Post by Admin/YBB on Oct 29, 2022 5:41:04 GMT -6
Pg 26, TRADER. A GREAT WEEK! Cyclical DJIA beat growthy Nasdaq Comp handily by the best margin in 45 years; for October (almost), DJIA +14.4%, R2000 +11%, SP500 +8.8%, Nasdaq Comp +5%. Nasdaq Comp got deflated by a big-tech-bust. There have been several runs of DJIA outperformance vs Nasdaq Comp (1978, 1980, 1992, some periods within the dot. com bust of 1999-2002) and this run may continue for a while.
Beneficiaries of RESHORING boom include industrials (HON, RTX, URI), techs (ROP), REITs (PLD), financials (PAYX), utilities (SRE).
Mondelez/MDLZ is a strong player in the better performing consumer-staples sector (XLP -7.8% YTD); but the sector P/Es are high. It has strong sales, pricing power and strong brands (Oreo, Chips Ahoy, Trident). Strong dollar is a headwind due to 80% of the sales non-US (including 35% from the EMs).
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.
13th , 14th & 15th rate hikes, FOMC 11/2/22+ (75 bps hike possible)
16th &, 17th rate hikes, FOMC 12/14/22+ (50 bps hike possible) (rate 4.25-4.50%)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +5.72%, SP500 +3.95%, Nasdaq Comp +2.24%, R2000 +6.01%. DJ Transports +6.95%; DJ Utilities +6.56%. (Rotating spot communication services XLC -2.23%) US$ index (spot) -1.19%, oil/WTI futures +3.35%, gold futures -0.69%.
YTD (index changes only), DJIA -9.57%, SP500 -18.15%, Nasdaq Comp -29.04%. (Rotating spot communication services XLC -38.88%)
Note. XLC data are widely cited in the media without pointing out that its top 2 include GOOGL/GOOG and META for 34.87%.
Pg 40: NYSE cumulative (5-day) A/D line rose for 2nd week; ratio of winners:losers 4:1. Missing – strong up-volume days in a very strong week (actually, the 2nd when few were expecting). (October is known not only for market crashes but also as a bear-killer month)
Pg 29, EUROPE. Dutch CHIP-EQUIPMENT maker ASML is having a rough year. Taiwan-based TSM is its biggest customer; the US has restricted some advanced chips-related exports to China. Demand for chip-equipment is high, and it takes 18 months from order to shipment (so low order cancellations), but ASML is experiencing delays in booking revenues. It is now using “fast shipments” where it does the final quality-control checks at customers’ sites (rather than at the factory).
Pg 29, EMERGING MARKETS. JAPAN cannot easily decouple from its #1 trading neighbor CHINA. This despite some unease about President’s XI’s policies and past Japanese unsuccessful efforts to diversify away from China. Japan is also facing the US pressures to curb advanced tech exports to China. Within Japan, the political and business opinions on China are also split.
Pg 30, OPTIONS. The UK political circus and the upcoming US elections on November 8 have caused lots of market uncertainties. Stocks are down sharply this year, and the FED remains on a tightening course. Recommended are long-term calls/leaps on broad indexes such as VTI.
(SP500 VIX 25.75 (high), Nasdaq 100 VXN 31.86 (high), options SKEW 112.06, bond MOVE 144.60 (high) (Yahoo Finance data).
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 32, COMMODITIES. Volatility of NATURAL GAS prices has been crazy high. Consumers have been shocked by their high gas bills. But the US natural gas prices have come down due to expectations of a milder Winter (La Nina will be back for the 3rd year). Europe also has good natural gas inventories (93%+ full) for the Winter. Trade with caution, if at all.
Pg 45: A great week in EUROPE (Spain +4.83%, Finland +1.53%, Greece +0.36%) and a down week in ASIA (Singapore +4.22%, China -8.09%) (Poor reception to XI’s 3rd term?) (Actually, all world areas did well except the China region).
TREASURY* 3-mo yield 4.18%, 1-yr 4.55%, 2-yr 4.41%, 5-yr 4.19%, 10-yr 4.02%, 30-yr 4.15%. REAL yields 5-yr 1.57%, 10-yr 1.51%, 30-yr 1.65%.
DOLLAR fell, ^DXY 110.67, -1% (pg 50). GOLD was flat at $1,648 (Handy & Harman spot, Thursday) (pg 52); the gold-miners were up. (^XAU was at 104.88, +1.15% for the week)
Top FDIC insured savings deposit rates** (This feature has been discontinued)
US SAVINGS I-Bonds^, current rate 9.62% (annualized). Rates change on May 1 & November 1 (Nov 1 estimates 6.47-8.02% based on fixed rates of 0-1.5%).
*Treasury Yield-Curve home.treasury.gov/policy-issues/financing-the-government/interest-rate-statistics?data=yield
**For local rates www.depositaccounts.com/banks/rates-map/
^Treasury Direct (I-Bonds + T-Bills/Notes/Bonds, FRNs, TIPS) www.treasurydirect.gov/marketable-securities/
(BONUS from Part 2 include Cover Story, Up and Down Wall Street, Streetwise and these won’t be repeated in Part 2)
Pg 14: COVER STORY, ”The Midterms Are Almost Here: What’s at Stake for the Economy”. Divided Congress may be the result, with Republicans in the House, Democrats barely hanging on to the Senate; but full control of Congress by the Republicans is also possible that will place the WH in a difficult situation. Read more details online or in the paper copy.
Pg 5, UP & DOWN WALL STREET. WHY are the markets going up in the face of continuing FED tightening? The PCE was +5.1%. The expectations are of +75 and +50 bps hikes, respectively, at the November and December FOMC meetings, but the longer-term Treasury yields and real/TIPS yields have been falling. The DOLLAR has eased; dollar index DXY moving below 108 (now 110.67) may be a huge turning point for the markets. Notably, this was a GREAT WEEK despite the shellacking of several BIG TECHS. The only explanation to all this is that Fed may PIVOT in early/mid-2023 (a pause?). Public and political pushbacks against the Fed tightening are also growing (in the US and globally).
Don’t expect the Midterm Elections (with Republicans potentially taking over the Congress) to have much impact on the markets because the FED is running the show. It’s different this time.
Pg 7, STREETWISE. Avoid CHINESE TECHS (BABA, etc) because they are screaming buys for very bad reasons. The ETF PFG of the US-listed Chinese ADRs is down sharply. President XI’s unprecedented 3rd term caused a new selloff in Chinese techs that have been in his crosshairs. There are US-China frictions on trade, tariffs, chips, HK, Taiwan, etc. The US-listed Chinese ADRs don’t provide you with the ownership of anything that you can hang on to; they are offshore creations to dodge the US and Chinese rules, and some legal ruling in the US or China can make them worthless overnight. (The MSCI China index is now negative over 30 years but had wild rollercoasters up/down in that period; pg 2)
(More later….)
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).
Beneficiaries of RESHORING boom include industrials (HON, RTX, URI), techs (ROP), REITs (PLD), financials (PAYX), utilities (SRE).
Mondelez/MDLZ is a strong player in the better performing consumer-staples sector (XLP -7.8% YTD); but the sector P/Es are high. It has strong sales, pricing power and strong brands (Oreo, Chips Ahoy, Trident). Strong dollar is a headwind due to 80% of the sales non-US (including 35% from the EMs).
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.
13th , 14th & 15th rate hikes, FOMC 11/2/22+ (75 bps hike possible)
16th &, 17th rate hikes, FOMC 12/14/22+ (50 bps hike possible) (rate 4.25-4.50%)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +5.72%, SP500 +3.95%, Nasdaq Comp +2.24%, R2000 +6.01%. DJ Transports +6.95%; DJ Utilities +6.56%. (Rotating spot communication services XLC -2.23%) US$ index (spot) -1.19%, oil/WTI futures +3.35%, gold futures -0.69%.
YTD (index changes only), DJIA -9.57%, SP500 -18.15%, Nasdaq Comp -29.04%. (Rotating spot communication services XLC -38.88%)
Note. XLC data are widely cited in the media without pointing out that its top 2 include GOOGL/GOOG and META for 34.87%.
Pg 40: NYSE cumulative (5-day) A/D line rose for 2nd week; ratio of winners:losers 4:1. Missing – strong up-volume days in a very strong week (actually, the 2nd when few were expecting). (October is known not only for market crashes but also as a bear-killer month)
Pg 29, EUROPE. Dutch CHIP-EQUIPMENT maker ASML is having a rough year. Taiwan-based TSM is its biggest customer; the US has restricted some advanced chips-related exports to China. Demand for chip-equipment is high, and it takes 18 months from order to shipment (so low order cancellations), but ASML is experiencing delays in booking revenues. It is now using “fast shipments” where it does the final quality-control checks at customers’ sites (rather than at the factory).
Pg 29, EMERGING MARKETS. JAPAN cannot easily decouple from its #1 trading neighbor CHINA. This despite some unease about President’s XI’s policies and past Japanese unsuccessful efforts to diversify away from China. Japan is also facing the US pressures to curb advanced tech exports to China. Within Japan, the political and business opinions on China are also split.
Pg 30, OPTIONS. The UK political circus and the upcoming US elections on November 8 have caused lots of market uncertainties. Stocks are down sharply this year, and the FED remains on a tightening course. Recommended are long-term calls/leaps on broad indexes such as VTI.
(SP500 VIX 25.75 (high), Nasdaq 100 VXN 31.86 (high), options SKEW 112.06, bond MOVE 144.60 (high) (Yahoo Finance data).
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 32, COMMODITIES. Volatility of NATURAL GAS prices has been crazy high. Consumers have been shocked by their high gas bills. But the US natural gas prices have come down due to expectations of a milder Winter (La Nina will be back for the 3rd year). Europe also has good natural gas inventories (93%+ full) for the Winter. Trade with caution, if at all.
Pg 45: A great week in EUROPE (Spain +4.83%, Finland +1.53%, Greece +0.36%) and a down week in ASIA (Singapore +4.22%, China -8.09%) (Poor reception to XI’s 3rd term?) (Actually, all world areas did well except the China region).
TREASURY* 3-mo yield 4.18%, 1-yr 4.55%, 2-yr 4.41%, 5-yr 4.19%, 10-yr 4.02%, 30-yr 4.15%. REAL yields 5-yr 1.57%, 10-yr 1.51%, 30-yr 1.65%.
DOLLAR fell, ^DXY 110.67, -1% (pg 50). GOLD was flat at $1,648 (Handy & Harman spot, Thursday) (pg 52); the gold-miners were up. (^XAU was at 104.88, +1.15% for the week)
Top FDIC insured savings deposit rates** (This feature has been discontinued)
US SAVINGS I-Bonds^, current rate 9.62% (annualized). Rates change on May 1 & November 1 (Nov 1 estimates 6.47-8.02% based on fixed rates of 0-1.5%).
*Treasury Yield-Curve home.treasury.gov/policy-issues/financing-the-government/interest-rate-statistics?data=yield
**For local rates www.depositaccounts.com/banks/rates-map/
^Treasury Direct (I-Bonds + T-Bills/Notes/Bonds, FRNs, TIPS) www.treasurydirect.gov/marketable-securities/
(BONUS from Part 2 include Cover Story, Up and Down Wall Street, Streetwise and these won’t be repeated in Part 2)
Pg 14: COVER STORY, ”The Midterms Are Almost Here: What’s at Stake for the Economy”. Divided Congress may be the result, with Republicans in the House, Democrats barely hanging on to the Senate; but full control of Congress by the Republicans is also possible that will place the WH in a difficult situation. Read more details online or in the paper copy.
Pg 5, UP & DOWN WALL STREET. WHY are the markets going up in the face of continuing FED tightening? The PCE was +5.1%. The expectations are of +75 and +50 bps hikes, respectively, at the November and December FOMC meetings, but the longer-term Treasury yields and real/TIPS yields have been falling. The DOLLAR has eased; dollar index DXY moving below 108 (now 110.67) may be a huge turning point for the markets. Notably, this was a GREAT WEEK despite the shellacking of several BIG TECHS. The only explanation to all this is that Fed may PIVOT in early/mid-2023 (a pause?). Public and political pushbacks against the Fed tightening are also growing (in the US and globally).
Don’t expect the Midterm Elections (with Republicans potentially taking over the Congress) to have much impact on the markets because the FED is running the show. It’s different this time.
Pg 7, STREETWISE. Avoid CHINESE TECHS (BABA, etc) because they are screaming buys for very bad reasons. The ETF PFG of the US-listed Chinese ADRs is down sharply. President XI’s unprecedented 3rd term caused a new selloff in Chinese techs that have been in his crosshairs. There are US-China frictions on trade, tariffs, chips, HK, Taiwan, etc. The US-listed Chinese ADRs don’t provide you with the ownership of anything that you can hang on to; they are offshore creations to dodge the US and Chinese rules, and some legal ruling in the US or China can make them worthless overnight. (The MSCI China index is now negative over 30 years but had wild rollercoasters up/down in that period; pg 2)
(More later….)
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).