Traders Market Weekly: APR 3-9 — Yield Inversion & Inflation concerns

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    April 3-9 2022 FEAR NOT Brave Investors Where have we been and where are we going? Join our weekly market thread on Traders Community… See the full post at:

    Traders Market Weekly: Yield Inversion Therapy Kill Growth To Kill Inflation


    S&P futures vs fair value: +10.60. Nasdaq futures vs fair value: +50.80.

    The S&P 500 futures trade 11 points, or 0.2%, above fair value to start the week, as the market continues to weather a host of growth-related concerns.

    Some of those concerns include
    the prolonged Russia-Ukraine situation,
    the COVID lockdowns in Shanghai,
    the potential for a Fed policy mistake,
    the 2s10s spread inversion,
    supply chain disruptions,
    inflationary environment that includes $100/bbl oil prices ($100.29, +1.02, +1.0%).


    Twitter (TWTR 48.80, +9.49, +24.1%) has jumped 24% in pre-market action after Elon Musk disclosed a 9.2% stake in the company.
    Tesla (TSLA 1090.43, +5.84, +0.5%) reported over 310,000 vehicle deliveries in the first quarter.
    Starbucks (SBUX 89.02, -2.47, -2.7%) suspended its share buyback program


    The Treasury market is trading little changed

    Although the 30-yr yield has risen four basis points to 2.46% after dropping 18 basis points last week.
    The 2-yr yield is unchanged at 2.43%,
    10-yr yield is up one basis point to 2.39%.
    The U.S. Dollar Index is up 0.3% to 98.88.


    JPMorgan Chase (JPM 134.34, -0.97): -0.7% after CEO Jamie Dimon warned the bank “could still lose about $1 billion over time” as a result of its direct exposure to Russia.


    Equity indices in the Asia-Pacific region were mostly higher on Monday,

    Japan’s Nikkei: +0.3%
    Hong Kong’s Hang Seng: +2.1%
    China’s Shanghai Composite: closed for holiday
    India’s Sensex: +2.3%
    South Korea’s Kospi: +0.7%
    Australia’s ASX All Ordinaries: +0.4%.


    Japan’s March Monetary Base +7.9% yr/yr (prior +7.6%)
    Australia’s Retail Sales +1.8% m/m (expected +1.8%; prior +1.6%)
    India’s March Nikkei Manufacturing PMI 54.0 (expected 55.2; prior 54.9)
    Stocks in Hong Kong rallied amid reports that regulators are set to provide U.S. regulators more access to audit reports for Chinese companies.
    Hong Kong Chief Executive Carrie Lam said she will not seek a second term in office due to family considerations.
    China’s markets were closed for the Ching Ming Festival and will remain closed until Wednesday.
    COVID concerns persist, though, with all of Shanghai in some version of lockdown mode, pressuring China’s GDP growth outlook and supply chain logistics.
    Japanese officials calling more attention to the negative effects of a weaker yen. T
    The BOJ plans to increase purchases of 1-3 yr notes and decrease purchases of 3-5 yr and 10-25 yr securities.
    The Bank of Korea is planning to buy up to KRW2.0 trln of government securities on Tuesday.


    Eurozone’s April Sentix Investor Confidence -18.0 (expected -9.2; prior -7.0)
    Germany’s February Exports +6.4% m/m (expected +1.5%; prior -2.8%) and Imports +4.5% (expected +1.4%; prior -4.2%)
    Spain’s Unemployment Change – 2.9K (prior -11.4K)
    Russia-Ukraine peace talks remain bogged down and reports this morning are highlighting claims that Russian troops have carried out civilian massacres in areas around Kyiv. Consequently, EU officials are reportedly planning to level more sanctions on Russia.
    The Eurozone’s Sentix Investor Confidence reading for April dropped to its lowest level (-18.0) since June 2020.

    Helmholtz Watson

    Midday Mega-caps doing the heavy lifting

    The S&P 500 is up 0.5% on the back of the mega-cap stocks, which are fueling the outperformance of the Nasdaq Composite (+1.5%). The Dow Jones Industrial Average (unch) and Russell 2000 (unch), which are more cyclically-oriented, are roughly unchanged. T

    he Vanguard Mega Cap Growth ETF (MGK 239.50, +3.79, +1.6%), like the Nasdaq 100, is up 1.6% while the Invesco S&P 500 Equal Weight ETF (RSP 158.12, -0.10, -0.1%) is down 0.1%.

    From a sector perspective, eight of the 11 S&P 500 sectors are trading lower with losses ranging from 0.4% (materials) to 1.4% (utilities). Conversely, the information technology (+1.5%), communication services (+2.2%), and consumer discretionary (+1.7%) sectors are up more than 1.0%. Growth stocks in general appear to be catching a bid after Elon Musk disclosed a 9.2% passive stake in Twitter (TWR 50.45, +11.11, +28.3%). TWTR is up 28% on the news, which has stoked a bargain-hunting mindset in growth stocks that have underperformed this year.

    Helmholtz Watson

    Factory Orders decline in February

    Factory orders for manufactured goods declined 0.5% m/m in February ( consensus -0.6%) following an upwardly revised 1.5% increase (from +1.4%) in January. Shipments of manufactured goods jumped 0.6% after increasing 1.4% in January.

    The key takeaway from the report is that it followed a relatively strong month of order growth in January and likely reflects some delayed influence of the Omicron variant on business activity, making it too early to say if this is the start of a weakening trend for factory orders.

    New orders for durable goods dropped 2.1% m/m in February after increasing 1.5% in January.
    New orders for nondurable goods increased 1.2% m/m in February after increasing 1.5% in January.
    Nondefense capital goods orders, excluding aircraft — a proxy for business spending — fell 0.2% in February after increasing 1.2% in January.

    The inventory-to-shipments ratio held steady at 1.45.

    Helmholtz Watson

    The ECB still posits that its first rate hike is unlikely to occur until sometime after it ends its asset purchase program in Q3, whereas the fed funds futures market is pricing in a 74.4% probability of a 50-basis points increase at the May FOMC meeting, according to the CME’s FedWatch Tool. That would take the target range for the fed funds rate to 0.75-1.00%.

    Yield Check Midday:
    2-yr: unch at 2.43%
    3-yr: -1 bp to 2.61%
    5-yr: unch at 2.55%
    10-yr: +3 bps to 2.41%
    30-yr: +5 bps to 2.47%


    Dow 34,921.88 103.61 0.30%
    S&P 500 4,582.64 36.78 0.81%
    Nasdaq 14,532.55 271.05 1.90%
    GlobalDow 4,112.61 4.41 0.11%
    Gold 1,936.90 13.20 0.69%
    Oil 103.67 4.40 4.43%

    as ELON MUSK went TWEET, TWEET, TWEET all the way in becoming largest Twitter shareholder 😉


    Asia Overnight

    Japan’s Nikkei: +0.2%
    Hong Kong’s Hang Seng: closed for holiday
    China’s Shanghai Composite: closed for holiday
    India’s Sensex: -0.7%
    South Korea’s Kospi: +0.1%
    Australia’s ASX All Ordinaries: +0.2%


    The ISM Non-Manufacturing Index for March increased to 58.3% (consensus 58.5%) from 56.5% in February. The dividing line between expansion and contraction is 50.0%. The March reading marks the 22nd straight month of growth for the services sector, with some acceleration from the prior month.

    The key takeaway from the report is that business activity for the non-manufacturing sector picked up in March following an Omicron-related slowdown in February; however, respondents continue to bemoan supply chain constraints and elevated cost pressures.

    The New Orders Index rose to 60.1% from 56.1%.
    The Production Index moved to 55.5% from 55.1%.
    The Prices Index increased to 83.8% from 83.1%, hitting its second-highest reading ever.
    The Employment Index rose to 54.0% from 48.5%.
    The Supplier Deliveries Index dropped to 63.4% from 66.2%.
    The Backlog of Orders Index edged up to 64.5% from 64.2%.


    The February Trade Balance Report showed a deficit of $89.2 billion (consensus -$88.5 billion) versus an upwardly revised deficit of $89.2 billion for January (from -$89.7 billion). The three-month moving average for total trade in goods and services widened to $86.8 billion in February from $83.7 billion in January and $66.2 billion a year ago.

    The key takeaway from the report is that it reflects a fractured trade situation that remains broken by COVID-related problems that have snarled supply chains and fueled economic imbalances.

    February exports were $228.6 billion, $4.1 billion more than January exports
    February imports were $317.8 billion, $4.1 billion more than January imports

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