Post by Admin/YBB on Jul 13, 2024 4:00:50 GMT -6
From Barron’s, July 15, 2024 (Part 1, Market Week+)
Pg 34, TRADER. Watch equal-weight RSP vs market-cap SPY (in StockCharts, ratio RSP:SPY) to see if the ROTATION will stick. Fed cuts would benefit cyclicals and small-caps (SCs). But that doesn’t mean that mega-caps have to collapse – just a little shift from LC to SC may sustain the rotation (it’s noted elsewhere that SC R2000 is now only 5.2% of the total R3000; also note that it isn’t in market’s nature to keep everybody happy).
RESTAURANT stocks have sold off, but Domino’s (DPZ; yield 1.28%; fwd P/E 27.8) looks attractive. It’s adding more stores, offering larger menus and delivery options. It should be able to finance these from its cash flow.
Devon Energy/DVN selloff is overdone on the news of acquisition of Williston Basin assets from private Grayson. The deal will be financed with 35% in stock, 65% in bonds. The higher debt levels would have to be monitored, and the oil prices hopefully remain at current levels or higher.
Cheap stocks to buy ahead of earnings announcements include CI, MRK, TOL, MDT.
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+ cut
FOMC 12/18/24+ cut
FOMC 1/29/25+ hold
(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 +1.59%, SP500 +0.87%, Nasdaq Comp +0.25%, R2000 +6.00%. DJ Transports +1.59%; DJ Utilities +4.15%. (Rotating spot equal-weight SP500 RSP +2.96%) US$ index (spot) -0.76% (remains too strong over 100), oil/WTI futures -1.14%, gold futures +1.07%.
YTD (index changes only), DJIA +6.13%, SP500 +17.73%, Nasdaq Comp +22.56%. (Rotating spot equal-weight SP500 RSP +6.80%)
SENTIMENTS
Sentiments
NYSE cumulative (5-day) A/D LINE rose for a 4th week; ratio of winners:losers 4:1. (Breadth improved with major indexes at/near highs)
FUND INFLOWS +/OUTFLOWS-: Stocks +|+, taxable bonds +|-, munis +|+, money-market funds 0|-. (NEW FORMAT: 4wMA|weekly change)
AAII Bull-Bear Spread +27.5% (high). (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
$NYA50R, NYSE %Above 50-dMA 68.97% (positive)
$SPXA50R, SP500 %Above 50-dMA 70.20% (high, barely)
stockcharts.com/h-sc/ui?s=%24NYA50R&p=D&b=5&g=0&id=p91704957718 .
Delta MSI 47.9% (negative); a proprietary index for %Above 75-dMA for selected 1,800 stocks that is published midweek but reported by Barron’s on late-Fridays. The all-cap $NYA50R (NYSE has 2,760+ stocks) is typically closer to it than the large-cap $SPXA50R (SP500 has 500 stocks).
(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 37, INTERNATIONAL. SOUTH AFRICAN stocks (ETF EZA) are attractive with reforms likely under the new coalition government (ANC + DA). Global investors may return if the government can control crime, corruption and keep the economy growing at +2%.
Pg 38, OPTIONS. Selling- calls (conservative) and puts (risky) can provide income for retirees.
SP500 VIX 12.46 (low), Nasdaq 100 VXN 17.26 (low), options SKEW 150.86 (high), bond MOVE 86.79 (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 51: A good week in EUROPE (Sweden +2.96%, Finland +0.75%, Greece +0.04%) and a good week in ASIA (HK +4.82%, S Korea -0.71%).
DOLLAR fell, ^DXY 104.08, -1.8% (pg 58). GOLD rose to $2,407, +1.9% (Handy & Harman spot, Thursday; pg 60); the gold-miners rose. (^XAU was at 153.73, +5.50% for the week)
INTEREST RATES
TREASURY*
T-Bills 3-mo yield 5.43%, 1-yr 4.87%; T-Notes 2-yr 4.45%, 5-yr 4.10%, 10-yr 4.18%; T-Bonds 30-yr 4.39%;
Real yields 5-yr 1.95%, 10-yr 1.94%, 30-yr 2.12%;
FRNs Index** 5.30% (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 pending; est +2.7%)
*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, “Roundtable – Midyear Update” was conducted by phone. A score card for recommendations in January is also provided.
Todd AHLSTEN, Parnassus CIO & PRBLX: Bullish but expects volatility. Fed cuts may benefit cyclicals. AI and semi themes are long-term themes.
Scott BLACK, Delphi Management: 2024 GDP +1.5% only. The US fiscal policy is a disaster with annual budget deficits of 6%+ in 2024 and 2025, and US debt 122% of GDP. With his Es, SP500 fwd P/E 23.3. The SCs and MCs may disappoint again.
Abby COHEN, Columbia U: Inflation has moderated, economy is good. AI capex is not yet producing profits. Concerns are the US elections, tariffs, “Chevron” revocation. Likes SPYV, RSP.
Sonal DESAI, Franklin Templeton: 1-2 Fed cuts. Economy is slowing, High deficit and debt are concerns. Bond vigilantes may return. Start switch from cash to ST/IT bonds and credit risks.
Henry ELLENBOGEN, Durable Capital Partners: Very narrow market; compares NVDA now to CSCO in 2000. The economy is in mud. Likes AI themes.
Mario GABELLI, Gabelli Funds: Worried about deficit, debt, tariffs, geopolitics. More M&A coming. Algos now control the US market. As a big holder, still evaluating Skydance & Paramount deal.
David GIROUX, T Rowe Price CIO & PRWCX (PRCFX, TCAF): With his Es, SP500 fwd P/E 21.4, a bit overvalued. GARP strategy is underperforming. He has made frequent switches between growth and cyclicals. Overweight tech, healthcare, utilities; underweight consumer-staples, financials.
Rajiv JAIN, GQG Partners: Upbeat. Likes US (tech, semi), Europe (energy, software, consumers), EMs (Brazil, India, Mexico). Some post-election concerns about France and Mexico.
William PRIEST, Epoch: Choppy markets ahead with risks in the US, China, Taiwan. High US debt is a concern. Onshoring is adding to inflation.
John ROGERS, Ariel Investments: US market is closer to the top. The economy is slowing. Like Gabelli, evaluating Skydance and Paramount deal.
Meryl WITMER, Eagle Capital Partners: US market strength is surprising. Corporate earnings will weaken, and taxes will rise. The auto sector is undervalued. Likes strong cash flows.
Pg 6, UP & DOWN WALL STREET. AIRLINES have seen booms-and-busts. Air travel has rebounded, but airline stocks have sold off. The problem was that they increased capacity expecting even higher growth. The Boeing 737 MAX debacle is also hurting airlines, especially LUV, in which the activist Elliott Management has 11% stake. AAL is reversing its missteps on ignoring business travelers. JBLU and SAVE are struggling – their merger is finally off. DAL is in the best position among the airlines. The issues are that airlines have high costs (20% from jet fuel alone), debt (with debt/equity 5-6), and regulations; moreover, they are unionized. The market-cap of the entire airline sector is $80 billion (but the EV is much higher). Airlines have frustrated investors such as Warren BUFFETT, Julian ROBERTSON, etc. If you feel bullish, just check the Wiki pages on “Airline Bankruptcies in the US” and “Defunct Airlines of the US”.
(More later….)
Accessible from PB-Big Bang, Facebook + Threads (“at”yogibearbull), Twitter (“at”YBB_Finance).
Pg 34, TRADER. Watch equal-weight RSP vs market-cap SPY (in StockCharts, ratio RSP:SPY) to see if the ROTATION will stick. Fed cuts would benefit cyclicals and small-caps (SCs). But that doesn’t mean that mega-caps have to collapse – just a little shift from LC to SC may sustain the rotation (it’s noted elsewhere that SC R2000 is now only 5.2% of the total R3000; also note that it isn’t in market’s nature to keep everybody happy).
RESTAURANT stocks have sold off, but Domino’s (DPZ; yield 1.28%; fwd P/E 27.8) looks attractive. It’s adding more stores, offering larger menus and delivery options. It should be able to finance these from its cash flow.
Devon Energy/DVN selloff is overdone on the news of acquisition of Williston Basin assets from private Grayson. The deal will be financed with 35% in stock, 65% in bonds. The higher debt levels would have to be monitored, and the oil prices hopefully remain at current levels or higher.
Cheap stocks to buy ahead of earnings announcements include CI, MRK, TOL, MDT.
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+ cut
FOMC 12/18/24+ cut
FOMC 1/29/25+ hold
(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 +1.59%, SP500 +0.87%, Nasdaq Comp +0.25%, R2000 +6.00%. DJ Transports +1.59%; DJ Utilities +4.15%. (Rotating spot equal-weight SP500 RSP +2.96%) US$ index (spot) -0.76% (remains too strong over 100), oil/WTI futures -1.14%, gold futures +1.07%.
YTD (index changes only), DJIA +6.13%, SP500 +17.73%, Nasdaq Comp +22.56%. (Rotating spot equal-weight SP500 RSP +6.80%)
SENTIMENTS
Sentiments
NYSE cumulative (5-day) A/D LINE rose for a 4th week; ratio of winners:losers 4:1. (Breadth improved with major indexes at/near highs)
FUND INFLOWS +/OUTFLOWS-: Stocks +|+, taxable bonds +|-, munis +|+, money-market funds 0|-. (NEW FORMAT: 4wMA|weekly change)
AAII Bull-Bear Spread +27.5% (high). (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
$NYA50R, NYSE %Above 50-dMA 68.97% (positive)
$SPXA50R, SP500 %Above 50-dMA 70.20% (high, barely)
stockcharts.com/h-sc/ui?s=%24NYA50R&p=D&b=5&g=0&id=p91704957718 .
Delta MSI 47.9% (negative); a proprietary index for %Above 75-dMA for selected 1,800 stocks that is published midweek but reported by Barron’s on late-Fridays. The all-cap $NYA50R (NYSE has 2,760+ stocks) is typically closer to it than the large-cap $SPXA50R (SP500 has 500 stocks).
(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 37, INTERNATIONAL. SOUTH AFRICAN stocks (ETF EZA) are attractive with reforms likely under the new coalition government (ANC + DA). Global investors may return if the government can control crime, corruption and keep the economy growing at +2%.
Pg 38, OPTIONS. Selling- calls (conservative) and puts (risky) can provide income for retirees.
SP500 VIX 12.46 (low), Nasdaq 100 VXN 17.26 (low), options SKEW 150.86 (high), bond MOVE 86.79 (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 51: A good week in EUROPE (Sweden +2.96%, Finland +0.75%, Greece +0.04%) and a good week in ASIA (HK +4.82%, S Korea -0.71%).
DOLLAR fell, ^DXY 104.08, -1.8% (pg 58). GOLD rose to $2,407, +1.9% (Handy & Harman spot, Thursday; pg 60); the gold-miners rose. (^XAU was at 153.73, +5.50% for the week)
INTEREST RATES
TREASURY*
T-Bills 3-mo yield 5.43%, 1-yr 4.87%; T-Notes 2-yr 4.45%, 5-yr 4.10%, 10-yr 4.18%; T-Bonds 30-yr 4.39%;
Real yields 5-yr 1.95%, 10-yr 1.94%, 30-yr 2.12%;
FRNs Index** 5.30% (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 pending; est +2.7%)
*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, “Roundtable – Midyear Update” was conducted by phone. A score card for recommendations in January is also provided.
Todd AHLSTEN, Parnassus CIO & PRBLX: Bullish but expects volatility. Fed cuts may benefit cyclicals. AI and semi themes are long-term themes.
Scott BLACK, Delphi Management: 2024 GDP +1.5% only. The US fiscal policy is a disaster with annual budget deficits of 6%+ in 2024 and 2025, and US debt 122% of GDP. With his Es, SP500 fwd P/E 23.3. The SCs and MCs may disappoint again.
Abby COHEN, Columbia U: Inflation has moderated, economy is good. AI capex is not yet producing profits. Concerns are the US elections, tariffs, “Chevron” revocation. Likes SPYV, RSP.
Sonal DESAI, Franklin Templeton: 1-2 Fed cuts. Economy is slowing, High deficit and debt are concerns. Bond vigilantes may return. Start switch from cash to ST/IT bonds and credit risks.
Henry ELLENBOGEN, Durable Capital Partners: Very narrow market; compares NVDA now to CSCO in 2000. The economy is in mud. Likes AI themes.
Mario GABELLI, Gabelli Funds: Worried about deficit, debt, tariffs, geopolitics. More M&A coming. Algos now control the US market. As a big holder, still evaluating Skydance & Paramount deal.
David GIROUX, T Rowe Price CIO & PRWCX (PRCFX, TCAF): With his Es, SP500 fwd P/E 21.4, a bit overvalued. GARP strategy is underperforming. He has made frequent switches between growth and cyclicals. Overweight tech, healthcare, utilities; underweight consumer-staples, financials.
Rajiv JAIN, GQG Partners: Upbeat. Likes US (tech, semi), Europe (energy, software, consumers), EMs (Brazil, India, Mexico). Some post-election concerns about France and Mexico.
William PRIEST, Epoch: Choppy markets ahead with risks in the US, China, Taiwan. High US debt is a concern. Onshoring is adding to inflation.
John ROGERS, Ariel Investments: US market is closer to the top. The economy is slowing. Like Gabelli, evaluating Skydance and Paramount deal.
Meryl WITMER, Eagle Capital Partners: US market strength is surprising. Corporate earnings will weaken, and taxes will rise. The auto sector is undervalued. Likes strong cash flows.
Pg 6, UP & DOWN WALL STREET. AIRLINES have seen booms-and-busts. Air travel has rebounded, but airline stocks have sold off. The problem was that they increased capacity expecting even higher growth. The Boeing 737 MAX debacle is also hurting airlines, especially LUV, in which the activist Elliott Management has 11% stake. AAL is reversing its missteps on ignoring business travelers. JBLU and SAVE are struggling – their merger is finally off. DAL is in the best position among the airlines. The issues are that airlines have high costs (20% from jet fuel alone), debt (with debt/equity 5-6), and regulations; moreover, they are unionized. The market-cap of the entire airline sector is $80 billion (but the EV is much higher). Airlines have frustrated investors such as Warren BUFFETT, Julian ROBERTSON, etc. If you feel bullish, just check the Wiki pages on “Airline Bankruptcies in the US” and “Defunct Airlines of the US”.
(More later….)
Accessible from PB-Big Bang, Facebook + Threads (“at”yogibearbull), Twitter (“at”YBB_Finance).
