May Day .. The first trading day of May saw continued selling after Friday’s wash with negative sentiment and rising rates paramount. The S&P 500 bounced to +0.6% on Monday, overcoming a 1.7% decline, even as the 10-yr yield reached 3.00% for the first time since December 2018. The Nasdaq Composite gained 1.6%, the Russell 2000 gained 1.0%, and the Dow Jones Industrial Average gained 0.3%b ahead of the Fed’s policy decision this week. WTI crude futures increased 0.1%, or $0.08, to $105.11/bbl. The U.S. Dollar Index increased 0.7% to 103.65.
We look at the indices, $AAPL $EXPE $AMZN $TSLA Gold, Copper, BTC, ETH, Natgas and oil in the podcast. We talk through to today’s action and where to now …
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 retraced earlier losses and settled at $105.17. That’s up $0.48 or 0.46%.
- Low price was $100.28. High price extended to $105.71.
- Brent Crude Futures 107.64 0.06 0.06
- Natural Gas Futures 7.649 0.083 1.10
- Unleaded Gasoline Futures 3.4879 -0.0222 -0.63
- WTI off the high price of $129.44. The highest in 2008 was $147.27.
- 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 increased 0.7% to 103.65.
- Gold futures settled $48.10 lower (-2.6%) to $1,863.60/oz, starting out May with its worst daily losses since March 9 as a rise in the dollar and yields have provided pressure.
- Silver Futures 22.665 0.081 0.36
- Copper Futures 4.2880 0.0200 0.47
- Corn Futures 804.25 -9.25 -1.14
- Wheat Futures 1052.75 -3.00 -0.28
- Bloomberg Commodity Index 128.97 -0.51 -0.40
- Bitcoin USD 38654 333 0.87
- Ethereum USD 2869.02 41.33 1.46
US Indices & S&P 500 sector watch:
- Dow industrial average rose 84.29 points or 0.26% at 33061.49
- S&P index rose 23.47 points or 0.57% at 4155.39
- NASDAQ index rose 201.39 points or 1.63% at 12536.03
- Russell 2000 rose 18.81 points or 1.01% at 1882.91
- NYSE Composite 15609.28 -5.97 -0.04
- CBOE Volatility 32.34 -1.06 -3.17
- NYSE Adv 1319 Dec 1743 Vol 1.1 bln
- Nasdaq Adv 2306 Dec 1977 Vol 4.8 bln
- S&P 500 information technology (+1.6%), communication services (+2.4%), consumer discretionary (+1.4%) & energy sector (+1.4%).
- The real estate (-2.6%), consumer staples (-1.3%), utilities (-1.0%), health care (-0.7%), and materials (-0.3%) sectors were the weakest performers.
Key After Hours
- Arista Networks (ANET) beats by $0.03, beats on revs; guides Q2 revs above consensus… ANET +0.2%
- Avis Budget (CAR) beats by $6.45, beats on revs… CAR +5.5%
- Chegg (CHGG) beats by $0.08, reports revs in-line; guides Q2 revs below consensus; lowers FY22 revs below consensus… CHGG -29.9%
- Chemours (CC) beats by $0.55, beats on revs… CC +7.3%
- Clorox (CLX) beats by $0.35, reports revs in-line; guides FY22 EPS in-line, reaffirms FY22 revs guidance… CLX -1.6%
- Devon Energy (DVN) beats by $0.12, beats on revs; raises dividend payout by 27% and expands share buyback authorization… DVN +3.3%
- Expedia Group (EXPE) beats by $0.01, reports revs in-line… EXPE +2.6%
- Fabrinet (FN) misses by $0.02, misses on revs; guides Q4 EPS in-line, revs below consensus… FN -8.5%
- Flowserve (FLS) misses by $0.14, misses on revs; guides FY22 EPS below consensus, revs below consensus… no indication for FLS
- FMC Corp (FMC) beats by $0.17, beats on revs; lowers FY22 EPS in-line, reaffirms FY22 revs guidance… FMC +0.9%
- Freshpet (FRPT) misses by $0.03, beats on revs; reaffirms FY22 revs guidance… FRPT -4.1%
- Intrepid Potash (IPI) beats by $0.08, beats on revs… IPI +2.0%
- Kforce (KFRC) beats by $0.17, beats on revs; guides Q2 revs above consensus… no indication for KFRC
- MGM Resorts (MGM) beats by $0.06, beats on revs… MGM +1.3%
- Mosaic (MOS) misses by $0.01, misses on revs… MOS -2.8%
- NXP Semi (NXPI) beats by $0.17, beats on revs; guides Q2 revs above at the midpoint… NXPI +1.4%
- Sanmina (SANM) beats by $0.13, beats on revs; guides Q3 EPS mostly above consensus, revs above consensus; increases buyback authorization… SANM +3.8%
- SolarEdge Technologies (SEDG) misses by $0.11, beats on revs; guides Q2 revs above consensus… SEDG +2.0%
- Varonis Systems (VRNS) beats by $0.01, reports revs in-line; guides Q2 EPS in-line, revs in-line; guides FY22 EPS in-line, revs in-line… VRNS -9.5%
- Williams Cos (WMB) beats by $0.07, reports revs in-line; provides FY22 guidance… no indication for WMB
- ZoomInfo (ZI) beats by $0.03, beats on revs; guides Q2 EPS in-line, revs above consensus; raises FY22 EPS and revenue guidance above consensus… no indication for ZI
US Markets YTD
- Dow Jones Industrial Average -9.0% YTD
- S&P 500 -12.8% YTD
- Russell 2000 -16.1% YTD
- Nasdaq Composite -19.9% YTD
Cboe Daily Market Ratios:
- UK: FTSE 100 7544.55 35.36 0.47
- Germany: DAX 13939.07 -158.81 -1.13
- France: CAC 40 6425.61 -108.16 -1.66
- Italy: FTSE MIB 23857.23 -394.93 -1.63
- Spain: IBEX 35 8436.00 -148.20 -1.73
- Stoxx Europe 600 443.83 -6.56 -1.46
- Switzerland: Swiss Market 11971.73 -157.03 -1.29
- Hong Kong: Hang Seng 21089.39 813.22 4.01
- Japan: Nikkei 225 26818.53 -29.37 -0.11
- China: Shanghai Composite 3047.06 71.58 2.41
- India: S&P BSE Sensex 56975.99 -84.88 -0.15
- Australia: S&P/ASX 7347.0 -88.0 -1.18
- S. Korea: KOSPI 2687.45 -7.60 -0.28
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 started May with losses across the curve paced by longer tenors. The underperformance in 10s and 30s drove their respective yields to fresh highs for the year while the 5-yr yield marked a session high within two basis points of its peak from April (3.029%). The 10-yr real yield saw positive territory for the first time in over two years, completing a 150-bps recovery off its low from late 2021.
- 2-yr: +4 bps to 2.73%
- 3-yr: +7 bps to 2.93%
- 5-yr: +10 bps to 3.01%
- 10-yr: +11 bps to 3.00%
- 30-yr: +11 bps to 3.06%
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%.
- April ISM Manufacturing Index decreased to 55.4% (consensus 57.9%) from 57.1% in March. A number above 50.0% is indicative of expansion. April marked the 23rd consecutive month of expansion in the manufacturing sector, although the April reading is the lowest since July 2020.
- IHS Markit Manufacturing PMI fell to 59.2 in the final reading for April from 59.7 in the preliminary reading but was up from 58.8 in the final reading for March.
- Total construction spending increased 0.1% month-over-month in March (consensus 0.8%) following a 0.5% increase in February. Total private construction increased 0.2% month-over-month while total public construction decreased 0.2%. On a year-over-year basis, total construction spending was up 11.7%.
- 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
- German officials called for a gradual ban on imports of Russian oil into the EU.
- European Central Bank policymaker de Guindos spoke in favor of ending asset purchases in July, adding that a rate hike would depend on data and macroeconomic projections, while policymaker Holzmann said that he favors quick action on rates.
- Fitch affirmed Germany’s AAA rating with a Stable outlook.
- Eurozone’s April Manufacturing PMI fell to 55.5 from 56.5 (expected 55.3). April Business and Consumer Survey fell to 105.0 from 106.7 (expected 108.0).
- Germany’s March Retail Sales were down 0.1% m/m (expected 0.3%; last 0.3%) and down 2.7% yr/yr (expected 6.1%; last 7.0%).
- France’s April Manufacturing PMI rose to 55.7 from 54.7 (expected 55.4).
- Italy’s April Manufacturing PMI fell to 54.5 from 55.8 (expected 55.0) and March Unemployment Rate fell to 8.3% from 8.5% (expected 8.4%).
- Spain’s April Manufacturing PMI fell to 53.3 from 54.2 (expected 54.0).
- Swiss Q2 SECO Consumer Climate fell to -18 from 3 and April procure.ch PMI fell to 62.5 from 64.0 (expected 61.5).
- Chinese regulators reportedly held an emergency meeting with bank representatives on April 22 to discuss ways of shielding China’s assets from being targeted by sanctions like the ones imposed on Russia.
- Japan’s April Manufacturing PMI fell to 53.5 from 54.1 and April Household Confidence rose to 33.0 from 32.8.
- China’s April Manufacturing PMI fell to 47.4 from 49.5 (expected 48.0) and Non-Manufacturing PMI fell to 41.9 from 48.4. April Caixin Manufacturing PMI fell to 46.0 from 48.1 (expected 47.0).
- South Korea’s April trade deficit reached $2.66 bln (last deficit of $120 mln) as imports grew 18.6% yr/yr (expected 22.3%; last 27.9%) and exports rose 12.6% yr/yr (expected 14.5%; last 18.2%). April Nikkei Manufacturing PMI rose to 52.1 from 51.2.
- Australia’s April AIG Manufacturing Index rose to 58.5 from 55.7.
- India’s April Nikkei Markit Manufacturing PMI rose to 54.7 from 54.0 (expected 53.8).
The Day Ahead:
- 10:00 ET: March Factory Orders (consensus 1.0%; prior -0.5%)
- March job openings (prior 11.266 mln)
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!