Post by Admin/YBB on Feb 27, 2021 8:24:55 GMT -6
Pg M1, Trader: A bad week. Economic data have been good, more Stimulus3 is coming, the Fed promised to remain easy. But rising bond yields may be signaling an end for this rally. 7-yr Treasury auction was horrible. Some 2021 GDP growth estimates are triple that by the Fed. Investors worry that the Fed may flip [citing “new data”] as it has done in the past. The environment is good for cyclicals.
Cyclical chemical DOW is attractive [yield 4.7%; fwd P/E 17; fwd free cash flow yield 8%]. Recently DowDupont splintered into DOW, DD, CTVA.
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.
ZIRP [0-0.25% fed fund rate] through December 2021 FOMC meeting.
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html ]
For the week [index changes only], DJIA -1.78%, SP500 -2.45%, Nasdaq Comp -4.92%, Russell 2000 -2.90%. DJ Transports +0.43%; DJ Utilities -6.01%. [Rotating spot TLT -0.10%] US$ index (spot) +0.63%, oil/WTI futures +3.82%, gold futures -2.69%.
YTD [index changes only], DJIA +1.06%, SP500 +1.47%, Nasdaq Comp +2.36%. [Rotating spot TLT -9.26%]
Pg M4, Europe: UK online fashion and cosmetics retailer Asos [ASC.uk/ASOMY] has been a beneficiary of pandemic; people at-home want to look good in video calls in casuals and makeup. It is growing rapidly via acquisitions. It has distribution centers in UK, US, Germany.
Pg M4, Emerging Markets: Brazil faces pandemic, expiring corona-vouchers for population, aftermath of recent Petrobras/PBR shakeup [5% of Brazil index], elections next year in October 2022 but campaigning has started already. EWZ is down YTD while EMs have been strong. Outlook is muddy.
Pg M6, Commodities: OPEC/OPEC+ meet in early-March and no major actions are expected. Oil prices have been strong and with strong demand they may reach $80-100. Watch for a rift between Saudi Arabia [it likes higher prices] and Russia [it wants to raise production].
Pg M5, Options: Complex options strategies are discussed for Walmart/WMT assuming that it remains rangebound.
[SP500 VIX 27.95, SKEW 136.23] [Yahoo Finance data]
finance.yahoo.com/quotes/%5EVIX,%5ESKEW?.tsrc=fin-srch
Pg M22, M28: An bad week in Europe [Greece +2.65%, Norway +0.71%, Netherlands -5.20%] and an ugly week in Asia [Thailand +0.15%, China -9.40%]. The equity CEF index [data to Thursday] underperformed the DJIA and its discount was -5% [wide fluctuations between -4% to -16% over the last few months].
Treasury rates 3-mo yield 0.04%, 2-yr 0.14%, 5-yr 0.75%, 10-yr 1.44%, 30-yr 2.17% [Treasury data*]. Dollar rose, DXY 90.93, +0.6% [M31]. Gold [Handy & Harman spot, Thursday] tumbled to $1,743 -2.4% [M34]; the gold-miners fell. [^XAU was at 130.79, -4.38% for the week]
*Treasury Yield-Curve www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield
Top FDIC insured savings deposit rates*: Money-market accounts 0.61%; 3-mo Jumbo CD 0.40% [most are 0.25% or below], 1-yr CDs 0.70%; 5-yr CDs 1.00% [M29].
*For local rates www.depositaccounts.com/banks/rates-map/
[Bonus from Part 2 include Cover Story (now only in online designation), Up and Down Wall Street, Streetwise and these won’t be repeated in Part 2]
Pg 21: Cover Story, “Utilities Offer Yield and a Way to Play Green Energy. And Their Stocks are Cheap”. Green energy [solar, wind; 39% by 2030 vs 13% now] beneficiaries will be several utilities: LNT, AEP, CMS, D, ETR, EXC, NEE, PNW, XEL; ETFs XLU, VPU; CEF UTG.
Pg 5, Up and Down Wall Street: Bonds are no longer boring. 10-yr yield range was 25 bps this week although it finished up only 7 bps; it rose by 60 bps in 3 months, 35 bps in February. Some yield disturbances are coming from the MBS market where the Fed [with 33% of all MBS] and mREITs are big players. 7-yr Treasury auction was also lousy. Bond market is disbelieving Fed’s promise to keep rates low longer [through 2023]. But some think that the bond market drama this week was overdone, and bonds may become boring again as calm returns.
Been an unprecedented 12 months – pandemic, historic economic contraction & recovery, quick & sharp bear & strong rebound, massive monetary & fiscal stimulus, elections. For 12 months: SPY/SP500 +24.6%, VTI/total stock market +28.3%, QQQ/Nasdaq 100 +46.3%, IWM/R2000 +41.8%, 60-40 VBIAX +17.6%, AGG/total bond market +1.2%.
Pg 7, Streetwise: Good news is turning into bad news for stocks. Among the good news: Q4 GDP, widespread vaccinations [45+ million with at least 1 shot], a new 1-shot vaccine from J&J/JNJ, Stimulus3, etc. Expectations are for the economy to run hot in 2021 and that may be accompanied by higher bond yields and inflation. Service sector will rebound strongly in recovery [unlike goods, there is no capacity constraint if one is willing to pay]. Beneficiaries will be consumer-discretionary, energy, financials, industrials, healthcare, and small- and mid- size companies. Super-cyclicals include LVS, OXY, C, DE, etc. Lagging will be bond-proxies [utilities, consumer-staples, REITs] and growth stocks [with deflating P/S, P/E, etc]. 10-yr yield above 1.75% will be headwind for stocks. But Tesla/TSLA and Bitcoin [held directly or via GBTC] bull Cathie Wood of ARK funds is unfazed.
[More later….]
Cyclical chemical DOW is attractive [yield 4.7%; fwd P/E 17; fwd free cash flow yield 8%]. Recently DowDupont splintered into DOW, DD, CTVA.
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.
ZIRP [0-0.25% fed fund rate] through December 2021 FOMC meeting.
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html ]
For the week [index changes only], DJIA -1.78%, SP500 -2.45%, Nasdaq Comp -4.92%, Russell 2000 -2.90%. DJ Transports +0.43%; DJ Utilities -6.01%. [Rotating spot TLT -0.10%] US$ index (spot) +0.63%, oil/WTI futures +3.82%, gold futures -2.69%.
YTD [index changes only], DJIA +1.06%, SP500 +1.47%, Nasdaq Comp +2.36%. [Rotating spot TLT -9.26%]
Pg M4, Europe: UK online fashion and cosmetics retailer Asos [ASC.uk/ASOMY] has been a beneficiary of pandemic; people at-home want to look good in video calls in casuals and makeup. It is growing rapidly via acquisitions. It has distribution centers in UK, US, Germany.
Pg M4, Emerging Markets: Brazil faces pandemic, expiring corona-vouchers for population, aftermath of recent Petrobras/PBR shakeup [5% of Brazil index], elections next year in October 2022 but campaigning has started already. EWZ is down YTD while EMs have been strong. Outlook is muddy.
Pg M6, Commodities: OPEC/OPEC+ meet in early-March and no major actions are expected. Oil prices have been strong and with strong demand they may reach $80-100. Watch for a rift between Saudi Arabia [it likes higher prices] and Russia [it wants to raise production].
Pg M5, Options: Complex options strategies are discussed for Walmart/WMT assuming that it remains rangebound.
[SP500 VIX 27.95, SKEW 136.23] [Yahoo Finance data]
finance.yahoo.com/quotes/%5EVIX,%5ESKEW?.tsrc=fin-srch
Pg M22, M28: An bad week in Europe [Greece +2.65%, Norway +0.71%, Netherlands -5.20%] and an ugly week in Asia [Thailand +0.15%, China -9.40%]. The equity CEF index [data to Thursday] underperformed the DJIA and its discount was -5% [wide fluctuations between -4% to -16% over the last few months].
Treasury rates 3-mo yield 0.04%, 2-yr 0.14%, 5-yr 0.75%, 10-yr 1.44%, 30-yr 2.17% [Treasury data*]. Dollar rose, DXY 90.93, +0.6% [M31]. Gold [Handy & Harman spot, Thursday] tumbled to $1,743 -2.4% [M34]; the gold-miners fell. [^XAU was at 130.79, -4.38% for the week]
*Treasury Yield-Curve www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield
Top FDIC insured savings deposit rates*: Money-market accounts 0.61%; 3-mo Jumbo CD 0.40% [most are 0.25% or below], 1-yr CDs 0.70%; 5-yr CDs 1.00% [M29].
*For local rates www.depositaccounts.com/banks/rates-map/
[Bonus from Part 2 include Cover Story (now only in online designation), Up and Down Wall Street, Streetwise and these won’t be repeated in Part 2]
Pg 21: Cover Story, “Utilities Offer Yield and a Way to Play Green Energy. And Their Stocks are Cheap”. Green energy [solar, wind; 39% by 2030 vs 13% now] beneficiaries will be several utilities: LNT, AEP, CMS, D, ETR, EXC, NEE, PNW, XEL; ETFs XLU, VPU; CEF UTG.
Pg 5, Up and Down Wall Street: Bonds are no longer boring. 10-yr yield range was 25 bps this week although it finished up only 7 bps; it rose by 60 bps in 3 months, 35 bps in February. Some yield disturbances are coming from the MBS market where the Fed [with 33% of all MBS] and mREITs are big players. 7-yr Treasury auction was also lousy. Bond market is disbelieving Fed’s promise to keep rates low longer [through 2023]. But some think that the bond market drama this week was overdone, and bonds may become boring again as calm returns.
Been an unprecedented 12 months – pandemic, historic economic contraction & recovery, quick & sharp bear & strong rebound, massive monetary & fiscal stimulus, elections. For 12 months: SPY/SP500 +24.6%, VTI/total stock market +28.3%, QQQ/Nasdaq 100 +46.3%, IWM/R2000 +41.8%, 60-40 VBIAX +17.6%, AGG/total bond market +1.2%.
Pg 7, Streetwise: Good news is turning into bad news for stocks. Among the good news: Q4 GDP, widespread vaccinations [45+ million with at least 1 shot], a new 1-shot vaccine from J&J/JNJ, Stimulus3, etc. Expectations are for the economy to run hot in 2021 and that may be accompanied by higher bond yields and inflation. Service sector will rebound strongly in recovery [unlike goods, there is no capacity constraint if one is willing to pay]. Beneficiaries will be consumer-discretionary, energy, financials, industrials, healthcare, and small- and mid- size companies. Super-cyclicals include LVS, OXY, C, DE, etc. Lagging will be bond-proxies [utilities, consumer-staples, REITs] and growth stocks [with deflating P/S, P/E, etc]. 10-yr yield above 1.75% will be headwind for stocks. But Tesla/TSLA and Bitcoin [held directly or via GBTC] bull Cathie Wood of ARK funds is unfazed.
[More later….]