fuzzy “until the job market recovers” or “average inflation of +2%”. Actually, post-FOMC, the weekly JOBLESS report went the wrong way (i.e. was worse). Then, the federal-OPEN-MOUTH-crowd started loose talk of possible rate hike even in 2022 (BULLARD). CYCLICALS took it on the chin: materials XLB -6.3%, industrial XLI -3.8%. There may be buying opportunity developing in cyclicals, but the question is when? Nasdaq Comp was spared damage but don’t take that as signal to pile into most expensive and speculative stocks. POWELL testifies on Tuesday before the House subcommittee on Covid-19 and may be more reassuring (or not).
BANKS got beat (KRE -6.9% for the week, but still +19% YTD) along with other cyclicals. YIELD-CURVE flattened; 2Y-10Y spread shrunk to 119 bps. LOAN demand is weak. Results of STRESS-TESTS for big banks are due on Thursday after the market close and all are expected to pass. Restrictions on buybacks and dividends may be lifted for most big banks. So, bank stocks may soon find floor.
FedEx/FDX earnings report on Thursday is expected to be good. Shipping volume is up, and due to supply/capacity constraints, FDX can raise prices (so, higher margins). Stock is under pressure due to poor reception of UPS at its investor day (and late-week weakness in cyclicals).
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes.
NO-CHANGE (for the current ZIRP of 0-0.25%) through March 2022 FOMC. Beyond, the probabilities of rate rise are low but in double-digit %.
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -3.45%, SP500 -1.91%, Nasdaq Comp -0.28%, R2000 -4.20%. DJ Transports -4.60%; DJ Utilities -3.07%. (Rotating spot bank KBE -6.93%) US$ index (spot) +1.98%, oil/WTI futures +1.03%, gold futures -5.83%.
YTD (index changes only), DJIA +8.77%, SP500 +10.93%, Nasdaq Comp +8.86%. (Rotating spot bank KBE +19.39%)
Pg M4, EUROPE. UK chemical company Elementis (ELMTY; fwd P/E 20.7) is attractive post-pandemic. It is a potential takeover target (already rejected bids from MTX, IOSP).
Pg M4, EMERGING MARKETS. Look beyond PUTIN and crude oil for RUSSIAN stocks in techs, e-commerce, metals (aluminum, nickel).
Pg M6, COMMODITIES have been pressured by CHINA’s moves to cool speculation, reveal their national inventories, and possible trading from those inventories. Commodities were also hit post-FOMC meeting. But all that will not stop Dr COPPER (recent high on May 11) – bullish factors for copper include post-pandemic recovery, push for clean energy, government infrastructure spending, and long lead times required to develop copper mines. China consumes almost half of all copper produced globally.
Pg M5, OPTIONS. Plant-based milk (almonds, oat, soy) maker Oatly (OTLY), May IPO, also makes yogurts and cheeses. For holders, short-strangle (pairing selling-put with selling-call) is recommended for the bet that the stock remains rangebound.
(SP500 VIX 20.70, Nasdaq 100 VXN 22.43, SKEW 150.78 (high) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg M27, M33: An up week in EUROPE (Switzerland +1.30%, Norway -0.82%, Greece -1.42%) and a down week in ASIA (Taiwan +0.83%, Indonesia -2.55%). The equity CEF index (data to Thursday) underperformed the DJIA and its discount was -4%.
TREASURY* 3-mo yield 0.05%, 2-yr 0.26%, 5-yr 0.89%, 10-yr 1.45%, 30-yr 2.01%. DOLLAR jumped, DXY 92.321, +2% (M35). GOLD (Handy & Harman spot, Thursday) tanked to $1,773, -5.7% (M38); the gold-miners were crushed. (^XAU was at 141.82, -11.41% for the week)
*Treasury Yield-Curve www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield
Top FDIC insured savings deposit rates*: Money-market accounts 0.61%; 3-mo Jumbo CD 0.35%, 1-yr CDs 0.60%; 5-yr CDs 1.00% (M33).
*For local rates www.depositaccounts.com/banks/rates-map/
(BONUS from Part 2 include Cover Story, Up and Down Wall Street, Streetwise and these won’t be repeated in Part 2)
Pg 18: COVER STORY, “Self-Driving Cars Are Closer Than You Think”. There was too much hype on SELF-DRIVING/AUTONOMOUS VEHICLES (AVs), and disappointments, and some players sold off their operations (UBER, LYFT). Despite Elon MUSK’s boasts (and some drivers’ media stunts), TSLA is not there yet – its reliance on photo-sensors limits it to only AV Level 2 now (see below for scale). AV related stocks have sold off (-30% YTD, -50% from 52-wk highs). AV Level 3-5 players now include Motional (APTV and Hyundai joint-venture; APTV used to be Delphi at one time), Waymo (from GOOGL), Cruise (yes, from the old GM). AVs are expensive ($150K+) due to lots of sensors (photo-cameras, radar, lidar), regular checks, calibrations, and software upgrades. Lidar companies are struggling (INVZ, LAZR, OUST, VLDR, AEVA, CFAC). Good AV applications now are commercial as high costs of AVs can be justified there.
SAE AV Levels: 1&2 are driver-assist; 3 is with driver still in the seat as backup; 4 & 5 are truly autonomous without any human intervention.
SUPPLEMENT, Top 100 Women Financial Advisors, has soft advisory features plus top advisor listing.
Pg 7, UP & DOWN WALL STREET. Summer solstice on Sunday, June 20 typically would mean the start of Summer doldrums. But this time may be different – economy is REOPENING; the FED is shifting from ultraeasy to just easy. The FUTURES markets are pricing several rate hikes ahead of the timeframe indicated by the Fed. The talk of reducing QE has begun; formal plans may be announced at August Jackson Hole Fed annual meeting, with mortgage QE probably the first to be trimmed. It was as if the Fed put an expiration date on the current supereasy monetary policy regime. Volatility/VIX will rise especially as the FOMC members will claim their few minutes of fame on TV. The 10-yr peaked at 1.75% and is below 1.5% (that is the wrong way to 2%). YIELD-CURVE flattened post-FOMC and is that signaling economic slowdown ahead? MBS portfolios that hedge with Treasuries were hurt (mortgage rates rose, Treasury yields fell). As for the damage, metals/mining XME was down -12%, but oil did OK (XLE also has a generous yield). (There were so many crosscurrents this week, so don’t jump to any big conclusions)
Pg 11, STREETWISE. Several RETAIL and APPAREL stocks will benefit from returning to offices (RTO). Much of the current wardrobe (especially women’s) may be out of style or may not fit anymore. With thousands of clothing stores closed during the pandemic, and supply-chains still disrupted, apparel prices are uncharacteristically strong now. Beneficiaries include TGT, NKE, VFC, LEVI, AEO, BOOT, GPS, LULU (it is moving beyond yoga apparel), RL, M.M. LaFleur (private), SFIX (AI-based fits/styles) TDUP (used clothing). For accessories, TPR, CPRI.
(NOTE. Postings will be delayed to afternoon & evening on Saturday, 6/26/21)
(More later….)
BANKS got beat (KRE -6.9% for the week, but still +19% YTD) along with other cyclicals. YIELD-CURVE flattened; 2Y-10Y spread shrunk to 119 bps. LOAN demand is weak. Results of STRESS-TESTS for big banks are due on Thursday after the market close and all are expected to pass. Restrictions on buybacks and dividends may be lifted for most big banks. So, bank stocks may soon find floor.
FedEx/FDX earnings report on Thursday is expected to be good. Shipping volume is up, and due to supply/capacity constraints, FDX can raise prices (so, higher margins). Stock is under pressure due to poor reception of UPS at its investor day (and late-week weakness in cyclicals).
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes.
NO-CHANGE (for the current ZIRP of 0-0.25%) through March 2022 FOMC. Beyond, the probabilities of rate rise are low but in double-digit %.
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -3.45%, SP500 -1.91%, Nasdaq Comp -0.28%, R2000 -4.20%. DJ Transports -4.60%; DJ Utilities -3.07%. (Rotating spot bank KBE -6.93%) US$ index (spot) +1.98%, oil/WTI futures +1.03%, gold futures -5.83%.
YTD (index changes only), DJIA +8.77%, SP500 +10.93%, Nasdaq Comp +8.86%. (Rotating spot bank KBE +19.39%)
Pg M4, EUROPE. UK chemical company Elementis (ELMTY; fwd P/E 20.7) is attractive post-pandemic. It is a potential takeover target (already rejected bids from MTX, IOSP).
Pg M4, EMERGING MARKETS. Look beyond PUTIN and crude oil for RUSSIAN stocks in techs, e-commerce, metals (aluminum, nickel).
Pg M6, COMMODITIES have been pressured by CHINA’s moves to cool speculation, reveal their national inventories, and possible trading from those inventories. Commodities were also hit post-FOMC meeting. But all that will not stop Dr COPPER (recent high on May 11) – bullish factors for copper include post-pandemic recovery, push for clean energy, government infrastructure spending, and long lead times required to develop copper mines. China consumes almost half of all copper produced globally.
Pg M5, OPTIONS. Plant-based milk (almonds, oat, soy) maker Oatly (OTLY), May IPO, also makes yogurts and cheeses. For holders, short-strangle (pairing selling-put with selling-call) is recommended for the bet that the stock remains rangebound.
(SP500 VIX 20.70, Nasdaq 100 VXN 22.43, SKEW 150.78 (high) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg M27, M33: An up week in EUROPE (Switzerland +1.30%, Norway -0.82%, Greece -1.42%) and a down week in ASIA (Taiwan +0.83%, Indonesia -2.55%). The equity CEF index (data to Thursday) underperformed the DJIA and its discount was -4%.
TREASURY* 3-mo yield 0.05%, 2-yr 0.26%, 5-yr 0.89%, 10-yr 1.45%, 30-yr 2.01%. DOLLAR jumped, DXY 92.321, +2% (M35). GOLD (Handy & Harman spot, Thursday) tanked to $1,773, -5.7% (M38); the gold-miners were crushed. (^XAU was at 141.82, -11.41% for the week)
*Treasury Yield-Curve www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield
Top FDIC insured savings deposit rates*: Money-market accounts 0.61%; 3-mo Jumbo CD 0.35%, 1-yr CDs 0.60%; 5-yr CDs 1.00% (M33).
*For local rates www.depositaccounts.com/banks/rates-map/
(BONUS from Part 2 include Cover Story, Up and Down Wall Street, Streetwise and these won’t be repeated in Part 2)
Pg 18: COVER STORY, “Self-Driving Cars Are Closer Than You Think”. There was too much hype on SELF-DRIVING/AUTONOMOUS VEHICLES (AVs), and disappointments, and some players sold off their operations (UBER, LYFT). Despite Elon MUSK’s boasts (and some drivers’ media stunts), TSLA is not there yet – its reliance on photo-sensors limits it to only AV Level 2 now (see below for scale). AV related stocks have sold off (-30% YTD, -50% from 52-wk highs). AV Level 3-5 players now include Motional (APTV and Hyundai joint-venture; APTV used to be Delphi at one time), Waymo (from GOOGL), Cruise (yes, from the old GM). AVs are expensive ($150K+) due to lots of sensors (photo-cameras, radar, lidar), regular checks, calibrations, and software upgrades. Lidar companies are struggling (INVZ, LAZR, OUST, VLDR, AEVA, CFAC). Good AV applications now are commercial as high costs of AVs can be justified there.
SAE AV Levels: 1&2 are driver-assist; 3 is with driver still in the seat as backup; 4 & 5 are truly autonomous without any human intervention.
SUPPLEMENT, Top 100 Women Financial Advisors, has soft advisory features plus top advisor listing.
Pg 7, UP & DOWN WALL STREET. Summer solstice on Sunday, June 20 typically would mean the start of Summer doldrums. But this time may be different – economy is REOPENING; the FED is shifting from ultraeasy to just easy. The FUTURES markets are pricing several rate hikes ahead of the timeframe indicated by the Fed. The talk of reducing QE has begun; formal plans may be announced at August Jackson Hole Fed annual meeting, with mortgage QE probably the first to be trimmed. It was as if the Fed put an expiration date on the current supereasy monetary policy regime. Volatility/VIX will rise especially as the FOMC members will claim their few minutes of fame on TV. The 10-yr peaked at 1.75% and is below 1.5% (that is the wrong way to 2%). YIELD-CURVE flattened post-FOMC and is that signaling economic slowdown ahead? MBS portfolios that hedge with Treasuries were hurt (mortgage rates rose, Treasury yields fell). As for the damage, metals/mining XME was down -12%, but oil did OK (XLE also has a generous yield). (There were so many crosscurrents this week, so don’t jump to any big conclusions)
Pg 11, STREETWISE. Several RETAIL and APPAREL stocks will benefit from returning to offices (RTO). Much of the current wardrobe (especially women’s) may be out of style or may not fit anymore. With thousands of clothing stores closed during the pandemic, and supply-chains still disrupted, apparel prices are uncharacteristically strong now. Beneficiaries include TGT, NKE, VFC, LEVI, AEO, BOOT, GPS, LULU (it is moving beyond yoga apparel), RL, M.M. LaFleur (private), SFIX (AI-based fits/styles) TDUP (used clothing). For accessories, TPR, CPRI.
(NOTE. Postings will be delayed to afternoon & evening on Saturday, 6/26/21)
(More later….)