Two outa three days ain’t good, major US stock indices down sharply for the second time in three trading sessions. The Dow industrial average fell nearly 1000 points two days ago and is down by another 800 points today. The NASDAQ index was wrecked over 500 points or -3.95%.
However, after getting wrecked to $360 on beating, it soared to $386 pulling the Spoos back up 40 handles. Tomorrow we get to see if that was a capitulation or just a blip. Dow fell -810 points or -2.38% at 33239/46 S&P fell -120.95 points or -2.82% at 4175.18 Nasdaq fell -514.1 points or -3.95% at 12490.74 Russell 2000 fell -63.72 points or -3.26% at 1890.47
We look at the indices, $MSFT $XOM $AAPL $GOOGL $NUTA $TSLA 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.
- WTI crude oil futures settled higher by $2.79 (+2.8%) to $101.42/barrel.
- Brent Crude Futures 105.42 0.81 0.77
- Natural Gas Futures 6.841 -0.009 -0.13
- Unleaded Gasoline Futures 3.3462 0.0352 1.06
- 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 climbed 0.6% to 102.32, nearing its high from 2020 (102.99), highest since the very peak of the pandemic scare in March 2020.
- Gold futures settled $7.20 higher (+0.38%) to $1,903.20/oz, reclaiming recent declines to late-February lows.
- Silver Futures 23.600 0.056 0.24
- Copper Futures 4.4725 0.0085 0.19
- Corn Futures 798.75 -2.75 -0.34
- Wheat Futures 1088.50 -6.50 -0.59
- Bloomberg Commodity Index 128.55 0.26
US Indices & S&P 500 sector watch:
- DJIA 33240.18 -809.28 -2.38
- Nasdaq Composite 12490.74 -514.11 -3.95
- S&P 500 4175.20 -120.92 -2.81
- Russell 2000 1890.47 -63.73 -3.26
- NYSE Composite 15694.24 -360.53 -2.25
- CBOE Volatility 33.52 6.50 24.06
- NYSE Adv 1588 Dec 1648 Vol 1.1 bln
- Nasdaq Adv 2394 Dec 2053 Vol 4.7 bln
- The energy sector (+0.04%) was the only sector in the S&P 500 that closed higher
- The consumer discretionary (-5.0%), information technology (-3.7%), and communication services (-3.2%) sectors posted the steepest declines. The former included a 12% drop in Tesla (TSLA 876.42, -121.60, -12.2%) attributed in part to concerns surrounding Elon Musk’s ownership of Twitter (TWTR 49.68, -2.02, -3.9%).
Key After Hours
US Markets YTD
- Dow Jones Industrial Average -8.5% YTD
- S&P 500 -12.4% YTD
- Russell 2000 -15.8% YTD
- Nasdaq Composite -20.2% YTD
Cboe Daily Market Ratios:
- UK: FTSE 100 7386.19 5.65 0.08
- Germany: DAX 13756.40 -167.77 -1.20
- France: CAC 40 6414.57 -34.81 -0.54
- Italy: FTSE MIB 23681.76 -226.79 -0.95
- Spain: IBEX 35 8439.30 -135.30 -1.58
- Stoxx Europe 600 441.10 -4.01 -0.90
- Switzerland: Swiss Market 11933.28 -151.70 -1.26
- DJIA 33240.18 -809.28 -2.38
- Global Dow 3815.15 -8.41 -0.22
- Japan’s Nikkei: +0.4%
- Hong Kong’s Hang Seng: +0.3%
- China’s Shanghai Composite: -1.4%
- India’s Sensex: +1.4%
- South Korea’s Kospi: +0.4%
- Australia’s ASX All Ordinaries: -2.1%.
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 continuing yesterday’s show of relative strength. Today’s strong $48 bln 2-yr note sale while the 2-yr note revisited its session high. The auction preceded tomorrow’s 49 bln 5-yr note sale and a $44 bln 7-yr note sale on Thursday.
- 2-yr: -8 bps to 2.55%
- 3-yr: -7 bps to 2.73%
- 5-yr: -6 bps to 2.80%
- 10-yr: -5 bps to 2.77%
- 30-yr: -3 bps to 2.87%
- $48 bln 2-year Treasury note auction results (prior 12-auction average):
- High yield: 2.585% (0.677%).
- Bid-to-cover: 2.74 (2.54).
- Indirect bid: 66.0% (55.1%).
- Direct bid: 21.4% (18.9%).
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%.
- New home sales decreased 8.6% month-over-month in March to a seasonally adjusted annual rate of 763,000 units (consensus 770,000) from an upwardly revised 835,000 (from 772,000) in February. On a year-over-year basis, new home sales were down 12.6%
- Total durable goods orders increased 0.8% month-over-month in March (consensus +1.1%) following an upwardly revised 1.7% decline (from -2.2%) in February. Excluding transportation, durable goods orders increased 1.1% month-over-month (consensus +0.5%) following an upwardly revised 0.5% decline (from -0.6%) in February.
- The Conference Board’s Consumer Confidence Index dipped to 107.3 in April (consensus 106.0) from an upwardly revised 107.6 (from 107.2) in March. In the same period a year ago, the index stood at 117.5.
- The FHFA Housing Price Index rose 2.1% in February after increasing 1.6% in January.
- The S&P Case-Shiller Home Price Index was up 20.2% in February (consensus 18.9%) after increasing a revised 18.9% (from 19.1%) in January.
- Fed Governor Brainard is on track to be confirmed as vice chair of the Fed.
- 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%
- Goldman Sachs pulled forward its forecast for the initial rate hike from the European Central Bank to July from September.
- UBS reported better than expected results for Q1.
- The U.K. will hold four additional auctions this year after increasing its net financing requirement for the fiscal year by GBP13.80 bln to GBP161.70 bln.
- U.K.’s March Public Sector Net Borrowing reached GBP17.32 bln (last GBP9.85 bln) and Public Sector Net Cash Requirement decreased by GBP2.416 bln (last GBP2.346 bln).
- Swiss March trade surplus reached CHF2.988 bln (last surplus of CHF5.882 bln).
- The People’s Bank of China lowered the foreign exchange deposit reserve ratio to 8.0% from 9.0%. The cut will be effective on May 15.
- Japan’s March Unemployment Rate ticked down to 2.6% from 2.7% (expected 2.7%) and March BoJ Core CPI was up 1.1% yr/yr (last 1.0%).
- South Korea’s Q1 GDP expanded 0.7% qtr/qtr (expected 0.6%; last 1.2%), growing 3.1% yr/yr (expected 2.8%; last 4.2%).
- Singapore’s March Industrial Production was down 12.6% m/m (expected -3.9%; last 16.6%) but up 3.4% yr/yr (expected 3.5%; last 17.6%).
- 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!