Today’s stock market was another sharp reversal from ‘in the hole’ as the bear market rally continuation still holds, S&P 500 failed to penetrate the May 27 low 4077.43 on its opening decline at 4080.19 and up it went. Negative news early with $TGT warning just 3 weeks after earnings and Gasoline and Natural gas prices surging which also sent multiple energy stocks to 52 week and all-time highs. Today’s best-performing sector was the energy sector (+3.1%), which is now up 65.0% for the year with Exxon Mobil over $100 XOM 103.37, +4.53, +4.6%, which was upgraded by Evercore ISI to Outperform from In-Line.
The 10-yr note yield slipped back below 3.00% (-7 bps to 2.97%) and we had a US Treasury 3-Year Bond Sale perform much worse than expected, garnering a D+ rating across the Fixed Interest desk with weak demand from the international market.
Enjoy live commentary from Our Trading Room at YouTube as the day wraps up – feel free to like and share
This week we have inflation data and more Central Bank action as a result yields, energy prices and the USDJPY are in focus. Natural Gas jumped again, over 9.22% to settle at $9.3220/MMBTU on Tuesday, the biggest one-day gain since Feb. 16.
We talk through to today’s action and where to now ….
In today’s post market wrap live from the trading room traders discuss the patterns through the options and futures markets that have played out perfectly from last week to today. We discuss trading psychology, risk management and trader development in today’s markets. Listen to our technical and market psychology read on the day. Join the Traders Community Podcast crew @traderscom @knovawave @Mahdavi4 @MetaJohnny1 plot out 2022.
Around the table today was packed with the Fed, geopolitics, domestic political influence and distortions, reading sentiment, patterns and order flow. After hours earnings and chart pattern review. This is a high-risk market.
- Crude Oil Futures settled at $119.41 Up $0.91 or 0.77%, up $0.91 or $0.77. The high price reached $120.26. The low price $117.14.
- WTI off the 2022 high price of $129.44. The highest in 2008 was $147.27.
- Brent Crude Futures 120.81 0.24 0.20
- Natural Gas Futures 9.344 0.022 0.24
- Unleaded Gasoline Futures 4.1552 -0.0378 -0.90
- EIA Forecasts US LNG Exports will Increase 22% in 2022 to 11.9 Bcf/d and to 12.6 Bcf/d in 2023
- EIA Raises 2022 Oil Production Forecasts, says OPEC Production Returned to Pre-Pandemic Levels
- Rystad Energy said the war-induced uncertainty is likely to continue to impact gas prices. “The gas market remains highly volatile, and news driven,” said Rystad analyst Fabian Rønningen. This week, in particular, “the market remains anxious for clarity on rules governing ruble payments for Russian gas supplies.”
Commodities and FX
- The U.S. Dollar Index recovered, rising 0.3% to 102.42
- Gold futures settled $8.40 higher (+0.5%) to $1,852.10/oz
- Silver Futures 22.255 0.163 0.74
- Copper Futures 4.4490 0.0140 0.32
- Corn Futures 757.25 14.75 1.99
- Wheat Futures 1074.50 -18.50 -1.69
- Bloomberg Commodity Index 136.41 0.10 0.07
- Bitcoin USD 31425 84 0.27
- Ethereum USD 1845.35 0.62 0.03
- Ripple USD 0.4120 -0.0016 -0.39
US Indices & S&P 500 sector watch:
- DJIA 33180.14 264.36 0.80
- Nasdaq Composite 12175.23 113.86 0.94
- S&P 500 4160.68 39.25 0.95
- DJ Total Stock Market 41937.24 427.73 1.03
- Russell 2000 1919.56 29.68 1.57
- NYSE Composite 16019.56 171.11 1.08
- CBOE Volatility 24.02 -1.05 -4.19
- NYSE Adv 2272 Dec 1035 Vol 945 mln
- Nasdaq Adv 3052 Dec 1650 Vol 4.3 bln
- Consumer discretionary sector was the only sector that didn’t finish higher (-0.4%), bouncing after being -2.7% at its worst levels of the morning.
- S&P energy sector was today’s best-performing sector (+3.1%), which is now up 65.0% for the year. The industrials (+1.4%), health care (+1.3%), information technology (+1.2%), and real estate (+1.2%) sectors all ended with gains in excess of 1.0%.
Market Pre-Market Notables
- Target (TGT 144.82, -14.85, -9.3%): lowers Q2 operating margin guidance to ~2% (prior 5.3%) in conjunction with plan to focus on inventory optimization; reaffirms FY23 revenue growth in low-to-mid-single digit range
- Walmart (WMT 120.46, -4.41, -3.5%): trading lower in response to the warning from Target
- Kohl’s (KSS 46.00, +3.88, +9.2%): enters into three-week exclusive negotiations with Franchise Group for possible acquisition of company for $60.00 per share
- J.M. Smucker (SJM 122.00, -1.26, -1.0%): beats by $0.34, beats on revs; guides FY23 EPS below consensus, revs above consensus
- Tractor Supply Co. (TSCO 196.52, -2.57, -1.3%): guides Q2 EPS and revenue slightly above consensus; sees comparable store sales growth of 5%
US Markets YTD
- Dow Jones industrial Average: -8.6% YTD
- S&P 400: -9.7% YTD
- S&P 500: -12.7% YTD
- Russell 2000: -14.5% YTD
- Nasdaq Composite: -22.2% YTD
Key After Hours
- Casey’s General (CASY) beats by $0.03, reports revs in-line, inside comps +5.2%; expects FY23 inside comps up +4-6%; increases quarterly dividend 9% to $0.38/share… CASY up 0.1%
- DocuSign (DOCU) expands its strategic partnership with Microsoft (MSFT) to accelerate anywhere work… DOCU up 4.8%
- Goodyear Tire (GT) ticks lower on news it is recalling over 170,000 tires produced between 1996-2003, according to the NHTSA… GT down 1.9%
- Guidewire Software (GWRE) beats by $0.02, beats on revs; guides Q4 revs in-line… GWRE down 2.0%
- Novavax (NVAX) receives positive vote from US FDA advisory committee recommending emergency use authorization of its COVID-19 vaccine for people 18 years and older… NVAX up 0.9%
- O-I Glass (OI) raises its Q2 adjusted EPS guidance as glass container shipments are up approx. 1% QTD through May… OI down 2.7%
- Smartsheet (SMAR) beats by $0.01, beats on revs; guides Q2 EPS below consensus, revs above consensus; guides FY23 EPS above consensus, revs above consensus… SMAR down 5.7%
Cboe Daily Market Ratios:
Recall in January: JP Morgan quant maestro Marko Kolanovic was out with a comment near lows that didn’t go unnoticed.
“Near term we recommend buying the dip on US indices given oversold conditions… though medium term we favor EM/China/Europe on a regional basis on improving activity and easing headwinds, and the UK on valuation.”Marko Kolanovic Jan 10 2022
- We stay positive on equities and expect omicron will ultimately prove a positive for risk assets, as this milder but more transmissible variant speeds the transition from pandemic to endemic with a lower human toll,
- As this wave fades, it will likely mark the end of the pandemic
- omicron’s lower severity and high transmissibility crowds out more severe variants and leads to broad natural immunity
- signs of supply constraints potentially passing their worst point
Recall back in October he said to buy the dip because fears of higher yields were overdone adding the market could absorb higher yields. “We don’t expect a broad market selloff unless yields were to rise above 250-300 bps (US 10y), which we don’t foresee in the near term,” From there the S&P 500 rose 11.5%.
Perhaps this time it’s’ different but nevertheless the algorithms liked it that day but from then ……… not so much
U.S. longer-dated Treasuries rallied strongly on Tuesday, reclaiming the bulk of their losses from Monday, while the 2-yr note underperformed throughout the day, ending with a slight loss. The late push took place even though today’s $44 bln 3-yr note auction met lukewarm demand ahead of tomorrow’s $33 bln 10-yr note reopening.
- 2-yr: UNCH at 2.72%
- 3-yr: -2 bps to 2.91%
- 5-yr: -5 bps to 2.98%
- 10-yr: -7 bps to 2.97%
- 30-yr: -7 bps to 3.12%
- EIA Forecasts US LNG Exports will Increase 22% in 2022 to 11.9 Bcf/d and to 12.6 Bcf/d in 2023 – TRADERS COMMUNITY
- EIA Raises 2022 Oil Production Forecasts, says OPEC Production Returned to Pre-Pandemic Levels – TRADERS COMMUNITY
- Treasuries Pull Back After Weak Demand for U.S. 3-year Bond Auction with High Yield of 2.927% – TRADERS COMMUNITY
- Around The Barrel – Crude Oil and Gasoline Outlook as Storage Continues to Tighten – TRADERS COMMUNITY
- U.S. Trade Deficit Pulls Back from Record as Exports Rise Led by Natural Gas, Petroleum Products and Soybeans – TRADERS COMMUNITY
- Into The Vortex – Natural Gas Outlook with Production Pressured – TRADERS COMMUNITY
Index – Last – Chg – % Chg
- Stoxx 600 -0.3%
- German DAX -0.7%
- UK FTSE 100 -0.1%
- French CAC -0.8%
- Spain IBEX -0.3%
- Italy MIB -1.0%
- British Prime Minister Johnson survived yesterday’s no-confidence vote by 32 votes.
- Italy’s stats agency lowered Italy’s growth forecast for 2022 to 2.8% from 4.7%.
- Eurozone’s June Sentix Investor Confidence improved to -15.8 from -22.6 (expected -20.0).
- Germany’s April Factory Orders fell 2.7% m/m (expected 0.3%; last -4.2%). May IHS Markit Construction PMI dipped to 45.4 from 46.0.
- U.K.’s May Services PMI fell to 53.4 from 58.9 (expected 51.8).
- Spain’s April Industrial Production rose 2.4% yr/yr (expected -0.2%; last 0.1%).
Index – Last – Chg – % Chg
- Japan’s Nikkei +0.1%;
- Hang Kong’s Hang Seng -0.6%;
- China’s Shanghai Composite +0.2%;
- India’s Sensex -1.0%;
- South Korea’s Kospi -1.7%;
- Australia’s All Ordinaries -1.5%.
- Record Private Equity M&A deals Targeting Australian Companies – TRADERS COMMUNITY
- RBA Accelerates Rate Cycle as it Raises Rates by 50bps to 0.75% – TRADERS COMMUNITY
- Foreign tourists visiting Japan will have to acquire private medical insurance and will have to be chaperoned during their stay.
- Japan’s April Household Spending rose 1.0% m/m (expected 1.3%; last 4.1%) but was down 1.7% yr/yr (expected -0.8%; last -2.3%). April Overall Wage Income increased 1.7% yr/yr (last 2.0%). April Leading Index increased 2.1% m/m (last 0.7%) and Coincident Indicator was unchanged m/m (last 0.5%).
- Australia’s May AIG Services Index fell to 49.2 from 57.8. April Building Permits were down 2.4% m/m (prior -19.2%) while April Private House Approvals rose 0.5% m/m (last -3.0%).
Most of us are familiar with QE but what is QT? When the Fed reduces its balance sheet it is known as quantitative tightening, the flipside of quantitative easing. The US Federal Reserve at its December FOMC put the world on notice that tighter financial conditions are ahead. What does it mean? The possible Bifurcations would make Mandelbrot wince.
- Traders Market Weekly: Inflation and Central Banker Rate Watch – TRADERS COMMUNITY
- Tuesday: April Trade Balance (prior -$109.80 bln) at 8:30 ET; $44 bln 3-yr Treasury note auction results at 13:00 ET; and April Consumer Credit (prior $52.40 bln) at 15:00 ET
- Wednesday: Weekly MBA Mortgage Index (prior -2.3%) at 7:00 ET; April Wholesale Inventories (prior 2.3%) at 10:00 ET; weekly crude oil inventories (prior -5.07 mln) at 10:30 ET; and $33 bln 10-yr Treasury note reopening results at 13:00 ET
- Thursday: Weekly Initial Claims (prior 200,000) and Continuing Claims (prior 1.309 mln) at 8:30 ET; weekly natural gas inventories (prior +90 bcf) at 10:30 ET; and $19 bln 30-yr Treasury bond reopening results at 13:00 ET
- Friday: May CPI (prior 0.3%) and Core CPI (prior 0.6%) at 8:30 ET; preliminary June University of Michigan Consumer Sentiment survey (prior 58.4) at 10:00 ET; and May Treasury Budget (prior $308.00 bln) at 14:00 ET
Monday (June 6)
After-Hours: COUP GTLB
Tuesday (June 7)
Pre-Market: ASO CBRL PLAY GIII MOMO SJM REVG UNFI
After-Hours: CASY GWRE SMAR CURV VRNT
Wednesday (June 8)
Pre-Market: BF.B CPB KC LOVE OLLI THO VRA
After-Hours: ABM BASE FIVE GEF AVO OXM YEXT
Thursday (June 9)
Pre-Market: BILI FCEL NIO SIG
After-Hours: CMTL DOCU SFIX MTN
Friday (June 10)
Trust you all had a great day, sleep well and get your trading plan sorted.
Any questions please feel free to ask them below. Trade Smart!