Post by Admin/YBB on Oct 7, 2023 4:19:08 GMT -6
From Barron’s, October 9, 2023 (Part 1, Market Week+)
Pg 31, TRADER. While all eyes were on RATES, look instead at EARNINGS. After bottoming in Q2, earnings are expected rise a bit for Q3, more for quarters beyond. But earnings revisions have been aggressive and there may be disappointments. Important SP500 levels are 4,200, 4,100, 3,900 (some bearish strategists are around 3,500).
Big/magnificent-7 techs (AAPL, AMZN, GOOGL, META, MSFT, NVDA, TSLA) have become attractive now. Rising rates have been bad for growth stocks. Their P/Es are high, but so is their PEG ratio.
The media hype on the new weight-loss drugs has hit junk food/drink stocks such as Pepsi/PEP (-18% since May); consumer-staples ETF XLP is down -13%. Higher rates have also contributed to the decline in bond-proxies. But PEP revenues and earnings are rising.
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 11/1/23+ hold (cycle peak 5.25-5.50%)
FOMC 12/13/23+ hold
FOMC 1/31/24+ hold
FOMC 3/20/24+ hold
FOMC 5/1/24+ hold
(Cuts in mid/late-2024) (Probabilities for most rate-ranges aren’t high, so there can be some unexpected moves.)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -0.30%, SP500 +0.48%, Nasdaq Comp +1.60%, R2000 -2.22%. DJ Transports -1.08%; DJ Utilities -2.01% (relentless weekly drops as “growth” went out of utilities). (Rotating spot total bond BND -1.43%) US$ index (spot) -0.09% (remains too strong over 100), oil/WTI futures -8.81%, gold futures -0.97%.
YTD (index changes only), DJIA +0.79%, SP500 +12.22%, Nasdaq Comp +28.33%. (Rotating spot total bond BND -4.26%)
SENTIMENTS
In the hindsight, several sentiment indicators PEAKED around 7/20/23.
NYSE cumulative (5-day) A/D LINE fell for a 3rd week; ratio of winners:losers 1:3.
AAII Bull-Bear Spread -11.5% (low).
%Above 50-dMA for NYSE-listed stocks 19.68% (oversold; even more oversold for SP500 – on Tuesday, only 6.8% of SP500 stocks were above 50-dMA); Scale: oversold < 30, negative < 50, positive > 50, overbought > 70 (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 19.5% (oversold); Scale: oversold < 30, negative < 50, positive > 50, overbought > 70 (a proprietary index for %Above 75-dMA for selected 1,800 stocks). Unclear what day of the week it is released, but it seems to lag other sentiment indicators (Barron’s updates it on late-Fridays). The all-cap $NYA50R is typically closer to it than the large-cap $SPXA50R.
Pg 34, INTERNATIONAL. Beneficiaries of recoveries from Lat Am tech wreck are BRAZILIAN fintech Nu Holdings/NU and e-commerce/fintech Mercado Libre/MELI. They are also expanding in Mexico and elsewhere.
EXTRA, COMMODITIES. COAL may not have a long-term future, but coal stocks are HOT – AMR, ARCH, BTU, CEIX, HCC. The last coal ETF was liquidated in 2020. But prospects of coal suddenly turned by the Russia-Ukraine war that has disrupted the global energy markets. (Trading opportunity only)
Pg 35, OPTIONS. Some basic options TIPs: Look at a stock first, options on it second; avoid high volatility options; use simpler strategies like covered-call and cash-secured-puts before moving on to complex strategies (if ever); don’t get wedded to your hypothesis (so, get out of a trade if it starts to go against you); control risks instead of chasing profits.
(SP500 VIX 17.45, Nasdaq 100 VXN 21.41 (high), options SKEW 129.36 (high), bond MOVE 126.64 (Yahoo Finance data).
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 48: A BAD week in EUROPE again (Netherlands -0.14%, Norway -3.04%, Greece -4.97%) and a BAD week in ASIA again (Taiwan +1.21%, Japan -2.56%).
TREASURY* 3-mo yield 5.63%, 1-yr 5.43%, 2-yr 5.08%, 5-yr 4.75%, 10-yr 4.78%, 30-yr 4.95%;
REAL yields 5-yr 2.58%, 10-yr 2.47%, 30-yr 2.54%;
FRNs Index** 5.42% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
DOLLAR fell, ^DXY 106.10, -0.12% (pg 54; rising since mid-July, now near 11/2022 high). GOLD fell to 1,820, -2.7% (Handy & Harman spot, Thursday; pg 56); the gold-miners fell. (^XAU was at 106.66, -0.76% for the week)
Top FDIC insured savings deposit rates*** (This feature has been discontinued but see the link below)
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%.
(NOTE1 – the current semiannual inflation is +2.0562% (CPI-U, unadjusted) & next data on 10/12/23 will be used to determine the I-Bond variable rate on November 1)
(NOTE2 – the Social Security COLA will also be known on 10/12/23. It is based on the Q3 average of CPI-W and the estimates now are around +3.2% COLA for 2024)
*Treasury Yield-Curve home.treasury.gov/policy-issues/financing-the-government/interest-rate-statistics?data=yield
**Treasury Direct (I-Bonds + T-Bills/Notes/Bonds, FRNs, TIPS)
www.treasurydirect.gov/auctions/announcements-data-results/frn-daily/
www.treasurydirect.gov/marketable-securities/
***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 18, COVER STORY. Barron’s HEALTHCARE ROUNDTABLE. Panelists Ziad BAKRI/PRHSX; Asad HAIDER/GS, Jared HOLZ/Mizuho; Debra NETSCHERT/PHLAX.
Media is saturated with the headlines on the new diabetes/weight-loss dugs from LLY, NVO. Access for these drugs will improve with their insurance coverage and their availability in oral tablet forms. Tackling obesity through drugs may also benefit patients with heart disease, sleep apnea, etc, and would eliminate many bariatric surgeries.
But there is much more to the healthcare market. A huge issue is the federal DRUG-PRICING negotiations (for new and expensive drugs) allowed under the 2022 Inflation Reduction Act (2022 IRA). After a new drug is patented, there are years of drug trials (and many drugs fail), time consuming FDA approval(s) and then the commercial launch in the few remaining years of the patent life. The 2022 IRA may adversely affect that cycle and may even increase nongovernment drug pricing. There are multiple lawsuits pending, so there is a lot of uncertainty around a small number of new and expensive drugs. With the 2024 ELECTIONS, there may not be many changes in the healthcare legislation. The FTC hardline against most M&A may be a problem for healthcare as the industry and its investors want consolidation. There are also promising developments for Alzheimer’s (BIIB, Eisai, LLY), pain management with nonopioids (VRTX), depression, gene therapy, etc. Also mentioned are APLS, AZN, IMCR, MCK, MRK, PRTA, REGN, SRPT; healthcare providers HCA, HUM; medtech BSX.
Pg 7, UP AND DOWN WALL STREET. The JOBS REPORT was much better than expected. It temporarily drove the 30-yr yield to above 5%. However, wage gains were modest. The NEXT jobs report would be impacted adversely by labor STRIKES. The FOMC action on November 1 is less certain to some although the CME FedWatch shows rate holds all the way to May. The Fed-PUT has expired after 25+ years (so, the Fed may not come to the rescue if the stock market turns south). The CPI report is on Thursday (it’s a critical report for I-Bonds and Social Security COLA)
The DC DRAMA is bad for the stock and bond markets. With the Speaker-less House, the government SHUTDOWN may now be on November 17. With higher rates, the DEBT SEVICING costs are rising, as is the total federal DEBT. The annual budget DEFICIT for the uncertain FY2024 may be 6% of GDP, rather high for peaceful and strong economic times. Recent rise in the long-term rates reflect economic and political issues. Basically, the yield-curve has risen sharply on both ends, short and long. 2024 being the ELECTION year, don’t expect much progress on budget issues. The 30-yr briefly crossed 5% on Friday and the 10-yr is expected to be 5%+ soon; real-rates (TIPS yields) are also record high.
EXTRA. Musings on Donald TRUMP, Sam BANKMAN-FRIED and Elon MUSK who have been in the news for different reasons. Trump and SBF are on trials; SBF and Musk have biographies out. There may be some interesting interconnections among the three.
Pg 9, STREETWISE. Hurt by rising rates, REITs are now attractive. Their yields and FFOs are good; they trade at discounts from book values. REITs are better capitalized than private property owners and should benefit from the CRE weakness/consolidation; some bigger REITs may buy smaller REITs. There are growth/”hare” REITs – hotels (HST, RHP), industrial (CDP, FR), drug research facilities, apartments (ARE, CPT, UDR), senior housing (LTC, SBRA); and income/”tortoise” REITs – casinos (GLPI, VICI), nursing centers, ground leases. What about office REITs? Forget them! Headwinds include higher rates, tighter credit conditions, recession. (Real-estate has been a GICS sector since 2016; mREITs have remained with the financials.)
(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 31, TRADER. While all eyes were on RATES, look instead at EARNINGS. After bottoming in Q2, earnings are expected rise a bit for Q3, more for quarters beyond. But earnings revisions have been aggressive and there may be disappointments. Important SP500 levels are 4,200, 4,100, 3,900 (some bearish strategists are around 3,500).
Big/magnificent-7 techs (AAPL, AMZN, GOOGL, META, MSFT, NVDA, TSLA) have become attractive now. Rising rates have been bad for growth stocks. Their P/Es are high, but so is their PEG ratio.
The media hype on the new weight-loss drugs has hit junk food/drink stocks such as Pepsi/PEP (-18% since May); consumer-staples ETF XLP is down -13%. Higher rates have also contributed to the decline in bond-proxies. But PEP revenues and earnings are rising.
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 11/1/23+ hold (cycle peak 5.25-5.50%)
FOMC 12/13/23+ hold
FOMC 1/31/24+ hold
FOMC 3/20/24+ hold
FOMC 5/1/24+ hold
(Cuts in mid/late-2024) (Probabilities for most rate-ranges aren’t high, so there can be some unexpected moves.)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -0.30%, SP500 +0.48%, Nasdaq Comp +1.60%, R2000 -2.22%. DJ Transports -1.08%; DJ Utilities -2.01% (relentless weekly drops as “growth” went out of utilities). (Rotating spot total bond BND -1.43%) US$ index (spot) -0.09% (remains too strong over 100), oil/WTI futures -8.81%, gold futures -0.97%.
YTD (index changes only), DJIA +0.79%, SP500 +12.22%, Nasdaq Comp +28.33%. (Rotating spot total bond BND -4.26%)
SENTIMENTS
In the hindsight, several sentiment indicators PEAKED around 7/20/23.
NYSE cumulative (5-day) A/D LINE fell for a 3rd week; ratio of winners:losers 1:3.
AAII Bull-Bear Spread -11.5% (low).
%Above 50-dMA for NYSE-listed stocks 19.68% (oversold; even more oversold for SP500 – on Tuesday, only 6.8% of SP500 stocks were above 50-dMA); Scale: oversold < 30, negative < 50, positive > 50, overbought > 70 (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 19.5% (oversold); Scale: oversold < 30, negative < 50, positive > 50, overbought > 70 (a proprietary index for %Above 75-dMA for selected 1,800 stocks). Unclear what day of the week it is released, but it seems to lag other sentiment indicators (Barron’s updates it on late-Fridays). The all-cap $NYA50R is typically closer to it than the large-cap $SPXA50R.
Pg 34, INTERNATIONAL. Beneficiaries of recoveries from Lat Am tech wreck are BRAZILIAN fintech Nu Holdings/NU and e-commerce/fintech Mercado Libre/MELI. They are also expanding in Mexico and elsewhere.
EXTRA, COMMODITIES. COAL may not have a long-term future, but coal stocks are HOT – AMR, ARCH, BTU, CEIX, HCC. The last coal ETF was liquidated in 2020. But prospects of coal suddenly turned by the Russia-Ukraine war that has disrupted the global energy markets. (Trading opportunity only)
Pg 35, OPTIONS. Some basic options TIPs: Look at a stock first, options on it second; avoid high volatility options; use simpler strategies like covered-call and cash-secured-puts before moving on to complex strategies (if ever); don’t get wedded to your hypothesis (so, get out of a trade if it starts to go against you); control risks instead of chasing profits.
(SP500 VIX 17.45, Nasdaq 100 VXN 21.41 (high), options SKEW 129.36 (high), bond MOVE 126.64 (Yahoo Finance data).
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 48: A BAD week in EUROPE again (Netherlands -0.14%, Norway -3.04%, Greece -4.97%) and a BAD week in ASIA again (Taiwan +1.21%, Japan -2.56%).
TREASURY* 3-mo yield 5.63%, 1-yr 5.43%, 2-yr 5.08%, 5-yr 4.75%, 10-yr 4.78%, 30-yr 4.95%;
REAL yields 5-yr 2.58%, 10-yr 2.47%, 30-yr 2.54%;
FRNs Index** 5.42% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
DOLLAR fell, ^DXY 106.10, -0.12% (pg 54; rising since mid-July, now near 11/2022 high). GOLD fell to 1,820, -2.7% (Handy & Harman spot, Thursday; pg 56); the gold-miners fell. (^XAU was at 106.66, -0.76% for the week)
Top FDIC insured savings deposit rates*** (This feature has been discontinued but see the link below)
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%.
(NOTE1 – the current semiannual inflation is +2.0562% (CPI-U, unadjusted) & next data on 10/12/23 will be used to determine the I-Bond variable rate on November 1)
(NOTE2 – the Social Security COLA will also be known on 10/12/23. It is based on the Q3 average of CPI-W and the estimates now are around +3.2% COLA for 2024)
*Treasury Yield-Curve home.treasury.gov/policy-issues/financing-the-government/interest-rate-statistics?data=yield
**Treasury Direct (I-Bonds + T-Bills/Notes/Bonds, FRNs, TIPS)
www.treasurydirect.gov/auctions/announcements-data-results/frn-daily/
www.treasurydirect.gov/marketable-securities/
***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 18, COVER STORY. Barron’s HEALTHCARE ROUNDTABLE. Panelists Ziad BAKRI/PRHSX; Asad HAIDER/GS, Jared HOLZ/Mizuho; Debra NETSCHERT/PHLAX.
Media is saturated with the headlines on the new diabetes/weight-loss dugs from LLY, NVO. Access for these drugs will improve with their insurance coverage and their availability in oral tablet forms. Tackling obesity through drugs may also benefit patients with heart disease, sleep apnea, etc, and would eliminate many bariatric surgeries.
But there is much more to the healthcare market. A huge issue is the federal DRUG-PRICING negotiations (for new and expensive drugs) allowed under the 2022 Inflation Reduction Act (2022 IRA). After a new drug is patented, there are years of drug trials (and many drugs fail), time consuming FDA approval(s) and then the commercial launch in the few remaining years of the patent life. The 2022 IRA may adversely affect that cycle and may even increase nongovernment drug pricing. There are multiple lawsuits pending, so there is a lot of uncertainty around a small number of new and expensive drugs. With the 2024 ELECTIONS, there may not be many changes in the healthcare legislation. The FTC hardline against most M&A may be a problem for healthcare as the industry and its investors want consolidation. There are also promising developments for Alzheimer’s (BIIB, Eisai, LLY), pain management with nonopioids (VRTX), depression, gene therapy, etc. Also mentioned are APLS, AZN, IMCR, MCK, MRK, PRTA, REGN, SRPT; healthcare providers HCA, HUM; medtech BSX.
Pg 7, UP AND DOWN WALL STREET. The JOBS REPORT was much better than expected. It temporarily drove the 30-yr yield to above 5%. However, wage gains were modest. The NEXT jobs report would be impacted adversely by labor STRIKES. The FOMC action on November 1 is less certain to some although the CME FedWatch shows rate holds all the way to May. The Fed-PUT has expired after 25+ years (so, the Fed may not come to the rescue if the stock market turns south). The CPI report is on Thursday (it’s a critical report for I-Bonds and Social Security COLA)
The DC DRAMA is bad for the stock and bond markets. With the Speaker-less House, the government SHUTDOWN may now be on November 17. With higher rates, the DEBT SEVICING costs are rising, as is the total federal DEBT. The annual budget DEFICIT for the uncertain FY2024 may be 6% of GDP, rather high for peaceful and strong economic times. Recent rise in the long-term rates reflect economic and political issues. Basically, the yield-curve has risen sharply on both ends, short and long. 2024 being the ELECTION year, don’t expect much progress on budget issues. The 30-yr briefly crossed 5% on Friday and the 10-yr is expected to be 5%+ soon; real-rates (TIPS yields) are also record high.
EXTRA. Musings on Donald TRUMP, Sam BANKMAN-FRIED and Elon MUSK who have been in the news for different reasons. Trump and SBF are on trials; SBF and Musk have biographies out. There may be some interesting interconnections among the three.
Pg 9, STREETWISE. Hurt by rising rates, REITs are now attractive. Their yields and FFOs are good; they trade at discounts from book values. REITs are better capitalized than private property owners and should benefit from the CRE weakness/consolidation; some bigger REITs may buy smaller REITs. There are growth/”hare” REITs – hotels (HST, RHP), industrial (CDP, FR), drug research facilities, apartments (ARE, CPT, UDR), senior housing (LTC, SBRA); and income/”tortoise” REITs – casinos (GLPI, VICI), nursing centers, ground leases. What about office REITs? Forget them! Headwinds include higher rates, tighter credit conditions, recession. (Real-estate has been a GICS sector since 2016; mREITs have remained with the financials.)
(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).