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Futures Extend Slide As Yields, Dollar Blow Out
Futures Extend Slide As Yields, Dollar Blow Out Global markets started the new week on the back foot with US equity futures, European bourses and Asian markets all sliding as Treasury yields resumed their grind higher, with 10Y yields rising above 4.50% and 30Y TSYs rising 6bps to 4.59% - both new cycle highs - as traders speculated central banks will keep interest rates elevated to quell inflation. The dollar hit its highest level since March as investors sought the "safety" of the "strong" US economy amid hopes the US can somehow decouple from the recession in Europe and China for the foreseeable future. The mood was depressed following the worst weekly selloff on Wall Street since March, and as of 7:45am, S&P 500 and Nasdaq 100 futures edged 0.2% lower while rates climbed across the board, mirroring moves in European and UK bond markets. WTI traded unchanged around $90/barrel, while gold and Bitcoin fell. In premarket trading, Warner Bros Discovery climbed about 4%, Disney was up 1%, and Netflix up 1.3%, leading film and TV producers higher, after striking Hollywood screenwriters reached a tentative new labor agreement. By contrast, Foot Locker and Nike were poised for a lower open as Jefferies analysts downgraded the stocks over looming consumer headwinds. Alector delined 3.6% after Goldman gives the clinical stage biopharmaceutical company its only sell rating in an initiation note, citing “significant clinical risk.” After the barrage of central bank decisions last week, traders are increasingly concerned that rising oil prices will further fan inflation, which will make it difficult for policymakers to reduce rates anytime soon. Oil resumed a rally as hedge funds piled on bets tightening supplies will stoke demand. Bloomberg’s Dollar Spot Index rose to the highest since March. “All central banks need to stick to this higher-for-longer rhetoric as inflation is nowhere close to their mandate,” said Pooja Kumra, senior European rates strategist at Toronto-Dominion Bank. Which is great, the only problem is that it means that US housing market is now effectively frozen for the middle class where nobody can afford to pay the current insane mortgages, and so it is only a matter of time before this becomes a major political issue. The monthly mortgage payment for purchasers of existing homes, using the 30-year average mortgage rate, stands at $2,309. This is a substantial increase from $977 in March 2020. pic.twitter.com/JQHIJGQp9u — Michael McDonough (@M_McDonough) September 25, 2023 Two Fed officials said at least one more rate hike is possible and that borrowing costs may need to stay higher for longer for the central bank to ease inflation back to its 2% target. While Boston Fed President Susan Collins said further tightening “is certainly not off the table,” Governor Michelle Bowman signaled that more than one increase will probably be required. Meanwhile, the "shocking" surge in oil prices - which apparently nobody could have anticipated even though the senile occupant of the White House intentionally drained half the SPR just to lower gas for a few months and oil is now back above the average price at which SPR oil was sold - and a massive fiscal deficit are spurring losses in government debt, sending Treasury yields across the maturity curve the highest levels in more than a decade. The Treasury 10-year yield may rise to 4.75% before softer risk sentiment and tighter financial conditions push it lower into year-end, according to BofA strategists. European stocks were broadly lower, sending the Stoxx 600 down 0.8%; dragged by mining shares as China’s property problems weighed on the outlook for natural resources. Travel, mining and consumer products were the worst performing sectors in Europe after the German IFO business climate topped expectations. Here are the biggest European movers: SBB shares surge as much as 40%, most since June 2 after selling a stake in subsidiary EduCo to Brookfield for SEK242m and being repaid an inter-company loan. Bpost shares rise as much as 14% after the postal company finalized three compliance reviews and took a provision of €75m, which is well below KBC (hold) initial assumption of between €112 and €375m. Italian lenders outperformed after Bloomberg reported that they will be allowed to avoid paying a controversial windfall tax introduced last month if they set aside additional capital reserves, citing a government amendment. Ubisoft shares gain as much as 7.3% after BNP Paribas upgraded the shares to outperform, saying the market underestimates upside from new game releases. Anima shares rise as much as 4.9% in Milan trading - highest since March, after newspaper La Stampa reported on Sunday Amundi may raise its stake in the Italian asset manager and could consider a full takeover. Close Brothers shares gain as much as 2.8% as JPMorgan upgrades to neutral from underweight, noting the lender has materially lagged other UK banks over the past year. European miners and steelmakers shares fall after iron ore slumped as China’s persistently weak property market causes construction companies to hold back restocking of steel before the National Day holiday period. Aperam shares plunge as much as 12% after the steelmaker cut its outlook for third-quarter volumes, citing two “unforeseen” events. Degroof Petercam says co. faces a tough quarter after warning 3Q will “significantly” miss expectations and previous guidance. Victoria shares drop as much as 13%, to the lowest in about four months, after FT Alphaville noted the flooring company’s recent delay of audited results and statements made by auditor Grant Thornton relating to Victoria’s Hanover subsidiary. Alphawave IP shares drop as much as 11% after the semiconductor-intellectual-property firm gave a forecast that was no better than market expectations. Entain shares fall as much as 11% after the gambling company said net gaming revenue was “softer than anticipated” after the summer, and noted a simplification of group structures to reduce costs. Salzgitter shares drop as much as 3.9% after JPMorgan lowered its price target on the steel producer to a new Street low, citing downside risk to 2023 consensus and 2024 estimates after the company recently cut its guidance. Earlier in the session, Asian stocks also fell, extending last week’s loss, as Chinese stocks slid on renewed property-related concerns while investors also weighed the prospects of US interest rates remaining higher for longer. The MSCI Asia Pacific Index declined as much as 0.4%, with Tencent and AIA Group among the biggest drags. Asian equities have fallen below key support levels this month as worries over China’s economic woes in addition to high US rates and surging global crude prices weaken the case for region’s risk assets. The regional benchmark is on track for a second-straight monthly loss. Benchmarks fell in Hong Kong and mainland China, with property stocks sliding after distressed developer Evergrande scrapped a key creditor meeting added to fears about its debt pile. That’s compounding concern that global growth will stall as the economic engine of China sputters. Furthermore, China Aouyuan shares dropped by over 70% on the resumption of trade following a 17-month hiatus. Nikkei 225 outperformed amid stimulus hopes with the government considering 5yr-10yr tax benefits for firms producing semiconductors and storage batteries, as well as providing support in areas where firms face high entry risk and will reportedly boost take-home pay for part-time workers. Australia's ASX 200 was marginally lower with losses in mining stocks and financials overshadowing the resilience in the consumer and tech sectors. Key stock gauges in India ended flat on Monday dragged by information technology firms amid cautious sentiment across the region. Reliance Industries fell for a fifth consecutive session to its lowest level in almost three months, also dragging the the country’s most valuable firm to a level seen as oversold based on its 14-day RSI. In FX, the Bloomberg Dollar Spot Index reversed modest losses to gain 0.2%, up a fourth day. Investors mulled the week ahead that includes plenty of Fed speakers, jobless claims and PCE deflator data, with increasing concern about potential for a US government shutdown. The euro traded off the lows after German IFO beat expectations, although the single currency is still down 0.2% versus the greenback. The Swiss franc and Aussie dollar were the worst performers in G-10, falling 0.4%; the franc was the worst-performer in G-10 as it remains under pressure after SNB kept rates unchanged last week. USDJPY extended through 148.50, adding to cheapening pressure on Treasury yields. In rates, treasuries bear-steepened with long-end yields cheaper by up to 7bp on the day and 2s10s, 5s30s spreads near session wides heading into early US session. 10-year TSY yields were around 4.49% (after touching a fresh 2007 high of 4.50%) and more than 5bp higher on the day, near top of Friday session range and 30-year yields rose 6bps to 4.59% - a new cycle high; the German benchmark jumped six basis points to 2.80%, the highest since 2011. Long-end-led losses prolong curve-steepening trend, leaving US 2s10s, 5s30s spreads wider by 5.5bp and 3bp on the day; 2s10s reached -62bp, least inverted since May 24. Treasuries led by price action in core European rates, where German 30-year yields are cheaper by almost 9bp on the day. Into the move, German 10-year yields rise to highest since 2011 as central banks remain in higher for longer mode. Dollar IG issuance slate contains three names so far; weekly volume is expected to total $15b-$20b. Treasury sells 2-, 5- and 7-year notes this week with auctions starting Tuesday. In commodities, oil prices pared an earlier gain. Spot gold fell 0.2%. Bitcoin prices remain subdued around the USD 26k mark. Mixin Network suspended services after a hack involving USD 200mln in funds, according to The Block. Today's calendar is relatively sparse: we get the Dallas Fed manufacturing activity at 10:30am. At 6pm Minneapolis Fed President Kashkari speaks Market Snapshot S&P 500 futures little changed at 4,360.25 STOXX Europe 600 down 0.4% to 451.27 MXAP down 0.5% to 159.33 MXAPJ down 0.7% to 493.69 Nikkei up 0.9% to 32,678.62 Topix up 0.4% to 2,385.50 Hang Seng Index down 1.8% to 17,729.29 Shanghai Composite down 0.5% to 3,115.61 Sensex little changed at 66,042.86 Australia S&P/ASX 200 up 0.1% to 7,076.53 Kospi down 0.5% to 2,495.76 German 10Y yield little changed at 2.78% Euro down 0.2% to $1.0632 Brent Futures up 0.7% to $93.92/bbl Gold spot down 0.2% to $1,922.02 U.S. Dollar Index up 0.12% to 105.71 Top Overnight News China central bank advisor says the country should pursue structural reforms instead of further monetary easing to bolster growth. RTRS Chinese property stocks tumble after China Evergrande Group suffered another setback in its restructuring and may be forced to liquidate. BBG China prevents a senior Nomura banker from leaving the mainland as part of an investigation, a move likely to further undermine global business community confidence in the country. FT Japan is considering a series of tax breaks to lower production costs in critical industries such as semiconductors, batteries, and biotechnology. Also, Japan is likely to come under growing pressure to intervene and stabilize the yen, w/the 150 level considered a potential trigger point. Nikkei ECB’s Villeroy says the recent rise in energy prices won’t derail the Eurozone’s underlying disinflation, as the goal is still to achieve 2% inflation in 2025. BBG Italy will allow banks to avoid a controversial windfall tax if they put 2.5x the tax amount toward strengthening their common equity tier 1 ratio. BBG Trump has a 10-point lead over Biden in a new Washington Post-ABC poll, and 3 in 5 Dems/Dem-leaning independents say they would prefer someone other than Biden on the ticket. WaPo Screenwriters reached a tentative deal with Hollywood studios, settling one of two walkouts that have shut down production. The writers gained concessions on key points, including higher wages, people familiar said. Initial votes on the pact by union boards may come as soon as tomorrow. The focus will then shift to reaching a deal with striking actors. Netflix and Disney gained premarket. BBG The US economy faces a slew of headwinds during the final months of the year, including the lagged effect of monetary tightening, the UAW strike, a potential gov’t shutdown, elevated oil/gas prices, and the resumption of student loan payments. WSJ Per GS’s PB book US equities were heavily net sold last week, driven almost entirely by short selling, which in notional terms was the largest since Sep ’22, driven by Macro Products and Single Stocks (~70/30 split). HFs have been pressing US shorts for 3 straight weeks (5 of the past 6). In cumulative notional terms over any 6-week period, the amount of shorting in US equities since mid-August is the largest in six months and ranks in the 98th percentile vs. the past decade. GSPB A more detailed look at global markets courtesy of Newsquawk APAC stocks traded mixed albeit with a mostly negative bias following the lack of major catalysts from over the weekend and amid Chinese developer woes, while attention this week turns to data releases and the US government shutdown deadline. ASX 200 was marginally lower with losses in mining stocks and financials overshadowing the resilience in the consumer and tech sectors. Nikkei 225 outperformed amid stimulus hopes with the government considering 5yr-10yr tax benefits for firms producing semiconductors and storage batteries, as well as providing support in areas where firms face high entry risk and will reportedly boost take-home pay for part-time workers. Hang Seng and Shanghai Comp were pressured amid developer-related concerns with Evergrande shares down more than 20% after it cancelled its creditor meeting and is scrapping its USD 35bln debt restructuring plan, while the Co. said it is unable to issue new debt under the present circumstances citing an investigation into its subsidiary Hengda Real Estate. Furthermore, China Aouyuan shares dropped by over 70% on the resumption of trade following a 17-month hiatus. Top Asian News PBoC adviser said China has limited room for further monetary policy easing and should pursue structural reforms such as encouraging entrepreneurs instead of relying on macroeconomic policies to revive growth, according to Reuters. Chinese state asset manager, China Reform Holdings is to set up a strategic emerging industry fund worth at least CNY 100bln, according to Bloomberg. Evergrande (3333 HK) cancelled its creditor meeting set for early this week and is scrapping its USD 35bln debt restructuring plan, while it noted that it is necessary to re-assess the terms of the proposed restructuring. Co. also stated that it is unable to issue new debt under the present circumstances citing an investigation into its subsidiary Hengda Real Estate. Chinese President Xi said in a meeting with South Korea’s PM that he welcomes a summit between China, South Korea and Japan at an opportune time and will seriously consider visiting South Korea, according to Reuters. US Department of Defense said the US and China will hold a working-level meeting on cyber issues and strategy, according to Reuters. EU’s Dombrovskis said the EU has no intention to decouple from China but needs to protect itself when its openness is abused. Dombrovskis also said that cooperation with Europe and China remains essential and if they talk candidly, they can make paths converge and re-energise engagement. Furthermore, he said that de-risking is a strategy to maintain openness not undermine it and that the strongest headwind is Russia's aggression against Ukraine and how China positions itself on the issue. Japan’s government is considering 5yr-10yr tax benefits for firms producing semiconductors and storage batteries as part of an upcoming economic stimulus package, while the government is considering providing support in areas where private-sector firms face high entry risks. Japan is to boost take-home pay for part-time workers, according to Yomiuri. BoJ Governor Ueda reiterated that BoJ must patiently maintain monetary easing; Japan's economy is recovering moderately. He added the policy framework has a big simulative effect on the economy but at times could have big side effects. Ueda noted stable and sustainable achievement of 2% inflation is not yet in sight, and Japan's economy is at a critical stage on whether it can achieve positive wage-inflation cycle. Japanese firms are changing prices more frequently than in the past, which is an important sign suggesting wages and inflation could move in tandem. Ueda said it is important for FX to move stably reflecting fundamentals; BoJ hopes to work closely with the government and scrutinise the impact of FX moves on the economy and prices. BoJ Governor Ueda said the BoJ will not directly target FX in guiding monetary policy. European bourses extended on losses since the cash open, despite no obvious catalyst to drive price action, and with no initial move seen in response to the German Ifo metrics - a release which on balance was better-than-expected. Sectors in Europe are lower across the board with Travel & Leisure and Basic Resources, and Consumer Products as the biggest laggards, while Healthcare, Energy, and Banks see their losses cushioned in comparison. US futures reversed their earlier gains and saw an acceleration in losses at one point despite a lack of fresh drivers at the time. The futures have since stabilised around flat levels intraday. Top European News UK PM Sunak is facing a renewed backlash from within the Tory party and opposition Labour politicians, as well as business executives and university leaders after the government refused to rule out scrapping the northern leg of the HS2 rail project, according to FT. BoE is reportedly set to delay the implementation of some Basel III reforms for a further 6 months but will disappoint banks by reducing the phase-in period, according to FT. ECB’s Villeroy said the recent increase in oil prices won’t derail the ECB’s fight to tame inflation and stated that patience is more important than raising rates further, according to Bloomberg citing an interview with France Inter ECB's Villeroy said maintaining the current level of interest rates will lower inflation, and sees a risk that the ECB could do too much in the future. He said they should focus on the persistence of rates rather than pushing rates up, and markets should not expect rate cuts before a sufficiently long time. ECB's De Cos said must avoid insufficient and excessive tightening; and if rates are kept at the current 4.0% long enough, we should reach the 2% goal, according to Bloomberg. Bundesbank faces hundreds of job reductions under a modernisation plan by Boston Consulting Group which was hired in an effort to make the central bank more agile and efficient, according to FT. Italy revisited the windfall tax on banks to give lenders the option to boost reserves instead of paying a levy, according to Reuters. Germany is to scrap stricter building insulation standards to help prop up the struggling property sector and Chancellor Scholz is to meet property industry leaders today. FX DXY retains an underlying bid in the wake of recent Fed rhetoric underlining that inflation remains too high, while the USD also benefits from a retreat in the Yuan on the back of Evergrande woe plus ongoing weakness in the Yen and Franc on policy divergence dynamics. AUD is among the laggards amid contagion from the Yuan and the decline in base metal prices, particularly iron and copper, while the CAD is underpinned by resilient crude prices. Sterling slipped to a new multi-month low against the USD, whilst the Euro faded above 1.0650 against its US counterpart even though German Ifo survey metrics either beat or matched expectations. Instead, EUR/USD seemed more inclined to remarks from ECB’s Villeroy and de Cos backing the rates have peaked scenario. Barclays on month-end rebalancing: model suggests strong USD buying vs. all majors as US equities have trimmed gains alongside a hawkish hold from the FOMC. Fixed Income Bears remain in control of proceedings as alluded to earlier, and momentum is building with little sign of underlying buyers turning the tide as more technical and psychological support levels are breached Bunds have now been down to 128.87 from a peak at 129.56 that matched their previous Eurex close. Gilts are now probing 95.50 to the downside after failing to retain 96.00+ status very early on Liffe, and T-note is rooted to the base of its 108-11/25+ range. Yields are extending to fresh peaks, and there may be some respite for bonds if the 10-year German benchmark holds around 2.80% and its US equivalent is capped at circa 4.50%. Commodities Crude November futures are firmer intraday despite the firmer Dollar, downbeat mood across stocks, and the Chinese property woes overnight, underpinned by bullish fundamentals. Dutch TTF prices are on the rise this morning despite bearish fundamentals at face value, with the Australian LNG strikes averted and Norway also ramping up gas output. There is no obvious reason for the surge in TTF prices which has also been gradual in nature. Spot gold briefly topped its 200 DMA (1,925.93/oz) but remains within Friday’s USD 1,918.95-28.89/oz range, while spot silver briefly rose above its 50 DMA at USD 23.63/oz before reversing back to session lows. Base metals are lower across the board, with the initial downside emanating from the losses across Chinese property names overnight, while the deterioration in sentiment in the European morning keeps industrial metals under pressure. Saudi Foreign Minister said the kingdom is keen to maintain stability, reliability, sustainability and security of oil markets, according to Reuters. EU energy official said Europe will have to rely on US fossil fuels for decades, according to FT. Russia mulls tweaks to exempt some oil productions from the export ban; Exemptions on bunker fuel and gasoils from its fuel ban, via Bloomberg. Geopolitics Ukrainian President Zelensky said he met with Mike Bloomberg and other top US financiers during his US visit to discuss reconstruction and investment, according to Reuters. Russian Foreign Minister Lavrov said the Ukraine peace formula is not feasible, while he stated regarding the latest proposals by the UN Secretary-General to revive the Black Grain deal that they do not reject them but noted the proposals are simply not realistic, according to Reuters. Iranian President Raisi told CNN that Iran has not said it does not want IAEA nuclear inspectors in the country, while he added that Israeli normalisation with Gulf Arab states will see no success. Iran’s intelligence ministry said 30 simultaneous explosives were neutralised in Tehran and 28 terrorists were arrested. French President Macron announced that France is to end its military cooperation with Niger in the months ahead following the military coup and decided to recall its ambassador from the African country, according to Reuters. US President Biden’s administration is reportedly in talks for a major arms transfer to Vietnam that may include fighter jets. Philippines strongly condemned the Chinese Coast Guard’s installation of a 300-metre floating barrier preventing Filipino boats from entering the Scarborough Shoal in the South China Sea. US Event Calendar 08:30: Aug. Chicago Fed Nat Activity Index, est. 0.05, prior 0.12 10:30: Sept. Dallas Fed Manf. Activity, est. -13.0, prior -17.2 Central Bank speakers 18:00: Fed’s Kashkari Speaks DB's Jim Reid concludes the overnight wrap It's nice to get back to the free form creativity of research after an highly scheduled weekend in sole charge of the kids as my wife went on a reverse hen do (2yrs after a covid wedding!). I was given a 3-page itinerary and instructions that included meal plans, 3 lots of swimming lessons, 2 separate golf lessons, violin and piano practise, Maths and English homework, a friend’s 8th birthday party and helping to design 2 fireworks posters. Oh and I had to lend the tooth fairy some money. I’m dropping them off to school this morning and then straight to the peace and quiet of a 7-hour flight to New York. Bliss. This week one of the main highlights will take markets through a full on Back to the Future and Quantum Leap (my favourite show as a teenager) moment as the-every-5-years US GDP revisions take place on Thursday alongside the final Q2 2023 revisions (unch at 2.4% expected). DB's Brett Ryan talks about the revisions here but he discusses how GDP will be revised from Q1 2005 through Q1 2023, although revisions prior to the first quarter of 2013 will be offsetting across industries within each period. Gross domestic income (GDI) and select income components will be revised from Q1 1979 through Q1 2023. You'll see our CoTD from a couple of weeks ago here that discussed how the current big gap between US GDI and GDP could possibly be explained by erroneous recent data showing that net interest payments have been going down in the US as rates and yields have been soaring in the last 2 years. It's possible that revisions could make GDI look more healthy (interest payments add income to parts of the economy) but also make interest costs in the economy look more realistic and hurt fundamental models of interest cover for those indebted. This is just an educated guess at this stage. Anyway, the revisions are potentially an important event and could make us think differently about the US economy in the recent past and therefore the future. It's also possible not much changes of course. That would make a boring time travel movie though. Outside of this the core PCE deflator on Friday is as important. Our economists point out that the data from the August CPI and PPI releases point to a slightly softer reading (+0.20% vs. +0.22% last month), which would have the effect of lowering the year-over-year growth rate by a little over 30bps (to 3.9%). As they highlight, the Fed's latest SEP forecast for Q4/Q4 core PCE inflation last week was 3.7%, which implies a modest re-acceleration in the monthly prints. This is one reason why our economists believe the bar is relatively high for the Fed to hike again before year-end. Staying with inflation, over in Europe, the flash September CPIs kick off with prints from Germany on Thursday. The numbers for the Eurozone, France and Italy will be out on Friday. Friday also sees Tokyo CPI which is an important economy wide lead indicator as the BoJ considers more radical changes to its monetary policy soon. Elsewhere in the US we have new home sales and consumer confidence tomorrow, durable goods on Thursday with trade numbers and personal income and consumption numbers on Friday. In Europe, Germany sees the Ifo survey today, consumer confidence on Wednesday and labour market data on Friday. In France, consumer confidence will be out on Wednesday and consumer spending data is due Friday. Sentiment gauges will also be out in Italy and the Eurozone on Thursday. Asian equity markets are mostly retreating this morning with Chinese stocks leading losses amid persistent concerns over the property market after embattled real estate developer Evergrande Group indicated that it will be unable to issue new debt due to an ongoing government investigation into its unit Hengda Real Estate Group. In terms of specific index moves, the Hang Seng (-1.43%) is emerging as the biggest underperformer while the CSI (-0.62%) and the Shanghai Composite (-0.42%) are also trading in negative territory. Elsewhere, the KOSPI (-0.57%) is also weak in early trade while the Nikkei (+0.58%) is bucking the regional trend. US stock futures are indicating a rebound though with those on the S&P 500 (+0.27%) and NASDAQ 100 (+0.34%) moving higher. 10yr US yields are back up +2.4bps to 4.458% as I type . This morning, Marion Laboure and Cassidy Ainsworth-Grace in my team have published the first instalment of their new series on the Future of Money – Cryptocurrencies: The return of faith, trust and, fairy dust. Focusing on the hot topic of cryptocurrencies, followed by a deep dive on stablecoins, they argue that despite the bankruptcies and negative news over the last 18 months, the crypto ecosystem has edged closer to the established financial sector. As a result, digital assets are here to stay. You can find their report here. Looking back on last week now, we had a run of flash PMI data on Friday. Starting with the US, the flash composite PMI for September surprised to the downside at 50.1 (vs 50.4 expected), with services weaker at 50.2 (vs 50.7 expected) and at its lowest level since January. Manufacturing on the other hand was stronger than forecast, at 48.9 (vs 48.2 expected). Digging deeper, in the services PMI, the employment component bounced to 52.6, the highest level in a year, pointing to a still robust US labour market. All other details were on the softer side, with backlogs in particular at its lowest level since the pandemic, at 44.5. The moderating activity signal of the PMIs on Friday helped US fixed income recoup some of its losses earlier in the week. US 10yr Treasury yields fell -6.1bps, and 2yr yields fell -3.4bps. However, 10yr yields still rose +10.1bps week-on-week to 4.435%, their highest weekly close since 2007. This followed on from the hawkish Fed meeting on Wednesday, and a strong weekly jobless claims print on Thursday that affirmed a higher-for-longer approach by the Fed. As such, the expected rate for December 2024 rose by +13.0bps week-on-week to 4.67% (-3.6bps Friday) . The European PMIs were a bit more of a whirlwind relative to the US. The composite PMI surprised to the upside, rising +0.3pts to 47.1 (vs 46.5 expected). The increase was driven by a +0.5pts increase in services (48.4 vs 47.6 expected), while manufacturing was mostly unchanged at 43.4 (vs 44.0 expected). However, the interesting tidbit came with the divergence between France and Germany. For the former, the composite PMI surprised to the downside, falling to 43.5 (vs 46.0 expected), whereas German PMI rose to 46.2 (vs 44.7 expected). Off the back of this, German 10yr bund yields traded largely flat on the day (+0.3bps). In weekly terms, the 10yr bund yield followed the US, up +6.4bps. Equities struggled last week against the backdrop of rising yields, as the S&P 500 fell -2.93% week-on-week (-0.23% Friday) in its largest down move since March (and its lowest level since early June). Tech stocks saw a modest outperformance on Friday, with the NASDAQ down a marginal -0.09%. However, the tech-heavy index slipped -3.82% in weekly terms, its third consecutive week of losses, and a c.8% decline from its July peak. In Europe, the STOXX 600 laboured last week, falling back -1.88% (and -0.31% on Friday). Finally, in commodities, the oil price rally ran out of steam last week.Brent was down -0.70% to $93.27/bbl (-0.03% Friday) after rising by over +11% over the previous three weeks. WTI saw a similar down move of -0.82% to $90.03 (+0.45% Friday). Nonetheless, energy supply risks remained in focus last week. For instance, on Thursday Russia temporarily banned most gasoline and diesel exports with immediate effect . We’ll see how we go this week as we hit the business month-end on Friday. Tyler Durden Mon, 09/25/2023 - 08:28.....»»
10 Oversold Value Stocks To Buy
In this piece, we will take a look at ten oversold value stocks to buy. If you want to skip an introduction to value investing and oversold stocks, then take a look at 5 Oversold Value Stocks To Buy. Value investing has multiple benefits, particularly for patient investors. Understanding the complexities of a firm’s business […] In this piece, we will take a look at ten oversold value stocks to buy. If you want to skip an introduction to value investing and oversold stocks, then take a look at 5 Oversold Value Stocks To Buy. Value investing has multiple benefits, particularly for patient investors. Understanding the complexities of a firm’s business operations and translating them into a stock price to compare it with the market price is a tedious process that can provide the right dividends if executed correctly. Theoretically, the field of value investing is now more than a century old. Its fundamentals center on completely ignoring price movements and focusing on intrinsically valuing a stock. This value is then compared to the stock price for determining a margin of safety that the investment would have to overcome to converge with the market price and provide an opportunity to sell the shares and book a profit. The market’s role in value investing is simply of a “voting machine” with little relation to the actual value that a stock provides. When patiently followed, it has the potential to return billions of dollars in profit through share price appreciation – a fact that has contributed to the massive wealth of famous value investors like Warren Buffett. However, while the fundamentals of value investing were written in 1930, selecting shares through a quantitative metric dubbed the relative strength index (RSI) is a relatively new theory. The RSI, at its heart, is a momentum oscillator that determines the upward and downward variations in stock prices. It has only positive values that are limited to a maximum of 100 and is often used as part of a technical trading setup which indicates whether a stock is oversold or undersold. Determining whether an RSI reading alone is sufficient to determine if a stock can be bought or sold is the same as using a mean profit of a corporation to determine financial strength without comparing it to peer values. Reading the index requires understanding its moves, their magnitude, and the frequency of overbought or oversold readings. The frequency of these readings and the levels that they trade at provides details about whether a stock is a bull or a bear run. Crucially, RSI readings and stock prices can also diverge. For instance, a share might have an RSI reading in overbought territory (namely around the 80 level) but, while intuition suggests that an overbought territory should yield a downward price correction, the opposite happens and the shares actually start to rise in value. In this case, conventional wisdom suggests that a price reversal might be in place and lead to a longer downturn. A bearish signal provided by the RSI is dubbed by its founder as a Failure Swing where the RSI fails to meet previous high readings. This failure of the reading to, for instance, touch 75 but then drop and touch only 73 before dropping again can indicate a potential downturn in the market. The opposite of this can be a bullish indicator, where the RSI crosses the previous high, for example, touches 20 and then crosses 20. However, while technical indicators can be a nice way of studying individual stocks or other instruments such as currencies, the market as a whole is often influenced by macroeconomic patterns. And in the American economy, banks have decided to change their recession forecasts. This trend was started by Bank of America in its latest U.S. Economic Viewpoint report which expects U.S. economic growth to fall below previous levels but still remain positive. BofA was joined by JPMorgan who also no longer believes that the U.S. economy might be headed for a downturn. In a fresh research note issued late in the trading day on Wednesday, the bank’s chief economist Michael Feroli revised its earlier GDP growth forecast for Q2 2023 to 2.5% from a dismal 0.5% earlier. His shift in viewpoint is influenced by the strong GDP growth rate in the second quarter, which has led the team at the investment bank to doubt that growth can drop from 2.5% to 0.5% within a quarter. The latest jobs report did not favor any aggressive monetary tightening, and if the inflation readings also indicate that prices continue to drop then the Fed might actually start becoming cautious of rethinking a potential ‘higher for longer’ approach. However, on the flip side, as the GDP growth continues to be robust, as evidenced by analyst thoughts above, then the central bank might also see more leeway in finding the upper range of its interest hiking cycle. To understand the impact of the latter thought process consider the fact that after JPMorgan revised its recession estimates, the S&P500 dropped from 4,540 points it was trading at during midday to close at 4,478. Seems like Wall Street is also wary of higher interest rates fueled by an optimistic Fed. With these details in mind, let’s take a look at some oversold value stocks. The top scorers are Assertio Holdings, Inc. (NASDAQ:ASRT), Cambium Networks Corporation (NASDAQ:CMBM), and First Wave BioPharma, Inc. (NASDAQ:FWBI). Photo by Chris Liverani on Unsplash Our Methodology For this article we chose 10 companies with the lowest RSI scores, a price to trailing earnings ratio (P/E) of less than 15, and average analyst ratings of Buy or higher. Oversold Value Stocks To Buy 10. TELUS International (Cda) Inc. (NYSE:TIXT) Latest 14 Day RSI Score: 25.37 TELUS International (Cda) Inc. (NYSE:TIXT) is a Canadian technology company that provides a variety of products for customer management. These include solutions powered by artificial intelligence, bots, and data analytics. The firm came out with some good news for investors in August after it met its Q2 2023 guidance and confirmed a raised guidance for the full year. TELUS International (Cda) Inc. (NYSE:TIXT)’s shares were awarded accordingly and were up by more than 3%. By the end of March 2023, five of the 943 hedge funds polled by Insider Monkey had held TELUS International (Cda) Inc. (NYSE:TIXT)’s shares. Along with Cambium Networks Corporation (NASDAQ:CMBM), Assertio Holdings, Inc. (NASDAQ:ASRT), and First Wave BioPharma, Inc. (NASDAQ:FWBI), TELUS International (Cda) Inc. (NYSE:TIXT) is a value stock that is currently oversold. 9. Silicom Ltd. (NASDAQ:SILC) Latest 14 Day RSI Score: 25.13 Silicom Ltd. (NASDAQ:SILC) is an Israeli company that manufactures and sells networking products such as cards and adapters. The firm managed to meet analyst EPS estimates for its second quarter earnings at a time when the technology industry is reeling back from reduced data center and associated infrastructure spending. After the earnings, Needham rated the shares as a Buy and the stock’s average share price target is $35 for an $8 upside. As of Q1 2023, nine of the 943 hedge funds part of Insider Monkey’s database had bought Silicom Ltd. (NASDAQ:SILC)’s shares. The firm’s largest investor out of these is Austin Wiggins Hopper’s AWH Capital with an investment worth $4 million. 8. Aptevo Therapeutics Inc. (NASDAQ:APVO) Latest 14 Day RSI Score: 24.85 Aptevo Therapeutics Inc. (NASDAQ:APVO) is a biotechnology company that develops treatments for leukemia and other kinds of cancers. The firm successfully closed a $5 million public offering of its shares in August 2023 and the stock is down a massive 74% year to date with little analyst coverage as of late. After digging through 943 hedge funds for their first quarter of 2023 investments, Insider Monkey discovered that two had held a stake in the company. Aptevo Therapeutics Inc. (NASDAQ:APVO)’s largest shareholder in our database is Ryan Tolkin (Cio)’s Schonfeld Strategic Advisors with a stake of $292,633. 7. CarGurus, Inc. (NASDAQ:CARG) Latest 14 Day RSI Score: 24.25 CarGurus, Inc. (NASDAQ:CARG) is a technology company that provides a retailing platform that allows used car sellers to connect with buyers online. The stock tumbled by more than three percent in August after the firm surprised investors by delaying its earnings release for the second quarter. Analyst coverage on the stock is limited as well, as the shares are rated Buy on average but have seen recent Neutral ratings as well. Insider Monkey’s March quarter of 2023 survey of 943 hedge funds revealed that 22 had invested in CarGurus, Inc. (NASDAQ:CARG). Michael Pausic’s Foxhaven Asset Management is the firm’s largest hedge fund investor since it owns 4.7 million shares that are worth $88 million. 6. AMN Healthcare Services, Inc. (NYSE:AMN) Latest 14 Day RSI Score: 24.06 AMN Healthcare Services, Inc. (NYSE:AMN) is a human resources firm that offers hospitals and other facilities with staffing to fulfill the demand of nurses, therapists, physicians, technicians, and others. The firm has outperformed analyst EPS estimates in all four of its latest quarter, making it unsurprising that the stock is rated Strong Buy on average. By the end of this year’s first quarter, 31 of the 943 hedge funds surveyed by Insider Monkey had held a stake in the firm. AMN Healthcare Services, Inc. (NYSE:AMN)’s largest shareholder in our database is Jim Simons’ Renaissance Technologies with a $39.8 million stake. Assertio Holdings, Inc. (NASDAQ:ASRT), AMN Healthcare Services, Inc. (NYSE:AMN), Cambium Networks Corporation (NASDAQ:CMBM), and First Wave BioPharma, Inc. (NASDAQ:FWBI) are some top oversold value stocks. Click to continue reading and see 5 Oversold Value Stocks To Buy. Suggested Articles: George Soros’ Top 10 Stock Picks Billionaire Lee Cooperman’s Top 10 Stock Picks 10 Oversold NASDAQ Stocks to Buy Disclosure: None. 10 Oversold Value Stocks To Buy is originally published on Insider Monkey......»»
10 Oversold Small Cap Stocks To Buy
In this piece, we will take a look at the ten oversold small cap stocks to buy. If you want to skip what’s happening in the market right now and background on small cap stocks, then head on over to 5 Oversold Small Cap Stocks To Buy. If there’s one thing that can be said […] In this piece, we will take a look at the ten oversold small cap stocks to buy. If you want to skip what’s happening in the market right now and background on small cap stocks, then head on over to 5 Oversold Small Cap Stocks To Buy. If there’s one thing that can be said with certainty right now, it’s that the investing climate at the start of August is markedly different than the one during late July. The Federal Reserve, which has been one of the most closely watched institutions (at least in the stock markets), has been making the news for well over a year now with its rapid series of interest rate hikes. These hikes make securing credit harder, and the central bank has been clear in outlining that it will base its decisions on a handful of important economic indicators such as the job creation rate and the rate of price increases also known as inflation. In July, these data sets seemed to confirm that the previous interest rate hikes have started to make their effects, making it more likely that the bank rate is unlikely to increase rates. In the broader term, stable interest rates, even if they are high, allow small and large businesses to adjust their borrowing needs and working capital financing models. Even if the link between interest rates and stock prices is often subject to debate, the association of easier credit with improved spending from the corporate and consumer ends of the economy is quite intuitive. The more credit a firm can raise, the faster it can increase its share of markets or launch products, and consumers are able to finance purchases through easier credit find it easier to spend on products such as graphics processing units (GPUs). Even as stock market investors could have taken some solace in knowing that the interest rate hike environment has toned down, rating agency Fitch Ratings was ready to create history and downgrade U.S. government credit for the first time in more than a decade. Fitch’s latest warning that it might do so came in 2019, and the latest decision is based on the agency’s Sovereign Rating Model (SRM). For the U.S., this rating was adjusted by Fitch’s committee based on factors such as a rapid rise in inflation after the coronavirus pandemic and higher volatility in the gross domestic product (GDP). In Fitch’s words, the SRM was adjusted as follows: Macro: A +1 notch adjustment to offset the impact on the SRM from the deterioration of the GDP volatility variable and sharp spike in inflation following the COVID shock and its aftermath, while Fitch continues to believe the U.S. growth outlook remains solid and relatively stable over the medium term. For those wondering, the SRM itself is a regression model that uses 18 different variables and the committee’s Quantitative Overlay (QO) adjusts it to account for factors that are trickier to demonstrate mathematically. The latest QO was based on 11 factors, which highlighted that Governance is weaker than AAA peer countries and high interest rates and low tax receipts have strained public finances. However, the note was also sure to highlight that America has low levels of corruption, it is the world’s largest economy, has high GDP per capita, and enjoys strategic advantage of its currency being the most widely held reserve currency. The news of the rating downgrade was met with strong disagreement from the U.S. government, particularly Treasury Secretary Janet Yellen who cited U.S. GDP growth as evidence of the rating’s flaws. Secretary Yellen was also optimistic about the future of U.S. Treasury securities, stating at an event in Virginia that they would continue to be the most preferred safe haven asset in the world. As compared to its European peers, America’s economy has shown surprising resilience by managing to avoid a recession. In fact, optimism is abundant in some quarters, such as the Federal Reserve and Bank of America Corporation (NYSE:BAC). Bank of America, like other banks, has feared that the U.S. economy might tip into a recession due to tighter credit, but it reversed this outlook as August kicked off. Now, the bank feels it is necessary to “reassess our prior view that a mild recession in 2024 is the most likely outcome for the U.S. economy” in favor of positive growth over the time horizon. Moving towards small cap stocks, these stocks are mostly of firms that are tied more closely to the American economy. This is because these firms have fewer resources to target global markets, and the relative insulation also leads the shares to respond more to domestic economic conditions. In today’s era, this can be an advantage since America is one of the few large economies growing in an environment where other developed countries are having difficulty in managing strong growth rates. Additionally, small cap stocks also provide the potential for large profit percentages through share price appreciation, which also leaves them susceptible to equally larger losses and liquidity problems. With these details in mind, let’s take a look at some oversold small cap stocks, out of which the notable names are 2seventy bio, Inc. (NASDAQ:TSVT), TELUS International (Cda) Inc. (NYSE:TIXT), and Harmonic Inc. (NASDAQ:HLIT). Photo by Mohamed Hadji on Unsplash Our Methodology To compile our list of the most oversold small cap stocks to buy, we have narrowed down the top ten companies with an RSI reading of 30 or less, a market capitalization ranging between $300 million to $2 billion, and a Buy or better rating from analysts. Oversold Small Cap Stocks To Buy 10. Waldencast plc (NASDAQ:WALD) Latest 14 Day RSI Score: 22.98 Waldencast plc (NASDAQ:WALD) sells professional skincare products to plastic surgeons, dermatologists, and other doctors. The firm’s shares fell considerably in June end, and they have been unable to recover the losses so far. The shares are rated Strong Buy on average primarily due to Telsey Advisory’s Outperform rating in March. Raymond James, however, downgraded the shares to Market Perform in July. As of March 2023, eight of the 943 hedge funds part of Insider Monkey’s database had held a stake in Waldencast plc (NASDAQ:WALD). Along with TELUS International (Cda) Inc. (NYSE:TIXT), 2seventy bio, Inc. (NASDAQ:TSVT), and Harmonic Inc. (NASDAQ:HLIT), Waldencast plc (NASDAQ:WALD) is an oversold small cap stock seeing strong analyst attention. 9. MSP Recovery, Inc. (NASDAQ:LIFW) Latest 14 Day RSI Score: 22.02 MSP Recovery, Inc. (NASDAQ:LIFW) is a Florida based company that caused a bit of a stir in May 2022 after its shares tanked to below $3 after the firm merged with a SPAC that was trading above $10 at the time of the deal. The stock has not recovered, and it currently trades in cents. Year to date, the shares have lost more than 80%, and Cantor Fitzgerald, which is the only firm rating the stock, issued an Overweight rating in September 2022. Insider Monkey took a look at 943 hedge funds for this year’s first quarter and found out that six had invested in MSP Recovery, Inc. (NASDAQ:LIFW). 8. Cambium Networks Corporation (NASDAQ:CMBM) Latest 14 Day RSI Score: 21.81 Cambium Networks Corporation (NASDAQ:CMBM) is a technology company that sells networking equipment to businesses in a variety of industries. The firm’s second quarter earnings saw it miss analyst EPS estimates heavily, yet four analysts maintained an Outperform rating for the shares in August. The stock is down nearly 50% year to date. By the end of 2023’s March quarter, 11 of the 943 hedge funds part of Insider Monkey’s database had held a stake in the company. Cambium Networks Corporation (NASDAQ:CMBM)’s largest hedge fund shareholder is Orin Hirschman’s AIGH Investment Partners with a stake of $9.4 million. 7. Anika Therapeutics, Inc. (NASDAQ:ANIK) Latest 14 Day RSI Score: 21.33 Anika Therapeutics, Inc. (NASDAQ:ANIK) is a medical technology company that focuses on developing technologies and treatments aiming at joint preservation. The shares are down 24% year to date and the selloff started in March around the same time period the firm reported a slight annual growth for its fiscal year 2022 revenues but nevertheless missed analyst EPS estimates. 11 of the 943 hedge funds part of Insider Monkey’s Q1 2023 research had invested in Anika Therapeutics, Inc. (NASDAQ:ANIK). Out of these, the firm’s biggest investor is Douglas T. Granat’s Trigran Investments since it owns 1.5 million shares that are worth $45 million. 6. Impinj, Inc. (NASDAQ:PI) Latest 14 Day RSI Score: 19.58 Impinj, Inc. (NASDAQ:PI) is a technology firm that provides connectivity chips that are used in retailing and warehousing applications. Investment bank Goldman Sachs is quite optimistic about the stock, with its note earlier this year rating the shares as a Buy and setting a $101 share price target. The current share price is $63 and the average share price target is $92. After sifting through 943 hedge funds for their investments during 2023’s first quarter, 28 had bought a stake in the firm. Impinj, Inc. (NASDAQ:PI)’s largest shareholder among these is Daniel Patrick Gibson’s Sylebra Capital Management with a stake worth $385 million. 2seventy bio, Inc. (NASDAQ:TSVT), Impinj, Inc. (NASDAQ:PI), TELUS International (Cda) Inc. (NYSE:TIXT), and Harmonic Inc. (NASDAQ:HLIT) are some top oversold small cap stocks. Click to continue reading and see 5 Oversold Small Cap Stocks To Buy. Suggested Articles: 15 Most Undervalued Growth Stocks To Buy 10 Most Oversold S&P 500 Stocks Right Now 10 Recession-Proof Stocks Billionaires Are Loading Up On Disclosure: None. 10 Oversold Small Cap Stocks To Buy is originally published on Insider Monkey......»»
S&P Futures Hit 6 Week High, Nasdaq Set For Best March Since 2010 Ahead Of Quarter-End Fireworks
S&P Futures Hit 6 Week High, Nasdaq Set For Best March Since 2010 Ahead Of Quarter-End Fireworks US futures extended gains for the 3rd straight day and are on pace to rise 6 of the past 7 days, led by the Nasdaq 100 which is set for its best March in more than a decade as investors bet on a softening in central-bank policy amid worries about a recession while the slowdown in new money market fund injections eased fears about the ongoing bank run. Contracts on the Nasdaq 100 were up 0.3% as of 7:45 a.m. in New York, while S&P 500 futures also rose 0.2% hitting the highest level in 6 weeks. For the month, the tech-heavy gauge is tracking an increase of about 7.7%, its biggest March advance since 2010. The benchmark S&P 500 is also set for a small monthly gain as the rates outlook overshadowed concerns about turmoil in the banking sector and a possible economic contraction. The dollar strengthened Friday, trimming some of its sharp declines this month. Treasury yields steadied at the end of a quarter of wild swings. Investors have struggled to adjust for banking collapses and the shifting outlook for interest rates amid high inflation and threats to economic growth. The two-year yield was around 4.13% Friday while the 10-year maturity was about 3.55%. Among notable premarket movers, Nikola Corp. dropped 8.6% after a $100 million share offering priced at a 20% discount to the stock’s last close. Digital World Acquisition Corp., the special-purpose acquisition company merging with Trump Media, rallied as much as 16% following former President Donald Trump’s indictment. Virgin Orbit shares slump a record 40% after the satellite launch provider said it’s ceasing operations indefinitely. Here are the other notable premarket movers: Digital World Acquisition, the blank-check firm taking Trump Media public, rallied 8% in premarket trading, advancing along with other stocks tied to Donald Trump after the indictment of the former president. Phunware , a software firm that worked on Trump’s reelection campaign, rose 2.5%, while video platform Rumble gained 14%. Advance Auto Parts upgraded to equal-weight at Barclays, which says that rather than a positive call it is based on significant year-to-date underperformance. The stock gains 1.1%. Alphabet Inc.’s price target is lowered to $117 from $120 at Piper Sandler, which cites concerns about competition in artificial intelligence technology. Blackberry shares drop 3.8% after the cybersecurity company’s fourth- quarter revenue missed analyst estimates, with brokers flagging the impact of some large government deals slipping, as well as needing more convincing that important metrics were recovering. Generac shares are down 3% after BofA Global Research downgrades the generator company to underperform from neutral. IonQ shares are up more than 4% after the quantum-computing company reported fourth-quarter results that beat expectations and gave a full-year revenue forecast that was ahead of the consensus estimate. US stocks have experienced a big sector rotation this month with technology stocks rallying amid bets of lower interest rates, while economically-linked cyclical sectors lagged behind following their outperformance at the start of the year. The Nasdaq 100 is up nearly 19% in the first quarter, its best January-March performance since 2012. That rotation prompted momentum-chasing penguins, pardon strategists at Citigroup to upgrade US stocks to overweight from underweight, saying they “perform more defensively than other markets” during earnings recessions. Michael Hewson, chief market analyst at CMC Markets UK, said US stock markets “have undergone a bit of a crisis of confidence with concern about the effects of much higher rates giving way to concern about the health of the US banking system.” On the outlook for rates, all eyes Friday are on the so-called PCE Core Deflator, which is expected to show a slight easing of price pressures in February, though it should still be well above target. A round of Fed speakers on Thursday suggested more monetary tightening was necessary to quell inflation, even after the collapse of three US banks this month. “The Fed’s preferred measure of inflation could generate some volatility within the fixed income markets if we see any surprises,” economists at Rand Merchant Bank in Johannesburg wrote in a note. “Risks are tilted to the upside, and if the data shows that inflation pressures remained strong in February, the inversion of the US yield could deepen even further.” Traders will also be on guard for any choppiness amid quarter-end rebalancing from pension funds and options hedging activity, especially the famous JPM collar which has a 4065 strike. And they continue to debate the extent to which policy makers may cut interest rates this year. Several strategists have said markets are wrong to expect easing by the Fed this this year as the labor market remains robust, though US unemployment claims ticked up for the first time in three weeks. European stocks are ahead with the Stoxx 600 up 0.3% and on course for a third day of gains. Personal care, retailers and consumer products are the strongest-performing sectors while miners and banks fall. Here are some notable premarket movers: Air France-KLM rises as much as 4.5%, IAG 3.2%, Lufthansa 3.3% and EasyJet 3.8% following bullish notes on the sector from Deutsche Bank and Barclays and a slew of upgrades Ocado gains as much as 7.9%, while AutoStore falls as much as 12% after a UK court invalidated the two remaining patent lawsuits the Norwegian firm had filed against Ocado SAF-Holland rises as much as 7.6%, extending gains following Thursday morning’s results, as Hauck & Aufhaeuser lifts its PT to a new Street high CD Projekt soars as much as 9.8% after posting the second-highest quarterly earnings fueled by stronger sales of Cyberpunk 2077 and Witcher 3 games Getin Holding soars as much as 27% after the company proposes a record dividend of 0.58 zloty per share, its first payout since 2013 Computacenter shares gain as much as 3.2% on Friday after the IT reseller posted better-than-expected results, saying demand from most of its largest customers remains solid Torm rises as much as 9.6% after holder OCM Njord Holdings Sarl terminated a planned secondary public offering of 5 million class A shares in the Danish tanker operator Marston’s shares rise as much as 5.3%, with analysts saying the pub operator’s amendment and extension of its debt facilities should provide some relief for investors Jungheinrich shares slide as much as 9.2% after the forklifts and stackers manufacturer’s cautious outlook for 2023 overshadowed a strong end to 2022 EMIS shares plunged as much as 24% after Britain’s competition regulator said it would investigate UnitedHealth’s deal to acquire the health-technology company Earlier in the session, Asian stocks headed for a fourth day of gains as data showed China’s economy gained momentum in March, while concerns about global banking turmoil and elevated interest rates eased. The MSCI Asia Pacific Index rose as much as 1.1%, set to cap a second-straight weekly gain, boosted by consumer discretionary and materials shares. Most regional markets gained, led by Japan, South Korea and Hong Kong. Indian shares jumped after returning from a holiday. Chinese stocks got a boost after a report that manufacturing continued to expand amid a strong pickup in services activity and construction. The report offered investors more confidence about an economic rebound after stringent Covid restrictions were dropped. Spinoff plans for JD.com and Alibaba units also lifted sentiment for tech shares. Read: China’s Strong PMIs Show Economic Recovery Gaining Traction The latest data “confirms the early cycle economic recovery is on track, paving the way for earning revisions to stabilize and improve from 2Q,” analysts at UBS Global Wealth Management’s chief investment office wrote in a report. “We expect over 20% upside for MSCI China by year-end, with the recent consolidation presenting an attractive entry point.” Globally, concerns over the financial sector continued to cool and investors digested a round of Federal Reserve commentary. Bank of Boston President Susan Collins said the banking system is sound and more interest-rate increases are needed to bring down inflation. Japanese stocks rebounded, following US peers higher, as concerns over the financial sector continued to cool and investors digested a round of Fed commentary. The Topix Index rose 1% to 2,003.50 as of market close Tokyo time, while the Nikkei advanced 0.9% to 28,041.48. Mitsui & Co. contributed the most to the Topix Index gain, increasing 7.6%. Out of 2,160 stocks in the index, 1,471 rose and 588 fell, while 101 were unchanged. Meanwhile, Japanese semiconductor-related stocks pared earlier gains after Japan said it will tighten chip gear exports to help restrict tech shipments to China. Japan Trading Firms Gain on Reported Plans to Improve Returns “Besides the stabilizing overseas markets, expectations for firm corporate earnings outlooks are also boosting Japanese equities,” said Rina Oshimo, a senior strategist at Okasan Securities. “Japan’s macro economy this year is more resilient than overseas, mainly driven by reopening growth, and the government’s policy for childcare support is also positive material. Australian stocks also advanced: the S&P/ASX 200 index rose 0.8% to close at 7,177.80, boosted by mining and bank shares. Stocks across Asia advanced with US and European equity futures, underscoring investor optimism in the face of banking turmoil and elevated interest rates. The benchmark snapped seven weeks of losses, rising 3.2% for the week, the most since the week of Nov. 11. The index also posted a second straight quarter of gains. The focus will now be on Australia’s central bank, which is set to make a rate decision Tuesday. The RBA is expected to keep borrowing costs unchanged at next week’s meeting, delivering its first pause since initiating a policy tightening cycle in May 2022. In New Zealand, the S&P/NZX 50 index fell 0.4% to 11,884.50. India stocks rallied the most in more than four months on Friday bouncing back from their oversold levels to trim losses for the quarter. The S&P BSE Sensex Index rose 1.8% to 58,991.52 in Mumbai, while the NSE Nifty 50 Index advanced 1.6% to 17,359.75. The gauges posted their biggest single-day rallies since Nov. 11, narrowing their losses for the quarter to 3% and 4%, respectively. Even with the gains this week, the indices clocked their worst quarterly performance since June 2022 after scaling to their record peaks in December. Globally tightening monetary conditions and the impact of inflation have dampened the outlook for economic growth and shrunk the valuation gap that India enjoyed over its peers. Foreigners turned buyers of local shares in March after three straight months of outflows, purchasing a net of $1.4b of stocks through March 28, while domestic institutional investors remain supportive of equities. Reliance Industries contributed the most to the Sensex’s advance, increasing 4.3% after the company firmed up its plan for separating its financial services business, a move that will potentially result into value creation for the country’s biggest listed firm. Out of 30 shares in the Sensex index, 26 rose and 4 fell In FX, the Bloomberg Dollar Spot Index rose 0.2%, boosted by gain versus the yen; the dollar is set to end the quarter 1.4% lower, its first consecutive quarterly loss in more than two years, amid easing concerns about the global banking sector and money market wagers on Federal Reserve interest-rate cuts. USD/JPY rallied as much as 0.8% as Japan’s fiscal year-end flows dominated and haven bids waned amid easing concerns about the global banking sector; International Monetary Fund said the nation’s central bank should avoid a premature exit from monetary easing. In rates, US 10-year yields are down 2 bps at 3.537% ahead of the core PCE data due later today. Treasury 2-year yields cheaper by ~2bp on the day with 2s10s flatter by 3bp to -61bp from a high of around -50bp Thursday. Bunds outperform little-changed US 10-year by 2bp while gilts lag by 3bp. Earlier, ECB rate-hike premium was unwound slightly after euro-area core inflation accelerated to 5.7% in March, matching the median forecast. IG dollar issuance slate empty so far; a couple of names priced $1.4b Thursday, leaving March total around $100b vs $150b that was expected. Bund futures rallied as traders trimmed ECB rate bets after euro-area inflation slowed more than expected in March, although the core rate did accelerate. German 10-year yields are flat at 2.37% while the Euro is down 0.2% versus the greenback. US economic data slate includes February personal income/spending with PCE deflator (8:30am), March MNI Chicago PMI (9:45am) and March final University of Michigan sentiment (10am). In commodites, US crude futures are little changed with WTI at $74.35. Spot gold is also flat around $1,980 Looking to the day ahead. We have quite a busy day data wise, with the US PCE deflator data, the March MNI Chicago PMI and the February personal spending and income data. In Europe, we have the Eurozone March CPI data and the February unemployment. We will also see the release of the Italian March CPI and the January industrial index, the German march unemployment change, February retail sales and the import price index, and lastly the French March CPI. February CPI and consumer spending. Finally, we will hear from several central bankers, including the ECB’s Lagarde and Kazaks, as well as the Fed’s Williams, Waller and Cook. Market Snapshot S&P 500 futures little changed at 4,082.00 MXAP up 0.6% to 161.90 MXAPJ up 0.5% to 523.44 Nikkei up 0.9% to 28,041.48 Topix up 1.0% to 2,003.50 Hang Seng Index up 0.4% to 20,400.11 Shanghai Composite up 0.4% to 3,272.86 Sensex up 1.7% to 58,952.31 Australia S&P/ASX 200 up 0.8% to 7,177.75 Kospi up 1.0% to 2,476.86 STOXX Europe 600 up 0.2% to 455.58 German 10Y yield little changed at 2.39% Euro down 0.3% to $1.0876 Brent Futures down 0.9% to $78.54/bbl Gold spot down 0.3% to $1,975.10 US Dollar Index up 0.30% to 102.45 Top Overnight News Former President Donald Trump faces a set of legal requirements no American leader has had to confront after being indicted by a Manhattan grand jury on Thursday in a probe of hush money payments to a porn star during his 2016 campaign — a historic event in American law and politics that is certain to divide an already polarized society and electorate: BBG The BOJ expanded the range of its planned bond purchases next quarter, giving itself the option to dial back buying. It will buy ¥100 billion to ¥500 billion ($750 million to $3.8 billion) of 10-to-25-year bonds per operation, compared with a range of ¥200 billion to ¥400 billion in the first quarter. It also widened the range of purchase amounts for other maturities above one year. BBG The China Securities Regulatory Commission last month released long-awaited guidelines that require all mainland Chinese companies planning share sales outside the domestic A-share market to inform the regulator beforehand. That applies to jurisdictions that have been popular venues for Chinese listings, including Hong Kong and the U.S. Companies in some technology fields that haven’t yet generated revenue will be able to explore listings in Hong Kong, after the city’s stock exchange last week finalized a new set of rules known as Chapter 18C. WSJ China’s economic recovery gathered pace in March, with gauges for manufacturing, services and construction activity remaining strong, boosting the outlook for growth this year: BBG The U.S. and South Korea are both seeking to extradite captured crypto entrepreneur Do Kwon from Montenegro, authorities in the tiny European nation said this week, setting up competing bids to prosecute him over criminal charges tied to the collapse of his TerraUSD stablecoin. WSJ Eurozone inflation has fallen sharply to its lowest level for a year after a decline in energy costs. Harmonized consumer prices in the euro area rose by 6.9 per cent in the year to March, down from 8.5 per cent the previous month, to reach their lowest level since February 2022. The drop, due to a 0.9 per cent fall in energy prices, was steeper than a forecast by economists polled by Reuters, who had expected March eurozone inflation of 7.1%. FT Underlying inflation in the euro area hit a record in March, handing ammunition to European Central Bank officials who say interest-rate increases aren’t over yet: BBG Banks reduced their borrowings from two Fed backstop lending facilities in the most recent week, a sign that liquidity demand may be stabilizing. US institutions had a combined $152.6 billion in outstanding borrowings, compared with $163.9 billion the previous week. But US banks are facing a new problem as savers flee for higher deposit rates. BBG Finland has cleared the last significant hurdle in its bid to join Nato after Turkey’s parliament approved the Nordic country’s accession to the western military alliance. FT Investors are still flooding into cash, with $60.1 billion entering money markets funds in the week through Wednesday, according to EPFR data. That brings the quarterly flow into cash to about $508 billion, the most since the very start of the pandemic. BBG A majority of Americans don’t think a college degree is worth the cost, according to a new Wall Street Journal-NORC poll, a new low in confidence in what has long been a hallmark of the American dream. The survey, conducted with NORC at the University of Chicago, a nonpartisan research organization, found that 56% of Americans think earning a four-year degree is a bad bet compared with 42% who retain faith in the credential. WSJ A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were mostly firmer at quarter-end as they took impetus from the tech-led gains on Wall Street and with participants digesting a slew of data releases including better-than-expected Chinese PMI figures. ASX 200 was led by the mining and resources sectors after the strong data from Australia’s largest trading partner although the upside was capped ahead of next week’s RBA meeting with a recent Reuters poll showing near-even expectations amongst economists between a hike and a pause. Nikkei 225 gained heading into the end of the fiscal year and climbed back above the 28,000 level after encouraging Industrial Production and Retail Sales data but was off highs with chipmakers later pressured after Japan announced to impose new restrictions on chip-making gear. Hang Seng and Shanghai Comp. were positive after the strong Chinese PMI data in which Manufacturing PMI topped forecasts and Non-Manufacturing PMI rose to its highest since 2011, with the outperformance in Hong Kong led by tech as JD.com plans to spin off its industrials and property units. However, the gains in the mainland were limited amid a deluge of earnings releases including mixed results from China’s mega-banks and with the nation’s largest property developer Country Garden posting its first annual loss since its listing in 2007. Top Asian News Chinese Vice Finance Minister Zhu said China needs to step up fiscal policy adjustments to support the economy and that China will move steadily in implementing preferential tax and fee policies. Zhu also stated that China will effectively ease tax burdens of small firms and household businesses, while he noted that recently announced preferential tax and fee policies will reduce companies' burdens by CNY 480bln per year, according to Reuters. China's Ambassador to the EU warned the bloc of ‘peril’ in following the US on trade curbs, while he urged resistance to ‘unwarranted’ pressure and said that Beijing will not be ‘trampled’, according to FT. Japan is to impose new restrictions of chip-making gear, according to Bloomberg and Reuters. Japan said it will impose restrictions on 23 types of chip-making equipment from July. Japanese officials said the scope of restrictions went further than the US measures imposed in 2022. Chip-equipment exporters would need licenses for all regions. The measures will affect a broader range of companies than previously expected, according to FT. Agricultural Bank of China (1288 HK) says NIM for the banking sector will continue to shrink in Q1; Co. says its NIM faces downward pressure in 2023. Bank of China (3988 HK) CFO says they are to face a mild decline in NIM this year. Japan is to end current COVID border measures on May 8th, via TBS; replaced with random genomic surveillance at airports. European bourses are firmer, Euro Stoxx 50 +0.3%, continuing the positive APAC tone with incremental impetus from as-expected EZ Core HICP. Sectors are mixed with Banks lagging as yields retreat post-HICP while Personal Care/Drug names outperform. Stateside, futures are incrementally in the green with the tone more cautious ahead of PCE data and Fed speak, incl. Williams, thereafter. Top European News UK PM Sunak's office said Britain will join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership Trans-Pacific after the bloc's members reached an agreement on Britain joining the trade pact, while Japan's Economy Minister said they aim for an early signing of UK joining the CPTPP, according to Reuters. Sartorius to Buy French Biotech Polyplus for $2.6 Billion DSV Slips as JPMorgan Cuts Rating, Prefers Kuehne + Nagel Energy Cliff-Edge Threatens Thousands of British Businesses German Unemployment Rises More Than Expected on Sluggish Economy FX USD/JPY and Yen crosses still marching higher into month end as importer hedging and buy orders persist, headline pair popped above 133.50 before topping out and DXY holding 102.000+ status as a result. Aussie unable to keep hold of 0.6700 handle as AUD/NZD cross retreats through 1.0700 on divergent RBA/RBNZ rate expectations. Euro mixed after EZ inflation data showing a softer than forecast headline, but firmer than previous core, EUR/USD sub-1.0900, but EUR/CHF nearer parity than 0.9950. Cable unable to hold above 1.2400 irrespective of UK Q4 GDP upgrades as Buck bounces broadly pre-US PCE. Fixed Income EGBs experienced a marked bounce following the EZ inflation measure after dipping on the initial French reading; with the EZ figure showing a larger than expected cooling in the headline while the core measures are stick but were as-expected. Specifically, Bunds have been up to a 135.64 peak which saw the associated yield pullback from 2.40% best towards the 2.30% mark. USTs and Gilts have been moving in tandem with EGBs; though, USTs are somewhat more cautious ahead of upcoming events with yields slightly firmer as it stands. BoJ Q2 Bond Purchase plans; expands range for mid-to-superlong purchases for Q2. Click here for more detail. Commodities WTI and Brent are mixed/flat after settling higher by over USD 1.0bbl on Thursday with the overall tone tentative ahead of the US docket while crude specifically is cognisant of next week's JMMC. Specifically, benchmarks are near-unchanged but at the upper-end of USD 73.77-74.67/bbl and USD 78.54-79.18/bbl parameters. Metals hold a slight downward bias in otherwise tentative trade for the space with the USD's strength capping any potential upside from the somewhat cauutious tone. Geopolitics Japanese Finance Minister Suzuki said Japan is to extend the suspension of its most favoured nation treatment on tariffs for Russia, while it was also reported that Japan banned Russia-bound exports of steel, aluminium and aircraft from April 7th, according to the Ministry of Economy, Trade and Industry cited by Reuters. Turkish parliament approved a bill to clear the way for Finland's NATO accession, according to Reuters. Deputy Chairman of the Russian National Security Council says "our army will arrive in Kiev if necessary". Belarusian President Lukashenko warns that the West seeks to invade his country with the aim of "destroying" it; The war is not far from us and there are attempts to drag us into it; return of nuclear weapons is not blackmail but a safeguard. Says, talks to resolve the conflict in Ukraine need to commence now, a ceasefire without pre-conditions should be declared. Russia's Kremlin says Russian President Putin is to hold an "important" meeting of Security Council today; Foreign Ministry Lavrov to present a new concept of Russian foreign policy. Will talk to Belarussian President next week about Lukashenko's call for immediate peace talks, cContinuation of special military operation is the only way to achieve goals at the moment. US Event Calendar 08:30: Feb. Personal Income, est. 0.2%, prior 0.6% Personal Spending, est. 0.3%, prior 1.8% Real Personal Spending, est. -0.1%, prior 1.1% 08:30: Feb. PCE Deflator MoM, est. 0.3%, prior 0.6% Feb. PCE Core Deflator YoY, est. 4.7%, prior 4.7% Feb. PCE Deflator YoY, est. 5.1%, prior 5.4% Feb. PCE Core Deflator MoM, est. 0.4%, prior 0.6% 09:45: March MNI Chicago PMI, est. 43.0, prior 43.6 10:00: March U. of Mich. Sentiment, est. 63.2, prior 63.4 Current Conditions, est. 66.4, prior 66.4 Expectations, est. 61.4, prior 61.5 1 Yr Inflation, est. 3.8%, prior 3.8% 5-10 Yr Inflation, est. 2.8%, prior 2.8% Central Banks 15:05: Fed’s Williams Speaks at Housatonic Community College 17:45: Fed’s Cook Discusses US Economy and Monetary Policy 22:00: Fed’s Waller Discusses the Phillips Curve DB's Karthik Nagalingam completes the overnight wrap For a fourth straight day, market behaviour was rather benign with risk-sentiment remaining positive and volatility ebbing. Equity indices in both the US and Europe rose moderately, while longer-dated sovereign yields in the two regions diverged as inflation data is coming back to the foreground. Hotter-than-expected European inflation led to a selloff in bonds, and today we will get more inflation data from both sides of the pond. Given the calmer market narrative around the global banking system, focus today will be on the US PCE data. Fed members had an approximation of what PCE would look like given recent CPI and PPI prints when they rose rates 25bps last week but seeing how the underlying components are tracking may force market participants to refocus on pricing pressures. However, the market is likely to look through anything but an extraordinary print, given that the recent banking crisis will not be reflected in the data. Our US economists see a +0.36% advance for core PCE in February (+0.57% in January) and m/m declines for both income (-0.1% vs +0.6% in January) and consumption (-0.6% vs +1.8%). Ahead of the PCE print there was a bevy of Fed speakers yesterday, all of whom highlighted the fact that inflation remained too hot. Boston Fed President Collins (non-voter), while at a conference in Washington DC said, “Inflation remains too high, and recent indicators reinforce my view that there is more work to do.” Separately, Minneapolis Fed President Kashkari (voter) said that the stresses on the banking sector could last longer than expected, but also said that “the services part of the economy has not yet slowed down and … wage growth is still growing faster than what is consistent with our 2% inflation target.” Lastly, Richmond President Barkin (non-voter) said that “if inflation persists, we can react by raising rates further,” and pointed out that the committee was discussing a 50bp hike just a few weeks ago. He had no stated preference on the size of a future rate hike, but he said that continuing to fight inflation was the priority. These comments did little to change fed futures yesterday, as the market priced in just an extra +4.0bps for the rate following the December Fed meeting, increasing expectations to 4.387%. That was their highest closing level since March 10 - the day of the collapse of Silicon Valley Bank. The expectations around the May meeting rose marginally, with futures now pricing in a 55% chance of a 25bp hike, up from 47% the day before. While fed speakers don’t seem ready to talk about cutting rates, the market is still pricing in over two 25bps rate cuts by year-end after hitting a terminal rate in May. Against this backdrop, the more policy sensitive US 2yr yield was up +2.1bps to 4.12% – returning to roughly where they were before the most recent Fed rate hike on the 21 March. Meanwhile the US 10yr yield fell back -1.5bps after trading in a tight 6bp range all day, although yields have slightly pulled back (+1.51bps) overnight as we go to print. It was a different story in Europe, as 10yr bund yields rose +4.6bps to 2.37% and German 2yrs rose +9.5bps to 2.75%, their highest level since the third week of March. 10yr OATs (+5.2bps) and BTPs (+8.5bps) underperformed, while 10yr gilts yields rose by +4.6bps as well. As noted above, the selloff in European bonds began after the German inflation print showed an unexpected acceleration in price growth, with German CPI up to +0.8% (vs +0.7% expected) month-on-month, and +7.8% year-on-year (vs +7.5% expected) on the EU-harmonised measure. Eurozone CPI data for March later today will complete the picture, and our European economists expect euro-area EU-harmonised CPI to fall from 8.6% in February to 7.1% year-on-year, but with risks slightly to the upside following the German print. See their note here. Following the upside surprise on German CPI, the terminal ECB rate priced in by overnight index swaps for the December meeting climbed +10.7bps to 3.44%, pricing in barely any cuts (5bps) by the end of 2023 with the terminal rate expected for October at 3.49%. Turning to equities, the S&P 500 was up +0.57% with all but 3 of 24 industry groups gaining on the day. Semiconductors (+1.61%), consumer discretionary retail (+1.21%), and real estate (+1.19%) outperformed. The outperformance of technology continued, leading the NASDAQ (+0.73%) to maintain its trajectory for its best quarter since 2020. The only three S&P 500 industries down on the day were diversified financials (-0.13%), consumer durables (-0.21%) and banks (-1.00%). The underperformance in banks was primarily driven by the regionals with First Republic (-4.0%) the clear laggard, while Fifth Third (-2.6%), Zion (-2.4%), and M&T Bank (-2.3%) were in the next tier of underperformers. The larger banks outperformed with Citi (+0.3%) the only S&P bank constituent higher on the day, while JPM (-0.3%) and BofA (-1.3%) saw smaller losses. After markets closed, the Fed released their weekly H.4.1 balance sheet data showing how banks were using the Fed’s new bank lending facility and the discount window. Over the prior week, discount window borrowing was down from $110bn to $80bn, there was no further extension of credit to SVB or Signature, and the bank term funding program saw increased borrowing of $64bn from $54bn the week prior. The foreign repo facility, FIMA, saw use fall from $60bn to $55bn. Overall this shows modest improvement across the complex and should add to the narrative that the pain is mostly contained. In Europe, the STOXX 600 similarly gained on the day (+1.03%), with real estate (+3.74%) as well as information technology (+2.54%) driving performance. Food and Beverage (-0.47%) was the only industry group weaker off the back of the German CPI data, as the finer details of the release showed price inflation for food inched higher. Additionally, unlike in the US, European financials continued to rally back yesterday with as European banks climbed +1.84% and are now up +6.62% on the year. Looking into other bourses, the CAC and the DAX were up +1.06% and +1.26% respectively. This morning, Asian equity markets have carried over the overnight gains on Wall Street. Across the region, the Hang Seng (+1.46%) is leading gains with the KOSPI (+1.06%), Nikkei (+1.01%), CSI (+0.35%) and the Shanghai Composite (+0.33%) also rising. In overnight trading, US equity futures are pointing to further gains with those on the S&P 500 (+0.28%) and NASDAQ 100 (+0.34%) edging higher. China equities are outperforming following the official manufacturing PMI beating expectations at 51.9, and the non-manufacturing PMI rising to 58.2 in March. That is the non-manufacturing index’s highest level since May 2011. This data suggests that the economic recovery in the world’s second biggest economy remains on track even amid weaker global demand and a continued property market downturn. There was also a batch of economic data out of Japan indicating that inflation in Tokyo is still above trend after coming in at +3.3% y/y in March (vs +3.2% expected) compared to +3.4% recorded last month. At the same time, core Tokyo CPI rose +3.2% y/y (vs +3.1% expected) in March, following a peak of +4.3% back in December. So further improvement but not as much as the market was looking for. Labour market conditions loosened slightly as the unemployment rate unexpectedly rose to +2.6% in February from +2.4% in January, while the jobs to applicant ratio moved lower to +1.34 (vs +1.36 expected). Retail sales jumped +1.4% m/m in February, compared to January’s downwardly revised increase of +0.8%. Meanwhile, industrial production rebounded +4.5% m/m in February (vs +2.7% expected) on easing supply bottlenecks for carmakers. It was a big day for data release yesterday. Starting with the US, weekly jobless claims came in at 198,000 (vs 196,000 expected) suggesting a slight softening in an otherwise tight labour market. Continued claims was lower than expected (1,689k vs 1,700k expected), having remained in a tight range over the past few months now. The third revision to 4Q’22 US GDP saw annualised quarter-over-quarter GDP taken down to 2.6% (2.7% prior) on the back of lower personal consumption (1.0% vs 1.4% prior). 4Q’22 PCE was revised +0.1pp higher to 4.4%. In Europe, we had several confidence data points for March in the Eurozone demonstrating a slight weakening relative to February. Economic confidence was down to 99.3 (vs 100 expected), industrial confidence became negative at -0.2 (vs 0.5 expected) and services confidence fell a tenth to 9.4 (vs 10 expected). Consumer confidence remained steady at -19.2. This contrasted with the services-driven improvement in the PMIs for March. Looking on the individual country level, the Spanish CPI rose +1.1% month-on-month (vs +1.6% expected) and +3.1% year-on-year (vs +3.7% expected) year-on-year on the EU-harmonised measure. Italian February PPI came in at -1.3% month-on-month, and 10% year-on-year. Finally on commodities, oil rose sharply again yesterday for its third gain out of the last 4 days, as Bloomberg reported that it is highly unlikely that exports from Iraq will resume this week. Officials from the Kurdistan Regional Government are set to re-enter discussions with Iraqi officials early next week. WTI crude contracts were up +1.92% to $74.37/bbl whilst Brent crude hit $79.27/bbl after climbing +1.26%. Now to the day ahead. We have quite a busy day data wise, with the US PCE deflator data, the March MNI Chicago PMI and the February personal spending and income data. From the UK we have the March Lloyds business barometer and the Q4 current account balance. In Europe, we have the Eurozone March CPI data and the February unemployment. We will also see the release of the Italian March CPI and the January industrial index, the German march unemployment change, February retail sales and the import price index, and lastly the French March CPI. February CPI and consumer spending. Finally, we will hear from several central bankers, including the ECB’s Lagarde and Kazaks, as well as the Fed’s Williams, Waller and Cook. Tyler Durden Fri, 03/31/2023 - 08:17.....»»
3 Late January Earnings Plays With Pop Potential
Corporate earnings reports often produce some major stock price swings. Tesla is the second most volatile mega cap name and one of the 10 most volatile S&P constituents. The Street expects 35% year-over-year EPS growth when Tesla reports this week. Surging metals prices have Freeport-McMoRan investors braced for a shiny Q4 earnings report and 2023 […] Corporate earnings reports often produce some major stock price swings. Tesla is the second most volatile mega cap name and one of the 10 most volatile S&P constituents. The Street expects 35% year-over-year EPS growth when Tesla reports this week. Surging metals prices have Freeport-McMoRan investors braced for a shiny Q4 earnings report and 2023 guidance. In the wake of a Calix selloff, three research firms reiterated buy ratings and gave Calix price targets from $85 to $90. 5 stocks we like better than Tesla The snow is falling. New Year’s resolutions are holding up. Football playoffs are in high gear. It must be fourth-quarter earnings season. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q4 2022 hedge fund letters, conferences and more If you’re like us, you get excited this time of year. That’s because corporate earnings reports often produce some major stock price swings. Recent sales and profits get scrutinized, and outlooks get debated. In turn, heavy trading activity sparks major moves that often precede extended uptrends or downtrends. Traders use various tools to anticipate how a company will perform relative to internal guidance or Wall Street estimates. MarketBeat’s Earnings Announcement Screener is a valuable resource for identifying companies that are soon to report or have recently reported quarterly results. Two weeks into Q4 earnings season, things have gone well. Approximately two-thirds of companies delivered positive earnings per share (EPS) surprises, with banks, medical care and education companies among the biggest movers. As we get into the thick of it over the next couple of weeks, volatility will be fully displayed. With a historical flair for the dramatic, these three stocks could see some of the biggest pops. What is Tesla's Current Options Chain? Tesla, Inc. (NASDAQ:TSLA) reports after the close on January 25th. Even after the 3-for-1 split, the EV maker’s share price is relatively high, which makes options a popular investment vehicle. Our Options Chain tab is a good place to start when devising a bullish, bearish or neutral strategy around earnings. Whether Tesla goes forward or in reverse is debatable, but it will probably make a big move. It is the second most volatile mega-cap name after Meta Platforms and one of the 10 most volatile S&P constituents. On October 19th, 2022, Tesla’s third-quarter earnings beat failed to excite a market which chose to focus on a slowdown in growth and a cautious 2023 outlook. The stock went from roughly $222 to $207, twice the average daily volume, setting the tone for an ugly fourth quarter slide. Aggressive price cuts in the U.S. and China and lower gas prices have Tesla near a 52-week low heading into this week’s report. The Street is expecting 35% year-over-year EPS growth, but this could vary significantly based on the impact of reduced selling prices around the holidays. Why is Freeport-McMoran Rallying Into Earnings? Copper has been one of the hottest industries of 2023, which makes Freeport-McMoRan Inc. (NYSE:FCX) one to watch. The natural resources stock has surged nearly 20% year-to-date, thanks to a spike in copper prices. Copper futures reached seven-month highs last week due to low supplies and expectations of higher demand. The global transition to copper-rich renewable energy and China’s transition from zero-Covid restrictions have copper closing in on March 2022 at all-time highs. Combined with surging gold prices, this has investors braced for a shiny Q4 earnings report and 2023 guidance. The Street’s Q4 EPS forecast of $0.45 is much lower than the prior year but marks an acceleration from Q3. This reflects expectations of easing cost pressures on top of higher metal prices. A look at Freeport-McMoran’s earnings history reveals two consecutive misses. Last time around, lower average realized prices for copper and gold and increased cash costs were to blame. Will improved Q4 operating conditions be enough to stem the tide? The bar is set high and technical indicators point to the stock potentially being in overbought territory. Either way, expect this earnings announcement to provide electricity. Will Calix’s Q4 Earnings Be A Positive Surprise? Software developer Calix, Inc. (NYSE:CALX) is a lesser-known earnings play but one worthy of a look, given its volatility. The stock limps into Wednesday’s report down -26% from its December high but may be oversold. A major reversal could happen if Calix can surpass the market’s expectation of flat earnings. Look no further than Calix’s Q3 report to see the earnings pop potential. On October 24th, management announced earnings nearly 50% higher than consensus, led by record performances for both the EXOS and AXOS platforms. Calix’s cloud customer base rose by 28%, which showed demand for cloud infrastructure software is healthy despite macroeconomic pressures. The next morning, the stock gapped 10% to an impressive two-day run above $70. That rally has since fizzled, and the mid-cap is back in the mid-$50s. Calix suffered a high volume selloff on January 11th following an investor conference at which management noted ongoing supply constraints. Yet, with end-market demand still strong and management sticking with its Q4 guidance, jittery sellers may have created an opportunity for Calix bulls. Wall Street sure thinks they did. In the wake of the selloff, three research firms reiterated their buy ratings and gave Calix price targets running from $85 to $90. With opinions on the stock varying widely, expect Calix’s Q4 update to be the next big catalyst. Should you invest $1,000 in Tesla right now? Before you consider Tesla, you'll want to hear this. MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Tesla wasn't on the list. While Tesla currently has a "Hold" rating among analysts, top-rated analysts believe these five stocks are better buys. Article by MarketBeat.....»»
All About That Base, No Trouble
All About That Base, No Trouble By Peter Tchir of Academy Securities Last weekend we published Positioning & Key Drivers. Much of the work on interest rates followed up on the previous week’s Rates, Risk & Taylor Swift, but we really wanted to highlight “positioning”, aka “the base”. Positioning has been forming the “base” for market moves in both directions. The market’s response to Fed Chair Powell finally agreeing with us (they have to be much more cautious on rate hikes going forward) exposed the broader positioning in bonds and possibly equities. The rallies were strong, though I’d argue that the equities rally was less about positioning and more about people finally having to accept that the Fed has little interest in driving the economy into the ground. Powell’s message was not contradicted by other Fed speakers and was actually reinforced by them (all good for stocks). There is some furious debate over Friday’s market behavior. What Did Friday’s Price Action Tell Us? Price action early in the week was quite obvious. We saw weak data come in, which was coupled with the Fed pulling back on their tightening narrative (terminal rate is probably still too high). Friday saw stocks and bonds collapse after the Non-Farm Payroll data was released. The strong headline data wasn’t the key driver (though it had some impact). What drove the initial sell-off in stocks and bonds was the high and unexpected jump in average wages. That part is clear. What is less clear is why stocks and bonds reversed course (the 10-year came back from 3.63% to 3.48% and the S&P 500 e-mini futures rebounded from 4,007 back to 4,075 at the 4pm close). There are two competing theories: It’s all about the base. Positioning was so bearish that the market had to rally on news that just a couple of weeks ago would have sent it spiraling down. There is some logic to this, but there is little evidence that the market is so bearishly positioned. We can concede that the market isn’t overly bullish, but this “short covering panic theory” leaves a lot to be desired, at least for me. People questioned the data. For those of you who are sick and tired of reading T-Reports highlighting inconsistencies in the data (big focus on jobs and owners equivalent rent), you may have received many such notes from others this past week. My inbox and social media channels were filled with people questioning the jobs report. There was the now “obvious” discrepancy between the Establishment and the Household Surveys (the Household showed job losses). The data from 2 months ago got revised down (again). There were questions about the birth/death adjustment (was high in a period where other evidence showed that existing small businesses struggled, which isn’t typically a sign that new small businesses were being created rapidly). There were also questions about the historically low response rate (possibly due to timing of the survey and Thanksgiving). Finally, many people started to question if the new and improved ADP data isn’t the better data to watch. Maybe neither explanation is correct? No Trouble? Maybe there are two other big factors influencing markets: The potential for some form of armistice, truce, détente, or something between Russia and Ukraine. While many members of our Geopolitical Intelligence Group see the slog grinding through the winter, there are three things that I think have changed, making some sort of peace more likely. The U.S. election is over. Whether we like it or not, support of Ukraine was an election issue. This support had already started to break down along party lines. Why? I don’t know, but that is certainly my perception. So, with the election over, the ongoing cost of supporting Ukraine with weapons and aid will come to the forefront. The tricky question of “how does this end?” will rise to the top. Can we give Ukraine enough support to push Russia completely out? Possibly, but at what expense and where does that leave Putin and Russia? Energy. It is the winter and energy needs are spiking. The West is set to impose more sanctions and there is something about price caps (which I admit I haven’t read, because they are so unlikely to work and far more likely to backfire). Russia, by all accounts, has done a much better job than the West in securing transport for their fuel (not shocking as we pat ourselves on the back about sanctions while they are busy working around the issues). The logistics of these new sanctions will cause the amount of transportation needed to skyrocket. Quite simply, energy markets used to be somewhat efficient. A delivered to B and C delivered to D because they were closer. If A has to ship to D and B has to ship to C, the distances are longer. Ships would be at sea for longer, reducing the number of shipments. For a lot of reasons, addressing global energy concerns may take precedence over what Ukraine wants (and possibly even deserves). Winter. Winter was already mentioned in the energy discussion, but it plays several other roles. Academy’s GIG expects Russia to try to take advantage of frozen rivers to renew their attack on Ukraine. Russia needs to push west and all the rivers run north/south. At the moment, this forces the Russians to cross over bridges in very specific areas which are easily defended by Ukrainians with their highly capable weapons systems. Frozen rivers could help the Russians, but increasingly the efficiency of Ukrainian soldiers will make any Russian advance more difficult. That has led to targeting more and more infrastructure in Ukraine. Ukrainian winters are bleak at the best of times, let alone without the energy and raw resources needed to survive. The human toll will be bad for Ukraine even if they are technically “winning.” Finally, the forced migration of Ukrainians into Europe is placing unexpected burdens on the countries receiving those refugees. The longer the war and destruction lasts, the less likely people are willing or able to go “home” when it is all said and done. Winter will crystalize many risks. China. China seems to be nudging Putin along. You could almost argue that Xi, when he met with Putin, gave him a “win it, or get out ultimatum.” Let’s not fool ourselves, China would be okay with a Russian victory, but they are tired of the daily headlines. Since Russia hasn’t achieved this victory there could be pressure on Putin (whose health is being questioned again in some circles) to find some “graceful” way out. Putin is a bully, but even bullies recognize bigger bullies and try to appease them. The end of China’s zero-COVID policy. This attracts a lot of attention and seems logical (at least from our perspective). It seems realistic that China will set in motion steps to have fewer and less severe restrictions after the winter (there is that word again). That should be good for global supply chains, but with inventory levels already too high, I’m not sure how much of a bounce can be expected from China shifting their policy. Of all these narratives, I like the “peace” one the best (as you can tell by the time spent on that subject relative to others). If we get another big rally in stocks, it could be linked to developments on this front. Mo Trouble? We’ve examined no trouble, so what could cause more trouble? We covered this in more detail in Doesn’t Goldilocks Get Eaten in the End?, so we will just highlight the key issues. The Fed has already set the dominos in motion. The wealth effect and higher rates are bringing the economy to a screeching halt in some areas that will in turn impact others. The recession is coming sooner and will be deeper than expected (we will ultimately recover, but first we need to get through the recession fears). Quantitative tightening is like a nagging cough. It doesn’t seem too bad, but it certainly isn’t good, and you have to be worried about whether it will develop into something more severe. Without a doubt the Fed is committed to balance sheet reduction (because they now believe what I’ve believed all along – that QE affects asset prices directly and that is a big issue and one they want to resolve). When does bad news become bad? My guess is soon, even after Friday’s reversal (remember, Friday’s NFP data wasn’t really “bad” in any traditional sense, so it’s difficult to garner much information on how the market will respond to truly bad economic news, especially on the jobs front). The Pseudo-Random Wildcard! I like using the term pseudo-random as opposed to random because it sounds “smart,” but is actually appropriate as I’m going to apply it to the trading of daily and weekly expiration options. The prominence of these very short-dated options should not be understated. Report after report comes in showing that volumes in these options are increasing and are a large part of all options trading. This includes not just open interest, but also the back-and-forth trading of these contracts. This literally sets us up for large gamma moves each and every day. Any significant move has a greater likelihood of triggering additional buying or more selling, rather than encouraging profit taking or dip buying. It’s a minefield out there wondering what price point triggers buying from those who sold options, which in turn risks pushing levels to the next option point. It is a massive wildcard in trading these days. But it is not random. There are clearly strategies involved in trading these and just because I don’t understand them (yet) doesn’t mean we should ignore them. I’m reasonably certain of two things about these short expiration options: They mostly amplify already large moves. They allow markets to shift from seemingly being overbought to oversold in record time (and vice versa). In terms of learning more, this is an area that requires more study and better understanding. Bottom Line If it weren’t for my “hopes” that we will see some progress with Russia and Ukraine, I’d be in full anti-Goldilocks mode. Barring any positive news out of this war, I’d like to be in a “risk-off” position. Long/overweight bonds (especially in the 2-to-7-year part of the curve) and short/underweight credit spreads and equities. Since this is what I believe most strongly, it is what I should do. But, if you can’t beat them, join them, so I’d also buy some daily or weekly calls to benefit from any headline risk. Maybe the “everyone is short thesis” is correct, but I’m still not there and don’t believe that last week really supported this theory. The moves were rational given the data (and guesstimating the impact of the short-dated expiration options). On the Fed, I don’t expect them to backtrack, and I am looking for the data to drive the terminal rate lower. It isn’t often that you can be in bearish mode with world peace as the risk against you, so hopefully we get that peace dividend and the daily call options pay off! Tyler Durden Mon, 12/05/2022 - 10:50.....»»
4 Oversold Growth Tech Stocks to Buy Before They Rebound
Investors may consider adding oversold tech stocks like SPLK, FTNT, PANW and MTD to their portfolio amid the current stock market uncertainties and gain from their upside potential once the broader market rebounds. The broader equity market has been highly volatile so far this year on increasing pessimism around the possibility of a recession amid rising interest rates, soaring inflation and supply-chain issues. The ongoing Russia-Ukraine war has further increased worries for investors about a global economic recovery.Technology is among the most-battered sectors amid the broader market sell-off this year so far. Technology Select Sector SPDR Fund, which seeks to provide investment results that, before expenses, generally correspond to the price and yield performance of the Technology Select Sector Index, has lost approximately 32.8% of its value year to date (YTD). Also, the Nasdaq Composite index, which has the maximum weightage of tech stocks (approximately 50%) in its components, has plunged 34% YTD.However, this sell-off in the broader equity market has led to a massive correction in several technology companies’ stock prices, which were considered to be widely overvalued at the sector’s peak in 2021. With this correction, several tech stocks are currently trading way below their 52-week high and at attractive valuations as well, despite their strong fundamentals.In our opinion, Splunk SPLK, Fortinet FTNT, Palo Alto Networks PANW and Mettler-Toledo International MTD are among the most beaten-down stocks in the technology space. Given the strength of their fundamentals and solid prospects, it would be prudent move to add these stocks to your portfolio.Why Should You Bet on the Aforementioned Tech Stocks?Amid the financial instability, it is a prudent idea to pick solid growth companies as these are financially stable, accruing profits in established markets. These stocks, with their solid fundamentals, allow investors to hedge their funds from any economic downturn. Moreover, these fundamentally strong stocks are likely to outshine once the current macro headwinds subside and market sentiments improve.Apart from having solid fundamentals, the long-term earnings growth rate for the aforementioned stocks is more than 10%. These stocks also have a favorable combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or #2 (Buy).Per Zacks’ proprietary methodology, stocks with such a favorable combination offer solid investment opportunities.Additionally, these stocks are currently trading way below their 52-week high and are now available at attractive valuations.Our PicksSplunk – This San Francisco, CA-based company gains from strong execution across its platform, observability and security businesses as organizations partner with it to secure their infrastructure.Splunk’s software can be deployed in various computing environments, from a single laptop to large distributed data centers. This feature is helping Splunk win customers. The integration with Amazon Web Services security hub to help customers accelerate their response to potential threats is a key catalyst.SPLK currently sports a Zacks Rank #1 and has a Growth Score of B. Shares of the company have plunged 39.3% YTD and currently trade 60.2% lower than its 52-week high of $176.66 attained on Nov 10, 2021. Moreover, the stock trades at a one-year forward price-to-sales of 2.99X compared with its five-year average of 8.21X. You can see the complete list of today’s Zacks #1 Rank stocks here.The Zacks Consensus Estimate for Splunk’s fiscal 2023 earnings has improved to 84 cents per share from 18 cents over the past 60 days, implying a strong improvement from the fiscal 2022 loss of $1.25 per share. For fiscal 2024, the consensus mark for earnings has been revised upward by 10 cents to $1.52 per share over the past 30 days, indicating year-over-year growth of 81.1%. The long-term earnings growth rate for the stock is pegged at 30%.Splunk Inc. Price and Consensus Splunk Inc. price-consensus-chart | Splunk Inc. QuoteFortinet – It is a provider of network security appliances and Unified Threat Management (UTM) network security solutions to enterprises, service providers and government entities worldwide. Its solutions are designed to integrate multiple levels of security protection, including firewall, virtual private networking, antivirus, intrusion prevention, web filtering, anti-spam and wide area network (WAN) acceleration.Fortinet is benefiting from rising demand for security and networking products amid the growing hybrid working trend. It is also benefiting from robust growth in Fortinet Security Fabric, cloud and Software-defined Wide Area Network (SD-WAN) offerings. Moreover, continued deal wins, especially those of high value, are a key driver. Higher IT spending on cybersecurity is further expected to aid Fortinet in growing faster than the security market. Also, its focus on enhancing its UTM portfolio through product development and acquisitions is a tailwind for Fortinet.FTNT currently sports a Zacks Rank #1 and has a Growth Score of B. Shares of the company have plunged 33% YTD and currently trade 35.3% lower than its 52-week high of $74.35 attained on Dec 29, 2021. Moreover, the stock trades at a one-year forward price-to-earnings of 38.57X compared with its five-year average of 66.69X.The Zacks Consensus Estimate for Fortinet’s 2022 earnings has improved a penny to $1.05 per share over the past 60 days, suggesting a year-over-year increase of 31.3%. For 2023, the consensus mark for earnings has been revised upward by a penny to $1.30 per share over the past seven days, indicating year-over-year growth of 23.9%. The long-term earnings growth rate for the stock is pegged at 18%.Fortinet, Inc. Price and Consensus Fortinet, Inc. price-consensus-chart | Fortinet, Inc. QuotePalo Alto Networks – The company offers network security solutions to enterprises, service providers and government entities worldwide. It is benefiting from the increased adoption of its next-generation security platforms, driven by a rise in the remote working policy among top-notch companies.Palo Alto Networks continues to win back-to-back deals for offering unique cyber safety solutions, which ensure the blocking of attacks or malicious content. It is currently focusing on selling more subscription-based services, which, in turn, are helping it to generate stable revenues while expanding margins.PANW currently carries a Zacks Rank #2 and has a Growth Score of A. Shares of the company have plunged 16.6% YTD and are currently trading 27.5% lower than its 52-week high of $213.63 attained on Apr 20, 2022. Moreover, the stock trades at a one-year forward price-to-sales of 6.45X compared with its five-year average of 6.86X.The Zacks Consensus Estimate for Palo Alto Networks’ fiscal 2023 earnings has improved 6 cents to $3.15 per share over the past 60 days, implying a year-over-year increase of 25%. For fiscal 2024, the consensus mark for earnings has been revised downward by a couple of cents to $3.82 per share over the past 30 days, indicating year-over-year growth of 21.3%. The long-term earnings growth rate for the stock is pegged at 31.5%.Palo Alto Networks, Inc. Price and Consensus Palo Alto Networks, Inc. price-consensus-chart | Palo Alto Networks, Inc. QuoteMettler-Toledo – It is the world's largest manufacturer and marketer of weighing instruments for use in laboratory, industrial and food retailing applications. The company is also a leading provider of analytical instruments for use in life science, reaction engineering and real-time analytic systems used in drug and chemical compound development, and process analytics instruments used for in-line measurement in production processes.Mettler Toledo is benefiting from solid momentum across its laboratory and industrial segments. The company’s strengthening presence in the Americas, Europe, Asia and the Rest of the World remains a positive. Furthermore, portfolio strength, cost-cutting efforts, robust sales and marketing strategies benefit from investments in Spinnaker sales. Field resources are contributing well. Also, a strong core industrial business is encouraging. Solid demand across pharmaceutical and life science markets is a tailwind.MTD currently carries a Zacks Rank #2 and has a Growth Score of B. Shares of the company have plunged 34.2% YTD and currently trade 34.9% lower than its 52-week high of $1,714.75 attained on Dec 30, 2021. Moreover, the stock trades at a one-year forward price-to-earnings of 26.57X compared with its five-year average of 31.82X.The Zacks Consensus Estimate for Mettler-Toledo’s 2022 earnings has improved a penny to $39.01 per share over the past 30 days, indicating a year-over-year increase of 14.7%. For 2023, the consensus mark for earnings has been revised upward by 3 cents to $42.83 per share over the past 30 days, suggesting year-over-year growth of 9.8%. The long-term earnings growth rate for the stock is pegged at 10.4%.MettlerToledo International, Inc. Price and Consensus MettlerToledo International, Inc. price-consensus-chart | MettlerToledo International, Inc. Quote 5 Stocks Set to Double Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2021. Previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%. Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Fortinet, Inc. (FTNT): Free Stock Analysis Report Splunk Inc. (SPLK): Free Stock Analysis Report Palo Alto Networks, Inc. (PANW): Free Stock Analysis Report MettlerToledo International, Inc. (MTD): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»
Has AMD Stock Stock Fallen Too Far?
AMD (NASDAQ:AMD) stock has declined for the past year, on fears that the semiconductor market is heading for a glut, mainly as fears of a global slowdown weigh on sentiment, after this years of shortages. In addition to the potential glut, that is expected to come in 2023, AMD is now witnessing the price fall […] AMD (NASDAQ:AMD) stock has declined for the past year, on fears that the semiconductor market is heading for a glut, mainly as fears of a global slowdown weigh on sentiment, after this years of shortages. In addition to the potential glut, that is expected to come in 2023, AMD is now witnessing the price fall for some of its chips. While the fall in price is currently primarily segregated to the secondary market, the price decline is now starting to affect the primary sales as well. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q2 2022 hedge fund letters, conferences and more Analysts are currently torn between whether there will be a chip shortage, or a glut going into 2023, and the mixed news is clearly leading to a negative outlook. AMD isn't the only semiconductor company facing headwinds, other competitors such as NVIDIA (NASDAQ: NVDA) have also witnessed their stock retreat. AMD has been continuing to perform well, and with the Zen4 architecture, and Xilinx chips, and when combined with the demand for the older chips, the stock may be oversold. Some of that is due to demand for electronics, and demand has slowed down for them when compared to previous years, but the supply of semiconductors remains a problem with demand from autos and network-based demand keeping supply in check. Prices also remain higher than in the past few years, although they have come down in recent times, even if only slightly, and the high prices are leading to generous margins for chip makers While electronics are showing signs of a slowdown, the auto market has been quickly recovering, and more and more large companies such as Amazon, continue to invest in backend infrastructure in anticipation of long-term demand, although the pace of investment has slowed down in recent times. The demand for data center chips has helped balance out the weakness in other areas and AMD has increasingly started to bet on data centers in order to continue its pace growth, with AMD’s Pesando deal re-iterating the strategy of concentrating resources on data centers, which is clearly paying off. CEO AMD “This is all for us … doubling down on the data center,” “Of course, we love our traditional PC and gaming markets but the data center is the most strategic area” for future growth.” Supply Chains Exacerbate Shortages New supply is expected to slowly come through in 2023 and 2024, which may finally ease up the current shortages, as plants across the United States, and Asia (Japan), open up. But issues that continue to hamper supply in the short term as material shortages, stemming from supply chain disruptions in China, and water shortages continue to affect the market. The Zen 4 chips will be built on the 5-nanometer processor, and are expected to be up to 29%-30% faster than the previous Zen 3 chips. The release of the chips will be quickly followed by the next generation of Zen 5 chips, which will be released somewhere in 2024. The continued rollouts mean that the product cycle is likely to continue to see demand, thereby ensuring that revenue growth remains within the expectations of the market. Fundamental and Technical Analysis Looking at the fundamentals the current forward price-to-earnings stands at a relatively moderate level trading at 30x. Meanwhile, analysts are currently forecasting a forward P/E of 17-18x. All things considered, the current valuations are quite cheap. Semiconductor stocks tend to be quite volatile mainly due to the news cycle that surrounds them. Therefore, the risk of supply chain constraints and the constant push and pull between shortage and glut keep the stock trading at valuations that are lower than they should be. Meanwhile, the technicals also remain slightly bearish with the put-call ratio at .82, and the current RSI is at 35, indicating the stock is oversold. Investors and traders are clearly on the back foot, as the increasingly dovish monetary policy is weighing on sentiment. To some extent, AMD’s rally was previously driven by liquidity and speculation, but the current environment doesn’t justify the oversold conditions, especially considering the long-term fundamentals remain intact. AMD has risks and the global economy slowing down leading to a cyclical downturn, combined with excess investment leading to a chips glut, remain the biggest ones. But the stock clearly has a lot of upsides as well. AMD was previously riding the wave of low discount rates, and that has partially weighed on valuation, but that isn’t enough to justify current price levels. According to the most recent quarter's results the long-term fundamentals of the company remain intact, which could be a good opportunity for long terms investors to get into the stock. Should you invest $1,000 in Advanced Micro Devices right now? Before you consider Advanced Micro Devices, you'll want to hear this. MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Advanced Micro Devices wasn't on the list. While Advanced Micro Devices currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys. View The Five Stocks Here Article by Parth Pala, MarketBeat.....»»
Crowdstrike Stock Retraces, As Earnings Sober Expectations
Crowdstrike (NASDAQ:CRWD) continued to witness strong revenue growth during the quarter, with total revenue surging by 56%. The company had initially guided $512 million in revenue, but final revenue came in at $535 million handily beating estimates. Earnings per share also come in significantly higher at 36 cents per share, versus an estimate of 28 […] Crowdstrike (NASDAQ:CRWD) continued to witness strong revenue growth during the quarter, with total revenue surging by 56%. The company had initially guided $512 million in revenue, but final revenue came in at $535 million handily beating estimates. Earnings per share also come in significantly higher at 36 cents per share, versus an estimate of 28 cents from management. The stock fell early trading after results were released. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q2 2022 hedge fund letters, conferences and more The CEO stated the following: “As organizations respond to macroeconomic conditions, they are prioritizing investments and looking to standardize with a security partner they can trust to achieve better protection with less time, fewer resources and lower total cost of ownership,” CrowdStrike CEO George Kurtz said in a statement.” Crowdstrike’s management has guided that third-quarter revenue is likely to come in at around $570 million, and despite macroeconomic hurdles, the endpoint security market will continue to be robust. Endpoint security has become a crucial factor for most organizations. And a number of companies including Crowdstrike, and SentinelOne (NYSE:S) continue to be the front runners in the industry, and historical competitors have slowly become less and less important. Endpoint security is witnessing a number of key trends, and Gartner has projected that 95% of the endpoint security market will eventually be cloud-based. This makes Crowdstrike among the most preferred endpoint security systems currently with the Falcon endpoint security system being the highest rated system among the various choices. Crowdstrike also offers a whole host of security solutions for the Cloud, and considering the Cloud industry is expected to grow significantly over the next decade, this offers Crowdstrike a significant opportunity. Crowdstrike’s sell-off after results were released can be attributed to a number of factors, the primary factor was the company continues to trade at a relatively high valuation. Despite the significant increase in revenue, the current price-to-sales stands at 27, which reflects a valuation that was more common in the last few years rather than in today’s market environment, where rates are higher, and the future is more uncertain. The valuation reflects Crowdstrike’s current market share which stands at 16%, and considering the quality of products, many are expecting that market share is likely to increase over a period of time. Margins for the company remain at a relatively high level with gross margins currently averaging 72% and cash flow is likely to increase significantly once the company reduces investing in growth. But valuations still remain rich and investors are clearly banking on 30-40% growth over the foreseeable future. Investors are banking on not only the significant flow of revenue from North America but other markets such as Asia, which remain relatively large in terms of potential. And the global potential is what is keeping investors committed to the stock. Should You Invest In Crowdstrike? Currently, Crowdstrike remains in investor favor, but, valuations may have gotten ahead of themselves. The security market has a large addressable market and is expected to grow by around 9-10% over the next five years, and likely will stand at around $36 billion at the end of 2022. Considering the company’s revenue and the market cap of $43 billion, investors might be pushing the valuation to its limit. Crowdstrike’s technicals such as the RSI-14 continue to show that the stock is neither overbought nor oversold, but the put-call ratio which stands at 0.7 shows that on average investors are all bullish on the stock. Considering the strong investor sentiment, if future earnings come in weaker, the stock could easily retrace, as we have seen with many high-flying tech stocks that have quite often fallen by 50-60% after a poor earnings report, and done so very quickly. The current price target on average by analysts stands at $241, but it is well known, that analysts are constantly on the wrong side of history. The next couple of quarters will increasingly determine whether Crowdstrike is rightly priced, until then a wait and watch approach might be prudent. Should you invest $1,000 in CrowdStrike right now? Before you consider CrowdStrike, you'll want to hear this. MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and CrowdStrike wasn't on the list. While CrowdStrike currently has a "Buy" rating among analysts, top-rated analysts believe these five stocks are better buys. View The Five Stocks Here Article by Parth Pala, MarketBeat.....»»
Snowflake Stock Soars On Strong Results
Snowflake (NYSE:SNOW) reported earnings after-hours on 24th August. Shares soared over 18% after-hours as better-than-expected results played strongly into investor sentiment. Revenue surged by 83% to $497 million. The revenue retention rate came in at 171% meanwhile customers grew to 6800, indicating an 8% expansion from the first quarter. The stock is down 58% from […] Snowflake (NYSE:SNOW) reported earnings after-hours on 24th August. Shares soared over 18% after-hours as better-than-expected results played strongly into investor sentiment. Revenue surged by 83% to $497 million. The revenue retention rate came in at 171% meanwhile customers grew to 6800, indicating an 8% expansion from the first quarter. The stock is down 58% from its high. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q2 2022 hedge fund letters, conferences and more Find A Qualified Financial Advisor Finding a qualified financial advisor doesn't have to be hard. SmartAsset's free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you're ready to be matched with local advisors that can help you achieve your financial goals, get started now. Snowflake’s business model continued to show strong quarterly results as product revenue continued to see significant uptake from consumers. The “warehouse as a service”, and a revenue, model based on usage is clearly working for management. Snowflake has projected that it will produce anywhere from $500-500 million in the next quarter, and the full-year revenue is expected to be around $1.91 billion to $1.92 billion. Management has also indicated that the company is expected to produce a gross margin of around 75% for the year. Snowflake currently has more than 240 1m+ customers. Snowflake is clearly benefitting from a strategy that was initially implemented in 2014. At that point, management decided to remove the scale, performance, and economic bottlenecks, that held back its data analytics services. Snowflake’s customer base continues to be a wide range with customers ranging from financial services to healthcare, and retail. The company also plans to introduce a number of key changes moving forward, which should help it to continue to compete in the future. On the earning’s call the CEO stated the following: “ Now with massive disruption, the status quo must change. Our next frontier of innovation is aimed at reinventing cloud application development. Our ambition is far-reaching. Our aim is to transform how cloud applications are built, deployed, sold, and transacted.” Snowflake introduced Powered by Snowflake recently, which should help engineers improve their velocity by leveraging design resources, and optimizing performance, especially for app developers. Powered by Snowflake now has over 590 customers and a 35% growth quarter-on-quarter. The company also plans to acquire a number of new companies such as Applica to shore up its data analytics business. The acquisition should help the company improve its unstructured data. The data warehousing industry is expected to grow to around $52 billion by 2028 according to projections, growing at a rate of around 11-12%. Snowflake is likely to benefit from additional customers not only in North America but also globally as well. Within the data warehousing market Snowflake currently has around a 20% market share. That number could increase as the company continues to aggressively introduce new products and features that help customers improve their end-to-end operations. The company’s finances remained strong for the quarter as cash flow from operating activities turned positive during the quarter, with net cash from operating activities coming in at $64 million. Meanwhile, the non-GAAP operating margin came in at 2%. Considering Snowflake’s run-rate, the company could be headed towards profitability on a GAAP basis in 2024. The long-term margin for the company will probably be around 30% once the market settles down a bit. Snowflake’s stock currently trades at 33x revenue, which is quite high despite the fact the revenue is growing quickly. The company would need to maintain around 30-40% growth over the next 4-5 years, in order to justify its valuation. The stock has been trading sideways for a while and the 14-day RSI currently shows that the stock is neither overbought nor oversold. Investors remain bullish on the stock, and the current put-to-call ratio is around 0.83. But the implied volatility remains high, which would make the stock less desirable for those looking for a steady stock. Snowflake remains strongly placed to grow over the next few years, but questions remain about valuation. The data warehouse industry does not have many players, and the lack of competitors puts Snowflake in a strong position in terms of its ability to compete moving forward. Should you invest $1,000 in Snowflake right now? Before you consider Snowflake, you'll want to hear this. MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Snowflake wasn't on the list. While Snowflake currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys. View The Five Stocks Here Article by Parth Pala, MarketBeat.....»»
This Is Worse Than Anyone Realizes: A Dire Outlook From Wall Street"s Biggest Bear
This Is Worse Than Anyone Realizes: A Dire Outlook From Wall Street's Biggest Bear There was a (very) brief period in which BofA's Michael Hartnett - whom we long ago dubbed Wall Street's biggest bear - turned ever slightly more bullish, when he told clients that while the bear market is far from over (recall he expects that to end some time in October with the S&P plunging down to 3,000) a powerful bear market rally had taken hold around the time we saw the biggest equity inflow in 10 weeks; even so, his advice to clients was simple: "fade all rallies." All that's over, and in his latest Flow Show note (available to ZH pro subscribers), Hartnett asks "Where's my bear market rally gone" and for good reason: both credit and stocks are massively oversold, BofA's Bull & Bear Indicator is in deep "contrarian bullish" territory - falling to 0.3 from 0.4, more deeply in "extreme bearish" territory, and just shy off all time lows - and yet, despite this latest buy signal for risk assets having been triggered almost one month ago on May 18th, the S&P has gone from 3800 to 4200 and now back again to 3900. But before we answer Hartnett's rhetorical question, a quick look back two years ago to June 8, 2020, when as Hartnett notes, NYC announced stage 1 "reopening" after 13-week COVID lockdown, permitting curbside pickup from retail outlets. As the BofA strategist puts it, "if you had said then that two years later US retail sales would be up 67%, unemployment would fall by 17 million, inflation would surge from 0.1% to 8.3%, oil would soar from $12/b to $120/b, that a pandemic would be followed by war & famine, you would have been thought utterly mad; but that’s what happened." For those looking for catchy Wall Street soundbites, here is from Hartnett: "2020 marked a secular low in inflation & yields, the beginning of regime change and a decade of social, political, economic & financial volatility." And speaking of regime change, there have been few clearer examples of that then the “inflation shock” we have now: natural gas 141% gasoline 91% oil 61% iron ore 45% wheat 39% nickel 39% soybean 33% corn 30% cotton 30% YTD And with the triple whammy of COVID, monetary & fiscal stimulus, and war, we have seen "massive 18-month outperformance of inflation assets" but watch for low in biotech (deflation) vs real estate for a trend reversal, according to the BofA strategist. Which is not to say that everyone is fighting a war with inflation: there is always Japan, the perpetual outlier. According to Hartnett, the BoJ is the last central bank left fighting the last deflation war (i.e., the "Shoichi Yokoi" trade), which has sent the yen plunging 14% YTD as Kuroda repeatedly vows unlimited bond buying to defend YCC policy which in the past 6 years has led to… wait… 0.0% Japan GDP growth & 0.2% CPI. That dismal math then leads us to another even scarier equality from Hartnett, one which has anything but a happy ending: investor "policy incredulity" = yen collapse = (Asia FX war) = BoJ FX intervention = capital repatriation to Japan = potential catalyst for summer global risk-off trade. Meanwhile, turning attention to Europe, we find one currency but with many interest rates: As we noted earlier this week, with EU CPI at 8.1% and PPI at 37.2%... ... the ECB boldly decided to…not raise rates, leaving policy rate at -0.5%, and to continue QE until July 1st. Yet despite the ECB's failure to "wake up" and "go-go", Greece 10-year yields exploded above 4%, and Italy 5-year yields shot to fresh 8 years highs, above 3% and blowing away the March 2020 highs as BTP-Bund spreads soar wider than 200bps. Meanwhile, as we also said earlier today... 10Y Italian BTPs close up 16bps at 3.763%, highest since 2014. Either the ECB is about to fire Berlusoni again or Europe is on the verge of another sovereign debt crisis. In any case, this little rate hike experiment won't last long pic.twitter.com/4qYnH7ofiX — zerohedge (@zerohedge) June 10, 2022 ... and as Hartnett echoed "markets stop panicking when policy makers start panicking"... but the reason why there is still no bid for risk assets is that "there is not enough inflation panic yet, policy credibility waning, higher risk premium required." One final observation on the Bear Market: one third, or 33% (952 of 2910 stocks) of the MSCI All World ACWI index currently trades below their 2018 highs, 40% of Nasdaq (1496 of 3760 stocks) trading below their 2018 highs; and some more staggering math: global equity market cap peak to trough down $23.4tn since Nov'21 = 1 US economy (US GDP $24.4tn); meanwhile, in a sign that things are indeed about to snap, distressed EM bonds trading at the Lehman/GFC lows of 2008, almost as if EMs are competing with Europe who blows up first. Which brings us back to answering the key question posed by Hartnett: "Where my Bear Market Rally gone", and why despite massively oversold conditions and record revulsion, are stocks unable to bounce? His answer: In short, inflation shock not over, rates shock just starting, growth shock coming, no release valve from peak in yields, bear market ralliy too consensus. Inflation: geopolitics, end of globalization, extraordinarily misguided G7 energy policies across the G7 = 2 standard deviation commodity shock unlike any other since 1973/74. Recession: we’re in technical recession but just don't realize it; US Q1 GDP -1.5%, Atlanta Fed GDPNow forecast for Q2 just 0.9%, a couple of bad data points away from “recession”; consumer data getting murkier. Household and consumer balance sheets point to shallow recession, what can turn shallow into deep is the great unknown of the shadow banking system. Stagflation: Hartnett says growth is returning to trend, but inflation won’t as stagflation is incompatible with “goldilocks” SPX PE of 20x past 20 years, and should be closer to 20th century PE of 15x. Events: the occasions (all of which saw BofA Bull & Bear Indicator at 0) when very bearish sentiment not enough to turn markets were 2 standard deviation events caused “liquidations”: WorldCom Jul'02, Lehman Sep'08, US debt downgrade Aug'11, China devaluation Aug'15; Nagging worries that QT just beginning: to expose fragilities in EM, crypto, tech, VC/PE, risk parity, CTAs. As a result of the above, Hartnett is convinced that no matter how strong the intervening bear market rallies - whether it is a benign CPI print (clearly not todays') or something else, and narrative flips back to peak inflation - his ultimate bear market targets remain 30Y TSY at 4% and SPX at 3600 (markets always overshoot/undershoot, and we assume no systemic crisis). And with the market on its way to said lows, the BofA strategist warns that the most vulnerable assets to own are Big Tech (positioning, secular loser), REITs (inflation hedge), resources (they are in secular bull but at lows investors forced to sell winners), and US dollar (will discount peak yields). Finally, once we finally do hit the lows, these are the assets that will be bought: long-duration Treasuries (for obvious deflationary reasons), HY bonds (where risk deployed first)... ... EM bonds & stocks (distressed, weak dollar beneficiaries), small cap (the surprise bull coming), industrials (according to Hartnett the next policy stimulus will be fiscal not monetary, but we disagree: after November, the US will have a Dem President and Republican Congress, and the two sides will not reach a bipartisan agreement on a stimulus, leaving only the Fed) and of course the widely lamented 60-40 strategy: all these will be the most likely winners at end of bear market, some time in late 2022. More in the full note available to professional subs. Tyler Durden Sun, 06/12/2022 - 07:51.....»»
Software Is The Tell – Crescat Capital
Crescat Capital’s commentary for the month of December 2021, discussing that software is the tell. Q3 2021 hedge fund letters, conferences and more Equity Market Warning The recent weakness in the broad US equity market is being masked by the outperformance of mega-market cap companies that remain near record valuations. With that in mind, it […] Crescat Capital’s commentary for the month of December 2021, discussing that software is the tell. .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Ray Dalio Series in PDF Get the entire 10-part series on Ray Dalio in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more Equity Market Warning The recent weakness in the broad US equity market is being masked by the outperformance of mega-market cap companies that remain near record valuations. With that in mind, it is remarkable to us how the NASDAQ Composite is just 2.6% from all-time highs while only 35% of its members are above the 200-day moving average. Such a disconnect is corrosive. This backdrop of deteriorating market breadth is present at a time when significantly rising inflation is putting pressure on the Fed to accelerate its taper and begin raising rates sooner than it has signaled to date. With the Fed out of the liquidity pump game, weak stock market internals suggest that the long overdue reckoning of the most inflated financial asset bubble in US stock and bond history is close at hand. We believe there is substantial risk of a significant equity market selloff in the near term, even before year-end. We exclude the energy and materials sectors from this warning where equity fundamentals are driven much more by currently low valuations, scarce supplies, and robust demand. Similar Divergence Preceded the Tech Bust at the 2000 Top We are wary of times when the generals lead but the soldiers don’t follow. It is reminiscent of the breadth deterioration at the peak of the tech bubble in March of 2000. Most Extreme Asset Bubbles Yet Our equity models continue to flash warning signs of excessive valuations among stocks at large. According to our research, on a median and aggregate basis, US equities are at their most expensive levels ever across a lengthy composite of underlying fundamental measures. Conventional wisdom today believes that mega-cap tech stocks are reasonably valued. However, as we showed in our August research letter, the top five market cap stocks in the US, all tech stocks, were 54% more over-valued relative to GDP than the top five market cap stocks at the peak of the tech bubble in 2000. The common refrain is that it is different this time, that P/E ratios are reasonable, that earnings are stronger, and that growth is more sustainable. P/Es had been the one area still not quite at 2000 top levels but that is not true anymore. It is true that earnings are strong, but they are anything but sustainable. There is a business cycle after all, and we are essentially at the peak of one that has been longest ever US expansion, twelve years now since the GFC. The March 2020 Covid recession was a mere blip, hardly a recession at all because there was no reconciliation of the imbalances, no creative destruction, just more inflating of the same bubbles. When it comes to P/E ratios, we believe most investors today are not even looking at them let alone factoring in the effect that sustainably rising inflation would likely have on compressing them going forward. The median P/E ratio of the top 10 largest stocks in the US is now as high as it was at the peak of the Tech Bubble, 37 times earnings. Software Is the Tell In our analysis, the software industry is the most speculative and concerning segment of the stock market. It has been the best performing broad industry group since the 2008-9 Global Financial Crisis and is more than 50% more overvalued than it was at the peak of the dotcom bubble in 2000 based on median enterprise value to sales. We believe most software companies have already begun a major downturn. In fact, if we look at a list of all the US-listed software companies with a market cap greater than $1 billion, the median stock is down 34% from its 52-week highs. The performance of the equal-weighted SPDR S&P Software and Services ETF has just broken below its 200-day moving average. This broad software index shows sharply negative relative performance compared to the S&P 500 since February. Inflationary Pressure is Real The Fed was overly optimistic in its inflation forecasting this year and has been proven horribly wrong. With CPI just clocking in at 6.8% year over year for November, inflation is already much higher than the central bank forecasted four months ago when it sold itself and the world on the idea that inflation would be “transitory”. To maintain its credibility, the Fed must now lay out a path to tighten monetary policy at a more aggressive pace. Inflationary forces in the real world and inside the CPI data are not likely to ease up soon. Based on what home prices have already signaled, and the fact that there is a fifteen-month lag in Owner’s Equivalent Rent, the 23%-weighted OER component of CPI appears poised to keep going higher until at least October 2022. But inflation is also likely to be around for longer and at a higher rate due to structural shortages in the commodity and natural resources sectors of the economy based on years of deteriorating capital investment trends. Meanwhile, tightness in the labor market is also portending a future wage-price spiral that could continue for years. Because of these factors, we think investors are poised to rotate out of the bubble in large cap growth, mega-cap tech, uber-low yielding long duration fixed income, and into stocks and commodities that offer high intermediate-term growth, low valuations, and inflation protection. At Crescat, we refer to this broad macro theme as the Great Rotation. Crescat Embraces Moderate Volatility in Pursuit of Superior Value-Driven Returns At Crescat, we are macro and value investors. The Great Rotation has hardly even begun, but we believe it is poised to start playing out soon in a big way. We are positioned for it in various ways across the firm. We believe natural resource industries, specifically precious metals’ companies are true deep-value opportunities that should benefit tremendously from the current economic imbalances in the world today. Additionally, gold and silver stocks look exceptionally oversold and ripe for a major reversal to the upside in our strong opinion. Conversely, as we laid out our fundamental case for being short overall US stocks in our Global Macro and Long/Short funds, we think the recent weakness in market internals is an incredibly bearish sign that we are in the process of a major speculative top. Our Global Macro fund has additional important exposures supported by our macro research including put options on the Chinese yuan and Hong Kong dollar and a carefully crafted sleeve of fixed income short positions. We will be elaborating more on these positions in our next research letter that will be out before year end. While much of the hedge fund industry has attempted to sell low volatility as an attribute, many of those funds have fallen short on delivering performance. Our funds are quite unique in that sense. For the last 22 years of company history, Crescat has embraced a moderate level of volatility as part of our investment process in our efforts to deliver outstanding long-term returns. After having two of the top 10 hedge funds according to Bloomberg in 2020 and delivering over 235% in the first year our recently launched Precious Metals fund, in a down year for gold and silver, it is only natural that we are experiencing a pullback. We believe that such retracements are great opportunities for new and existing clients to add capital. We feel more confident than ever in the underlying value and future appreciation potential of our portfolio. November Performance Update Download PDF Version Sincerely, Kevin C. Smith, CFA Member & Chief Investment Officer Tavi Costa Member & Portfolio Manager For more information including how to invest, please contact: Marek Iwahashi Client Service Associate miwahashi@crescat.net Cassie Fischer Client Service Associate cfischer@crescat.net Linda Carleu Smith, CPA Member & COO lsmith@crescat.net © 2021 Crescat Capital LLC Article by Crescat Capital Updated on Dec 20, 2021, 3:54 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»
Crescat Capital September 2021: The Psychology Of Inflation
Crescat Capital’s commentary for the month ended September 2021, titled, “The Psychology Of Inflation.” Q3 2021 hedge fund letters, conferences and more The Psychology Of Inflation Today’s macro environment is indeed very different than any other period we have experienced in the last four decades. Inflation is infiltrating the mindset of US households in a […] Crescat Capital’s commentary for the month ended September 2021, titled, “The Psychology Of Inflation.” if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more The Psychology Of Inflation Today’s macro environment is indeed very different than any other period we have experienced in the last four decades. Inflation is infiltrating the mindset of US households in a way not seen since the wage-price spirals of the 1970s. Prices for the goods and services that individuals require to meet basic needs have been increasing at an accelerated pace. These necessities include shelter, food, energy, and transportation. The rising cost of living is due to both supply constraints and increased demand from fiscal and monetary stimulus. In the mix, net profit margins for S&P 500 companies at large are at record highs today, because these firms have been able to pass rising costs onto their customers in the short run. These windfall profit margins are unsustainable and poised to reverse quickly in our analysis. The two biggest costs of running a business that affect net profit margins are on track to rise imminently: taxes and labor. Corporate tax rate hikes are almost certain with the legislation now under consideration by the Democratic-controlled Congress and White House. Even less discounted by today’s buoyant stock market in our view is an impending rise in labor costs. Individuals and families cannot rely on continued government handouts to the degree they were provided during the pandemic lockdowns and the US government cannot afford to provide them. We believe a new and well-justified psychology of rising inflation will be forcing more of the population back into the labor force. At the same time, we are likely to see workers at large both demanding and receiving significantly higher wages and salaries contributing to a substantial squeeze to corporate profit margins in the years ahead. Increases in the general price level for goods and services and the rising inflation expectations that go along with them are a self-reinforcing helix that is set to become a durable feature of the economy. Just like the 1970s, these inflationary macro forces will likely lead to shorter economic expansions and more frequent stagflationary recessions in the 2020s and beyond than we have had in the last four decades under a generally disinflationary regime. These more contractions in real GDP due to rising inflation are likely to contrast with the deflationary recessions of the 2008-2009 Global Financial Crisis and the short-lived Covid recession in 2020. Starting from record valuations relative to underlying cash flows in the broad financial markets today, combined with historic loose financial conditions, we see substantial downside risk in crowded and highly speculative equity and fixed income markets at large. Rising inflationary pressures and ultimate Fed tightening measures needed to counter them will put downward pressure on hyper-overvalued, low yielding, long duration growth stocks and fixed income investments. We believe investors should be reducing exposure to these limited-upside and high downside-risk-areas of the financial markets today. We see a silver lining, however, in deep value and high near-term fundamental growth investments in the energy and materials sectors of the economy that are likely to be among the biggest beneficiaries of the new secular stagflationary environment ahead. These sectors are not without volatility but represent a calculated risk with substantial value-driven upside potential for investors who want to profit from the underlying fundamental tailwinds identified by Crescat’s equity and macro models. Diversifying among the best industries and companies within these sectors is what we are focused on now at Crescat with our own money and for clients with a like-minded outlook, risk tolerance, needs, and objectives. In our analysis, this approach is the highest probability path to generating strong risk-adjusted, real returns in the immediate years ahead. Supply Problems are Structural Supply chain disruptions will be with us for some time. They are due to complex structural problems that include a new deglobalization countertrend, particularly between the US and China. Another problem is the chronic underinvestment in the energy and basic materials sectors of the economy. As capital has overwhelmingly flowed to the information technology and innovation sectors of the economy in the last decade, the capital needs of the primary resource producing sectors of the economy got left behind. The goods produced by these industries are at the core of the supply chain and have long lead times with challenging permitting issues and heavy capital expenditure requirements. While demand continues to increase for the raw materials produced by these industries, companies are having difficulty filling jobs with qualified management and technical professionals to produce them efficiently. A decade of declining college enrollment in geosciences worldwide is one of the long-term structural imbalances affecting the oil and gas and mining industries. Skilled tradespeople in these industries are also in short supply. Source: Samuel Boone and Mark Quigley, University of Melbourne. Resource logistics issues are compounded by the environmental moment, which has captured both social norms and government technocrats, significantly adding to costs and lead times to produce basic resources. The push for the new green economy might be well intentioned but continues to have many blind spots regarding the need for traditional energy and material resources to ensure a healthy economy today as well as in the more environmentally friendly future. Stagflation is Here The problem is that while consumer prices are rising, we are also seeing signs that the global economy is starting to decelerate. China is the elephant in the room in that respect. The second largest economy in the world has achieved that spot while creating a property and credit bubble that, as measured by banking assets to GDP, is more than four times the size of the US housing and financial sector bubble ahead of the GFC. With its equity markets under pressure since February, the Evergrande collapse, and nationwide energy shortages, China’s economy appears to be in a serious meltdown. The spillover effects should not be underestimated. We need to start discounting now the ultimate new global fiscal and monetary stimulus that will be needed to counter China’s currently unfolding credit collapse and what that portends for its currency given its communist banking system with a whopping $52 trillion of suspiciously priced assets. As we have learned throughout the world in the post GFC era, the speed at which governments can create new central bank money is instantaneous. At the same time, and more than ever today, the speed at which countries can deliver the basic resources to meet their citizens’ needs is significantly impaired. The US economy has already started to slow significantly. The Atlanta Fed GDP nowcast, for instance, just went from 6% to 1.3% in the last couple of months. With business activity now decelerating as inflation remains historically elevated, the set of monetary and fiscal policies needed to fix one problem would worsen the other. At the same time, with historic high valuations for equity and credit markets in the US at large, there is much downside risk. The Fed is trapped to do anything to prevent a rotation out of speculatively priced assets with deteriorating fundamentals. Note the tight correlation between the real-time Atlanta Fed’s macro quantitative measure of real GDP growth and actual subsequently reported economic growth after inflation. Great Rotation Financial markets are not correctly priced for the stagflation that is already evident in the macro data. This creates both risks and opportunities for a large swath of investors who are crowded on the wrong side of this trade in our view. First and foremost, we see a major shift out of overpriced growth stocks and fixed income securities and into a much narrower group of deeply undervalued and high near-term growth stocks and commodity investments that will be the primary beneficiaries of stagflation, creating a reflexive inflationary loop. The smart money should be the first to make this move. We call it the Great Rotation. The motivation for such a shift in our research is that it is the most highly probable way to both protect against the downside risk of significantly rising inflation to financial assets at large while potentially substantially profiting from it at the same time. Investors should take note while overall price to book values for the broad market are at record highs along with many other fundamental measures, the relative price-to-book value of the Russell 1000 Growth compared to the Russell 1000 Value indices is about 60% higher than it was at the peak of the tech bubble in 2000, further illustrating the extreme imbalances and market risks along with the set-up for a growth to value rotation. Getting Ahead with Gold and Silver As inflation continues to develop in the economy, the chart below shows the incredible link between gold prices and CPI since the Global Financial Crisis. Note how after the pandemic lows, gold front ran the potential risk of a rise in consumer prices and the entire precious metals market appreciated sharply. Gold and silver not only diverged from CPI but also significantly outperformed the rest of the commodities market. It is important to remember that before recently peaking, gold had been going on a streak for two years already. The metal was up more than 75% from August 2018 to August 2020 and even reached historical highs during this period. Back then, with CPI around 1%, very few investors foresaw inflation as a risk to the economy. Now it is a real problem. We think gold likely appreciated too quick and too fast becoming what some thought as an obvious trade. Extreme sentiment probably explains the reason for its recent weakness after signaling way earlier than any other asset the possibility that an inflationary environment could be ahead of us. We are now on the other side of this extreme. Gold looks fundamentally cheap, technically oversold while inflation continues to gain traction. We think the historic relationship between precious metals and the growth in consumer prices will continue to be strong and the recent pullback in gold and silver related assets poses an incredible opportunity for investors to deploy capital at what we believe to be truly attractive levels. Also, keep in mind that we are using government reported numbers to gauge inflation in this analysis. We should all know by now that the true cost of goods and services is growing at a drastically faster pace than CPI. Recent Pullback in Precious Metals Presents Constructive Buying Opportunity The decline in Crescat’s strategies in the past two months has been almost entirely attributable to our precious metals long holdings which has been deliberately the largest exposure we have had firmwide. Our gold and silver names are ultra-cheap, worth an estimated 15 times their current market prices in aggregate according to our company-by-company model in the Crescat Precious Metals Fund. This fund was up 235% net in its first year ended in July and has experienced an 18.9% net pullback in August and September. The precious metals longs similarly have been the largest contributor to the last two-month decline in our Global Macro and Long/Short funds. These latter two funds also have significant short positions that have held the fund back year to date. We believe they are poised to deliver strong returns as the broad equity markets appear to finally be breaking down. We are not pleased at all with the recent pullback, but believe it is an inevitable part of the game. We think that accepting a moderate amount of volatility is necessary to build wealth and protect against rising inflation in the current environment of financial repression that we live in where governments maintain artificially low risk-free interest rates compared to true inflation. The goal of this policy is to resolve unsustainable debt-to-GDP imbalances with hidden inflation. We have been increasing our exposure to other resource industries in Large Cap, Global Macro, and Long/Short to add more diversification also with strong upside potential, based on our equity fundamental model scores within the energy and materials sectors. We remain highly committed and significantly exposed on the long side to activist positions in gold and silver mining companies with a strong focus on exploration under the guidance of our Geologic and Technical Director, Quinton Hennigh, Ph.D. We believe gold and silver commodity and equity markets are due for a major bull market resumption. This market may have already turned in our favor this month from deeply oversold levels for mining stocks and extreme negative sentiment despite incredibly positive fundamentals. All Crescat strategies are up month to date in October. Overvalued equity short positions in our Global Macro and Long/Short also generated positive profit attribution in September though modestly. We aim to increase our short exposure in these two funds to be able to take advantage of the abundant opportunities on this side of the market now that the risk of shorting has been decreased with inflationary pressures becoming more acknowledged and the Fed attempting to start tapering. With Crescat’s three high conviction macro themes coalescing, and after the recent pullback in Crescat’s strategies, we believe it is a highly constructive time for new and existing clients to be adding money to our strategies. HFM Award We are pleased to announce that the Crescat Global Macro Fund was just shortlisted for a HFM performance award in the macro category for funds with assets under $1 billion for the one-year period ended June 30, 2021. The final winner will be announced next month in NYC. We understand this is one of the most prestigious awards in the hedge fund industry. There is no guarantee that we will win, but for what it’s worth, according to Bloomberg and eVestment data, our fund was far-and-away the best performer for the period among all five shortlisted for the category. The fund was up 45% net over that time frame. September Performance Estimates Download PDF Version Sincerely, Kevin C. Smith, CFA Member & Chief Investment Officer Tavi Costa Member & Portfolio Manager For more information including how to invest, please contact: Marek Iwahashi Client Service Associate miwahashi@crescat.net 303-271-9997 Cassie Fischer Client Service Associate cfischer@crescat.net (303) 350-4000 Linda Carleu Smith, CPA Member & COO lsmith@crescat.net (303) 228-7371 © 2021 Crescat Capital LLC Updated on Oct 11, 2021, 11:27 am (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»
Western militaries need to start figuring out how to fight long and bloody attritional wars like Ukraine, former Army officer warns
Attrition could define future wars between near-peer powers, Alex Vershinin wrote, and the West isn't prepared for that type of fighting. A Ukrainian soldier of the Khartia brigade fires an AK-47 pellet gun from a trench during a training as the Russia-Ukraine war continues in Donetsk oblast, Ukraine, on February 7, 2024.Diego Herrera Carcedo/Anadolu via Getty ImagesWestern militaries aren't ready to fight wars of attrition like the Ukraine war, a former Army officer argues.Great power conflict may not be quick and decisive and could boil down to attrition.The war in Ukraine has shed light on what resources and preparations are needed to win.There's a real possibility that a future great-power war might look a lot like Ukraine, and Western militaries aren't as ready as they should be for this kind of long, bloody fight, a former Army officer argued in a new article.Though its hard to say when talking major powers with nuclear arsenals, great-power conflict could result in a protracted attritional kind of warfare. Western militaries haven't been preparing for that type of fighting, and it may need a change in strategy, resource management, and training."In attritional wars, military operations are shaped by a state's ability to replace losses and generate new formations, not tactical and operational manoeuvres," retired US Army lieutenant colonel Alex Vershinin explained in a Royal United Services Institute commentary, "The Attritional Art of War: Lessons from the Russian War on Ukraine," published Monday. Unlike maneuver warfare, which is aimed at quickly and violently defeating an enemy, the attritional fight takes time, maybe years."The side that accepts the attritional nature of war and focuses on destroying enemy forces rather than gaining terrain is most likely to win. The West is not prepared for this kind of war," he said.Vershinin noted that Western militaries have long seen attritional conflicts as exceptions to be avoided at all costs in favor of the shorter, maneuver-focused clashes. Rather than a "decisive battle" through maneuver warfare, "attritional warfare focuses on destroying enemy forces and their ability to regenerate combat power, while preserving one's own," he wrote, noting that a successful attritional strategy "accepts that the war will last at least two years."Between near-peer rivals, such as China and the US, victory in combat may be about who has the ability to replace losses and keep fighting. Stronger military powers are far more likely to have widely available resources and recruits, meaning fighting could drag on, similar to what's being seen in Ukraine, where the Russians are battling NATO-backed forces in Kyiv.A Ukrainian soldier loads a machine gun inside a trench amid Russia and Ukraine war in Donetsk Oblast, Ukraine on August 17, 2023.Ignacio Marin/Anadolu Agency via Getty ImagesOn both sides of the war, firepower has proven vital, as has the ability to outgun and outlast, chipping away at enemy positions and maintaining pressure. After Ukraine initially fought off Russia's invasion of Kyiv in the early weeks of the full scale invasion, Western assistance packages largely helmed by the US gave it the ammunition it needed to both defend itself and attack Russian positions.The rate of fire in Ukraine has been astonishing — Russian forces averaged 15,000 shells a day throughout 2022 — and both sides have been burning through stockpiles. Both the West and Russia have ramped up production and industrial capacity to meet demand, and the war has since prompted the US Army to at least question how much ammunition it actually needs to fight future conflicts."Wars of attrition are won by economies enabling mass mobilization of militaries via their industrial sectors," Vershinin wrote in his RUSI commentary. "Armies expand rapidly during such a conflict, requiring massive quantities of armored vehicles, drones, electronic products, and other combat equipment."Important, too, is the ability to strike deep into enemy territory, overwhelm defenses, and target its facilities and infrastructure. This aspect has been seen throughout the war in Ukraine as well, with both sides using a mix of long-range assets and drones to target energy hubs, civilian centers, and other key sectors with the purpose of damaging production and supply lines.Ukrainian soldiers fire with the Archer Artillery System on Russian position on January 3, 2024, in Donetsk Oblast, Ukraine.Photo by Roman Chop/Global Images Ukraine via Getty ImagesThe war in Ukraine has also demonstrated the importance of being able to quickly replenish depleted forces, making up for high casualties on the battlefield.Russia has been able to do this successfully, rebuilding manpower despite suffering high losses, upwards of over 300,000 casualties according to Western estimates. Ukraine currently faces a shortage of recruits, and its parliament is currently debating a bill intended to expand mobilization and enforce stricter draft rules.Ukrainian President Volodymyr Zelenskyy has been warning for months that the army faces a severe shortage of qualified troops on the front but has not been able to present a clear strategy for how to conscript or recruit the forces needed. The president's former top commander, Gen. Valery Zaluzhny, often argued for further mobilization.According to Vershinin, Western forces could face personnel issues, as their NATO armies value professional and experienced non-commissioned officers (NCOs) and troops that, if taken out of battle, aren't easily replaceable."The most effective model" for an army, he wrote, is a balanced mixture of a NATO-style "medium-sized professional army" with a Soviet-style "mass of draftees available for mobilization."Future large-scale conflicts could also look a lot like the battlefields in Ukraine in other ways, potentially riddled with challenging technologies like evolutions in electronic jamming and drones, as well as artillery, mines, and traditional infantry. This makes logistics and planning key, adding complexities to fighting.Read the original article on Business Insider.....»»
Reasons to Retain Stanley Black (SWK) Stock in Your Portfolio
Strength in the engineered fastening business, driven by solid demand in aerospace and auto end markets, is aiding Stanley Black (SWK). Stanley Black & Decker, Inc. SWK is benefiting from solid momentum in the engineered fastening business despite lower consumer outdoor and DIY market demand, and escalating expenses.Let us discuss the factors why investors should retain the stock for the time being.Growth CatalystsBusiness Strength: Solid momentum in the engineered fastening business, driven by strength in aerospace and auto end markets is aiding the engineered fastening business. The company’s global cost-reduction program is expected to aid its bottom line and drive margin performance in the quarters ahead. Stanley Black is making efforts to eliminate and reduce overlapping capabilities and functions. It is resizing operations to ensure that resources better serve core businesses.In 2023, it generated pre-tax run rate savings of $835 million from a global cost-reduction program. The company expects to generate run rate savings of $1.5 billion by the end of 2024. By 2025, it envisions run rate savings of $2 billion. Supply-chain optimization programs and inventory reduction efforts are also expected to boost margins. In 2023, the company reduced its inventory by $1.1 billion. Benefiting from supply-chain transformation and inventory reductions, Stanley Black expects to achieve adjusted gross margins of more than 30% in 2024.Focus on Core Operations: Stanley Black has been divesting non-core operations to drive growth. In December 2023, Stanley Black inked a deal to divest its STANLEY Infrastructure (Infrastructure) business to Epiroc AB for a cash amount of $760 million. The divestment will help Stanley Black focus on the core businesses while supporting its capital-allocation priorities. The company expects to use the cash proceeds of the transaction, net of modest taxes, to reduce its debt. The completion of the deal is conditioned on regulatory approvals and customary closing conditions.In July 2022, the company sold its Security Business to Securitas AB for $3.2 billion cash. It funded its debt reduction from the net proceeds of this sale. In the same month, it divested its Automatic Doors business to Allegion for $900 million in cash. The divestitures reinforce Stanley Black's strategic focus on its core businesses. In June 2022, the company inked a deal to sell its STANLEY oil & gas division to Pipeline Technique Limited. The divestiture enables Stanley Black to better focus and efficiently direct its resources to the Industrial, and Tools & Outdoor segments.Rewards to Shareholders: The company’s measures to reward its shareholders through dividend payments are noteworthy. In 2023, the company paid dividends of $482.6 million, up 3.6% year over year. It also bought back shares worth $16.1 million in the same period. In July 2023, the company hiked its dividend by a penny to 81 cents per share (annually: $3.24 per share).In light of the above-mentioned positives, we believe, investors should retain SWK stock for now, as suggested by its current Zacks Rank #3 (Hold). In the past year, shares of the company have gained 12.1%.Image Source: Zacks Investment ResearchStocks to ConsiderSome better-ranked companies from the Industrial Products sector are discussed below:Atmus Filtration Technologies Inc. ATMU presently sports a Zacks Rank #1 (Strong Buy) and a trailing four-quarter earnings surprise of 20.3%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.ATMU’s earnings estimates have increased 2.9% for 2024 in the past 60 days. Shares of Atmus Filtration have risen 20.7% in the past year.Tetra Tech, Inc. TTEK currently carries a Zacks Rank #2 (Buy). It delivered a trailing four-quarter average earnings surprise of 14.4%.In the past 60 days, the Zacks Consensus Estimate for TTEK’s fiscal 2024 earnings has increased 2.9%. The stock has soared 26.8% in the past year.Applied Industrial Technologies, Inc. AIT presently has a Zacks Rank of 2. It has a trailing four-quarter average earnings surprise of 10.4%.The Zacks Consensus Estimate for AIT’s fiscal 2024 earnings has increased 1.7% in the past 60 days. The stock has gained 41.5% in the past year. Infrastructure Stock Boom to Sweep America A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made. The only question is “Will you get into the right stocks early when their growth potential is greatest?” Zacks has released a Special Report to help you do just that, and today it’s free. Discover 5 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.Download FREE: How To Profit From Trillions On Spending For Infrastructure >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Tetra Tech, Inc. (TTEK): Free Stock Analysis Report Stanley Black & Decker, Inc. (SWK): Free Stock Analysis Report Applied Industrial Technologies, Inc. (AIT): Free Stock Analysis Report Atmus Filtration Technologies Inc. (ATMU): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»
Top-Ranked Energy ETFs to Ride the Rebound in Oil Prices
Oil prices spiked last week, gaining 3% to near four-month high, buoyed by rising demand forecasts by the International Energy Agency, geopolitical tensions and domestic market dynamics. Oil prices spiked last week, gaining 3% to near four-month high, buoyed by rising demand forecasts by the International Energy Agency (“IEA”), geopolitical tensions and domestic market dynamics. After peaking above $85 per barrel for the first time since November, Brent crude is trading near $85, while West Texas Intermediate is hovering around $81.Investors should tap the growth potential in oil prices through ETFs having a Zacks Rank #1 (Strong Buy) or #2 (Buy). These include Energy Select Sector SPDR XLE, VanEck Vectors Oil Services ETF OIH, Invesco S&P SmallCap Energy ETF PSCE, Invesco Dynamic Energy Exploration & Production ETF PXE and Invesco Oil & Gas Services ETF PXJ.Several key developments have contributed to the solid trends in crude oil prices:IEA Demand Forecast: The IEA revised its 2024 oil demand outlook upward for the fourth time since November, citing disruptions in Red Sea shipping due to Houthi attacks. The forecast now indicates an increase in global demand by 110,000 barrels per day (bpd), totaling 1.3 million bpd.US Drilling Activity: According to a Reuters report citing energy service firm Baker Hughes, the United States saw a significant addition of oil and natural gas rigs, marking the largest weekly increase since September. This rise brought the oil rig count to its highest in six months, signaling growth in future output.Economic Factors and the US Dollar: The strengthening of the U.S. dollar, making crude more expensive for holders of other currencies, did not deter the upward trend in oil prices. Despite the fastest strengthening of the dollar in eight weeks, market dynamics, such as the potential for lower interest rates in the United States, indicated room for demand growth. However, mixed signals from the U.S. economy, including a larger-than-expected increase in producer prices, suggested that the Fed might not cut interest rates before June this year (read: Dividend ETFs to Consider Amid Hot Inflation Data).Stockpile and Inventory Movements: Unexpected declines in US crude oil stockpiles, coupled with increased refinery processing and a drop in gasoline inventories amid rising demand, were reported by the Energy Information Administration. Such trends underline a robust demand for oil, further buoying prices.Geopolitical Tensions: Escalating conflicts, particularly Ukrainian drone strikes on Russian oil refineries, have exerted pressure on global oil supply dynamics. These attacks, which resulted in significant damage to Russia's refining capacity, highlight the ongoing geopolitical risks that influence oil markets.Here, we have profiled the above-mentioned ETFs:Energy Select Sector SPDR (XLE)Energy Select Sector SPDR is the largest and the most popular ETF in the energy space, with an AUM of $37.2 billion and an average daily volume of 16 million shares per day. It offers exposure to the broad energy space and follows the Energy Select Sector Index. Energy Select Sector SPDR holds 23 securities in its basket, with a higher concentration on the top two firms.Energy Select Sector SPDR charges 9 bps in annual fees and has a Zacks ETF Rank #1, with a High risk outlook.VanEck Vectors Oil Services ETF (OIH)VanEck Vectors Oil Services ETF tracks the MVIS U.S. Listed Oil Services 25 Index, which offers exposure to companies involved in oil services to the upstream oil sector, including oil equipment, oil services or oil drilling. It holds 26 stocks in its basket, with double-digit concentration on the top three firms.With an AUM of $2.1 billion, VanEck Vectors Oil Services ETF charges 35 bps in annual fees. The product trades in an average daily volume of 414,000 shares and has a Zacks ETF Rank #2, with a High risk outlook.Invesco S&P SmallCap Energy ETF (PSCE)Invesco S&P SmallCap Energy ETF offers exposure to companies that are principally engaged in producing, distributing or servicing energy-related products, including oil and gas exploration, and production, refining, oil services and pipelines. It tracks the S&P Small Cap 600 Capped Energy Index, holding 31 stocks in its basket with a modest concentration across firms.Invesco S&P SmallCap Energy ETF has accumulated $230.4 million in its asset base and charges 29 bps in annual fees. It trades in an average daily volume of 19,000 shares and has a Zacks ETF Rank #2, with a High risk outlook.Invesco Dynamic Energy Exploration & Production ETF (PXE)Invesco Dynamic Energy Exploration & Production ETF follows the Dynamic Energy Exploration & Production Intellidex Index, which thoroughly evaluates companies involved in the exploration and production of natural resources used to produce energy based on a variety of investment merit criteria, including price momentum, earnings momentum, quality, management action and value.Holding 32 stocks in its basket, Invesco Dynamic Energy Exploration & Production ETF has amassed $139 million in its asset base and charges 60 bps in annual fees. It trades in a volume of 33,000 shares and has a Zacks ETF Rank #2, with a High risk outlook (read: Time for Oil & Energy ETFs?).Invesco Oil & Gas Services ETF (PXJ)Invesco Oil & Gas Services ETF follows the Dynamic Oil Services Intellidex Index, which thoroughly evaluates companies based on a variety of investment merit criteria, including price momentum, earnings momentum, quality, management action and value. It holds 32 stocks in its basket.Invesco Oil & Gas Services ETF has accumulated $87.2 million and charges 63 bps in fees per year. It trades in an average daily volume of 34,000 shares and has a Zacks ETF Rank #2, with a High risk outlook. Want key ETF info delivered straight to your inbox? Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.Get it free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Energy Select Sector SPDR ETF (XLE): ETF Research Reports Invesco Oil & Gas Services ETF (PXJ): ETF Research Reports VanEck Oil Services ETF (OIH): ETF Research Reports Invesco S&P SmallCap Energy ETF (PSCE): ETF Research Reports Invesco Energy Exploration & Production ETF (PXE): ETF Research ReportsTo read this article on Zacks.com click here.Zacks Investment Research.....»»
Goldman (GS) Closes GreenSky Sale in Pivot From Consumer Finance
Goldman (GS) closes the sale of its home-improvement lending platform GreenSky two years after buying the company to scale back from the consumer banking footprint. The Goldman Sachs Group, Inc. GS has completed the sale of GreenSky, its home-improvement lending platform, to a consortium that includes KKR, Bayview Asset Management and CardWorks, and is led by investment firm Sixth Street Partners. GreenSky offers point-of-sale (POS) technology to connect home improvement contractors with consumers for loan originations.GreenSky was acquired by GS in 2022 for $1.7 billion. However, in October 2023, the company announced intentions to dispose of the business in a major business restructuring initiative.When the sale was announced, David Solomon, chairman and CEO of Goldman, stated, “This transaction demonstrates our continued progress in narrowing the focus of our consumer business. While GreenSky is an attractive business, we are focused on advancing the strategy we laid out for our two core franchises. In Global Banking & Markets, we’ve improved our wallet share and are demonstrating strong growth in financing activities; and across our Asset & Wealth Management platform, we are making very strong progress towards both our fundraising and management fee targets.”In fourth-quarter 2023, the company completed the sale of a majority of the GreenSky installment loan portfolio. It also entered an agreement with General Motors GM to transition GM’s credit card program to another issuer to be chosen by GM.GS will now focus on its two core businesses — the Global Banking and Markets segment, and the Asset and Wealth Management segment.In 2023, Goldman was ranked in the top position in worldwide announced and completed mergers and acquisitions (M&As), equity and equity-related offerings, and common stock offerings. This likely gives it an edge over its peers. Strong M&A activities drove record investment banking (IB) revenues in 2021 on the back of stellar performances in financial advisory, equity underwriting and debt underwriting activities. However, IB revenues declined in 2022 and 2023 due to muted global M&A deal value and volumes.Nonetheless, Goldman witnessed strong improvement in its M&A backlog in fourth-quarter 2023. It expects various initial public offerings in 2024. We believe that robust client engagement, backed by digital disruption and transformation trends, signs of growing M&A and underwriting pipelines, and the company’s decent IB backlog will support IB revenues in the upcoming period. We expect IB fees to rise 8.8% and 3.4% year over year in 2024 and 2025, respectively.Shares of this Zacks Rank #3 (Hold) company have gained 12.8% in the past six months, outperforming the industry’s growth of 11.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Image Source: Zacks Investment Research Business Exit by Another Finance CompanyAlly Financial Inc. ALLY completed the divestiture of its POS financing business — Ally Lending (that includes $2.2 billion of loan receivables as of Dec 31, 2023) — to Synchrony. The move reflects ALLY's commitment to optimizing its capital allocation and prioritizing resources toward high-growth areas.The deal was announced in January. At that time, ALLY expected the divestiture to bolster its Common Equity Tier 1 ratio by almost 15 basis points at closing. Further, the deal is projected to be modestly accretive to tangible book value and earnings per share this year. Infrastructure Stock Boom to Sweep America A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made. The only question is “Will you get into the right stocks early when their growth potential is greatest?” Zacks has released a Special Report to help you do just that, and today it’s free. Discover 5 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.Download FREE: How To Profit From Trillions On Spending For Infrastructure >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report The Goldman Sachs Group, Inc. (GS): Free Stock Analysis Report General Motors Company (GM): Free Stock Analysis Report Ally Financial Inc. (ALLY): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»
UBS Group (UBS) Seeks Wealth Management Growth in the US
UBS Group (UBS) seeks merger and acquisition opportunities in the United States to expand its wealth management footprint in the country. UBS Group AG UBS intends to expand its wealth management business in the United States over the next three or four years on the back of mergers and acquisitions (M&A). The news was reported by Reuters that cited an interview of UBS chairman, Colm Kelleher, with the NZZ newspaper.This strategic approach reflects UBS Group’s commitment to expanding its footprint in the U.S. market and further strengthening its presence in the wealth management space.Over the past years, UBS Group has significantly strengthened its geographic footprint and expanded operations on the back of strategic partnerships and buyouts, underlining its inorganic growth strategy. In June 2023, UBS Group successfully completed the acquisition of Credit Suisse (a regulatory-assisted deal). This strategic transaction is expected to bolster capabilities in wealth and asset management as well as aid in growing its capital-light businesses. The company is on track to complete the integration process by the end of 2026.UBS’ previous efforts to grow inorganically also include its wealth management joint venture (JV) with Japan’s Sumitomo Mitsui Trust Holdings (UBS SuMi TRUST Wealth Management Co.), which was launched in August 2021. It established another investment banking JV with Banco do Brasil SA on Oct 1, 2020. The company’s Global Wealth Management segment is its highest revenue-generating source. As of Dec 31, 2023, it had $3.8 trillion in invested assets and held the first position in Asia, Latin America, EMEA and Switzerland in terms of invested assets. Looking forward, the company has set an ambitious target to exceed $5 trillion in invested assets by 2028, indicating a strategic commitment to substantial growth and expansion in the upcoming years. We believe expansion into the U.S. market through strategic M&A will allow UBS to strengthen its position and ultimately become a market leader in the region. Over the past six months, UBS shares have gained 22.5% on the NYSE compared with the industry’s growth of 10.2%. Image Source: Zacks Investment Research Currently, UBS Group carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Expansion Efforts by Other CompaniesLast week, Vinci Partners Investments Ltd. VINP inked a deal to buy Compass Group LLC to redefine the investment landscape in Latin America. The transaction is set to close in the third quarter of 2024, pending regulatory approvals.With this acquisition, VINP will solidify its position as a key player in the Latin American investment landscape, boasting more than $50 billion in assets under management across private markets, investment products and solutions, public equities and corporate advisory segments.Last month, LPL Financial Holdings LPLA announced its plan to acquire Atria Wealth Solutions, Inc. This move underscores the company’s commitment to expanding its reach and enhancing its offerings in the wealth management solutions market.The acquisition aligns with LPLA’s goal to empower independent financial advisors and institutions nationwide by providing them with comprehensive support and resources. The agreement involves acquiring Atria Wealth Solutions’ broker-dealers, which include subsidiaries catering to both independent financial professionals and banks/credit unions. Infrastructure Stock Boom to Sweep America A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made. The only question is “Will you get into the right stocks early when their growth potential is greatest?” Zacks has released a Special Report to help you do just that, and today it’s free. Discover 5 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.Download FREE: How To Profit From Trillions On Spending For Infrastructure >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report UBS Group AG (UBS): Free Stock Analysis Report LPL Financial Holdings Inc. (LPLA): Free Stock Analysis Report Vinci Partners Investments Ltd. (VINP): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»
How Big Banks, Ranchers and Unions Found a Common Foe in Biden Regulators
A huge lobbying effort aims to kill an arcane regulation called Basel Endgame III This article is part of The D.C. Brief, TIME’s politics newsletter. Sign up here to get stories like this sent to your inbox. [time-brightcove not-tgx=”true”] When a member of Congress loses re-election and is trying to figure out what turned voters away, their position on an arcane bank regulation doesn’t usually come up. But a deep-pocketed lobbying effort is working overtime to make a handful of powerful lawmakers fear such a scenario could be their future. Stranger still, the campaign may be working, as an unlikely and uneasy coalition is coming together on the Hill to shut down an effort to require big banks hold more cash to ensure the country avoids another Too Big to Fail moment. It’s a battle that’s pitting liberal stalwarts like Sen. Elizabeth Warren against Wall Street-minded Democrats, rural state lawmakers, civil rights leaders, and consumer groups. And it’s why NFL fans in a few targeted markets saw TV ads talking about something known among financial insiders as Basel III Endgame. “Families, seniors, farmers, and small businesses are already struggling to make ends meet,” says one such ad. “Washington needs to scrap Basel III Endgame and start over.” The core of this expensive and esoteric dogfight comes down to this: should some banks have to keep more cash reserves to ward off insolvency? After three banks failed last year, interest in making sure the surviving institutions could weather unexpected challenges rose, leading to a revisiting of a framework published back in 2010 in response to the 2008 financial crisis. (It’s worth noting that the Basel III Endgame would not have saved any of these institutions but still serves as a good bump up in the headline hierarchy.) The ideas have been around since Congress passed the Dodd-Frank financial reforms of 2010, but the implementation of them were slow-walked at first then delayed because of the Covid-19 pandemic. As expected, banks are almost universally opposed to the tighter controls. But the weariness extends beyond Wall Street. Of the 356 substantive comment letters sent to regulators, 347 of them were negative. And, of those naysayers, almost 9-in-10 came from voices outside of the banking sector, according to an analysis from a law firm keeping close tabs on the proposal. A lot of the opposition—and the bulk of the public messaging powering it through a campaign-styled effort—notes that increased cash reserves means less money available for loans to small businesses and homebuyers. Essentially, keeping cash parked in bank vaults means it’s going to be tougher and more expensive to buy a new tractor for the farm or send investment into green-energy projects. That dynamic has made internal politics tricky for Democrats, and the banking industry has been hardly circumspect about playing off these tensions heading into an election year when five Democratic seats on the Senate Banking Committee—including the chair—are in cycle. On the other side, with a paltry nine letters, is the argument that reducing risk would lead to more lending because there would be fewer threats to institutions. But it’s worth noting that among those signing onto that pitch is Sen. Sherrod Brown, the Democratic chairman of the Senate Banking, Housing, and Urban Affairs Committee. Rep. Maxine Waters, a California Democrat and the former chair of the Financial Services Committee, also has backed the requirements, arguing that opposition to them only stands to enrich bank execs. And it’s not even all banks. The rule would apply to financial institutions with more than $100 billion in collective assets, and smaller ones that specialize in trading assets. Community banks would be exempt, and the rule wouldn’t kick in until July 2028—the last year of the next presidential term. But that position isn’t exactly a popular one, at least in the record so far. Federal Reserve Chairman Jerome Powell—an Obama, Trump, and Biden appointee—has testified to Congress that he has seen the arguments that tilt overwhelmingly against the current proposals and is open to changing them to build a better coalition. That sentiment has met welcome audiences along Wall Street, K Street, and Main Street alike. For its part, Treasury has remained intentionally on the sidelines of the debate. Secretary Janet Yellen—herself a former Federal Reserve chair—has refused to take a position in public. But among Democrats, the pressure campaign is clearly trending in a single direction thanks to a seven-figure political blitz from the nation’s largest banks, including ads that aired during NFL games and the State of the Union speech coverage. The ads are meant to build pressure, not just on Brown and his particularly tricky re-election in Ohio this year, but also on Banking panel members from farm states like Sens. Jon Tester of Montana, Bob Casey of Pennsylvania and Jackie Rosen of Nevada. At the same time, Banking panel member Bob Menendez, who is simultaneously under indictment and seeking another term, is seen as a reliable ally of Wall Street while his colleague on the committee, Warren of Massachusetts, could not be further from that ideological space. What comes to the fore in this debate is a rare schism among Democrats about what the party stands for. While most Democrats have rallied on commonalities like stronger worker protections and reproductive rights, this banking proposal is less clear cut. While hating on the greedy banks and bashing capitalism plays well with the animated and very-online progressive movement, the fact remains that so much of what powers the broader economy is reliant on that system that prizes easy and reliable access to capital. Take, for instance, the unlikely opponents who sent letters to the feds about their concerns—much of which was coached and coordinated behind the scenes. Black-owned business groups have joined the discussion, arguing that an increase in capital-holding needs will hurt communities of color starting or expanding their efforts. “The Black community has faced disproportionate challenges when seeking access to capital and resources, making it even more critical to take their unique circumstances into account when making policy decisions that affect their operations,” the head of the Grand Rapids, Mich., Area Black Businesses group wrote. In Virginia, Richmond Mayor Levar Stoney, a Democrat seen as a rising star in the party and a candidate for Governor next year, wrote in opposition with similar worries, especially if the nation were to face another pandemic that requires quick and broad access to loans. Elsewhere, the Columbus/Central Ohio Building and Construction Trades Council and its 18,000 unionized tradesmen are opposing the move because it could force infrastructure projects to scale back if the cost of borrowing cash rises. Similarly, the American Clean Power Association—made up of some of the biggest names in emerging tech and legacy energy suppliers alike—warned that the new requirements could cut investments by as much as 90% from some pockets of the market. The American Council on Renewable Energy also cited the reduced appeal of such investments with a potential cost of $20 billion in planned renewable tax-equity investments this year alone. And powerful agribusiness coalition that includes the cattlemen, pork farmers, grain producers, and dairy professionals all signed on against the effort: “We are very concerned that any contraction in the availability of clearing services will have a disproportionate impact on agricultural end-users that are far outside the major financial centers, especially smaller entities such as grain elevators and family farms. We urge you to modify the proposals so that they do not disincentivize banks from providing this important service to their customers.” The naysayers also includes the massive public-employee pension systems of California, Wisconsin, and Ohio. If all of the opposition were coming from the biggest banks, or even the banks plus major financial players like insurer Nationwide, the National Association of Realtors, and Hilton Hotels, Democrats might have had an easier time pushing past it; the underlying coalition of disparate groups, however, makes this a bit trickier, especially in an election year. Which is precisely the point. The proposed changes may be grounded in solid preventative policies, but the coalition afoot is going to be tough for regulators—especially those nominated by Democrats—to ignore. (They are, of course, officially immune to pressure, even from the Senators who confirmed them or the White House that nominated them, but political neophytes don’t regularly survive a grilling from Banking panel pros when billions are at stake for their biggest campaign donors. Their bosses are even more politically savvy.) Democrats studying their electoral maps this year, from state legislatures to President Joe Biden’s re-election, are not eager to see unions, retirees, Black entrepreneurs, farmers, the Green New Deal types, and Wall Street all lined up against one of the most under-appreciated changes under consideration right now. Leaders of the Democratic coalition have looked at the polls and knows they’re in trouble—and so do the powerful lobbying voices looking to derail anything that could ding their bosses’ bottom line. Make sense of what matters in Washington. Sign up for the D.C. Brief newsletter......»»
Are You a Value Investor? Bet on These 3 Energy Stocks
Amid supportive energy business, it would be wise for investors to bet on value stocks like Energy Transfer (ET), Transportadora de Gas (TGS) and Helmerich & Payne (HP). Energy stocks have once again caught the attention of investors following The International Energy Agency's recent upward revision of the oil demand outlook. The favorable commodity pricing environment is supporting upstream operations, while downstream firms are enjoying steady cash flows. These conditions create opportunities for Energy Transfer LP ET, Transportadora de Gas del Sur SA TGS, and Helmerich & Payne Inc. HP to witness gains.Favorable Energy BusinessWith West Texas Intermediate crude surpassing the $80 per barrel mark, the conditions are highly conducive for exploration and production endeavors. According to the short-term energy outlook from the U.S. Energy Information Administration, the average spot price for West Texas Intermediate crude is projected to be $82.15 per barrel this year. This price point is exceptionally promising for upstream operations, leading to increased demand for drilling activities and oilfield services in the prolific shale plays across the United States.Higher production, following favorable commodity prices, is leading to an increased need for transportation and storage activities, aiding the midstream players. Additionally, companies and partnerships involved in natural gas transportation are generating consistent cash flows due to the commodity's cleaner and more efficient characteristics compared to traditional fuels. Which Stocks to Buy?Amid supportive energy business, it would be wise for investors to bet on those stocks that are witnessing upward earnings estimate revisions and are undervalued.Employing our proprietary stock screener, we have zeroed in on three such stocks. While one stock sports a Zacks Rank #1 (Strong Buy), the remaining two have a Zacks Rank #2 (Buy). All the stocks carry a Value Score of A.You can see the complete list of today’s Zacks #1 Rank stocks here. 3 Stocks in The SpotlightEnergy Transfer has a stable business model with its huge pipeline network of natural gas, oil and refined petroleum products across 125,000 miles. The partnership has midstream assets in all the key basins in the United States, thereby generating stable fee-based revenues.Energy Transfer, sporting a Zacks Rank #1 (Strong Buy), has offered a higher dividend yield than the composite stocks belonging to the industry over the past year. For this year, the partnership has witnessed upward earnings estimate revisions over the past 30 days.Transportadora de Gas’ midstream asset portfolio has the most extensive natural gas pipeline network in Latin America. It generates stable fee-based revenues since its pipeline assets transport more than 60% of the gas consumed in Argentina.Over the past year, the stock gained 49.5%, outpacing the industry’s 17.5% increase. The outperformance is backed by the company’s stable business model and a strong focus on creating differential value for shareholders. Also, TGS, carrying a Zacks Rank #2 (Buy), has significantly lower debt exposure than the composite stocks belonging to the industry. Transportadora de Gas has seen upward earnings estimate revisions for 2024 over the past 30 days.Helmerich & Payne is poised for growth as rising oil prices drive up exploration and production activities, resulting in greater demand for the company's drilling services and solutions. The Zacks #2 Ranked company’s super-spec FlexRigs is in high demand for unconventional drilling in key resources.For fiscal 2024, Helmerich & Payne has witnessed upward earnings estimate revisions over the past 60 days. Infrastructure Stock Boom to Sweep America A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made. The only question is “Will you get into the right stocks early when their growth potential is greatest?” Zacks has released a Special Report to help you do just that, and today it’s free. Discover 5 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.Download FREE: How To Profit From Trillions On Spending For Infrastructure >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Helmerich & Payne, Inc. (HP): Free Stock Analysis Report Energy Transfer LP (ET): Free Stock Analysis Report Transportadora De Gas Sa Ord B (TGS): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»