Post by Admin/YBB on May 21, 2022 5:33:22 GMT -6
Pg 27, TRADER (COVER STORY). The SP500 again missed the BEAR territory on closing basis. That may happen eventually, but there is already pain; Nasdaq Comp and R2000 are already in the bear territory. But where are the end-of-the-world headlines? Not even the trashing of solid WMT, TGT did that. Some previously strong sectors also rolled over (transportation XTN, consumer-staples XLP). The SP500 fwd P/E is 16.6 vs 21.5 on 1/1/22; sentiment is very poor. According to BoA/BAC, an average bear market decline over 140 years has been -37.3% (are you ready for SP500 3,000?) and average waterfall decline (like this one) -24.6% (well, SP500 3,617 isn’t that far away). A BOTTOM will be seen in the rearview mirror when there are a couple of explosive 10:1 gainer days; VIX spikes then recedes from 40+ (it has been 39 on 1/24/22, 38 on 2/24/22 & 3/8/22, 37 on 5/2/22); POWELL sticks to his current tough-love stance (and not flip-flop prematurely). Weeks long losing streaks are followed exceptionally strong rebounds. Just wait and hope.
Lost in the poor reports and brutal selloff in WMT, TGT, ROST, were better results for TJX, FL, DECK; BURL reports on May 26 (Thursday). These off-price retailers protected margins (at the expense of sales or market share) and managed inventories better. Yet their stocks also sold off and are attractive.
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.
4th & 5th rate hikes, FOMC 6/15/22+ (50 bps hike possible)
6th & 7th rate hike, FOMC 7/27/22+ (50 bps hike possible)
8th & 9th rate hike, FOMC 9/21/22+ (50 bps hike possible)
9th rate hike, FOMC 11/2/22+
10th rate hike FOMC 12/14/22+ (target 2.75-3.00%)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -2.90%, SP500 -3.05%, Nasdaq Comp -3.82%, R2000 -1.08%. DJ Transports -6.68%; DJ Utilities -0.19%. (Rotating spot retail XRT -9.44%) US$ index (spot) -1.46%, oil/WTI futures +2.48%, gold futures +1.90%.
YTD (index changes only), DJIA -13.97%, SP500 -18.14%, Nasdaq Comp -27.42%. (Rotating spot retail XRT -32.07%)
Pg 40: NYSE cumulative (5-day) A/D line fell for the 7th week.
Pg 31, EUROPE. Swiss CHOCOLATE maker Lindt & Spruengli (LDSVF; fwd P/E 44.1) has been hurt by labor and supply-chain issues. As a premium brand, it can pass on price increases; sales were very strong during the pandemic. New CEO will start in December. Sales grew in the US (37% of its sales; only 8% market share), Brazil, China, Japan.
Pg 31, EMERGING MARKETS. The EU and UK may soon (May 30-31 EU Summit) ban INSURANCE on Russian shipping. That may stop diversion of Russian oil to China and India. The EU will need a unanimous vote but Hungary, Greece, Cyprus, Malta are opposing this. As it is now, insurance premiums are about 10x the pre-war premiums and insurance may soon be 70% of the shipping costs.
Pg 32, OPTIONS. Covered calls on dividend-paying portfolio stocks (utilities, etc) are recommended (again).
(SP500 VIX 29.43 (high), Nasdaq 100 VXN 36.18 (high), options SKEW 122.32 (not high), bond MOVE 111.10 (high; new at YF) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 34, COMMODITIES. Indian EXPORT BAN (since relaxed a bit) was the latest shock to an already tight WHEAT market. Prices have more than doubled since July 2021 due to draught and War (lot of wheat stuck in Russia and Ukraine may just rot). But this may change by June/July when the new HARVEST data would be available. Consumers may also switch to relatively less expensive RICE. The ETF is WEAT. Speculative traders may be short wheat, long rice – beware of huge volatility.
Pg 45: A down week in EUROPE (Denmark +3.63%, Switzerland -2.98%) and a good week in ASIA (Philippines +5.51%, Malaysia +0.53%).
TREASURY* 3-mo yield 1.03%, 1-yr 2.07%, 2-yr 2.60%, 5-yr 2.80%, 10-yr 2.78%, 30-yr 2.99%. DOLLAR fell, ^DXY 103.03, -1.5%% (pg 50). GOLD rose to $1,834, +1.3% (Handy & Harman spot, Thursday) (pg 52); the gold-miners tanked again. (^XAU was at 129.52, +3.72% 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**, STALE DATA: Money-market accounts 0.70%; 3-mo Jumbo CD 0.38%, 1-yr CDs 1.23%; 5-yr CDs 2.47% (pg xx).
**For local rates www.depositaccounts.com/banks/rates-map/
US SAVINGS I-Bonds, current rate 9.62% (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 27: COVER STORY – TRADER (see above)
Pg 5, UP & DOWN WALL STREET. The SP500 had another NEAR-BEAR experience; Nasdaq Comp and R2000 have been in the bear market already. BoA/BAC suggests the SP500 bear targets of 3,600 (average waterfall bear) or 3,000 (average bear). There are lots of NEGATIVES around now – high inflation; slowing earnings growth; poor sentiment; widening corporate and HY spreads; declining LEI; weakening home sales; poor homebuilder sentiment; rising unemployment claims; falling (real) retail sales; financial asset deflation; disappearing fiscal and monetary stimulus. While many strategists remain bearish, Canadian BCA says to look where things may be in 6+ months vs now (global fwd P/E 15.3 only; 10-yr peaking?). (Yield-curve is likely to invert in Summer)
Stephanie POMBOY (MicroMavens) warns of PROFIT RECESSION, so beware buying dips (and of fwd P/Es). Among the NEGATIVES: End of fiscal stimulus; withdrawal of monetary stimulus (POWELL is VOLCKER 2.0); deflating financial assets; high inflation hurting consumer pocketbooks; profit margins under pressure (PPI > CPI, so most businesses are not able to pass through their cost increases); poor retail Q1 earnings. Among the POSITIVES are strong labor market and wage growth; strong housing. She is concerned about the growing discrepancy between the establishment and household job surveys. She likes CASH for now.
Pg 9, STREETWISE. When Walmart/WMT missed, investors thought that could be a fluke. But when Target/TGT missed, investors realized that they had a retail disaster on hand (Ross/ROST miss reinforced that). Other retail stocks also sold off. The SP500 Q1 EARNINGS were up +11.6% but Q2 earnings projections are still too high at +5.3% (they have been coming down gradually); the SP500 fwd P/E is 17. However, a recession (35% probability by GS) would hurt the SP500 more. Stocks may be fine over 10 years but near-term is anybody’s guess. Some firms (and advisors) are shopping for BARGAINS that seem to be already priced for recession – CVX, EA, QCOM, TROW, TSN, VRTX.
(More later….)
Accessible from Morningstar (M*), Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).
Lost in the poor reports and brutal selloff in WMT, TGT, ROST, were better results for TJX, FL, DECK; BURL reports on May 26 (Thursday). These off-price retailers protected margins (at the expense of sales or market share) and managed inventories better. Yet their stocks also sold off and are attractive.
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.
4th & 5th rate hikes, FOMC 6/15/22+ (50 bps hike possible)
6th & 7th rate hike, FOMC 7/27/22+ (50 bps hike possible)
8th & 9th rate hike, FOMC 9/21/22+ (50 bps hike possible)
9th rate hike, FOMC 11/2/22+
10th rate hike FOMC 12/14/22+ (target 2.75-3.00%)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -2.90%, SP500 -3.05%, Nasdaq Comp -3.82%, R2000 -1.08%. DJ Transports -6.68%; DJ Utilities -0.19%. (Rotating spot retail XRT -9.44%) US$ index (spot) -1.46%, oil/WTI futures +2.48%, gold futures +1.90%.
YTD (index changes only), DJIA -13.97%, SP500 -18.14%, Nasdaq Comp -27.42%. (Rotating spot retail XRT -32.07%)
Pg 40: NYSE cumulative (5-day) A/D line fell for the 7th week.
Pg 31, EUROPE. Swiss CHOCOLATE maker Lindt & Spruengli (LDSVF; fwd P/E 44.1) has been hurt by labor and supply-chain issues. As a premium brand, it can pass on price increases; sales were very strong during the pandemic. New CEO will start in December. Sales grew in the US (37% of its sales; only 8% market share), Brazil, China, Japan.
Pg 31, EMERGING MARKETS. The EU and UK may soon (May 30-31 EU Summit) ban INSURANCE on Russian shipping. That may stop diversion of Russian oil to China and India. The EU will need a unanimous vote but Hungary, Greece, Cyprus, Malta are opposing this. As it is now, insurance premiums are about 10x the pre-war premiums and insurance may soon be 70% of the shipping costs.
Pg 32, OPTIONS. Covered calls on dividend-paying portfolio stocks (utilities, etc) are recommended (again).
(SP500 VIX 29.43 (high), Nasdaq 100 VXN 36.18 (high), options SKEW 122.32 (not high), bond MOVE 111.10 (high; new at YF) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 34, COMMODITIES. Indian EXPORT BAN (since relaxed a bit) was the latest shock to an already tight WHEAT market. Prices have more than doubled since July 2021 due to draught and War (lot of wheat stuck in Russia and Ukraine may just rot). But this may change by June/July when the new HARVEST data would be available. Consumers may also switch to relatively less expensive RICE. The ETF is WEAT. Speculative traders may be short wheat, long rice – beware of huge volatility.
Pg 45: A down week in EUROPE (Denmark +3.63%, Switzerland -2.98%) and a good week in ASIA (Philippines +5.51%, Malaysia +0.53%).
TREASURY* 3-mo yield 1.03%, 1-yr 2.07%, 2-yr 2.60%, 5-yr 2.80%, 10-yr 2.78%, 30-yr 2.99%. DOLLAR fell, ^DXY 103.03, -1.5%% (pg 50). GOLD rose to $1,834, +1.3% (Handy & Harman spot, Thursday) (pg 52); the gold-miners tanked again. (^XAU was at 129.52, +3.72% 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**, STALE DATA: Money-market accounts 0.70%; 3-mo Jumbo CD 0.38%, 1-yr CDs 1.23%; 5-yr CDs 2.47% (pg xx).
**For local rates www.depositaccounts.com/banks/rates-map/
US SAVINGS I-Bonds, current rate 9.62% (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 27: COVER STORY – TRADER (see above)
Pg 5, UP & DOWN WALL STREET. The SP500 had another NEAR-BEAR experience; Nasdaq Comp and R2000 have been in the bear market already. BoA/BAC suggests the SP500 bear targets of 3,600 (average waterfall bear) or 3,000 (average bear). There are lots of NEGATIVES around now – high inflation; slowing earnings growth; poor sentiment; widening corporate and HY spreads; declining LEI; weakening home sales; poor homebuilder sentiment; rising unemployment claims; falling (real) retail sales; financial asset deflation; disappearing fiscal and monetary stimulus. While many strategists remain bearish, Canadian BCA says to look where things may be in 6+ months vs now (global fwd P/E 15.3 only; 10-yr peaking?). (Yield-curve is likely to invert in Summer)
Stephanie POMBOY (MicroMavens) warns of PROFIT RECESSION, so beware buying dips (and of fwd P/Es). Among the NEGATIVES: End of fiscal stimulus; withdrawal of monetary stimulus (POWELL is VOLCKER 2.0); deflating financial assets; high inflation hurting consumer pocketbooks; profit margins under pressure (PPI > CPI, so most businesses are not able to pass through their cost increases); poor retail Q1 earnings. Among the POSITIVES are strong labor market and wage growth; strong housing. She is concerned about the growing discrepancy between the establishment and household job surveys. She likes CASH for now.
Pg 9, STREETWISE. When Walmart/WMT missed, investors thought that could be a fluke. But when Target/TGT missed, investors realized that they had a retail disaster on hand (Ross/ROST miss reinforced that). Other retail stocks also sold off. The SP500 Q1 EARNINGS were up +11.6% but Q2 earnings projections are still too high at +5.3% (they have been coming down gradually); the SP500 fwd P/E is 17. However, a recession (35% probability by GS) would hurt the SP500 more. Stocks may be fine over 10 years but near-term is anybody’s guess. Some firms (and advisors) are shopping for BARGAINS that seem to be already priced for recession – CVX, EA, QCOM, TROW, TSN, VRTX.
(More later….)
Accessible from Morningstar (M*), Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).