Post by Admin/YBB on Jul 24, 2021 5:37:25 GMT -6
Pg M1, TRADER. After Monday’s selloff, major indexes reached new HIGHS. Q2 earnings have been very strong.
BUYBACKS are back. Shareholder yield is 3.9% (sum of dividend yield + buyback as % of market-cap). Companies can borrow cheaply to fund buybacks and/or M&A. Companies that are cash rich, and reduced buybacks in 2020 but had prior histories of buybacks, include NWL, DFS, CSCO, TXT, AMGN, etc.
ENERGY stocks have done well YTD (+30%) but may stall as this may be as good as it gets, according to GRAY/HSBC. Companies are moving at different paces toward renewable energy and carbon capture. Transition themes are not strong yet as companies are more focused on dividends, buybacks, debt reductions. Energy stocks look cheap but also have the risks of declining businesses. Other analysts are more optimistic (GROSH/JPM) and look for energy stocks to do well in the rest of 2021 (see related piece below on CRUDE OIL under Commodities).
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 May 2022 FOMC. Beyond, the probabilities of rate rise are in double-digit %; more than 50% for December 2022 FOMC and later.
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +1.08%, SP500 +1.96%, Nasdaq Comp +2.84%, R2000 +2.15%. DJ Transports +1.82%; DJ Utilities -1.10%. (Rotating spot energy XLE -0.33%) US$ index (spot) +0.24%, oil/WTI futures +0.36%, gold futures -0.72%.
YTD (index changes only), DJIA +14.56%, SP500 +17.46%, Nasdaq Comp +15.12%. (Rotating spot energy XLE +28.02%)
Pg M4, EUROPE. French-Italian eyewear giant EssilorLuxottica (ESLOY) completed their recent merger, and the new company is listed in France. It is now acquiring eyewear retailer GrandVision. Operations/brands include insurance EyeMed; retail stores LensCrafters, Pearle Vision, Sunglass Hut, etc; products (lens, frames) Armani, Bvlgari/Bulgari, Oakley, Prada, Ray-Ban, etc.
Pg M4, EMERGING MARKETS. Increase in the capital of IMF by $650 billion will provide a boost to IMF support for the EMs for Covid-19 recoveries to the tune of $230 billion. EMs can also access credit lines from IMF via Special Drawing Rights (SDRs).
Pg M6, COMMODITIES. Reemergence of Covid-19-X (Delta, etc) won’t hurt CRUDE OIL. There may be a ceiling of $80 with corrections along the way. OPEC/OPEC+ finally reached agreement on July 18 (just in time to bicker again at the next monthly meeting?) to increase the baseline productions for UAE and others starting May 2022. Oil demand may reach pre-pandemic level in 2022.
Pg M5, OPTIONS. If worried about Covid-19-Delta, consider a call spread for mRNA vaccine developer/maker Moderna/MRNA. It reports on Aug 5.
EXTRA: Options trading patterns have affected the market. The SP500 is up +9% in the morning/AM trades YTD (9:30am-1:00pm) and down -5% in the afternoon/PM trades (1:00pm-4:00pm). Many app-traders buy calls in the AM and sell them in the PM; the affected stocks show high daily call volumes but not much change in their open-interests. Another observation is that most of the gain (+28% over 12 months) in the SP500 is overnight (from the previous 4:00pm close to the next 9:30am open); the gain during the normal trading hours during the day was only +4%.
(SP500 VIX 17.20, Nasdaq 100 VXN 19.06, SKEW 159.44 (very high)) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg M20, M24: A good week in EUROPE (Netherlands +4.25%, Norway +0.07%, Greece -0.60%) and a bad week in ASIA (Singapore +3.01%, China -3.55%). The equity CEF index (data to Thursday) was in line with the DJIA and its discount was -4%.
TREASURY* 3-mo yield 0.05%, 2-yr 0.22%, 5-yr 0.72%, 10-yr 1.30%, 30-yr 1.92%. DOLLAR rose, DXY 92.92, +0.2% (M27). GOLD (Handy & Harman spot, Thursday) fell to $1,800, -1.4% (M30); the gold-miners fell. (^XAU was at 135.64, -1.40% 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 1.10% (M25).
*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 22: COVER STORY, “Rising Covid Cases Hang Heavy Over the TRAVEL INDUSTRY, Again. How to Play the Stocks Now”. Covid-19-Delta may hurt TRAVEL and LEISURE industry again (even before the sector recovered). Governments and businesses may soon reimpose some Covid-19 related restrictions. Business and group travel have been slow to recover and that has negatively impacted hotels and resorts that are open. There are labor shortages. Cruise lines, hotels/resorts, gaming/casinos are in different phases of recoveries. Many travel and leisure stocks ran up earlier in the expectations of recovery but have sold off. This gives another opportunity in this sector to selective investors. The stock market cannot decide whether the rotation is into value/cyclicals or growth and the level of uncertainty is high. Mentioned are HLT, HGV, HST, MGM, MGP, MAR, TNL, WH; CCL, RCL; CAR.
Pg 7, UP & DOWN WALL STREET. On Monday, investors were wondering “where was the bull”, and that turned into “here comes the bull” from Tuesday-Friday, thanks to DIP BUYERS. The 10-yr Treasury fell to 1.13% earlier in the week but ended UNCH for the week at 1.28% (but down significantly from 1.78% in late-March). FUND FLOWS have been very strong. DEBT financing/re-fi have also been strong; Carnival/CCL issued 4% notes to re-fi 11.5%notes issued just last year and it cannot thank the FED enough.
The FED is stoking the flames in red hot HOUSING market. The housing market is so hot (high demand, low supply) that it is affecting housing AFFORDABILITY and some homebuilder stocks (DH, etc) have sold off on good earnings and strong backlogs. That $120 billion/mo in QE ($80 billion/mo in Treasury-QE, $40 billion/mo in MBS-QE) has to go somewhere; note that the Fed is also reinvesting MBS interest and principal, and that is $60 billion/mo that the Fed is pumping back into the MBS. Yes, we had a steep and short 2-mo RECESSION in early-2020, but that was 15 months ago. The QEs are keeping the RATES down in the Treasury and mortgage markets. Bond market is anticipating reduction in MBS-QE before the Treasury-QE, so the MBS SPREADS have grown to 20-30 bps.
Pg 9, STREETWISE. Regulated UTILITIES are defensive plays but are relatively expensive now; the ETF is XLU. 3 attractive utilities are Duke (DUK; yield 3.8%; earnings growth 5-7%, so potential long-term TR is 8.8-10.8%; more renewable energy; activist Elliott Management wants to split it into 3), Public Service Enterprise Group (PEG; yield 4.4%), First Energy (FE; yield 4%). He is also nostalgic about Consolidated Edison (ED; yield 4.2%; nickname “ConEd”; the oldest listed stock on the NYSE but it has changed its name and ticker) because it sends HOUGH texts when his power may go out and then when it may be back, an impressive feat, he thinks, by a 198-yr old company.
(More later….)
BUYBACKS are back. Shareholder yield is 3.9% (sum of dividend yield + buyback as % of market-cap). Companies can borrow cheaply to fund buybacks and/or M&A. Companies that are cash rich, and reduced buybacks in 2020 but had prior histories of buybacks, include NWL, DFS, CSCO, TXT, AMGN, etc.
ENERGY stocks have done well YTD (+30%) but may stall as this may be as good as it gets, according to GRAY/HSBC. Companies are moving at different paces toward renewable energy and carbon capture. Transition themes are not strong yet as companies are more focused on dividends, buybacks, debt reductions. Energy stocks look cheap but also have the risks of declining businesses. Other analysts are more optimistic (GROSH/JPM) and look for energy stocks to do well in the rest of 2021 (see related piece below on CRUDE OIL under Commodities).
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 May 2022 FOMC. Beyond, the probabilities of rate rise are in double-digit %; more than 50% for December 2022 FOMC and later.
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +1.08%, SP500 +1.96%, Nasdaq Comp +2.84%, R2000 +2.15%. DJ Transports +1.82%; DJ Utilities -1.10%. (Rotating spot energy XLE -0.33%) US$ index (spot) +0.24%, oil/WTI futures +0.36%, gold futures -0.72%.
YTD (index changes only), DJIA +14.56%, SP500 +17.46%, Nasdaq Comp +15.12%. (Rotating spot energy XLE +28.02%)
Pg M4, EUROPE. French-Italian eyewear giant EssilorLuxottica (ESLOY) completed their recent merger, and the new company is listed in France. It is now acquiring eyewear retailer GrandVision. Operations/brands include insurance EyeMed; retail stores LensCrafters, Pearle Vision, Sunglass Hut, etc; products (lens, frames) Armani, Bvlgari/Bulgari, Oakley, Prada, Ray-Ban, etc.
Pg M4, EMERGING MARKETS. Increase in the capital of IMF by $650 billion will provide a boost to IMF support for the EMs for Covid-19 recoveries to the tune of $230 billion. EMs can also access credit lines from IMF via Special Drawing Rights (SDRs).
Pg M6, COMMODITIES. Reemergence of Covid-19-X (Delta, etc) won’t hurt CRUDE OIL. There may be a ceiling of $80 with corrections along the way. OPEC/OPEC+ finally reached agreement on July 18 (just in time to bicker again at the next monthly meeting?) to increase the baseline productions for UAE and others starting May 2022. Oil demand may reach pre-pandemic level in 2022.
Pg M5, OPTIONS. If worried about Covid-19-Delta, consider a call spread for mRNA vaccine developer/maker Moderna/MRNA. It reports on Aug 5.
EXTRA: Options trading patterns have affected the market. The SP500 is up +9% in the morning/AM trades YTD (9:30am-1:00pm) and down -5% in the afternoon/PM trades (1:00pm-4:00pm). Many app-traders buy calls in the AM and sell them in the PM; the affected stocks show high daily call volumes but not much change in their open-interests. Another observation is that most of the gain (+28% over 12 months) in the SP500 is overnight (from the previous 4:00pm close to the next 9:30am open); the gain during the normal trading hours during the day was only +4%.
(SP500 VIX 17.20, Nasdaq 100 VXN 19.06, SKEW 159.44 (very high)) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg M20, M24: A good week in EUROPE (Netherlands +4.25%, Norway +0.07%, Greece -0.60%) and a bad week in ASIA (Singapore +3.01%, China -3.55%). The equity CEF index (data to Thursday) was in line with the DJIA and its discount was -4%.
TREASURY* 3-mo yield 0.05%, 2-yr 0.22%, 5-yr 0.72%, 10-yr 1.30%, 30-yr 1.92%. DOLLAR rose, DXY 92.92, +0.2% (M27). GOLD (Handy & Harman spot, Thursday) fell to $1,800, -1.4% (M30); the gold-miners fell. (^XAU was at 135.64, -1.40% 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 1.10% (M25).
*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 22: COVER STORY, “Rising Covid Cases Hang Heavy Over the TRAVEL INDUSTRY, Again. How to Play the Stocks Now”. Covid-19-Delta may hurt TRAVEL and LEISURE industry again (even before the sector recovered). Governments and businesses may soon reimpose some Covid-19 related restrictions. Business and group travel have been slow to recover and that has negatively impacted hotels and resorts that are open. There are labor shortages. Cruise lines, hotels/resorts, gaming/casinos are in different phases of recoveries. Many travel and leisure stocks ran up earlier in the expectations of recovery but have sold off. This gives another opportunity in this sector to selective investors. The stock market cannot decide whether the rotation is into value/cyclicals or growth and the level of uncertainty is high. Mentioned are HLT, HGV, HST, MGM, MGP, MAR, TNL, WH; CCL, RCL; CAR.
Pg 7, UP & DOWN WALL STREET. On Monday, investors were wondering “where was the bull”, and that turned into “here comes the bull” from Tuesday-Friday, thanks to DIP BUYERS. The 10-yr Treasury fell to 1.13% earlier in the week but ended UNCH for the week at 1.28% (but down significantly from 1.78% in late-March). FUND FLOWS have been very strong. DEBT financing/re-fi have also been strong; Carnival/CCL issued 4% notes to re-fi 11.5%notes issued just last year and it cannot thank the FED enough.
The FED is stoking the flames in red hot HOUSING market. The housing market is so hot (high demand, low supply) that it is affecting housing AFFORDABILITY and some homebuilder stocks (DH, etc) have sold off on good earnings and strong backlogs. That $120 billion/mo in QE ($80 billion/mo in Treasury-QE, $40 billion/mo in MBS-QE) has to go somewhere; note that the Fed is also reinvesting MBS interest and principal, and that is $60 billion/mo that the Fed is pumping back into the MBS. Yes, we had a steep and short 2-mo RECESSION in early-2020, but that was 15 months ago. The QEs are keeping the RATES down in the Treasury and mortgage markets. Bond market is anticipating reduction in MBS-QE before the Treasury-QE, so the MBS SPREADS have grown to 20-30 bps.
Pg 9, STREETWISE. Regulated UTILITIES are defensive plays but are relatively expensive now; the ETF is XLU. 3 attractive utilities are Duke (DUK; yield 3.8%; earnings growth 5-7%, so potential long-term TR is 8.8-10.8%; more renewable energy; activist Elliott Management wants to split it into 3), Public Service Enterprise Group (PEG; yield 4.4%), First Energy (FE; yield 4%). He is also nostalgic about Consolidated Edison (ED; yield 4.2%; nickname “ConEd”; the oldest listed stock on the NYSE but it has changed its name and ticker) because it sends HOUGH texts when his power may go out and then when it may be back, an impressive feat, he thinks, by a 198-yr old company.
(More later….)