The dominating feature of the day was oil, WTI had a $10 range with conflicting US, another dribbler beware warning, if it still needs to be given. The result was a defensive day for stocks ahead of tomorrow’s US jobs report. The S&P 500 ended up losing 0.5% after being up 0.7%. The Nasdaq Composite (-1.6%) and Russell 2000 (-1.3%) were hit the most.
Stocks turned negative from there after a disappointing ISM Non-Manufacturing Index for February and tough-minded rhetoric from President Putin to French President Macron regarding Russia’s invasion of Ukraine.
BREAKING: Russia Began shelling the largest nuclear powerplant in Ukraine during the podcast – catch the $ES_F -75 handles lower and WTI higher by $2.70 live and the levels.
We look at the indices, Oil, $SWBI $GPS $AVGO $OXY $APA Gold, Copper, Wheat, BTC, ETH, Natgas in the podcast. We talk through to today’s action and where to now … This is a high-risk earnings season. …
Enjoy live commentary from Our Trading Room at YouTube as the day wraps up – feel free to like and share
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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 & @velocityradar 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 earnings season. We got the Bear Market rally resolution which has angered the BTFD quotient.
We look at the indices, Gold, Copper, BTC, ETH, Natgas, and oil in the podcast. De-risking may threaten progress that has been achieved on since the COVID bailout. It also has the potential to reverse some of the progress made in protecting downside risk if banks close or restrict access to money.
Market Closes
Energy
- April WTI crude oil (CLJ22) futures settled WTI crude futures settled lower by 2.9%, or $3.23, to $107.67/bbl, the low 106.43. The high price today was the highest level since the week of May 2, 2011. Since a swing low on December 6 at $62.46, the price has risen over 92% to the high price of $116.57. The swing low from the May 2, 2011, high at $114.79 was broken today and then over the August 2013 high, and the May 2011 high. The highest level since the week of September 8, 2008. The highest in 2008 was $147.27.
- April RBOB gasoline (RBJ22) closed down -2.39 (-0.72%).
- April Nymex natural gas (NGJ22) fell 4 cents during the period to reach $4.722/MMBtu on Thursday. May fell 5.1 cents to $4.736.
- Bespoke Weather Services said the EIA’s net 139 Bcf draw “does not materially alter our view” of the storage trajectory moving forward, End-of-season storage levels are expected to fall somewhere in the 1,300-1,400 Bcf range.
- Looking ahead to next week’s storage report, The Desk’s online energy platform Enelyst looked for a draw between roughly 115 Bcf and 130 Bcf.
- “The energy market fallout from Russia’s egregious invasion in Ukraine continues,” said EBW Analytics Group’s Eli Rubin, senior analyst. Traders “are pulling back from Russian supplies, with estimates of 2-3 million b/d of oil and product supply unable to find buyers as traders fear official new sanctions, desire to avoid being seen financing Russia, and freight and insurance costs spike.”
- BNEF data showed gas flows to U.S. export terminals Thursday rose +1.3% w/w to 11.7 bcf. On Feb 18, gas flows to U.S. export terminals rose to a record 13.482 bcf.
Metals and FX
- The dollar index (DXY00) on Thursday rose +0.407 (+0.42%).
- Gold futures settled $21.50 lower (-1.1%) to $1,922.
- March silver (SIH22) closed up +0.022 (+0.09%)
- Bitcoin CME March 22 -1845 to 42080
Stocks
For The Day
- Dow industrial average fell -96.71 points or -0.29% at 33794.65. The Dow all-time high close at 36952.65.
- S&P index fell -23.03 points or -0.53% at 4363.50. The S&P all-time high close at 4818.62.
- NASDAQ index fell -214.06 points or -1.56% at 13517.95
- Russell 2000 fell -26.46 points or -1.29% at 2032.41
- CBOE Volatility Index fell 30.48▼ 0.26 (0.85%)
- NYSE Adv 1350 Dec 1843 Vol 1.1 bln
- Nasdaq Adv 1550 Dec 2793 Vol 5.0 bln
S&P 500 sector watch:
- 6 of the 11 S&P 500 sectors closed lower
- S&P 500 utilities (+1.7%), real estate (+1.1%), consumer staples (+0.7%), and health care (+0.5%) sectors.
- Consumer discretionary (-2.3%), information technology (-1.2%), and communication services (-0.8%) sectors underperformed amid weakness in the mega-caps.
Key Earnings Reviews
- Snowflake (SNOW 210.35, -54.34): -20.5% after providing underwhelming revenue guidance, outweighing its revenue beat.
- Veeva Systems (VEEV 206.85, -23.77): -10.3% after guiding Q1 EPS and revenue below consensus. Veeva beat top and bottom-line estimates.
- Okta (OKTA 170.03, -12.67): -6.9% after guiding Q1 and FY23 EPS below consensus, outweighing its better-than-expected quarterly results and upside revenue guidance.
- Best Buy (BBY 106.00, +5.16): +5.1% even after missing revenue estimates and guiding FY23 EPS below consensus. Best Buy beat EPS estimates.
- Intel (INTC 47.83, -1.04): -2.1% after the stock was downgraded to Underweight from Equal-Weight at Morgan Stanley.
US Markets YTD
- Dow Jones Industrial Average -6.7% YTD
- S&P 500 -8.0% YTD
- Russell 2000 -8.3% YTD
- Nasdaq Composite -12.1% YTD
Cboe Daily Market Ratios:
Europe
- STOXX Europe 600, which includes around 90% of the market capitalization of the European market in 17 countries, fell 8.97 points, or 2.01%, to close at 437.36.
- London’s FTSE 100 decreased 190 points, or 2.57%, to finish at 7,238.
- Germany’s DAX 30 lost 301 points, or 2.16%, to end the day at 13,698,
- France’s CAC 40 was down 119 points, or 1.84%, to 6,378.
- Italy’s FTSE MIB decreased 575 points, or 2.35%, to close at 23,958.
- Spain’s IBEX 35 was the worst performer of the day, falling 309 points, or 3.72%, to 8,011.
Asia
- Japan’s Nikkei: +0.7%
- Hong Kong’s Hang Seng: +0.6%
- China’s Shanghai Composite: -0.1%
- India’s Sensex: -0.7%
- South Korea’s Kospi: +1.6%
- Australia’s ASX All Ordinaries: +0.6%
Recall Last Month: 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
Bonds
Longer-dated Treasuries ended Thursday right above their flat lines while shorter tenors recorded modest losses ahead of tomorrow’s release of the jobs report for February.
- 2-yr: +2 bps to 1.54%
- 3-yr: +1 bp to 1.68%
- 5-yr: -2 bps to 1.74%
- 10-yr: -2 bps to 1.84%
- 30-yr: -1 bp to 2.23%
- The fed funds futures market March FOMC meeting implied likelihood of a 50-bps hike fell to 6.6% from 24.0% on Friday and 65.7% two weeks ago.
- U.S. 30-year Treasury Bond Auction with High Yield of 2.340% Slapped by CPI and Bullard – TRADERS COMMUNITY
- Strong U.S. 10-year Treasury Bond Auction with High Yield of 1.904% – TRADERS COMMUNITY
- Strong U.S. 3-year Treasury Bond Auction with High Yield of 1.592% – TRADERS COMMUNITY
The probability for a half-point hike in March decreased to 50.2% from 93.8% yesterday, according to the CME FedWatch Tool.
What You Need Know About Quantitative Tightening QT Bifurcations Explained – TRADERS COMMUNITY
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.
Where did it all start?
The Federal Reserve System Chairman Jerome Powell took a decidedly hawkish tone today at last month’s FOMC and the release of Minutes which sent US stock markets sharply lower. That day in the Treasury market the 2-yr yield, which tracks expectations for the fed funds rate, rose seven basis points to 0.83%. The 10-yr yield settled the session four basis points higher at 1.71%, with growing expectations for a run-up to 2.00%.
News Highlights
USA
- The ISM Non-Manufacturing Index for February decreased to 56.5% (consensus 61.0%) from 59.9% in January. Business activity was held back in February by inflation pressures, supply constraints, logistical challenges, and labor shortages.
- Initial jobless claims for the week ending February 26 decreased by 18,000 to 215,000 (consensus 226,000) and continuing claims for the week ending February 19 increased by 2,000 to 1.476 million. Consistent with a tight labor market.
- The revised Q4 nonfarm business sector labor productivity showed no change to the advance estimate of 6.6% (consensus 6.7%), as output increased 9.1% and hours worked increased 2.4%. Unit labor costs, though, were revised up to 0.9% (consensus 0.3%) from 0.3% as hourly compensation increased 7.5% versus the 6.6% increase in productivity. Increase in productivity in Q4 helped keep unit labor costs in check.
- Factory orders for manufactured goods increased 1.4% m/m in January (consensus 0.5%) following an upwardly revised 0.7% increase (from -0.4%) in December. Shipments of manufactured goods jumped 1.2% after increasing 0.7% in December. The uptick seen in order growth for nondefense capital goods, excluding aircraft was a positive as is a proxy for business spending.
- The final IHS Markit Services PMI for February decreased to 56.5 from 56.7 in the preliminary reading.
- Around The Barrel – US Crude Oil Continues To Draw as WTI Trades To $112 Bbl – TRADERS COMMUNITY
Europe
- Eurozone’s January PPI 5.2% m/m (expected 2.3%; last 3.0%); 30.6% yr/yr (expected 26.9%; last 26.3%). January Unemployment Rate 6.8% (expected 7.0%; last 7.0%). February Services PMI 55.5 (expected 55.8; last 51.1)
- Germany’s February Services PMI 55.8 (expected 56.6; last 52.2)
- U.K.’s February Services PMI 60.5 (expected 60.8; last 54.1)
- France’s February Services PMI 55.5 (expected 57.9; last 53.1)
- Italy’s February Services PMI 52.8 (expected 52.5; last 48.5). January Unemployment Rate 8.8% (expected 9.0%; last 9.0%)
- Spain’s February Services PMI 56.6 (expected 51.4; last 46.6)
- Swiss February CPI 0.7% m/m (expected 0.3%; last 0.2%); 2.2% yr/yr (expected 1.7%; last 1.6%)
Asia
- China’s February Caixin Services PMI 50.2 (expected 50.9; last 51.4)
- Japan’s February Services PMI 44.2 (expected 42.7; last 47.6) and February Household Confidence 52.1 (last 49.8)
- South Korea’s Q4 GDP 1.2% qtr/qtr (expected 1.1%; last 0.3%); 4.2% yr/yr (expected 4.1%; last 4.0%)
- Australia’s February AIG Construction Index 53.4 (last 45.9) and February Services PMI 57.4 (expected 56.4; last 46.6). January Building Consents -27.9% m/m (expected -2.9%; last 9.8%) and Private House Approvals -17.5% m/m (last -0.3%). January trade surplus AUD12.89 bln (expected AUD9.00 bln; last AUD8.82 bln). January Imports -2% m/m (last 5%) and Exports 8% m/m (last 1%)
- Hong Kong’s February Manufacturing PMI 42.9 (last 48.9)
- The Japanese government is preparing new measures to counter rising energy prices for consumers.
- South Korea’s 2021 GDP expanded at its fastest pace in eleven years.
- China Business News reported that a former official with the State Administration of Foreign Exchange expects Chinese officials to set a 2022 GDP growth target between 5.0% and 5.5%.
Looking ahead:
- The Week Ahead:
- Monday: January advance goods trade deficit (prior -$101.00 bln), advance Wholesale Inventories (prior 2.1%), and advance Retail Inventories (prior 4.4%) at 8:30 ET; and February Chicago PMI (prior 65.2) at 9:45 ET
- Tuesday: January Construction Spending (prior 0.2%) and February ISM Manufacturing Index (prior 57.6%) at 10:00 ET
- Wednesday: Weekly MBA Mortgage Index (prior -13.1%) at 7:00 ET; February ADP Employment Change (prior -301,000) at 8:15 ET; and weekly crude oil inventories (prior +4.52 mln) at 10:30 ET
- Thursday: Weekly Initial Claims (prior 232,000), Continuing Claims (prior 1.476 mln), revised Q4 Productivity (prior 6.6%), and revised Q4 Unit Labor Costs (prior 0.3%) at 8:30 ET; January Factory Orders (prior -0.4%) and February ISM Non-Manufacturing Index (prior 59.9%) at 10:00 ET; and weekly natural gas inventories (prior -129 bcf) at 10:30 ET
- Friday: February Nonfarm Payrolls (prior 467,000), Nonfarm Private Payrolls (prior 444,000), Average Hourly Earnings (prior 0.7%), Unemployment Rate (prior 4.0%), and Average Workweek (prior 34.5) at 8:30 ET
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!