Post by Admin/YBB on Oct 16, 2021 6:50:21 GMT -6
Pg M1, TRADER. SUPPLY-CHAIN issues may not hold this bull market back. Dip buyers waiting for pullback/correction may have to soon think about a yearend rally. Typically volatile September was uneventful, and October is more than half gone. So, 6 weeks of directionless activity may be all that pessimist will get. Cyclicals and reopening plays may be good at this stage (financials, energy, etc).
RETAIL stocks rallied through the Labor Day but then stalled. However, there have been recent winners (M) and losers (JWN, BURL, TJX, ROST). There are concerns about supply-chain disruptions and lingering Covid-19. Discounters have been hurt more; they rely on clearing excess inventories from other big retailers but there isn’t much excess merchandise now. Also attractive are TGT, HD, LOW, TSCO.
Tesla/TSLA may beat low estimates on Wednesday, but its stock may not move (already +30% in 3 months). Its profit margins are under pressure like everybody else (so what’s new?).
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 January 2022 FOMC. Beyond, the probabilities of rate rise are in double-digit %; more than 50% for June 2022 FOMC and later. (significant movement towards higher rates sooner despite the Fed talk)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +1.58%, SP500 +1.82%, Nasdaq Comp +2.18%, R2000 +1.46%. DJ Transports +3.76%; DJ Utilities +1.56%. (Rotating spot retail XRT +0.91%) US$ index (spot) -0.12%, oil/WTI futures +3.69%, gold futures +0.62%.
YTD (index changes only), DJIA +15.32%, SP500 +19.04%, Nasdaq Comp +15.59%. (Rotating spot retail XRT +45.52%)
Pg M4, EUROPE. British American Tobacco (BTI; fwd P/E 7.3) is down but not out. It has added e-cigarettes Vuse, Glo Tobacco-heating products, Velo nicotine pouches to its traditional cigarette brands Lucky Strike, Newport, etc. Developing countries account for 70% of revenue.
Pg M4, EMERGING MARKETS. Indian market is expensive (INDA +25% YTD) as it has emerged from the depths of Covid-19 crisis in Spring. Economic growth +9.5% in 2021, +8.5% in 2022; sovereign rate 4%; foreign currency reserves strong; number of retail investors growing; Government privatizations picking up (airlines, insurance, etc). E-commerce/digital-transformations still offer opportunities for growth and many established companies are developing e-commerce units. Banks are also undervalued.
Pg M6, COMMODITIES. Winter heating bills will be high (+30% to +40%) due to high NATURAL GAS prices (futures-based UNG +105% YTD). Whether the US natural gas prices go higher would be clearer in December. The US EXPORTS of natural gas are strong as the prices in Europe and Asia are much higher. INVENTORIES are low. Companies are not rushing to increase PRODUCTION; most natural gas is byproduct of oil production. Some (but not all) users may shift from natural gas to oil.
Pg M5, OPTIONS. Investors may have become too cautious ahead of Q3 earnings. Stock SKEW has been high, meaning high levels of hedging activity. Any bit of good news may cause large upside moves in selected stocks. GS has a list of such stocks: SBUX, CNQ, YETI, CVE, CG, SBNY, ALGN, MRVI, FBHS, SHLS, CF, OKTA, PLTK, RSG. Suggested are short-term calls ahead of earnings for these.
(SP500 VIX 16.30, Nasdaq 100 VXN 18.51, SKEW 147.27 (high)) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg M23, M28: A good week in EUROPE (Sweden +4.55%, Spain +0.22%, Greece -0.92%) and a good week in ASIA (Philippines +4.12%, HK -0.18%). The equity CEF index (data to Thursday) outperformed the DJIA and its discount was -3%.
TREASURY* 3-mo yield 0.05%, 2-yr 0.41%, 5-yr 1.13%, 10-yr 1.59%, 30-yr 2.05%. DOLLAR fell, DXY 93.95, -0.1% (M31) (what’s with collapsing Japanese yen?). GOLD (Handy & Harman spot, Thursday) was flat at $1,773, UNCH (M34); the gold-miners rose. (^XAU was at 132.06, +6.72% 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 1.25% (M29).
*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 L4: COVER STORY, “Big Money Poll”.
US Stock Outlook: 50% bullish, 38% neutral, 12% bearish
SP500: 4,290-4,600 by December 2021; 4,108-4,812 by June 2022
Stock Correction (-10%): by 79%
Stock Bear Market (-20%): by 9%
Biggest Risks to Stocks: DC policy errors 17%, inflation 15%, rising rates 14%
US Stock Returns for Next Decade: 6-10% by 70%
Most Attractive Assets: US equities by 60%, gold 11%, commodities 11%
Most Attractive Sectors: Financials, IT, energy, consumer-discretionary
Invest in China: 20% via US ADRs, 15% via HK shares
Oil by June 2022: $74.48
Gold by June 2022: 1,836
US GDP Growth: 5-6% in 2021 by 61%; 3-4% in 2022 by 66%
Inflation: 3.5-4.5% in 2021 by 57%; 2.5-3.5% in 2022 by 63%
Fed Taper Start: 2021/H2 by 57%
Fed Rate Hike Start: 2022/H2 by 45%, 2023/H1 by 25%
10-Yr Yield in 1-Yr: 1.75-2.25% by 70%
Pg 7, UP & DOWN WALL STREET. Don’t fear STAGFLATION – low growth with high inflation. It can happen when supply constraints drive prices higher (now CPI +5.4%, PPI +8.6%), or higher prices cause lower demand. But retailers are ordering ahead, and President BIDEN has ordered ports to operate 24/7. Bottlenecks may start to disappear. Dr Copper was up +11% in a week and copper/gold ratio was the highest since 2013. Gradual reduction in monetary stimulus by the FED would favor value, cyclicals and reopening plays vs growth. Inflation may also be peaking, meaning that the stagflation condition may not be for long.
AAPL, MSFT, FB, AMZN, GOOGL account for 25% of the SP500 and have oversized influence on the SP500. Major indexes are back above 50-dMA. The 10-yr yield receded a bit; currently it has negative correlation with SP500 (but this is not always so). Big techs are facing regulatory headwinds and the pandemic-era tailwinds have subsided. Online retail sales are expected to fall sharply (-20%).
Pg, STREETWISE. Missing.
(More later….)
RETAIL stocks rallied through the Labor Day but then stalled. However, there have been recent winners (M) and losers (JWN, BURL, TJX, ROST). There are concerns about supply-chain disruptions and lingering Covid-19. Discounters have been hurt more; they rely on clearing excess inventories from other big retailers but there isn’t much excess merchandise now. Also attractive are TGT, HD, LOW, TSCO.
Tesla/TSLA may beat low estimates on Wednesday, but its stock may not move (already +30% in 3 months). Its profit margins are under pressure like everybody else (so what’s new?).
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 January 2022 FOMC. Beyond, the probabilities of rate rise are in double-digit %; more than 50% for June 2022 FOMC and later. (significant movement towards higher rates sooner despite the Fed talk)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +1.58%, SP500 +1.82%, Nasdaq Comp +2.18%, R2000 +1.46%. DJ Transports +3.76%; DJ Utilities +1.56%. (Rotating spot retail XRT +0.91%) US$ index (spot) -0.12%, oil/WTI futures +3.69%, gold futures +0.62%.
YTD (index changes only), DJIA +15.32%, SP500 +19.04%, Nasdaq Comp +15.59%. (Rotating spot retail XRT +45.52%)
Pg M4, EUROPE. British American Tobacco (BTI; fwd P/E 7.3) is down but not out. It has added e-cigarettes Vuse, Glo Tobacco-heating products, Velo nicotine pouches to its traditional cigarette brands Lucky Strike, Newport, etc. Developing countries account for 70% of revenue.
Pg M4, EMERGING MARKETS. Indian market is expensive (INDA +25% YTD) as it has emerged from the depths of Covid-19 crisis in Spring. Economic growth +9.5% in 2021, +8.5% in 2022; sovereign rate 4%; foreign currency reserves strong; number of retail investors growing; Government privatizations picking up (airlines, insurance, etc). E-commerce/digital-transformations still offer opportunities for growth and many established companies are developing e-commerce units. Banks are also undervalued.
Pg M6, COMMODITIES. Winter heating bills will be high (+30% to +40%) due to high NATURAL GAS prices (futures-based UNG +105% YTD). Whether the US natural gas prices go higher would be clearer in December. The US EXPORTS of natural gas are strong as the prices in Europe and Asia are much higher. INVENTORIES are low. Companies are not rushing to increase PRODUCTION; most natural gas is byproduct of oil production. Some (but not all) users may shift from natural gas to oil.
Pg M5, OPTIONS. Investors may have become too cautious ahead of Q3 earnings. Stock SKEW has been high, meaning high levels of hedging activity. Any bit of good news may cause large upside moves in selected stocks. GS has a list of such stocks: SBUX, CNQ, YETI, CVE, CG, SBNY, ALGN, MRVI, FBHS, SHLS, CF, OKTA, PLTK, RSG. Suggested are short-term calls ahead of earnings for these.
(SP500 VIX 16.30, Nasdaq 100 VXN 18.51, SKEW 147.27 (high)) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg M23, M28: A good week in EUROPE (Sweden +4.55%, Spain +0.22%, Greece -0.92%) and a good week in ASIA (Philippines +4.12%, HK -0.18%). The equity CEF index (data to Thursday) outperformed the DJIA and its discount was -3%.
TREASURY* 3-mo yield 0.05%, 2-yr 0.41%, 5-yr 1.13%, 10-yr 1.59%, 30-yr 2.05%. DOLLAR fell, DXY 93.95, -0.1% (M31) (what’s with collapsing Japanese yen?). GOLD (Handy & Harman spot, Thursday) was flat at $1,773, UNCH (M34); the gold-miners rose. (^XAU was at 132.06, +6.72% 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 1.25% (M29).
*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 L4: COVER STORY, “Big Money Poll”.
US Stock Outlook: 50% bullish, 38% neutral, 12% bearish
SP500: 4,290-4,600 by December 2021; 4,108-4,812 by June 2022
Stock Correction (-10%): by 79%
Stock Bear Market (-20%): by 9%
Biggest Risks to Stocks: DC policy errors 17%, inflation 15%, rising rates 14%
US Stock Returns for Next Decade: 6-10% by 70%
Most Attractive Assets: US equities by 60%, gold 11%, commodities 11%
Most Attractive Sectors: Financials, IT, energy, consumer-discretionary
Invest in China: 20% via US ADRs, 15% via HK shares
Oil by June 2022: $74.48
Gold by June 2022: 1,836
US GDP Growth: 5-6% in 2021 by 61%; 3-4% in 2022 by 66%
Inflation: 3.5-4.5% in 2021 by 57%; 2.5-3.5% in 2022 by 63%
Fed Taper Start: 2021/H2 by 57%
Fed Rate Hike Start: 2022/H2 by 45%, 2023/H1 by 25%
10-Yr Yield in 1-Yr: 1.75-2.25% by 70%
Pg 7, UP & DOWN WALL STREET. Don’t fear STAGFLATION – low growth with high inflation. It can happen when supply constraints drive prices higher (now CPI +5.4%, PPI +8.6%), or higher prices cause lower demand. But retailers are ordering ahead, and President BIDEN has ordered ports to operate 24/7. Bottlenecks may start to disappear. Dr Copper was up +11% in a week and copper/gold ratio was the highest since 2013. Gradual reduction in monetary stimulus by the FED would favor value, cyclicals and reopening plays vs growth. Inflation may also be peaking, meaning that the stagflation condition may not be for long.
AAPL, MSFT, FB, AMZN, GOOGL account for 25% of the SP500 and have oversized influence on the SP500. Major indexes are back above 50-dMA. The 10-yr yield receded a bit; currently it has negative correlation with SP500 (but this is not always so). Big techs are facing regulatory headwinds and the pandemic-era tailwinds have subsided. Online retail sales are expected to fall sharply (-20%).
Pg, STREETWISE. Missing.
(More later….)