Post by Admin/YBB on Oct 14, 2023 4:11:20 GMT -6
From Barron’s, October 16, 2023 (Part 1, Market Week+)
Pg 24, TRADER. The FED-PIVOT is coming. The long end of the BOND market is doing some additional tightening. The Fed may be content with higher rates for longer. The CME FedWatch also has a similar message (a rare concurrence). Soft landing then may become a reality.
Real EARNINGs news will be with the magnificent-8 big-techs (for SP500, 30% market-cap, but only 10% revenues, 16% earnings) starting from October 18 (Wednesday). The market doesn’t care as much for financials earnings starting from October 13 (Friday); and whose idea was it to name this as earnings season kick off as several companies (21) have already reported. The AI hype can only go so far but get ready for the negative impacts of the AI capex first.
OIL may still work as a hedge for events in the Middle East and other geopolitical events. Expectations so far are that Israel-Hamas conflict may not spread. The US is now also a big oil exporter, so it isn’t affected as much by oil; it also has a dwindling SPR. Mentioned are futures-based USO, UCO; BNO; oil producers’ ETF IEO.
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 some 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 +0.79%, SP500 +0.45%, Nasdaq Comp -0.18%, R2000 -1.48%. DJ Transports -0.73%; DJ Utilities +3.05%. (Rotating spot intermediate Treasuries IEF +1.30%) US$ index (spot) +0.59% (remains too strong over 100), oil/WTI futures +5.92%, gold futures +5.31%.
YTD (index changes only), DJIA +1.58%, SP500 +12.72%, Nasdaq Comp +28.10%. (Rotating spot intermediate Treasuries IEF -4.74%)
SENTIMENTS
NYSE cumulative (5-day) A/D LINE rose; ratio of winners:losers 3:1.
AAII Bull-Bear Spread +3.5% (below average).
%Above 50-dMA for NYSE-listed stocks 24.91% (oversold); 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 21.7% (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 27, INTERNATIONAL TRADER. Chinese state-owned Comac is emerging as a new competitor for Boeing/BA and Airbus/EADSY. Its entry with C919 (3,500-mile range) isn’t an immediate threat to Boeing 737 and Airbus A-320. The international certification process and ramping up production will take years. Initially, it may be cleared within China and by some countries friendly with (or dependent on) China. Another issue is that C919 uses many imported parts from GE, Safran/SAFRY, HON, Collins/RTX. Comac and other Chinese commercial aviation companies aren’t seen as military threats and have escaped sanctions so far, but that could change. Airbus has also started some local production in China for the sake of better relations with China.
Pg 28, OPTIONS. DO NOTHING for now. Hide in T-Bills and money-market funds. There are too many surprising things going on in the world. Better opportunities will come for playing with options. (Unusual view when options are supposed to hedge for all eventualities. But beware when professionals step aside in frustration.)
(SP500 VIX 19.32, Nasdaq 100 VXN 22.75 (high), options SKEW 144.30 (high), bond MOVE 128.33 (high) (Yahoo Finance data).
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 41: An up week in EUROPE (Denmark +5.92%, France -1.32%) and a good week in ASIA (Japan +2,02%, Indonesia -0.47%).
TREASURY* 3-mo yield 5.62%, 1-yr 5.41%, 2-yr 5.04%, 5-yr 4.65%, 10-yr 4.63%, 30-yr 4.78%;
REAL yields 5-yr 2.39%, 10-yr 2.29%, 30-yr 2.38%;
FRNs Index** 5.41% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
DOLLAR rose, ^DXY 106.63, +0.6% (pg 46; rising since mid-July). GOLD rose to 1,857, +1.69% (Handy & Harman spot, Thursday; pg 48); the gold-miners rose sharply. (^XAU was at 114.35, +7.21% 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 NEW semiannual inflation for I-Bonds is +1.9723% (CPI-U, unadjusted). Assuming base/fixed rate as 0.9-1.5%, the estimated I-Bond rate range on 11/1/23 is 4.86-5.47%.)
(NOTE2 – The Social Security COLA for 2024, based on the Q3 average of CPI-W, is +3.2%)
*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 16, COVER STORY “How Global Conflict Led to a Surprising Plan to Make Apple CHIPS in a Desert”. Chip manufactures TSM (a major supplier for AAPL and others), INTC, GFS, Samsung Electronics, etc are rushing to the water-scarce Arizona; there are new chip facilities in other US states too, Ohio, Texas, etc. This is part of the huge US reshoring effort that is bringing critical manufacturing to/near the US. However, there are several issues that are slowing construction of these facilities in Arizona – local approvals, labor (availability and complaints), timing of government subsidies, etc.
Pg 7, UP AND DOWN WALL STREET. BIG TECH will continue to lead this market – ignore the criticism or jokes about the Magnificent-7 or 8. There are many GEOPOLITICAL risks now that tend to favor large-caps – Israel-Hamas conflict was just added to those. INFLATION remains sticky. The 30-yr Treasury auction was poor. October has a bad market reputation. So, what did the SP500 do? It went up a bit for the week despite all that. Good SEASONALITY is here or approaching (November 1 – April 30). The strength of Magnificent-7 or 8 may end someday, but not now, nor this year. Their fwd P/Es are high, but PEGs are OK. BULLs have the benefit of doubt for now.
Post GFC (2008-09), Bank of America/BAC was growing fine, but now it has become a problem child after rates started rising in mid-2022. There are huge portfolio losses (HTM + AFS). Its CDS surged to 97.3 bps (from 50 bps), and that is even worse than those for C and WFC. But there is some hope as the rates are peaking.
Pg 9, STREETWISE. The consensus on Q3 EARNINGS growth ranges from 0% to low-single-digit-%. There were wide swings in oil prices that may hurt the energy sector earnings. The earnings median may differ a lot from the weighted average. Big BANKs kick off the official EARNINGS SEASON although 21 SP500 companies have already reported. Another pattern is that early reported earnings tend to be better than those reported later. Communications (with META, GOOGL, NFLX) and consumer-discretionary (with AMZN, TSLA) should have the best Q3 earnings. There will also be big upside or downside surprises, with positive surprises for ACGR, PHM, HD, CTAS, WDC; and negative surprises for SCHW, RHI, EFX.
(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 24, TRADER. The FED-PIVOT is coming. The long end of the BOND market is doing some additional tightening. The Fed may be content with higher rates for longer. The CME FedWatch also has a similar message (a rare concurrence). Soft landing then may become a reality.
Real EARNINGs news will be with the magnificent-8 big-techs (for SP500, 30% market-cap, but only 10% revenues, 16% earnings) starting from October 18 (Wednesday). The market doesn’t care as much for financials earnings starting from October 13 (Friday); and whose idea was it to name this as earnings season kick off as several companies (21) have already reported. The AI hype can only go so far but get ready for the negative impacts of the AI capex first.
OIL may still work as a hedge for events in the Middle East and other geopolitical events. Expectations so far are that Israel-Hamas conflict may not spread. The US is now also a big oil exporter, so it isn’t affected as much by oil; it also has a dwindling SPR. Mentioned are futures-based USO, UCO; BNO; oil producers’ ETF IEO.
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 some 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 +0.79%, SP500 +0.45%, Nasdaq Comp -0.18%, R2000 -1.48%. DJ Transports -0.73%; DJ Utilities +3.05%. (Rotating spot intermediate Treasuries IEF +1.30%) US$ index (spot) +0.59% (remains too strong over 100), oil/WTI futures +5.92%, gold futures +5.31%.
YTD (index changes only), DJIA +1.58%, SP500 +12.72%, Nasdaq Comp +28.10%. (Rotating spot intermediate Treasuries IEF -4.74%)
SENTIMENTS
NYSE cumulative (5-day) A/D LINE rose; ratio of winners:losers 3:1.
AAII Bull-Bear Spread +3.5% (below average).
%Above 50-dMA for NYSE-listed stocks 24.91% (oversold); 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 21.7% (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 27, INTERNATIONAL TRADER. Chinese state-owned Comac is emerging as a new competitor for Boeing/BA and Airbus/EADSY. Its entry with C919 (3,500-mile range) isn’t an immediate threat to Boeing 737 and Airbus A-320. The international certification process and ramping up production will take years. Initially, it may be cleared within China and by some countries friendly with (or dependent on) China. Another issue is that C919 uses many imported parts from GE, Safran/SAFRY, HON, Collins/RTX. Comac and other Chinese commercial aviation companies aren’t seen as military threats and have escaped sanctions so far, but that could change. Airbus has also started some local production in China for the sake of better relations with China.
Pg 28, OPTIONS. DO NOTHING for now. Hide in T-Bills and money-market funds. There are too many surprising things going on in the world. Better opportunities will come for playing with options. (Unusual view when options are supposed to hedge for all eventualities. But beware when professionals step aside in frustration.)
(SP500 VIX 19.32, Nasdaq 100 VXN 22.75 (high), options SKEW 144.30 (high), bond MOVE 128.33 (high) (Yahoo Finance data).
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 41: An up week in EUROPE (Denmark +5.92%, France -1.32%) and a good week in ASIA (Japan +2,02%, Indonesia -0.47%).
TREASURY* 3-mo yield 5.62%, 1-yr 5.41%, 2-yr 5.04%, 5-yr 4.65%, 10-yr 4.63%, 30-yr 4.78%;
REAL yields 5-yr 2.39%, 10-yr 2.29%, 30-yr 2.38%;
FRNs Index** 5.41% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
DOLLAR rose, ^DXY 106.63, +0.6% (pg 46; rising since mid-July). GOLD rose to 1,857, +1.69% (Handy & Harman spot, Thursday; pg 48); the gold-miners rose sharply. (^XAU was at 114.35, +7.21% 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 NEW semiannual inflation for I-Bonds is +1.9723% (CPI-U, unadjusted). Assuming base/fixed rate as 0.9-1.5%, the estimated I-Bond rate range on 11/1/23 is 4.86-5.47%.)
(NOTE2 – The Social Security COLA for 2024, based on the Q3 average of CPI-W, is +3.2%)
*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 16, COVER STORY “How Global Conflict Led to a Surprising Plan to Make Apple CHIPS in a Desert”. Chip manufactures TSM (a major supplier for AAPL and others), INTC, GFS, Samsung Electronics, etc are rushing to the water-scarce Arizona; there are new chip facilities in other US states too, Ohio, Texas, etc. This is part of the huge US reshoring effort that is bringing critical manufacturing to/near the US. However, there are several issues that are slowing construction of these facilities in Arizona – local approvals, labor (availability and complaints), timing of government subsidies, etc.
Pg 7, UP AND DOWN WALL STREET. BIG TECH will continue to lead this market – ignore the criticism or jokes about the Magnificent-7 or 8. There are many GEOPOLITICAL risks now that tend to favor large-caps – Israel-Hamas conflict was just added to those. INFLATION remains sticky. The 30-yr Treasury auction was poor. October has a bad market reputation. So, what did the SP500 do? It went up a bit for the week despite all that. Good SEASONALITY is here or approaching (November 1 – April 30). The strength of Magnificent-7 or 8 may end someday, but not now, nor this year. Their fwd P/Es are high, but PEGs are OK. BULLs have the benefit of doubt for now.
Post GFC (2008-09), Bank of America/BAC was growing fine, but now it has become a problem child after rates started rising in mid-2022. There are huge portfolio losses (HTM + AFS). Its CDS surged to 97.3 bps (from 50 bps), and that is even worse than those for C and WFC. But there is some hope as the rates are peaking.
Pg 9, STREETWISE. The consensus on Q3 EARNINGS growth ranges from 0% to low-single-digit-%. There were wide swings in oil prices that may hurt the energy sector earnings. The earnings median may differ a lot from the weighted average. Big BANKs kick off the official EARNINGS SEASON although 21 SP500 companies have already reported. Another pattern is that early reported earnings tend to be better than those reported later. Communications (with META, GOOGL, NFLX) and consumer-discretionary (with AMZN, TSLA) should have the best Q3 earnings. There will also be big upside or downside surprises, with positive surprises for ACGR, PHM, HD, CTAS, WDC; and negative surprises for SCHW, RHI, EFX.
(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).