Yesterday the markets continued with no fear in a FOMO bear market rally despite Walmart’s biggest daily fall since 1987 and Fed chair Powell reiterated raising rates and cutting free credit. The dribblers laughed and danced as their stocks squeezed. Today Target $TGT came in for the 1-2 to close at -53.67 (-24.93%) also the biggest daily fall since 1987
None of the Dow 30 stocks closed positive on the day, the DJIA closed down -1164.52 points or -3.57% at 31490.06. The S&P index closed down -165.17 points or 4.04% at 3923.67. NASDAQ was down -566.36 points or -4.73% at 11418.16 and the Russell 2000 down -65.45 points or -3.56% at 1774.84.
We look at the indices, $AAPL $WMT $TSLA $TGT $AMZN $SNAP 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.
- Crude Oil Futures settled down by $2.86 (-2.6%) to $109.35/barrel
- WTI off the high price of $129.44. The highest in 2008 was $147.27.
- Brent Crude Futures 109.25 0.14 0.13
- Natural Gas Futures 8.349 -0.106 -1.25
- Unleaded Gasoline Futures 3.7072 -0.0134 -0.36
- 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 reclaimed roughly half of yesterday’s loss, rising 0.4% to 103.81
- Gold Futures 1815.40 -0.50 -0.03
- Silver Futures 21.420 -0.124 -0.58
- Copper Futures 4.1525 -0.0260 -0.62
- Corn Futures 782.50 -18.25 -2.28
- Wheat Futures 1230.25 -47.25 -3.70
- Bloomberg Commodity Index 129.63 -2.00 -1.52
- Bitcoin USD 28943 -262 -0.90
- Ethereum USD 1946.44 -16.30 -0.83
- Ripple USD 0.4109 -0.0047 -1.13
US Indices & S&P 500 sector watch:
- Dow industrial average down -1164.52 points or -3.57% at 31490.06
- S&P index down -165.17 points or 4.04% at 3923.67
- Nasdaq down -566.36 points or -4.73% at 11418.16
- Russell 2000 down -65.45 points or -3.56% at 1774.84.
- NYSE Composite 15044.52 -497.39 -3.20
- CBOE Volatility 18.6% pop 30.96, +4.86
- NYSE Adv 484 Dec 2594 Vol 1.1 bln
- Nasdaq Adv 971 Dec 2947 Vol 4.9 bln
- Of the S&P 500 sectors 11 of the 11 closed lower
- S&P 500 consumer discretionary (-6.6%) and consumer staples (-6.4%) sectors were the weakest performers. The information technology sector (-4.7%) is the most heavily-weighted sector in the market.
- The defensive-oriented utilities sector (-1.0%)
Key After Hours
- Aurora (AUR) expands autonomous commercial linehaul trucking pilot with FedEx (FDX)… AUR up 6.2%; FDX down 0.1%
- Bath & Body Works (BBWI) beats by $0.12, reports revs in-line; guides JulQ EPS below consensus; guides FY23 EPS below consensus… BBWI down 4.3%
- BlackBerry (BB) provides its long-term financial goals; expects 5-yr revenue CAGR of 13% bringing its FY27 sales target to $1.213 bln… BB down 2.2%
- Cisco (CSCO) beats by $0.01, misses on revs; guides JulQ EPS below consensus, revs below consensus; cites Covid lockdowns in China and war in Ukraine for impacting revs… CSCO down 14.1%
- Synopsys (SNPS) beats by $0.13, beats on revs; guides JulQ EPS above consensus, revs above consensus; guides FY22 EPS above consensus, revs above consensus… SNPS up 3.8%
- Tesla (TSLA) ticks lower on report that NHTSA has opened a special investigation on a crash in CA, according to Reuters… TSLA down 0.3%
- Under Armour (UAA) CEO Patrik Frisk will step down, effective June 1… UAA down 2.6%
US Markets YTD
- Dow Jones Industrial Average -10.1% YTD
- S&P 500 -14.2% YTD
- Russell 2000 -18.0% YTD
- Nasdaq Composite -23.4% YTD
Cboe Daily Market Ratios:
Index – Last – Chg – % Chg
European stock indexes closed near the lows of the day in relentless selling that accelerated after the US open.
- UK:FTSE 100 7438.09 -80.26 -1.07
- Germany: DAX 14007.76 -178.18 -1.26
- France: CAC 40 6352.94 -77.25 -1.20
- Italy: FTSE MIB 24085.82 -215.83 -0.89
- Spain: IBEX 35 8476.40 0.70 0.01
- Stoxx Europe 600 433.95 -5.02 -1.14
- Switzerland: Swiss Market 11579.14 -151.30 -1.29
- Global Dow 3749.15 -76.52 -2.00
- Hong Kong: Hang Seng 20644.28 41.76 0.20
- Japan: Nikkei 225 26911.20 251.45 0.94
- China: Shanghai Composite 3085.98 -7.72 -0.25
- India: S&P BSE Sensex 54208.53 -109.94 -0.20
- Australia: S&P/ASX 7182.7 70.2 0.99
- S. Korea: KOSPI 2625.98 5.54 0.21
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 mostly higher note after reclaiming their opening losses. Treasuries added to their gains after the completion of today’s solid $17 bln 20-yr bond offering, with 10s and 30s finishing on their highs while shorter tenors ended a bit below their best levels, allowing the 2-yr note to dip back into the red ahead of the close.
- 2-yr: +1 bp to 2.68%
- 3-yr: -4 bps to 2.82%
- 5-yr: -6 bps to 2.89%
- 10-yr: -8 bps to 2.89%
- 30-yr: -9 bps to 3.07%
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%.
- Spirit Airlines (SAVE 19.27, +2.29, +13.5%) rallied 13.5% after JetBlue (JBLU 9.45, -0.61, -6.1%) officially commenced a hostile takeover bid for the company.
- Wix.com (WIX 66.68, -4.51, -6.3%) and Warby Parker (WRBY 16.51, -0.93, -5.3%) provided disappointing earnings news.
- Total housing starts declined 0.2% month-over-month in April to a seasonally adjusted annual rate of 1.724 million units (consensus 1.775 million) while building permits decreased 3.2% month-over-month to 1.819 million (consensus 1.820 million).
- Target Misses Earnings Metrics as Margins Collapse on Soaring Expenses – TRADERS COMMUNITY
- US Mortgage Applications Slide 11% After Federal Reserve Raised Rates 50bps – TRADERS COMMUNITY
- Around The Barrel – Big Draws in U.S. Crude Oil and Gasoline as SPR Continues To be Emptied – TRADERS COMMUNITY
- The Biggest Pusher of Easy Money, Former Federal Reserve Chairman Bernanke Warns on Stagflation in New Book – TRADERS COMMUNITY
- U.S. 20-year Treasury Bond Auction with High Yield of 3.29% on Higher International Demand – TRADERS COMMUNITY
- Home Depot Delivers Record Sales and Raises Guidance and Margins – TRADERS COMMUNITY
- Walmart Earnings Hit by Inflation, Lowers Forward Guidance – TRADERS COMMUNITY
- Currency Forwards and Option Hedging Strategies Rise with Soaring US Dollar – TRADERS COMMUNITY
- Baltic Sea Freight Index Higher for Fifth Straight Week Led By capesize index up 36.4% – TRADERS COMMUNITY
- Into The Vortex – Natural Gas Outlook – TRADERS COMMUNITY
- Federal Reserve Financial Stability Report Warns on Worsening Liquidity Risks – TRADERS COMMUNITY
- European Central Bank policymaker Rehn cautioned against feeding a change to inflation expectations, repeating his expectations for an initial rate hike this summer.
- Eurozone’s April CPI was up 0.6% m/m, as expected (last 2.4%) and up 7.4% yr/yr (expected 7.5%; last 7.5%). April Core CPI was up 1.0% m/m (expected 1.1%; last 1.1%) and up 3.5% yr/yr, as expected (last 3.0%).
- U.K.’s April CPI was up 2.5% m/m (expected 2.6%; last 1.1%) and up 9.0% yr/yr (expected 9.1%; last 7.0%). April Core CPI was up 0.7% m/m (expected 0.8%; last 0.9%) and up 6.2% yr/yr, as expected (last 5.7%). April Input PPI was up 1.1% m/m, as expected (last 4.6%) and Output PPI was up 2.3% m/m (expected 1.0%; last 1.9%).
- Spain’s March trade deficit reached EUR4.60 bln (last deficit of EUR4.30 bln).
- Former Bank of Japan policymaker Sakurai said that there is a chance that the central bank will adjust its yield curve control policy in the fall, adding that the yen could weaken to 140 per dollar.
- South Korean think tank KDI raised South Korea’s forecast for 2022 CPI to 4.2% from 1.7% while the growth forecast was reduced to 2.8% from 3.0%.
- The Chinese government will reportedly subsidize some vehicle purchases.
- China’s April House Prices rose 0.7% yr/yr (last 1.5%).
- Japan’s Q1 GDP was down 0.2% qtr/qtr (expected -0.4%; last 0.9%), contracting 1.0% yr/yr (expected -1.8%; last 3.8%).
- Australia’s Q1 Wage Price Index rose 0.7% qtr/qtr (expected 0.8%; last 0.7%), increasing 2.4% yr/yr (expected 2.5%; last 2.3%). April MI Leading Index was down 0.2% m/m (last 0.3%).
The Day Ahead:
- Traders Market Weekly: Eyes Up on Retail and Inflation – TRADERS COMMUNITY
- Monday: May Empire State Manufacturing Survey (prior 24.6) at 8:30 ET and March net long-term TIC flows (prior $141.7 bln) at 16:00 ET
- Tuesday: April Retail Sales (prior 0.5%) and Core Retail Sales (prior 1.1%) at 8:30 ET; April Industrial Production (prior 0.9%) and Capacity Utilization (prior 0.9%) at 9:15 ET; March Business Inventories (prior 1.5%) and May NAHB Housing Market Index (prior 77) at 10:00 ET
- Wednesday: Weekly MBA Mortgage Index (prior 2.0%) at 7:00 ET; April Housing Starts (prior 1.793 mln) and Building Permits (prior 1.873 mln) at 8:30 ET; weekly crude oil inventories (prior +8.49 mln) at 10:30 ET; and $17 bln 20-yr Treasury bond auction results at 13:00 ET
- Thursday: Weekly Initial Claims (prior 203,000), Continuing Claims (prior 1.343 mln), May Philadelphia Fed Survey (prior 17.6) at 8:30 ET; April Existing Home Sales (prior 5.77 mln) and April Leading Indicators (prior 0.3%) at 10:00 ET; and weekly natural gas inventories (prior +76 bcf) at 10:30 ET
- Friday: Nothing of note
FEDERAL RESERVE CHAIR JEROME POWELL
Tuesday, May 17
NEW YORK – Federal Reserve Chair Jerome Powell participates in conversation before the Wall Street Journal Future of Everything Festival, 1400 EDT/1800 GMT. No text. Q&A from moderator. Livestream at www.wsj.com. Spring Studios, 6 St. Johns Lane. Contact: Caitlyn Reuss, email@example.com or 757 642 4267
OTHER FED OFFICIALS
Monday, May 16
NEW YORK – Federal Reserve Bank of New York President John Williams participates in in moderated discussion before the Mortgage Bankers Association Secondary and Capital Markets Conference and Expo, 0855 EDT/1255 GMT. No livestream. No text. Moderated Q&A expected. New York Marriott Marquis, 1535 Broadway, Broadway Ballroom, 6th floor. RSVP: Adam DeSanctis, adesanctis https://www.mba.org/conferences-and-education/secondary-and-capital-markets-conference-and-expo/schedule/session-detail/opening-general-session-economic-outlook-from-the-new-york-fed-74963
Tuesday, May 17
NEWARK, Del. – Federal Reserve Bank of Philadelphia President Patrick Harker speaks on “Healthcare as an Economic Driver” before hybrid Stern Future Healthcare Workforce Summit, 0915 EDT/1315 GMT. Text available. Audience Q&A expected. No media Q&A. Virtual and in-person at the University of Delaware, The Tower at STAR, 4th Floor, 100 Discovery Blvd. RSVP: Daneil Mazone, daniel.mazone Alyssa Augustine, firstname.lastname@example.org or 612 508 6341
CLEVELAND – Federal Reserve Bank of Cleveland President Loretta Mester gives opening remarks before virtual “Cleveland Fed Conversations on Central Banking, Inflation and Monetary Policy: Parallels to and Differences from the 1970s” panel, 1430 EDT/1830 GMT. Via teleconference. No audience Q&A. No media Q&A. No text. RSVP for teleconference link: https://us02web.zoom.us/meeting/register/tZMldemoqjksG9BQdTj_4YEa0gZuBh7o3yFP. Information: Andrew Zajac, 216 579 3196 or email@example.com
NEW YORK – Federal Reserve Bank of Chicago President Charles Evans speaks on current economic conditions or monetary policy before the Money Marketeers of New York University, 1845 EDT/2245 GMT. No livestream planned. Embargoed text available. Audience Q&A and media scrum expected. Dial-in access to media scrum available for media not in attendance. RSVP: Gloria Nixon, firstname.lastname@example.org
Wednesday, May 18
PHILADELPHIA – Federal Reserve Bank of Philadelphia President Patrick Harker speaks on the economic outlook before virtual Mid-Size Bank Coalition of America CEO Talk, 1600 EDT/2000 GMT. Text available. Audience Q&A expected. No media Q&A. RSVP: Daneil Mazone, email@example.com
Thursday, May 19 ***MINNEAPOLIS – Federal Reserve Bank of Minneapolis President Neel Kashkari participates in Urban Institute virtual conversation, “Inflation and its Consequences for Families with Low and Moderate Incomes,” 1500 CDT/1600 EDT/2000 GMT. No Q&A. RSVP online: https://www.urban.org/events/inflation-and-its-consequences-families-low-and-moderate-incomes. Contact: Alyssa Augustine, firstname.lastname@example.org or 612 508 6341
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, email@example.com
Monday (May 16)
Pre-Market: YOU CGEN MNDY TSEM WRBY WEBR WIX
After-Hours: CCSI GAN GLBE SHLS SSYS TTWO TME
Tuesday (May 17)
Pre-Market: AER HD HUYA IHS JD ONON RSKD SE WMT
After-Hours: AGYS DLO DOCS KEYS NXGN
Wednesday (May 18)
Pre-Market: ADI DOYU DT LOW TGT TJX TGI
After-Hours: BBWI CSCO CPRT GDS SNPS
Thursday (May 19)
Pre-Market: WMS BJ CAE GOOS EXP KSS LSPD MNRO VIPS
After-Hours: AINV AMAT DECK FLO GLOB PANW ROST VFC
Friday (May 20)
Pre-Market: BAH DE FL
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!