Yesterday we cautioned on the foolhardy nature of Dribblers and relief rallies. Today’s markets collapsed fast and hard as reality hit home after The Federal Reserve raised rates by a half of a percent at their May meeting yesterday. The Bank of England raised today which saw the Pound collapse and more risk tomorrow with the US Jobs report.
Basically, US stock markets collapsed and gave everything back after yesterday’s bear market rally. Just to rub salt in the wound oil and natural gas exploded North.
We look at the indices, $AAPL $SNAP $AMD $TSLA $PNS 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.
- Crude Oil Futures rose 5.2%, or $5.29, to $107.97/bbl with news that the European Commission proposed to phase out Russian crude imports in the next six months and refined oil products by year-end.
- 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 110.72 -0.18 -0.16
- Natural Gas Futures 8.831 -0.010 -0.11
- Unleaded Gasoline Futures 3.6532 -0.0055 -0.15
- 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 fell 0.8% to 102.60, deepening its pullback from a 20-year high.
- Gold futures settled $6.90 higher (+0.3%) to $1,875.70/oz even despite eye-catching gains in yields and the dollar.
- Silver Futures 22.440 -0.003 -0.01
- Copper Futures 4.2945 0.0030 0.07
- Corn Futures 793.50 -4.00 -0.50
- Wheat Futures 1094.00 -12.50 -1.13
- Bloomberg Commodity Index 132.40 0.96 0.73
- Bitcoin USD 36337 -95 -0.26
- Ethereum USD 2736.35 -18.02 -0.65
US Indices & S&P 500 sector watch:
- Dow fell -1063.11 points or -3.12% at 32997.96
- S&P fell -153.30 points or -3.56% at 4146.86
- Nasdaq fell -647.15 points or -4.99% at 12317.70
- Russell 200 fell -78.77 points or -4.04% at 1871.14.
- NYSE Composite 15652.61 -467.00 -2.90
- CBOE Volatility 31.20 5.78 22.74
- NYSE Adv 296 Dec 2859 Vol 618.2 mln
- Nasdaq Adv 736 Dec 3443 Vol 4.1 bln
- Yesterday all S&P 500 sectors closed higher with gains ranging from 1.1% (real estate) to 4.1% (energy). Ten sectors advanced more than 2.0%. Today the consumer discretionary (-6.8%) and information technology (-5.9%) sectors are wrecked. The utilities sector is down the least with a sharp 1.8% decline.
Key After Hours
- Bill.com (BILL) beats by $0.08, beats on revs; guides Q4 EPS above consensus, revs above consensus; guides FY22 EPS above consensus, revs above consensus… BILL down 17.7%
- Block (SQ) misses by $0.02, misses on revs… SQ up 8.6%
- Cloudflare (NET) beats by $0.01, beats on revs; guides Q2 EPS above consensus, revs above consensus; guides FY22 EPS in-line, revs above consensus… NET down 14.9%
- DoorDash (DASH) misses by $0.06, beats on revs; Q1 adjusted EBITDA above guidance; reaffirms FY22 adjusted EBITDA guidance; raises FY22 marketplace GOV guidance… DASH up 6.0%
- Dropbox (DBX) reports EPS in-line, revs in-line, guides Q2 revs above consensus; reaffirms FY22 revs; expects to commence previously authorized $1.2 bln share repurchase program in Q2… DBX up 3.1%
- fuboTV (FUBO) misses by $0.16, reports revs in-line; guides Q2 revs below consensus; guides FY22 revs below consensus… FUBO down 9.0%
- Live Nation (LYV) beats by $0.38, misses on revs… LYV up 2.2%
- Lucid Group (LCID) reports Q1 (Mar) results, beats on revs; FY22 production volume remains on track at 12-14K vehicles… LCID up 0.6%
- MercadoLibre (MELI) misses by $0.09, beats on revs… MELI up 8.4%
- Opendoor Technologies (OPEN) reports Q1 (Mar) results, beats on revs; guides Q2 revs above consensus… OPEN up 16.5%
- Peloton (PTON) is exploring sale of minority stake of around 15% to 20%, according to WSJ… PTON down 3.6%
- Shake Shack (SHAK) beats by $0.04, beats on revs, comps of +10.3%; guides Q2 revs below consensus, comps of low to mid-teens percentage… SHAK down 1.8%
- Sony (SONY): FTC aiming to open investigation into SONY’s $3.6 bln purchase of Bungie Gaming, according to The Information… SONY up 1.2%
- Virgin Galactic (SPCE) misses by $0.04, beats on revs… SPCE down 3.1%
- Zillow (ZG) beats by $0.22, beats on revs and adjusted EBITDA; guides Q2 revs below consensus… ZG down 9.4%
US Markets YTD
- Dow Jones Industrial Average -9.2% YTD
- S&P 500 -13.0% YTD
- Russell 2000 -16.7% YTD
- Nasdaq Composite -21.3% YTD
Cboe Daily Market Ratios:
Index – Last – Chg – % Chg
- UK FTSE 100 7503.27 9.82 0.13
- Germany: DAX 13902.52 -68.30 -0.49
- France: CAC 40 6368.40 -27.28 -0.43
- Italy: FTSE MIB 23759.71 -142.35 -0.60
- Spain: IBEX 35 8434.70 -65.80 -0.77
- Stoxx Europe 600 438.26 -3.11 -0.70
- Switzerland: Swiss Market 11877.27 -2.97 -0.02
- Equity indices in China and Japan remained closed for holidays.
- Hong Kong’s Hang Seng: -1.1%
- India’s Sensex: -2.3%
- South Korea’s Kospi: -0.1%
- Australia’s ASX All Ordinaries: -0.3%.
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 ended Thursday sharply lower note with the long bond finishing behind shorter tenors. The 10-yr yield and the 30-yr yield finished the session at a fresh high for the year while the 5-yr yield finished the day one basis point below yesterday’s high. Up front, the 2-yr note gave back roughly half of yesterday’s gain. The Bank of England increased its base rate by 25 bps to 1.00% and forecast that inflation will climb above 10.0% in the fall, triggering a recession in the U.K.
- 2-yr: +11 bps to 2.72%
- 3-yr: +9 bps to 2.91%
- 5-yr: +13 bps to 3.02%
- 10-yr: +15 bps to 3.07%
- 30-yr: +16 bps to 3.16%
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%.
- Nonfarm business sector labor productivity decreased 7.5% in the first quarter (consensus -2.8%) following a downwardly revised 6.3% increase (from 6.6%) in the fourth quarter. Unit labor costs soared 11.6% (consensus 7.3%) following an upwardly revised 1.0% increase (from 0.9%) in the fourth quarter. The first quarter decline in productivity is the largest since the third quarter of 1947.
- The key takeaway from this report is that it’s a reflection of weak economic activity and rising labor costs that threaten corporate profit margins.
- The weekly initial claims report showed jobless claims for the week ending April 30 rising by 19,000 to 200,000 (consensus 184,000) and continuing claims for the week ending April 23 decreasing by 19,000 to 1.384 million, which is the lowest since January 17, 1970.
- The key takeaway from the report is that initial claims are still running near historically low levels that point to tightness in the labor market and the likely persistence of wage-based inflation pressures.
- Into The Vortex – Natural Gas Outlook as Europe Weans Itself Off Russian Supplies – TRADERS COMMUNITY
- Brazil Central Bank Aggressively Raises Rates For Tenth Consecutive Time, Another 100bp to 12.75%, Signals More To Come – TRADERS COMMUNITY
- Federal Reserve Raises Rates 50 Basis Points First Time Since 2000 as Expected – TRADERS COMMUNITY
- Around The Barrel – US Crude Oil Builds as Gasoline and Distillate Draw Again – TRADERS COMMUNITY
- US Mortgage Applications Rise First Time in Two Months Ahead of Federal Reserve Expected to Raise Rates 50bps – TRADERS COMMUNITY
- Baltic Sea Freight Index Gains for Third Straight Month in April – TRADERS COMMUNITY
- Advanced Micro Devices (AMD 96.62, +5.49): +6.0% after beating top and bottom-line estimates and issuing upside revenue guidance for Q2 and FY22.
- Airbnb (ABNB 152.56, +7.56): +5.2% after beating top and bottom-line estimates and guiding Q2 revenue above consensus.
- Starbucks (SBUX 79.06, +4.73): +6.4% despite missing revenue estimates and suspending guidance for Q3 and Q4 due to numerous macroeconomic challenges. The company said there will need to be significant investments to help catch up to unmet demand.
- Moderna (MRNA 158.50, +11.96): +8.2% after beating top and bottom-line estimates.
- Lyft (LYFT 23.08, -7.68): -25.0% after issuing downside Q2 revenue guidance and saying it expects to ramp up investments in driver supply.
- European Commission President von der Leyen announced that three more Russian banks, including Sberbank, will be excluded from the SWIFT messaging system. The EU plans to phase out the use of Russian crude in the next six months and stop the use of refined products from Russia by the end of the year.
- Most members of the Bank of England’s Shadow board are in favor of a 50-bps rate hike tomorrow.
- Germany’s Finance Minister Lindner warned against taxing excess profits of oil and gas companies.
- Eurozone’s April Services PMI rose to 57.7 from 55.6, as expected. March Retail Sales decreased 0.4% m/m (expected -0.1%; last 0.4%) but were up 0.8% yr/yr (expected 1.4%; last 5.2%).
- Germany’s April Services PMI rose to 57.6 from 56.1 (expected 57.9). March trade surplus reached EUR3.20 bln (expected surplus of EUR9.80 bln; last surplus of EUR11.10 bln) as imports grew 3.4% m/m (expected 1.0%; last 4.7%) while exports fell 3.3% m/m (expected -2.0%; last 6.2%).
- U.K.’s March Mortgage Lending reached GBP6.97 bln (expected GBP5.11 bln; last GBP4.56 bln) and Mortgage Approvals reached 70,690 (expected 70,780; last 70,970).
- France’s April Services PMI rose to 58.9 from 57.4 (expected 58.8).
- Italy’s April Services PMI rose to 55.7 from 52.1 (expected 54.5).
- Spain’s April Services PMI rose to 57.1 from 53.4 (expected 55.9) and April unemployment decreased by 86,300 (last -2,900).
- The Reserve Bank of India unexpectedly raised its repurchase rate by 40 bps to 4.4%.
- Executives from HSBC and Ping An will reportedly discuss a proposal for a spinoff of HSBC’s Asian unit or other strategic options later this month.
- North Korea reportedly conducted its 14th missile test of the year.
- Australia’s April AIG Construction Index fell to 55.9 from 56.5. March Retail Sales rose 1.6% m/m (expected 0.6%; last 1.8%) and March Home Loans rose 0.9% m/m (expected -2.0%; last -4.7%).
- New Zealand’s Q1 Employment Change ticked up 0.1% qtr/qtr, as expected (last 0.1%). Q1 Labor Cost Index rose 0.7% qtr/qtr, as expected (last 0.7%), increasing 3.1% yr/yr, as expected (last 2.8%). Q1 Participation Rate fell to 70.9% from 71.1% (expected 71.1%).
The Day Ahead:
8:30 ET: April Nonfarm Payrolls (Briefing.com consensus 395,000; prior 431,000), Nonfarm Private Payrolls (Briefing.com consensus 390,000; prior 426,000), Unemployment Rate (Briefing.com consensus 3.6%; prior 3.6%), Average Hourly Earnings (Briefing.com consensus 0.4%; prior 0.4%), and Average Workweek (Briefing.com consensus 34.7; prior 34.6)
15:00 ET: March Consumer Credit (Briefing.com consensus $25.00 bln; prior $41.80 bln)
- Federal Reserve Bank of New York President John Williams
- Minneapolis President Neel Kashkari
- Atlanta President Raphael Bostic
- Federal Reserve Governor Christopher Waller
- Federal Reserve Bank of St. Louis President James Bullard
- San Francisco President Mary Daly
Pre-Market: MACMR AXL ABR BKI BEP ECOM CI CNK ROAD ENB ESNT FLR FYBR GT GTN IEP IMGN TILE KOP NRG PRLB QRTEA SSP SPB FLOW TU UAA
After-Hours: BLDP WPRT
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!