The stock markets ended the week with gains other than the small caps. For the week, Nasdaq (+2.0%), Dow (+0.3%), S&P 500 (+1.8%) and Russell 2000 (-0.4%). U.S. Treasuries sold across the curve with the belly of the curve the hardest hit area. The 10-yr note yield hit 2.50% holding close to that level into the close of the cash session. Securities across the curve all went out near their high yields for the day, including the 2-yr note yield (2.29%).
Energy (+2.3%) led after WTI crude turned positive amid reports of an attack on a Saudi oil field. There was more talk about another release from the strategic reserve while Chevron (CVX 169.31, +3.01, +1.8%) received clearance to resume operations in Venezuela. WTI crude climbed $2.59, or 2.3%, to $113.83/bbl, gaining $10.80, or 10.5%, for the week. Marijuana stocks continued their rally.
We look at the indices, $AAPL, $VET $EQT $FCX $COP $TLRY $ACB $CRON $FLGC $CLVR and others, 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 earnings season. We got the Bear Market rally resolution which has angered the BTFD quotient.
- May WTI crude oil (CLK22) on Friday closed up +1.56 (+1.39%)
- Crude prices recovered Friday afternoon after an oil storage facility in Saudi Arabia was hit by a barrage of drone attacks. Crude prices Friday initially moved lower after the EU shied away from banning Russian crude imports.
- Off the high price of $129.44. The highest in 2008 was $147.27.
- May RBOB gasoline (RBK22) closed up +6.74 (+2.00%).
- April Nymex natural gas (NGJ22) Friday closed up by +0.170 (+3.15%).
- The Commodity Weather Group on Friday said that below-normal temperatures are expected over the Northeast through March 29, and Midwestern states will see colder-than-normal weather from March 30-April 3.
- Nat-gas prices +30% surge in European gas prices after Russian President Putin said Russia would demand ruble payments for natural gas purchases from “unfriendly” nations. The order means some Russian contracts with European customers, which are mostly in euros, will need to be renegotiated, and any supply disruptions as a result of the changing rules will further deepen Europe’s energy crisis.
- BNEF data showed gas flows to U.S. export terminals rose +8.7% w/w to 13.40 bcf. On Saturday, gas flows to U.S. export terminals rose to a record 13.77 bcf.
- Baker Hughes reported Friday that the number of active U.S. nat-gas drilling rigs in the week ended March 25 were unchanged at a 2-1/4 year high of 137 rigs. Active rigs have recovered sharply from the record low of 68 rigs posted in July 2020 (data since 1987).
Commodities and FX
- The U.S. Dollar Index was flat today at 98.80 and up 0.6% for the week.
- Gold futures settled $8.00 lower (-0.4%) to $1,954.20/oz, up more than +1% on the week.
- May silver (SIK22) closed down -0.305 (-1.18%)
- CME Bitcoin Futures Settle MAR 22 UNCH 44504.00
For The Day
- Dow +153.30 at 34861.24, (+0.4%)
- Nasdaq -22.54 at 14169.30 (-0.2%)
- S&P +22.90 at 4543.06 (+0.5%)
- Russell 2000 (+0.1%)
- For the week, Nasdaq (+2.0%), Dow (+0.3%), S&P 500 (+1.8%) and Russell 2000 (-0.4%)
- NYSE Adv 1600 Dec 1601 Vol 872.8 mln
- Nasdaq Adv 1945 Dec 2592 Vol 5.49 bln
S&P 500 sector watch:
- 9 of the 11 S&P 500 sectors closed higher
- Energy (+2.3%) utilities sector (+1.5%) financials (+1.3%) and real estate (+1.2%) materials sector (+1.1%) gained 4.1% for the week with fertilizer producers Mosaic (MOS 71.34, +2.77, +4.0%) and CF Industries (CF 109.52, +3.12, +2.9%) fresh 52-week highs, alongside steelmaker Nucor (NUE 157.62, +4.10, +2.7
- Technology (-0.1%) and consumer discretionary (-0.1%). Technology sector ended the week with a gain of 2.3%.
Key Earnings Reviews
US Markets YTD
- Dow Jones Industrial Average -4.1% YTD
- S&P 500 -4.7% YTD
- Russell 2000 -7.5% YTD
- Nasdaq Composite -9.4% YTD
Cboe Daily Market Ratios:
- STOXX Europe 600: +0.6% (+0.2% for the week)
- Germany’s DAX: +0.9% (-0.2% for the week)
- U.K.’s FTSE 100: +0.2% (+1.1% for the week)
- France’s CAC 40: +0.8% (-0.2% for the week)
- Italy’s FTSE MIB: +0.7% (+1.5% for the week)
- Spain’s IBEX 35: +0.3% (-0.9% for the week)
- Japan’s Nikkei: +0.1% (+4.9% for the week)
- Hong Kong’s Hang Seng: -2.5% (flat for the week)
- China’s Shanghai Composite: -1.2% (-1.2% for the week)
- India’s Sensex: -0.4% (-0.9% for the week)
- South Korea’s Kospi: unch (+0.9% for the week)
- Australia’s ASX All Ordinaries: +0.3% (+1.6% for the week)
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 sold across the curve with the belly of the curve was the hardest hit area. The 10-yr note yield hit 2.50% holding close to that level into the close of the cash session. Securities across the curve all went out near their high yields for the day, including the 2-yr note yield (2.29%) with Bank of America calling for two 50-basis points rate hikes in June and July (and 25 bps at all other meeting this year) and Citigroup calling for 50-basis points rate hikes at each of the next four FOMC meetings. Today’s selling capped off a brutal week for Treasuries, which could not escape inflation and rate-hike concerns. The 2s10s spread stands at 20 bps, whereas the 5s30s spread is a mere 3 bps.
- 2-yr: +16 bps to 2.29% (up 34 bps for the week)
- 3-yr: +19 bps to 2.53% (up 38 bps for the week)
- 5-yr: +20 bps to 2.57% (up 43 bps for the week)
- 10-yr: +15 bps to 2.49% (up 34 bps for the week)
- 30-yr: +9 bps to 2.60% (up 18 bps for the week)
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%.
- Pending Home Sales fell 4.1% in February (Briefing.com consensus 1.2%) after decreasing a revised 5.8% (from -5.7%) in January.
- The final March reading for the University of Michigan Consumer Sentiment Index 59.4 (consensus 59.5) versus the preliminary reading of 59.7. The final reading for February was 62.8. The March reading marks the lowest level for the index since October 2012.
- Rising inflation is eating away at consumer sentiment, as consumers recognize their standard of living has been reduced because their income is not keeping up with inflation. Notably, it was indicated in the report that 32% of consumers expect their overall financial position to worsen in the year ahead, which is the highest level since the survey started in the mid-1940s.
- Germany’s March Ifo Business Climate Index 90.8 (expected 94.2; prior 98.5)
- UK’s February Retail Sales -0.3% m/m (expected +0.6%; prior +1.9%) and +7.0% yr/yr (expected +7.8%; prior +9.4%); March GfK Consumer Confidence -31 (expected -30; prior -26)
- Spain’s Q4 GDP +2.2% qtr/qtr (expected +2.0%; prior +2.6%) and +5.5% yr/yr (expected +5.2%; prior +3.5%); PPI +40.7% yr/yr (prior +35.7%)
- Italy’s March Business Confidence 110.3 (expected 111.7; prior 112.9) and March Consumer Confidence 100.8 (expected 108.3; prior 112.4)
- Japan’s March Tokyo CPI +1.3% yr/yr (prior +1.0%) and Tokyo Core CPI +0.8% yr/yr (expected +0.4%; prior +0.5%)
- Singapore’s February Industrial Production +17.6% yr/yr (expected +6.3%; prior +2.4%)
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!