Traders Market Weekly: Stock and Bond Bear Markets Hover

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    Barron’s mentions:

    The cover story delves into how Elon Musk could make Twitter (TWTR) a financial success. The bullish scenario for Twitter is said to be that it has huge potential that could be unlocked after years of mismanagement. Musk’s strategy is expected to involve a harder shift to subscription revenue over advertising revenue, which accounted for nearly 90% of Twitter’s revenue last year. One of the obstacles that Twitter will face is annual interest costs could total $600 million or more after Twitter raises financing in the high-yield bond market.

    The cruise line sector gets a favorable write-up this week on the simple thesis the demand is booming. Onboard cruise spending in restaurants, spas, and other venues this winter and spring has been strong, while bookings for 2022 and beyond are accelerating in a positive development for Royal Caribbean (RCL), Carnival (CCL), and Norwegian Cruise Line (NCLH).


    U.S auto sales preview:

    There could be some more ripples in the U.S. auto sector next week is the selling pressure continues for electric vehicle names like Tesla (TSLA), Rivian Automotive (NASDAQ:RIVN), Lucid Group (LCID), Fisker (FSR), Lordstown Motors (NASDAQ:RIDE) and Nikola (NKLA) without any solid catalysts seen to spark a new rally. Earnings reports from within the sector are anticipated to show production run rate below initial targets due to the ongoing supply chain issues. In addition, overall April U.S. light vehicle sales are forecast to decline ~24% year-over-year on a selling day adjusted basis, which translates to a seasonally adjusted annualized rate of a disappointing level of around 13.9M units.

    Bank of America is not optimistic of a quick turnaround in the sector, pointing to the supply chain disruptions from global semiconductor shortage, the Russia-Ukraine conflict, and COVID-induced shutdowns in China. The firm warns dealer lots could be short vehicles through 2022 and likely well into 2023. “As production remains under pressure and inventory remains constrained, we anticipate OEMs will continue to push price and mix as a means to bolster margins,” updates BofA.


    FOMC preview:

    The two-day Federal Reserve meeting will conclude with a rate announcement on May 4. The market has fully priced in a 50 basis points hike for May and at least another five to six 25-point hikes are expected before the end of year. Chairman Jerome Powell is likely to keep a cautiously hawkish posture during the press conference without any solid macro reason for a policy change. BTIG notes that the actual policy moves at the meeting will not be a big surprise with them being telegraphed in advance. The biggest drama seen is how Powell might respond to questions on a 75-point hike in a rip-the-Bandaid-off move down the road.


    Li Auto (LI), Nio (NIO), and XPeng (XPEV) could be big movers after the Chinese automakers report early on May 2 on deliveries for April amid the COVID and supply chain disruption


    The global equity markets are mixed in thin holiday action. After closing at the low on Friday, the S&P Futures are up about 20 points to trade around the 4148 area. With many of the overseas markets closed, spoos have traded within a range that saw a high at 4158.25 and the low established at 4116.75.

    In Asia, Chinese markets were closed for public holiday while Japan slid 0.1%. China released disappointing Manufacturing PMI data on Saturday. The April print came in at 47.4. This was below the consensus of 48.0 and marked the lowest reading since February 2020. In Japan, the Nikkei traded in lackluster fashion. Nintendo lost over 2% after stating it saw less than anticipated Switch console sales for the fiscal year.

    In Europe, the DAX and CAC are lower, while the UK is closed for holiday. Part of the weakness likely stems from sympathy with Wall Street’s move on Friday. Additionally, the weaker than expected Chinese data may be taking its toll on these markets. The region saw modest upward revisions to the final Manufacturing PMI readings in Germany, France and the Eurozone. On the flip side, Germany also reported a miss in March Retail Sales.


    S&P Futures vs Fair Value: +21.0
    10 yr Note: 2.943%
    USD/JPY: 130.09 +0.24
    EUR/USD: 1.0524 -0.0026

    Europe: FTSE: CLOSED DAX: -1.0% CAC: -1.7%
    Asia: Hang Seng: CLOSED Shanghai: CLOSED Nikkei: -0.1%
    Gold (1879.00 -32.70) Silver (22.64 -0.45) Crude (101.58 -3.11)


    S&P 500 futures 0.1% below fair value; Nasdaq 100 futures 0.4% below fair value; DJIA futures 0.2% above fair value

    Key factors driving the futures market:

    Further weakness in most mega-cap stocks as deleveraging continues
    Dampened investor sentiment following Friday’s broad-based selloff
    Weaker-than-expected April manufacturing PMI data out of China contributing to global slowdown concerns
    Wait-and-see mentality in front of this week’s FOMC meeting, and ISM Manufacturing and Employment Situation reports

    Apple (AAPL) down 0.7% on an EU Statement of Objections regarding the company’s payment technology

    Warren Buffett, at annual shareholders’ meeting, says “inflation swindles almost everyone,” talks of gambling parlor conditions in market, and notes he doesn’t see any value in bitcoin


    Japan’s Nikkei: -0.1%
    Hong Kong’s Hang Seng: CLOSED
    China’s Shanghai Composite: CLOSED
    India’s Sensex: -0.2%
    South Korea’s Kospi: -0.3%
    Australia’s ASX All Ordinaries: -1.3%


    Major European indices trade in the red while the U.K.’s FTSE is closed for a Bank Holiday.

    German officials are calling for a gradual ban on imports of Russian oil into the EU.
    European Central Bank policymaker de Guindos spoke in favor of ending asset purchases in July, adding that a rate hike would depend on data and macroeconomic projections, while policymaker Holzmann said that he favors quick action on rates.
    Fitch affirmed Germany’s AAA rating with a Stable outlook.


    Japan’s April Manufacturing PMI 53.5 (last 54.1) and April Household Confidence 33.0 (last 32.8)
    China’s April Manufacturing PMI 47.4 (expected 48.0; last 49.5) and Non-Manufacturing PMI 41.9 (last 48.4). April Caixin Manufacturing PMI 46.0 (expected 47.0; last 48.1)
    South Korea’s April trade deficit $2.66 bln (last deficit of $120 mln). April Imports 18.6% yr/yr (expected 22.3%; last 27.9%) and Exports 12.6% yr/yr (expected 14.5%; last 18.2%). April Nikkei Manufacturing PMI 52.1 (last 51.2)
    Australia’s April AIG Manufacturing Index 58.5 (last 55.7)
    India’s April Nikkei Markit Manufacturing PMI 54.7 (expected 53.8; last 54.0)


    Eurozone’s April Manufacturing PMI 55.5 (expected 55.3; last 56.5). April Business and Consumer Survey 105.0 (expected 108.0; last 106.7)
    Germany’s March Retail Sales -0.1% m/m (expected 0.3%; last 0.3%); -2.7% yr/yr (expected 6.1%; last 7.0%)
    France’s April Manufacturing PMI 55.7 (expected 55.4; last 54.7)
    Italy’s April Manufacturing PMI 54.5 (expected 55.0; last 55.8) and March Unemployment Rate 8.3% (expected 8.4%; last 8.5%)
    Spain’s April Manufacturing PMI 53.3 (expected 54.0; last 54.2)
    Swiss Q2 SECO Consumer Climate -18 (last 3) and April PMI 62.5 (expected 61.5; last 64.0)


    Before US Open:

    STOXX Europe 600: -1.3%
    Germany’s DAX: -1.1%
    U.K.’s FTSE 100: CLOSED
    France’s CAC 40: -1.8%
    Italy’s FTSE MIB: -1.5%
    Spain’s IBEX 35: -1.2%


    Apple (AAPL 157.07, -0.58): -0.4% after the European Commission informed Apple of its preliminary view that it abused its dominant position in markets for mobile wallets on iOS devices.
    Spirit Airlines (SAVE 23.01, -0.60): -2.5% after reiterating support for its merger with Frontier Airlines (ULCC 10.75, +0.14, +1.3%). JetBlue (JBLU 10.99, -0.02, -0.2%) submitted an “enhanced superior proposal” to acquire Spirit for $33 cash per share, but Spirit did not agree it was a superior offer.
    Enterprise Products (EPD 26.12, +0.21): +0.8% after beating top and bottom-line estimates.
    Global Payments (GPN 138.00, +1.02): +0.7% after beating top and bottom-line estimates.
    Timken (TKR 57.64, -0.03): -0.1% after lowering its FY22 revenue guidance below consensus, mitigating the positive effect from its EPS beat.


    Good early afternoon … MARKETS went from “+” to “-” as the pit traders “sheer some sheep”
    Even though tempted to put some of my own “DRY POWDER” (aka money market “kash”) to work
    This old BEAR INVESTOR is awaiting “capitulation” & to “buy pennies on dollar”
    Although the DEER & our baby pugs & me hope for PEACE & economic “miracles” ahead for best of America 🙂


    Great example of the “WORLD PEACE” that we hope for in near future 🙂

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