Post by Admin/YBB on Aug 5, 2023 3:53:31 GMT -6
From Barron’s, August 7, 2023 (Part 1, Market Week+)
Pg 28, TRADER. Guess what – the stock market is rising and so are the Wall Street analysts’/strategists’ 2023 TARGETS (why don’t they do this ahead?). Some notable bears (Mike WILSON/MS, etc) have given up. This past week was rough – even though the earnings have been strong, and the job market is strong, the techs (including AAPL most recently) have disappointed (XLK YTD is fine), and Fitch’s downgrade of the US debt to AA+ from AAA was a good excuse for some profit taking. But the market is already looking beyond 2023 and for a better 2024. So, buy the dips.
UTILITIES (XLU) have been lagging (weekly move of -5% was large). Look for utilities that offer stable income and growth – DUK, ETR.
Eli Lilly (LLY; fwd P/E 42) has rallied on the news related to its Alzheimer’s drug donanemab (FDA approval pending) and weight loss drugs Mounjaro and Jardiance (originally for DM II). Take some profit.
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.
FOMC 9/20/23+ hold (cycle peak 5.25-5.50%)
FOMC 11/1/23+ hold
FOMC 12/13/23+ hold
(Cuts in 2024)
(Watch the news from Fed Jackson Hole Conf, August 24-26.)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -1.11%, SP500 -2.27%, Nasdaq Comp -2.85%, R2000 -1.21%. DJ Transports -2.25%; DJ Utilities -5.00% (large move). (Rotating spot tech XLK -3.81%) US$ index (spot) +0.37%, oil/WTI futures +2.78%, gold futures -1.06%.
YTD (index changes only), DJIA +5.79%, SP500 +16.63%, Nasdaq Comp +32.89%. (Rotating spot tech XLK +37.54%)
SENTIMENTS
NYSE cumulative (5-day) A/D LINE fell; ratio of winners:losers 1:2.
AAII Bull-Bear Spread +27.7% (high).
%Above 50-dMA for NYSE-listed stocks 63.55% (good) (StockCharts $NYA50R; $SPXA50R for the SP500 is also included in the bottom panel),
stockcharts.com/h-sc/ui?s=%24NYA50R&p=D&b=5&g=0&id=p91704957718 .
Delta MSI 79.1% (overbought) (a proprietary index for %Above 75-dMA for selected 1,800 stocks). The all-cap $NYA50R is typically closer to it than the large-cap $SPXA50R.
Pg 31, INTERNATIONAL. BRAZIL’s leftist President LULA (77) is getting things done and stocks (EWZ; fwd P/E 8 only) are doing well. Government spending has been reduced; rates are being cut. Nature has cooperated too – the crops are good. Some money that fled Brazil is gradually returning.
Pg 32, OPTIONS. Lagging financial XLF may benefit from higher rates. A pair of call-buy and put-sell is recommended. Risks include the FOMCs, Fed’s Jackson Hole conference, economic data.
(SP500 VIX 17.14, Nasdaq 100 VXN 22.05 (high), options SKEW 147.38 (high), bond MOVE 124.60 (sharp rise) (Yahoo Finance data).
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 45: An ugly week in EUROPE (Norway +0.03%, Spain -4.07%) and a bad week in ASIA (Indonesia +0.35%, HK -2.46%).
TREASURY* 3-mo yield 5.54%, 1-yr 5.33%, 2-yr 4.78%, 5-yr 4.15%, 10-yr 4.05%, 30-yr 4.21%. REAL yields 5-yr 1.89%, 10-yr 1.67%, 30-yr 1.87%.
DOLLAR rose, ^DXY 102.01, +0.40% (pg 50). GOLD fell to $1,942, -0.6% (Handy & Harman spot, Thursday; pg 52); the gold-miners fell. (^XAU was at 119.63, -3.73% for the week)
Top FDIC insured savings deposit rates** (This feature has been discontinued)
US SAVINGS I-Bonds^, NEW rate from May 1, 2023, is 4.30%; the fixed rate is +0.90%, the semiannual inflation is +1.69%.
*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 16, COVER STORY, “Restaurants Want More TEEN LABOR. Critics Say They’re Putting Kids at Risk of Sexual Harassment”. Restaurants and bars want to hire more teenagers but haven’t taken steps to avoid their exploitation. Dozen+ states have rolled back restrictions on underage workers. The US (EEOC, Congress) is also rethinking the child labor laws. Often the workers and managers lack training for dealing with harassment and there may not be formal reporting procedures. It has also become very expensive to hire and retain full-time workers.
Pg 7, UP AND DOWN WALL STREET. Higher bond YIELDS are here to stay. But are you prepared for long-term Treasury yields near or higher than the fed funds rate (Ackman was shorting long Treasuries, while Buffett continued to buy T-Bills)? What would that do to stocks and bonds? INFLATION isn’t going down and the FED won’t be cutting rates soon (the QT also continues at -$95 billion/month). In the end, the Fed will make everybody unhappy. Elsewhere, first the Fed staff and now BAC, JPM, etc have cancelled their recession calls. But the UM consumer sentiment is low despite rebounding some. Wages are rising. The CPI may have improved as much as it can for now (it doesn’t care about the Fed’s +2% average target).
Don’t blame FITCH for the US debt issues that led to its downgrade of the US sovereign debt to AA+ from AAA (now 2 out of big 3 ratings agencies have it as AA+). Fitch is just following what is in the market already. The US has the ability to pay its debt, but its willingness to haggle (debt-ceiling, etc) causes head scratching by foreigners. The US budget DEFICIT is about 6% of the GDP when the economy is strong. Treasury debt issuance has gone up significantly. At the same time, the FED is reducing its holding of Treasuries via the QT (-$60 billion/mo for Treasuries; total QT -$95 billion/mo) and foreign central banks are also reducing their dollar reserves (in response to dollar diplomacy). But there is only so much debt that the private market can absorb. The Government should implement plans to boost the economy and to reduce budget deficit (well, financial repression, or pain for consumers). Also, is the Fed’s +2% average inflation target the right number?
Pg 10, STREETWISE. Weight loss drugs are the new rage – Ozempic/Wegovy (NVO), Mounjaro (LLY), etc. These drugs were developed for diabetes/DM II but their weight loss effects have been amazing. It’s unclear whether insurance will cover these very expensive drugs for weight loss. One speculation is that these drugs may be hurting the medtechs (MDT, EW, BSX, ABT, SYK, BDX, BAX, JNJ, ZBH) and specialized bariatric (stomach-stapling) surgeries (ISRG). However, the selloff in these is a buying opportunity.
(EXTRAS from online Friday that didn’t make the weekend paper version)
See Column Topics. It seems some consolidation/rearrangement of Columns is going on.
(More later….)
Accessible from Morningstar (M*), PB-Big Bang, Facebook + Threads (“at”yogibearbull), Twitter (“at”YBB_Finance).
Pg 28, TRADER. Guess what – the stock market is rising and so are the Wall Street analysts’/strategists’ 2023 TARGETS (why don’t they do this ahead?). Some notable bears (Mike WILSON/MS, etc) have given up. This past week was rough – even though the earnings have been strong, and the job market is strong, the techs (including AAPL most recently) have disappointed (XLK YTD is fine), and Fitch’s downgrade of the US debt to AA+ from AAA was a good excuse for some profit taking. But the market is already looking beyond 2023 and for a better 2024. So, buy the dips.
UTILITIES (XLU) have been lagging (weekly move of -5% was large). Look for utilities that offer stable income and growth – DUK, ETR.
Eli Lilly (LLY; fwd P/E 42) has rallied on the news related to its Alzheimer’s drug donanemab (FDA approval pending) and weight loss drugs Mounjaro and Jardiance (originally for DM II). Take some profit.
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.
FOMC 9/20/23+ hold (cycle peak 5.25-5.50%)
FOMC 11/1/23+ hold
FOMC 12/13/23+ hold
(Cuts in 2024)
(Watch the news from Fed Jackson Hole Conf, August 24-26.)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -1.11%, SP500 -2.27%, Nasdaq Comp -2.85%, R2000 -1.21%. DJ Transports -2.25%; DJ Utilities -5.00% (large move). (Rotating spot tech XLK -3.81%) US$ index (spot) +0.37%, oil/WTI futures +2.78%, gold futures -1.06%.
YTD (index changes only), DJIA +5.79%, SP500 +16.63%, Nasdaq Comp +32.89%. (Rotating spot tech XLK +37.54%)
SENTIMENTS
NYSE cumulative (5-day) A/D LINE fell; ratio of winners:losers 1:2.
AAII Bull-Bear Spread +27.7% (high).
%Above 50-dMA for NYSE-listed stocks 63.55% (good) (StockCharts $NYA50R; $SPXA50R for the SP500 is also included in the bottom panel),
stockcharts.com/h-sc/ui?s=%24NYA50R&p=D&b=5&g=0&id=p91704957718 .
Delta MSI 79.1% (overbought) (a proprietary index for %Above 75-dMA for selected 1,800 stocks). The all-cap $NYA50R is typically closer to it than the large-cap $SPXA50R.
Pg 31, INTERNATIONAL. BRAZIL’s leftist President LULA (77) is getting things done and stocks (EWZ; fwd P/E 8 only) are doing well. Government spending has been reduced; rates are being cut. Nature has cooperated too – the crops are good. Some money that fled Brazil is gradually returning.
Pg 32, OPTIONS. Lagging financial XLF may benefit from higher rates. A pair of call-buy and put-sell is recommended. Risks include the FOMCs, Fed’s Jackson Hole conference, economic data.
(SP500 VIX 17.14, Nasdaq 100 VXN 22.05 (high), options SKEW 147.38 (high), bond MOVE 124.60 (sharp rise) (Yahoo Finance data).
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 45: An ugly week in EUROPE (Norway +0.03%, Spain -4.07%) and a bad week in ASIA (Indonesia +0.35%, HK -2.46%).
TREASURY* 3-mo yield 5.54%, 1-yr 5.33%, 2-yr 4.78%, 5-yr 4.15%, 10-yr 4.05%, 30-yr 4.21%. REAL yields 5-yr 1.89%, 10-yr 1.67%, 30-yr 1.87%.
DOLLAR rose, ^DXY 102.01, +0.40% (pg 50). GOLD fell to $1,942, -0.6% (Handy & Harman spot, Thursday; pg 52); the gold-miners fell. (^XAU was at 119.63, -3.73% for the week)
Top FDIC insured savings deposit rates** (This feature has been discontinued)
US SAVINGS I-Bonds^, NEW rate from May 1, 2023, is 4.30%; the fixed rate is +0.90%, the semiannual inflation is +1.69%.
*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 16, COVER STORY, “Restaurants Want More TEEN LABOR. Critics Say They’re Putting Kids at Risk of Sexual Harassment”. Restaurants and bars want to hire more teenagers but haven’t taken steps to avoid their exploitation. Dozen+ states have rolled back restrictions on underage workers. The US (EEOC, Congress) is also rethinking the child labor laws. Often the workers and managers lack training for dealing with harassment and there may not be formal reporting procedures. It has also become very expensive to hire and retain full-time workers.
Pg 7, UP AND DOWN WALL STREET. Higher bond YIELDS are here to stay. But are you prepared for long-term Treasury yields near or higher than the fed funds rate (Ackman was shorting long Treasuries, while Buffett continued to buy T-Bills)? What would that do to stocks and bonds? INFLATION isn’t going down and the FED won’t be cutting rates soon (the QT also continues at -$95 billion/month). In the end, the Fed will make everybody unhappy. Elsewhere, first the Fed staff and now BAC, JPM, etc have cancelled their recession calls. But the UM consumer sentiment is low despite rebounding some. Wages are rising. The CPI may have improved as much as it can for now (it doesn’t care about the Fed’s +2% average target).
Don’t blame FITCH for the US debt issues that led to its downgrade of the US sovereign debt to AA+ from AAA (now 2 out of big 3 ratings agencies have it as AA+). Fitch is just following what is in the market already. The US has the ability to pay its debt, but its willingness to haggle (debt-ceiling, etc) causes head scratching by foreigners. The US budget DEFICIT is about 6% of the GDP when the economy is strong. Treasury debt issuance has gone up significantly. At the same time, the FED is reducing its holding of Treasuries via the QT (-$60 billion/mo for Treasuries; total QT -$95 billion/mo) and foreign central banks are also reducing their dollar reserves (in response to dollar diplomacy). But there is only so much debt that the private market can absorb. The Government should implement plans to boost the economy and to reduce budget deficit (well, financial repression, or pain for consumers). Also, is the Fed’s +2% average inflation target the right number?
Pg 10, STREETWISE. Weight loss drugs are the new rage – Ozempic/Wegovy (NVO), Mounjaro (LLY), etc. These drugs were developed for diabetes/DM II but their weight loss effects have been amazing. It’s unclear whether insurance will cover these very expensive drugs for weight loss. One speculation is that these drugs may be hurting the medtechs (MDT, EW, BSX, ABT, SYK, BDX, BAX, JNJ, ZBH) and specialized bariatric (stomach-stapling) surgeries (ISRG). However, the selloff in these is a buying opportunity.
(EXTRAS from online Friday that didn’t make the weekend paper version)
See Column Topics. It seems some consolidation/rearrangement of Columns is going on.
(More later….)
Accessible from Morningstar (M*), PB-Big Bang, Facebook + Threads (“at”yogibearbull), Twitter (“at”YBB_Finance).