Post by Admin/YBB on Apr 9, 2022 5:37:40 GMT -6
Pg 33, TRADER. More GROWTH SCARE this week from weakening economic data and partially inverted YIELD-CURVE. Aggressive FED talk on monetary tightening continued. Major indexes fell, and highly economically sensitive DJ Transports collapsed into a bear market. But Michael DARDA (MKM Partners) is optimistic and points to stable credit-spreads (despite a sharp selloff in bonds), rising inflation-expectations and higher metal prices, all signs of economic strength (not weakness). Valuations are high with fwd P/E 19.4 for SP500 (DJIA 17.7, Nasdaq Comp 27.5, growth-tech IGV 38.8) and there is volatility. Andrew SLIMMON (MS) says that growth highflyers will decline sharply and there won’t be a V-rebound (dip-buyers, take note).
After Russia-Ukraine war, DEFENSE stocks (GD, LMT, NOC, etc; ETF PPA) have rallied. General Dynamics/GD is attractive due to its defense and commercial businesses; it reports on April 27.
BUYBACKS are losing popularity. Several companies are putting more emphasis on dividends, growth/capex (SBUX, QCOM, etc). Rising RATES also favor dividends over buybacks. SP500 Q1 dividends were at a record and the dividend-growth for full 2022 may be +13%.
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 (+/- 0.25%). In the list below, more than 50% probability is used to indicate rate hike; “+” is shown after the FOMC date to indicate that rate hike can be at that or a later FOMC.
2nd & 3rd rate hike, FOMC 5/4/22+ (50 bps hike possible)
4th & 5th rate hikes, FOMC 6/15/22+ (50 bps hike possible)
6th & 7th rate hike, FOMC 7/27/22+
8th rate hike, FOMC 9/21/22+
9th rate hike, FOMC 11/2/22+
10th rate hike, FOMC 12/14/22+ (target 2.50-2.75%)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -0.28%, SP500 -1.27%, Nasdaq Comp -3.86%, R2000 -4.62%. DJ Transports -6.71% (amazing quick collapse into a bear market); DJ Utilities +1.28% (strong utilities typically signal lower rates ahead but that isn’t likely). (Rotating spot healthcare XLV +3.45%) US$ index (spot) +1.24%, oil/WTI futures -1.02%, gold futures +1.17%
YTD (index changes only), DJIA -4.45%, SP500 -5.83%, Nasdaq Comp -12.36%. (Rotating spot healthcare XLV +1.38%)
Pg 14, EUROPE (fits here better). A huge change due to Russia-Ukraine war will be that Europe will spend more on ENERGY (SHEL, TTE, RWEOY, etc) and DEFENSE (HAGHY, THLLY, etc). Be cautious in that the European stocks don’t account for possible recession.
Pg 36, EMERGING MARKETS. UKRAINE’s bid for the EU membership is a long shot. There is limited support for it now. There are 5 countries waiting ahead of Ukraine. It may have to live with the EU Partnership status.
Pg 37, OPTIONS. Basic options strategies are recommended for these uncertain times: Writing/selling calls on portfolio stocks; selling-puts on stocks one wants to buy (note Tesla/TSLA earnings in late-April).
(SP500 VIX 21.16, Nasdaq 100 VXN 28.06, SKEW 141.51 (high)) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg 38, COMMODITIES. GASOLINE prices at pumps will remain high. In a House subcommittee hearing, oil company executives said that the market is setting prices based on supply and demand. The pump prices lag CRUDE OIL prices by 2-4 days and seem to go up faster than they come down. Crude oil prices account for 54% of the pump prices and the net profit MARGINS at pump are only about 10c/gallon.
Pg 55, L54: A down week in EUROPE (Denmark +2.14%, Italy -3.39%) and a bad week in ASIA (India +0.80%, Philippines -2.93%). The equity CEF index (data to Thursday) underperformed the DJIA, and its discount was -0.2%.
TREASURY* 3-mo yield 0.70%, 1-yr 1.81%, 2-yr 2.53%, 5-yr 2.76%, 10-yr 2.72%, 30-yr 2.76%. DOLLAR rose, ^DXY 99.84, +1.2% (highest since 2016; yen continued collapsing; pg 57). GOLD rose to $1,941, +0.6% (Handy & Harman spot, Thursday) (pg 60); the gold-miners rose. (^XAU was at 163.63, +0.26% for the week)
*Treasury Yield-Curve home.treasury.gov/policy-issues/financing-the-government/interest-rate-statistics?data=yield
Top FDIC insured savings deposit rates**: Money-market accounts 0.70%; 3-mo Jumbo CD 0.35%, 1-yr CDs 1.10%; 5-yr CDs 2.47% (notable movements; pg L55).
**For local rates www.depositaccounts.com/banks/rates-map/
US SAVINGS I-Bonds, current rate 7.12% (annualized). Rates change on May 1 & Nov 1.
www.treasurydirect.gov/tdhome.htm
(BONUS from Part 2 include Cover Story, Up and Down Wall Street, Streetwise and these won’t be repeated in Part 2)
Pg 20: COVER STORY, “RETAIL CRIME is Hurting Companies and Making Inflation Worse. What Investors Should Know”. Retail thefts, break-ins, robberies (smash-and-grab, flash-mobs), card and merchandise return frauds are up sharply (+30% since the start of pandemic). Many robberies turn violent. Losses from these (0.07% of sales), expenses for enhanced security (including changes in store layouts) and high inflation are pressuring retail MARGINS. Organized crime has also moved in. Several groups involve juveniles knowing that they may face light punishments if caught. It is easy to sell stolen goods ONLINE. LAW enforcement has more important issues to tackle than minor retail thefts (under $1,000) and many go unreported; and many reported cases are not followed through by investigations or prosecutions. Store EMPLOYEES are often unprepared or untrained for these encounters; many are poorly paid and don’t need/like this added responsibility/risk for store security.
FUNDS QUARTERLY supplement will be in the Mutual Fund forum.
Pg 7, UP & DOWN WALL STREET. It is now the FED CHOIR on monetary tightening (QT or -QE; several 25-50 bps HIKES). Yet the Fed actions have barely begun. The new Fed policy tool may be “words”. The impact on stocks so far has been minor (except in some segments) but that on bonds is another matter. David ROSENBERG (own firm) notes that QT will have the effect of raising rates that will add to actual rate hikes. The CME FedWatch is now showing 3 50-bps hikes and 3 25-bps hikes with the fed funds to 2.50-2.75% by the yearend. The Fed balance sheet has high correlation (0.91) with stocks, so expect stocks to fall as the balance sheet shrinks. It may be time to shift some money from elevated stocks to depressed bonds.
Be ready for Summer stock PLUNGE that may be a buying opportunity. Poor SEASONALITY is from May 1 – October 31 (although things haven’t been good during the current “good” period, November 1 – April 30). The FED is tightening. The Midterm ELECTIONS are in November; many market bottoms have been in the Midterm election years. In the meantime, depressed bonds may offer a temporary hiding place from falling stocks until the stocks bottom.
Pg 11, STREETWISE. The worst AIRLINE (JetBlue/JBLU) made an offer for the 2nd worst (Spirit/SAVE) to top the offer by the 3rd worst (Frontier/ULCC). On this head-scratching news, JBLU and ULCC fell while SAVE was up but was far from the deal price. JBLU and SAVE do fly similar Airbus/EADSY models. The DOJ is suing JBLU on its partnership with American/AAL and it is unclear how the new deal will be viewed. The best airline now is Delta/DAL that also owns a small refinery; American/AAL and United/UAL are also attractive. But airlines are not for the faint-hearted.
EXTRA. Will Twitter/TWTR become a meme stock after Elon MUSK’s 9.2% stake? The new CEO Parag AGRAWAL (11/2021- ) invited Musk to join the board. If the stock becomes depressed, the buybacks may continue, but if the meme craze catches on, may be it should issue more stocks instead (like AMC, GME, etc).
(More later….)
After Russia-Ukraine war, DEFENSE stocks (GD, LMT, NOC, etc; ETF PPA) have rallied. General Dynamics/GD is attractive due to its defense and commercial businesses; it reports on April 27.
BUYBACKS are losing popularity. Several companies are putting more emphasis on dividends, growth/capex (SBUX, QCOM, etc). Rising RATES also favor dividends over buybacks. SP500 Q1 dividends were at a record and the dividend-growth for full 2022 may be +13%.
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 (+/- 0.25%). In the list below, more than 50% probability is used to indicate rate hike; “+” is shown after the FOMC date to indicate that rate hike can be at that or a later FOMC.
2nd & 3rd rate hike, FOMC 5/4/22+ (50 bps hike possible)
4th & 5th rate hikes, FOMC 6/15/22+ (50 bps hike possible)
6th & 7th rate hike, FOMC 7/27/22+
8th rate hike, FOMC 9/21/22+
9th rate hike, FOMC 11/2/22+
10th rate hike, FOMC 12/14/22+ (target 2.50-2.75%)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -0.28%, SP500 -1.27%, Nasdaq Comp -3.86%, R2000 -4.62%. DJ Transports -6.71% (amazing quick collapse into a bear market); DJ Utilities +1.28% (strong utilities typically signal lower rates ahead but that isn’t likely). (Rotating spot healthcare XLV +3.45%) US$ index (spot) +1.24%, oil/WTI futures -1.02%, gold futures +1.17%
YTD (index changes only), DJIA -4.45%, SP500 -5.83%, Nasdaq Comp -12.36%. (Rotating spot healthcare XLV +1.38%)
Pg 14, EUROPE (fits here better). A huge change due to Russia-Ukraine war will be that Europe will spend more on ENERGY (SHEL, TTE, RWEOY, etc) and DEFENSE (HAGHY, THLLY, etc). Be cautious in that the European stocks don’t account for possible recession.
Pg 36, EMERGING MARKETS. UKRAINE’s bid for the EU membership is a long shot. There is limited support for it now. There are 5 countries waiting ahead of Ukraine. It may have to live with the EU Partnership status.
Pg 37, OPTIONS. Basic options strategies are recommended for these uncertain times: Writing/selling calls on portfolio stocks; selling-puts on stocks one wants to buy (note Tesla/TSLA earnings in late-April).
(SP500 VIX 21.16, Nasdaq 100 VXN 28.06, SKEW 141.51 (high)) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg 38, COMMODITIES. GASOLINE prices at pumps will remain high. In a House subcommittee hearing, oil company executives said that the market is setting prices based on supply and demand. The pump prices lag CRUDE OIL prices by 2-4 days and seem to go up faster than they come down. Crude oil prices account for 54% of the pump prices and the net profit MARGINS at pump are only about 10c/gallon.
Pg 55, L54: A down week in EUROPE (Denmark +2.14%, Italy -3.39%) and a bad week in ASIA (India +0.80%, Philippines -2.93%). The equity CEF index (data to Thursday) underperformed the DJIA, and its discount was -0.2%.
TREASURY* 3-mo yield 0.70%, 1-yr 1.81%, 2-yr 2.53%, 5-yr 2.76%, 10-yr 2.72%, 30-yr 2.76%. DOLLAR rose, ^DXY 99.84, +1.2% (highest since 2016; yen continued collapsing; pg 57). GOLD rose to $1,941, +0.6% (Handy & Harman spot, Thursday) (pg 60); the gold-miners rose. (^XAU was at 163.63, +0.26% for the week)
*Treasury Yield-Curve home.treasury.gov/policy-issues/financing-the-government/interest-rate-statistics?data=yield
Top FDIC insured savings deposit rates**: Money-market accounts 0.70%; 3-mo Jumbo CD 0.35%, 1-yr CDs 1.10%; 5-yr CDs 2.47% (notable movements; pg L55).
**For local rates www.depositaccounts.com/banks/rates-map/
US SAVINGS I-Bonds, current rate 7.12% (annualized). Rates change on May 1 & Nov 1.
www.treasurydirect.gov/tdhome.htm
(BONUS from Part 2 include Cover Story, Up and Down Wall Street, Streetwise and these won’t be repeated in Part 2)
Pg 20: COVER STORY, “RETAIL CRIME is Hurting Companies and Making Inflation Worse. What Investors Should Know”. Retail thefts, break-ins, robberies (smash-and-grab, flash-mobs), card and merchandise return frauds are up sharply (+30% since the start of pandemic). Many robberies turn violent. Losses from these (0.07% of sales), expenses for enhanced security (including changes in store layouts) and high inflation are pressuring retail MARGINS. Organized crime has also moved in. Several groups involve juveniles knowing that they may face light punishments if caught. It is easy to sell stolen goods ONLINE. LAW enforcement has more important issues to tackle than minor retail thefts (under $1,000) and many go unreported; and many reported cases are not followed through by investigations or prosecutions. Store EMPLOYEES are often unprepared or untrained for these encounters; many are poorly paid and don’t need/like this added responsibility/risk for store security.
FUNDS QUARTERLY supplement will be in the Mutual Fund forum.
Pg 7, UP & DOWN WALL STREET. It is now the FED CHOIR on monetary tightening (QT or -QE; several 25-50 bps HIKES). Yet the Fed actions have barely begun. The new Fed policy tool may be “words”. The impact on stocks so far has been minor (except in some segments) but that on bonds is another matter. David ROSENBERG (own firm) notes that QT will have the effect of raising rates that will add to actual rate hikes. The CME FedWatch is now showing 3 50-bps hikes and 3 25-bps hikes with the fed funds to 2.50-2.75% by the yearend. The Fed balance sheet has high correlation (0.91) with stocks, so expect stocks to fall as the balance sheet shrinks. It may be time to shift some money from elevated stocks to depressed bonds.
Be ready for Summer stock PLUNGE that may be a buying opportunity. Poor SEASONALITY is from May 1 – October 31 (although things haven’t been good during the current “good” period, November 1 – April 30). The FED is tightening. The Midterm ELECTIONS are in November; many market bottoms have been in the Midterm election years. In the meantime, depressed bonds may offer a temporary hiding place from falling stocks until the stocks bottom.
Pg 11, STREETWISE. The worst AIRLINE (JetBlue/JBLU) made an offer for the 2nd worst (Spirit/SAVE) to top the offer by the 3rd worst (Frontier/ULCC). On this head-scratching news, JBLU and ULCC fell while SAVE was up but was far from the deal price. JBLU and SAVE do fly similar Airbus/EADSY models. The DOJ is suing JBLU on its partnership with American/AAL and it is unclear how the new deal will be viewed. The best airline now is Delta/DAL that also owns a small refinery; American/AAL and United/UAL are also attractive. But airlines are not for the faint-hearted.
EXTRA. Will Twitter/TWTR become a meme stock after Elon MUSK’s 9.2% stake? The new CEO Parag AGRAWAL (11/2021- ) invited Musk to join the board. If the stock becomes depressed, the buybacks may continue, but if the meme craze catches on, may be it should issue more stocks instead (like AMC, GME, etc).
(More later….)