Market Wrap – The End of a Head Spinning Quarter Loaded with Inflation March 31

Markets finished off a head-spinning quarter with major stock indexes suffering their worst performance in two years and other markets recording some of the most extreme moves on record. Nickel, oil, wheat and natural gas to name a few. After hours GME announced a split and we saw wild action there. Inflation focuses on PCE data for February rose in-line with expectations, further hitting real personal disposable income, which decreased 0.2% in February. On a year-over-year basis, the PCE Price Index was up 6.4% while the core PCE Price Index, which excludes food and energy, was up 5.4%, its highest level since 1983. 

We look at the indices, $AAPL, $AMZN, 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 earnings season. We got the Bear Market rally resolution which has angered the BTFD quotient.


Market Closes

Energy

  • May WTI crude oil (CLK22) settled $100.28. Down $-7.54 or -6.99%. The low for the day reached $99.66. The high was at $107.80.
  • Off the high price of $129.44. The highest in 2008 was $147.27.
  • May RBOB gasoline (RBK22) closed up by +10.97 (+3.45%).
  • The May Nymex gas futures contract gained 3.7 cents day/day and settled at $5.642/MMBtu. June rose 4.3 cents to $5.701
  • 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 Thursday rose +11.2% y/y to 13.239 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 rose 0.6% to 98.37. The Index gained 1.6% in March and 2.8% in Q1.
  • The CBOE Volatility Index increased 6.4% to 20.56. 
  • Gold futures settled $15.00 higher (+0.8%) to $1,954.00/oz
  • May silver (SIK22) closed up +0.020 (+0.08%)
  • CME Bitcoin Futures Settle MAR 22 -690 47240.0

Stocks

For The Day

  • Dow 34678.35 -550.46 (-1.56%)
  • Nasdaq 14220.51 -221.76 (-1.54%)
  • SP 500 4530.41 -72.04 (-1.57%)
  • NYSE Adv 1317 Dec 1977 Vol 1.2 bln
  • Nasdaq Adv 1710 Dec 2734 Vol 5.3 bln

S&P 500 sector watch:

  • All 11 of the 11 S&P 500 sectors closed lower
  • Financials (-2.3%) and communication services (-2.0%) sectors losing at least 2.0%.
  • The utilities (-0.2%) and consumer staples (-0.4%) sectors outperformed on a relative basis with modest declines.

Key After Hours

  • BlackBerry (BB) beats by $0.04, reports revs in-line… BB up 2.0%
  • Blend Labs (BLND) misses by $0.13, reports revs in-line; guides Q1 revs below consensus; guides FY22 revs below consensus, cites inflation and higher rates decreasing mortgage demand… BLND down 17.4%
  • Duck Creek Technologies (DCT) beats by $0.03, beats on revs; guides MayQ revs below consensus; guides FY22 revs in-line… DCT down 15.9%
  • GameStop (GME) to seek approval for 3.33-for-1 stock split for Class A shares… GME up 16.6%
  • Lockheed Martin (LMT) awarded $3.2 bln Army contract and $1.3 bln Missile Defense Agency contract modification… LMT up 0.7%
  • nCino (NCNO) reports EPS in-line, beats on revs; guides AprQ revs above consensus; guides FY23 revs above consensus… NCNO up 1.9%
  • Planet Labs (PL) reports Q4 (Jan) earnings, beats on revs; guides AprQ revs in-line; guides FY23 revs in-line… PL up 1.6%
  • Robinhood Markets (HOOD) reportedly nearing launch of retirement account support on its platform, according to Bloomberg… HOOD up 0.5%

US Markets YTD

  • Dow Jones Industrial Average -4.6% YTD
  • S&P 500 -5.0% YTD
  • Russell 2000 -7.8% YTD
  • Nasdaq Composite -9.1% YTD

Cboe Daily Market Ratios:

Cboe Daily Market Statistics

Europe

  • UK FTSE 100 -0.6%
  • German DAX -1.1%
  • Italy MIB -0.8%
  • French CAC -1.0%
  • Spain IBEX -1.0%

For the quarter:

  • UK FTSE 100 +2.0%
  • German DAX -9.0%
  • Italy MIB -8.2%
  • French CAC -6.7%
  • Spain IBEX -2.8%

Asia

  • Japan’s Nikkei: -0.8%
  • Hong Kong’s Hang Seng: +1.4%
  • China’s Shanghai Composite: +2.0%
  • India’s Sensex: +1.3%
  • South Korea’s Kospi: +0.2%
  • Australia’s ASX All Ordinaries: +0.7%.

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 2-yr yield decreased five basis points to 2.28%, and the 10-yr yield decreased three basis points to 2.33%. Today’s rally pressured the 10-yr yield back to its low from last Wednesday, leaving the benchmark yield down 16 bps for the week. However, it increased by 49 bps in March and was up 82 bps in Q1. Up front, the 2-yr yield increased by 85 bps this month and 155 bps for Q1. 

  • 2-yr: -5 bps to 2.28% (+85 bps in March)
  • 3-yr: -3 bps to 2.46% (+85 bps in March)
  • 5-yr: -3 bps to 2.42% (+70 bps in March)
  • 10-yr: -3 bps to 2.33% (+49 bps in March)
  • 30-yr: -3 bps to 2.45% (+27 bps in March)

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

USA

  • Personal income increased 0.5% month-over-month in February (consensus 0.5%), though real personal disposable income was down 0.2%. Personal spending increased 0.2% (consensus 0.5%) while the personal savings rate as a percentage of disposable income increased to 6.3% from a revised 6.1% (from 6.4%) in January.
  • Real personal spending was down 0.4%. The PCE Price Index was up 0.6% (Briefing.com consensus 0.6%), pushing the year-over-year rate to 6.4% from 6.0%. The core PCE Price Index, which excludes food and energy, was up 0.4% (Briefing.com consensus 0.4%), pushing the year-over-year rate up to 5.4% from 5.2% in January.
  • Real personal disposable income decreased 0.2% while the Core PCE Price Index rose to its highest level since 1983.
  • Initial jobless claims for the week ending March 26, increased by 14,000 to 202,000 (consensus 200,000), rising off their lowest level since September 1969. Continuing jobless claims for the week ending March 19 decreased by 35,000 to 1.307 million, a level not seen since December 27, 1969.
  • The Chicago PMI for March increased to 62.9 (Briefing.com consensus 56.8) from 56.3 in February.

Pre-Market

  • Micron (MU 85.35, +3.30): +4.0% after beating top and bottom-line estimates and guiding Q3 EPS and revenue above consensus. 
  • lululemon athletica (LULU 369.34, +25.37): +7.4% after beating EPS estimates, issuing upside EPS/revenue guidance for fiscal Q1 and FY22, and authorizing a $1 billion stock repurchase program. 
  • Five Below (FIVE 166.00, -5.39): -3.1% after guiding EPS and revenue for Q1 and FY23 below consensus. 
  • Chewy (CHWY 43.85, -7.15): -14.0% after missing top and bottom-line estimates and guiding revenue for Q1 and FY23 below consensus. 

Europe

  • Eurozone’s March Business and Consumer Survey 108.5 (expected 109.0; last 113.9)
  • Italy’s January Industrial Sales 2.3% m/m (last -2.0%); 16.9% yr/yr (last 14.5%). February PPI 0.4% m/m (last 9.7%); 32.8% yr/yr (last 32.9%)
  • Spain’s March CPI 3.0% m/m (expected 1.3%; last 0.8%); 9.8% yr/yr (expected 8.0%; last 7.6%). March Business Confidence 5.3 (last 10.0)
  • Swiss March KOF Leading Indicators 99.7 (expected 100.8; last 105.3). March ZEW Expectations -27.8 (last 9.0)
  • European Central Bank President Lagarde said that inflation is expected to accelerate in the short term and that households have become more pessimistic. She also claimed that the economic consequences could be mitigated with the right response.
  • European Central Bank policymaker Kazimir said that the first rate hike could take place by the end of the year.
  • Germany has activated the early warning phase of its gas emergency law as the potential for shortages grows due to Germany’s refusal to pay for deliveries from Russia in rubles.

Asia

  • Japan’s February Retail Sales -0.8% yr/yr (expected -0.3%; last 1.1%)
  • New Zealand’s February Building Consents 10.5% m/m (last -8.7%). March ANZ Business Confidence -41.9 (last -51.8)
  • The Bank of Japan continued buying JGBs ahead of tomorrow’s end of the fiscal year.
  • China Securities Journal reported that Chinese companies have forecast an improvement in profits for Q1.
  • Developer Evergrande is reportedly planning another asset sale.
  • Australia is reportedly nearing a free trade agreement with India.
  • Australia is planning to sell AUD125 bln in debt during FY22/23, up from AUD100 bln sold a year ago.

Looking ahead:

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!