Today’s markets were about value versus growth stocks, even more so after LYFT reported truly dreadful earnings and lost a third of its already depressed value. The S&P 500 gained 0.5% on Tuesday, the Dow Jones Industrial Average (+0.2%) and Nasdaq Composite (+0.2%) both increased 0.2% while the Russell 2000 outperformed with a 0.9% gain.
Nine of the 11 S&P 500 sectors closed higher, paced by the energy (+2.9%), financials (+1.3%), real estate (+1.3%), and materials (+1.1%) sectors with gains over 1.0%. The consumer staples (-0.2%) and consumer discretionary (-0.3%) sectors were the two downers.
All ahead of the Fed’s highly anticipated policy decision tomorrow. We saw a 9.6% decline in the CBOE Volatility Index (29.25, -3.09, -9.6%).
Other supportive factors included a four-basis-point decline in the 10-yr yield (2.96%), a 2% decline in oil prices ($102.86, -2.31, -2.2%), and a better-than-expected 2.2% m/m increase in factory orders for March (consensus +1.0%).
We look at the indices, $AAPL $LYFT $AMD $TSLA Gold, Copper, BTC, ETH, Natgas and oil in the podcast.
We talk through to today’s action and where to now …
Enjoy live commentary from Our Trading Room at YouTube as the day wraps up – feel free to like and share
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.
- WTI crude oil futures settled lower by $2.43 (-2.3%) to $102.68/barrel.
- Low price was $100.28. High price extended to $105.71.
- WTI off the high price of $129.44. The highest in 2008 was $147.27.
- Brent Crude Futures 105.94 0.97 0.92
- Natural Gas Futures 7.929 -0.096 -1.20
- Unleaded Gasoline Futures 3.5598 0.0586 1.67
- 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.”
- BNEF data showed gas flows to U.S. export terminals Tuesday rose by +10.7% w/w to 12.8 bcf. In March gas flows to U.S. export terminals rose to a record 13.77 bcf.
Commodities and FX
- The U.S. Dollar Index narrowed its loss to 0.3% at 103.48.
- Gold futures settled $7 higher (+0.4%) to $1,870.60/oz, edging out modest gains after finishing near two-month lows to open the week.
- Silver Futures 22.605 -0.060 -0.26
- Copper Futures 4.3000 0.0170 0.40
- Corn Futures 793.25 -10.25 -1.28
- Wheat Futures 1047.00 -8.50 -0.81
- Bloomberg Commodity Index 128.62 -0.35 -0.27
- Bitcoin USD 37883 249 0.66%
- Ethereum USD 2787.11 12.74 0.46%
US Indices & S&P 500 sector watch:
- Dow industrial average is up 67.27 points or 0.20% at 33128.78
- S&P is up 20.08 points or +0.48% at 4175.47
- Nasdaq is up 27.75 points or 0.22% at 12563.77
- Russell 2000 is up 15.94 points or 0.85% at 1898.85
- NYSE Composite 15729.53 120.24 0.77
- CBOE Volatility 29.25 -3.09 -9.55
- NYSE Adv 1921 Dec 1207 Vol 975.6 bln
- Nasdaq Adv 2401 Dec 1987 Vol 4.5 bln
- Nine of the 11 S&P 500 sectors closed higher, paced by the energy (+2.9%), financials (+1.3%), real estate (+1.3%), and materials (+1.1%) sectors with gains over 1.0%. The consumer staples (-0.2%) and consumer discretionary (-0.3%) sectors were the two misses
Key After Hours
- Advanced Micro (AMD) beats by $0.20, beats on revs; guides Q2 revenue mid-point above consensus; guides FY22 revs above consensus… AMD up 7.0%
- Airbnb (ABNB) beats by $0.27, beats on revs; guides Q2 revs above consensus… ABNB up 4.1%
- Akamai Tech (AKAM) misses by $0.03, reports revs in-line… AKAM down 10.5%
- Caesars Entertainment (CZR) misses by $0.03, misses on revs… CZR up 3.2%
- Cirrus Logic (CRUS) beats by $0.61, beats on revs; guides Q1 revs above consensus… CRUS up 4.8%
- Lyft (LYFT) beats by $0.14, beats on revs, Adjusted EBITDA of $54.8 mln vs. original guidance of $5-$15 mln; guides for Q2 revenue of $950 mln – $1.0 bln vs. $1.02 bln consensus estimate; sees adjusted EBITDA of $10-$20 mln… LYFT down 27%
- Match Group (MTCH) beats by $0.12, reports revs in-line; guides Q2 revs below consensus… MTCH down 6.6%
- Paycom Software (PAYC) beats by $0.15, beats on revs; guides Q2 revs above consensus; guides FY22 revs above consensus… PAYC up 8.9%
- Skyworks (SWKS) reports EPS in-line, revs in-line; guides Q3 EPS below consensus, revs below consensus… SWKS down 4.0%
- Starbucks (SBUX) misses by $0.01, reports revs in-line, global comps +7%, US comps +12%; suspends guidance for Q3 and Q4 due to numerous macroeconomic challenges; will provide update for FY23 and beyond at Investor Day in September… SBUX up 5.2%
- Twitter (TWTR): Elon Musk spoke privately about taking TWTR public again in a few years, WSJ… TWTR up 0.3%
- Yum China (YUMC) misses by $0.09, beats on revs, comps of -8%, Omicron variant caused significant volatility in business operations; FY22 targets remain unchanged… YUMC up 0.9%
US Markets YTD
- Dow Jones Industrial Average -8.8% YTD
- S&P 500 -12.4% YTD
- Russell 2000 -15.4% YTD
- Nasdaq Composite -19.7% YTD
Cboe Daily Market Ratios:
Index – Last – Chg – %Chg
- UK: FTSE 100 7561.33 16.78 0.22
- Germany: DAX 14039.47 100.40 0.72
- France: CAC 40 6476.18 50.57 0.79
- Italy: FTSE MIB 24242.25 385.02 1.61
- Spain: IBEX 35 8590.20 154.20 1.83
- Stoxx Europe 600 446.20 2.37 0.53
- Switzerland: Swiss Market 12001.88 30.15 0.25
- Markets in China, Japan, Singapore, and India were closed for holidays.
- Japan’s Nikkei: CLOSED
- Hong Kong’s Hang Seng: +0.1%
- China’s Shanghai Composite: CLOSED
- India’s Sensex: CLOSED
- South Korea’s Kospi: -0.3%
- Australia’s ASX All Ordinaries: -0.5%.
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. Treasuries saw the 5-yr note and longer tenors record gains while shorter tenors finished in the red after outperforming during yesterday’s retreat. The 10-yr note and the long bond outperformed, finishing with solid gains ahead of tomorrow’s FOMC decision, which the market expects to be a 50-bps rate hike.
- 2-yr: +3 bps to 2.76%
- 3-yr: +1 bp to 2.94%
- 5-yr: -1 bp to 3.00%
- 10-yr: -4 bps to 2.96%
- 30-yr: -6 bps to 3.01%
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%.
- Factory orders for manufactured goods increased 2.2% m/m in March (consensus +1.0%) following an upwardly revised 0.1% increase (from -0.5%) in February. Shipments of manufactured goods jumped 2.3% after increasing 1.1% in February.
- New orders for durable goods rose 1.1% m/m in March after declining 1.7% in February.
- New orders for nondurable goods jumped 3.2% m/m in March after increasing 2.1% in February.
- Nondefense capital goods orders, excluding aircraft — a proxy for business spending — increased 1.3% in March after declining 0.2% in February.
- The inventory-to-shipments ratio fell to 1.43 from 1.45.
- Around The Barrel – Crude Oil and Gasoline Outlook with Russian European Impact – TRADERS COMMUNITY
- Into The Vortex – Natural Gas Outlook as Europe Weans Itself Off Russian Supplies – TRADERS COMMUNITY
- Baltic Sea Freight Index Gains for Third Straight Month in April – TRADERS COMMUNITY
- Pfizer (PFE 48.00, -0.34): -0.7% after guiding FY22 EPS and revenue below consensus, overshadowing its beat on the top and bottom lines.
- Estee Lauder (EL 235.00, -25.63): -9.8% after missing revenue estimates and guiding FY22 EPS below consensus.
- Rockwell Automation (ROK 219.95, -30.09): -12.0% after missing top and bottom-line estimates and guiding FY22 EPS and revenue below consensus.
- Chegg (CHGG 15.25, -9.73): -39.0% after guiding Q2 revenue below consensus and lowering its FY22 revenue guidance below consensus. Chegg beat EPS estimates.
- Avis Budget (CAR 300.00, +19.44): +6.9% after beating top and bottom-line estimates.
- Eurozone’s March PPI 5.3% m/m (expected 5.0%; last 1.1%); 36.8% yr/yr (expected 36.3%; last 31.5%). March Unemployment Rate 6.8% (expected 6.7%; last 6.9%)
- Germany’s April Unemployment Change -13,000 (expected -15,000; last -18,000) and April Unemployment Rate 5.0%, as expected (last 5.0%)
- U.K.’s April Manufacturing PMI 55.8 (expected 55.3; last 55.2)
- France’s March government budget deficit EUR38.30 bln (last deficit of EUR37.60 bln)
- German Chancellor Scholz said that sanctions on Russia will not be lifted until the country signs a peace deal with Ukraine.
- Italy’s Prime Minister Draghi indicated that another EUR14 bln will be spent on energy and will be financed by higher taxes on energy producers.
- British Prime Minister Johnson rejected the idea of a windfall tax, saying that it would discourage investment.
- South Korea’s April CPI 0.7% m/m (expected 0.4%; last 0.7%); 4.8% yr/yr (expected 4.4%; last 4.1%)
- Hong Kong’s Q1 GDP -2.9% qtr/qtr (last 0.0%); -4.0% yr/yr (last 4.7%)
- New Zealand’s March Building Consents 5.8% m/m (last 12.2%)
- South Korea’s April CPI increased at its fastest yr/yr pace since 2008.
- Bank of Korea Governor Lee said that CPI may continue growing at around 4.0% “for a while.”
- The Reserve Bank of Australia raised its cash rate by 25 bps to 0.35% against expectations for a 15-bps hike.
The Day Ahead:
7:00 ET: Weekly MBA Mortgage Index (prior -8.3%)
8:15 ET: April ADP Employment Change (Briefing.com consensus 390,000; prior 455,000)
8:30 ET: March Trade Balance (Briefing.com consensus -$97.50 bln; prior -$89.20 bln)
9:45 ET: Final April IHS Markit Services PMI (prior 54.7)
10:00 ET: April ISM Non-Manufacturing Index (Briefing.com consensus 58.7%; prior 55.5%)
10:30 ET: Weekly crude oil inventories (prior 0.69 mln)
14:00 ET: May FOMC Rate Decision (Briefing.com consensus 0.75-1.00%; prior 0.25-0.50%)
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!