Post by Admin/YBB on Oct 28, 2023 4:28:40 GMT -6
From Barron’s, October 30, 2023 (Part 1, Market Week+)
Pg 28, TRADER. Stocks stumbled despite hot GDP growth of +4.9% (real). Decent earnings reports didn’t help either. Investor confidence and sentiment were poor. The FOMC is expected to hold rates on Wednesday. The SP500 P/E of 17 is high for 10-yr at 4.84%. (TA damage: SP500 broke below 200-dMA on 10/20/23, Nasdaq Com on 10/26/23. DJIA, DJ Transports, DJ Utilities, R2000/IWM were all well below 200-dMA.)
Peaking bond YIELDs should benefit DEFENSIVE stocks – utilities (XLU; D, DUK), consumer-staples (VDC; KO, PG), healthcare (XLV; JNJ, UNH). Some techs may also benefit from possible rise in P/Es (when rates start to fall in 2024) and the continuing AI hype (XLK; GOOGL, MSFT).
ON Semiconductor (ON; fwd P/E 15; buybacks) is now attractive after the semis selloff. Consumer-related chips sales are weak. ON has also been hurt by export ban for China. Almost 50% of its sales are from less advanced but profitable auto-chips.
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 -2.14%, SP500 -2.53%, Nasdaq Comp -2.62%, R2000 -2.61%. DJ Transports -6.19%; DJ Utilities +0.71%. (Rotating spot communications -5.16%) US$ index (spot) +0.40% (remains too strong over 100), oil/WTI futures -3.62%, gold futures +1.33%.
YTD (index changes only), DJIA -2.20% (negative YTD), SP500 +7.24%, Nasdaq Comp +20.80%. (Rotating spot communications XLC +31.46%)
(Top holdings of communications XLC are META, GOOGL/GOOG)
SENTIMENTS
NYSE cumulative (5-day) A/D LINE fell again; ratio of winners:losers 2:5.
FUND INFLOWS/OUTFLOWS (4-weekMA) (NEW). Outflows from stocks, taxable bonds, munis, money-market funds. (For the 2nd week, on 4-wMA basis, money left all major fund categories. Where is it going? Not to banks.)
AAII Bull-Bear Spread -13.9% (below average).
%Above 50-dMA for NYSE-listed stocks 15.09% (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 16.7% (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 36, INTERNATIONAL TRADER. 90% of GRAPHITE for EV batteries comes from CHINA; its global share for mining is 80%, for processing 100%. Graphite can also be produced synthetically but those processes aren’t environment friendly. China has imposed licensing requirements for graphite from Dec 1, as it has done previously for rare earth metals gallium and germanium; these actions are in retaliation to the US restrictions on advanced semis and tech. Large graphite reserves are found in Brazil, Turley, etc, but developing mining and processing facilities would take years; Australia and Norway are making early efforts. Chinese restrictions may lead to development of alternative markets; China may also play selective pick-and-choose game.
Pg 37, OPTIONS. Eli Lilly/LLY is a maker of hot new diabetes/obesity drugs (GLP-1 agonists). There are also geopolitical events in the world that can lead to adverse markets. Recommended is selling puts on LLY (that will commit to buying on declines).
(SP500 VIX 21.27 (high), Nasdaq 100 VXN 24.44 (high), options SKEW 133.38 (high), bond MOVE 129.16 (high) (Yahoo Finance data).
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 50: A down week in EUROPE (Netherlands +1.19%, Denmark -1.90%) and a down week in ASIA (China +2.38%, S Korea -2.96%).
TREASURY* 3-mo yield 5.59%, 1-yr 5.39%, 2-yr 4.99%, 5-yr 4.76%, 10-yr 4.84%, 30-yr 5.03%;
REAL yields 5-yr 2.37%, 10-yr 2.42%, 30-yr 2.51%;
FRNs Index** 5.38% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
DOLLAR rose, ^DXY 106.58, +0.4% (pg 58; rising since mid-July). GOLD was near 2,000, -0.3% (Handy & Harman spot, Thursday; pg 60); the gold-miners fell. (^XAU was at 115.07, -1.08% 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 “It’s Time to Stop Crying About BONDs and Buy Them Instead”. 2023 may (hopefully) end the worst-ever 3-yr stretch for TREASURIES. Other investment-grade bonds have also suffered. But the RATES are peaking, and focus should be on what comes next (rather than crying over the spilled milk). Hedge-fund manager Bill ACKMAN has covered his Treasury shorts. Yields are much higher now, and much of the bond return is from their starting yields. Bond prices are related to DURATION and longer-term bonds have more kick (up/down). Taxable bonds are oversold and are more attractive than comparable munis. INFLATION-expectations are moderate around +2.5%. Investment-grade bonds may resume their traditional BALLAST role and 60-40 portfolios also look attractive. RISKS include higher persistent inflation, the FED losing control to BOND VIGILANTES, reduced global DEMAND for Treasuries and DOLLAR. The high short-term yields won’t last and it’s time to extend duration/maturity through intermediate-term bonds and/or bond ladders. Mentioned are funds representing a broad spectrum: VMFXX, PFIAX, AGG/BND, OSTIX, BASIX, BINC (new).
Pg 18: Long-Treasury ETF TLT is having a lousy year again (3rd), but investors continue to pour money into it (#3 ETF inflows YTD) in the hopes of a turnaround soon (2024?). The better performing HY JNK may do the opposite.
Pg 7, UP AND DOWN WALL STREET. Fertile grounds for future fund managers have been Fidelity, Mutual Series and Tiger Management (hedge-fund).
Several universities (15-20) have sold 100-yr bonds. It is hard to beat U Virginia that issued $300 million in 2019 at 3.23% only; others in the older era were Yale $125 million in 1996 at 7.375%, MIT $750 million in 2011 at 5.6%, OSU, USC, CalTech, Bowdoin, Wesleyan, Tufts, etc. (But their buyers may not be very happy now)
Pg 11, STREETWISE. mREITs have double-digit % yields but they are highly leveraged MBS portfolios (NLY, etc). Their interest sensitivity is high. Their TRs stink. Some say that most of the damage may be done already, but beware.
(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. Stocks stumbled despite hot GDP growth of +4.9% (real). Decent earnings reports didn’t help either. Investor confidence and sentiment were poor. The FOMC is expected to hold rates on Wednesday. The SP500 P/E of 17 is high for 10-yr at 4.84%. (TA damage: SP500 broke below 200-dMA on 10/20/23, Nasdaq Com on 10/26/23. DJIA, DJ Transports, DJ Utilities, R2000/IWM were all well below 200-dMA.)
Peaking bond YIELDs should benefit DEFENSIVE stocks – utilities (XLU; D, DUK), consumer-staples (VDC; KO, PG), healthcare (XLV; JNJ, UNH). Some techs may also benefit from possible rise in P/Es (when rates start to fall in 2024) and the continuing AI hype (XLK; GOOGL, MSFT).
ON Semiconductor (ON; fwd P/E 15; buybacks) is now attractive after the semis selloff. Consumer-related chips sales are weak. ON has also been hurt by export ban for China. Almost 50% of its sales are from less advanced but profitable auto-chips.
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 -2.14%, SP500 -2.53%, Nasdaq Comp -2.62%, R2000 -2.61%. DJ Transports -6.19%; DJ Utilities +0.71%. (Rotating spot communications -5.16%) US$ index (spot) +0.40% (remains too strong over 100), oil/WTI futures -3.62%, gold futures +1.33%.
YTD (index changes only), DJIA -2.20% (negative YTD), SP500 +7.24%, Nasdaq Comp +20.80%. (Rotating spot communications XLC +31.46%)
(Top holdings of communications XLC are META, GOOGL/GOOG)
SENTIMENTS
NYSE cumulative (5-day) A/D LINE fell again; ratio of winners:losers 2:5.
FUND INFLOWS/OUTFLOWS (4-weekMA) (NEW). Outflows from stocks, taxable bonds, munis, money-market funds. (For the 2nd week, on 4-wMA basis, money left all major fund categories. Where is it going? Not to banks.)
AAII Bull-Bear Spread -13.9% (below average).
%Above 50-dMA for NYSE-listed stocks 15.09% (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 16.7% (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 36, INTERNATIONAL TRADER. 90% of GRAPHITE for EV batteries comes from CHINA; its global share for mining is 80%, for processing 100%. Graphite can also be produced synthetically but those processes aren’t environment friendly. China has imposed licensing requirements for graphite from Dec 1, as it has done previously for rare earth metals gallium and germanium; these actions are in retaliation to the US restrictions on advanced semis and tech. Large graphite reserves are found in Brazil, Turley, etc, but developing mining and processing facilities would take years; Australia and Norway are making early efforts. Chinese restrictions may lead to development of alternative markets; China may also play selective pick-and-choose game.
Pg 37, OPTIONS. Eli Lilly/LLY is a maker of hot new diabetes/obesity drugs (GLP-1 agonists). There are also geopolitical events in the world that can lead to adverse markets. Recommended is selling puts on LLY (that will commit to buying on declines).
(SP500 VIX 21.27 (high), Nasdaq 100 VXN 24.44 (high), options SKEW 133.38 (high), bond MOVE 129.16 (high) (Yahoo Finance data).
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 50: A down week in EUROPE (Netherlands +1.19%, Denmark -1.90%) and a down week in ASIA (China +2.38%, S Korea -2.96%).
TREASURY* 3-mo yield 5.59%, 1-yr 5.39%, 2-yr 4.99%, 5-yr 4.76%, 10-yr 4.84%, 30-yr 5.03%;
REAL yields 5-yr 2.37%, 10-yr 2.42%, 30-yr 2.51%;
FRNs Index** 5.38% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
DOLLAR rose, ^DXY 106.58, +0.4% (pg 58; rising since mid-July). GOLD was near 2,000, -0.3% (Handy & Harman spot, Thursday; pg 60); the gold-miners fell. (^XAU was at 115.07, -1.08% 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 “It’s Time to Stop Crying About BONDs and Buy Them Instead”. 2023 may (hopefully) end the worst-ever 3-yr stretch for TREASURIES. Other investment-grade bonds have also suffered. But the RATES are peaking, and focus should be on what comes next (rather than crying over the spilled milk). Hedge-fund manager Bill ACKMAN has covered his Treasury shorts. Yields are much higher now, and much of the bond return is from their starting yields. Bond prices are related to DURATION and longer-term bonds have more kick (up/down). Taxable bonds are oversold and are more attractive than comparable munis. INFLATION-expectations are moderate around +2.5%. Investment-grade bonds may resume their traditional BALLAST role and 60-40 portfolios also look attractive. RISKS include higher persistent inflation, the FED losing control to BOND VIGILANTES, reduced global DEMAND for Treasuries and DOLLAR. The high short-term yields won’t last and it’s time to extend duration/maturity through intermediate-term bonds and/or bond ladders. Mentioned are funds representing a broad spectrum: VMFXX, PFIAX, AGG/BND, OSTIX, BASIX, BINC (new).
Pg 18: Long-Treasury ETF TLT is having a lousy year again (3rd), but investors continue to pour money into it (#3 ETF inflows YTD) in the hopes of a turnaround soon (2024?). The better performing HY JNK may do the opposite.
Pg 7, UP AND DOWN WALL STREET. Fertile grounds for future fund managers have been Fidelity, Mutual Series and Tiger Management (hedge-fund).
Several universities (15-20) have sold 100-yr bonds. It is hard to beat U Virginia that issued $300 million in 2019 at 3.23% only; others in the older era were Yale $125 million in 1996 at 7.375%, MIT $750 million in 2011 at 5.6%, OSU, USC, CalTech, Bowdoin, Wesleyan, Tufts, etc. (But their buyers may not be very happy now)
Pg 11, STREETWISE. mREITs have double-digit % yields but they are highly leveraged MBS portfolios (NLY, etc). Their interest sensitivity is high. Their TRs stink. Some say that most of the damage may be done already, but beware.
(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).