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Nice little 42 handle bounce in SPX/ES_F after Friday’s virus damage. Big boys & girls return to trading desks asking their junior traders WTF did you do Friday?
Market Updates
S&P Futures vs Fair Value: +36.0
10 yr Note: 1.541%
USD/JPY: 113.44 +0.06
EUR/USD: 1.1291 -0.0027
Europe: FTSE: +0.8% DAX: +0.3% CAC: +0.7%
Asia: Hang Seng: -1.0% Shanghai: 0.0% Nikkei: -1.6%
Gold (1795.00 +9.50) Silver (23.31 +0.20) Crude (71.36 +3.22)Overnight Summary — World markets attempting to bounce back
The global equity markets are mixed but the US and Europe are witnessing hefty bounces. S&P Futures are up about 39 points to trade around the 4636 area. Spoos caught a quick bid right out of the gate with the first print of the open representing the low at 4588.75. The market has been steady throughout the session trading near the upper end of the range that saw a high of 4642.75.
In Asia, China closed flat while Japan lost 1.6%. The Shanghai was off to a rough start, trading down about 1% on the open. After that, the market managed to claw its way back to the neutral zone. In Japan, most stocks closed in the red. Automotive names felt a pinch with Mitsubishi Motors, Mazda and Nissan falling over 4%. Shipping stocks bucked the overall tone with names such as Nippon Yusen K.K. and Mitusi O.S.K. Lines gaining 2-3%.
In Europe, the major bourses are trying to rebound. In fact, most sectors are trading in the green. Retail stocks are seeing the most strength with names such as Puma, Adidas, Hermes and Kering up 3-4%. Banks are also outpacing the broader market with lenders such as Societe Generale and Credit Agricole up over 2%.
Wake-Up Call Briefing
Futures market on the rebound after Friday’s sharp selloff
Hope that omicron variant can be managed without severe health and economic effects, but still too early to tell
Moderna thinks a new vaccine targeting omicron could be ready early next year if needed
Japan bans all foreign travelers starting November 30
Ratings actions for H, TFC, BMBL, TJX, BABA, MRK, PDD, USB, UPS, and BIRD
WTI crude futures seeing nice rebound, as are copper futures
Treasuries weak across the curve as safety trade unwinds
Big week of Fedspeak and economic dataFriday’s washout is starting to look like an overreaction that could lead to a year-end rally, but further consolidation or chop into year-end also seems plausible. It is not yet clear whether the new Omicron variant is more transmissible or deadly than prior variations. Current vaccination formulations are likely to provide some protection while vaccine makers scramble to update their jabs to improve efficacy. New variants will continue to emerge in Africa, a continent that is largely unvaccinated.
Li Auto (LI) is higher after reporting another solid beat and raise, with revenue up over 200% yr/yr and deliveries +190%. The company beat estimates on every metric and projected triple digit sales growth for the fourth quarter. This Chinese EV marker continues to trade at a significant discount to other emerging pure play EV companies and Chinese rival XPEV (XPEV). Unlike Chinese tech stocks, domestic manufacturers are heralded, so I continue to like this stock as a relatively under the radar EV play.
Chegg (CHGG) is entering the digital language learning market with a $436M cash acquisition of Busuu.
This deal was done at 10x 2021 sales. The company also announced a new $300M buyback, but this deal may be an admission that the core business will continue to face headwinds after a dreadful Q3 report.
Some big winners today included:
Moderna, +11.71%
Goodrx, +8.85%
Rivian automotive, +6.98%
Nvidia, +5.96%
Lam research, +5.95%
Roblox, +5.47%
Tesla, +5.11%
AMD, +4.55%
Salesforce, +4.36% (Salesforce will announce earnings after the close tomorrow).Some big losers today included:
Novavax, -11.08%
Merck, -5.41%
Worthington industries, -3.77%
Crowdstrike, -3.55%
Bed Bath & Beyond, -3.44%
Bristol-Myers Squibb, -3.4%
Wynn resorts, -3.16%
RobinHood, -3.01%
Pfizer, -2.96%
Beyond Meat, -2.83%
Twitter, -2.8%The final numbers are showing:
Dow industrial average +236.47 points or 0.68% at 35135.99
S&P index +60.61 points or 1.32% at 4655.25
NASDAQ index up 291.19 points or 1.88% at 15782.84.
Russell 2000 fell -3.95 points or -0.18% at 2241.97At the highs, the major indices showed:
Dow Jones up 388.57 points or 1.11%
S&P index up 78.45 points or 1.71%
NASDAQ index up 341.5 points or 2.2%Wake-Up Call Briefing
Futures market on the rebound after Friday’s sharp selloff
Hope that omicron variant can be managed without severe health and economic effects, but still too early to tell
Moderna thinks a new vaccine targeting omicron could be ready early next year if needed
Japan bans all foreign travelers starting November 30
Ratings actions for H, TFC, BMBL, TJX, BABA, MRK, PDD, USB, UPS, and BIRD
WTI crude futures seeing nice rebound, as are copper futures
Treasuries weak across the curve as safety trade unwinds
Big week of Fedspeak and economic dataEnergy (55.46 -0.44)
All eleven sectors trade in negative territory with energy (-0.8%) trading near the middle of the pack after starting at the bottom of today’s leaderboard.
Key factors driving today’s performance include:
Pressure from a lower price of oil. WTI crude is down $2.10, or 3.0%, at $67.85/bbl, slipping past its low from Friday. Oil fell back below its 200-day moving average (69.80), reaching its lowest level since late August amid continued uncertainty about the new coronavirus variant.
Losses in most components resulting in a continuation of this month’s underperformance. The sector is down 0.2% for the week and down 4.2% in November.
Mixed showing from top-weighted names like Chevron (CVX 115.40, +0.55, +0.5%) and Exxon Mobil (XOM 60.93, -0.63, -1.1%).Notable movers:
NOV (NOV 12.08, -0.37, -3.0%): weakest performer in the sector, falling toward its November low (11.86).
Schlumberger (SLB 28.71, -0.82, -2.8%): falling toward Friday’s low (28.41). Stock went ex-dividend today.
Halliburton (HAL 21.77, -0.48, -2.2%): falling back below its 200-day moving average (22.07).
Williams Companies (WMB 27.43, -0.58, -2.1%): falling past its 50-day moving average (27.89) toward its November low (27.34).
APA (APA 26.31, -0.52, -1.9%): fell past its 50-day moving average (25.94) before rallying back above that mark.
ONEOK (OKE 61.30, -1.16, -1.9%): falling back below its 50-day moving average (62.38) to a fresh low for the month.
Exxon Mobil (XOM 60.93, -0.63, -1.1%): trading between its 50-day (62.29) and 200-day (59.17) moving averages.
Phillips 66 (PSX 69.31, -0.56, -0.8%): fell toward its November low (67.08) before narrowing its loss.
Chevron (CVX 115.40, +0.55, +0.5%): rising into the top half of yesterday’s range after being upgraded to Buy from Hold at Tudor, Pickering, Holt & Co.
Diamondback Energy (FANG 110.67, +0.74, +0.7%): bouncing off its 50-day moving average (106.08).
Hess (HES 76.65, +0.58, +0.8%): best performer in the sector, hit a fresh low for the month before rising back toward its 200-day moving average (77.30).Policy angst and vaccine worries rattle market
The stock market is on the defensive and efforts to hedge investment portfolios are on the rise. Currently, the S&P 500 is down 1.4% and the CBOE Volatility Index is up 14% to 26.20.
The primary catalysts for today’s weakness include:
Worries that current vaccines will have reduced efficacy for the omicron variant and that it could take months to develop and approve new vaccines that target omicron specifically.
An acknowledgment from Fed Chair Powell that the risk of persistent inflation has risen and that it is time to retire the word “transitory,” which is fueling angst that the Fed will pursue a more aggressive policy approach to try to rein in inflation.
Vaccine worries drove the initial selling today, but monetary policy angst has taken over as the main driver. As an aside, there are separate reports today that suggest vaccine efficacy against omicron might be reduced, but that current vaccines should still help preventing severe disease in vaccinated individuals.
The focal point for the policy angst is the 2-yr note yield, which went from 0.43% to as high as 0.56% in rapid-fire fashion after Mr. Powell’s remarks. The 10-yr note yield moved from 1.41% to 1.48%. As those moves occurred, growth stocks took a hit and the major indices recoiled, falling to new lows for the session.
All 11 S&P 500 sectors are down at least 1.1%. The biggest losers are the communication services (-2.0%), materials (-1.8%), industrials (-1.7%), and financial (-1.7%) sectors.
The Russell 2000 is down 1.3%; the Nasdaq Composite is down 1.4%; and the Dow Jones Industrial Average is down 1.5%.
White House briefing on COVID-19 with health officials (457.32 -7.28)
Not changing the definition of fully vaccinated right now.
Available tests detect the variant.
It is too early to tell what the viral severity is right now. Reports of mild symptoms are among young people, so they can not draw any conclusions right now.
US has sent 13 million doses to southern African countries, but there is a lot of resistance there and distribution problems. South Africa is trying to increase vaccine confidence.
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