Traders Market Weekly: Valuation Matters in Earnings Season

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    U.S. Treasuries are on track for a higher start after three days of sharp losses. The advance in Treasury futures has taken place alongside gains in other sovereign debt and weakness

    The U.S. Treasury will sell $43 bln in 3-yr notes at 13:00 ET.

    The U.S. Dollar Index is up 0.8% at 107.83.

    2-yr: -5 bps to 3.07%
    3-yr: -4 bps to 3.11%
    5-yr: -4 bps to 3.10%
    10-yr: -4 bps to 3.06%


    S&P 500 futures are down 32 points and are trading 0.8% below fair value.
    Nasdaq 100 futures are down 83 points and are trading 0.7% below fair value.
    Dow Jones Industrial Average futures are down 169 points and are trading 0.5% below fair value.

    Energy futures are climbing off their overnight lows ahead of the open. WTI crude oil futures are down 1.8% to $102.88/bbl. Unleaded gasoline futures are down 1.5% to $3.39/gal. Natural gas futures are up 9.4% to $6.53/mmbtu.

    The 2s10s spread is widening with the 2-yr note yield down five basis points to 3.07% while the 10-yr note yield is down seven basis points to 3.03%.


    ^^^ Thank you “TC” & Harry “the buck stops here” Truman for in-depth look ahead of coming week 🙂

    EQUITIES were down earlier & bouncing back flat on DOW & -100 on NAZ
    OIL is $103, BITCOIN=$20,500 & key reports ahead on inflation + recession ECON is ahead
    as well as EARNING seasons, where results + future outlook will tailor stocks further

    And like our pug “Samson”, this cautious investor is not “crying wolf” 😉


    Dow 31,173.84 -164.31 -0.52%
    S&P 500 3,854.43 -44.95 -1.15%
    Nasdaq 11,372.60 -262.71 -2.26%
    GlobalDow 3,472.69 -41.31 -1.18%
    Gold 1,730.70 -11.60 -0.67%
    Oil 103.63 -1.16 -1.11%
    BITCOIN 20.561

    in honor of our baby pug “DAISY” 🙂


    The mega caps were an important downside driver with the Vanguard Mega Cap Growth ETF (MGK) closing down 1.9% versus a 1.2% loss in the S&P 500.

    The Invesco S&P 500 Equal Weight ETF (RSP), for its part, closed down 0.9%.

    Meta Platforms (META 162.88, -7.99, -4.7%) was one of the biggest laggards after being downgraded to Underperform from Hold at Needham.
    Tesla (TSLA 703.03, -49.26, -6.6%) was the single worst performing mega cap after Elon Musk walked away from his acquisition deal with Twitter (TWTR 32.64, -4.16, -11.3%).

    Buyers showed reluctance this session with declining issues leading advancing issues by a 5-to-2 margin at the NYSE and a roughly 3-to-1 margin at the Nasdaq.

    Nine of the 11 S&P 500 sectors closed in negative territory. The holdouts in the green were real estate (+0.1%) and utilities (+0.6%). Countercyclical sectors, consumer staples (-0.2%) and health care (-0.2%), also closed ahead of the S&P 500, though in negative territory.

    Influential groups like technology (-1.3%), consumer discretionary (-2.3%), and communication services (-2.3%) dotted the bottom of today’s leaderboard. These sectors contain many multinational companies, whose foreign earnings are expected to see pressure from the recent dollar strength, which has lifted the U.S. Dollar Index to a level not seen since late 2002. The Index has gained 6.1% since the end of May.

    Apple (AAPL 144.87, -2.17, -1.5%), Alphabet (GOOG 2330.45, -72.92, -3.0%), and Microsoft (MSFT 264.51, -3.15, -1.2%) lost between 1.2% and 3.0%.


    Wynn Resorts (WYNN 52.81, -3.65, -6.5%) and Las Vegas Sands (LVS 32.21, -2.17, -6.3%), trading down in response to the news from Macau. To be fair, the second biggest sector component, Tesla, lost nearly 7% falling back below its 50-day moving average. Meanwhile, the largest discretionary component, (AMZN 111.75, -3.79, -3.3%), also fell back below its 50-day moving average but recorded a slimmer loss.

    The 2s10s spread stayed inverted with the 2-yr note yield settling down six basis points to 3.06% and the 10-yr note yield settling down 11 basis points to 2.99%.


    After-Hours Spotlight:

    Dave & Buster’s (PLAY) announces new executive leadership team, including new CFO and COO… PLAY up 2.0%
    GameStop (GME) launches non-custodial, Ethereum Layer 2-based NFT marketplace… GME up 0.8%
    Gap (GPS) CEO Sonia Syngal will step down; hires Walmart Canada exec as new CEO for Old Navy unit; reaffirms Q2 revenue outlook but expects increased promotional activity and expects Q2 adjusted operating margin to be zero to slightly negative… GPS down 3.7%
    PriceSmart (PSMT) reports Q3 (May) results, beats on revs… PSMT down 4.2%
    Westport Fuel Systems (WPRT) awarded €38 million program to develop and supply liquefied petroleum gas systems for a global original equipment manufacturer… WPRT up 22.8%


    U.S. Treasuries are on track to build on yesterday’s gains with the 10-yr note expected to show some early relative strength. Treasury futures spent last evening in a narrow range, rising to highs during the Asian session. Another wave of buying at the start of the European session lifted Treasury futures to fresh highs, where they remain at this time.

    The U.S. Treasury will follow yesterday’s solid 3-yr note sale with a $33 bln 10-yr note reopening at 13:00 ET. The U.S. Dollar Index is little changed at 108.05.

    2-yr: -3 bps to 3.03%
    3-yr: -5 bps to 3.05%
    5-yr: -6 bps to 2.99%
    10-yr: -7 bps to 2.92%
    30-yr: -6 bps to 3.12%


    Equity indices in the Asia-Pacific region ended Tuesday on a lower note.

    The Bank of Japan’s quarterly economic assessment upgraded its view of seven out of nine regions.
    Hyundai will reportedly build its first dedicated electric vehicle factory that aims to begin production in 2025.
    China’s insurance and banking regulator indicated that support for manufacturers will be increased.
    The Bank of Korea and Reserve Bank of New Zealand are expected to announce 50-bps rate hikes tomorrow.

    —Equity Markets—

    Japan’s Nikkei: -1.8%
    Hong Kong’s Hang Seng: -1.3%
    China’s Shanghai Composite: -1.0%
    India’s Sensex: -0.9%
    South Korea’s Kospi: -1.0%
    Australia’s ASX All Ordinaries: -0.1%


    Japan’s June PPI 0.7% m/m (expected 0.5%; last 0.1%); 9.2% yr/yr (expected 8.8%; last 9.3%)
    Australia’s June Westpac Consumer Sentiment -3.0% (last -4.5%). June NAB Business Confidence 1 (last 6) and NAB Business Survey 13 (last 15)
    New Zealand’s May External Migration & Visitors 26.3% yr/yr (last 70.1%)


    Major European indices trade in the red amid ongoing growth concerns.

    Spain’s Prime Minister Sanchez warned that economic growth in the coming months will be slower than expected.
    Germany’s ZEW Economic sentiment survey fell past its pandemic low.
    The U.K.’s conservative party will begin electing a new leader tomorrow.
    The EU’s energy commissioner said that energy cuts in the summer could help avoid shortages in the winter.

    —Equity Markets—

    STOXX Europe 600: -0.4%
    Germany’s DAX: -0.6%
    U.K.’s FTSE 100: -0.2%
    France’s CAC 40: -0.2%
    Italy’s FTSE MIB: -0.9%
    Spain’s IBEX 35: -1.7%


    Germany’s July ZEW Economic Sentiment -53.8 (expected -38.3; last -28.0) and ZEW Current Conditions -45.8 (expected -34.5; last -27.6)


    Capital One (COF 104.70, -2.47, -2.3%): Capital One was downgraded to Perform from Outperform at Oppenheimer and downgraded to Equal-Weight from Overweight at Morgan Stanley
    Expeditors International of Washington (EXPD 96.17, -1.16, -1.2%): Expeditors Intl was downgraded to Underperform from Peer Perform at Wolfe Research
    American Express (AXP 136.97, -3.61, -2.6%): American Express was downgraded to Equal-Weight from Overweight at Morgan Stanley
    C.H. Robinson Worldwide (CHRW 96.40, -1.50, -1.5%): C.H. Robinson was downgraded to Peer Perform from Outperform at Wolfe Research
    PepsiCo (PEP 172.14, +1.67, +1.0%): PepsiCo beats by $0.12, beats on revs; reaffirms FY22 EPS guidance; raises FY22 organic revs guidance
    The Gap (GPS 8.26, -0.50, -5.7%): Gap was downgraded to Equal Weight from Overweight at Wells Fargo and CEO will step down; names new CEO for Old Navy unit; reaffirms Q2 rev outlook but expects increased promotional activity
    PriceSmart (PSMT 69.60, -2.93, -4.0%): PriceSmart reports Q3 (May) results, beats on revs


    S&P 500 futures are down 13 points and are trading 0.3% below fair value.
    Nasdaq 100 futures are up 12 points and are trading 0.1% above fair value.
    Dow Jones Industrial Average futures are down 197 points and are trading 0.6% below fair value.


    WOW – 1st images from JAMES WEBB space telescope 1 million miles away
    Click on the 1st photo shown & left side menu of links … DEEPEST SPACE photo shows 00s of new galaxies & 2nd is crab nebula in razor sharp detail 🙂 🙂 🙂

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