Natural gas hit a high of in the front month of $9.399 the highest since 2008 with worries that fragile supplies may prove inadequate to meet summer cooling demand and U.S. exports. Bottom pickers remain out there in the stock market with another rebound attempt after the release of the Minutes for the May FOMC meeting. Small-cap and mid-cap stocks attracted the punters, the Russell 2000 increased 2.0% and the S&P Midcap 400 Index increased 1.9% versus gains of 1.0% for the S&P 500 and 0.6% for the Dow Jones Industrial Average. The S&P energy sector rose +2.0%.
We look at the indices, $AAPL $TSLA $NVDA $VVV $TWTR 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
Live on YouTube
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.
Market Closes
Energy
- Crude Oil Futures settled July at 110.33/bbl
- WTI off the high price of $129.44. The highest in 2008 was $147.27.
- Brent Crude Futures settled at 114.03/bbl
- June Nymex gas futures contract, a day before rolling off the books, later gave back some of the gains in afternoon trading but still advanced 17.5 cents day/day and settled at $8.971. July jumped 15.7 cents to $8.993.
- Unleaded Gasoline Futures 3.7302 0.0405 1.10
- 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 slipped 0.2% to 101.85.
- Gold futures settled $19.10 lower (-1%) to $1,846.30/oz its steepest percentage decline in two weeks, pressured in part by a modestly higher dollar.
- Silver Futures 21.980 -0.083 -0.38
- Copper Futures 4.2700 -0.0350 -0.81
- Corn Futures 770.75 -1.00 -0.13
- Wheat Futures 1149.75 -5.00 -0.43
- Bloomberg Commodity Index 132.10 0.18 0.13
- Bitcoin USD 29822 60 0.20
- Ethereum USD 1963.99 4.90 0.25
- Ripple USD 0.4077 0.0007 0.18
Stocks
US Indices & S&P 500 sector watch:
- Dow Jones, +191.66 points or 0.6% at 32120.27
- S&P index up 37.25 points or 0.95% at 3978.74
- NASDAQ index up 170.3 points or 1.51% at 11434.75
- Russell 2000 rose 34.33 points or 1.95% at 1799.16
- NYSE Composite 15290.38 -52.58 -0.34
- CBOE Volatility 29.45 0.97 3.41
- NYSE Adv 2582 Dec 700 Vol 1.02 bln
- Nasdaq Adv 3187 Dec 1434 Vol 4.4 bln
- Most sectors ended today higher. Losers were utilities (-0.06%) and industrials (-0.02%) sectors.
- The energy (+2.0%) and information technology (+1.2%) after the consumer discretionary (+2.82%) sector as the best-performing sectors. Gains for the remaining sectors ranged from 0.04% to 0.9%.
Key After Hours
- Box (BOX) misses by $0.02, beats on revs; guides Q2 EPS in-line, revs above consensus; guides FY23 EPS in-line, revs in-line… BOX down 1.4%
- Guess? (GES) misses by $0.05, beats on revs; guides Q2 revs below consensus; guides FY23 revs in-line… GES up 5.8%
- Modine Manufacturing (MOD) beats by $0.07, beats on revs; guides FY23 revs above two analyst estimate… MOD up 14.6%
- Nutanix (NTNX) beats by $0.16, beats on revs; guides Q4 revs below consensus; guides FY22 revs below consensus… NTNX down 27.6%
- NVIDIA (NVDA) beats by $0.07, beats on revs; guides JulQ revs below consensus due to Russia and COVID lockdowns in China; increased and extended share repurchase program to $15.0 bln… NVDA down 7.3%
- Safe Bulkers (SB) reports Q1 EPS of $0.24 vs. $0.28 consensus estimate, revenue increased 24% yr/yr to $77.7 mln vs. the $74.1 mln consensus estimate… SB down 4.5%
- Snowflake (SNOW) reports Q1 (Apr) results, beats on revs; reaffirms FY23 product revs of $1.885-1.90 bln… SNOW down 13.8%
- Splunk (SPLK) beats by $0.43, beats on revs; guides Q2 revs above consensus; guides FY23 revs above consensus… SPLK up 6.9%
- Twitter (TWTR) trades higher after hours; Elon Musk has increased commitment in takeover bid to $33.5 bln; reaches settlement with DOJ and FTC, to pay $150 mln in civil penalties for alleged data privacy violations… TWTR up 5.8%
- Williams-Sonoma (WSM) beats by $0.61, beats on revs, comps of +9.5%; reiterated FY23 revenue growth of mid-to-high single-digit percentage… WSM up 16.0%
US Markets YTD
- Dow Jones Industrial Average -11.5% YTD
- S&P 500 -16.5% YTD
- S&P 400 -14.6% YTD
- Russell 2000 -19.9% YTD
- Nasdaq Composite -26.9% YTD
Cboe Daily Market Ratios:
Europe
Index – Last – Chg – % Chg
Europe
- UK: FTSE 100 7522.75 38.40 0.51
- Germany: DAX 14007.93 88.18 0.63
- France: CAC 40 6298.64 45.50 0.73
- Italy: FTSE MIB 24250.45 374.37 1.57
- Spain: IBEX 35 8760.20 129.00 1.49
- Stoxx Europe 600 434.31 2.73 0.63
- Switzerland: Swiss Market 11491.80 8.24 0.07
- DJIA 32120.28 191.66 0.60
- Global Dow 3811.53 21.05 0.56
Asia
- Hong Kong: Hang Seng 20171.27 59.17 0.29
- Japan: Nikkei 225 26677.80 -70.34 -0.26
- China: Shanghai Composite 3107.46 36.54 1.19
- India: S&P BSE Sensex 53749.26 -303.35 -0.56
- Australia: S&P/ASX 7155.2 26.4 0.37
- S. Korea: KOSPI 2617.22 11.35 0.44
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
Bonds
U.S. Treasuries ended modestly higher note while 3s and 5s outperformed throughout the day with almost no reaction to today’s $48 bln 5-yr note sale.
- 2-yr: UNCH at 2.50%
- 3-yr: -5 bps to 2.63%
- 5-yr: -4 bps to 2.72%
- 10-yr: -1 bp to 2.75%
- 30-yr: -1 bp to 2.97%
$48 bln 5-year Treasury note auction results (prior 12-auction average):
- High yield: 2.736% (1.392%).
- Bid-to-cover: 2.44 (2.43).
- Indirect bid: 62.9% (62.1%).
- Direct bid: 20.0% (17.5%).
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
Market Notables
- Dick’s Sporting Goods (DKS) issuing FY23 EPS guidance well below consensus to account for the expected impact of “evolving macroeconomic conditions”; DKS shares indicated 14% lower
- Nordstrom (JWN) jumps 3.9% following better-than-expected FY23 outlook
- Wendy’s (WEN) up 8% after filing by Trian Fund suggests it intends to explore and evaluate potential transactions with company to enhance shareholder value
USA
- Valvoline Soars Over 25% on Saudi Aramco Takeover Rumor – TRADERS COMMUNITY
- Around The Barrel – US Crude Oil SPR Stocks SPR Lowest Since 1987 as Crude and Refined Product Exports Soar – TRADERS COMMUNITY
- The conditions for durable goods orders proved to be reasonably good in April, if not altogether as strong as expected. New orders for durable goods increased 0.4% month-over-month (consensus 0.6%) while new orders for durable goods, excluding transportation, rose 0.3% month-over-month (consensus 0.6%).
- The key takeaway from the report is that business spending continued to increase. That view was embedded in the 0.3% increase in nondefense capital goods orders, excluding aircraft, which followed on the heels of a 1.1% increase in March.
- The weekly MBA Mortgage Index fell 1.2% to follow last week’s 11.0% decrease. The Purchase Index rose 0.2% while the Refinance Index fell 3.9%.
- US New Home Sales Slide 16.1% in April, Lowest Level Since April 2020 – TRADERS COMMUNITY
- Snap Crashes Another 30% After Warns Again as Supply Chain, Digital Advertising Apple Worsens – TRADERS COMMUNITY
- Zoom Video Raises Earnings Guidance as it Adjusts to Lower Stay at Home Demand and Inflation – TRADERS COMMUNITY
- Who is Attending the Davos World Economic Forum and Who Is Not – TRADERS COMMUNITY
Europe
- Germany Consumer Sentiment Near All Time Low with Soaring Prices and War in Ukraine – TRADERS COMMUNITY
- European Central Bank policymaker Panetta said that the current outlook justifies a gradual exit from negative rates but does not mean that stimulus should be removed outright.
- British employers have reportedly increased pay by about 4% over the past three months, representing the biggest increase in 30 years, though raises were still below the pace of inflation.
- Germany’s Q1 GDP expanded 0.2% qtr/qtr, as expected (last -0.3%), growing 4.0% yr/yr, as expected (last 1.8%).
- France’s May Consumer Confidence fell to 86 from 87 (expected 89) and April jobseekers increased to 2.955 mln from 2.940 mln.
- Spain’s April PPI was up 45.0% yr/yr (last 47.0%).
- Swiss May ZEW Expectations fell to -52.6 from -51.6.
Asia
- The Reserve Bank of New Zealand raised its official cash rate by 50 bps to 2.00%, as expected.
- Japan’s Cabinet office maintained its overall economic assessment but raised its view of employment and housing.
- Shanghai Security News reported that small and medium banks have been instructed to limit their asset management units this year.
- Japan’s March Leading Index was up 0.7% m/m (last 0.9%) and Coincident Indicator was up 0.7% m/m (last 0.2%).
- South Korea’s June Manufacturing BSI Index remained at 85.
- Singapore’s Q1 GDP expanded 1.4% qtr/qtr (expected 0.8%; last 1.4%), growing 3.7% yr/yr, as expected (last 3.4%).
- Australia’s Q1 Construction Work Done was down 0.9% qtr/qtr (expected 1.0%; last -0.4%).
Looking ahead:
The Day Ahead:
- Traders Market Weekly: Bear Jitters as Risk Factors Deepen – TRADERS COMMUNITY
- Monday: Nothing of note
- Tuesday: Preliminary May IHS Markit Manufacturing PMI (prior 59.2) and preliminary May IHS Services PMI (prior 55.6) at 9:45 ET; April New Home Sales (prior 763,000) at 10:00 ET; and $47 bln 2-yr Treasury note auction results at 13:00 ET
- Wednesday: Weekly MBA Mortgage Index (prior -11.0%) at 7:00 ET; April Durable Orders (prior 0.8%) and Durable Orders ex-transportation (prior 1.1%) at 8:30 ET; weekly crude oil inventories (prior -3.39 mln) at 10:30 ET; $48 bln 5-yr Treasury note auction results at 13:00 ET; and May FOMC Minutes at 14:00 ET
- Thursday: Q1 GDP — second estimate (prior -1.4%), Q1 GDP Deflator — second estimate (prior 8.0%), weekly Initial Claims (prior 218,000), Continuing Claims (prior 1.317 mln) at 8:30 ET; April Pending Home Sales (prior -1.2%) at 10:00 ET; weekly natural gas inventories (prior +89 bcf) at 10:30 ET; and $42 bln 7-yr Treasury note auction result at 13:00 ET
- Friday: April Personal Income (prior 0.5%), Personal Spending (prior 1.1%), PCE Prices (prior 0.9%), Core PCE Prices (prior 0.3%), April advance goods trade deficit (prior -$125.30 bln), April advance Retail Inventories (prior 2.0%), and April advance Wholesale Inventories (prior 2.3%) at 8:30 ET; and final May University of Michigan Consumer Sentiment survey (prior 59.1) at 10:00 ET
Wednesday, May 25
WASHINGTON – Federal Reserve Vice Chair Lael Brainard gives commencement remarks before the Johns Hopkins University School of Advance International Studies 2022 Commencement Ceremony, 1215 EDT/1615 GMT. Text available. No Q&A. Webcast at https://www.youtube.com/watch?v=d4z2VRB4GZU. DAR Constitution Hall, 1776 18th Street N.W. Contact: Danielle Khan, dkhan@jhu.edu or 202 963 8865
Monday, May 23
ATLANTA – Federal Reserve Bank of Atlanta President Raphael Bostic participates in conversation on the economic outlook before an Atlanta Rotary event, 1200 EDT/1600 GMT. No livestream. Audience and media Q&As expected. No embargoed text. Loudermilk Conference Center, 40 Courtland Street. RSVP to attend: media Karen Mracek, karen.mracek@atl.frb.org
Earnings:
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!