Post by Admin/YBB on Jun 15, 2024 4:13:32 GMT -6
From Barron’s, June 17, 2024 (Part 1, Market Week+)
Pg 24, TRADER. The current stock market doesn’t need the Fed’s rate cuts. SP500 and Nasdaq Comp had new highs this week. Investors liked Apple’s delayed jump into AI via partnership with OpenAI. Inflation data were tame. The Fed remains on hold. SP500 is at elevated fwd P/E of 21, but valuations can remain high.
Some GARP stocks (PEG < 1.5, E-growth +10%): NVDA, GOOGL, META, NFLX, PGR, TXRH, AVGO, PINS.
PG&E (PCG; fwd P/E 13 only; market-cap $39 billion) is making a comeback after CA wildfire disasters and 2019 bankruptcy. It will receive help from the CA $21 billion special fund to settle old liabilities of up to $30 billion. CA now also has clear safety guidelines for utilities. PCG has huge capex needs that it will cover from cash flow and capital markets (mostly debt, some equity). It’s adding new power plants.
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes (+/- 0.25%). In the list below, more than 50% probability is used to indicate rate hike; “+” is shown after the FOMC date to indicate that rate hike can be at that or a later FOMC.
FOMC 7/31/24+ hold (cycle peak 5.25-5.50%)
FOMC 9/18/24+ cut
FOMC 11/7/24+ hold
FOMC 12/18/24+ cut
FOMC 1/29/25+ cut
(Probabilities for some rate-ranges aren’t high, so there can be some unexpected moves.)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -0.54%, SP500 +1.58%, Nasdaq Comp +3.24%, R2000 -1.01%. DJ Transports -1.43%; DJ Utilities -0.37%. (Rotating spot tech XLK +5.60%) US$ index (spot) +0.60% (remains too strong over 100), oil/WTI futures +3.87%, gold futures +1.14%.
YTD (index changes only), DJIA +2.39%, SP500 +13.87%, Nasdaq Comp +17.84%. (Rotating spot tech XLK +18.28%)
(Looks like XLK rebalance on 6/21/24, based on 6/14/24 close, will cause about $11 billion shift from AAPL to NVDA. It was a close race, but the free-float market-caps on 6/14/24 seemed MSFT, NVDA, AAPL. S&P has to confirm this in an official press release.)
SENTIMENTS
Sentiments are mixed.
NYSE cumulative (5-day) A/D LINE fell for a 2nd week; ratio of winners:losers 1:2 . (Not good when SP500 and Nasdaq Comp made new highs)
FUND INFLOWS +/OUTFLOWS-: Stocks -|-, taxable bonds +|+, munis +|+, money-market funds +|+. (NEW FORMAT: 4wMA|weekly change) (Stock funds had outflows)
AAII Bull-Bear Spread +18.9% (above average). (Thursday-Wednesday)
(Sentiment Scale: v low << avg - 1*SD; low < avg - 1*SD; below avg, avg, above avg for in-between; high > avg + 1*SD, v high >> avg + 1*SD)
ybbpersonalfinance.proboards.com/thread/141/aaii-sentiment-survey-weekly?page=12&scrollTo=1285
%Above 50-dMA for NYSE-listed stocks 42.57% (negative); (StockCharts $NYA50R for NYSE; $SPXA50R for the SP500 in the bottom panel),
stockcharts.com/h-sc/ui?s=%24NYA50R&p=D&b=5&g=0&id=p91704957718 .
Delta MSI 48.3% (negative); a proprietary index for %Above 75-dMA for selected 1,800 stocks that is published midweek but is updated by Barron’s only on late-Fridays (so, it typically LAGS). The all-cap $NYA50R is typically closer to it than the large-cap $SPXA50R.
(Common Scale for %Above: oversold < 30-; 30 < negative < 50-; 50 < positive < 70-; overbought > 70; note that Delta MSI itself uses all in/out using 50% neutral value, but the same graduated scale is used here for both sources of %Above.)
Pg 31, INTERNATIONAL. In Mexico, the 1st female President Claudia SHEINBAUM won a supermajority. In India, Prime Minister Narendra MODI had to form a coalition government as a landslide didn’t materialize. (The European elections will lead to political shifts in Europe) Eyes are now on the US elections.
Pg 32, OPTIONS. Ignore interest rate noise and use options on stocks you have confidence in. Some recent recommendations that didn’t work out are analyzed.
SP500 VIX 12.66 (low), Nasdaq 100 VXN 16.05 (low), options SKEW 156.18 (high), bond MOVE 100.16 (Yahoo Finance data).
(Low VIX, high SKEW combo is a sign of nervous bulls)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 45: A bad week in EUROPE (Denmark -0.69%, France -6.46%) (European election concerns) and an up/mixed week in ASIA (Taiwan +3.39%, HK -3.17%).
TREASURY* 3-mo yield 5.51%, 1-yr 5.07%, 2-yr 4.67%, 5-yr 4.22%, 10-yr 4.20%, 30-yr 4.34%;
REAL yields 5-yr 2.11%, 10-yr 2.03%, 30-yr 2.12%;
FRNs Index** 5.32% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
DOLLAR rose, ^DXY 104.94, +0.25% (pg 50). GOLD rose to $2,330, +0.9% (Handy & Harman spot, Thursday; pg 52); the gold-miners fell. (^XAU was at 135.01, -0.87% for the week)
Top FDIC insured savings deposit rates*** (This feature has been discontinued but see the link below)
US SAVINGS I-Bonds**, Rate from 5/1/24 – 10/31/24 is 4.28%; the fixed rate is 1.30%, the semiannual inflation is 1.48%.
(NOTE – The Social Security COLA for 2025, based on the Q3 average of CPI-W, is ?, est +3%)
*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, “HCA’s Business is Thriving. Its Hospital Are Paying a Price”. HCA Healthcare (179 hospitals) is doing well, but critics point to harsh cost cutting at acquired hospitals to boost its margins that are highest in the industry. The Fed/CMS and several states are investigating. HCA says that some issues are from pandemic – higher costs, stresses, and turnovers. There are no requirements for patient/nurse ratios except in CA and OR. HCA does poorly on private data on hospital staffing levels, but HCA objects to their methodologies. HCA also says that Medicare Cost Reports are not comprehensive. It has its own internal matrix of 160 indicators and none of its hospitals want to be at the bottom. HCA says that it promptly fixes complaints and issues (but that isn’t a way to run quality hospitals). Pandemic was also tough on smaller healthcare systems and big got bigger (including HCA). Now, in many areas, patients, nurses and doctors have to deal with HCA whether they like it or not.
Pg 6, UP & DOWN WALL STREET. Unlike the US, the French markets were rattled by a sudden call for early elections. Several EU policies are unpopular in France. (The recent EU elections were bad for incumbents) Markets in Mexico and India were also volatile due to recent elections. In the US, the upcoming elections aren’t affecting the markets yet. The 10-yr was at 4.20%. The Fed was on hold, but the projections for 2024 are 0-2 cuts.
A new dream portfolio is an extreme barbell: 30% in hot AI stocks, 70% in T-Bills. But this may not be sustainable. Some investors are using barbell with high tail risks. For another group of investors, valuations don’t matter and 2024 is like the late-1990s or 2021. But it is concerning that DJIA and SP500 have diverged, often on daily basis; many such daily divergences were in 2000 at the dot. com bubble peak. Now only 3 stocks, MSFT, NVDA, AAPL account for 20% of SP500. Some lottery players may do better with buying puts on some hot AI stocks.
Pg 8, STREETWISE. Strange that housing inventories are still low, prices are high, mortgage rates are steady at 7%, there is a national shortage of 2.2 million units, BUT homebuilder stocks are in a slump. Almost 61% of existing mortgages are under 4%, 71% under 5%, and these homeowners aren’t in rush to sell, or have unrealistically high asking prices. But in this tough environment, strong homebuilders will do well and mentioned are TOL, LEN, DHI, KBH.
Go figure – both NVDA and HIMS are hot! NVDA got boost from AI, HIMS from the new obesity drugs from NVO, LLY. HIMS didn’t find anything revolutionary, but it has a compounding pharmacy to mix some drugs for problems that people don’t talk about. The FDA doesn’t regulate or monitor these compounded drugs that are customized mixes of currently approved drugs (but if they are bottled or packaged for retail sales, that is treated differently).
(More later….)
Accessible from PB-Big Bang, Facebook + Threads (“at”yogibearbull), Twitter (“at”YBB_Finance).
Pg 24, TRADER. The current stock market doesn’t need the Fed’s rate cuts. SP500 and Nasdaq Comp had new highs this week. Investors liked Apple’s delayed jump into AI via partnership with OpenAI. Inflation data were tame. The Fed remains on hold. SP500 is at elevated fwd P/E of 21, but valuations can remain high.
Some GARP stocks (PEG < 1.5, E-growth +10%): NVDA, GOOGL, META, NFLX, PGR, TXRH, AVGO, PINS.
PG&E (PCG; fwd P/E 13 only; market-cap $39 billion) is making a comeback after CA wildfire disasters and 2019 bankruptcy. It will receive help from the CA $21 billion special fund to settle old liabilities of up to $30 billion. CA now also has clear safety guidelines for utilities. PCG has huge capex needs that it will cover from cash flow and capital markets (mostly debt, some equity). It’s adding new power plants.
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes (+/- 0.25%). In the list below, more than 50% probability is used to indicate rate hike; “+” is shown after the FOMC date to indicate that rate hike can be at that or a later FOMC.
FOMC 7/31/24+ hold (cycle peak 5.25-5.50%)
FOMC 9/18/24+ cut
FOMC 11/7/24+ hold
FOMC 12/18/24+ cut
FOMC 1/29/25+ cut
(Probabilities for some rate-ranges aren’t high, so there can be some unexpected moves.)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -0.54%, SP500 +1.58%, Nasdaq Comp +3.24%, R2000 -1.01%. DJ Transports -1.43%; DJ Utilities -0.37%. (Rotating spot tech XLK +5.60%) US$ index (spot) +0.60% (remains too strong over 100), oil/WTI futures +3.87%, gold futures +1.14%.
YTD (index changes only), DJIA +2.39%, SP500 +13.87%, Nasdaq Comp +17.84%. (Rotating spot tech XLK +18.28%)
(Looks like XLK rebalance on 6/21/24, based on 6/14/24 close, will cause about $11 billion shift from AAPL to NVDA. It was a close race, but the free-float market-caps on 6/14/24 seemed MSFT, NVDA, AAPL. S&P has to confirm this in an official press release.)
SENTIMENTS
Sentiments are mixed.
NYSE cumulative (5-day) A/D LINE fell for a 2nd week; ratio of winners:losers 1:2 . (Not good when SP500 and Nasdaq Comp made new highs)
FUND INFLOWS +/OUTFLOWS-: Stocks -|-, taxable bonds +|+, munis +|+, money-market funds +|+. (NEW FORMAT: 4wMA|weekly change) (Stock funds had outflows)
AAII Bull-Bear Spread +18.9% (above average). (Thursday-Wednesday)
(Sentiment Scale: v low << avg - 1*SD; low < avg - 1*SD; below avg, avg, above avg for in-between; high > avg + 1*SD, v high >> avg + 1*SD)
ybbpersonalfinance.proboards.com/thread/141/aaii-sentiment-survey-weekly?page=12&scrollTo=1285
%Above 50-dMA for NYSE-listed stocks 42.57% (negative); (StockCharts $NYA50R for NYSE; $SPXA50R for the SP500 in the bottom panel),
stockcharts.com/h-sc/ui?s=%24NYA50R&p=D&b=5&g=0&id=p91704957718 .
Delta MSI 48.3% (negative); a proprietary index for %Above 75-dMA for selected 1,800 stocks that is published midweek but is updated by Barron’s only on late-Fridays (so, it typically LAGS). The all-cap $NYA50R is typically closer to it than the large-cap $SPXA50R.
(Common Scale for %Above: oversold < 30-; 30 < negative < 50-; 50 < positive < 70-; overbought > 70; note that Delta MSI itself uses all in/out using 50% neutral value, but the same graduated scale is used here for both sources of %Above.)
Pg 31, INTERNATIONAL. In Mexico, the 1st female President Claudia SHEINBAUM won a supermajority. In India, Prime Minister Narendra MODI had to form a coalition government as a landslide didn’t materialize. (The European elections will lead to political shifts in Europe) Eyes are now on the US elections.
Pg 32, OPTIONS. Ignore interest rate noise and use options on stocks you have confidence in. Some recent recommendations that didn’t work out are analyzed.
SP500 VIX 12.66 (low), Nasdaq 100 VXN 16.05 (low), options SKEW 156.18 (high), bond MOVE 100.16 (Yahoo Finance data).
(Low VIX, high SKEW combo is a sign of nervous bulls)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 45: A bad week in EUROPE (Denmark -0.69%, France -6.46%) (European election concerns) and an up/mixed week in ASIA (Taiwan +3.39%, HK -3.17%).
TREASURY* 3-mo yield 5.51%, 1-yr 5.07%, 2-yr 4.67%, 5-yr 4.22%, 10-yr 4.20%, 30-yr 4.34%;
REAL yields 5-yr 2.11%, 10-yr 2.03%, 30-yr 2.12%;
FRNs Index** 5.32% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
DOLLAR rose, ^DXY 104.94, +0.25% (pg 50). GOLD rose to $2,330, +0.9% (Handy & Harman spot, Thursday; pg 52); the gold-miners fell. (^XAU was at 135.01, -0.87% for the week)
Top FDIC insured savings deposit rates*** (This feature has been discontinued but see the link below)
US SAVINGS I-Bonds**, Rate from 5/1/24 – 10/31/24 is 4.28%; the fixed rate is 1.30%, the semiannual inflation is 1.48%.
(NOTE – The Social Security COLA for 2025, based on the Q3 average of CPI-W, is ?, est +3%)
*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, “HCA’s Business is Thriving. Its Hospital Are Paying a Price”. HCA Healthcare (179 hospitals) is doing well, but critics point to harsh cost cutting at acquired hospitals to boost its margins that are highest in the industry. The Fed/CMS and several states are investigating. HCA says that some issues are from pandemic – higher costs, stresses, and turnovers. There are no requirements for patient/nurse ratios except in CA and OR. HCA does poorly on private data on hospital staffing levels, but HCA objects to their methodologies. HCA also says that Medicare Cost Reports are not comprehensive. It has its own internal matrix of 160 indicators and none of its hospitals want to be at the bottom. HCA says that it promptly fixes complaints and issues (but that isn’t a way to run quality hospitals). Pandemic was also tough on smaller healthcare systems and big got bigger (including HCA). Now, in many areas, patients, nurses and doctors have to deal with HCA whether they like it or not.
Pg 6, UP & DOWN WALL STREET. Unlike the US, the French markets were rattled by a sudden call for early elections. Several EU policies are unpopular in France. (The recent EU elections were bad for incumbents) Markets in Mexico and India were also volatile due to recent elections. In the US, the upcoming elections aren’t affecting the markets yet. The 10-yr was at 4.20%. The Fed was on hold, but the projections for 2024 are 0-2 cuts.
A new dream portfolio is an extreme barbell: 30% in hot AI stocks, 70% in T-Bills. But this may not be sustainable. Some investors are using barbell with high tail risks. For another group of investors, valuations don’t matter and 2024 is like the late-1990s or 2021. But it is concerning that DJIA and SP500 have diverged, often on daily basis; many such daily divergences were in 2000 at the dot. com bubble peak. Now only 3 stocks, MSFT, NVDA, AAPL account for 20% of SP500. Some lottery players may do better with buying puts on some hot AI stocks.
Pg 8, STREETWISE. Strange that housing inventories are still low, prices are high, mortgage rates are steady at 7%, there is a national shortage of 2.2 million units, BUT homebuilder stocks are in a slump. Almost 61% of existing mortgages are under 4%, 71% under 5%, and these homeowners aren’t in rush to sell, or have unrealistically high asking prices. But in this tough environment, strong homebuilders will do well and mentioned are TOL, LEN, DHI, KBH.
Go figure – both NVDA and HIMS are hot! NVDA got boost from AI, HIMS from the new obesity drugs from NVO, LLY. HIMS didn’t find anything revolutionary, but it has a compounding pharmacy to mix some drugs for problems that people don’t talk about. The FDA doesn’t regulate or monitor these compounded drugs that are customized mixes of currently approved drugs (but if they are bottled or packaged for retail sales, that is treated differently).
(More later….)
Accessible from PB-Big Bang, Facebook + Threads (“at”yogibearbull), Twitter (“at”YBB_Finance).
