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Sysco (SYY) Dips More Than Broader Markets: What You Should Know

In the latest trading session, Sysco (SYY) closed at $77.38, marking a -1.36% move from the previous day. Sysco (SYY) closed the most recent trading day at $77.38, moving -1.36% from the previous trading session. This change lagged the S&P 500's 0.84% loss on the day. Elsewhere, the Dow lost 0.36%, while the tech-heavy Nasdaq lost 0.18%.Coming into today, shares of the food distributor had lost 8.83% in the past month. In that same time, the Consumer Staples sector lost 7.2%, while the S&P 500 lost 10.24%.Investors will be hoping for strength from Sysco as it approaches its next earnings release. In that report, analysts expect Sysco to post earnings of $0.99 per share. This would mark year-over-year growth of 19.28%. Our most recent consensus estimate is calling for quarterly revenue of $18.61 billion, up 13.06% from the year-ago period.Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $4.20 per share and revenue of $75.6 billion. These totals would mark changes of +29.23% and +10.15%, respectively, from last year.Investors might also notice recent changes to analyst estimates for Sysco. These revisions typically reflect the latest short-term business trends, which can change frequently. As such, positive estimate revisions reflect analyst optimism about the company's business and profitability.Our research shows that these estimate changes are directly correlated with near-term stock prices. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an actionable rating system.The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Within the past 30 days, our consensus EPS projection has moved 0.08% lower. Sysco is currently sporting a Zacks Rank of #3 (Hold).In terms of valuation, Sysco is currently trading at a Forward P/E ratio of 18.66. This valuation marks a premium compared to its industry's average Forward P/E of 17.97.Meanwhile, SYY's PEG ratio is currently 2.07. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. Food - Miscellaneous stocks are, on average, holding a PEG ratio of 2.66 based on yesterday's closing prices.The Food - Miscellaneous industry is part of the Consumer Staples sector. This group has a Zacks Industry Rank of 167, putting it in the bottom 34% of all 250+ industries.The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.Make sure to utilize Zacks.com to follow all of these stock-moving metrics, and more, in the coming trading sessions. Just Released: Free Report Reveals Little-Known Strategies to Help Profit from the  $30 Trillion Metaverse Boom It's undeniable. The metaverse is gaining steam every day. Just follow the money. Google. Microsoft. Adobe. Nike. Facebook even rebranded itself as Meta because Mark Zuckerberg believes the metaverse is the next iteration of the internet. The inevitable result? Many investors will get rich as the metaverse evolves. What do they know that you don't? They’re aware of the companies best poised to grow as the metaverse does. And in a new FREE report, Zacks is revealing those stocks to you. This week, you can download, The Metaverse - What is it? And How to Profit with These 5 Pioneering Stocks. It reveals specific stocks set to skyrocket as this emerging technology develops and expands. Don't miss your chance to access it for free with no obligation.>>Show me how I could profit from the metaverse!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 Sysco Corporation (SYY): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksSep 22nd, 2022

Futures Slide Ahead Of Tech Earnings Deluge

Futures Slide Ahead Of Tech Earnings Deluge One day after stocks staged a remarkable rebound and closing well in the green after sliding as much as 1.5% (ostensibly after getting a boost from the latest bout of bearishness from Dennis Gartman), index futures are trading lower again despite another attempt by China's central bank to reassure investors overnight that China's sliding risk assets will rebound, with investors once again preoccupied by risks from aggressive monetary tightening. S&P500 futures contracts were 0.4% not too far off the worst levels ahead of a busy session of earnings releases including Google, Microsoft and Google; Nasdaq 100 futures declined 0.3%. Treasuries were steady and the dollar gained. “Markets in general are preoccupied by the prospect of tighter monetary policy conditions from global central banks to stem rising prices,” said Cesar Perez Ruiz, chief investment officer at Pictet Wealth Management. “Indeed, while the Federal Reserve and the ECB both stepped up their inflation-fighting rhetoric, they failed to prevent market-based inflation expectations from moving higher.” Twitter extended gains in premarket trading after Elon Musk agreed to buy the social media company for $44 billion. Its shares are still trading below the offer price of $54.20 per share. Analysts say Musk’s vision to reduce moderation to promote free speech could put the social media company’s advertising dollars at risk. Here are some of the other big U.S. movers today: Meme stock Cenntro Electric (CENN) drops as much as 15% in U.S. premarket trading, after the maker of commercial electric vehicles reported a net loss of $16.4 million for 2021. Redbox Entertainment (RDBX) shares rise 2.8% in U.S. premarket trading after the company disclosed after Monday’s close that CFO Kavita Sutha had resigned. O-I Glass (OI) “crushes” its first-quarter, according to Truist Securities, with the broker noting the glass bottle maker’s operating profit beat and a guidance hike. O-I shares were up 12% in postmarket trading. Venator Materials (VNTR) jumps as much as 27% in premarket trading Tuesday after the company reached an $85 million cash settlement with Tronox Holdings over a break fee from a failed chemical plant deal dating back to 2018. Nkarta (NKTX) shares slump 8% in U.S. premarket after launching a stock offering via Cowen, SVB, Evercore at a price of $15/share that represents 19.9% discount to last close. Universal Health’s (UHS) weaker-than-expected results and potential guidance downgrade were driven by labor headwinds, analysts say. Shares fell 12% in after-hours trading. Protagonist Therapeutics’ (PTGX) PN-943 drug candidate “still has legs to make it across the finish line,” despite the Phase 2 data showing that a 450 mg BID dose did not meet its primary endpoint. Shares fell 31% in postmarket trading. Barclays sees positive fundamentals for medical office building property category, expanding coverage with initiations on Healthcare Realty Trust (HR US) and Physicians Realty Trust (DOC) at overweight. Companies reporting earnings on Tuesday include Microsoft, Google parent Alphabet and Visa. European stocks traded well, the Stoxx 600 Index 0.8% higher with energy and mining shares gaining as commodity prices rebounded. Euro Stoxx rises as much as 1.25%, roughly halving Monday’s decline. Miners and real estate lead broad sectoral gains. A third of Stoxx 600 companies will be updating on earnings and sales this week.  Asian stocks pared most of their early Tuesday advance as Chinese shares gave up gains spurred by a renewed central bank pledge to support the region’s biggest economy. The MSCI Asia Pacific Index was up 0.3% as of 5:38 p.m. in Hong Kong, versus an earlier rally of as much as 0.8%. China’s CSI 300 Index ended 0.8% lower as worries about a potential city-wide lockdown in Beijing weighed on sentiment. Still, a gauge of the nation’s tech stocks jumped almost 3% in Hong Kong on fresh policy promises to end a regulatory crackdown in the sector. Continued losses in Chinese equities have weighed on the Asian stock benchmark, which is headed for a fourth straight month of losses. China’s government expanded Covid-19 testing to most of Beijing, sparking fears about an unprecedented lockdown. Traders have said a change in the nation’s Covid-Zero strategy is the key to turning around sentiment.  “It would be difficult to see a quick improvement in sentiment” amid weak market fundamentals and fund flows, said Kim Kyung Hwan, a Chinese equity strategist at Hana Financial Investment in Seoul. “Market players are waiting for stronger measures, such as an interest-rate cut.” Elsewhere in Asia, stocks rose in India and South Korea while those in Australia slipped. Traders are also monitoring results releases in what is set to be the busiest week of the current earnings cycle in Asia. Japanese equities rose for the first time in three sessions, boosted by gains in telecoms. Service providers also lifted the Topix, which rose 0.1%. SoftBank Group and M3 Inc. were the largest contributors to a 0.4% rise in the Nikkei 225 Australian stocks fell the most in two months on the continued Materials selloff. The S&P/ASX 200 index fell 2.1%, the most since Feb. 24, to close at 7,318.00, as trading resumed after a three-day break. The materials and energy groups led declines following drops in commodities prices. EML Payments tumbled to the lowest level in two years after lowering its revenue and earnings forecasts for the full year. Nufarm was among the biggest gainers, rising to its highest level since September 2018 after issuing 1H guidance.  In New Zealand, the S&P/NZX 50 index fell 0.8% to 11,813.18. Fixed income grinds higher with 10y bund and UST futures erasing Asia’s losses; the 10-year TSY is around 2.795% outperforming bunds by ~2.5bp, gilts by ~3.5bp. Treasuries are moderately richer across the curve, sharply outperforming bunds and gilts over the London session, although 10-year note futures remain inside Monday’s range. US yields are richer by 1bp-3bp across most of the curve with long-end lagging slightly, steepening 5s30s and 10s30s by ~2bp. Peripheral spreads widen to cover with long-end Portugal underperforming. Japan’s bond futures gained after the central bank said it will extend its unlimited debt buying operation by two more days. In FX, the Bloomberg Dollar Spot Index rose a fourth day, as the greenback advanced against most of its Group-of-10 peers. Treasury yields dropped 2-3 bps across the curve. The euro fell to touch $1.0673, the lowest level since March 2020. European bonds were little changed, underperforming U.S. Treasuries.  China’s yuan rose for the first time in six days after the nation’s central bank pledged to support the economy through targeted financing for small businesses, and a quick resolution of the ongoing crackdown on technology firms, in a bid to reassure investors nervous about growth and Covid lockdowns. Australian dollar climbed on leveraged buying as China’s policy-support pledge spurred a turnaround in the nation’s stock indexes and added to a bounce in oil and iron ore. The yen was set for its longest winning streak in almost a month.  The pound ticked lower against the dollar amid broad-based greenback strength and Gilts inched up, led by the short end. Prime Minister Boris Johnson will urge ministers to explore “innovative ways” to ease pressures on household finances on Tuesday In commodities, crude futures decline with WTI eventually finding support near $97. Spot gold posts small gains, Bitcoin holds a narrow range near $40,500. Binance has launched Binance Refugee Crypto Card for all current and new Binance users from Ukraine moving to EEA countries Looking at the day ahead, data releases from the US include the Conference Board’s consumer confidence indicator for April, preliminary March data on durable goods orders and core capital goods orders, the FHFA house price index for February, and new home sales for March. From central banks, we’ll hear from the ECB’s Villeroy and de Cos. Finally, earnings releases include Microsoft, Alphabet, Visa, Pepsico, UPS, Texas Instruments, General Electric and General Motors. Market Snapshot S&P 500 futures down 0.3% to 4,281.50 STOXX Europe 600 up 0.8% to 448.67 MXAP up 0.2% to 166.28 MXAPJ up 0.3% to 546.79 Nikkei up 0.4% to 26,700.11 Topix up 0.1% to 1,878.51 Hang Seng Index up 0.3% to 19,934.71 Shanghai Composite down 1.4% to 2,886.43 Sensex up 1.0% to 57,161.33 Australia S&P/ASX 200 down 2.1% to 7,317.98 Kospi up 0.4% to 2,668.31 German 10Y yield little changed at 0.84% Euro down 0.2% to $1.0687 Brent Futures down 0.3% to $101.97/bbl Brent Futures down 0.3% to $101.97/bbl Gold spot up 0.3% to $1,902.86 U.S. Dollar Index up 0.13% to 101.89 Top overnight News from Bloomberg ECB Governing Council member Martins Kazaks says the central bank should raise interest rates soon and has room for as many as three hikes this year, Reuters reports The renewed pledge by Chinese authorities to boost the economy is being met with skepticism by stock traders worried about a potential city-wide lockdown in Beijing China’s central bank pledged to increase support for the economy, seeking to reassure investors as financial markets take a hammering from a worsening growth outlook and threats of widespread Covid lockdowns. China’s economy slowed rapidly in April as the costs of both a worsening Covid outbreak and the nation’s stringent approach to eliminating the virus took their toll. Oil held its decline below $100 a barrel as investors assessed the impact of China’s Covid-19 resurgence on the outlook for global demand. Base metals in London plunged on Monday, following sinking iron ore markets in Asia as investors fret over deteriorating demand outlook in China and higher interest rates in western economies. A more detailed look at global markets courtesy of Newsquawk APAC stocks were mostly higher with bourses in the region encouraged after the rebound on Wall Street. ASX 200 bucked the trend as the prior day’s rout caught up with markets in Australia and New Zealand on return from the extended weekend, with miners pressured by tepid output from South32 and Woodside Petroleum. Nikkei 225 gained after a surprise decline in Unemployment and amid preparations for a relief package. Hang Seng and Shanghai Comp were lifted as strength in tech helped the former reclaim the 20k level and after further PBoC policy support pledges gradually offset the initial Beijing COVID-19 jitters in the mainland. Top Asian news BOJ Extends Unlimited Bond Buying Into Policy Meeting This Week China Tech Stocks Rebound as Beijing Renews Policy Support China Is Running Out of Ways to Stem Self-Made Market Meltdown Tencent-Backed Fintech Startup Airwallex Said to Seek New Funds European bourses feel some reprieve following the bout of selling seen in recent sessions and following Wall Street's afternoon bounce yesterday. Sectors are all in the green but to varying degrees – with Basic Resources rebounding with a vengeance after yesterday’s slide, albeit Energy has failed to hold onto early gains as the underlying commodity price wanes. Stateside, US equity futures trade relatively flat with a mild downside bias (ES -0.1%, NQ -0.1%, RYT -0.1%, YM -0.1%), trimming earlier losses. United Parcel Service Inc (UPS) Q1 2022 (USD): EPS 3.03 (exp. 2.88), Revenue 24.4bln (exp. 23.79bln), reaffirms guidance; doubles buy-back target to USD 2bln Top European News Germany to Send Anti-Aircraft Tanks to Ukraine in Policy Shift European Gas Prices Swing With Focus on LNG Imports, Russia Flow Gupta’s GFG Alliance Offices in Paris Raided by French Police Sunak Warns Future Generations at Risk From U.K. Debt Burden FX Dollar mixed as broad risk appetite returns after Monday’s flight to safety; USD down vs high betas, but up against most index components. Aussie and Kiwi refreshed following long holiday weekend and further rebound in Yuan on the back of China’s RRR reduction effective May 15 Euro and Pound flounder as DXY eyes 102.000 and conflict contagion weighs heavier in Europe relative to the US Yen continues to consolidate off multi year lows after a dip in Japan’s unemployment rate and Government rolls out fiscal relief measures Japanese PM Kishida said rapid FX moves are undesirable; no comment on specific JPY levels. Fixed Income Debt futures resume recovery rally or retracement from recent cycle lows with curves a tad flatter ahead of 2 year US auction    Bunds are just shy of Monday's 155.26 peak, Gilts back above 119.00 and 10 year T-note eyeing 120-00 BTPs hold firm following Italian issuance, irrespective marginally softer cover ratios UK debt lags after larger than forecast PSNB deficit and upwardly revised 2022/32 DMO remit UK DMO raises its 2022/23 Gilt issuance remit to GBP 131.5bln from GBP 124.7bln and sees GBP 7bln additional T-bill sales Commodities WTI and Brent June futures continue drifting lower as the crude complex continues to be dampened by China's COVID situation. Spot gold was pressured by the firmer Buck and fell to a current intraday low of USD 1,894/oz in early trade before finding a base and reclaiming a USD 1,900/oz handle   Base metals, meanwhile, are mostly firmer in what is seemingly a rebound following yesterday's downside. Shanghai Futures Exchange raises trading limits and margin requirements for steel rebar, wire rod, and hot rolled coils futures from settlement on April 28. US Event Calendar 08:30: March Durable Goods Orders, est. 1.0%, prior -2.1%; -Less Transportation, est. 0.6%, prior -0.6% 08:30: March Cap Goods Ship Nondef Ex Air, est. 0.5%, prior 0.3%; Cap Goods Orders Nondef Ex Air, est. 0.5%, prior -0.2% 09:00: Feb. S&P CS Composite-20 YoY, est. 19.20%, prior 19.10% Feb. S&P/CS 20 City MoM SA, est. 1.50%, prior 1.79% 10:00: April Conf. Board Consumer Confidenc, est. 108.2, prior 107.2 Present Situation, prior 153.0; Expectations, prior 76.6 10:00: April Richmond Fed Index, est. 9, prior 13 10:00: March New Home Sales, est. 768,000, prior 772,000 March New Home Sales MoM, est. -0.6%, prior -2.0% DB's Jim Reid concludes the overnight wrap I'll admit to being a bit tired this morning as at 2am I got woken by loud constant shouts of "Daddy, Daddy". On bleary eyed investigation one of the twins wanted to know when we are next going to a water park. As we haven't discussed this or been to one since last summer this was a bit random. I said it was inappropriate to shout the house down at 2am to ask this. He then said "what's inappropriate mean". I angrily shut the conversation down which didn't help him or I get back to sleep very quickly. The market felt tired and worn down by the building risks yesterday and by the time Europe closed things were looking pretty bleak. However a late rally turned the S&P 500 from being -1.67% to closing +0.57%. The Nasdaq closed +1.29% and was rallying back even before Twitter agreed to sell the company to Elon Musk. Outside of that late story it was hard to find a narrative for the strong rebound. Tech stocks will stay front-and-center though as earnings progress this week, with Microsoft and Alphabet both set to report after the close tonight. It was much easier to find a narrative for the earlier sell-off as investors grappled with the continued Covid outbreak in China, further signs of inflationary pressures, and the prospect that the Fed and other central banks’ hiking cycles might push their economies into recession. As Europe closed the S&P was over -7% lower in April and on track to see the worst month since the pandemic rout of March 2020. Even with the rebound, the index is still more than -5% lower over April and still at risk of taking the ignominious title of worst monthly return since Covid if it dips below this January’s -5.26% return. Bonds also sold off with the US equity bounce back but unlike equities held on a large proportion of the days gains. 10yr Treasuries closed down -7.9bps to 2.82%, after being as much as -14bps lower intraday. That decline was driven by declining inflation expectations, as growth fears dominated. Given the global growth fear flavour of yesterday’s risk off, the 2s10s curve flattened -3.7bps to 18.8bps, as 2yr yields lagged the longer-maturity rally. The curve has maintained its level this morning but the yield reversal has continued with 2 and 10yr yields both back up around +3.5bps as we type. The dollar was another significant beneficiary yesterday, strengthening +0.53% to levels not seen since March 2020, and leaving it on track for its best monthly performance since January 2015. It's given up -0.18% of the gains so far this morning. As discussed, the biggest concern yesterday came from China, where the potential that there could be a lockdown in Beijing (in addition to the one already in Shanghai) saw the CSI 300 (-4.94%) fall to a 2-year low in yesterday’s session, marking the index’s worst daily performance since the original Covid-19 outbreak there in February 2020. This morning the index is +0.90% higher with the Shanghai Composite (+0.67%) also trading in positive territory after the PBOC reassured markets of their policy support for the economy. That comes as Beijing expanded its Covid testing to 11 further districts from today until April 30, with growing questions as to how the economy will perform against the backdrop of further lockdowns, particularly if the country continues its Zero Covid strategy. Other Chinese assets are also struggling, with the offshore Yuan weakening to its lowest levels against the US Dollar since 2020, though yesterday the People’s Bank of China said in a statement that they will lower banks’ FX reserve ratio from 9% to 8% beginning May 15. Overnight, the Yuan has witnessed a rebound, climbing +0.4% to 6.533 against the US dollar, snapping five days of losses. Elsewhere in Asia, equity markets are mostly trading higher with the Hang Seng (+1.81%) leading gains across the region in early trading amid a gain in tech stocks. Elsewhere, the Nikkei (+0.51%) is up following the release of upbeat jobs data. Data showed that Japan’s jobless rate unexpectedly dropped 0.1 percentage points to 2.6% in March while the Job-To-Applicant Ratio improved to +1.22 in March from +1.21, climbing for the third consecutive month. Meanwhile, the Kospi (+0.60%) is climbing after South Korea’s Q1 GDP data surprised on the upside. The nation’s GDP expanded +0.7% q/q, slowing from +1.2% a quarter earlier, but slightly faster than the +0.6% expected. Looking ahead, stock futures in the US are pointing to a positive start with contracts on the S&P 500 (+0.23%) and Nasdaq (+0.25%) trading up with European future soaring (Stoxx 50 +1.66%) after the poor close yesterday. European sovereign bonds are likely to sell off at the open after a strong close yesterday before the risk relief rally. Yesterday, yields on 10yr German bunds (-13.5bps) saw the biggest declines as havens outperformed. The French 10yr spread over bunds did widen by +2.6bps, but that was part of a broader widening in European spreads rather than because of the election result that was mostly priced in already, and we also saw the Italian (+4.1bps) and Greek (+11.0bps) spreads move by even larger margins. That left the Italian spread at 173.6bps, its widest level since June 2020. Back to equities and earlier the STOXX 600 (-1.81%) slumped along with other bourses on the continent, closing during the nadir in US equities. On a sectoral basis, the biggest global underperformer for equities were energy stocks, but that was no surprise considering the decline in oil prices given concerns over Chinese demand going forward. By the close, Brent Crude fell by -4.06% to $102.32/bbl, but rallied along with equities after trading as much as -6.30% lower intraday and below $100/bbl for the first time in a couple of weeks. WTI was also down -3.46% at $98.54/bbl. And other energy prices lost ground too, with European natural gas futures (-2.15%) falling to their lowest levels since Russia’s invasion of Ukraine began, at €92.84/MWh. Oil is back up around 1% this morning after the renewed global risk appetite. In spite of the more negative growth tone in markets, the Ifo’s business climate indicator from Germany yesterday came in above expectations in April, with the reading at 91.8 (vs. 89.0 expected), marking an unexpected improvement from the March reading that had been the worst since August 2020. Otherwise on the data side, the Dallas Fed’s manufacturing activity index for April fell to 1.1 (vs. 5.0 expected), the lowest since July 2020. To the day ahead now, and data releases from the US include the Conference Board’s consumer confidence indicator for April, preliminary March data on durable goods orders and core capital goods orders, the FHFA house price index for February, and new home sales for March. From central banks, we’ll hear from the ECB’s Villeroy and de Cos. Finally, earnings releases include Microsoft, Alphabet, Visa, Pepsico, UPS, Texas Instruments, General Electric and General Motors. Tyler Durden Tue, 04/26/2022 - 07:45.....»»

Category: blogSource: zerohedgeApr 26th, 2022

Futures Recover Losses After Netflix Disaster; 10Y Real Yields Turn Positive

Futures Recover Losses After Netflix Disaster; 10Y Real Yields Turn Positive US index futures were little changed, trading in a narrow, 20-point range, and erasing earlier declines as a selloff in bonds reversed with investors also focusing on the catastrophic Q1 earnings report from Netflix. Nasdaq 100 Index futures slipped 0.2% by 7:15 a.m. in New York, recovering from an earlier drop of as much as 1.2%; the Nasdaq 100 has erased $1.3 trillion in market value since April 4 as bond yields have been surging on fears of rate hikes. S&P 500 futures also recouped losses to trade little changed around 4,460. Treasuries rallied and 10Y yields dropped to 2.86% after hitting 2.98% yesterday. The dollar dropped for the first time in 4 days after hitting the highest level since July 2020, and gold was flat while bitcoin rose again, hitting $42K. In perhaps the most notable move overnight, US 10-year real yields turned positive for the first time since March 2020, signaling a potential return to the pre-pandemic normal. But that was quickly followed by a global drop in bond yields as investors assessed growth challenges from the Ukraine war and the potential for a peak in inflation. “Real yields matter for equities,” Esty Dwek, chief investment officer at Flowbank SA, said in an interview with Bloomberg Television. “It’s another aspect for the valuation picture that isn’t helping. It shouldn’t be that much of a surprise to see real yields are back closer to zero again. We’re pricing in so much bad news already between inflation and the hikes and war and supply chains.” 10-year Treasurys yield shed 7 basis points in choppy session after as money managers from Bank of America to Nomura indicated the panic over inflation has gone too far: “Our forecasts point to inflation peaking this quarter and falling steadily into 2023,” BofA analysts including Ralph Axel wrote in a note. “We believe this will reduce the panic level around inflation and allow rates to decline.”  Bank of America also said it has turned long on 10-year Treasuries. Elsewhere, Japan's 10-year yield holds at 0.25%, the top of Bank of Japan’s trading band as the central bank resumes massive intervention. Despite the BOJ's dovish commitment to keep rates low, the Japanese yen rebounded from a 13-day slump and gold extended its decline. Going back to stocks, Netflix shares which have a 1.2% weighting in the Nasdaq, sank 27% in premarket trading after the streaming service said it lost customers for the first time in a decade and forecast that the decline will continue. The shares were downgraded at many firms including UBS Group AG, KGI Securities and Piper Sandler. Other streaming stocks including Walt Disney and Roku also slipped. IBM, on the other hand, rose 2.5% after reporting revenue that beat the average analyst estimate on demand for its hybrid-cloud offerings. Analysts acknowledged the strong quarter of revenue performance. A dimmer outlook for corporate earnings as well as the rise in yields have dented demand for risk assets, with investors preferring defensive stocks such as healthcare to growth-linked stocks, which come under greater pressure from higher interest rates. Some other notable premarket movers: Interactive Brokers (IBKR US) shares fell 1.1% in after-market trading as net income missed analysts’ consensus estimates. Still, analysts at Piper Sandler and Jefferies are positive. Omnicom (OMC US) shares jumped 3.7% in postmarket. Its cautious outlook for the rest of the year could bring some positive surprises, according to analysts, after the company’s 1Q revenue beat estimates In Europe, the Stoxx 600 rose 0.8%, led by banking and technology shares while miners underperformed as metals fell, as investors assessed a mixed bag of corporate results and the outlook for France’s presidential-election runoff on Sunday.  There’s a divergence in performance of European stocks; Euro Stoxx 50 rallies 1.2%. FTSE 100 lags, adding 0.4%. Danone SA rose after reporting its fastest sales growth in seven years, and Heineken NV advanced after sales climbed. Here are some of the biggest European movers today: ASML shares rise as much as 8% with analysts saying the semiconductor-equipment group’s earnings show demand remains strong, even if a timing issue meant its outlook missed expectations. Danone shares gain as much as 9% following a French financial newsletter report that rival Lactalis may be interested in buying its businesses and after the producer of Evian reported a surge in bottled water revenue. Just Eat Takeaway shares rise as much as 7.7% after the company gave mixed guidance and said it is considering selling Grubhub. While analysts note the growth looks weak, they highlight the focus on profitability and the strategic review of Grubhub are positives. Vopak shares rise as much as 7.2%, most since March 2020, after the tank terminal operator reported higher revenues and Ebitda for the first quarter. Heineken shares rise as much as 5% after the Dutch brewer reported 1Q organic beer volume that beat analyst expectations and said net revenue (beia) per hectolitre grew 18.3%. Analysts were impressed by the company’s price-mix during the period. Rio Tinto shares fall as much as 3.9%. A production miss for 1Q could prevent the miner’s shares from recovering after recent underperformance, RBC Capital Markets says. Credit Suisse declines as much as 2.8% after the bank said it anticipates a first-quarter loss owing to a hit to revenue from Russia invading Ukraine and an increase in legal provisions. Oxford Biomedica drops as much as 10% after reporting full-year revenue that was below consensus. RBC Capital said reasons for the revenue miss were “unclear,” adding that there was no new business development news. Asian stocks rose as Japanese equities rallied on the back of a weaker yen, which will support exports. Shares in China fell as investors were disappointed by the decision among banks to keep borrowing rates there unchanged. The MSCI Asia Pacific Index gained as much as 0.9% and was poised to snap a three-day losing streak. Japanese exporters including Toyota and Sony helped lead the way, with shares also stronger in Singapore, Malaysia and the Philippines.  “It looks like the cheap yen may continue for a longer period than originally expected,” said Bloomberg Intelligence auto analyst Tatsuo Yoshida. “The weaker yen is good for all Japanese automakers.” China’s benchmarks bucked the uptrend and dipped more than 1%, as lenders maintained their loan rates for a third month despite the central bank’s call for lower borrowing costs to help an economy hurt by Covid-19 and geopolitical headwinds.  China’s rate stall, together with last week’s smaller-than-expected cut in the reserve requirement, has led some investors to believe broad and significant policy easing is unlikely. “Doubts about access to easier funding remain a bugbear despite headline easing,” Vishnu Varathan, head of economics and strategy at Mizuho Bank, wrote in a note. “Inadvertent restraints on actual lending may mute intended stimulus, revealing risks of ‘too little too late’ stimulus.” In positive news, daily covid cases in Shanghai were in downtrend in recent days and number of communities with more than 100 daily infections fell for three consecutive days, Wu Qianyu, an official with Shanghai’s health commission, says at a briefing. Financial stocks outside of China gained after U.S. 10-year Treasury real yields turned positive for the first time since 2020 as traders continue to bet on a series of aggressive Federal Reserve rate hikes. This may pose more headwinds for Asian tech stocks, which have dragged the broader market lower this year. Japanese equities rose for a second day after the yen weakened against the dollar for a record 13 straight days. Automakers were the biggest boost to the Topix, which climbed 1%. Financials advanced as yields gained. Fast Retailing and SoftBank Group were the largest contributors to a 0.9% gain in the Nikkei 225. The yen strengthened slightly after shedding nearly 6% against the dollar since the start of the month. “It looks like the cheap yen may continue for a longer period than originally expected,” said Bloomberg Intelligence auto analyst Tatsuo Yoshida. “The weaker yen is good for all Japaneseautomakers, “no one loses,” he added. Indian equities snapped their five-day drop as energy companies advanced on expectations of blockbuster earnings, driven by wider refining margins. Software exporters Infosys, Tata Consultancy and lender HDFC Bank bounced back from a slump, triggered by weaker results.  The S&P BSE Sensex gained 1% to 57,037.50 in Mumbai, while the NSE Nifty 50 Index rose 1.1%. The two gauges posted their biggest surge since April 4. Thirteen of the 19 sector sub-indexes compiled by BSE Ltd. climbed, led by a gauge of automobile companies. “A series of sharp negative reactions to minor misses in earnings from large caps points to a precarious state of positioning among investors,” according to S. Hariharan, head of sales trading at Emkay Global Financial. He expects corporate commentary on the margin outlook for FY23 to be key to investors’ reaction to other quarterly results, which will be released over the next couple of weeks. The benchmark Sensex lost about 5% in the five sessions through Tuesday, dragged lower by a selloff in software makers, a slump in HDFC Bank and its parent Housing Development Finance Corp. Foreign investors, who have been net sellers of Indian stocks since the start of October, have withdrawn $1.7 billion from local equities this month through April 18. The IMF slashed its world growth forecast by the most since the early months of the Covid-19 pandemic and projected even faster inflation. It expects India’s economy to grow by 8.2% in fiscal 2023 compared with an earlier estimate of 9%. Reliance Industries contributed the most to the Sensex’s gain, increasing 3%. Out of 30 shares in the Sensex index, 20 rose, while 10 fell. In FX, the Bloomberg Dollar Spot Index fell 0.4%, its first drop in four days, after yesterday reaching its highest level since July 2020, as the greenback weakened against all Group-of-10 peers. Scandinavian and Antipodean currencies led gains followed by the yen, which halted a 13-day rout. The euro advanced a second day and bunds extended gains, underperforming euro-area peers as money markets pared ECB tightening wagers. The yen snapped a historic declining streak amid short covering after the currency approached a key level of 130 per dollar. The Bank of Japan stepped in to cap 10-year yields for the first time since late March as it reiterated its ultra loose monetary policy with four days of unscheduled bond buying. The Australian and New Zealand dollars gained as risk sentiment improved after a selloff in Treasuries paused. The Aussie was supported by offshore funds buying into contracting yield spreads with the U.S. and on demand from exporters for hedging at the week’s low, according to FX traders. The pound edged higher against a broadly weaker dollar, but lagged behind the rest of its Group-of-10 peers, with focus on the risks to the U.K. economy. In rates, Treasuries advanced, reversing a portion of Tuesday’s sharp selloff which pushed the 10Y as high as 2.98%, with gains led by belly of the curve amid bull-flattening in core Focal points of U.S. session include Fed speakers and $16b 20-year bond reopening. US yields were richer by ~7bp across belly of the curve, 10-year yields around 2.87% keeping pace with gilts while outperforming bunds, Fed-dated OIS contracts price in around 222bp of rate hikes for the December FOMC meeting vs 213bp priced at Monday’s close; 49bp of hikes remain priced in for the May policy meeting. Japan 10-year yields held at 0.25%, the top of Bank of Japan’s trading band as the central bank resumes massive intervention. Australian and New Zealand bonds post back-to-back declines. Coupon issuance resumes with $16b 20-year bond sale at 1pm New York time; WI yield at around 3.10% sits ~45bp cheaper than March result, which stopped 1.4bp through.  IG dollar issuance slate includes Development Bank of Japan 5Y SOFR, Canada 3Y and ADB 3Y/10Y SOFR; six deals priced almost $19b Tuesday, headlined by financials including JPMorgan and Bank. In commodities, crude futures advance. WTI trades within Tuesday’s range, adding 1.1% to around $103. Brent rises 0.9% to around $108. Most base metals trade in the red; LME lead falls 1.6%, underperforming peers. Spot gold falls roughly $4 to trade near $1,946/oz. Looking at the day ahead now, and data releases include German PPI for March, Euro Area industrial production for February, US existing home sales for march, and Canadian CPI for March. From central banks, we’ll hear from the Fed’s Bostic, Evans and Daly, as well as the ECB’s Rehn and Nagel, whilst the Federal Reserve will be releasing their Beige Book. Earnings releases include Tesla, Procter & Gamble, and Abbott Laboratories. Finally, French President Macron and Marine Le Pen will debate tonight ahead of Sunday’s presidential election. Market Snapshot S&P 500 futures down 0.4% to 4,443.50 STOXX Europe 600 up 0.4% to 458.21 MXAP up 0.5% to 171.88 MXAPJ up 0.2% to 570.00 Nikkei up 0.9% to 27,217.85 Topix up 1.0% to 1,915.15 Hang Seng Index down 0.4% to 20,944.67 Shanghai Composite down 1.3% to 3,151.05 Sensex up 0.9% to 56,945.14 Australia S&P/ASX 200 little changed at 7,569.23 Kospi little changed at 2,718.69 German 10Y yield little changed at 0.88% Euro up 0.3% to $1.0823 Brent Futures up 1.0% to $108.27/bbl Brent Futures up 1.0% to $108.27/bbl Gold spot down 0.3% to $1,943.30 U.S. Dollar Index down 0.28% to 100.67 Top Overnight News from Bloomberg On the surface the yen looks like the perfect well for carry traders to dip into, under pressure from a Bank of Japan determined to keep local yields anchored to the floor even as interest rates around the world push higher. But despite consensus building for further losses -- peers look like better funding options on certain key metrics Almost eight weeks after Vladimir Putin sent troops into Ukraine, with military losses mounting and Russia facing unprecedented international isolation, a small but growing number of senior Kremlin insiders are quietly questioning his decision to go to war French President Emmanuel Macron and nationalist leader Marine le Pen are gearing up for their only live TV debate on Wednesday evening, a high-stakes event just days before the final ballot of the presidential election this weekend China will continue strengthening strategic ties with Russia, a senior diplomat said, showing the relationship remains solid despite growing concerns over war crimes in Vladimir Putin’s war in Ukraine A more detailed look at global markets courtesy of Newsquawk APAC stocks eventually traded mostly positive after the firm handover from the US despite continued upside in yields. ASX 200 was led by the healthcare sector as shares in Ramsay Health Care surged due to a takeover proposal from a KKR-led consortium, but with gains capped by miners after Rio Tinto's lower quarterly iron ore production and shipments. Nikkei 225 was underpinned by the initial currency depreciation and with the BoJ defending its yield cap. Hang Seng and Shanghai Comp were mixed with the mainland subdued after the PBoC defied expectations for a cut to its benchmark lending rates and instead maintained the 1yr and 5yr Loan Prime Rates at 3.70% and 4.60%, respectively. Top Asian News Fed’s Aggressive Rate Hike Plans Jolt Policy in China and Japan BOJ Further Boosts Bond Buying as Yields Advance to Policy Limit Sunac Bondholders Say They Haven’t Received Interest Due Tuesday Regulators Under Pressure to Ease Loan Curbs: Evergrande Update China Buys Cheap Russian Coal as World Shuns Moscow European bourses and US futures were choppy at the commencement of the European session, but, have since derived impetus in relatively quiet newsflow amid multiple earnings and as yields continue to ease; ES Unch. Currently, Euro Stoxx 50 +1.8%, while US futures are little changed on the session but rapidly approaching positive territory ahead of key earnings incl. TSLA. Netflix Inc (NFLX) - Q1 2022 (USD): EPS 3.53 (exp. 2.89), Revenue 7.87bln (exp. 7.93bln), Net Subscriber Additions: -0.2mln (exp. +2.5mln). Q1 UCAN streaming paid net change -640k (exp.+87.5k). Co. lost 640k subscribers in US/Canada, 300k in EMEA, and 350k in LatAm. Co. Said macro factors, including sluggish economic growth, increasing inflation, geopolitical events such as Russia’s invasion of Ukraine, and some continued disruption from COVID are likely having an impact, via PR Newswire. Click here for the full breakdown. -26% in the pre-market. Chinese Civil Aviation publishes prelim report looking into the China Eastern Airline crash; still recovering and analysing damaged black boxes from the plane: there was no abnormal communication between air crew and air controllers before the aircraft deviated from cruising altitude; no dangerous weather, goods or overdue maintenance. Top European News Le Pen Upset Would Be as Big a Shock to Markets as Brexit Macron and Le Pen Set for High Stakes French Debate Riksbank Governor Leaves Door Open for String of Rate Hikes Danone Gains on Lactalis Takeover Speculation, Evian Rebound Heineken Rises; MS Says Results Were Widely Expected FX: Buck concedes ground to recovering Yen as US Treasury yields recede, USD/JPY over 150 pips below new 20 year high circa 129.42. Yuan on the rocks after PBoC set a soft onshore reference rate and regardless of unchanged LPRs, USD/CNH eyes 6.4500 after breach of 200 DMA. Aussie back in pole position as high betas benefit from Greenback retreat and Kiwi in second spot ahead of NZ CPI data; AUD/USD rebounds through 0.7400 and NZD/USD from under 0.6750. Loonie also bouncing before Canadian inflation metrics, with Usd/Cad closer to 1.2550 than 1.2625, while Euro and Pound are both firmer on 1.0800 and 1.3000 handles respectively as DXY dips below 100.500. Rand shrugs aside mixed SA CPI prints as correction from bull run continues and Gold slips under Usd 1950/oz, USD/ZAR holds above 15.0000. ECB's Kazaks says a rate hike is possible as soon as July this year; ending APP early in Q3 is possible and appropriate; zero is not an a cap for the deposit rate, via Bloomberg. Adds, a gradual approach does not mean a slow approach, do not need to wait for stronger wage growth. Fixed Income: Debt redemption, as futures retrace following tests/probes of cycle lows. Lack of concession not really evident at longer-dated German and UK bond sales, but 20 year US supply may be a separate issue. BoJ ramps up intervention and aims to anchor rather than cap 10 year JGB yield around zero percent, while BoA suggests contra-trend position in 10 year UST to target 2.25% from current levels close to 3.0%. Commodities: Crude benchmarks are firmer on the session in what is more of a consolidation from yesterday's pressured settlement than a concerted effort to move higher, also benefitting from broader equity action. Currently, WTI and Brent reside at the top-end of USD 2/bbl parameters; focus very much on China-COVID, Iran, Libyan supply and Ukraine-Russia developments. US Private Energy Inventory Data (bbls): Crude -4.5mln (exp. +2.5mln), Cushing +0.1mln, Gasoline +2.9mln (exp. -1.0mln), Distillate -1.7mln (exp. -0.8mln). Spot gold/silver are contained at present but have seen bouts of modest pressure, including the loss of the USD 1946.45/oz 21-DMA at worst. US Event Calendar 07:00: April MBA Mortgage Applications, prior -1.3% 10:00: March Existing Home Sales MoM, est. -4.1%, prior -7.2% 10:00: March Home Resales with Condos, est. 5.77m, prior 6.02m 14:00: U.S. Federal Reserve Releases Beige Book Central Bank Speakers 11:25: Fed’s Daly Discusses the Outlook 11:30: Fed’s Evans Discusses the Economic and Policy Outlook 13:00: Fed’s Bostic Discusses Equity in Urban Development DB's Jim Reid concludes the overnight wrap It took me a while to adjust to being back to the office yesterday after two and a half weeks off. No screaming kids, no stealing half their food as I made their meals, and no stepping on endless lego and screaming myself. My team at work are much better behaved, protect their food, and clear up after playing with their toys. Talking of lego, the first day of the holiday was spent in a snow blizzard at LEGOLAND and the last day in shorts and t-shirt on a family bike ride on the Thames. No I haven't been off for that long just a typical April in the UK. When I left you, I was in constant agony due to sciatica in my back and a knee that was very fragile post surgery. On my last day I had a back injection that I wasn't that hopeful about as three previous ones hadn't done anything. However after a second opinion and a new consultant, this injection hit the spot and my sciatica has completely gone and I'm just back to the long-standing normal wear and tear related back stiffness. The consultant can't tell me how long it'll last so Reformer Pilates starts next week. My knee is slowly getting better via some overuse flare ups. So until the next time, I'm in as good a shape as I have been for quite some time! It's hard to guage how good a shape the market is in at the moment as there are lots of conflicting forces. Since I've been off global yields have exploded higher, the US yield curve has resteepened notably and risk is a bit softer. As regular readers know I think a late 2023/early 2024 US recession is likely in this first proper boom and bust cycle for over 40 years. However we're still in some kind of boom phase and I've been trying not to get too bearish too early. While I was off, I published our latest credit spread forecasts and having met our earlier year widening targets, we've moved more neutral for the rest of the year. However into year end 2023, we now have a very big widening of spreads in the forecasts to reflect the likely recession. See the report here. Also while I've been off, the House View is now also that we'll get a US recession at a similar point which as far as I can see is the first Wall Street bank to officially predict this. See the World Outlook here for more. On the steepening I don't have a strong view but ultimately I think 2 year yields will probably have to rise again at some point after a recent pause as the risks are skewed to the Fed having to move faster than the market expects. The long end is complicated by QT but generally I suspect the curve will be fairly flat or inverted for most of the next few months. Coming back after my holidays and the long Easter weekend, the bond market sell-off resumed yesterday with yields climbing to fresh highs. In fact, the losses for Treasuries so far in April now stand at -2.95% on a total return basis, just outperforming the -3.04% decline in March that itself was the worst monthly performance since January 2009, back when the US economy started emerging from the worst phase of the GFC. Elsewhere the US yield curve flattened for the first time in six sessions, with 2yr yields climbing +14.4bps to 2.59%, their highest level since early 2019. Yields on 10yr Treasuries rose +8.3bps to 2.94%, a level unseen since late 2018, on another day marked by heightened rates volatility. Meanwhile 30yr yields breached 3.00% intraday for the first time since early 2019, climbing +5.4bps. And what was also noticeable was the continued rise in real yields, with the 10yr real yield closing at -0.009% yesterday, and briefly trading in positive territory for the first time since March 2020 in early trading this morning. Bear in mind that the 10yr real yield has surged roughly 110bps in around 6 weeks, and since we’ve been able to calculate real yields using TIPS, the only faster moves over such a short time period have been during the GFC and a remarkable 2-week period in March 2020 around the initial Covid-19 wave. On the other hand, as I pointed out in my CoTD yesterday (link here), the 10yr real yield based on spot inflation is currently around -5.6%, so still incredibly negative. The latest moves come ahead of the Fed’s next decision two weeks from now, where futures are placing the odds of a 50bp hike at over 100% now. We’ve been talking about 50bps for some time, and we’d probably have had one last month had it not been for Russia’s invasion of Ukraine, but it would still be a historic moment if it happens, since the last 50bp hike was all the way back in 2000. Nevertheless, we could be about to see a whole run of them, with our economists pencilling in 50bp hikes at the next 3 meetings, whilst St Louis Fed President Bullard (the only dissenting vote at the last meeting who wanted 50bps) said on Monday night that he wouldn’t even rule out a 75bps hike, which probably gave some fuel to the subsequent front end selloff. The bond selloff also took hold in Europe yesterday, where yields on 10yr bunds (+6.9ps), 10yr OATs (+5.0bps) and BTPs (+6.2bps) all hit fresh multi-year highs. Indeed, those on 10yr bunds (0.91%) were at their highest level since 2015, having staged an astonishing turnaround since they closed in negative territory as recently as March 7. Rising inflation expectations have been a driving theme behind this, and yesterday we saw the 5y5y forward inflation swap for the Euro Area close above 2.4%, which is the first time that’s happened in almost a decade, and just shows how investor confidence in the idea of “transitory” inflation is becoming increasingly subdued given that metric is looking at the 5-10 year horizon. Those moves higher in inflation expectations came in spite of the fact that European natural gas prices fell to their lowest level since Russia’s invasion of Ukraine began yesterday. By the close, they’d fallen -1.94% to €93.77/MWh, whilst Brent crude oil prices were down -5.22% to $107.25/bbl. In Asia, oil prices are a touch higher, with Brent futures +0.82% higher as we go to press. Whilst bonds sold off significantly on both sides of the Atlantic, equities put in a much more divergent performance, with the US seeing significant advances just as Europe sold off. By the close of trade, the S&P 500 (+1.61%) had posted its best day in more than a month, as part of a broad-based advance that left 446 companies in the index higher on the day, the most gainers in a month. Tech stocks outperformed in spite of the rise in yields, with the NASDAQ (+2.15%) and the FANG+ index (+1.81%) posting solid advances, and the small-cap Russell 2000 (+2.04%) also outperformed. In Europe however, the STOXX 600 shed -0.77%, with others including the DAX (-0.07%), the CAC 40 (-0.83%) and the FTSE 100 (-0.20%) also losing ground. The S&P was higher despite a day of mixed earnings. Of the ten companies reporting during trading yesterday, only 4 beat both sales and earnings expectations. After hours, Netflix was the main story, losing subscribers for the first quarter in over a decade and forecasting further declines this quarter, which sent the stock as much as -24% lower in after hours trading. It’s 2 bad earnings releases in a row for the world’s largest streaming service, who saw their stock dip -21.79% the day after their fourth quarter earnings in January. Asian equity markets are mixed this morning as the People’s Bank of China (PBOC) defied market expectations by keeping its benchmark lending rates steady. In mainland China, the Shanghai Composite (-0.21%) and the CSI (-0.43%) are lagging on the news. Bucking the trend is the Nikkei (+0.57%) and the Hang Seng (+0.66%). Outside of Asia, stock futures are indicating a negative start in the US with contracts on the S&P 500 (-0.35%) and Nasdaq (-0.75%) both trading in the red partly due to the Netflix earnings miss. Separately, the Bank of Japan (BOJ) reiterated its commitment to purchase an unlimited amount of 10-yr Japanese Government Bonds (JGBs) at 0.25% to contain yields, underscoring its desire for ultra-loose monetary settings, in contrast to the global move in a more hawkish direction. The yen has moved slightly higher (+0.3%) after depreciating for 13 straight days, a streak which hasn’t been matched since the US left the gold standard in the early 70s and effectively brought the global free floating exchange rate regime into being. The pace and magnitude of the depreciation has brought some expressions of consternation from Japanese officials, but no official intervention. The reality is, it would be extraordinarily difficult to credibly support the currency at the same time as maintaining strict control of the yield curve. 10yr JGBs continue to trade just beneath the important 0.25% level. Over in France, we’re now just 4 days away from the French presidential election run-off on Sunday, and tonight will see President Macron face off against Marine Le Pen in a live TV debate. Whilst that will be an important moment, recent days have seen a slight widening in Macron’s poll lead that has also coincided with signs of an easing in market stress, with the spread of French 10yr yields over bunds coming down to its lowest level since the start of the month yesterday, at 46.7bps. In terms of yesterday’s polls, Macron was ahead of Le Pen by 56-44 (Opinionway), 56.5-43.5 (Ipsos), and 55-54 (Ifop), putting his lead beyond the margin of error in all of them. Elsewhere, the IMF released their latest World Economic Outlook yesterday, in which they downgraded their estimates for global growth in light of Russia’s invasion of Ukraine. They now see global growth in both 2022 and 2023 at +3.6%, down from estimates in January of +4.4% in 2022 and +3.8% in 2023. Unsurprisingly it was Russia that saw the biggest downgrades, but they were broadly shared across the advanced and emerging market economies, whilst inflation was revised up at the same time. Otherwise on the data side, US housing starts grew at an annualised rate of 1.793m in March (vs. 1.74m expected), which is their highest level since 2006. Building permits also rose to an annualised rate of 1.873m (vs. 1.82m expected), albeit this was still beneath its post-GFC high reached in January. To the day ahead now, and data releases include German PPI for March, Euro Area industrial production for February, US existing home sales for march, and Canadian CPI for March. From central banks, we’ll hear from the Fed’s Bostic, Evans and Daly, as well as the ECB’s Rehn and Nagel, whilst the Federal Reserve will be releasing their Beige Book. Earnings releases include Tesla, Procter & Gamble, and Abbott Laboratories. Finally, French President Macron and Marine Le Pen will debate tonight ahead of Sunday’s presidential election. Tyler Durden Wed, 04/20/2022 - 08:02.....»»

Category: blogSource: zerohedgeApr 20th, 2022

Goldman: "Is The Recession Signal Once Again Hiding In Plain Sight?"

Goldman: "Is The Recession Signal Once Again Hiding In Plain Sight?" Two weeks ago, Goldman's head of hedge funds sales Tony Pasquariello unexpectedly took a contrarian position to the conventionally bullish house view, warning that over the next few weeks, "he called the market lower." So far he has been spot on, and stocks indeed are now lower than they were at the end of March as the retail driven melt up that started in mid-March has once again collapsed. So what happens next? Well, it depends on whom one listens to: Goldman or Goldman, because while the bank's traditionally permabullish chief equity strategist (for common consumption) David Kostin continues to push the bank's retail clients to buy whatever Goldman has to sell, and as we noted on Friday, Goldman has been selling a lot... ... Pasquariello still refuses to jump on the bullish bandwagon, and instead in his latest Markets and Macro note says that while he is not yet ready to fully subscribe to the recession narrative, he is very close and adds that when all is said and done, "bulls are fighting uphill." . Below we excerpt from the note which is traditionally reserved for Goldman's most lucrative institutional clients, and which presents a far less optimistic view than that one would glean from reading Goldman's generic (and generally worthless) "house" research. From Pasquariello's latest "Markets and Macro: From QE to QT": Let me summarize 23 points in just two lines: the tectonic plates underlying the global investing ecosystem are on the move. that is neither “all good” nor “all bad” for market participants, but the game is getting a lot more complicated. here’s the run of it ... as always, a taker of feedback and good ideas: 1. Recent price action in spaces like homebuilders (see S15HOME) and transports (see GSSITRUC) has been dreadful, and cause for some contemplation. If you lived through 2006-08, when you observe these charts today, it’s hard not to wonder if the recession signal is once again hiding in plain sight. What I’m getting at here: there’s a message coming from the underbelly of the market that -- rightly or wrongly -- points, with increasing force, in the direction of a growth scare. 2. This stress in the deep cyclicals is consistent with a recent poll of our institutional client base, where over half of the respondents expect a US recession between now and the end of next year. alongside the ongoing heaviness of high yield, this also foots with the interest strip, where Eurodollars are seemingly discounting that the Fed will need to reverse course come 2024. Even though I would argue that geopolitical risk premium has been tamping down over recent weeks -- look no further than the VIX or EM currencies -- other parts of the macro complex are simultaneously dialing up warning signs around the trajectory of growth. 3. To be clear, the GFC was principally a function of the US building far too many homes, while the broader private sector built up far too much leverage. this time around, the setup is fundamentally very different: the US currently has a serious national shortage of housing ... and, the private sector financial balance is far healthier. Furthermore, despite how poorly certain parts of the market trade, also note how well some of traditional mega caps have performed: WMT, KO, JNJ, LLY and COST all marked an ATH this week (reflective of a sensible up-in-quality bias). 4. Where this leaves me: respectful of the flickering red lights on the macro dashboard, while not yet ready to fully subscribe to the recession narrative (see point 10 below). That tension supports my ongoing instinct that S&P will remain in a turbulent range trade -- sell rips over 4500, buy dips below 4200 -- with an overall portfolio bias towards commodities and quality. I also continue to believe that gap risk is more likely to be to the downside and not to the upside. 5. The upcoming barrage of Q1 earnings is apt to be fascinating given the macro cross-currents. As mentioned last week, the bar for Q1 isn’t particularly demanding: 0% expected y/y growth ex-energy, which seems low given the nominal GDP world we live in. The challenge, rather, will be H2’22 expectations of double-digit y/y growth … how guidance around that shakes out will be the key part of the story. As GMD colleague Bobby Molavi put it: “in certain cases it will be the starter gun for broad stroke sell side downward revisions.” 6. I’d argue the biggest development of the week -- a more forceful discussion of Fed balance sheet runoff -- supports a view that the bulls are fighting uphill. I’m inclined to think this is a big deal, and one which will intimidate stock operators on occasion, given what we learned way back in QE2: if you want to adjust financial conditions, the balance sheet is a much more powerful tool than the Fed Funds rate. I had actually pecked out that point before Bill Dudley took off the gloves: “if stocks don’t fall, the Fed needs to force them. In contrast to many other countries, the U.S. economy doesn’t respond directly to the level of short-term interest rates ... financial conditions need to tighten. If this doesn’t happen on its own (which seems unlikely), the Fed will have to shock markets to achieve the desired response.” 7. With respect to positioning, the disjunction between professionals and households persists: our Prime Brokerage franchise has seen selling from hedge funds for five of the past six weeks; over that same period, there’s been $46bn of inflows to equity mutual funds / ETF’s (entirely to the US; credit GMD client Scott Rubner). I suspect the collective flow-of-funds picture skews towards the negative side over the next few weeks, given the buyback blackout window and market talk of a > $300bn capital gains tax bill -- while also noting that retail is the heavy, and if they don’t back down, underlying sponsorship will remain intact. 8. While it’s a guarantee of nothing on the forward, I suspect a significant part of ongoing retail demand for equities begins and ends with a severe lack of good alternatives. Witness this check-down: the real returns on cash are terrible (consider the compounding of inflation over a five or ten-year period, it’s sobering). The nominal bonds you hold -- Treasuries, munis -- just keep selling off. the risk/reward profile of corporate bonds is not at all appealing. Crypto continues to hang in there, but it carries a very low weighting for most actors, and as much as you should love commodities, the volatility is not for anyone. 9. A non sequitur: through the end of 2021, the total return of S&P was positive in 17 of the past 19 years, and the average annual return over the prior three years was +26%. This provokes a few big picture reactions: (1) while those stats belie how hugely difficult the path of risk management was along the way, for strategic holders of risky assets, the getting was so exceptionally good; (2) despite an ongoing boom in genuine corporate innovation, I do worry that some of the underlying drivers that supported profit growth -- the compounding of immense Chinese GDP growth, structurally lower global inflation, low US corporate taxes and an ever lower cost of capital -- could all be in some form of retreat. 10. This is the most interesting point I read all week, credit to Jan Hatzius in GIR: “There has never been an increase in the [US] unemployment rate of more than 0.35pp (on a 3-month average basis) that wasn’t associated with a recession. The broader point is that once the labor market has overshot full employment, the path to a soft landing becomes narrow ... nevertheless, we think a recession is far from inevitable. First, the US recession sample underlying our labor market rules of thumb is small -- 12 in the entire postwar period and just 4 since 1982 -- and there are quite a few instances in other G10 economies in which moderate labor market deterioration did not result in recession. Second, in previous US labor market overheating episodes there was no source of incremental labor supply comparable to the 1-1.5 million prime-age workers that may now be poised to return to the workforce. Third, few of the financial imbalances that made the US economy vulnerable to self-feeding recessionary forces in the run up to the 2001 and 2007-2009 recessions -- especially the giant private sector deficits in the household and/or corporate sector -- are visible now." 11. quick points: i. while acknowledging how volatile local price action has been, Jeff Currie’s mark-to-market on the commodities bull market is worth a glance. The punch line is vividly clear: this is a policy-driven volatility trap ... oil to $125 by year-end and GSCI +28% NTM ... “our conviction in a multi-year super cycle has risen substantially." ii. speaking of commodities and inflation, next Tuesday brings a biggee: CPI. while this print could well mark the cycle high -- consensus on headline is +8.4% y/y -- I suspect the move from peak back towards trend will keep macro traders on their feet a good while longer. iii. do you know when globalization peaked? if defined by global trade as a % of GDP, the peak in globalization was not in 2016 ... it was not in 2019 ... it was actually back in 2008. iv. a reminder: Chinese industrial data peaked in November of 2020. in this spirit, I re-learned something else this week: Chinese debt/GDP is now running around 280%. v. Brazil has enjoyed a remarkable, if surprising trading rally to start the year. For a (cautious) take on where we go from here: link. vi. on the technicals of the all-important US bond market: “The past 24 hours have seen some significant developments transpire in the US rates markets. the most notable is the 1yr1yr Libor Swap ending its secular downtrend with the break above its 2018 high at 3.330%. To our knowledge this is the first US rates market to end its long term bull trend”. vii. in the spirit of April Fool’s -- and, my unabashed fondness for Taco Bell -- this warrants mention: “the Taco Liberty Bell was an April Fool's Day joke played by fast food restaurant chain Taco Bell. On April 1, 1996, Taco Bell took out a full-page advertisement in seven leading U.S. newspapers announcing that the company had purchased the Liberty Bell to ‘reduce the country's debt’ and renamed it the ‘Taco Liberty Bell’”. 12. This plots the real Fed Funds rate, with the inflation adjustment coming from market-based expectations. It levels sets just how crazy easy the starting point is for this tightening cycle -- perhaps part of the reason stocks have held up decently of late -- while also inviting the question of “how could this possibly get any better from here”: 13. Then there’s this show stopper -- also subject to your interpretation -- the GS wage tracker. My view: while it’s hard to think the gradient of this slope can be sustained forever, I also don’t see it turning meaningfully lower anytime soon: 14. A chart that (actually) tells you everything you need to know about Q1: 15. Speaking of energy prices ... this is what the cost of jet fuel looks like. From Callum Bruce in GIR: “ultimately, it’s a specific locational issue that is not significant to broader balances, but is nevertheless symptomatic of tight market and shows the binding, physical nature of commodity shortages and their large upside convexity at low storage levels. more of these events are in store.” 16. The more I travel around, the more I think the primary destination for capital is the US for now. In a similar vein, the market is very clearly rewarding companies with leverage to the US vs those with leverage to offshore revenues: 17. Scott Feiler, GMD: “at the idea dinners I attended in November/December, shorting the low-income consumer was the most popular idea. that was just due to compares, lack of stimulus, lack of child tax credit etc. that had not even contemplated higher gas prices. here we are though at the end of 1Q and our GS low-income basket outperformed the high-income basket by 500 bps. many of the low-income stocks have heavy consumables exposure and have simply outperformed. Our conversations have shifted dramatically the last 3 weeks, with investors looking to more middle-income type names that are heavily discretionary and have chunky dollar purchases that a consumer might forgo ... our baskets team put a basket together last week that they think addresses this theme, with the title being the ‘middle income discretionary basket’ (ticker GSCNSMDI Index).” note the ratio of this basket vs S&P. Tyler Durden Sun, 04/10/2022 - 11:10.....»»

Category: worldSource: nytApr 10th, 2022

The Top 3 Stocks To Buy In April

Keep an Eye on These 3 Standout Stocks This Month With the S&P 500 and the NASDAQ indexes both posting their worst quarters since the pandemic crash of March 2020, investors are likely wondering what’s next for equities this year. Keep in mind that the market would be in a lot worse shape if not […] Keep an Eye on These 3 Standout Stocks This Month With the S&P 500 and the NASDAQ indexes both posting their worst quarters since the pandemic crash of March 2020, investors are likely wondering what’s next for equities this year. Keep in mind that the market would be in a lot worse shape if not for a massive rally that took place over the last few weeks of the quarter, which begs the question – is the bottom for the year officially in? While there could certainly be some more volatility ahead for investors to deal with in April, staying focused on strong investment opportunities instead of guessing when corrections are over is typically the right strategy. 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 Series in PDF Get the entire 10-part series on Charlie Munger 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 2021 hedge fund letters, conferences and more Now that the market has some clarity about the Federal Reserve’s plan for combating inflation and the initial shock of the recent geopolitical turmoil has passed, it’s not a bad idea to consider adding stocks with bright business prospects and strong price action. That’s why we’ve prepared a brief list of the top 3 stocks to buy in April. If you’re looking to put some money to work this month, take a look at these standout names: Alphabet (NASDAQ:GOOGL) We’ve been getting a lot of stock split announcements lately from a variety of different companies, yet perhaps Alphabet’s is the most intriguing. The company is pursuing a 20-for-1 stock split in July 2022 that could ignite a strong rally in the coming weeks. The search engine giant will also be reporting its Q1 earnings later this month, and if the market can hold up it wouldn't be surprising to see shares head higher into the release. Regardless of how the stock performs in the near term, adding shares of this mega-cap tech company should pay off in a big way over the years. Keep in mind that Alphabet has developed one of the best business models in the world and has plenty of room for continued growth, particularly with how strong both the digital advertising and cloud computing industries are. Alphabet smashed its Q4 earnings last quarter and posted 38% EPS growth, and with so many businesses ramping up their digital ad spending as the economy recovers from the pandemic, there’s a chance another strong quarter is on the horizon. Additional technology like quantum computing, machine learning, natural language processing, and autonomous driving are more reasons why Alphabet is such a special company. Any dips to the 200-day moving average could offer an intriguing spot to consider adding shares. Johnson & Johnson (NYSE:JNJ) One trend has held true during a volatile and unpredictable 2022 in markets – investors are interested in biopharmaceutical stocks with affordable valuations and strong dividends. Just look at the performance of stocks like AbbVie and Bristol Myers Squibb for proof. That’s a big reason to consider adding shares of this major biopharmaceutical stock that quietly hit new all-time highs recently, Johnson & Johnson. It’s a global leader in the pharmaceutical, medical device, and consumer health care products industries and exactly the type of company to target amidst so much uncertainty in the world. Part of what makes Johnson & Johnson so attractive is the company’s history of dividend growth. It’s a member of the Dividend Aristocrats and has increased its payout for 60 consecutive years, which is definitely the type of consistency that investors want to see given inflation concerns. Johnson & Johnson also has plans to spin off its Consumer Health business to focus on higher growth, which is an intriguing strategic move that has massive implications. Finally, an uptick in doctor and hospital visits as the pandemic fades should be another catalyst for this stock, making it a great pick this month and beyond. Johnson & Johnson will report its Q1 earnings on April 19th, so keep an eye on shares heading into the release. Cleveland Cliffs (NYSE:CLF) Commodity stocks have been some of the biggest outperformers this year, and steel names like Cleveland-Cliffs stand out as smart buy-the-dip candidates this month. It’s the largest flat-rolled steel company and the largest iron ore pellet producer in North America, which is certainly attractive since the steel prices are expected to remain elevated thanks to the conflict in Ukraine. Shares of the stock have rocketed higher in recent weeks and are hitting prices not seen since 2013, which tells us just how strong the narrative surrounding commodity stocks is at this time. It’s also worth noting that Cleveland-Cliffs recently acquired AK Steel and ArcelorMittal to become a fully integrated company, which is another positive for investors to ponder. If the automotive industry can rebound later this year, look for shares to continue trending higher as this company supplies almost all of the auto manufacturers in the country with steel. Cleveland-Cliffs will announce its Q1 earnings results on April 22nd, which should provide some interesting information given the elevated steel prices. Should you invest $1,000 in Cleveland-Cliffs right now? Before you consider Cleveland-Cliffs, 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 Cleveland-Cliffs wasn't on the list. While Cleveland-Cliffs currently has a "Buy" rating among analysts, top-rated analysts believe these five stocks are better buys. Article by Sean Sechler, MarketBeat Updated on Apr 1, 2022, 7:25 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});.....»»

Category: blogSource: valuewalkApr 1st, 2022

After Urging To Buy The Dip Every Week In 2022, Kolanovic Tells Clients To Buy The Dip... And He Means It This Time

After Urging To Buy The Dip Every Week In 2022, Kolanovic Tells Clients To Buy The Dip... And He Means It This Time If it sometimes feels like JPMorgan's global head of markets strategy Marko Kolanovic has turned into a broken record, and tells the bank's clients (and anyone else) to buy the dip every single week... well, that's because it's true. One almost wonders if JPM has an agenda in trying to get retail investors to buy all day, every day the stocks that the bank's whale clients are selling (and for those who laugh at this suggestion, do not read the far more bearish commentary from JPM's trading desk reserved for a smaller and much more "select" list of clients). So in a historic week when JPMorgan absolutely murdered what may have been the biggest short squeeze in recent history, when Hong Kong-traded Chinese tech stocks and ETFs exploded higher, in some cases as much as 50% on Wednesday just hours after JPMorgan downgraded the entire Chinese internet sector calling it "uninvestable", Marko Kolanovic is out not with one but two notes in which he tells clients to - you guessed it - buy the dip. To wit, just three days after the JPMorgan quant, who one year ago was promoted to global markets strategist, bet it all on green perhaps figuring that purely statistically his call to BTFD should finally pan out and in a note on Monday Kolanovic wrote that "Too much negativity priced in - add risk to equities" adding that "we stay with a pro risk stance as we do not believe that we will see a recession", the Croatian has literally doubled down and on Thursday pushed out a note titled "A time of big risks but even bigger market opportunities", in which he points to one of the few bearish calls he has made in the past year - "we warned about the commodity supercycle and energy crisis; we also warned about the bubble in innovation, renewables, etc, and on the front page of our year ahead outlook in December we warned about geopolitical risks as a key risk in 2022", and just to impress those clients who still haven't bought the dip because perhaps they didn't see Marko as bullish enough, he writes that "it is our assessment that these forecasts have now nearly fully materialized." Noting that "while the commodity supercycle will persist, in our view, the correction in bubble sectors is now likely finished, and geopolitical risk will likely start abating in a few weeks’ time (while a comprehensive resolution may take a few months)" and predicts that "markets may anticipate these turning points sooner, and we think it is time to start adding risk in many areas that overshot on the downside year to date." In other words, in case you missed all his previous weekly calls to buy the dip, this time he really means it even as he caveats that not all dips should be bought( "not all assets are cheap, and one can still find expensive segments in mega caps, defensives and low volatility stocks that are sensitive to rising rates, a slowing US economy and factor rotations" he writes). So for those JPM who still have some dry powder left after buying every single dip in 2022 - and there have been many - Marko's reco is that "there are great opportunities in high beta, beaten down segments that now include innovation, tech, biotech, emerging markets (e.g. China), as well as more broadly in smaller capitalization and more volatile stocks." Translation: buy the highest beta, shittest assets out there, because they should go up... or something. Oh, and buy China now after the biggest ripfest in history, just ignore the reco from another JPM strategist who on Monday said not to touch Chinese tech names with a 10 foot pole, right before the biggest short squeeze in Chinese history. So why should investors buy the dip in the worst-of-the-worst stocks out there? He explains" These segments are already pricing in a severe global recession, which will not materialize in our view (though it is not possible to rule out a recession in Europe and further slowdown in the US). From the time when we called the bubble, these segments are down 60-80%, which we think is the end of the correction and in some areas represents a liquidity-driven overshoot. In fact, many of these market segments trade at all-time valuation lows (including previous recessions and periods of much higher interest rates). Perhaps the loudest message from the above is that a recession in the US is now assured, a view which not just this website but other, more astute Wall Street strategists now share. And while Kolanovic's thesis could actually make sense if he anticipated a sharp slowdown in growth which would force the Fed to halt rate hikes, cut rates and unleash a new QE, sparking rotation out of value/cyclicals and into growth/deflation stocks (i.e., buy those names the go up when growth and inflation are slowing), bizarrely he actually goes full barbell and tells his readers that he als remains "bullish on commodities and commodity equities, as recent developments are just the bi-product and not the cause of the great supply/demand imbalances that developed over the past years due to underinvesting in ‘dirty’ industries and the COVID crisis." In other words, and we agree with this, Kolanovic sees all the same reflationary catalysts that pushed energy stocks higher persisting, at the same time he is also pushing the opposite trade, buying high-beta crap, a trade which makes zero sense in a world where inflation is set to continue to rise, and where the same bubble stocks which he did indeed would drop, are set to continue sliding ever lower as growth and high beta factors continue to get crushed. In any case, where we do agree with Marko, is his continued energy bullishness, and picking up on a point we made last week when we noted that when looked in the context of the broader S&P, energy is a tiny fraction and is only set to increase, bringing with it far greater capital inflows... the Energy sector in context pic.twitter.com/bvcQ6QU8rc — zerohedge (@zerohedge) March 10, 2022 ... Marko writes that "investors are asking how far our positive Energy view can go – for a perspective we show the historical weight of the energy sector in the market and some of the supercycle drivers over the past decade." His punchline which, again, we agree with, is that "the energy crisis will end when the energy sector attains the same relative weight as during the previous commodity  up cycle. This would realign economic incentives, reduce the impact of politically-driven capital allocation and reach a capital clearing point needed to alleviate the crisis." Does this then mean that the energy sector will "appreciate multiple times" Kolanovic asks rhetorically, and answers "Not  necessarily, as the convergence can take place with some combination of Energy appreciation and a decline of other sectors in case of a continued acute energy crisis" although it certainly assures far more upside for energy stocks, a view which Warren Buffett clearly shares with his continued investment in OXY. The Croat also correctly notes that "energy is also center and key to geopolitical developments. Historically it was not uncommon that energy was traded between geopolitical enemies during the conflict, however nearly always it was at exorbitant geopolitical cost for the party that was experiencing an energy shortage. This type of energy trade is currently an important factor in 2 geopolitical regions: in Eastern Europe and in the Middle East." If Marko would only extend further on this line of thought, he may reach the same striking conclusions published in recent weeks by Zoltan Pozsar, who in the past three years, has boldly taken the title of Wall Street's most insightful analyst, a title which once belonged to Kolanovic until one day, several years ago, something snapped and Marko decided to trade in his probing market observations for the (much better compensated) political talking points emanating from JPM's C-suite. Tyler Durden Thu, 03/17/2022 - 14:05.....»»

Category: blogSource: zerohedgeMar 17th, 2022

Top Stock Picks For 2022

2022 is a stock pickers market and the recent dip provides us with some favorable pricing for these winning picks. After a brief yield-fueled market pullback to start the year, 2022’s looks ripe with fresh investment opportunities. Below I break down 6 innovation-powered picks for the rapidly digitalizing economic environment that the new normal is poised to drive materially higher.An Accommodative FedFed Chair Powell's dovish words of relief in his reconfirmation hearing on Capitol Hill provided a friendly bid for recently pressured equities (especially deeply discounted innovation), giving US Treasury yields a chance to take a momentary pause before the Fed's January meeting at the end of this month.Jerome Powell remains stoic in his positioning regarding the persistent nature of global supply and demand imbalances that he maintains are being generated by relentless COVID pressures, which have yet to subside (I agree with this perspective).Jerome acknowledged that the aggressive monetary stimulus the Fed provided public markets for nearly 2 years now is no longer necessary but didn't sound anxious to raise the Fed Funds rate back to pre-pandemic levels in any expedited manner.Powell reiterated what he had said in December's FOMC meeting: we are operating in a digitalized economic environment that is entirely different than the one we left behind in 2019 (no past comparable can be used as reference). The Fed has lowered its long-term target Fed Funds range by 50 basis points since the pandemic began, implying a systemic economic shift that could support lower rates.Jerome's dovish comments about the natural inflation curbing ahead coupled with a slow and steady monetary tightening strategy were just what the market needed to hear. Powell may have put a bottom in for the best-positioned high-growth stocks in the market. It's time to get greedy as others remain fearful.CrowdStrike (CRWD)When asked what he thought the greatest threat to the US economy was at present, Fed Chair Jerome Powell's answer wasn't the Omicron-variant, inflation, or even global economic turmoil but a cyberattack on a prominent US financial institution. CrowdStrike CRWD and its unmatchable cutting-edge AI-fueled cybersecurity platform is the long-term opportunity for this looming digital threat. Any price below $200 a share is a steal for CRWD.CrowdStrike is trusted by Wall Street's top firms, including Goldman Sachs GS and Credit Suisse CS, who can't afford to have any digital vulnerabilities.CrowdStrike is a modern cloud-based solution for the escalating security threats that the increasingly mobile internet age has brought. This company leverages AI, cloud computing, and graph databases for its vigilant security software. CrowdStrike's security AI is perpetually improving as it advances from crowdsourcing and economies of scale. CRWD's cloud-based Falcon platform is an intelligent and evolving digital protector that detects and stops breaches in real-time. This business was provided with a tremendous tailwind in 2020 as the enterprise's best-in-class AI-driven cybersecurity platform became arguably the most sought-after in the industry. Business spending is taking off as we enter 2022 and the economy finally reemerges from the Pandemic downturn. Upgrading cybersecurity is on the top of that Cap Ex list for many financial institutions. CrowdStrike's best-in-class AI-powered Falcon platforms are the obvious solution to any business's digital susceptibility concerns.The TradeThe Fed has now set its interest rate expectations for 2022, and I believe it's prudent to start a position in this best-in-class cybersecurity stock for the future.The market looks to have put in a bottom to CRWD's precipitous decline at just below $175 a share. Look to buy CRWD between $200 and $190, which I presume we reach at some point in today's session, with profit pulling in mega-cap tech weighing on sentiment for high-valuation stocks.Final Thought On CRWDCrowdStrike is taking over the cybersecurity space with its unmatchable threat detection and immediate response capabilities that continue to improve as its proven AI-driven platform learns and adapts to mounting risks. No matter what happens in the broader economy, there will continue to be a swelling demand for this technology as the rapid digital adaptation exposes more and more endpoint liabilities.The company is expected to turn a full-year profit in 2022. Its proliferating subscription-based business model provides the visibility & reliability that justify its still frothy valuation (24x price to forward sales).This is a high-risk/high-reward play, so I am only giving it a 5% allocation. Still, with price targets averaging around $300 a share, I am confident that reward far outweighs the risk in the long run, as long as you can stomach some short-term volatility.ACM Research (ACMR)The time to reopen our Headline Trader portfolio to the recently suppressed Chinese stocks has come, with Biden's administration making clear efforts to resume its alliance with Beijing (after years of political turmoil). At the same time, China's overdue economic recovery commences as it prepares for the 2022 Olympics in Beijing, which is now less than 4 weeks away.At the same time, the ripping rally in US public equities has been decelerating over the past 2 months, following an over 100% bull run from the S&P 500 since the pandemic lows in March 2020 (40% above pre-pandemic high), and investors are beginning to look abroad for higher return opportunities.I am adding ACM Research ACMR, a niche small-cap semiconductor play with ideal exposure in Asia. ACMR provides substantial upside potential at its currently discounted valuation, with its rapidly accelerating chipmaking capacity and its strategic Chinese exposure being the primary buy catalyst.ACM Research is a global leader in semiconductor equipment. As chip manufacturers in Asia begin ramping up production, ACM's best-in-class chipmaking equipment is poised to take flight following a year and a half of sideways trading action.Chip demands far surpassing current production capacities entering the digital renaissance of the 4th Industrial Revolution, positioning this business to explode as the Roaring 20s recommence.China Risk's May Be USChinese stocks have been hammered for nearly a year now, as President Xi and his increasingly autocratic communist administration crackdown on the swelling wealth in its booming tech sector. Xi's fear of losing control of "his" nation to a wealthy group of elites is reminiscent of Mao Zedong's totalitarian regime.This paranoid egotistical positioning has led to a tidal wave of new tech-focused regulations under the guise of elevating "equality" and improved "productivity." These have capitulated the value of this nation's most prominent innovators by a meaningful amount.Those stocks that had been at the center of these regulatory headwinds have seen their share values significantly deteriorate, presenting some superior long-term prospects as the global economy reemerges from the pandemic with a digitally fueled ambition.The CatalystACM Research is a US-based capital equipment firm. Yet, its 3 most prominent customers, representing 76% of 2020 revenue, are based in mainland China, with another nearly 10% of its sales going to a South Korean chip innovator. Over the past 5 years, China and Korea have seen their semiconductor spaces drive compounded annual revenue growth of 20.7% & 19.5% and have become the epicenter for future development for ACMR.As ACM Research takes advantage of the booming demand, this chip equipment powerhouse is rapidly ramping up its own equipment production capacity and capabilities (more offerings) in the region. The company has several new expansion projects for organic growth that will continue to fuel this stock's growth in 2022.ACMR remains a small-cap equity with a market cap of less than $1.5 billion, but with proven profitable growth between 35% - 45% in the past 3 years, and a place in Morgan Stanley's short list of 2022 chip picks, it’s only a matter of time before the market gets wind of this unique investment thesis and lifts ACMR out of its small-cap shadow and into the large-cap spotlight.6 out of 6 analysts are calling ACMR a buy today now, with price targets between $100 and $150 (representing upsides between 27% and 92%). Not to mention the increasingly bullish outlook on ACMR has thrusted this stock into a Zacks Rank #1 (Strong Buy).SMART Global Holdings (SGH)SMART Global Holdings SGH is the under-the-radar semiconductor stock you've been looking for, with its broadening portfolio of cutting-edge chips poised to take flight in this commencing technological Renaissance.SGH is roaring out of the shadows with an ambitious growth strategy that won't remain under the investors' radars for much longer. New CEO Mark Adams is transforming this once complacent memory-focused legacy tech business into a motivated leader in niche innovations.The company released a record quarterly report at the start of 2022, blowing analysts' estimates out of the water and raising forward guidance. However, SGH's undiscovered attributes appear to have both positive and negative consequences, which we saw in its (unwarranted) post-earnings capitulation. This drop-off is a technical retreat catalyzed by the overbought RSI levels it had reached in recent weeks after an over 100% 52-week run into this year opening earnings report (confusion about the upcoming stock split may also be playing a role).The good news is that it presents us with an excellent long-term investment and short-term trading opportunity as the stock picks up support at its 50-day moving average.SMART Global shares' exceedingly thin trading volumes (low liquidity due to its under-the-radar quality) allowed a small group of controlling institutional shareholders to direct its post-earnings narrative. They pulled profits from this recent winner (up 70% since mid-October), and the downward momentum catalyzed a fear-fueled momentum sell-off.The TradeDon't let these big-shot Wall Street firms scare you away from this clear-cut winner. SGH's post-earnings capitulation is extraordinarily overdone and with the recent shareholder shuffle.Silver Lake, a nearly $100 billion tech-focus private equity fund, had been the primary shareholders of SGH since it went public in 2017 until this past fall when the global investment group completely exited the trade (with public returns of nearly 400% in just a few years), leaving $10s of millions in stock value up for grabs.SMART Global's ownership has since been erratic, with most of the investing world still unaware of this small-cap stock's existence. SGH's ownership is almost entirely institutional at this point, and with the already thin volumes, its vulnerability to short-term price manipulation is high.Nevertheless, those analysts covering SGH are more bullish than ever after its most recent quarterly release.The Earnings ReportSMART Global SGH reported its November quarter results (fiscal Q1 2022) after the closing bell Tuesday afternoon (1/4), beating analysts' estimates and raising guidance, yet SGH fell off a cliff. SMART Global achieved record revenues and margins that flowed down to an incredible 177% increase in per-share profits, with its top-of-the-line intelligence platforms (AI, HPC, & other cloud-functionality) being this next-generation innovator's primary growth driver.SGH was down as much as 18% in its post-earnings price action, but I remain unconvinced that it will stay below $70 a share for long. This knee-jerk sell-off reaction resulted from its small market cap (less than $1.5 billion), concentrated ownership, and overbought RSI levels, which SGH had floated up into following its sizable 25% end-of-year rally.SGH also announced that it would be initiating a 2-for-1 stock split, which would go into effect at the beginning of February. This is a clear signal from SMART Global's new CEO, Mark Adams, whose savvy ambition for innovative growth is the primary reason we are in SGH, that this stock is headed much higher. Either way, I'm more bullish on SGH post-earnings than ever before.The TransformationNow is the time to add this hidden gem to your portfolio before the broader investing world catches wind of this discounted chip winner.SMART Global has been around since the late 80s, but it wasn't until Mark Adams took the helm amid the pandemic last year that this chipmaker's upside potential went through the roof. Adams is transforming this once complacent memory-focused legacy tech company into an energized visionary.Adams was the leading force behind SGH's quick strategic acquisition of Cree's niche LED chip business at the peak of pandemic fear for a steal at $300 million. Cree LED's synergies are already paying dividends as it drives margin expansion, improves the firm's capital & operational efficiency, and provides critical industry relationships.SMART Global's new forward-thinking chief has already vastly improved its operational performance and is ramping up R&D spending to ensure that the enterprise remains ahead of the innovative curve.Analysts are getting increasingly bullish on this under-the-radar transformation play as SGH flips the switch on accelerating profitable growth, knocking estimates out of the park by an expanding percentage over the past 3 quarters. Zacks Consensus EPS Estimates for SGH's have been soaring across all time horizons after this most recent quarterly report driving the stock into a Zacks Rank #2 (Buy), and all 6 covering analysts agree on a buy rating for the unique value opportunity here.The New Business MixSMART Global Holdings had been a reliable pure-play memory leader in the chip space for over 30 years before deciding to broaden its product portfolio, which appeared to be catalyzed by activist investors following SGH's 2017 IPO. The company has since executed 4 strategic acquisitions.Penguin Computing was SGH's first vital acquisition ($85 million price tag) back in 2018, adding a broad portfolio of leading next-generation products, including high-performance computing (HPC), cloud computing, hyperscale data centers, and the development of artificial intelligence (AI). This segment has exploded since its acquisition as its AI-focused products experience budding demand. In the summer of 2019, this resourceful chip giant acquired Artesyn Embedded Computing and Inforce Computing for $80 million and $12 million, respectively. Artesyn (which is now called Smart Embedded Computing) provides critical data center architecture used in "industries such as telecom, military and aerospace, medical, and diverse automation and industrial markets," according to its website.SMART Wireless Computing (formerly known as Inforce Computing) exposes the enterprise to cutting-edge technologies like "medical imaging, collaboration/videoconferencing, wearable hands-free computing, and robotics/unmanned aerial vehicles," according to its investor relations page.SMART's diverse set of growing end-market demands provides the company with an enormous total addressable market (TAM), significant upside potential, and not to mention an excellent hedge against the cyclical nature of the semiconductor market.The mere 11x forward P/E that SGH is currently trading at is a remarkably underappreciated valuation multiple for a high-growth tech business that is expected to exhibit consistent 20%+ earnings growth in the years to come.Final Thoughts On SGHWith its fresh innovation-oriented operational outlay, Mark Adams at the helm (with a now proven track record of skilled management), and an industry-wide outlook of accelerating growth, the future SGH has never been brighter. SGH’s post-earnings capitulation has presented us with an incredible investment opportunity today.Analysts are more bullish than ever on this undiscovered profitable growth chip innovator, which will likely not remain under the broader market’s radar for long. I’m looking at price targets between $90 and $100 a share.Uber (UBER)Uber's UBER heavily discounted valuation is finally receiving the attention it deserves as investors begin to recognize the opportunity that this leading mobility-as-a-service (MaaS) business provides in the new normal. Uber Eats & Uber Rides are poised to explode with margin expanding growth in the new normal as our digitally conditioned global economy relies on these leading mobility services more than ever.A flood of analysts are coming out with exceptionally bullish outlooks on this next-generation global leader in digitally fueled mobility solutions. 22 out of 25 analysts are calling Uber a buy now, with no sell ratings. UBER is trading 75% below its average price target of more than $70 a share and it continues to rise.Alaskan Air (ALK)Alaskan Air ALK is perfectly positioned for the 2022 as it becomes the go-to budget airliner. Alaskan took advantage of the unique growth opportunity the pandemic shutdowns presented, adding 70 new markets, and is one of the few commercial airlines to return to profitability in the third quarter of 2021. Its commitment to customer satisfaction and focus on ESG goals will keep ALK at the top of its class.  The CompanyAlaskan Air ALK, primarily driven by vacationers instead of business travel, generated its first positive quarterly earnings since the pandemic began in Q3 as it benefited from the summer getaway rush. I see ALK as the best-positioned airline moving forward with its best-in-class budget vacation offering and still ripening synergies from its acquisition of Virgin America back in 2016.ALK has been an outperforming airline throughout the pandemic with an ESG-focus and no business travel reliance. Analysts have been pushing their price targets to around $80 a share (38% upside), with estimated record earnings by 2023. ALK just busted above its 50-day moving average, and is on its way towards its consensus price target.With remote working functionalities like cloud computing, video conferencing, team messaging, workflow automation, etc., analysts are beginning to rightly question whether companies will be paying up for flights when the job can and has proven to be done in a remote environment.Corporate travel will not return to pre-pandemic levels, at least not anytime soon, and the stocks to stick with are the budget vacation plays, with Alaskan Air being at the top of that value list. I’m looking at price targets between $75 and $100 a share, for this airliner of the New Normal.Upstart (UPST)Upstart UPST, the AI-driven fintech innovator changing the way creditworthiness is assessed, is ripe for a buy today with a couple of key support levels ready to maintain its recent buoyancy, following an overdone sell-off.The final quarter of 2021 was horrendous for the top fintech innovators, with Cathie Wood's ARK Invest Fintech ETF ARKF, the benchmark for next-generation digital finance, falling over 25%. Investors have been selling growth stocks indiscriminately, creating some excellent buying opportunities for the best-positioned fintech equities.UPST has seen significant valuation compression from its mid-October 2021 highs at $400, but the over 1,500% gain it saw from its IPO last December may have been a little overzealous. With UPST now 70% below those highs, it's time to consider adding UPST to your portfolio.Upstart's recent capitulation was catalyzed by profit-pulling in the face of Q3 earnings coupled with the Fed's accelerating tapering timeline, which has valuation compressing impacts on this fintech giant, do to its outsized growth outlay (analysts expecting to see 250% topline appreciation in 2021).UPST found critical support at a vital Fib-derived level around $160, where the markets appear to have put in a temporary bottom.I am looking at a UPST price target of $300+ with quarterly performance continuously outpacing even the most optimistic analysts. Upstart is looking at an unprecedented profitable growth outlook, and with most fresh fintech startups not even able to post positive earnings, UPST is more attractive than ever.The BusinessThis AI-powered cloud incepted fintech business is changing the way banks assess creditworthiness. Many fintech giants are competing against banks, but Upstart has decided to partner with them in its next-generation offering. This is an excellent position to be in as a high-growth company in a rising interest rate environment because higher rates means more profits for banks, which should inevitably drive significant demand for Upstart's one-of-a-kind product offering.The AI platform uses more than 1,600 differing variables before coming to the conclusion of creditworthiness compared to the typical bank, which only looks at 8-15 and the most sophisticated models 30.Upstart's CEO David Girouard said his lending algorithm is 5 times more effective than current systems at accurately depicting a person's ability to repay a loan. Saying that on a scale of 1-100, the current credit regimes are only at about 2 on predicting risk of default, and David believes his AI platform would put banks at closer to a 10, with still a lot more room to grow. Upstart's AI is continuously learning and will continue to be more effective as it is provided with more datasets.A Strategy To Stick To Amid 2022’s Chop:“Be Greedy When Others Are Fearful”Continue to buy the dips in your favorite stocks and look past the short-term volatility (don’t let this choppy market discourage you).Happy Trading!Dan LaboeEquity Strategist & Manager of The Headline Trader Portfolio at Zacks Investment Research Breakout Biotech Stocks with Triple-Digit Profit Potential The biotech sector is projected to surge beyond $2.4 trillion by 2028 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases. Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Recommendations from previous editions of this report have produced gains of +205%, +258% and +477%. The stocks in this report could perform even better.See these 7 breakthrough stocks now >>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 Credit Suisse Group (CS): Free Stock Analysis Report ACM Research, Inc. (ACMR): Free Stock Analysis Report Alaska Air Group, Inc. (ALK): Free Stock Analysis Report SMART Global Holdings, Inc. (SGH): Free Stock Analysis Report ARK Fintech Innovation ETF (ARKF): ETF Research Reports Uber Technologies, Inc. (UBER): Free Stock Analysis Report CrowdStrike (CRWD): Free Stock Analysis Report Upstart Holdings, Inc. (UPST): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksJan 13th, 2022

Futures Rise Boosted By JNJ Split As Treasuries, Dollar Slide

Futures Rise Boosted By JNJ Split As Treasuries, Dollar Slide U.S. equity index futures were slightly up at the end of a volatile week, trading in a narrow 20 point range for the second day in a row, while Treasuries resumed declines in response to the recent shock inflation data from the world’s largest economies. Contracts on the three main U.S. gauges were higher, with Johnson & Johnson rising in premarket trading after saying it will split into two companies, while tech stocks again led gains at the end of a week scarred by deepening concerns over prolonged inflation. All the major U.S. indexes were set for a more than 1% weekly drop, their first since the week ended Oct. 1, as hot inflation numbers sapped investor sentiment and halted an earnings-driven streak of record closing highs. At 7:15 a.m. ET, Dow e-minis were up 106 points, or 0.3%, S&P 500 e-minis were up 8.5 points, or 0.18%, and Nasdaq 100 e-minis were up 40.25points, or 0.25%. The same bullish sentiment that lifted US futures pushed European shares up as luxury shares gained after Cartier owner Richemont posted better-than-forecast earnings, offsetting a drop in travel stocks. Asian shares also climbed, helped by a rally in Japan. At the same time, Treasuries resumed a selloff after a trading holiday Thursday, with this week’s shock US inflation figures still reverberating through the bond market. Five-year notes led losses on concern the price pressure will force the Federal Reserve to raise rates earlier than anticipated. A gauge of the yield curve flattened to the least since March 2020. While global stocks are set for their first weekly drop since early October, their swings have been muted compared with the gyrations in the bond market. Investor focus on a strong earnings season has tempered worries about higher inflation. “Inflation could remain elevated in the coming months, and each inflation release that comes in above expectations has the potential to cause volatility in rate and equity markets, but we still don’t expect inflation to derail the equity rally,” Mark Haefele, chief investment officer at UBS Global Wealth Management, wrote in a note. In US premarket trading, Johnson & Johnson jumped 4.7% in premarket trading after the drugmaker said it is planning to break up into two companies focused on its consumer health division and the large pharmaceuticals unit. Shares of the GAMMA giga techs (fka as FAAMG) also inched up. Tesla’s boss Elon Musk sold even more shares of the electric car maker, regulatory filings showed, after offloading about $5 billion worth of stock following a poll he posted on Twitter. The sale news naturally pushed TSLA stock price higher.  A gauge of U.S.-listed Chinese stocks jumped more than 5%, helped by Alibaba’s blowout Singles’ Day shopping festival and a report that Didi is getting ready to relaunch its apps. Rivian shares gain as much as 5% in U.S. premarket trading, extending the surge for the EV maker seen since its IPO this week which has sent its market value over $100b. Rivian trading at $122.99 in at 5am in New York, compared to IPO price of $78 Rising price pressures across the globe have been a top concern for market participants, with focus now shifting towards how consumer spending would fare as the holiday shopping season approaches. “The risk-on trading stance remains,” said Pierre Veyret, a technical analyst at ActivTrades in London. “However, markets are likely to remain volatile as investors will need to have more clues on where both the economy and monetary policies are going.” In Europe, gains for consumer and retail stocks balanced out declines for mining and energy companies. The Stoxx Europe 600 Index fluctuated as Bank of America strategists predicted a fall of at least 10% for the continent’s equities by early next year. Here are some of the biggest European movers today: Richemont shares jump as much as 9.8% to a record high, with analysts seeing scope for earnings estimates to be upgraded after the company reported first-half results that Citigroup described as “stellar.” Peer Swatch also bounced. Renault shares gain as much as 4.6% after Morgan Stanley upgraded the French automaker to overweight, saying it should have a stronger 2022 if it can raise production levels from a currently low base. Deutsche Telekom rises as much as 3% with analysts highlighting a good revenue performance and upgraded earnings and cash flow guidance as key positives from its earnings. Intertrust shares surge as much as 40% after the trust and corporate-services firm entered talks to be acquired by private-equity firm CVC. AstraZeneca falls as much as 5.9% after the drugmaker’s 3Q results missed estimates, with analysts noting a big miss for cancer drug Tagrisso. Wise shares sink as much as 8.8% after the money-transfer company won’t be added to an MSCI index in the latest rejig as some investors had expected. JDE Peet’s, Atos and Investor AB also all moved after the MSCI review. Fortum shares decline as much as 3.6% after the Finnish utility’s 3Q sales missed estimates. Uniper, in which Fortum owns a 75% stake, also slid after Fortum said it stopped share purchases in the German group in July owing to high prices. Avon Protection plummet as much as 44% after it warned of testing failures for some body-armor plates ordered by the U.S. military. SimCorp shares drop as much as 7.1% after the financial software and services company’s 3Q earnings, with Handelsbanken calling the quarter “weak,” and saying it raises doubts for the 2022 outlook Earlier in the session, Asia’s regional benchmark advanced, on track for a second day of gains, after sales in the Singles’ Day shopping festival boosted optimism. The MSCI Asia Pacific Index rose as much as 0.9%, with materials and communication stocks driving the benchmark. Tencent climbed 1.6%, after it bought a Japanese game studio and sold HengTen Networks shares. JD.com gained 5.2% after it received record Singles’ Day orders. Adding to sentiment were the mandate for China’s President Xi Jinping to potentially rule for life, which may mean policy continuity and fewer regulatory surprises and Goldman Sachs’ upgrade of offshore China stocks. A report that Didi Global is getting ready to relaunch apps in China further fueled optimism. “Investors are hoping that greenshoots of a loosening of reforms are upon us,” said Justin Tang head of Asian research at United First Partners. It’s clear “tech shares got a little boost from Singles’ Day and the anointing of Xi as forever leader.” JD.com Shines in Muted Singles Day After Sales Beat: Street Wrap South Korea and Japan benchmarks posted the top gains in the region. Australia’s shares also advanced, boosted by mining stocks. Japanese equities also rose, following gains in U.S. peers, erasing virtually all of their losses from earlier in the week. Electronics makers and telecoms were the biggest boosts to the Topix, which gained 1.3%. All 33 industry groups were in the green except energy products. Tokyo Electron and SoftBank Group were the largest contributors to a 1.1% rise in the Nikkei 225. The yen has weakened more than 1% against the dollar since Tuesday. “It’s a favorable environment for risk-taking thanks to China,” said Shogo Maekawa, a strategist at JP Morgan Asset Management in Tokyo, referring to Evergrande’s latest interest payment. Rising U.S. yields and a weaker yen “may serve as a trigger for foreign investors to re-evaluate Japanese equities and shift their focus to stocks here.” Indian stocks also rose, snapping three sessions of declines, boosted by gains in software exporter Infosys. The S&P BSE Sensex climbed 1.3% to 60,686.69 to a two-week high and completed a second successive week of gains with a 1% advance. The NSE Nifty 50 Index increased 1.3% on Friday. All 19 sub-indexes compiled by BSE Ltd. rose, led by a measure of technology companies. In earnings, of the 45 Nifty 50 companies that have announced results so far, 29 have either met or exceeded consensus analyst expectations, 15 have missed estimates, while one couldn’t be compared. Oil & Natural Gas Corp. and Coal India are among those scheduled to announce results today.  Expectations of the U.S. Fed raising interest rates earlier than expected after a surge in inflation weighed on most emerging markets this week. In India, consumer prices probably quickened for the first time in five months in October, according to economists in a Bloomberg survey. The data will be released on Friday after market hours.   In FX, the Bloomberg Dollar Spot Index was little changed, even as the dollar added to gains versus most its Group-of-10 peers, and Treasury yields rose across the curve on concern that rising U.S. inflation would warrant earlier rate hikes. The euro hovered around a more than a one-year low of $1.1450. The pound extended an Asia session advance and was the best performer among G-10 peers; the currency still heads for a third week of losses, having touched its lowest level since Christmas and options suggest the move may have legs to follow. Australian and New Zealand dollars are headed for back-to-back weekly declines as rising Treasury yields stoke further demand for the greenback; A 60% drop in the price of iron ore signals a blow to the Australian government’s efforts to stabilize the fiscal position following massive spending to support the economy through the coronavirus pandemic.Meanwhile, the ruble extended its losses, tracking a decline in Brent crude, as tensions flared up between Russia and Western nations over energy supplies and migrants. The currency tumbled as much as 1.1% to 72.4375 per dollar after the U.S. sounded out its EU allies that Russia may invade Ukraine. That made the ruble the worst performing currency in emerging markets.  In rates, Treasuries were off session lows, but cheaper by 2bp-3bp across belly of the curve which underperforms as reopened cash market catches up with Thursday’s slide in futures. Treasury 10-year yields around 1.566%, cheaper by 2bp on the day, while 5-year topped at 1.262% in early Asia session; curve is flatter amid belly-led losses, with 5s30s spread tighter by ~1bp on the day after touching 63.7bp, lowest since March 2020. On the 2s5s30s fly, belly cheapened 3.5bp on the day, re-testing 2018 levels that were highest since 2008. Bunds advanced, led by the front end, while Italian bonds slid across the curve, pushing the 10-year yield above 1% for the first time since Nov. 4, as money markets held on to aggressive ECB rate-hike bets. The Asia session was relatively calm, while during the European morning, Italian bonds lagged as futures continue to price in aggressive ECB policy. Treasury options activity in U.S. session has included downside protection on 5-year sector, where yields reached YTD high.     In commodities, crude futures dip to lowest levels for the week: WTI drops 1.4% before finding support near $80, Brent dips 1% back onto a $81-handle. Spot gold drifts lower near $1,852/oz. Base metals are mixed: LME aluminum, nickel and tin post modest gains, copper and zinc lag. Looking at the day ahead, data releases from the US include the University of Michigan’s preliminary consumer sentiment index for November, as well as the JOLTS job openings for September. In the Euro Area, there’ll also be industrial production for September. From central banks, we’ll hear from New York Fed President Williams, ECB Chief Economist Lane, and the BoE’s Haskel. Market Snapshot S&P 500 futures little changed at 4,646.50 STOXX Europe 600 little changed at 485.18 MXAP up 0.8% to 199.85 MXAPJ up 0.6% to 653.35 Nikkei up 1.1% to 29,609.97 Topix up 1.3% to 2,040.60 Hang Seng Index up 0.3% to 25,327.97 Shanghai Composite up 0.2% to 3,539.10 Sensex up 1.3% to 60,697.82 Australia S&P/ASX 200 up 0.8% to 7,443.05 Kospi up 1.5% to 2,968.80 Brent Futures down 1.3% to $81.83/bbl Gold spot down 0.5% to $1,853.43 U.S. Dollar Index little changed at 95.20 German 10Y yield little changed at -0.23% Euro little changed at $1.1441 Top Overnight News From Bloomberg Inflation is soaring across the euro area, but it’s also diverging by the most in years in a further complication for the European Central Bank’s ongoing pandemic stimulus The White House is debating whether to act immediately to try to lower U.S. energy prices or hold off on dramatic measures in the hope markets settle, as President Joe Biden’s concern about inflation runs up against climate, trade and foreign policy considerations Reports U.S. is concerned that Russia may be planning to invade Ukraine are “empty and unfounded efforts to exacerbate tensions,” Kremlin spokesman Dmitry Peskov says on conference call Financial problems faced by institutions like China Evergrande Group are “controllable” and spillovers from the nation’s markets to the rest of the world are limited, a former central bank adviser said Hapag-Lloyd AG warned that a crunch in global container shipments could persist into next year, with labor negotiations, environmental pressures and disruptive weather combining to hamper goods flows Japan’s government plans to compile an economic stimulus package of more than 40 trillion yen ($350 billion) in fiscal spending, according to the Nikkei newspaper President Xi Jinping appeared more certain than ever to rule China well into the current decade, as senior Communist Party officials declared that the country had reached a new “historical starting point” under his leadership Italian President Sergio Mattarella tried to quash speculation that he could stay on for a second term, leaving Prime Minister Mario Draghi as the top contender for the role early next year A more detailed look at global markets courtesy of Newsquawk Asian equity markets traded mostly higher heading into the weekend as the region attempted to build on the somewhat mixed performance stateside, where price action was contained amid Veterans Day and with US equity futures also slightly picking up from the quasi-holiday conditions. ASX 200 (+0.8%) was lifted in which mining stocks and the tech industry spearheaded the broad gains across sectors aside from healthcare as Ramsay Health Care remained pressured after it recently announced a near-40% decline in Q1 net profit. Nikkei 225 (+1.1%) was underpinned with Japanese exporters benefitting from recent favourable currency flows and with the biggest stock movers influenced by a deluge of earnings. Hang Seng (+0.3%) and Shanghai Comp. (+0.2%) were indecisive with Hong Kong tech stocks encouraged after e-commerce retailers Alibaba and JD.com posted record Singles Day sales, despite a deceleration in revenue growth from the shopping festival to its slowest annual pace since its conception in 2009 amid a toned-down event due to Beijing’s tech crackdown and emphasis on common prosperity. Conversely, mainland bourses were indecisive following a neutral liquidity operation by the PBoC and after US President Biden recently signed the Secure Equipment Act which prevents companies deemed as security threats from receiving new equipment licences from US regulators, which comes ahead of Monday’s potential Biden-Xi virtual meeting. Finally, 10yr JGBs were lower due to a lack of momentum from US treasuries as cash bond markets were closed for the federal holiday, with demand for JGBs also hampered by the gains in stocks and lack of BoJ purchases in the government debt market. Top European News Macron and Draghi Have Plans to Fill the Void Left by Merkel Johnson Burns Through Political Capital Built Up With Tory MPs JPMorgan Hires Zahn as Head of DACH Equity Capital Markets Hapag-Lloyd CEO Says Global Shipping Crunch Could Extend in 2022 European equities (Stoxx 600 -0.1%) have seen a relatively directionless start to the session with the Stoxx 600 set to close the week out with modest gains of around 0.4%. Macro updates have been particularly sparse thus far with today’s data docket also relatively light (highlights include US JOLTS and Uni. of Michigan sentiment). The handover from the APAC region was a predominantly positive one as Japanese equities benefited from favourable currency dynamics and Chinese markets focused on the fallout from Singles Day which saw record sales for Alibaba and JD.com. Stateside, futures are also relatively directionless (ES -0.1%) ahead of aforementioned US data points and Fedspeak from NY Fed President Williams (voter), who will be speaking on heterogeneity in macroeconomics. The latest BofA Flow Show revealed USD 7.3bln of inflows for US equities, whilst tech stocks saw outflows of USD 1.6bln; the largest outflow since June. In Europe, equities saw their largest outflows in seven weeks with USD 1.7bln of selling. In a separate note, BofA projects 10+% of downside by early next year for European stocks amid weakening growth momentum and rising bond yields. Sectors in Europe are mixed with outperformance seen in Personal & Household Goods with Richemont (+8.6%) shares boosted following better-than-expected Q3 results. LVMH (+1.4%) also gained at the open following reports that the Co. could consider opening duty-free stores in China. Telecom names are firmer with Deutsche Telekom (+2.6%) one of the best performers in the DAX after posting solid results and raising guidance. To the downside, commodity-exposed names are lagging peers with Basic Resources and Oil & Gas names hampered by price action in their underlying markets. FTSE-100 heavyweight AstraZeneca (-4.4%) sits at the foot of the index after Q3 profits fell short of expectations. Finally, Renault (+4.3%) is the best performer in the CAC after being upgraded to overweight from equalweight at Morgan Stanley with MS expecting the Co. to have a better year next year. Top Asian News JPMorgan Japan Stocks Downgrade Shows Doubts Before Stimulus Japan Stimulus Package to Top 40 Trillion Yen, Nikkei Reports Hon Hai Warns Chip Shortage Will Outweigh IPhone Boost to Sales AirAsia X Gets Over 95% Support From Creditors for Revamp In FX, it would be far too premature to suggest that the Buck’s winning streak is over, but having rallied so far in relatively short order some consolidation is hardly surprising, especially on a Friday in between a semi US market holiday and the weekend. Hence, the index is hovering just above 95.000 within a 95.078-266 range after a minor extension from yesterday’s peak to set a new 2021 best, and the Dollar is on a more mixed footing vs basket components plus other G10 and EM counterparts, awaiting the return of those not in on Veteran’s Day, JOLTS, preliminary Michigan sentiment and Fed’s Williams for some fresh or additional impetus and direction. GBP/CAD - The Pound and Loonie are flanking the major ranks even though the latest retreat in Brent and WTI is pretty uniform from a change on the day in Usd terms perspective, so it seems like Sterling is getting a boost from a downturn in the Eur/Gbp cross ahead of the UK-EU showdown on Brexit and Article 16, while Usd/Cad remains bullish on technical impulses before the BoC’s Q3 Senior Loan Officer Survey. Cable has bounced from just over 1.3350 to retest 1.3400 with Eur/Gbp probing 0.8550 to the downside, but Usd/Cad is probing 1.2600 irrespective of the Greenback stalling. AUD/JPY - Both fractionally firmer as the Buck takes another breather, though the Aussie is also deriving some traction from favourable Aud/Nzd tailwinds again. Aud/Usd has pared losses sub-0.7300 as the cross hovers around 1.0400, while Usd/Jpy has retreated from around 114.30 towards 1.9 bn option expiries at the 114.00 strike amidst reports that the Japanese Government's economic stimulus package will increase to Yen 40+ tn in fiscal spending, according to the Nikkei citing sources. EUR/NZD/CHF - The Euro is still hanging in following its close below a key technical level for a second consecutive session and fall further from the psychological 1.1500 mark, especially as better than forecast Eurozone ip has not prompted any upside, However, option expiry interest at 1.1450 (1.2 bn) may keep Eur/Usd afloat if only until the NY cut. Similarly, the Kiwi has not gleaned anything via a decent pick-up in NZ’s manufacturing PMI as Nzd/Usd clings to 0.7000+ status and the Franc remains under 0.9200 regardless of an acceleration in Swiss import and producer prices. SCANDI/EM - More transitory inflation remarks from Riksbank Governor Ingves are not helping the Sek fend off another dip through 10.0000 vs the Eur. but the Nok is getting protection from weaker oil prices via unusually large option expiries spanning the same big figure given 1.2 bn at 9.7500, 1.7 bn on the round number and 1 bn at 10.2000. Conversely, the Rub is underperforming as tensions rise around the Russian/Ukraine border and the Kremlin aims blame at the feet of the US alongside NATO, while the Try only just survived the latest assault on 10.00000 against the Usd in wake of below forecast Turkish ip and CBRT survey-based CPI projections for year end rising again. Elsewhere, the Mxn is softer following confirmation of a 25 bp Banxico hike on the basis that the verdict was not unanimous and some were looking for +50 bp, but the Zar retains an underlying bid after Thursday’s supportive SA MTBS and with Eskom reporting no load shedding at present, while the Cnh and Cny are holding gains in advance of the virtual Chinese/US Presidential meeting scheduled for Monday. In commodities, WTI and Brent are pressured in the European morning, experiencing more pronounced downside after a gradual decline occurred in APAC hours. However, the magnitude of today’s performance is comparably minimal when placed against that seen earlier in the week and particularly on Wednesday; in-spite of the earlier pronounced movements, benchmarks are currently set to end the week with losses of less than USD 1.00/bbl – albeit the range is in excess of USD 5.00/bbl. Newsflow this morning has been minimal and thus yesterday’s themes remain in-focus where a firmer USD likely continues to factor but more specifically COVID-19 concerns, with Germany’s Spahn on the wires, and geopolitics via Russia drawing attention. On the latter, tensions are becoming increasingly inflamed as the US said they are concerned that Russia could attack Ukraine and in response Russia said they are not a threat to anyone, but, says US military activity is aggressive and a threat. Moving to metals, spot gold and silver are softer on the session, but remain notably firmer on the week given the CPI-induced move. On this, UBS highlights the risk of additional inflation strength next year which could stoke further gold demand. Elsewhere, base metals are, broadly speaking, marginally softer given tentative APAC performance and the aforementioned COVID concerns, particularly those pertinent for China. In terms of associated bank commentary, SocGen looks for copper to average USD 9.2k/T and USD 8.0k/T in 2021 and 2022 respectively. US Event Calendar 10am: Sept. JOLTs Job Openings, est. 10.3m, prior 10.4m 10am: Nov. U. of Mich. 1 Yr Inflation, est. 4.9%, prior 4.8%; 5-10 Yr Inflation, prior 2.9% 10am: Nov. U. of Mich. Sentiment, est. 72.5, prior 71.7; Current Conditions, est. 77.2, prior 77.7; Expectations, est. 68.8, prior 67.9 DB's Henry Allen concludes the overnight wrap there wasn’t much to speak of in markets yesterday as US bond markets were closed for Veterans Day and investors elsewhere continued to digest the bumper CPI print from the previous session. We did see a bit of residual concern at the prospect of a faster tightening in monetary policy, and implied rates on Eurodollar futures continued to climb, gaining between +4bps and +8bps on contracts maturing through 2023. However, on the whole equities were relatively unfazed on both sides of the Atlantic, and the S&P 500 (+0.06%) stabilised after 2 successive declines thanks to a bounceback among the more cyclical sectors. Looking at those moves in more depth, interest-sensitive tech stocks were a big outperformer yesterday as both the NASDSAQ (+0.52%) and the FANG+ index (+0.98%) of megacap tech stocks moved higher. Material stocks in the S&P (+0.85%) were another sectoral winner, and the VIX index of volatility (-1.07pts) ticked down from its 4-week high on Wednesday. In Europe, the advance was even more prominent, where the STOXX 600 (+0.32%), the DAX (+0.10%) and the CAC 40 (+0.20%) all reached fresh records. Indeed, for the STOXX 600, that now marks the 13th advance in the last 15 sessions, with the index having risen by over +6% in the space of a month. As mentioned, it was a quieter day for sovereign bond markets with the US not trading, but the sell-off continued in Europe as yields on 10yr bunds (+1.7bps), OATs (+1.4bps) and BTPs (+2.7bps) all moved higher. We didn’t get any fresh news on the Fed officials either given the US holiday, but a Washington Post article yesterday said that officials from the White House had stayed in touch with Governor Brainard since her meeting with President Biden last week, albeit still emphasising that no final decision had yet been made. Separately, Bloomberg reported that senior Biden advisors did not view the recent trading scandal at the Federal Reserve as disqualifying Chair Powell. US Treasury markets have reopened overnight, with 10yr yields following their European counterparts higher, moving up +1.4bps to 1.563%. That’s been driven by a +2.4bps rise in the real yield, though 10yr real yields still remain close to their all-time lows since TIPS started trading back in 1997. Otherwise in Asia, markets are mostly trading higher with the KOSPI (+1.48%), Nikkei (+1.07%) and Hang Seng (+0.22%) all advancing, though the Shanghai Composite (-0.01%) is basically unchanged whilst the CSI (-0.31%) is trading lower. Data showed further signs of inflationary pressures in the region, with South Korea’s import price index up +35.8% in October on a year-on-year basis, the highest since 2008. Elsewhere in India, Prime Minister Modi is expected to announce an opening up of the sovereign bond market to retail investors today, which comes amidst rising inflation concerns as well. Looking ahead, futures are indicating a positive start in the US and Europe with those on the S&P 500 (+0.16%) and the DAX (+0.15%) pointing higher. Turning to the geopolitical scene, it was reported by Bloomberg that US officials had briefed their counterparts in the EU about a potential Russian invasion of Ukraine. It follows a build-up in Russian forces near the Ukrainian border that have been reported more widely, and echoes a similar situation back in the spring. The Russian ruble weakened -0.57% against the US dollar yesterday in response, with the declines occurring after the report came out. This comes amidst a number of broader tensions in the region, and natural gas prices in Europe were up +6.66% yesterday after Belarus’ President Lukashenko threatened to cut the transit of gas if the EU placed additional sanctions on his regime. Meanwhile on Brexit, there were potential signs of compromise in the dispute over Northern Ireland, with the Telegraph reporting that the EU was prepared to improve its offer when it came to reducing customs checks. However, the report also said that this would be contingent on the UK ending its demands to remove the European Court of Justice’s role in overseeing the agreement. There has been growing speculation in recent days that the UK could be about to trigger Article 16 of the Northern Ireland Protocol, which allows either side to take unilateral safeguard measures if the deal was causing serious issues. This would risk EU retaliation that could in theory even led to a suspension of the entire trade deal agreed last year, which is an option that has been talked up in recent weeks. For those wanting further reading on the issue, DB’s FX strategist Shreyas Gopal put out a note on Tuesday (link here) looking at the issues surrounding Article 16 and its implications for sterling. Another important thing to keep an eye on over the coming weeks will be any further signs of deterioration in the Covid-19 situation. Cases have been ticking up at the global level for around 4 weeks now, and a number of European countries (including Germany) have seen a major surge over the last few days. In the Netherlands, they actually set a record for the entire pandemic yesterday, and Prime Minister Rutte is due to hold a press conference today where it’s been speculated he’ll announce fresh restrictions. Separately in Austria, Chancellor Schallenberg said that a lockdown for the unvaccinated was “probably unavoidable”, and said that “I don’t see why two-thirds should lose their freedom because one-third is dithering”. On the data front, the only major release was the UK’s Q3 GDP reading yesterday, which surprised on the downside with growth of +1.3% (vs. +1.5% expected), even though Covid-19 restrictions were much easier in Q3 relative to Q2. To be fair, the monthly reading for September did surprise on the upside, with growth of +0.6% (vs. +0.4% expected), but it came as July and August saw downward revisions. On a monthly basis, the September reading meant the UK economy was just -0.6% beneath its pre-pandemic size in February 2020. To the day ahead now, and data releases from the US include the University of Michigan’s preliminary consumer sentiment index for November, as well as the JOLTS job openings for September. In the Euro Area, there’ll also be industrial production for September. From central banks, we’ll hear from New York Fed President Williams, ECB Chief Economist Lane, and the BoE’s Haskel. Tyler Durden Fri, 11/12/2021 - 07:48.....»»

Category: blogSource: zerohedgeNov 12th, 2021

Futures Fall, Yields And Dollar Jump Ahead Of Highest CPI In 31 Years

Futures Fall, Yields And Dollar Jump Ahead Of Highest CPI In 31 Years For the third day in a row, early weakness in futures - in this case as a result of China's soaring, record producer price inflation - reversed and spoos rose from session lows but were still down on the session as traders awaited inflation data due later on Wednesday. Treasury yields climbed and the dollar and cryptos rose. At 7:45 a.m. ET, Dow e-minis were down 47 points, or 0.12%, S&P 500 e-minis were down 10.25 points, or 0.22%, and Nasdaq 100 e-minis were down 68 points, or 0.42%. Earlier, China's Shanghai Composite fell as much as 1.7% and the Hang Seng dropped more than 1% after China’s factory inflation soared to a 26-year high. The number came just hours before today's US CPI print is expected to rise 5.8% in October, the highest level since since December 1990, after a 5.4% increase in the previous month. The report comes a day after producer prices data showed a solid rise in October and will be scrutinized for clues on the extent to which manufacturers were passing on higher costs to consumers, whose spending accounts for 70% of the U.S. economy Elevated inflationary pressures “would be the latest test for the Fed’s ‘transitory’ view and challenge the central bank’s stance on policy tightening,” Han Tan, chief market analyst at Exinity Group, said in written comments. “The worry is that such stubborn inflationary pressures could choke the recovery in global demand or hasten policy tightening by major central banks.” On Tuesday, Wall Street's main indexes ended their long streak of record closing highs on Tuesday as Tesla tumbled and as investors booked profits from the recent run-up in gains, especially in the absence of market-moving catalysts. The declines on Wednesday came after data showed Chinese factory gate prices hit a 26-year high in October, while economic advisers to the German government said they expected the current rise in inflation to continue well into 2022. It has been a busy premarket trading session with lots of movers. We start with Coinbase which fell 11% as analysts said the crypto exchange’s quarterly results were well below expectations. DoorDash shares surged as analysts raised price targets on the food-delivery firm after expectation-beating results and purchase of Finnish food-delivery startup Wolt Enterprises Oy.  Here are some other premarket movers today: DoorDash (DASH US) shares surge 19% in U.S. premarket trading, with analysts raising their price targets on the food-delivery firm after expectation-beating results and its biggest ever acquisition Chinese technology stocks listed in the U.S. rise premarket after Tencent reported 3Q profit that exceeded expectations even as revenue missed amid China’s crackdown on the tech industry Tesla (TSLA US) shares inch higher 1.9% in premarket trading, set for a positive open after a 16% slump in two days amid several negative headlines for the stock Stran & Co. (STRN US) shares jump as much as 43% in U.S. premarket trading, recovering ground after a sharp drop following the branding solutions firm’s IPO Society Pass (SOPA US) shares drop as much as 54% in U.S. pre trading hours, after the loyalty tech platform had surged following its IPO in the prior session Upstart Holdings (UPST US) plunged 19% in U.S. premarket trading after the company released 3Q earnings and 4Q forecasts; Piper Sandler ascribes share drop to “elevated investor expectations” and lack of quantification of auto opportunity Poshmark (POSH US) shares sink 29% in U.S. premarket trading with Berenberg (buy) saying the online retail platform’s 3Q results and guidance were disappointing PubMatic (PUBM US) surges 22% in U.S. premarket trading after the company’s 4Q sales forecast topped expectations and it posted 3Q results that Jefferies called “impressive” FuboTV (FUBO US) shares drop 4.3% in U.S. premarket trading as a 3Q results beat for the “sports first” streaming-video platform was overshadowed by higher costs and some weakness on its ad revenue Purple Innovation (PRPL US) slumps 31% after it cut its net revenue forecast for the full year; the guidance missed the average analyst estimate RingCentral (RNG US) rises 22% premarket, a day after the provider of cloud-based communications services forecast 4Q revenue that beat the average analyst estimate Toast (TOST US) slides after reporting financial results that included a net loss that widened compared with the same period last year Turning back to CPI, here is a lenghtier preview courtesy of DB's Jim Reid: I may have just about found it vaguely conceivable at the start of the year that on November 10th we’d see a 5.9% YoY US CPI print and the sixth month above 5%; however, I would certainly not have thought that such a number if it had materialized would be greeted with a collective market “meh” with 10yr Treasury yields 450bps below this rate. A lot is resting on this inflation being transitory. This will be the multi-trillion dollar question for 2022, that’s for sure. Last month saw yet another upside surprise that further undermined the transitory narrative, and, in fact, if you look at the last 7 monthly readings, 5 of them have come in above the median estimate on Bloomberg, with just 1 below and the other in line. In terms of what to expect, our US economists are looking for a reacceleration in the monthly prints, with a +0.47% forecast for the headline measure (+0.6% consensus), and +0.37% for core (+0.4% consensus). Their view is that the main driver is likely to be price pressures in those categories most sensitive to supply shocks, such as new and used vehicles. But they also see some downside risk from Covid-19-sensitive sectors like lodging away and airfares, where prices fell over the late summer as the delta variant slowed the recovery in travel. Look out for rental inflation too – last month we saw owners’ equivalent rent experience its strongest monthly increase since June 2006. It’s a measure that reflects underlying trend inflation, so it is important to monitor moving forward. Many models suggest it will be over 4% for much of next year, which is large given that it makes up around a third of the headline rate and c.40% of core. Shifting back to markets, we next look at Europe, where equities also recovered off opening lows with the Euro Stoxx 50 and DAX recovering to trade flat. FTSE 100 outperformed, rising as much as 0.6%. Sector gains in oil & gas, utilities and insurance names are broadly offset by losses in luxury, tech, household & personal goods and travel. Earlier in the session, Asian equities fell for a second day after data showed China’s monthly factory-gate prices grew at the fastest pace in 26 years. The MSCI Asia Pacific Index slid as much as 0.6% before paring its loss, with materials and IT the biggest drags. The CSI 300 Index slid as much as 1.9% before sharply paring its drop, after China’s producer and consumer price inflation numbers both exceeded forecasts. Commodity prices have soared globally this year amid expectations for a rebound from the pandemic, with energy getting a further boost from a supply crunch. Traders await Wednesday’s U.S. consumer-price report for further clues on monetary policy and economic growth. “Eyes are now closely watching inflation as that is the next market catalyst,” said Justin Tang, head of Asian research at United First Partners. For some Asian companies “the candle is burning on both ends -- with the supply chain crisis as a ceiling on revenues while obligations to expenses and liabilities remain.”  The Hang Seng turned higher in late trading as real estate developers climbed on a report that China’s bond-issuance policies may be loosened, while Tencent led a surge in tech stocks ahead of its earnings report. Vietnam and Taiwan showed small gains, while benchmarks in most other markets fell. Japanese equities fell, following Asian peers lower after China reported worse than expected inflation. Electronics makers and trading houses were the biggest drags on the Topix, which fell 0.5%. SoftBank Group and Tokyo Electron were the largest contributors to a 0.6% drop in the Nikkei 225. The MSCI Asia Pacific Index slid 0.5%, while China’s CSI 300 Index tumbled 1.1% after monthly factory-gate prices in Asia’s largest economy grew at the fastest pace in 26 years. U.S. consumer price data is scheduled to be reported later Wednesday. “Asia is on inflation alert, fearing future costs of inputs from goods sourced from the mainland,” Jeffrey Halley, senior market analyst at Oanda, wrote in a note. “It seems that investors are keen to lower exposure into the U.S. CPI data tonight.” Australian stocks ended lower for a third session as miners tumbled: the S&P/ASX 200 index fell 0.1% to close at 7,423.90 after a volatile session. Miners were the worst performing industry group as iron ore prices dropped, with eight of the 11 subgauges closing lower.  Bluescope was the day’s biggest laggard after iron ore plunged to a fresh 18-month low as debt troubles in China’s real-estate market deal blow after blow to prospects for steel demand. United Malt advanced after a media report said the company could be a takeover target. Australia’s central bank Governor Philip Lowe is anchoring his bet that he won’t need to raise interest rates until 2024 on a view that unemployment needs to be lower to spur wage gains. In New Zealand, the S&P/NZX 50 index fell 0.5% to 13,022.46. In FX, the Bloomberg Dollar Spot Index rose as the greenback traded higher against all of its Group-of-10 peers apart from the Canadian dollar. The euro extended an Asia session loss and traded firmly below the $1.16 handle. The pound slipped against a broadly stronger dollar, and edged higher versus the euro before a speech by the BOE’s Tenreyro; market is focused on the outlook for rate hikes and traders are also turning attention back to Brexit risks, with the European Union preparing a package of retaliatory measures in case the U.K. decides to suspend parts of a trade accord. Australia’s dollar fell to a one-month low as a slump in iron ore prices prompted short-term leveraged funds to cut long positions. The kiwi declined after a preliminary New Zealand business confidence index weakened In rates, Treasuries traded weak in the early U.S. session, following a selloff in gilts as U.K. markets start to price a higher terminal rate, bear-steepening the curve. Treasury yields are mostly cheaper by 2bp-3bp across the curve with 10-year around 1.475%; gilts lag by additional 1bp vs Treasuries while bunds outperform. During the Asian session, China’s CPI data beat expectations, adding to downside pressure in front eurodollars. Focal points for U.S. session include October CPI expected to show steep increase in y/y rate and final quarterly refunding auction, a $25b 30-year bond sale. Reduced-size U.S. refunding auctions conclude with $25b 30-year bond vs $27b in previous four; Tuesday’s 10- year sale tailed by 1.2bp after steep gains into the bidding deadline. Wednesday's WI 30-year yield around 1.85% is below 30-year stops since January and ~19bp richer than last month’s, which stopped 1.3bp below the WI level at the bidding deadline. In commodities, Crude futures drift lower: WTI drops 0.5% to trade near $83.70. Brent dips back below $85. Base metals are mixed. LME aluminum is the strongest performer; tin and lead are in negative territory. Spot gold drifts lower, losing $5 to trade near $1,826/oz To the day ahead now, and the main highlight will be the aforementioned CPI release from the US for October. Otherwise, there’ll also be Italian industrial production for September. From central banks, we’ll hear from the ECB’s Elderson and the BoE’s Tenreyro, whilst earnings releases include Disney. Market Snapshot S&P 500 futures down 0.2% to 4,669.75 STOXX Europe 600 little changed at 482.35 MXAP down 0.1% to 198.31 MXAPJ up 0.1% to 648.70 Nikkei down 0.6% to 29,106.78 Topix down 0.5% to 2,007.96 Hang Seng Index up 0.7% to 24,996.14 Shanghai Composite down 0.4% to 3,492.46 Sensex little changed at 60,399.20 Australia S&P/ASX 200 down 0.1% to 7,423.90 Kospi down 1.1% to 2,930.17 Brent Futures little changed at $84.75/bbl Gold spot down 0.3% to $1,825.71 German 10Y yield little changed at -0.29% Euro down 0.2% to $1.1574 U.S. Dollar Index up 0.18% to 94.13 Top Overnight News from Bloomberg The European Central Bank would risk exacerbating inequality if it were to raise interest rates before ceasing asset purchases, according to Executive Board member Isabel Schnabel U.S. President Joe Biden and his Chinese counterpart Xi Jinpingare are scheduled to hold a virtual summit next week, although no specific date has been set, according to people familiar with the matter A lack of top-tier intelligence on Chinese President Xi Jinping’s inner circle is frustrating senior Biden administration officials struggling to get ahead of Beijing’s next steps, according to current and former officials who have reviewed the most sensitive U.S. intelligence reports China’s inflation risks are building as producers pass on higher costs to consumers, reigniting a debate over whether the central bank has scope to ease monetary policy to support a weakening economy and potentially adding to the pressure on global consumer prices The U.K. opposition called for a parliamentary investigation into former Conservative cabinet minister Geoffrey Cox, as the scandal over sleaze and lobbying engulfing Boris Johnson’s ruling party gains momentum A more detailed look at global markets courtesy of Newsquawk Asian equity markets traded negatively after a lacklustre handover from Wall Street where the major indices took a break from recent advances and the S&P 500 snapped an eight-day win streak ahead of looming US inflation data. ASX 200 (-0.1%) was rangebound with early strength in financials gradually offset by losses in the commodity-related sectors and with the improvement in Westpac Consumer Sentiment data doing little to spur risk appetite. Nikkei 225 (-0.6%) was subdued with exporters pressured by unfavourable currency inflows and with the list of biggest movers in the index dominated by companies that recently announced their earnings, although Nissan and NTT Data Corp were among the success stories on improved results including a surprise return to quarterly profit for the automaker. Hang Seng (+0.7%) and Shanghai Comp. (-0.4%) initially underperformed amid ongoing developer default concerns as Evergrande has reportedly failed to pay coupon payments at the end of its 30-day grace period. Rating agencies have also downgraded a couple of developers and Fantasia Holdings shares fell as much as 50% on resumption from a one-month trading halt after it missed bond payments due early last month. Furthermore, tensions continued to brew on the Taiwan Strait after US lawmakers made a surprise visit to Taiwan and with China conducting combat readiness patrols in the area ahead of a potential Biden-Xi virtual meeting that could occur next week, which potentially lifted sentiment, while participants also reflected on the firmer than expected inflation data from China which showed consumer prices registered their fastest increase in more than a year and factory gate prices rose at a fresh record pace. Finally, 10yr JGBs traded marginally higher amid the lacklustre mood in stocks and presence of the BoJ in the market for over JPY 1.3tln of JGBs with 1yr-10yr maturities, although gains were capped by resistance ahead of the 152.00 focal point and a pull-back in T-notes. Top Asian News China SOEs Suggest Govt Ease Debt Rules in Property M&A: Cailian Iron Ore Gloom Deepens as China Property Woes Threaten Demand Chinese Developers Surge on Report Bond Rules May be Eased Tencent’s ‘Other Gains’ Unexpectedly Double, Helping Profit Beat European equities (Eurostoxx 50 -0.1%) have traded with little in the way of firm direction as a slew of earnings dictate the state of play amid a lack of fresh macro impulses. The handover from Asia was mostly a downbeat one with focus on firmer than expected CPI and PPI prints out of China and ongoing developer default concerns as Evergrande bond holders have reportedly not received coupon payments by the end of today's Asia-close grace period, in reference to missed coupon payments totalling USD 148.1mln. Stateside, futures are a touch softer (ES -0.2%) after cash markets saw the S&P 500 snap its eight-day winning streak during yesterday’s session. Ahead, the main event for the US will be the CPI release at 13:30GMT whilst the earnings docket continues to slow down with Disney the main standout after-hours. Back to Europe, sectors are mixed with Oil & Gas outperforming peers alongside price action in the crude complex. Banking names saw initial gains trimmed after earnings from Credit Agricole (-1.1%) and ABN AMRO (+1.9%) were unable to provide sustained support for the sector despite the former exceeding profit expectations. The retail sector has been provided a boost by Marks & Spencer (+11.4%) after the Co. reported stellar earnings and raised guidance. Elsewhere in the UK, ITV (+12.0%) sits at the top of the FTSE 100 after printing solid revenue metrics and a bullish revenue outlook. To the downside, Personal and Household goods lag in the wake of earnings from Adidas (-6.0%) which saw the Co.’s performance hampered by factory closures in Vietnam and product boycotts in China. Finally, Alstom (+9.6%) sits at the top of the CAC post-earnings with the Co. stating that supply chain shortages had no material impact on H1 sales. Top European News ECB May Aid Rich If Rates Rise Before QE Ends, Schnabel Says Merkel Advisers Urge ECB Exit Strategy as Price Pressures Rise King Sinks Impala Plan to Create World’s No. 1 Platinum Firm Alstom’s Cash Drain Is Less Than Forecast; Shares Jump In FX, the Greenback remains relatively firm in the run up to US inflation data having turned a corner of sorts on Tuesday, with the index extending beyond 94.000 following its rebound from 93.872 and inching closer to the current 94.380 w-t-d peak, at 94.221, thus far. Interestingly, the Buck has regained momentum irrespective of the benign Treasury (and global) yield backdrop, softer than forecast elements in the PPI release and most Fed officials maintaining a distance between the end of tapering and tightening. However, risk sentiment if wavering to the benefit of the Dollar more than others and the aforementioned CPI readings may be supportive if in line or above consensus. Note, initial claims are also scheduled due to tomorrow’s Veteran’s Day holiday and the final leg of supply comes via Usd 25 bn long bonds. NZD/JPY - Ironically perhaps, the Kiwi is struggling to keep sight of 0.7100 vs its US peer on the very day that COVID-19 restrictions were eased in Auckland, and a further deterioration in NZ business sentiment alongside a fall in the activity outlook may be the catalyst, while the Yen has run into resistance again above 113.00 and is now relying on decent option expiry interest between the round number and 113.05 (1.1 bn) to keep its bull run going. GBP/EUR/AUD/CHF - All softer against the Greenback, as Cable hovers below 1.3550, the Euro pivots 1.1575, Aussie meanders within a range just above 0.7350 amidst favourable Aud/Nzd crossflows and an improvement in Westpac consumer sentiment, and the Franc treads water inside 0.9150-00 parameters. However, Eur/Usd appears to be underpinned by heavier option expiries on the downside than upside rather than ostensibly hawkish ECB promptings from Germany’s Government advisors given 2.1 bn between 1.1575-65 and a further 1.2 bn from 1.1555-50 vs 1.5 bn at the 1.1600 strike. CAD - The Loonie is outperforming or holding up better than other majors near 1.2400 vs its US rival even though WTI has backed off from best levels just shy of Usd 85/brl, but Usd/Cad could still be drawn to expiry interest starting at 1.2450 and stretching some way over 1.2500 in the absence of anything Canadian specific, and pending US inflation data of course. WTI and Brent have been somewhat choppy this morning, but remain within reach of overnight ranges and well within yesterday’s parameters as fresh newsflow has been light; a performance that is similar to the morning’s directionless equity trade. Focus has been on last nights/yesterday's events after the EIA’s STEO release seemingly lessened the likelihood of a SPR release followed by the weekly private inventory report, which printed a headline draw of 2.485M against the expected build of 2.1mln – reaction was minimal. Later today, we get the DoE equivalent for which expectations remain at a headline build of 2.13mln, but the components are expected to post draws of around 1mln. Elsewhere, spot gold and silver are a touch softer on the session with the US Dollar and yields perhaps weighing, though the previous metals have once again not deviated too far from overnight parameters. On copper, prices were hampered by the Chinese inflation data though LME copper has staged a marginal recovery as the session has progressed. US Event Calendar 8:30am: Oct. CPI YoY, est. 5.9%, prior 5.4%; CPI MoM, est. 0.6%, prior 0.4% 8:30am: Oct. CPI Ex Food and Energy YoY, est. 4.3%, prior 4.0%; MoM, est. 0.4%, prior 0.2% 8:30am: Nov. Initial Jobless Claims, est. 260,000, prior 269,000 8:30am: Oct. Continuing Claims, est. 2.05m, prior 2.11m 8:30am: Oct. Real Avg Weekly Earnings YoY, prior -0.8% 8:30am: Oct. Real Avg Hourly Earning YoY, prior -0.8% 10am: Sept. Wholesale Trade Sales MoM, prior -1.1%; Wholesale Inventories MoM, est. 1.1%, prior 1.1% 2pm: Oct. Monthly Budget Statement, est. -$179b, prior - $61.5b DB's Jim Reid concludes the overnight wrap After three days in hospital in traction, little Maisie has a 3-hour hip operation this morning. Showing one benefit of the pandemic, she had a zoom call with her class at school yesterday on their big screen where they all got to ask her questions. The best one apparently was one boy who put his hand up and said “will your new wheelchair have an engine?”. I was reading last night about people with Maisie’s condition (perthes) ending up playing international sport as an adult after a long recovery as a kid, including a Danish striker who played in the semi-finals of the Euros this summer and a 132kg American football player. As long as she waits a polite time after her long recovery to beat me at golf then I’ll be very happy. Keeping my mind off things today will undoubtedly be US CPI. Given my inflationary bias views I may have just about found it vaguely conceivable at the start of the year that on November 10th we’d see a 5.9% YoY US CPI print and the sixth month above 5%; however, I would certainly not have thought that such a number if it had materialised would be greeted with a collective market “meh” with 10yr Treasury yields 450bps below this rate. A lot is resting on this inflation being transitory. This will be the multi-trillion dollar question for 2022, that’s for sure. Last month saw yet another upside surprise that further undermined the transitory narrative, and, in fact, if you look at the last 7 monthly readings, 5 of them have come in above the median estimate on Bloomberg, with just 1 below and the other in line. In terms of what to expect, our US economists are looking for a reacceleration in the monthly prints, with a +0.47% forecast for the headline measure (+0.6% consensus), and +0.37% for core (+0.4% consensus). Their view is that the main driver is likely to be price pressures in those categories most sensitive to supply shocks, such as new and used vehicles. But they also see some downside risk from Covid-19-sensitive sectors like lodging away and airfares, where prices fell over the late summer as the delta variant slowed the recovery in travel. Look out for rental inflation too – last month we saw owners’ equivalent rent experience its strongest monthly increase since June 2006. It’s a measure that reflects underlying trend inflation, so it is important to monitor moving forward. Many models suggest it will be over 4% for much of next year, which is large given that it makes up around a third of the headline rate and c.40% of core. Staying with inflation, China’s year-on-year numbers for October surprised on the upside overnight with CPI +1.5% (consensus +1.4%, last month +0.7%), the highest since September 2020. PPI +13.5% (consensus +12.3%) was also at a 26-year high. Asian stocks are trading lower with the KOSPI (-0.86%), Shanghai Composite (-1.20%), CSI (-1.40%), the Nikkei (-0.49%) and Hang Seng (-1.20%) all down after the China numbers. Futures are pointing to a weak start in the US & Europe too with S&P 500 futures (-0.4%) and DAX futures (-0.23%) both down. As investors look forward to today’s number, the long equity advance finally petered out yesterday as the S&P 500 (-0.35%) snapped a run of 8 successive gains. A 9th day in the green would have marked the longest winning streak since November 2004, but in the end it wasn’t to be.It also prevented an 18th up day out of the last 20 for the first time since September 1954.So reset your counters. Instead, we saw a broader risk-off move as equity indices moved lower on both sides of the Atlantic alongside a fresh rally and flattening in sovereign bond yields and curves. So the S&P 500 (-0.35%), the NASDAQ (-0.60%) and Europe’s STOXX 600 (-0.19%) all fell back from their record highs in the previous session although the equal weighted S&P 500 was almost flat (-0.03%) showing that there wasn’t huge breadth to the US weakness. Sector dispersion was tight in the US, with materials (+0.43%) among the leaders again along with the more typically defensive utilities sector (+0.44%). Financials (-0.55%) declined on the flatter curve story but it was discretionary stocks (-1.35%) that took the biggest hit, dragged down by Tesla declining a further -11.99% and now losing c.$200bn of market cap over two days or the equivalent of 8.5 times Ford’s market cap. The VIX index of volatility ticked up another +0.58pts to hit its highest level in nearly 4 weeks, but remains comfortably below the peaks reached during September’s 5% pullback in the S&P. By contrast, Bitcoin proved to be one of the few winners of yesterday as it increased to an all-time high of $67,734, although that was slightly down from its all-time intraday high of $68,513 earlier in the day. Meanwhile, the question of the various Federal Reserve appointments has been occupying increasing attention and impacting bond markets, but in spite of the gossip there’s been no fresh news over the last 24 hours we didn’t already know. Earlier this week, Politico cited two sources with knowledge of the process saying that a decision would be made by Thanksgiving. But for those with longer memories, it was reported by Bloomberg back in August that people familiar with the process were saying that President Biden was likely to make his choice around Labor Day in early September, and over two months have passed since. So we’ll have to see what the real deadline is. Nevertheless, the news from late Monday night in the US that Fed Governor Brainard had been interviewed for the Fed Chair position helped support US Treasuries, thanks to the perception that Brainard would be a more dovish pick. Regardless of whether Powell or Brainard is Chair come this time next year, the Board will likely become more dovish as President Biden replaces outgoing Governors (and fills empty seats should he choose to do so). By the close of trade, 10yr yields were down -5.4bps to 1.44%, and the 30yr yield was down -6.4bps to 1.82%, which was its lowest closing level since mid-September. Another striking thing was that the moves lower in Treasury yields were entirely driven by a fresh decline in real yields, with the 10yr real yield down -7.0bps to -1.20%, marking its lowest closing level since TIPS began trading in 1997. Meanwhile, there was another round of curve flattening yesterday, with the 5s30s slope down -2.8bps to 73.5bps, which is the flattest it’s been since the initial market panic over the pandemic back in March 2020. For Europe it was a similar story as yields fell across the continent, and those on 10yr bunds (-5.5bps), OATs (-5.5bps) and BTPs (-5.3bps) all saw decent moves lower. Ahead of today’s CPI, investors had the PPI numbers to digest yesterday, though there was little market reaction to speak of as they came in almost entirely in line with the consensus. The monthly reading was up by +0.6% in October, which in turn saw the year-on-year measure remain at +8.6%, with both of those in line with expectations. The core measure did come in a touch below, at +0.4% (vs. +0.5% expected), but again that left the yoy reading at +6.8% as expected. One factor that may help on the inflation front over the coming months was a major decline in natural gas prices yesterday, with both European (-8.16%) and US (-8.26%) futures witnessing substantial declines. This wasn’t reflected elsewhere in the energy complex though, with WTI (+2.71%) and Brent crude (+1.62%) oil prices seeing a further rise following reports that the US would not need to release strategic reserves due to the demand outlook, and gold prices (+0.42%) closed at their highest levels since June. There wasn’t a massive amount of other data yesterday, though the ZEW survey from Germany for November saw the expectations reading unexpectedly rise to 31.7 (vs. 20.0 expected), which is the first increase after 5 consecutive monthly declines. However, the current situation measure did fall to 12.5 (vs. 18.3 expected). Finally out of the US, the NFIB’s small business optimism index for October fell to a 7-month low of 98.2 (vs. 99.5 expected). To the day ahead now, and the main highlight will be the aforementioned CPI release from the US for October. Otherwise, there’ll also be Italian industrial production for September. From central banks, we’ll hear from the ECB’s Elderson and the BoE’s Tenreyro, whilst earnings releases include Disney. Tyler Durden Wed, 11/10/2021 - 07:56.....»»

Category: blogSource: zerohedgeNov 10th, 2021

Michael Wilson Blames Retail BTFDers For Crushing His Vision Of A "Fire And Ice" Market Dump

Michael Wilson Blames Retail BTFDers For Crushing His Vision Of A "Fire And Ice" Market Dump You gotta hand it to Morgan Stanley's chief equity strategist Michael Wilson: he is persistent. Just two weeks a week after Wilson called (again) for a "fire and ice" correction that would send stocks lower by 10%-20% in the 4th quarter, stocks continue to grind higher completely oblivious of all mounting risks including stagflation, China property, Covid, tapering, supply chain bottlenecks, soaring energy costs, rate hikes, slowing global growth, higher interest rates and so on (implicitly validating Goldman's call for a meltup in the coming weeks), the Morgan Stanley strategist is out with a new "weekly warm-up" note, and while this time he is not making fresh recos, he is instead trying to pin the blame for the continued ascent. The culprit this time: no the Fed or massive stock buybacks (which according to Goldman amount to almost $4 billion per trading day) but retail investors. Wilson starts with a preemptive mea culpa, telling impatient bears that last week he warned "it may take a bit longer for the Ice portion of our Fire and Ice narrative to play out" due to the potential for markets to look through the near-term supply bottlenecks and shortages as temporary; he also notes that with the Biden administration directing substantial resources toward addressing the problem, that conclusion is potentially easier to make. Second, the MS strategist notes that the budget reconciliation process has been pushed out and is unlikely to be resolved until later this year. This in turn delays the negative earnings revisions from higher taxes dynamic which he thinks has yet to be incorporated into 2022 consensus forecasts. In short, while earnings revisions breadth is falling from extreme levels, it isn't falling fast enough yet to cause a deeper correction in the broader index. Also worth noting is that earnings revisions breadth is tied to FY2 estimates (i.e., CY2022) "so while forecasts may come down in the near term for supply / cost reasons, 2022 estimates could stay sticky until these issues are proven to be longer lasting and / or weaker demand appears in 1Q." In any case, "Q3 earnings post-Financials should bring more clarity here in coming weeks" he says. But the real reason why stocks just refuse to fall, according to Wilson, is the fact that "retail continues to be a major buyer of the dip." Wilson points clients to a note he published two weeks ago in which highlighted that the Evergrande dip was taking longer to recover than prior dips this year; "in fact, both the primary uptrend and the 50-day moving average had finally been breached on significant volume. Could it be that the retail investor had finally run out of dry powder or willingness to buy the dip?" Fast forward to today when Wilson concedes that the answer to that question is a definitive "no." Looking at the first charts below, the MS strategist notes "that retail investors remain steadfast in their commitment to buying equities, particularly on down days." Making matters worse for bears, he point to the next two charts which shows that the correlation of buying to negative price action is trong. The bottom line—until these flows subside or reverse, the index will remain elevated even as the fundamental picture deteriorates. What is bizarre about this conclusion is that it directly conflicts Bloomberg's own conclusion, which writes today that amateur traders (i.e. retail) continued to head for the exits, at least when it comes to buying S&P 500 calls. Citing data compiled by the Options Clearing Corp. and analyzed by Susquehanna International Group show, Bloomberg notes that while the overall volume of call options jumped last week, in line with the equity gauge’s 1.8% rally, demand from the smallest options traders continued to go down. The average dollar premium that small-lot investors -- those buying 10 contracts or less at a time -- spent on call contracts fell to the lowest since June 2020. In other words, retail investors may be buying the dip but they are no longer rushing to buy calls and ramp gamma. Whether retail is buying or not aside, one thing is clear: hedge funds are rushing back into stocks, and after scaling their exposure to the S&P in late August and September, hedge funds again turned long futures on the index in the back half of last month: "as the gauge’s selloff showed signs of easing, they boosted their net long S&P 500 futures positions to nearly 99,000 contracts, the most in a year." So much for technicals and fund flows, what about fundamentals? Well, here Wilson remains as bearish as ever, writing that "the fundamental outlook continues to deteriorate... albeit not fast enough to deter those looking to play the seasonal strength in equity markets." As noted above, earnings revisions breadth is rolling over and Wilson expects it to eventually revert back toward the zero line, if not below, between now and early next year. Some of this is due to higher costs/supply shortages which investors seem increasingly willing to look through as temporary. Specifically, he points to how markets penalized Nike for its supply issues in September but Apple received a pass last week. One could interpret this price action as the markets' way of saying it's fully discounted. Such a conclusion assumes these supply / cost issues are temporary and that demand, in fact, remains robust. Needless to say, on both counts Wilson remains more skeptical as the data "supports sustained supply chain pressures, rising costs, and the potential for weaker demand than anticipated next year." As he has discussed previously, one of the most predictive variables for the direction of equity markets is the PMI, shown below. As part of his mid-cycle transition call, Wilson has been expecting the PMIs to fall back toward the low 50s as they typically do at this stage of any recovery. However, they have remained stickier on the upside than normal, particularly when compared against the regional indices. But now the bank's internal indices are confirming PMI downside as they tend to be good leading/coincident indicators for the all important PMIs. Furthermore, it's not just manufacturing businesses that are struggling with costs/supply issues (Exhibit 9). Services are also showing material deterioration (Exhibit 10). Whether it proves to be important for equity markets remains unknown, but Wilson says he wouldn't bet against it. That said, the next readings aren't due until early November and until proven one way or the other, equity markets can drift higher with the seasonals despite growing evidence the outcome will ultimately be disappointing. Of course, a meltup in November could result in double digits gains, which Wilson's client will fail to catch if they listen to the strategist, even once he is eventually proven right. Going back to the core topic of this post, Wilson writes that one of the more dramatic divergences he has observed recently, is the relentless buying of the dip mentality from retail investors despite the steep fall in consumer confidence. Here we would beg to differ: consumer confidence in the economy may well be crashing, but retail investor confidence that the Fed will bail them out each and every time remains unshaken, and the only way this will ever change is if stocks do suffer a 10%, 20% or more correction. Until then absolutely every dip will be bought, precisely to boost consumer confidence because we live in a world where sentiment resulting from printing of funny money has more impact on the consumer psyche than one job prospects or wages. Wilson does touch on some of this, noting that the consumer appears to be most concerned with rising prices rather than their job or income. This jibes with the conclusion many are making that demand remains robust and we just need to get through these supply bottlenecks and price spikes. Whatever the reason, Wilson thinks that "this remains an unresolved risk in our view" and once again we disagree: there is absolutely nothing out there that can possibly shake consumer confidence that stonks will just keep rising forever and ever, especially if we are heading into a $150 trillion "net zero", "climate change" gauntlet which will see $2 trillion in QE for the next 30 years... you know, for grandkids. Tyler Durden Mon, 10/18/2021 - 14:16.....»»

Category: smallbizSource: nytOct 18th, 2021

Goldman On The Biggest Story In The Markets Right Now And 9 Other Observations

Goldman On The Biggest Story In The Markets Right Now And 9 Other Observations By Tony Pasqsuariello, Goldman Sachs' head of Hedge Fund Sales in US Equity Derivatives, The key story over recent weeks has been a nascent return of the reflation theme. To be sure, price action across the macro complex hasn’t been subtle -- be it higher rates, another charge higher in commodities or the searing outperformance of cyclicals over growth stocks -- yet, this is a different scene from the high velocity days of November through March. Whereas the franchise dialogue then was characterized by hopes for unbounded fiscal spending, a sincere Fed commitment to the AIT framework and blockbuster payrolls prints ... the recent story line has centered more on the FOMC taking their first clear step towards normalizing policy, energy markets contending with some very serious supply-and-demand issues and positioning/mis-positioning. That said, where you can find common ground between the two episodes is around the biggest fundamental variable in the markets: the interplay between COVID and global economic activity. Amidst all the noise and cross-currents and debate around first derivatives vs second derivatives, the fact is this: the global economy is firing on more cylinders today than at any point in the COVID era. For example, witness the GS Effective Lockdown Index, which trends in the right direction and clearly identifies a recent inflection from the Delta impingement -- taking the index to its easiest level since the early days of the pandemic. Here’s another framing from long-time colleague Dominic Wilson: “for me the big difference is that last year it was about large, new positives -- now it’s about removal of some downside stuff against a slowing trend so it’s all a bit more tactical. and, the upside tails aren’t really being restored.” Looking ahead, here’s where I come out, taker of feedback: Point-to-point, there’s been no better horse in the reflation race than commodities -- and, if the first point in the section below is correct, for medium-term investors, that could well remain the case. It’s not totally obvious to this stock operator where the bond market goes from here. given the inflation debate, I do think the asymmetry is skewed towards higher rates than lower rates. the house view continues to be 1.60% on 10-year notes at year end, with an ultimate path to 2.50% (link). Given that point on rates, it’s also not clear to me that you’re supposed to be sliding all of your chips from secular winners to cyclicals; I’d prefer to keep an ongoing balance there, while overtly avoiding the bond proxies. said another way: cyclicals-over-defensives is a clearer axis to me than value-over-growth. On S&P more broadly, as we approach a very strong seasonal period, I continue to believe the path of least resistance is higher. at the same time, I also suspect we’ll be living with a higher base level of volatility for a while -- with that comes a choppier trading environment where the bulls get paid by adding exposure on dips. If global central banks are getting out of the bond buying business, one can expect it will happen at different speeds and with different exit strategies. as a crafty client suggested, from a very boring starting point, this should open the door to a better opportunity set in FX trading. note, quietly, DXY has made YTD highs. Several other quick points, charts: 1. Commodities: another week, another higher high in BCOM, with an eye-popping sequence in the European power markets. In the GIR upgrade to our oil forecast, I found it a little interesting they touched up YE’21 Brent from 80 to 90 ... I found it more interesting that the 2023 bogey moved from 65 to 85 (link). 2. The Fed: from an arguably absurd starting point, last week marked the first step towards a glide path -- if a very long path -- to something resembling policy normalization. I looked back at the ’04-’06 analog: the Fed hiked rates 17 times, they were most perfectly predictable in doing so, and market volatility collapsed along the way. while I imagine they’d be happy with a similar outcome, again my instinct is that analog may not apply all over again. 3. Japan: it’s a big week for the ever pivotal Japanese election cycle, with an outcome that skews as generically market friendly. coupled with a much better outlook for COVID and the reset in global interest rate curves, the bullish house call for Japanese equities still aligns with my instincts: link. 4. China: GIR published an eye opening note on their property market (link). at 20% of GDP and 62% of household wealth, thus totaling $60tr, one can argue it’s the largest asset class in the world (btw, am I the only person who didn’t realize that). 5. From the 2017 market journal, when S&P never traded negative at any point in the year en route to a 22% total return and a 3 Sharpe: i. “maybe someday we’ll look back and be astounded that central banks bought $14tr bonds. or, maybe, they will still be buying.” note that since last March, the big four central banks have bought another ~ $5.5tr. ii. with updates: “in the 20th century, the Dow went from 66 to 11,497 (a gain of 17,320%). in the 21st century, the index is up a further 402%.” iii. with updates: “total returns since the ’04 IPO: Alphabet/Google + 6,312% ... Domino’s Pizza + 7,148%.” iv. “remember, 10% of cumulative alpha per year breaks down to ... 4 bps per trading day.” v. while not for deployment in this email, “data shows there’s a positive correlation between swearing and perceptions of honesty.” 6. When the market is trading at multiples not seen outside of the tech bubble, it’s fair to wonder if one of the big challenges is priced-to-perfection risk? I asked Ben Snider in GIR to zoom in a bit on valuation in the context of the COVID era. the sequence has been interesting: since the market bottomed last March, only 32% of the rally has been driven by earnings … the balance of 68% was re-rating of the multiple. that said, since the vaccine announcements last November, the entirety of the rally has been driven by earnings: 7. This is one of those big picture charts that doesn’t inform your risk taking in the short-term, but perhaps says a lot about the world in a broader sense. With credit to Peter Oppenheimer and team in GIR, this contextualizes just how big US mega cap tech companies are relative to the GDP of various large countries and indices: 8. Following on from there … again with credit to Ben Snider ... this a very simple snapshot of annual total returns in the FAAMG complex post-GFC ... for all of the local turbulence of recent weeks, I still think there’s a lot to like here long-term: 9. To level set positioning in the hedge fund community, this lays out the recent history in both gross exposure (left side) and net exposure (right side). While I am very aware that US households have gone whole-hog into stock market, the professional trading community is, by contrast, relatively sober in current risk taking. As someone put it to me: there’s lots of optimism, but lots of cash ... That’s not how bull markets usually end. Tyler Durden Sun, 10/03/2021 - 16:55.....»»

Category: blogSource: zerohedgeOct 3rd, 2021

Hedge Fund Net Leverage At All Time Highs As No Dips Are Sold

Hedge Fund Net Leverage At All Time Highs As No Dips Are Sold Two weeks ago, JPMorgan's prime desk wrote about 2 main themes among the hedge fund community: elevated leverage levels and low exposure to cyclicals/value that tend to do better when rates are rising. However, over the past week, both of these things have come into sharper focus as US equities suffered one of their larger pullbacks in a while and rates globally jumped higher towards the end of this week.  So what has the largest bank's prime brokerage desk seen in the past week?  According to the latest weekly Positioning Intelligence report published by the bank, at a high level, it seems that HFs are not that concerned about the broader market (nor is anyone else for that matter) with the bank finding that over the past few months, there’s been limited willingness to sell dips.  In line with this, the bank saw neutral flows globally over the past week with small buying on Monday, alongside retail BTFDers, even as professional sentiment tracked by AAII turned the most bearish since last October... ... followed by small selling on Thursday.  But more generally, net flows globally have remained neutral to skewed towards buying in the past 2 weeks with Asia the only region to see some selling. Furthermore, as has been the case for much of 2011, net leverage remains near highs with little change in the past few weeks—net at 98th percentile (of all time) across All Strategies. While gross leverage has come down a little to the 76th percentile, that appears to be more derivatives related and there could be an element of Quadruple Witching that might be impacting this as the largest gross leverage reductions were among Multi-Strat funds. According to JPM, one reason why leverage and flows among HFs might be more neutral this month is that performance has held in relatively well MTD: long-short spreads have been improving over the past few months.  Looking at this month, longs are holding up well, while shorts are down in line with the market. This leaves HFs up slightly MTD, according to JPM estimates. Back to the topic of leverage, FINRA just came out with its latest statistics on Margin Debt which showed them at a new ATH. Given it is up almost 60% since the start of 2020, it begs the question Bank of America asked one month ago: should we be concerned? Not surprisingly, JPM dismisses this indicator and thinks "this alone is not something that is concerning when one breaks down the changes and behavior to account for how the market has been performing." Furthermore the JPM prime desk notes that "this appears to be very different from the peaks in 2000 and 2007 when Margin Debt rose about 50% faster than the S&P 500 over a 12-month period." Instead, to JPM the recent moves seem more reminiscent to what happened in the early 90s. At a more micro level, cyclicals / value / inflation / travel related stocks have all been doing better recently as COVID are falling once more, some travel restrictions are getting lifted, and rates are rising globally.  In line with this, JPM continued to see buying of NA Financials, something that has been noted over the past few weeks, but this week JPM saw Banks getting bought (vs. more Insurance and Div. Fins in prior weeks).  COVID recovery stocks have also been bought but there’s room for more to go as positioning and valuations remain low in many cases (especially among the US COVID – Domestic Recovery basket, JPAMCRDB).  EMEA Travel & Leisure stocks saw strong buying in the past week as the US prepares to drop its ban for transatlantic travel, and net positioning is getting a bit elevated vs. history; however, EMEA Airlines still has low positioning.  Finally, not everything cyclical is getting bought—HFs have continued to sell Energy into strength - despite the recent surge in oil and all other commodities - and have also sold Materials.  Below we share some more details on each of these core themes Main theme #1: Global Flows and Leverage: HFs Don’t Seem Too Concerned While markets have been volatile over the past week, due to the myriad concerns, HF flows remained quite calm.  The reason is that hedge funds have been reluctant to sell dips and that appeared to be the case again last Fri/this Mon as global flows were quite neutral.  However, at the same time, HFs are also not chase the rally as the JPM Prime net flows were fairly neutral on Wed and skewed towards selling on Thurs when markets rallied back. A notable observation is that there appears to be some strategy differences in the past 2 weeks as Equity L/S and Quant funds have been buyers while Multi-Strats have been net sellers across JPM prime.  The selling among Multi-Strats comes as gross and net leverage have started to pull back from peak levels.  The gross reductions among some Multi-Strat funds have been the main driver of the broader “All Strategies” gross leverage figure lower WoW.  However, net leverage was basically unchanged. Furthermore, it appears derivative positions might be driving some of the changes as notional LMV and SMV increased WoW while delta adjusted LMV and SMV fell.   Among Equity L/S funds, who have been moderate net buyers of equities most days MTD, net leverage actually rose slightly WoW and it’s now at the 93rd %-tile since Mar 2017.   #2:  US Margin Debt: New ATHs at End of Aug…Should We Be Concerned? FINRA just released the latest monthly stats on “Margin Debt” which showed a fairly large increase, following a decrease in July.  As Margin Debt is at new All-Time-Highs and is now up almost 60% since the start of 2020, it’s worth asking -as BofA did one month ago -  if this is something we should be concerned about.   In order to answer this, we’ve looked at the relationship between Margin Debt and the markets over time, augmenting the data FINRA has on it’s website with NYSE Margin Debt data that goes back to 1959.  What this shows is that while there is a very big increase recently, it is 1) in line with the markets and 2) seems to be following the general pattern of the past 60+ years.   Similar to discussions of rate-driven VaR shocks, JPM argues that it’s not so much the level of Margin Debt that one should be focused on, but rather the rate of change. On this point, the bank measured the 12M change in Margin Debt and the S&P 500 over the past ~60 years and what this shows is that there is typically a fairly strong correlation over time. In particular, this correlation has been very strong since the GFC, but there were a couple notable divergences in 2000 and 2007 when Margin Debt rose much faster than the market. In its attempt to mitigate concerns about record margin debt, JPM then notes that increases in Margin Debt (i.e. investors taking on more leverage) that exceed the market returns by a wide margin could indicate greater potential for future stress because it might suggest that investors are adding leverage at market highs, but not actually making much money while doing so. Thus, when markets start to pull back, the recent investments start to lose money more quickly than if they had been added when the markets weren’t at highs. Addressing this point, JPM notes that when looking at what’s happened in the past 2 years, we have seen Margin Debt increase faster than the markets on a 12M rolling basis with the difference reaching +28% at its recent high.  However, the recent high in the 12M difference metric was reached in January of this year (perhaps due to the fact that HFs had performed very well in 2020 and had been adding risk throughout 2H20 in particular). Thus, this difference has been falling for much of the past 7 months.  Furthermore, the recent rise follows a period when Margin Debt had generally lagged the market increases; since the start of 2018, margin debt is only up ~40% vs. the S&P up ~70% in price terms. When it looks back even further, JPM notes that there were periods in the 70s-80s when large increases in Margin debt were followed by market weakness, suggesting this isn’t only a 2000 and 2007 phenomenon (left chart below).  Furthermore, one could reasonably ask why the relatively large increase in the early 90s didn’t result in a market pullback.  While there are likely other contributing factors as well, one thing to note about Margin Debt was that it had gone through a period of relatively slower growth in the late 80s, so the rise in the early 90s was somewhat of a “catch-up” period for it.  Similarly, JPM argues that the rise into Jan of this year could also be considered a bit of a “catch-up” period, which appears to be different from 2000 and 2007 when Margin Debt was reaching new highs, even when measuring it relative to the S&P changes.   In light of the above it's hardly a surprise that JPM thinks that while there are many potential reasons one could cite for market caution, "the level and changes in Margin Debt do not appear to be setting us up for extreme market drawdowns like we saw in 2000 and 2007." #3:  Reopening/Recovery Trades Back in Focus? With COVID cases appeared to be on the decline globally, and travel restrictions getting lifted in some places, reopening/recovery themes have been more topical as they’ve started to perform better. On the HF side, JPM Prime has seen net buying over the past 2-3 weeks in both the Domestic Recovery basket (JPAMCRDB) and the International Recovery Basket (JPAMCRIB).  Positioning in both groups remains low on a YTD basis and very low on a multi-year basis for the Domestic basket.  In addition, JPM’s U.S. Equity Research Strategist, Dubravko, recently wrote about this in a recent note where he showed that the COVID Recovery – Domestic basket had seen relative valuations fall back to multi-year lows while COVID Beneficiaries were back near highs. In a similar vein, Travel & Leisure stocks have seen strong performance this week in both N. America and EMEA, along with HF buying as the US said it would remove its ban on EU travel for vaccinated passengers starting in November. The recovery in performance, relative to the market, still has more to go before getting back to  where we were earlier this year. In terms of where the recent buying and outperformance leaves HF positioning, net exposures are nearing average levels among US Travel & Leisure stocks, but are a bit closer to highs in EMEA. Where there appears to be more potential upside for positioning in EMEA is among the Airlines stocks where net exposures is still about 1z below average and JPM has yet to see shorts covered in the group, after persistent additions for the past 6 months. Among US stocks, the rise in rates was accompanied by further buying of Inflation Winners and Rising Bond Yield Winners. Despite the recent buying, net exposure to the Inflation winners remains quite low with net exposures about 1 std dev below average and for the Rising Bond Yield Winners, the net exposure is still slightly below average.   Similarly, a couple weeks ago JPM wrote about how positioning and flows in Value vs. Growth had done a “180” in the past few months as Value had underperformed. Perhaps not surprisingly, US Value seems to be getting a revival recently as the Value factor has been bought in the past 2 weeks. This is coming from both Value Longs getting bought and Value Shorts being sold/shorted.  In line with this, Growth stocks have seen some selling. #4:  Performance – HFs Holding Well in Sep With a risk-on backdrop of cyclicals outperforming defensives, small caps rallying, and rising rates this week (Rising Bond Yield Winners up +5% WTD), Hedge Funds find themselves in the rare position of outperforming broader equity market indices MTD. And with WSB's short squeeze hunts fading, shorts are not detracting from performance as they are generally down in-line with the market; whereas, longs have fared better and protected to the downside.  Among Global Equity L/S funds, net returns continue to track positively with gains of +60-70bps MTD, outperforming MSCI ACWI (which is down -1.2%). The long-short spread has continued to improve since mid-August, driven more recently by shorts selling off faster in September than the market (down -1.3% on wgtd avg basis) and longs holding up relatively well (only down -15bps MTD). Non-Equity L/S funds are also up MTD and outperforming global equity indices, up between +30-85bps. In terms of alpha, longs have outperformed shorts throughout most of September (some reversion over the past 2 days). At a regional level, N. America L/S funds are flat to slightly up MTD, up around +0-30bps and are thus outpacing the SPX. The long-short spread has continued to improve steadily since mid-August but slowed yesterday as shorts outperformed. In EMEA, net returns among L/S funds are positive MTD, gaining around +0.5-1.3% and outperforming the headline European index. Tyler Durden Sat, 09/25/2021 - 20:30.....»»

Category: dealsSource: nytSep 25th, 2021

Futures Rise On Taper, Evergrande Optimism

Futures Rise On Taper, Evergrande Optimism US index futures jumped overnight even as the Fed confirmed that a November tapering was now guaranteed and would be completed by mid-2022 with one rate hike now on deck, while maintaining the possibility to extend stimulus if necessitated by the economy. Sentiment got an additional boost from a strong showing of Evergrande stock - which closed up 17% - during the Chinese session, which peaked just after Bloomberg reported that China told Evergrande to avoid a near-term dollar bond default and which suggested that the "government wants to avoid an imminent collapse of the developer" however that quickly reversed when the WSJ reported, just one hour later, that China was making preparations for Evergrande's demise, and although that hammered stocks, the report explicitly noted that a worst-case scenario for Evergrande would mean a partial or full nationalization as "local-level government agencies and state-owned enterprises have been instructed to step in only at the last minute should Evergrande fail to manage its affairs in an orderly fashion." In other words, both reports are bullish: either foreign creditors are made whole (no default) as per BBG or the situation deteriorates and Evergrande is nationalized ("SOEs step in") as per WSJ. According to Bloomberg, confidence is building that markets can ride out a pullback in Fed stimulus, unlike 2013 when the taper tantrum triggered large losses in bonds and equities. "Investors are betting that the economic and profit recovery will be strong enough to outweigh a reduction in asset purchases, while ultra-low rates will continue to support riskier assets even as concerns linger about contagion from China’s real-estate woes." That's one view: the other is that the Fed has so broken the market's discounting ability we won't know just how bad tapering will get until it actually begins. “The Fed has got to be pleased that their communication on the longer way to tapering has avoided the dreaded fear of the tantrum,” Jeffrey Rosenberg, senior portfolio manager for systematic fixed income at BlackRock Inc., said on Bloomberg Television. “This is a very good outcome for the Fed in terms of signaling their intent to give the market information well ahead of the tapering decision.” Then there is the question of Evergrande: “With regards to Evergrande, all those people who are waiting for a Lehman moment in China will probably have to wait another turn,” said Ken Peng, an investment strategist at Citi Private Bank Asia Pacific. “So I wouldn’t treat this as completely bad, but there are definitely a lot of risks on the horizon.” In any case, today's action is a continuation of the best day in two months for both the Dow and the S&P which staged a strong recovery from two-month lows hit earlier in the week, and as of 745am ET, S&P 500 E-minis were up 25.25 points, or 0.6%, Dow E-minis were up 202 points, or 0.59%, while Nasdaq 100 E-minis were up 92.0 points, or 0.60%. In the premarket, electric vehicle startup Lucid Group rose 3.1% in U.S. premarket trading. PAVmed (PVM US) jumps 11% after its Lucid Diagnostics unit announced plans to list on the Global Market of the Nasdaq Stock Market.  Here are some of the biggest movers today: U.S.-listed Chinese stocks rise in premarket trading as fears of contagion from China Evergrande Group’s debt crisis ease. Blackberry (BB US) shares rise 8.7% in premarket after co.’s 2Q adjusted revenue beat the average of analysts’ estimates Eargo (EAR US) falls 57% in Thursday premarket after the hearing aid company revealed it was the target of a Justice Department criminal probe and withdrew its forecasts for the year Amplitude Healthcare Acquisition (AMHC US) doubled in U.S. premarket trading after the SPAC’s shareholders approved the previously announced business combination with Jasper Therapeutics Steelcase (SCS US) fell 4.8% Wednesday postmarket after the office products company reported revenue for the second quarter that missed the average analyst estimate Vertex Energy Inc. (VTNR US) gained 2.1% premarket after saying the planned acquisition of a refinery in Mobile, Alabama from Royal DutVTNR US Equitych Shell Plc is on schedule Synlogic (SYBX US) shares declined 9.7% premarket after it launched a stock offering launched without disclosing a size HB Fuller (FUL US) climbed 2.7% in postmarket trading after third quarter sales beat even the highest analyst estimate Europe's Stoxx 600 index rose 0.9%, lifted by carmakers, tech stocks and utilities, which helped it recover losses sparked earlier in the week by concerns about Evergrande and China’s crackdown on its property sector. The gauge held its gain after surveys of purchasing managers showed business activity in the euro area lost momentum and slowed broadly in September after demand peaked over the summer and supply-chain bottlenecks hurt services and manufacturers. Euro Area Composite PMI (September, Flash): 56.1, consensus 58.5, last 59.0. Euro Area Manufacturing PMI (September, Flash): 58.7, consensus 60.3, last 61.4. Euro Area Services PMI (September, Flash): 56.3, consensus 58.5, last 59.0. Germany Composite PMI (September, Flash): 55.3, consensus 59.2, last 60.0. France Composite PMI (September, Flash): 55.1, consensus 55.7, last 55.9. UK Composite PMI (September, Flash): 54.1, consensus 54.6, last 54.8. Commenting on Europe's PMIs, Goldman said that the Euro area composite PMI declined by 2.9pt to 56.1 in September, well below consensus expectations. The softening was broad-based across countries but primarily led by Germany. The peripheral composite flash PMI also weakened significantly in September but remain very high by historical standards (-2.4pt to 57.5). Across sectors, the September composite decline was also broad-based, with manufacturing output softening (-3.3pt to 55.6) to a similar extent as services (-2.7pt to 56.3). Supply-side issues and upward cost and price pressures continued to be widely reported. Expectations of future output growth declined by less than spot output on the back of delta variant worries and supply issues, remaining far above historically average levels. Earlier in the session, Asian stocks rose for the first time in four sessions, as Hong Kong helped lead a rally on hopes that troubled property firm China Evergrande Group will make progress on debt repayment. The MSCI Asia Pacific Index climbed as much as 0.5%, with Tencent and Meituan providing the biggest boosts. The Hang Seng jumped as much as 2.5%, led by real estate stocks as Evergrande surged more than 30%. Hong Kong shares later pared their gains. Asian markets were also cheered by gains in U.S. stocks overnight even as the Federal Reserve said it may begin scaling back stimulus this year. A $17 billion net liquidity injection from the People’s Bank of China also provided a lift, while the Fed and Bank of Japan downplayed Evergrande risks in comments accompanying policy decisions Wednesday. Evergrande’s stock closed 18% higher in Hong Kong, in a delayed reaction to news a unit of the developer had negotiated interest payments on yuan notes. A coupon payment on its 2022 dollar bond is due on Thursday “Investors are perhaps reassessing the tail risk of a disorderly fallout from Evergrande’s credit issues,” said Chetan Seth, a strategist at Nomura. “However, I am not sure if the fundamental issue around its sustainable deleveraging has been addressed. I suspect markets will likely remain quite volatile until we have some definite direction from authorities on the eventual resolution of Evergrande’s debt problems.” Stocks rose in most markets, with Australia, Taiwan, Singapore and India also among the day’s big winners. South Korea’s benchmark was the lone decliner, while Japan was closed for a holiday In rates, Treasuries were off session lows, with the 10Y trading a 1.34%, but remained under pressure in early U.S. session led by intermediate sectors, where 5Y yield touched highest since July 2. Wednesday’s dramatic yield-curve flattening move unleashed by Fed communications continued, compressing 5s30s spread to 93.8bp, lowest since May 2020. UK 10-year yield climbed 3.4bp to session high 0.833% following BOE rate decision (7-2 vote to keep bond-buying target unchanged); bunds outperformed slightly. Peripheral spreads tighten with long-end Italy outperforming. In FX, the Bloomberg Dollar Spot Index reversed an earlier gain and dropped 0.3% as the dollar weakened against all of its Group-of-10 peers apart from the yen amid a more positive sentiment. CAD, NOK and SEK are the strongest performers in G-10, JPY the laggard.  The euro and the pound briefly pared gains after weaker-than-forecast German and British PMIs. The pound rebounded from an eight-month low amid a return of global risk appetite as investors assessed whether the Bank of England will follow the Federal Reserve’s hawkish tone later Thursday. The yield differential between 10-year German and Italian debt narrowed to its tightest since April. Norway’s krone advanced after Norges Bank raised its policy rate in line with expectations and signaled a faster pace of tightening over the coming years. The franc whipsawed as the Swiss National Bank kept its policy rate and deposit rate at record lows, as expected, and reiterated its pledge to wage currency market interventions. The yen fell as a unit of China Evergrande said it had reached an agreement with bond holders over an interest payment, reducing demand for haven assets. Turkey’s lira slumped toa record low against the dollar after the central bank unexpectedly cut interest rates. In commodities, crude futures drifted lower after a rangebound Asia session. WTI was 0.25% lower, trading near $72; Brent dips into the red, so far holding above $76. Spot gold adds $3.5, gentle reversing Asia’s losses to trade near $1,771/oz. Base metals are well bid with LME aluminum leading gains. Bitcoin steadied just below $44,000. Looking at the day ahead, we get the weekly initial jobless claims, the Chicago Fed’s national activity index for August, and the Kansas City fed’s manufacturing activity index for September. From central banks, there’ll be a monetary policy decision from the Bank of England, while the ECB will be publishing their Economic Bulletin and the ECB’s Elderson will also speak. From emerging markets, there’ll also be monetary policy decisions from the Central Bank of Turkey and the South African Reserve Bank. Finally in Germany, there’s an election debate with the lead candidates from the Bundestag parties. Market Snapshot S&P 500 futures up 0.7% to 4,413.75 STOXX Europe 600 up 1.1% to 468.32 MXAP up 0.5% to 200.57 MXAPJ up 0.9% to 645.76 Nikkei down 0.7% to 29,639.40 Topix down 1.0% to 2,043.55 Hang Seng Index up 1.2% to 24,510.98 Shanghai Composite up 0.4% to 3,642.22 Sensex up 1.4% to 59,728.37 Australia S&P/ASX 200 up 1.0% to 7,370.22 Kospi down 0.4% to 3,127.58 German 10Y yield fell 5.6 bps to -0.306% Euro up 0.4% to $1.1728 Brent Futures up 0.3% to $76.39/bbl Gold spot up 0.0% to $1,768.25 U.S. Dollar Index down 0.33% to 93.16 Top Overnight News from Bloomberg Financial regulators in Beijing issued a broad set of instructions to China Evergrande Group, telling the embattled developer to focus on completing unfinished properties and repaying individual investors while avoiding a near-term default on dollar bonds China’s central bank net-injected the most short- term liquidity in eight months into the financial system, with markets roiled by concerns over China Evergrande Group’s debt crisis Europe’s worst energy crisis in decades could drag deep into the cold months as Russia is unlikely to boost shipments until at least November Business activity in the euro area “markedly” lost momentum in September after demand peaked over the summer and supply chain bottlenecks hurt both services and manufacturers. Surveys of purchasing managers by IHS Markit showed growth in both sectors slowing more than expected, bringing overall activity to a five-month low. Input costs, meanwhile, surged to the highest in 21 years, according to the report The U.K. private sector had its weakest month since the height of the winter lockdown and inflation pressures escalated in September, adding to evidence that the recovery is running into significant headwinds, IHS Markit said The U.K.’s record- breaking debut green bond sale has given debt chief Robert Stheeman conviction on the benefits of an environmental borrowing program. The 10 billion-pound ($13.7 billion) deal this week was the biggest-ever ethical bond sale and the country is already planning another offering next month A more detailed look at global markets courtesy of Newsquaw Asian equity markets traded mostly positive as the region took its cue from the gains in US with the improved global sentiment spurred by some easing of Evergrande concerns and with stocks also unfazed by the marginally more hawkish than anticipated FOMC announcement (detailed above). ASX 200 (+1.0%) was underpinned by outperformance in the commodity-related sectors and strength in defensives, which have more than atoned for the losses in tech and financials, as well as helped markets overlook the record daily COVID-19 infections in Victoria state. Hang Seng (+0.7%) and Shanghai Comp. (+0.6%) were also positive after another respectable liquidity operation by the PBoC and with some relief in Evergrande shares which saw early gains of more than 30% after recent reports suggested a potential restructuring by China’s government and with the Co. Chairman noting that the top priority is to help wealth investors redeem their products, although the majority of the Evergrande gains were then pared and unit China Evergrande New Energy Vehicle fully retraced the initial double-digit advances. KOSPI (-0.5%) was the laggard as it played catch up to the recent losses on its first trading day of the week and amid concerns that COVID cases could surge following the holiday period, while Japanese markets were closed in observance of the Autumnal Equinox Day. China Pumps $17 Billion Into System Amid Evergrande Concerns China Stocks From Property to Tech Jump on Evergrande Respite Philippines Holds Key Rate to Spur Growth Amid Higher Prices Taiwan’s Trade Deal Application Sets Up Showdown With China Top Asian News European equities (Stoxx 600 +0.9%) trade on the front-foot and have extended gains since the cash open with the Stoxx 600 now higher on the week after Monday’s heavy losses. From a macro perspective, price action in Europe has been undeterred by a slowdown in Eurozone PMIs which saw the composite metric slip to 56.1 from 59.0 (exp. 58.5) with IHS Markit noting “an unwelcome combination of sharply slower economic growth and steeply rising prices.” Instead, stocks in the region have taken the cue from a firmer US and Asia-Pac handover with performance in Chinese markets aided by further liquidity injections by the PBoC. Some positivity has also been observed on the Evergrande front amid mounting expectations of a potential restructuring at the company. That said, at the time of writing, it remains unclear what the company’s intentions are for repaying its USD 83.5mln onshore coupon payment. Note, ING highlights that “missing that payment today would still leave a 30-day grace period before this is registered as a default”. The most recent reports via WSJ indicate that Chinese authorities are asking local governments to begin preparations for the potential downfall of Evergrande; however, the article highlights that this is a last resort and Beijing is reluctant to step in. Nonetheless, this article has taken the shine off the mornings risk appetite, though we do remain firmer on the session. Stateside, as the dust settles on yesterday’s FOMC announcement, futures are firmer with outperformance in the RTY (+0.8% vs. ES +0.7%). Sectors in Europe are higher across the board with outperformance in Tech and Autos with the latter aided by gains in Faurecia (+4.6%) who sit at the top of the Stoxx 600 after making an unsurprising cut to its guidance, which will at least provide some clarity on the Co.’s near-term future; in sympathy, Valeo (+6.6) is also a notable gainer in the region. To the downside, Entain (+2.6%) sit at the foot of the Stoxx 600 after recent strong gains with the latest newsflow surrounding the Co. noting that MGM Resorts is considering different methods to acquire control of the BetMGM online gambling business JV, following the DraftKings offer for Entain, according to sources. The agreement between Entain and MGM gives MGM the ability to block any deal with competing businesses; MGM officials believe this grants the leverage to take full control of BetMGM without spending much. Top European News BOE Confronts Rising Prices, Slower Growth: Decision Guide La Banque Postale Eyes Retail, Asset Management M&A in Europe Activist Bluebell Raises Pressure on Glaxo CEO Walmsley Norway Delivers Rate Lift-Off With Next Hike Set for December In FX, not much bang for the Buck even though the FOMC matched the most hawkish market expectations and Fed chair Powell arguably went further by concluding in the post-meeting press conference that substantial progress on the lagging labour front is all but done. Hence, assuming the economy remains on course, tapering could start as soon as November and be completed my the middle of 2022, though he continued to play down tightening prospects irrespective of the more hawkish trajectory implied by the latest SEP dot plots that are now skewed towards at least one hike next year and a cumulative seven over the forecast horizon. However, the Greenback only managed to grind out marginally higher highs overnight, with the index reaching 93.526 vs 93.517 at best yesterday before retreating quite sharply and quickly to 93.138 in advance of jobless claims and Markit’s flash PMIs. CAD/NZD/AUD - The Loonie is leading the comeback charge in major circles and only partially assisted by WTI keeping a firm bid mostly beyond Usd 72/brl, and Usd/Cad may remain contained within 1.2796-50 ahead of Canadian retail sales given decent option expiry interest nearby and protecting the downside (1 bn between 1.2650-65 and 2.7 bn from 1.2620-00). Meanwhile, the Kiwi has secured a firmer grip on the 0.7000 handle to test 0.7050 pre-NZ trade and the Aussie is looking much more comfortable beyond 0.7250 amidst signs of improvement in the flash PMIs, albeit with the services and composite headline indices still some way short of the 50.0 mark. NOK/GBP/EUR/CHF - All firmer, and the Norwegian Crown outperforming following confirmation of the start of rate normalisation by the Norges Bank that also underscored another 25 bp hike in December and further tightening via a loftier rate path. Eur/Nok encountered some support around 10.1000 for a while, but is now below, while the Pound has rebounded against the Dollar and Euro in the run up to the BoE at midday. Cable is back up around 1.3770 and Eur/Gbp circa 0.8580 as Eur/Usd hovers in the low 1.1700 area eyeing multiple and a couple of huge option expiries (at the 1.1700 strike in 4.1 bn, 1.1730 in 1 bn, 1.1745-55 totalling 2.7 bn and 1.8 bn from 1.1790-1.1800). Note, Eurozone and UK flash PMIs did not live up to their name, but hardly impacted. Elsewhere, the Franc is lagging either side of 0.9250 vs the Buck and 1.0835 against the Euro on the back of a dovish SNB Quarterly Review that retained a high Chf valuation and necessity to maintain NIRP, with only minor change in the ordering of the language surrounding intervention. JPY - The Yen is struggling to keep its head afloat of 110.00 vs the Greenback as Treasury yields rebound and risk sentiment remains bullish pre-Japanese CPI and in thinner trading conditions due to the Autumn Equinox holiday. In commodities, WTI and Brent have been choppy throughout the morning in-spite of the broadly constructive risk appetite. Benchmarks spent much of the morning in proximity to the unchanged mark but the most recent Evergrande developments, via WSJ, have dampened sentiment and sent WTI and Brent back into negative territory for the session and printing incremental fresh lows at the time of publication. Back to crude, newsflow has once again centred around energy ministry commentary with Iraq making clear that oil exports will continue to increase. Elsewhere, gas remains at the forefront of focus particularly in the UK/Europe but developments today have been somewhat incremental. On the subject, Citi writes that Asia and Europe Nat. Gas prices could reach USD 100/MMBtu of USD 580/BOE in the winter, under their tail-risk scenario. For metals, its very much a case of more of the same with base-metals supportive, albeit off-best given Evergrande, after a robust APAC session post-FOMC. Given the gas issues, desks highlight that some companies are being forced to suspend/reduce production of items such as steel in Asian/European markets, a narrative that could become pertinent for broader prices if the situation continues. Elsewhere, spot gold and silver are both modestly firmer but remain well within the range of yesterday’s session and are yet to recovery from the pressure seen in wake of the FOMC. US Event Calendar 8:30am: Sept. Initial Jobless Claims, est. 320,000, prior 332,000; Continuing Claims, est. 2.6m, prior 2.67m 8:30am: Aug. Chicago Fed Nat Activity Index, est. 0.50, prior 0.53 9:45am: Sept. Markit US Composite PMI, prior 55.4 9:45am: Sept. Markit US Services PMI, est. 54.9, prior 55.1 9:45am: Sept. Markit US Manufacturing PMI, est. 61.0, prior 61.1 11am: Sept. Kansas City Fed Manf. Activity, est. 25, prior 29 12pm: 2Q US Household Change in Net Wor, prior $5t DB's Jim Reid concludes the overnight wrap My wife was at a parents event at school last night so I had to read three lots of bedtime stories just as the Fed were announcing their policy decision. Peppa Pig, Biff and Kipper, and somebody called Wonder Kid were interspersed with Powell’s press conference live on my phone. It’s fair to say the kids weren’t that impressed by the dot plot and just wanted to join them up. The twins (just turned 4) got their first reading book homework this week and it was a bit sad that one of them was deemed ready to have one with words whereas the other one only pictures. The latter was very upset and cried that his brother had words and he didn’t. That should create even more competitive tension! Back to the dots and yesterday’s Fed meeting was on the hawkish side in terms of the dots and also in terms of Powell’s confidence that the taper could be complete by mid-2022. Powell said that the Fed could begin tapering bond purchases as soon as the November FOMC meeting, in line with our US economists’ forecasts. He left some room for uncertainty, saying they would taper only “If the economy continues to progress broadly in line with expectations, and also the overall situation is appropriate for this.” However he made clear that “the timing and pace of the coming reduction in asset purchases will not be intended to carry a direct signal regarding the timing of interest rate liftoff.” The quarterly “dot plot” showed that the 18 FOMC officials were split on whether to start raising rates next year or not. In June, the median dot indicated no rate increases until 2023, but now 6 members see a 25bps raise next year and 3 members see two such hikes. Their inflation forecasts were also revised up and DB’s Matt Luzzetti writes in his FOMC review (link here) that “If inflation is at or below the Fed's current forecast next year of 2.3% core PCE, liftoff is likely to come in 2023, consistent with our view. However, if inflation proves to be higher with inflation expectations continuing to rise, the first rate increase could well migrate into 2022.” Markets took the overall meeting very much in its stride with the biggest impact probably being a yield curve flattening even if US 10yr Treasury yields traded in just over a 4bp range yesterday and finishing -2.2bps lower at 1.301%. The 5y30y curve flattened -6.7bps to 95.6bps, its flattest level since August 2020, while the 2y10y curve was -4.2bps flatter. So the market seems to believe the more hawkish the Fed gets the more likely they’ll control inflation and/or choke the recovery. The puzzle is that even if the dots are correct, real Fed funds should still be negative and very accommodative historically for all of the forecasting period. As such the market has a very dim view of the ability of the economy to withstand rate hikes or alternatively that the QE technicals are overpowering everything at the moment. In equities, the S&P 500 was up nearly +1.0% 15 minutes prior to the Fed, and then rallied a further 0.5% in the immediate aftermath before a late dip look it back to +0.95%. The late dip meant that the S&P still has not seen a 1% up day since July 23. The index’s rise was driven by cyclicals in particular with energy (+3.17%), semiconductors (-2.20%), and banks (+2.13%) leading the way. Asian markets are mostly trading higher this morning with the Hang Seng (+0.69%), Shanghai Comp (+0.58%), ASX (+1.03%) and India’s Nifty (+0.81%) all up. The Kospi (-0.36%) is trading lower though and is still catching up from the early week holidays. Japan’s markets are closed for a holiday today. Futures on the S&P 500 are up +0.25% while those on the Stoxx 50 are up +0.49%. There is no new news on the Evergrande debt crisis however markets participants are likely to pay attention to whether the group is able to make interest rate payment on its 5 year dollar note today after the group had said yesterday that it resolved a domestic bond coupon by negotiations which was also due today. As we highlighted in our CoTD flash poll conducted earlier this week, market participants are not too worried about a wider fallout from the Evergrande crisis and even the Hang Seng Properties index is up +3.93% this morning and is largely back at the levels before the big Monday sell-off of -6.69%. Overnight we have received flash PMIs for Australia which improved as parts of the country have eased the coronavirus restrictions. The services reading came in at 44.9 (vs. 42.9 last month) and the manufacturing print was even stronger at 57.3 (vs. 52.0 last month). Japan’s flash PMIs will be out tomorrow due to today’s holiday. Ahead of the Fed, markets had continued to rebound from their declines earlier in the week, with Europe’s STOXX 600 gaining +0.99% to narrowly put the index in positive territory for the week. This continues the theme of a relative outperformance among European equities compared to the US, with the STOXX 600 having outpaced the S&P 500 for 5 consecutive sessions now, though obviously by a slim margin yesterday. Sovereign bonds in Europe also posted gains, with yields on 10yr bunds (-0.7bps), OATs (-1.0bps) and BTPs (-3.2bps) all moving lower. Furthermore, there was another tightening in peripheral spreads, with the gap in Italian 10yr yields over bunds falling to 98.8bps yesterday, less than half a basis point away from its tightest level since early April. Moving to fiscal and with Democrats seemingly unable to pass the $3.5 trillion Biden budget plan by Monday, when the House is set to vote on the bipartisan infrastructure bill, Republican leadership is calling on their members to vote against the bipartisan bill in hopes of delaying the process further. While the there is still a high likelihood the measure will eventually get passed, time is becoming a factor. Congress now has just over a week to get a government funding bill through both chambers of congress as well as raise the debt ceiling by next month. Republicans have told Democrats to do the latter in a partisan manner and include it in the reconciliation process which could mean that a significant portion of the Biden economic agenda – mostly encapsulated in the $3.5 trillion over 10 year budget – may have to be cut down to get the entire Democratic caucus on board. Looking ahead, an event to watch out for today will be the Bank of England’s policy decision at 12:00 London time, where our economists write (link here) that they expect no change in the policy settings. However, they do expect a reaffirmation of the BoE’s updated forward guidance that some tightening will be needed over the next few years to keep inflation in check, even if it’s too early to expect a further hawkish pivot at this stage. Staying on the UK, two further energy suppliers (Avro Energy and Green Supplier) ceased trading yesterday amidst the surge in gas prices, with the two supplying 2.9% of domestic customers between them. We have actually seen a modest fall in European natural gas prices over the last couple of days, with the benchmark future down -4.81% since its close on Monday, although it’s worth noting that still leaves them up +75.90% since the start of August alone. There wasn’t much data to speak of yesterday, though US existing home sales fell to an annualised rate of 5.88 in August (vs. 5.89m expected). Separately, the European Commission’s advance consumer confidence reading for the Euro Area unexpectedly rose to -4.0 in September (vs. -5.9 expected). To the day ahead now, the data highlights include the September flash PMIs from around the world, while in the US there’s the weekly initial jobless claims, the Chicago Fed’s national activity index for August, and the Kansas City fed’s manufacturing activity index for September. From central banks, there’ll be a monetary policy decision from the Bank of England, while the ECB will be publishing their Economic Bulletin and the ECB’s Elderson will also speak. From emerging markets, there’ll also be monetary policy decisions from the Central Bank of Turkey and the South African Reserve Bank. Finally in Germany, there’s an election debate with the lead candidates from the Bundestag parties. Tyler Durden Thu, 09/23/2021 - 08:13.....»»

Category: blogSource: zerohedgeSep 23rd, 2021

ALTCOINS TO BUY: Crypto experts share the best investing opportunities they"re seeing outside of bitcoin

Insider has talked to several experts about which altcoins they like most, why they're bullish, and what they recommend others should be buying now. In this photo illustration of the litecoin, ripple and ethereum cryptocurrency 'altcoins' sit arranged for a photograph Jack Taylor/Getty Image Thousands of cryptocurrencies now exist. It can be difficult to pick winners in such a saturated space. Insider has asked several experts about where they see the biggest opportunities in altcoins. See more stories on Insider's business page. Cryptocurrencies have exploded in popularity over the last several months. Of course, the most popular remains bitcoin.But some other smaller cryptos are gaining serious steam as well, as the concept of digital currencies continues to seep into the public consciousness.However, it can be difficult to know which cryptocurrencies to invest in, or whether you should in the first place. There are currently thousands of different types of coins on the market. And some - like dogecoin, which was founded as a joke - don't appear to be serious. Others, like some built on the Ethereum blockchain, appear to have better use cases. And overall, there are legitimate concerns over whether the altcoin boom is unsustainable and will soon come crashing down.Crypto is an esoteric domain - its intricacies can be difficult to understand, especially for those new to the space.To help cut through the noise, Insider has talked to several experts about which altcoins - cryptocurrencies other than bitcoin - they believe have the best upside. These experts also described the fundamentals and technicals that make these altcoins attractive. Their views are shared in the articles below.imghed with link and appendage blurb Coach JV, crypto investor and founder of 3T Warrior Academy. Coach JV 4 altcoins to buy: A 12-year banking veteran says the biggest generational wealth transfer that's about to take place will trigger a 'parabolic' bull run in crypto. He explains how he's maximizing gains on the cryptos he's holding.John Vasquez quit a 12-year banking career to dive into crypto full-time.He's betting that the massive wealth transfer from baby boomers to their younger heirs will lead to a crypto boom.Vasquez, known as Coach JV on social media, explained what people should know about crypto before investing and the altcoins he's buying. Adrian Zduńczyk. Adrian Zduńczyk 5 altcoins that could surge 10-100x in the coming 'legendary' altcoin season that outshines bitcoin, according to a crypto technical analyst who's holding themCrypto technical analyst Adrian Zduńczyk says some altcoins due to outperform bitcoin in a "legendary" way. Zduńczyk is the founder and CEO of the Birb Nest, a trading platform. He shared five altcoins with us that he thinks could surge 10-100 times. Matthew Sigel is the head of digital assets research at VanEck. VanEck The head of digital assets research at an $81 billion money manager breaks down 3 drivers fueling the $2 trillion crypto market's latest bull run - and shares 3 competing altcoins to ethereum, including one that could nearly double in the next yearEthereum is the second-biggest cryptocurrency at the moment, sitting behind bitcoin. But it has problems like expensive transaction fees. Matthew Sigel, head of digital asset research at VanEck, shares three altcoins to rival ether. Evergrande is China's second-biggest property developer. Noel Celis/Getty Images A trader who warned of the 2017 and 2021 bitcoin bull market tops shares 4 altcoins he's bullish on for the long-term - but breaks down why Evergrande's crisis is keeping him away from crypto at the momentThe looming debt crisis of Chinese real estate developer Evergrande sent shockwaves through global equity markets in September - and crypto was not spared.Given the recent sell-offs, Goodman said he was keeping his money on the sidelines in the crypto space until prices appear to be in an uptrend again. He shared four projects he thinks can do well in the longer-term. STR/NurPhoto via Getty Images Bitcoin is ready for a 'monster run' up to $85,000 if it clears a key resistance level, a crypto evangelist predicts - and shares 7 altcoins he's bullish on nowEthereum's major upgrade in early August led to a 9.6% intraday price spike, and investors haven't yet sold the positive news. That's one reason why David Gokhshtein is bullish. He also told us his theses for six smaller altcoins he owns. A local business in El Salvador that accepts bitcoin payments. Alex Pena/Anadolu Agency via Getty Images Why crypto crashed: 4 experts break down what Tuesday's sudden drop might mean for the altcoin season and NFT frenzy - and share 12 high-quality tokens that are likely to continue rallying toward the year's endVarious cryptos tumbled on Tuesday September 7 as El Salvador officially adopted bitcoin as legal tender. By the following morning, more than $3.25 billion in crypto positions had been liquidated over 24 hours, affecting more than 300,000 traders, according to Bybit. We asked experts what was driving the sell-off, and where they recommended buying dips. Dogecoin is a 'meme' cryptocurrency, seemingly created as a joke Yuriko Nakao/Getty The chief economist of a blockchain data firm breaks down why the current dogecoin rally has more legs to run - and lays out why 'anything is possible' for the altcoin, including reaching $1When dogecoin rose over 12,000% to $0.68 earlier this year, it shocked the investing community. It has since cooled off, though its price has picked up in recent weeks. It now sits around $.027. What will it do next? Chainalysis chief economist Philip Gradwell broke down why he think it will go to $1. crypto coins circle Nurphoto WATCH: Crypto analyst David Grider and venture capital investor Ria Bhutoria discuss state of the market, under-the-radar altcoins, and outlook on regulationInsider recently hosted a live webcast featuring two crypto experts. They broke down their views on everything from the recent slump to the possibility of regulation. Lyn Alden is the founder of Lyn Alden Investment Strategy Lyn Alden Investment Strategy Bitcoin to $100,000 and ether to $5,000: Famed investment strategist Lyn Alden explains her bullish predictions for the largest cryptos in 2022, and why there are only 2 altcoins worth watchingLyn Alden says most altcoins are "smoke and mirrors." But there are at least two with interesting technologies that are worth watching. Marnie Griffiths/Getty A crypto evangelist explains why he's going 'all in on altcoins' - and shares why he's worried about bitcoin whales taking over that marketAs some altcoins have shown, there is potential for huge appreciation in crypto outside of bitcoin. David Gokhshtein is one investor that's looking to take advantage of these opportunities. He shared two altcoins he's bullish on. Mack Lorden, left, and Lucas Dimos are TikTok crypto influencers. Mack Lorden and Lucas Dimos 2 crypto traders and TikTok influencers share their 6 go-to altcoins for riding out crypto bear markets - including one that's up more than 11,000% since its launch in 2017The broader crypto space just went through a rough patch after huge gains earlier this year. Like any asset class, it has its bull and bear markets. When crypto bear markets do come, crypto influencers Mack Lorden and Lucas Dimos told us that six altcoins in particular help them hedge losses. Many investors are excited about the Ethereum network's uses. SOPA Images/Getty Images The head of institutional coverage at crypto trading platform FalconX shares 9 Ethereum-tied digital tokens to take advantage of the DeFi revolution - and breaks down why Ethereum still has 'significant' upsideMany altcoins are built on top of the Ethereum blockchain. Aya Kantorovich, the head of institutional coverage at crypto exchange FalconX, shared nine coins built on top of the ethereum blockchain that she thinks have solid use cases."I personally always like coins with application," Kantorovich said.Read the original article on Business Insider.....»»

Category: worldSource: nytSep 22nd, 2021

Precarious Market Action

Precarious Market Action Dan Laboe here, Editor of the Headline Trader portfolio. I am covering for the acclaimed Jim who will be back in action tomorrow. The market is growing increasingly cautious as we enter post-earnings season action. This precarious market posture was apparent in today's dicey trade. Stocks were buoyant for most of the day (trading right around even) until the last hour of the session, where indecisiveness turned into panic, causing all the major averages to spill into the close. We are entering a seasonally weak period for the public equity market (September & October have been the worst months for stocks in the past decade), where down days are expected. Market participants are increasingly taking on the mindset that this may be as good as it gets, which could cause further short-term volatility. This is the second consecutive down day for all the major averages, with the S&P 500 and Dow Jones slipping 1.07% & 1.08%, respectively. The growth-driven Nasdaq 100 was punished marginally less because of its larger decline yesterday but still experienced a 0.97% decline. The VIX broke above its 200-day moving average for just the 3rd time since early March, and its 50-day turned into a support today. This may be an indication that volatility will remain with us for a time. Consumer discretionary, the biggest laggard yesterday following weak retail sales data, was the only market sector to close in the green today. This morning, robust earnings from Lowe's (LOW) and TJX (TJX) drove fresh hope back into the retail space. Fed Minutes July's Fed Minutes were published this afternoon, and the markets had an immediate knee-jerk reaction to the Fed's focus on the potential impact of the Delta-variant, causing the US 10 Year yield to plummet and equity indexes to jump in the 5 minutes that followed its release. This move quickly reversed with an exaggerated move in the opposite direction, which inevitably led to the end of session sell-off. Today's released Fed Minutes were stale. The Fed in last month's FOMC meeting is not the same Fed that we have today. Since the exceptional July jobs report earlier this month, members of the Fed have changed their stance on the tapering timeline. In the last couple of weeks, several Central Bankers have come out and said that it would be prudent to start paring its $120 billion in asset purchases sooner rather than later. The markets are now pricing in a September announcement (FOMC meeting September 21-22) to start tapering in October and complete its asset purchasing program in mid-2022. This morning, St. Louis Fed president James Bullard discussed the risks of delaying monetary tightening, stating that if the Fed's inflation projections are wrong, they may be forced to implement abrupt and potentially "very disruptive" policy changes. He declared that "every indication is that labor markets are about as tight as they ever get." Bullard wants the Fed to be done tapering by the first quarter of next year so that the Central Bank would have the flexibility to begin liftoff (first Fed Funds rate hike) as soon as possible. Every day it seems that the Fed gets more hawkish, but if the Delta-variant does begin to impact the economy, this narrative will quickly reverse.  Is This As Good As It Gets? Market participants are taking on a 'this is as good as it gets' mentality with peak earnings growth, ultra-low interest rates, peak consumer demand, and accommodative monetary/fiscal policies, all now ostensibly in the rearview mirror. Investors still have their mouths open as we round out a jaw-dropping Q2 earnings season. This was one of the best earnings seasons in history, with 88% of companies beating EPS estimates by an average of 17.5% while exhibiting record profit margins averaging 13.6%. Earnings and revenues are up an unprecedented 103% & 28% year-over-year, respectively. Despite the exceptionally weak Q2 2020 EPS comps, earnings are still up over 30% from pre-pandemic levels. Now investors are looking at decelerating earnings growth in the coming quarters, forcing market participants to reevaluate the market's rich valuation multiples. Since the pandemic lockdowns began, the Fed-induced ultra-low interest rate environment has provided a nice tailwind for high-growth stocks. Record low cost of capital (driven by low yields) provided nascent innovation-powered companies with an almost endless upside in the equity market. Analysts were able to catapult the value of growth businesses' projected future earnings, justifying some of the crazy valuation multiples we saw earlier this year. Most of the over euphoric valuations on unprofitable growth stocks have been compressed by the rising yields in anticipation of liftoff. Consumer spending took off in the first 4 months of 2021 as the economic reopening drove an unparalleled tidal wave of pent-up demand on Main Street. The pandemic lockdowns and resulting record levels of savings/wealth in the US ($19 trillion increase in wealth, 26% increase in net wealth) propelled our society's propensity to spend as storefronts reopened across the country. This effect has decelerated since April, causing investors to question if peak consumer spending is in the past. With back-to-school shopping and the holiday season around the corner, I find this notion unlikely. The unprecedented level of accommodation provided by record monetary (Federal Reserve) and fiscal (Federal Government) spending amid the pandemic is the only reason that our economy has been able to not only recover at such a speed but come out the other side better than ever. The PPP loans, COVID checks, and unemployment benefits provided by the Federal government provided the economy with enough liquidity to do a little better than survive last year and now thrive during the recovery. The Fed's swift action of dropping Fed Fund rates to 0-0.25% and its subsequent $120 billion monthly asset purchases (aka quantitative easing) allowed the equity market to take off after the initial pandemic sell-off. The accommodative monetary and fiscal policies are beginning to phase out. Still, I expect the aforementioned positive impacts will continue to echo in our economy for quarters to come. The best is yet to come. We are reentering the Roaring 20s with ambition. Technological advancements are accelerating faster than ever, pushing our economy to do the same. I expect to see growing annual stock market returns as prolifically advancing tech thrusts valuations to continuously new highs. A Technical Omen That Could Spell Trouble For Investors A Hindenburg Omen, a technical indicator that signals an elevated probability of a market crash, has been reached by this precarious market. This indicator looks for an elevated number of new 52-week highs and lows that surpasses 2.2% of all securities traded that day (the number of highs cannot be more than double the number of lows), along with an upward trending 50-day moving average, and negatively shifting market sentiment (indicated by the McClellan Oscillator or MCO). This indicator generally implies that market participants are tentative and uncertain. The Hindenburg Omen almost always precedes a stock market downturn but is only about 25% accurate when it is seen. Investors have been positioning themselves defensively as post-earnings price action commenced. These defensive investors are buying stocks in low beta sectors like health care, utilities, consumer staples, and real estate, which have led over the past week of trading. All of the previously mentioned sectors have lagged the broader market over the past 52-weeks, so it's only natural for weakness chasing money managers to rotate into these segments even if an index level correction (10%+ decline from recent highs) isn't coming. I'm not running for the hills quite yet, with trillions of bullish capital still waiting to be deployed on even the most immaterial dips. I am also not adding many new positions to my portfolio. I don't think we will experience a full correction, but I do believe that some consolidation may be in order over the next few months.  Cathie Wood vs. The Big Short's Michael Burry Expected interest rate growth and overzealous valuation multiples on ultra-high-growth stocks have some investors betting against Cathie Wood's Ark Innovation ETF (ARKK). 'Big Short' investor, Michael Burry, who is famous for predicting and profiting from the 2008 financial crisis, revealed a $31 million put position against ARKK, along with a $731 million bet against Tesla (TSLA), which happens to be Cathie's largest holding, in his latest 13-F filing (institutional investment managers' SEC required quarterly report). The actively traded ARKK fund has become the benchmark for high-growth 'market-disruptors,' and Cathie Wood has become an investing icon. Her innovation-driven ETF saw an impressive bull run during the pandemic, exhibiting a 384% 11-month rally from its March 2020 lows to its peak in mid-February, but has recently fallen out of market favor. Soaring yields forced investors to reevaluate the extreme growth multiples in Cathie's 4th Industrial Revolution focused holdings. Cathie Wood fired back at the press surrounding Burry's notable position against her ETF with a tweet saying, "I do not believe that he (Michael Burry) understands the fundamentals that are creating explosive growth and investment opportunities in the innovation space." Burry doesn't have a vendetta against Cathie Wood but sees a short-term trading opportunity. He is making a relatively small bet in his over $2 billion Scion Asset Management portfolio (ARKK put up just 1.5% of total assets under management). Burry believes that the current fundamentals of ARKK's high growth holdings are out of whack in this rising interest rate environment, and he is not alone with this thinking. A record 13.5% of outstanding ARKK shares are currently held short (24.87 million shares), and a Short ARKK ETF, which will trade under the ticker SARK, is awaiting SEC approval. ARKK is looking at a days-to-cover short ratio (number of shares held short divided by daily volume) of 4.6, which isn't exactly a concerning level yet, but it is growing. I personally love how Cathie Wood views this rapidly advancing market and focuses on long-term profitability instead of short-term volatility. I perceive Cathie's pandemic success as a reflection of her savvy ability to recognize market-disrupting innovators, and it finally paid off after more than 5 years of flying under the radar (relatively speaking). That being said, I still utilize her ETF for put option opportunities when they reveal themselves because of the speed at which ARKK moves. Cathie Wood remains one of if not the most influential players in the market today. "The Cathie Wood Effect" has replaced "The Warren Buffett Effect" in this rapidly progressing and digitalizing economic/market environment. ARKK is undoubtedly a long-term hold for the commencing 4th Industrial Revolution, which is already changing the world in which we live.  Today’s Portfolio Highlights Options Trader: Following some of this week's precarious price action, Kevin is pulling profits on the September call option in Nasdaq, Inc (NDAQ), after almost two months of holding. The NDAQ September 180 call contracts crossed the 30 days till expiration threshold, and Kevin doesn't want to lose that time premium baked into these options. This exchange has been an excellent trade for the Options Trader portfolio this year, with NDAQ providing three separate profit-driving trades since April. According to Kevin: "First one was a $892 gain on 4/16. Second one was a $906 gain on 6/24. Looks like we'll get approx. $435 on this one." NDAQ has been on an absolute tear so far this year, rallying over 40% year-to-date (more than doubling the S&P 500s performance). Kevin stated that he would likely jump back into this trade as he still sees further upside potential. Stocks Under $10: The health care sector has led the broader market over the past month of trading, with Moderna (MRNA) and Pfizer (PFE) leading the pack. Brian is taking advantage of this sector's momentum with the addition of Immunovant (IMVT) on this down day for the market. IMVT and its development of monoclonal antibodies for the treatment of autoimmune diseases are developing an early treatment for those with COVID. Brian expects this stock to get a Delta-variant catalyzed boost, and most analysts seem to agree with him with every price target showing a sizable increase from current price levels. Surprise Trader:  Car manufacturers are struggling to keep up with demand as chip shortages continue to plague the space, causing used/old cars to stay on the road longer. Dave is taking advantage of this notion with a read-through trade, adding Advanced Auto Parts (AAP) to the Surprise Trader portfolio. More old cars on the road means more tune-ups and breakdowns that will require vehicle parts. The company is reporting before open next Tuesday, and Dave believes that it has some strong upside potential that the markets are yet to price in. Happy Wednesday! DanRecommendations from Zacks' Private Portfolios: Believe it or not, this article is not available on the Zacks.com website. The commentary is a partial overview of the daily activity from Zacks' private recommendation services. If you would like to follow our Buy and Sell signals in real time, we've made a special arrangement for readers of this website. Starting today you can see all the recommendations from all of Zacks' portfolios absolutely free for 7 days. Our services cover everything from value stocks and momentum trades to insider buying and positive earnings surprises (which we've predicted with an astonishing 80%+ accuracy). Click here to "test drive" Zacks Ultimate for FREE >>  Zacks Investment Research.....»»

Category: topSource: zacksSep 21st, 2021

Energy Stocks and Crude Oil Diverge: What to Do Now

Crude has now come back down to the lows of the year, while energy stocks are trading near highs. It’s no secret that the energy sector has been the best performer this year, as energy companies have experienced stellar revenue and earnings growth. One of the lone bright spots in 2022, energy companies have roared back to life, handily outpacing the broader stock market. And as we’ll see, with both inflation as well as geopolitical pressures continuing to linger, investors are betting that the bullish move may still have room to run.The Zacks Oils and Energy sector is one of just two sectors that are currently in positive territory on the year, up nearly 43% versus a greater than 16% loss for the S&P 500:Image Source: Zacks Investment ResearchHere’s the fascinating part of this picture. For the first half of the year, energy stocks and crude prices moved more or less in sync. We can use the Energy Select Sector SPDR Fund XLE to represent energy companies in this example. The XLE ETF seeks to provide an effective representation of the energy sector of the S&P 500 Index. XLE constituents are companies engaged in oil, gas, and consumable fuel industries, as well as energy equipment and related services.As we can see below, through mid-July, the Energy Select Sector SPDR Fund tracked the movement of crude almost to a T:Image Source: Zacks Investment ResearchBut since then, energy stocks and crude prices have shown notable divergence. Here’s the same chart from mid-July to the present. Crude has now come back down to the lows of the year, while XLE is trading near a new yearly high:Image Source: Zacks Investment ResearchThere are two major forces at play that are responsible for the divergence. The first is declining inflation expectations given a weakening consumer and slowing demand. We’ve seen lagging inflation data begin to roll over, suggesting a potential peak in inflation. And as the outlook for consumers who are saving and spending less continues to deteriorate, oil prices have come down well off their peak.So, we know the reasoning behind lower oil prices. Why the sudden deviation from energy stocks? In a word – earnings. Simply put, energy companies are expected to witness substantial growth in the months ahead, despite oil prices coming down. Going back to our Zacks Oils and Energy sector, companies in this sector are still relatively undervalued while displaying above-average earnings growth:Image Source: Zacks Investment ResearchLet’s take a look at a top-ranked stock within this leading sector.PBF Energy Inc. (PBF)PBF Energy is a leading refiner that produces gasoline, diesel, heating oil, jet fuel, and petrochemicals. The company sells its products in the United States, Canada, and Mexico. PBF also provides rail, truck, and marine transportation services. PBF Energy was founded in 2008 and is headquartered in Parsippany, NJ.PBF sports the highest Zacks Growth and Value Style Scores of ‘A’, indicating the stock is likely to propel higher on the powerful combination of relative undervaluation and sustained earnings growth. The company is part of the Zacks Oil and Gas – Refining and Marketing industry group, which ranks in the top 9% out of more than 250 Zacks Ranked Industries. This group has widely outperformed the market this year, advancing more than 49%.PBF has surpassed earnings estimates in each of the past four quarters. The refiner reported Q3 EPS just last month of $7.96/share, a 32% surprise over the $6.03 consensus estimate. PBF has delivered a trailing four-quarter average earnings surprise of 48.97%, helping the stock soar more than 240% this year alone.Image Source: Zacks Investment ResearchAnalysts are in agreement in terms of earnings revisions and have increased their estimates across the board.  For the fourth quarter, analysts covering PBF have increased their estimates by 54.93% in the past 60 days. The Q4 Zacks Consensus EPS Estimate now stands at $5.19/share, translating to a staggering potential growth rate of 305.47% relative to the same quarter last year.Image Source: Zacks Investment ResearchBacked by a leading industry group and robust history of earnings beats, it’s not difficult to see why this company is a compelling investment. Make sure to keep an eye on PBF as well as the energy sector as markets look to close out 2022 on a positive note. Zacks Names "Single Best Pick to Double" From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all. It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time. This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.Free: See Our Top Stock and 4 Runners Up >>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 PBF Energy Inc. (PBF): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Category: topSource: zacks6 hr. 49 min. ago

Beyond Meat downgraded on results, cash flow guidance

Shares of battered Beyond Meat Inc. are down 3.5% Monday after the stock was downgraded by Barclays amid volatile market conditions and lingering questions around Beyond's results and cash flow guidance. Barclays analyst Benjamin Theurer downgraded the stock to underweight from equal weight while shaving the price target to $10 from $13. "Although the company expects to turn cash flow positive by 2H23, we remain skeptical given current cash burn rates and a sizable net loss of over $100 [million] in 3Q22," Theurer said in a note. Beyond Meat's stock has plunged 81% this year. The broader S&P 500 index is down 17% in 2022.Market Pulse Stories are Rapid-fire, short news bursts on stocks and markets as they move. Visit MarketWatch.com for more information on this news......»»

Category: topSource: marketwatch8 hr. 5 min. ago

2 Air Conditioner & Heating Stocks to Buy in a Prospering Industry

Despite the pandemic-induced challenges, Zacks Building Products - Air Conditioner & Heating industry stocks FIX and AAON are likely to gain from an improved non-residential market, pro-environmental moves and technological development. The Zacks Building Products - Air Conditioner & Heating industry has been benefiting from maintaining, monitoring and repairing services along with prudent cost-management practices. Also, the replacement of older systems to reduce electricity consumption and carbon footprint, as well as planned investments in technologies to capture more growth, is acting as a major tailwind for the industry participants like Comfort Systems USA, Inc. FIX and AAON, Inc. AAON. However, supply-chain disruptions and inflationary pressures are major challenges.Industry DescriptionThe Zacks Building Products - Air Conditioner & Heating industry comprises designers, manufacturers, and marketers of a broad range of products for heating, ventilation, air conditioning, and refrigeration markets. The products include rooftop units, chillers, air-handling units, condensing units and coils. The industry players also supply thermostats, insulation materials, refrigerants, grills, registers, sheet metal, tools, concrete pads, tape and adhesives. Air conditioning and heating equipment are sold in residential replacement, commercial and industrial HVAC (heating, ventilation and air conditioning) as well as residential new construction markets.3 Trends Shaping the Future of the Air Conditioner & Heating IndustryU.S. Administration’s Pro-Environmental Moves: Reducing greenhouse gas emissions for a cleaner environmental footprint has been a major focus of the U.S. administration. Many industry participants remain engaged in supporting industries and facilities by selling and maintaining clean and efficient energy systems to reach their environmental goals for carbon reduction, while providing resiliency to grid outages. The companies are also gaining from the fast-growing controlled environment agriculture industry, courtesy of their consistent supply of clean cooling solutions. Overall, the companies are well positioned to gain from the renewable energy drive of the pro-environmental U.S. administration. Meanwhile, the companies have also been benefiting from an improvement in the non-residential market along with a rise in repair and remodeling activities.Technology Augmentation & Inorganic Moves: Persistent investments in technologies designed to revolutionize customer experience seem vital for the industry. Digitization of the companies’ marketplace via e-commerce and iOS/Android-enabled apps, supported by a comprehensive database of product information, continues to see strong momentum. Importantly, new investments in the expansion of distribution, research and development projects, and marketing programs are contributing significantly to the companies’ top lines. The players are also actively pursuing accretive acquisitions to broaden their product portfolio and expand their geographic footprint as well as market share. Meanwhile, services associated with maintaining, monitoring and repairing the existing equipment are also providing the industry participants with stable revenue sources. The industry generates a major share of revenues from these services, which consumers generally cannot suspend even when the construction market fluctuates.Supply-Chain Woes, Rising Costs, Regulations: Supply-chain disruptions and rising raw material costs have been hurting the profit margins of the industry participants. Supply-chain constraints remain a key issue, resulting in inefficiencies and larger inventory. Operating expenses of companies are rising thanks to pandemic-related business challenges and sharp rises in variable operating expenses, including company-wide, performance-based compensation, excessive logistics and freight costs. Meanwhile, the industry is also susceptible to stringent governmental regulations on energy efficiency and gas emissions. HVAC systems use refrigerants for cooling, which is harmful to humans and the environment. Also, stiff competition and the impact of seasonality on the industry’s revenues are significant risks.Zacks Industry Rank Indicates Bright ProspectsThe Zacks Building Products - Air Conditioner & Heating industry is a six-stock group within the broader Zacks Construction sector. The industry currently carries a Zacks Industry Rank #39, which places it in the top 16% of more than 250 Zacks industries.The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates impressive near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.Industry Outperforms S&P 500, SectorThe Zacks Air Conditioner & Heating industry has outperformed the broader Zacks Construction sector and Zacks S&P 500 composite over the past year.Over this period, the industry has lost 12.1% versus the broader sector’s 17.4% decline. Meanwhile, the Zacks S&P 500 composite has slipped 15.1% during the period.One-Year Price PerformanceIndustry's Current ValuationOn the basis of the forward 12-month price to earnings, which is a commonly used multiple for valuing Air Conditioner and Heating stocks, the industry is currently trading at 24.8X versus the S&P 500’s 17.9X and the sector’s 13.4X.Over the past five years, the industry has traded as high as 39.9X, as low as 19.4X and at a median of 24.3X, as the chart below shows.Industry’s P/E Ratio (Forward 12-Month) Versus S&P 5002 Air Conditioner and Heating Stocks to BuyBelow, we have discussed two stocks from the Zacks Air Conditioner & Heating universe that have solid growth potential. The chosen companies currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Comfort Systems USA, Inc.: Based in Houston, TX, this company is a national provider of comprehensive heating, ventilation and air conditioning installation along with maintenance, repair and replacement services. A solid backlog level and substantial ongoing investments in training, productivity and technology are expected to drive growth. Overall positive trends — primarily in industrial, technology, and manufacturing markets served by the company — as well as accretive buyouts are encouraging. The acquisitions have expanded its scale, increased recurring service revenues, and enhanced expertise in complex markets, including industrial, technology and life sciences.Comfort Systems, which currently carries a Zacks Rank #2, has gained 28.8% over the past year. The company is expected to witness 17.7% earnings growth in 2023.Price and Consensus: FIXAAON, Inc.: Based in Tulsa, OK, AAON engineers, manufactures and markets air conditioning as well as heating equipment. The company maintains a balance between new construction and replacement applications and is making the most of robust replacement demand, broadly across the non-residential building market. Despite inflationary cost pressures, the BasX acquisition, which was closed in December 2021, has been delivering solid results for AAON. While supply-chain issues and inflation caused similar issues, BasX has been flexible in adapting to challenges.AAON, which currently carries a Zacks Rank #2, has gained 1.3% over the past year. Earnings are expected to grow 50% in 2023.Price and Consensus: AAON Zacks Names "Single Best Pick to Double" From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all. It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time. This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.Free: See Our Top Stock and 4 Runners Up >>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 Comfort Systems USA, Inc. (FIX): Free Stock Analysis Report AAON, Inc. (AAON): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Category: topSource: zacks11 hr. 21 min. ago

3 Top REITs to Buy From the Rebound in Retail REIT Industry

With shoppers' renewed enthusiasm for in-store shopping experience and retail landlords' focus on omni-channel retailing, adaptive reuse capabilities and essential retail tenants, Zacks REIT and Equity Trust - Retail industry stocks SPG, KIM, SKT are in focus. The Zacks REIT and Equity Trust - Retail industry constituents are poised to benefit from the renewed enthusiasm of shoppers for an exclusive in-store shopping experience following the pandemic downtime. Efforts to support omni-channel retailing, adaptive reuse capabilities and opportunities emanating from consolidations, and focus on e-commerce resistant sectors have poised Simon Property Group, Inc. SPG, Kimco Realty Corporation KIM and Tanger Factory Outlet Centers, Inc. SKT well for growth.However, inflationary pressure and economic slowdown might cast a pall on recovery. Rising borrowing costs and labor market pessimism are likely to weigh down on consumers’ willingness to spend to some extent. Also, higher e-commerce adoption might continue to affect retail landlords’ cash flows.Industry DescriptionThe Zacks REIT and Equity Trust - Retail industry embodies a group of REITs engaged in owning, developing, managing and renting space in a variety of retail real estates. Among these are regional malls, outlet centers, grocery-anchored shopping centers and power centers, including big-box retailers. Also, net lease REITs enjoy the ownership of freestanding properties, wherein both rent and the majority of operating expenses for the properties are borne by the tenants. The overall health of the economy, job market and consumer spending are the main drivers of retail REITs while property locations and trade area demographics play key roles in demand determination. Although dwindling footfall, store closures and retailer bankruptcies were bothering this asset category in the past, it is on its recovery on shoppers’ renewed enthusiasm for an in-person shopping experience.What's Shaping the Future of the REIT and Equity Trust - Retail Industry?Renewed Enthusiasm for In-Store Shopping Experience to Fuel Recovery: This industry is poised to benefit from the renewed enthusiasm of shoppers as they look for an exclusive in-store shopping experience following the pandemic downtime. As such, the landlords remain upbeat about the ongoing holiday shopping season. Also, the optimistic view of retailers for long-term growth is likely to act as a tailwind. Amid this, retailers’ focus has now shifted from the closing of stores to the revival of their growth plans, resulting in more demand for physical store spaces and paving the way for the retail REITs to experience gains in leasing activity, pricing power and flourish. Moreover, retailers are focusing on investments in their stores because apart from serving as showrooms, physical stores offer a convenient location for pick-up or exchange of goods, helping retailers counter the increasing costs associated with last-mile delivery.Limited New Supply and Rapid Formation of New businesses to Drive Leasing: Comparing to the pre-pandemic levels, the construction of new retail space remains dreary. Moreover, lease signings, rent and occupancies in retail real estates are likely to get a boost from limited new supply, the waning of pandemic concerns and the rapid formation of new businesses in the retail sector.Omni-Channel Strategy, Structural Changes in Focus: Omni-channel is the focal point for retailers. Physical stores will be a vital sales channel over the long run because though there is convenience in online shopping, it cannot replace the benefits and satisfaction of visiting a brick-and-mortar store. This is quite evident from the recent foot traffic at retail destinations. Moreover, digitally-native brands are likely to keep boosting their physical presence in the days to come as part of the omni-channel strategy since the opening of stores helps them to improve their connection with customers and drive expansion. In fact, for retailers, the focus now is not only on increasing their online presence but also on maintaining brick-and-mortar stores in the best locations, which in turn is raising hopes for retail REITs that focus on such locations. Also, with the waning impact of the pandemic, entertainment and dining concepts are seeing a revival, boosting retail REITs’ growth opportunities.Repurposing and Conversions Pick Up Pace: Retail REITs are now focusing on adaptive reuse, which includes multifamily, hotel, office and medical components, resulting in the construction of mixed-use real estate destinations. In fact, the mixed-use development option has gained immense popularity in recent years as it helps to catch the attention of people who prefer to live, work and play in the same area. Moreover, the open-air format and pick-up concepts have been helping landlords to lure tenants. Also, the conversion of malls into distribution hubs has accelerated as these distribution centers, being situated close to consumers of retailers, facilitate faster delivery of products and aid retailers in improving services, lower costs and make optimum asset utilization.Inflationary Pressure, Economic Slowdown Cast a Pall on Recovery: Higher material and operating costs remain a concern for the retailers and this, in turn, might cast a pall on their landlords’ cash flows. Moreover, a slowdown in the economy and the depletion of savings, rising borrowing costs and labor market pessimism is likely to weigh down on consumers’ willingness to spend to some extent.Higher E-commerce Adoption to Remain a Concern: Consumers’ habits have transformed at a rapid pace over the past years and traffic at retail real estates has suffered, with e-commerce capturing market share from brick-and-mortar stores. With the pandemic's impact waning, mall traffic has rebounded significantly. Yet, given the convenience it offers, online shopping is likely to remain a popular choice among customers. This might adversely impact the market share for brick-and-mortar stores.Zacks Industry Rank Indicates Bright ProspectsThe Zacks REIT and Equity Trust - Retail industry is housed within the broader Zacks Finance sector. It carries a Zacks Industry Rank #93, which places it in the top 37% of more than 250 Zacks industries.The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of the positive funds from operations (FFO) per share outlook for the constituent companies in aggregate. Looking at the aggregate FFO per share estimate revisions, it appears that analysts are gaining confidence in this group’s growth potential. Since April, the industry’s FFO per share estimate for 2022 has moved 1.1% north.Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.Industry Performance Mix With Sector & S&P 500The REIT and Equity Trust - Retail Industry has underperformed the broader Zacks Finance sector over the past year but outperformed the S&P 500 composite.The industry has declined 13.2% during this period compared with the S&P 500’s fall of 15.1% and the broader Finance sector’s decline of 9.2%.One-Year Price PerformanceIndustry's Current ValuationOn the basis of forward 12-month price-to-FFO (funds from operations), which is a commonly used multiple for valuing Retail REITs, we see that the industry is currently trading at 14.57X compared with the S&P 500’s forward 12-month price-to-earnings (P/E) of 17.89X. The industry is trading above the Finance sector’s forward 12-month P/E of 13.90X. This is shown in the chart below.Forward 12 Month Price-to-FFO (P/FFO) RatioOver the last five years, the industry has traded as high as 18.49X, as low as 10.20X, with a median of 15.39X.3 Retail REIT Stocks to ConsiderSimon Property Group: This retail REIT is a behemoth in its industry and enjoys a portfolio of premium retail assets in the United States and abroad. The adoption of an omni-channel strategy and successful tie-ups with premium retailers have been aiding the company. It is also tapping growth opportunities by assisting digital brands to enhance their brick-and-mortar presence, as well as capitalizing on buying recognized retail brands in bankruptcy.Additionally, Simon Property is exploring the mixed-use development option, which has gained immense popularity in recent years among those who prefer to live, work and play in the same area.Moreover, with solid balance-sheet strength and available capital resources, Simon Property Group looks poised to ride this growth curve and bank on opportunities emanating from market dislocations.Its third-quarter results reflected healthy operating performance, solid leasing activity and a rise in occupancy levels. Simon Property also announced a 2.9% sequential hike and a 9.1% year-over-year increase in its fourth-quarter 2022 dividend.Simon Property Group currently carries a Zacks Rank #3 (Hold). Over the past month, the Zacks Consensus Estimate for 2022 FFO per share witnessed marginal upward revision to $11.68, reflecting analysts’ bullish outlook. The stock has appreciated 34.5% so far in the quarter.  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Kimco Realty Corporation: Jericho, NY-based Kimco Realty is a leading publicly traded owner and operator of open-air, grocery-anchored shopping centers and mixed-use assets in the United States.Kimco is well-poised to benefit from its properties, which are predominantly grocery-anchored, and in the drivable first-ring suburbs of its top major metropolitan Sunbelt and coastal markets, having several growth levers. Its focus on last-mile assets, capital-recycling efforts and a strong balance-sheet position act as tailwinds.Currently, Kimco carries a Zacks Rank #3. The Zacks Consensus Estimate for this year’s FFO per share has been revised marginally upward to $1.58 over the past month, indicating a year-on-year improvement of 14.5%. The stock has appreciated 23.4% so far in the quarter.Tanger Factory Outlet Centers, Inc.: This Greensboro, NC-based retail REIT is a well-known operator of upscale, open-air outlet centers. SKT owns or has an ownership interest in, and manages a portfolio of 37 centers, with an additional center presently under development.With more than 41 years of experience in the outlet industry and a well-located portfolio, Tanger is poised to benefit from the upbeat retail environment in this holiday shopping season.Its strategic efforts, leasing acceleration operation revamp are aiding in NOI growth, rent spreads, longer lease terms and higher occupancy. With its open-air shopping destinations grabbing digitally native brands, iconic food and beverage, and entertainment uses, SKT is poised for growth in the upcoming period.Currently, SKT carries a Zacks Rank #2 (Buy) and has a long-term growth rate of 8.90%, which is ahead of the industry average of 6.2%. Moreover, for 2022, the stock has seen the Zacks Consensus Estimate for FFO per share being revised 1.7% upward to $1.8 over the past month. This also suggests an increase of 2.3% year over year. This upward trend in estimate revisions is also visible for 2023. The stock has also gained 42.7% quarter to date.Note: Funds from operations (FFO) is a widely used metric to gauge the performance of REITs rather than net income as it indicates cash flow from their operations. FFO is obtained after adding depreciation and amortization to earnings and subtracting the gains on sales. Zacks Names "Single Best Pick to Double" From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all. It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time. This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.Free: See Our Top Stock and 4 Runners Up >>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 Simon Property Group, Inc. (SPG): Free Stock Analysis Report Kimco Realty Corporation (KIM): Free Stock Analysis Report Tanger Factory Outlet Centers, Inc. (SKT): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Category: topSource: zacks11 hr. 21 min. ago

Here"s Why Watts Water (WTS) is a Strong Momentum Stock

The Zacks Style Scores offers investors a way to easily find top-rated stocks based on their investing style. Here's why you should take advantage. It doesn't matter your age or experience: taking full advantage of the stock market and investing with confidence are common goals for all investors. Luckily, Zacks Premium offers several different ways to do both.The research service features daily updates of the Zacks Rank and Zacks Industry Rank, full access to the Zacks #1 Rank List, Equity Research reports, and Premium stock screens, all of which will help you become a smarter, more confident investor.Zacks Premium also includes the Zacks Style Scores.What are the Zacks Style Scores?The Zacks Style Scores, developed alongside the Zacks Rank, are complementary indicators that rate stocks based on three widely-followed investing methodologies; they also help investors pick stocks with the best chances of beating the market over the next 30 days.Each stock is assigned a rating of A, B, C, D, or F based on their value, growth, and momentum characteristics. Just like in school, an A is better than a B, a B is better than a C, and so on -- that means the better the score, the better chance the stock will outperform.The Style Scores are broken down into four categories:Value ScoreValue investors love finding good stocks at good prices, especially before the broader market catches on to a stock's true value. Utilizing ratios like P/E, PEG, Price/Sales, Price/Cash Flow, and many other multiples, the Value Style Score identifies the most attractive and most discounted stocks.Growth ScoreGrowth investors are more concerned with a stock's future prospects, and the overall financial health and strength of a company. Thus, the Growth Style Score analyzes characteristics like projected and historic earnings, sales, and cash flow to find stocks that will see sustainable growth over time.Momentum ScoreMomentum trading is all about taking advantage of upward or downward trends in a stock's price or earnings outlook, and these investors live by the saying "the trend is your friend." The Momentum Style Score can pinpoint good times to build a position in a stock, using factors like one-week price change and the monthly percentage change in earnings estimates.VGM ScoreIf you want a combination of all three Style Scores, then the VGM Score will be your friend. It rates each stock on their combined weighted styles, helping you find the companies with the most attractive value, best growth forecast, and most promising momentum. It's also one of the best indicators to use with the Zacks Rank.How Style Scores Work with the Zacks RankA proprietary stock-rating model, the Zacks Rank utilizes the power of earnings estimate revisions, or changes to a company's earnings outlook, to help investors create a successful portfolio.#1 (Strong Buy) stocks have produced an unmatched +25.41% average annual return since 1988, which is more than double the S&P 500's performance over the same time frame. However, the Zacks Rank examines a ton of stocks, and there can be more than 200 companies with a Strong Buy rank, and another 600 with a #2 (Buy) rank, on any given day.This totals more than 800 top-rated stocks, and it can be overwhelming to try and pick the best stocks for you and your portfolio.That's where the Style Scores come in.You want to make sure you're buying stocks with the highest likelihood of success, and to do that, you'll need to pick stocks with a Zacks Rank #1 or #2 that also have Style Scores of A or B. If you like a stock that only as a #3 (Hold) rank, it should also have Scores of A or B to guarantee as much upside potential as possible.The direction of a stock's earnings estimate revisions should always be a key factor when choosing which stocks to buy, since the Scores were created to work together with the Zacks Rank.For instance, a stock with a #4 (Sell) or #5 (Strong Sell) rating, even one that boasts Scores of A and B, still has a downward-trending earnings forecast, and a much greater likelihood its share price will decline as well.Thus, the more stocks you own with a #1 or #2 Rank and Scores of A or B, the better.Stock to Watch: Watts Water (WTS)Headquartered in North Andover, MA, Watts Water Technologies, Inc. designs, manufactures and sells various water safety and flow control products for the water quality, water conservation, water safety, and water flow control markets. The company reports its business under three geographic segments: Americas (71.7% of total revenues in third-quarter 2022), Europe (23.2%) and APMEA consisting of Asia-Pacific, Middle East and Africa (5.1%).WTS is a #2 (Buy) on the Zacks Rank, with a VGM Score of B.Momentum investors should take note of this Computer and Technology stock. WTS has a Momentum Style Score of B, and shares are up 9.4% over the past four weeks.Five analysts revised their earnings estimate higher in the last 60 days for fiscal 2022, while the Zacks Consensus Estimate has increased $0.26 to $7.05 per share. WTS also boasts an average earnings surprise of 16.7%.With a solid Zacks Rank and top-tier Momentum and VGM Style Scores, WTS should be on investors' short list. Zacks Names "Single Best Pick to Double" From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all. It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time. This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.Free: See Our Top Stock and 4 Runners Up >>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 Watts Water Technologies, Inc. (WTS): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Category: topSource: zacks11 hr. 21 min. ago

Cigna (CI) Rises 18.9% in 6 Months: More Growth in Store?

Cigna (CI) expects its long-term adjusted earnings per share to witness 10-13% average annual growth. Cigna Corporation’s CI shares have jumped 18.9% in the past six months compared with the 7.7% rise of the industry it belongs to, thanks to the growing demand for healthcare-related plans. The company has also been gaining from an active inorganic growth strategy.Image Source: Zacks Investment ResearchBased in Bloomfield, CT, Cigna provides health services products and solutions to a wide range of clients. CI has a market cap of $99 billion.Can it Retain Momentum?The answer is yes and before we get into the details, let us show you how its estimates for the full-year 2022 stand. The Zacks Consensus Estimate for Cigna’s 2022 earnings is pegged at $23.13 per share, indicating a 13% rise from $20.47 a year ago. It has witnessed 11 upward estimate revisions in the past 30 days against no movement in the opposite direction. The company beat earnings estimates in each of the last four quarters, with an average of 9.8%.The consensus estimate for 2022 revenuesstands at $180.3 billion, signaling a 3.6% year-over-year rise.Now let’s delve into what’s driving this Zacks Rank #3 (Hold) stock.A diversified product portfolio, vast agent network and superior services are supporting Cigna’s membership growth. Its strong Government business, including Medicare Advantage, is a major positive. CI anticipates total medical customer growth of at least 900,000 while the prior view estimated the metric to be at least 800,000. Our estimate suggests total medical customers for 2022 to grow 5.4% year over year.Strategic acquisitions are helping the company to expand its scale and tap into new markets. Buyouts like Express Scripts, OnePath Life Insurance and others are praiseworthy. These moves are helping the company to consistently increase its top line. CI expects adjusted revenues for 2022 at a minimum of $179 billion. The company is on track to achieve 6-8% average annual adjusted revenue growth in the long term.Cigna also expects long-term adjusted earnings per share to witness 10-13% average annual growth. The company does not shy away from divesting less profitable businesses to improve efficiency and the bottom line. CI divested its life, accident and supplemental benefits businesses to insurer Chubb and received net after-tax proceeds of around $5.1 billion. It also divested its non-health insurance unit, Group Life and Disability insurance business to New York Life, America’s largest mutual life insurer.With the growing proportion of older persons in the population, demand for the company’s products is expected to increase. Also, rising employment and economic recovery will benefit the company’s commercial business. We expect total U.S. Commercial customers to rise 7.1% in 2022. This will result in higher premiums. Furthermore, we expect pharmacy revenues to jump 5.2% year over year in 2022.Cigna has a strong shareholder value-boosting program in place. It bought back 22 million shares of common stock worth around $5.8 billion over the first three quarters. This year, it plans to buy back at least $7 billion worth of shares.RisksDespite the upside potential, there are a few factors that are holding back the stock’s growth. A debt-laden balance sheet and rising operating expenses are concerning. At the third-quarter end, it had long-term debt of $28,090 million and short-term debt of $3,488 million. Total benefits and expenses rose 5% year over year in the first nine months of 2022. Nevertheless, we believe that a systematic and strategic plan of action will drive the company’s long-term growth.Key PicksSome better-ranked stocks in the broader medical space are Elevance Health Inc. ELV, AMN Healthcare Services, Inc. AMN and Inventiva S.A. IVA, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.The Zacks Consensus Estimate for Elevance Health’s full-year earnings is currently pegged at $29.02 per share, indicating a year-over-year increase of 11.7%. ELV beat earnings estimates in all the past four quarters, with an average surprise of 4.1%.The Zacks Consensus Estimate for AMN Healthcare’s current year bottom line indicates a 44% improvement from the prior-year reported number. The consensus estimate for AMN’s top line also indicates 30.1% year-over-year growth.The Zacks Consensus Estimate for Inventiva’s 2022 bottom line indicates an 11.3% year-over-year improvement. IVA has witnessed one upward estimate revision in the past 60 days against none in the opposite direction. Zacks Names "Single Best Pick to Double" From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all. It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time. This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.Free: See Our Top Stock and 4 Runners Up >>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 Cigna Corporation (CI): Free Stock Analysis Report AMN Healthcare Services Inc (AMN): Free Stock Analysis Report Inventiva S.A. Sponsored ADR (IVA): Free Stock Analysis Report Elevance Health, Inc. (ELV): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Category: topSource: zacks11 hr. 21 min. ago