Post by Admin/YBB on Jul 6, 2024 3:49:40 GMT -6
From Barron’s, July 8, 2024 (Part 1, Market Week+)
Pg 23, TRADER. Continuation of this stock RALLY will depend on inflation and Q2 earnings that kick off with big bank earnings this week. The financials and regional banks are attractive. The expectations are for an overall Q2 earnings growth of +8.8%. The jobs report was mixed – there were more jobs, but the unemployment rate also rose. The Fed may cut once in 2024.
DIVIDEND stocks to buy ahead of the Fed rate cuts include AMT, LNT, CMCSA, VZ, KHC, TOL, KBH, HD, SHW, GM, F.
Food company Conagra (CAG; yield 5%; fwd P/E 11) has been hit by the popularity of the new obesity drugs. But the fears are misplaced as these new drugs may lead some to go astray from healthy eating. Weight conscious people eat more frozen food, and CAG is focusing on this category. Moderating inflation will also help consumers. Its brands include Birds Eye, Healthy Choice, Duncan Hines, Slim Jim, Orville Redenbacher, etc.
www.barrons.com/magazine?mod=BOL_TOPNAV
CME FedWatch. It’s a tool 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 +0.66%, SP500 +1.95%, Nasdaq Comp +3.50%, R2000 -1.02%. DJ Transports -0.88%; DJ Utilities +0.13%. (Rotating spot equal-weight SP500 RSP -0.87%) US$ index (spot) -0.94% (remains too strong over 100), oil/WTI futures +1.99%, gold futures +2.61%.
YTD (index changes only), DJIA +4.47%, SP500 +16.72%, Nasdaq Comp +22.26%. (Rotating spot equal-weight SP500 RSP +3.73%)
SENTIMENTS
Sentiments are mixed.
NYSE cumulative (5-day) A/D LINE rose for a 3rd week; ratio of winners:losers 1+:1 . (Not good in the week with new highs for SP500 and Nasdaq Comp)
FUND INFLOWS +/OUTFLOWS-: Stocks +|+, taxable bonds +|0, munis +|-, money-market funds +|0. (NEW FORMAT: 4wMA|weekly change) (Stock funds had outflows)
AAII Bull-Bear Spread +15.6% (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
NYSE %Above 50-dMA 46.84% (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 44.3% (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 26, INTERNATIONAL. ARGENTIAN President MILEI (The Chainsaw) has followed unconventional political and economic policies under limited emergency powers. He has chopped off government departments, considered privatizations, ignored foreign creditors (bonds trade at 40c). But the budget has a small surplus. Argentinians are hoarding dollars for protection from inflation (it fell to 4% from 25%) and local currency controls. An ETF is ARGT.
Pg 27, OPTIONS. In this news/event driven market, leave market timing to professionals. They, or their computers, will have the information well ahead of retail investors. Keep eyes on short-term moving averages (MAs) – 5-dMA, 20-dMA, 50-dMA; major indexes are hugging ST-MAs and news will cause sudden moves off the MAs. Better yet, just take a Summer vacation.
SP500 VIX 12.48 (low), Nasdaq 100 VXN 16.76 (low), options SKEW 150.20 (high), bond MOVE 98.78 (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 40: A good week in EUROPE (France +2.78%, Denmark -1.34%) (Labour returns in the UK; French runoffs on Sunday) and a good week in ASIA (S Korea +3.32%, HK -0.81%).
DOLLAR fell, ^DXY 104.88, -0.9% (pg 46). GOLD rose to $2,361, +1.3% (Handy & Harman spot, Thursday; pg 48); the gold-miners rose. (^XAU was at 145.71, +6.07% for the week)
INTEREST RATES
TREASURY* 3-mo yield 5.46%, 1-yr 4.98%, 2-yr 4.60%, 5-yr 4.22%, 10-yr 4.28%, 30-yr 4.47%;
REAL yields 5-yr 2.00%, 10-yr 2.00%, 30-yr 2.17%;
FRNs Index** 5.31% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
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 12, COVER STORY, “The Charity of Choice for Silicon Valley’s Wealthy Elite”. Silicon Valley Community Foundation (SVCF, 2016- ) operates several smaller community foundations and DAFs (donor advised funds); its annual donations/grants of $4.58 billion are 2nd only to the private Gates Foundation (the largest in the world). The DAFs originated in 1931 but have become very popular now. Their total assets are $229 billion and total annual contribution inflows are $86 billion. They can be sponsored by community foundations and financial institutions such as Fidelity, Schwab, Vanguard. Many wealthy people are now using DAFs exclusively, or in addition to complex and expensive private foundations. Strangely, with the flood of new DAF accounts, the average DAF balance has been declining and is now $117K. A typical DAF may disburse 22.5% of assets vs typical 5% for private foundations. This makes the sponsors’ goal of keeping net inflows positive more difficult, and many sponsors spend lot of time to promote their DAFs and for fund gathering.
The DAF critics say that many DAFs just hoard the money as the distribution requirements apply at sponsor’s level, not at the individual DAF level; many transactions are among the DAFs to create the pretense of activity; most sponsors have only a handful of mega-DAFs along with thousands of small DAFs, so that creates the appearance lot of retail activity; the DAFs can make anonymous donations; the sponsors aren’t required to disclose contributions, contributors and investment details; many DAF assets include cryptos and US or foreign real assets. (There has been talk of DAF reforms but attempts to impose restrictions have failed; some recent reforms make sponsors more accountable.)
Pg 4, UP & DOWN WALL STREET. Mixed jobs report (jobs rose, but unemployment rate also rose) strengthened the case for Fed rate cut early (September?). The Treasury is relying more on short-term funding for its needs and there is strong demand for T-Bills from the money-market funds. Almost 20% of the US debt now is short-term, not a healthy situation. There is a cloud over the Democratic ticket. There are political and fiscal concerns. The Fed balance sheet has declined to $7.2 trillion from $9 trillion peak. POWELL will be at the Senate (Tuesday) and House (Wednesday) committees.
While MAGNIFICENT 7 (now 67% of the SP500 market-cap) may be overdone, each decade has a new crop of dominant technologies and stocks – railroads, cars, chemicals, computers, Internet, AI. There is also creative tech disruption, and many early leaders don’t do as well as the later stronger entrants. Some giant companies at their peak were broken up by the regulators (another possible source of disruption). Interestingly (tongue in cheek?), Piper Sandler said that it’s dropping coverage for SP500 because it no longer represents the US stock market. Only MSFT is the repeater from the dot. com era leaders, with most others being the shadows of their former self, or they disappeared. Besides MSFT, the Mag 6 were baby stocks during the dot. com era or didn’t exist. The market may be correct in assessing the great future prospects of AI and related stocks but may not be so for the valuations of Mag 7. Indexing is a new force that makes big, bigger. The equal-weight ETFs (RSP, EUSA, EQAL) or non-market-cap-weighted ETFs (PRF) may be more prudent now.
(More later….)
Accessible from PB-Big Bang, Facebook + Threads (“at”yogibearbull), Twitter (“at”YBB_Finance).
Pg 23, TRADER. Continuation of this stock RALLY will depend on inflation and Q2 earnings that kick off with big bank earnings this week. The financials and regional banks are attractive. The expectations are for an overall Q2 earnings growth of +8.8%. The jobs report was mixed – there were more jobs, but the unemployment rate also rose. The Fed may cut once in 2024.
DIVIDEND stocks to buy ahead of the Fed rate cuts include AMT, LNT, CMCSA, VZ, KHC, TOL, KBH, HD, SHW, GM, F.
Food company Conagra (CAG; yield 5%; fwd P/E 11) has been hit by the popularity of the new obesity drugs. But the fears are misplaced as these new drugs may lead some to go astray from healthy eating. Weight conscious people eat more frozen food, and CAG is focusing on this category. Moderating inflation will also help consumers. Its brands include Birds Eye, Healthy Choice, Duncan Hines, Slim Jim, Orville Redenbacher, etc.
www.barrons.com/magazine?mod=BOL_TOPNAV
CME FedWatch. It’s a tool 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 +0.66%, SP500 +1.95%, Nasdaq Comp +3.50%, R2000 -1.02%. DJ Transports -0.88%; DJ Utilities +0.13%. (Rotating spot equal-weight SP500 RSP -0.87%) US$ index (spot) -0.94% (remains too strong over 100), oil/WTI futures +1.99%, gold futures +2.61%.
YTD (index changes only), DJIA +4.47%, SP500 +16.72%, Nasdaq Comp +22.26%. (Rotating spot equal-weight SP500 RSP +3.73%)
SENTIMENTS
Sentiments are mixed.
NYSE cumulative (5-day) A/D LINE rose for a 3rd week; ratio of winners:losers 1+:1 . (Not good in the week with new highs for SP500 and Nasdaq Comp)
FUND INFLOWS +/OUTFLOWS-: Stocks +|+, taxable bonds +|0, munis +|-, money-market funds +|0. (NEW FORMAT: 4wMA|weekly change) (Stock funds had outflows)
AAII Bull-Bear Spread +15.6% (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
NYSE %Above 50-dMA 46.84% (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 44.3% (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 26, INTERNATIONAL. ARGENTIAN President MILEI (The Chainsaw) has followed unconventional political and economic policies under limited emergency powers. He has chopped off government departments, considered privatizations, ignored foreign creditors (bonds trade at 40c). But the budget has a small surplus. Argentinians are hoarding dollars for protection from inflation (it fell to 4% from 25%) and local currency controls. An ETF is ARGT.
Pg 27, OPTIONS. In this news/event driven market, leave market timing to professionals. They, or their computers, will have the information well ahead of retail investors. Keep eyes on short-term moving averages (MAs) – 5-dMA, 20-dMA, 50-dMA; major indexes are hugging ST-MAs and news will cause sudden moves off the MAs. Better yet, just take a Summer vacation.
SP500 VIX 12.48 (low), Nasdaq 100 VXN 16.76 (low), options SKEW 150.20 (high), bond MOVE 98.78 (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 40: A good week in EUROPE (France +2.78%, Denmark -1.34%) (Labour returns in the UK; French runoffs on Sunday) and a good week in ASIA (S Korea +3.32%, HK -0.81%).
DOLLAR fell, ^DXY 104.88, -0.9% (pg 46). GOLD rose to $2,361, +1.3% (Handy & Harman spot, Thursday; pg 48); the gold-miners rose. (^XAU was at 145.71, +6.07% for the week)
INTEREST RATES
TREASURY* 3-mo yield 5.46%, 1-yr 4.98%, 2-yr 4.60%, 5-yr 4.22%, 10-yr 4.28%, 30-yr 4.47%;
REAL yields 5-yr 2.00%, 10-yr 2.00%, 30-yr 2.17%;
FRNs Index** 5.31% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
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 12, COVER STORY, “The Charity of Choice for Silicon Valley’s Wealthy Elite”. Silicon Valley Community Foundation (SVCF, 2016- ) operates several smaller community foundations and DAFs (donor advised funds); its annual donations/grants of $4.58 billion are 2nd only to the private Gates Foundation (the largest in the world). The DAFs originated in 1931 but have become very popular now. Their total assets are $229 billion and total annual contribution inflows are $86 billion. They can be sponsored by community foundations and financial institutions such as Fidelity, Schwab, Vanguard. Many wealthy people are now using DAFs exclusively, or in addition to complex and expensive private foundations. Strangely, with the flood of new DAF accounts, the average DAF balance has been declining and is now $117K. A typical DAF may disburse 22.5% of assets vs typical 5% for private foundations. This makes the sponsors’ goal of keeping net inflows positive more difficult, and many sponsors spend lot of time to promote their DAFs and for fund gathering.
The DAF critics say that many DAFs just hoard the money as the distribution requirements apply at sponsor’s level, not at the individual DAF level; many transactions are among the DAFs to create the pretense of activity; most sponsors have only a handful of mega-DAFs along with thousands of small DAFs, so that creates the appearance lot of retail activity; the DAFs can make anonymous donations; the sponsors aren’t required to disclose contributions, contributors and investment details; many DAF assets include cryptos and US or foreign real assets. (There has been talk of DAF reforms but attempts to impose restrictions have failed; some recent reforms make sponsors more accountable.)
Pg 4, UP & DOWN WALL STREET. Mixed jobs report (jobs rose, but unemployment rate also rose) strengthened the case for Fed rate cut early (September?). The Treasury is relying more on short-term funding for its needs and there is strong demand for T-Bills from the money-market funds. Almost 20% of the US debt now is short-term, not a healthy situation. There is a cloud over the Democratic ticket. There are political and fiscal concerns. The Fed balance sheet has declined to $7.2 trillion from $9 trillion peak. POWELL will be at the Senate (Tuesday) and House (Wednesday) committees.
While MAGNIFICENT 7 (now 67% of the SP500 market-cap) may be overdone, each decade has a new crop of dominant technologies and stocks – railroads, cars, chemicals, computers, Internet, AI. There is also creative tech disruption, and many early leaders don’t do as well as the later stronger entrants. Some giant companies at their peak were broken up by the regulators (another possible source of disruption). Interestingly (tongue in cheek?), Piper Sandler said that it’s dropping coverage for SP500 because it no longer represents the US stock market. Only MSFT is the repeater from the dot. com era leaders, with most others being the shadows of their former self, or they disappeared. Besides MSFT, the Mag 6 were baby stocks during the dot. com era or didn’t exist. The market may be correct in assessing the great future prospects of AI and related stocks but may not be so for the valuations of Mag 7. Indexing is a new force that makes big, bigger. The equal-weight ETFs (RSP, EUSA, EQAL) or non-market-cap-weighted ETFs (PRF) may be more prudent now.
(More later….)
Accessible from PB-Big Bang, Facebook + Threads (“at”yogibearbull), Twitter (“at”YBB_Finance).