Markets rebounded from the depths of despair Monday as downside momentum slowed coupled with profit taking ahead of a monster earnings week. Oil dumped hard also as did Natty gas only to recover partially. China’s zero-tolerance policy for a worsening COVID-19 situation, and Russia’s invasion of Ukraine, now a landgrab strategy in eastern Ukraine are front and center.
The rebound growth concerns are there with an eight-basis-point decline in the 10-yr yield (2.83%), the 3% decline in oil prices ($98.63/bbl, -3.37, -3.3%), the underperformance of the value/cyclical stocks, and the relative strength of the growth stocks.
We look at the indices, $AAPL $SWVL $WBD $MSFT $FB $XOM $PTGX $NKTX 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
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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 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 at $98.54, down $3.53 or -3.46%. The high $101.55. The low $95.28.
- Brent Crude Futures 102.38 0.22 0.22
- Natural Gas Futures 6.835 0.166 2.49
- Unleaded Gasoline Futures 3.2243 0.0037 0.11
- 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 rose 0.5% to 101.72, nearing its high from 2020 (102.99), the highest since the very peak of the pandemic scare in March 2020.
- Gold Futures 1901.30 5.30 0.28
- Silver Futures 23.770 0.100 0.42
- Copper Futures 4.4820 0.0330 0.74
- Corn Futures 797.50 8.50 1.08
- Wheat Futures 1072.25 -3.00 -0.28
- Bloomberg Commodity Index 126.83 -2.20 -1.70
US Indices & S&P 500 sector watch:
- Dow industrial average up 238.06 points or 0.70% at 34049.47
- S&P index up 24.33 points or 0.57% at 4296.13
- NASDAQ index up 165.57 points or 1.29% at 13004.6
- Russell 2000 up 13.53 points or 0.70% at 1954.20
- NYSE Composite 16054.76 -2.10 -0.01
- CBOE Volatility 27.02 -1.19 -4.22
- NYSE Adv 1588 Dec 1648 Vol 1.1 bln
- Nasdaq Adv 2394 Dec 2053 Vol 4.7 bln
- Seven of the 11 S&P 500 sectors closed higher after each traded lower during the session.
- The information technology (+1.4%) and communication services (+1.5%) sectors, which are this month’s worst-performing sectors, outperformed, while the energy sector (-3.3%) the worst performer today.
Key After Hours
US Markets YTD
- Dow Jones Industrial Average -6.3% YTD
- S&P 500 -9.9% YTD
- Russell 2000 -13.0% YTD
- Nasdaq Composite -16.9% YTD
Cboe Daily Market Ratios:
- UK: FTSE 100 7380.54 -141.14 -1.88
- Germany: DAX 13924.17 -217.92 -1.54
- France: CAC 40 6449.38 -132.04 -2.01
- Italy: FTSE MIB 23908.55 -371.08 -1.53
- Spain: IBEX 35 8574.60 -77.70 -0.90
- Stoxx Europe 600 445.11 -8.20 -1.81
- Switzerland: Swiss Market 12084.98 -173.35 -1.41
- Hong Kong: Hang Seng 19869.34 -769.18 -3.73
- Japan: Nikkei 225 26590.78 -514.48 -1.90
- China: Shanghai Composite 2928.51 -158.41 -5.13
- India: S&P BSE Sensex 56579.89 -617.26 -1.08
- Australia: S&P/ASX 7473.3 -119.5 -1.57
- S. Korea: KOSPI 2657.13 -47.58 -1.76
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 shorter tenors pacing the Monday advance after lagging last week. The U.S. Treasury will hold a $48 bln 2-yr note sale.
- 2-yr: -9 bps to 2.63%
- 3-yr: -9 bps to 2.80%
- 5-yr: -9 bps to 2.86%
- 10-yr: -8 bps to 2.83%
- 30-yr: -5 bps to 2.89%
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%.
- Into The Vortex – Natural Gas Storage Outlook Amongst Sharp Price Volatility – TRADERS COMMUNITY
- Around The Barrel – Crude Oil and Gasoline Outlook in a Soaring Interest Rate Environment – TRADERS COMMUNITY
- Baltic Sea Freight Index Gains for Second Week Despite First Weekly Fall in Dalian Iron Ore in Two Months – TRADERS COMMUNITY
- 3D Systems (DDD) CFO Jagtar Narula is stepping down, effective May 20; co reiterates FY22 guidance… DDD down 1.4%
- Annaly Capital Mgmt (NLY) to sell its Middle Market Lending portfolio to Ares Capital Management (ARES) for ~$2.4 bln… NLY up 0.7%
- Axalta Coating Systems (AXTA) beats by $0.05, beats on revs; guides FY22 EPS below consensus, revs above consensus… AXTA down 0.3%
- Cadence Design (CDNS) beats by $0.15, beats on revs; guides Q2 EPS above consensus, revs above consensus; guides FY22 EPS above consensus, revs above consensus… CDNS up 5.9%
- Calix Networks (CALX) beats by $0.02, beats on revs; guides Q2 EPS below consensus, revs above consensus… CALX up 1.0%
- Crown (CCK) beats by $0.19, beats on revs; guides Q2 EPS in-line; guides FY22 EPS in-line; agrees to sell the Transit Packaging segment’s Kiwiplan business for approximately $182 mln… CCK up 0.1%
- O-I Glass (OI) beats by $0.17, beats on revs; guides Q2 EPS in-line; raises upper end of FY22 EPS guidance range… OI up 13.0%
- Packaging Corp (PKG) beats by $0.20, beats on revs; guides Q2 EPS above consensus… PKG up 1.6%
- The Aaron’s Company (AAN) beats by $0.21, misses on revs; updates guidance to reflect closing of BrandsMart acquisition… AAN down 0.1%
- Universal Health (UHS) misses by $0.32, beats on revs… UHS down 11.6%
- Whirlpool (WHR) beats by $0.52, misses on revs; guides FY22 EPS below consensus, revs below consensus; initiates strategic review of its EMEA business… WHR up 2.7%
- W.R. Berkley (WRB) beats by $0.16… WRB down 0.9%
- French President Macron was elected to a second term.
- European Central Bank President Lagarde indicated that there is a high probability that asset purchases will end in early Q3.
- The German government is expected to announce that this year’s borrowing plan was increased by EUR40 bln to EUR140 bln. Separately, this year’s CPI forecast was raised to 6.1% from 3.3%.
- Standard & Poor’s affirmed Italy’s BBB rating with a Positive outlook while Greece’s rating was raised to BB+ from BB.
- Eurozone’s February Construction Output increased 1.86% m/m (last 3.87%).
- Germany’s April ifo Business Climate Index rose to 91.8 from 90.8 (expected 89.1). April Current Assessment rose to 97.2 from 97.1 (expected 95.8) and Business Expectations rose to 86.7 from 84.9 (expected 83.5).
- U.K.’s April CBI Industrial Trends Orders fell to 14 from 26 (expected 21).
- Spain’s March PPI was up 46.6% yr/yr (last 41.2%).
- Nikkei reported that Japan’s government is planning JPY6.2 trln in new stimulus.
- China’s National Development and Reform Commission expects that the 3.0% CPI target will be reached this year.
- Japan’s February Corporate Services Price Index was up 1.3% yr/yr (expected 1.2%; last 1.1%). February Leading Index decreased 1.2% m/m (last -1.6%) and Coincident Indicator was up 0.5% m/m (last -0.1%).
- Singapore’s March CPI was up 5.4% yr/yr (expected 4.7%; last 4.3%).
- The Day Ahead:
- Monday: Nothing of note
- Tuesday: March Durable Orders (Briefing.com consensus 1.1%; prior -2.2%), Durable Orders ex-transportation (Briefing.com consensus 0.5%; prior -0.6%) at 8:30 ET; February FHFA Housing Price Index (prior 1.6%) and February S&P Case-Shiller Home Price Index (Briefing.com consensus 18.9%; prior 19.1%) at 9:00 ET; March New Home Sales (Briefing.com consensus 770,000; prior 772,000) and April Consumer Confidence (Briefing.com consensus 106.0; prior 107.2) at 10:00 ET; and $48 bln 2-yr Treasury note auction results at 13:00 ET
- Wednesday: Weekly MBA Mortgage Index (prior -5.0%) at 7:00 ET; March advance goods trade deficit (prior -$106.60 bln), March advance Retail Inventories (prior 1.1%), and March advance Wholesale Inventories (prior 2.1%) at 8:30 ET; March Pending Home Sales (Briefing.com consensus -1.5%; prior -4.1%) at 10:00 ET; weekly crude oil inventories (prior -8.02 mln) at 10:30 ET; and $49 bln 5-yr Treasury note auction results at 13:00 ET
- Thursday: Advance Q1 GDP (Briefing.com consensus 1.1%; prior 6.9%), advance Q1 GDP Deflator (Briefing.com consensus 7.3%; prior 7.1%), weekly Initial Claims (Briefing.com consensus 182,000; prior 184,000), and Continuing Claims (prior 1.417 mln) at 8:30 ET; weekly natural gas inventories (prior +53 bcf) at 10:30 ET; and $44 bln 7-yr Treasury note auction results at 13:00 ET
- Friday: March Personal Income (Briefing.com consensus 0.4%; prior 0.5%), Personal Spending (Briefing.com consensus 0.6%; prior 0.2%), PCE Prices (prior 0.6%), core PCE Prices (Briefing.com consensus 0.3%; prior 0.4%), and Q1 Employment Cost Index (Briefing.com consensus 1.1%; prior 1.0%) at 8:30 ET; April Chicago PMI (Briefing.com consensus 62.0; prior 62.9) at 9:45 ET; and final April University of Michigan Consumer Sentiment Survey (Briefing.com consensus 65.7; prior 65.7) at 10:00 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!