The stock markets continued in bear market rally mode, but the main distraction was Tesla’s Elon Musk feud on Twitter with Twitter chair over $TWTR numbers. We had another Billionaire, Amazon founder Jeff Bezos feuding with the Whitehouse over inflation blaming. Consumer discretionary sector was down the most with a 2.0% decline, this sector is down 8.4% this month and down 27.7% for the year. Tesla (TSLA 725.02, -44.52, -5.3%) and Amazon.com (AMZN 2224.63, -37.60, -1.7%) are notably dragging down the sector.
Today’s winner the energy sector is way up at 3.0%. Crude oil futures settled higher by $3.48 (+3.2%) at $113.80/barrel. Rising interest rates, Russia’s war in Ukraine, and China’s COVID-related lockdowns all remain.
We look at the indices, $AAPL $TWTR $TSLA $VTNR 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 at higher by $3.48 (+3.2%) at $113.80/barrel.
- WTI off the high price of $129.44. The highest in 2008 was $147.27.
- Brent Crude Futures 114.32 0.08 0.07
- Natural Gas Futures 8.117 0.352 4.53
- Unleaded Gasoline Futures 4.0174 0.0596 1.51
- 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 increased fell 0.3% to 104.24 off its fresh 20-year high.
- Gold futures settled $5.80 higher (+0.3%) to $1,814.00/oz, ending back-to-back losses all be it modestly.
- Silver Futures 21.615 0.614 2.92
- Copper Futures 4.2065 0.0315 0.75
- Corn Futures 808.50 27.25 3.49
- Wheat Futures 1247.50 70.00 5.94
- Bloomberg Commodity Index 130.84 2.53 1.97
- Bitcoin USD 29803 -1188 -3.83
- Ethereum USD 2025.47 -103.41 -4.86
- Ripple USD 0.4256 -0.0158 -3.58
US Indices & S&P 500 sector watch:
- Dow industrial average rose 26.76 points or 0.08% at 32223.41
- S&P index fell -15.87 points or -0.39% at 4008.03
- NASDAQ index fell -142.2 points or -1.20% at 11662.80
- Russell 2000 fell -9.24 points or -0.52% at 1783.42
- NYSE Composite 15259.82 2.45 0.02
- CBOE Volatility 27.47 -1.40 -4.85
- NYSE Adv 1746 Dec 1454 Vol 554.0 mln
- Nasdaq Adv 2117 Dec 2382 Vol 4.0 bln
- Of the S&P 500 sectors the consumer discretionary sector (-2.1%) was the weakest performer as heavyweights Amazon.com (AMZN 2216.21, -44.89, -2.0%) and Tesla (TSLA 724.37, -45.22, -5.9%) continued to struggle. The information technology sector (-0.9%) was another key laggard without the leadership of Apple (AAPL 145.54, -1.57, -1.1%).
- Growth stocks in general remained out of favor, evident by the 1.1% decline in the Russell 3000 Growth Index, versus the 0.1% gain for the Russell 3000 Value Index.
- Energy stocks contributed to the outperformance of the value index and, more directly, the S&P 500 energy sector (+2.6%).
Key After Hours
- Abbott Labs (ABT) enters into consent decree with FDA related to Sturgis, Michigan infant formula plant, could restart plant within two weeks once FDA confirms requirements have been met; also confirms FY22 EPS guidance… ABT down 0.1%
- Brinker (EAT) CEO Wyman Roberts will retire, effective June 5; Kevin Hochman appointed as successor… EAT down 0.3%
- Global-E Online (GLBE) reports Q1 (Mar) results, beats on revs; guides Q2 revs below consensus; lowers FY22 revs guidance below consensus… GLBE down 24.6%
- Rocket Lab USA (RKLB) reports Q1 (Mar) results, beats on revs; guides Q2 revs below consensus; CAPSTONE spacecraft arrives at Launch Complex 1 in New Zealand in preparation for launch to lunar orbit… RKLB up 5.2%
- Take-Two (TTWO) reports MarQ results, beats on EPS, misses on net bookings; guides JunQ net bookings below consensus; guides FY23 net bookings below consensus… TTWO up 2.6%
- United Airlines (UAL) provides an update on its Q2 outlook; notes that the demand environment has continued to improve resulting in a higher unit revenue outlook for Q2… UAL up 3.4%
US Markets YTD
- Dow Jones Industrial Average -11.3% YTD
- S&P 500 -15.9% YTD
- Russell 2000 -20.6% YTD
- Nasdaq Composite -25.5% 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 7464.80 46.65 0.63
- Germany: DAX 13964.38 -63.55 -0.45
- France: CAC 40 6347.77 -14.91 -0.23
- Italy: FTSE MIB 24033.05 -15.24 -0.06
- Spain: IBEX 35 8353.70 15.60 0.19
- Stoxx Europe 600 433.67 0.19 0.04
- Switzerland: Swiss Market 11672.23 21.81 0.19
- Hong Kong: Hang Seng 19950.21 51.44 0.26
- Japan: Nikkei 225 26547.05 119.40 0.45
- China: Shanghai Composite 3073.75 -10.54 -0.34
- India: S&P BSE Sensex 52973.84 180.22 0.34
- Australia: S&P/ASX 7093.0 17.9 0.25
- S. Korea: KOSPI 2596.58 -7.66 -0.29
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 saw a decline in the 10-yr yield, which fell six basis points to 2.88%. The 2-yr yield decreased one basis point to 2.58%.
- 2-yr: -1 bp to 2.58%
- 3-yr: -6 bps to 2.73%
- 5-yr: -7 bps to 2.82%
- 10-yr: -6 bps to 2.88%
- 30-yr: -1 bp to 3.08%
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.
- Goldman Sachs lowered its forecast for 2022 growth in the U.S. to 2.4% from 2.6% while the outlook for 2023 was reduced to 1.6% from 2.2%.
- 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
- Around The Barrel – Crude Oil and Gasoline Outlook – TRADERS COMMUNITY
- Into The Vortex – Natural Gas Outlook – TRADERS COMMUNITY
- Federal Reserve Financial Stability Report Warns on Worsening Liquidity Risks – TRADERS COMMUNITY
- The EU Commission’s spring forecast lowered the 2022 growth outlook for the eurozone to 2.7% from 4.0% and raised the inflation forecast to 6.1% from 3.5%.
- European Central Bank policymaker De Cos said that the next ECB meeting is likely to produce a decision to end asset purchases in July, followed by a rate hike.
- Eurozone’s March trade deficit reached EUR16.40 bln (last deficit of EUR8.80 bln).
- Germany’s April WPI was up 2.1% m/m (last 6.9%) and up 23.8% yr/yr (last 22.6%).
- India’s government will reportedly continue exporting wheat to countries with a food deficit despite announcing a ban on exports.
- South Korea’s President Yoon acknowledged the impact of inflation and higher interest rates when speaking about the government’s planned extra budget of KRW59.4 trln.
- China’s April Retail Sales fell 11.1% yr/yr (expected -6.1%; last -3.5%), April Industrial Production fell 2.9% yr/yr (expected 0.4%; last 5.0%), and April Fixed Asset Investment was up 6.8% yr/yr (expected 7.0%; last 9.3%). April Unemployment Rate rose to 6.1% from 5.8%.
- Japan’s April PPI was up 1.2% m/m (expected 0.8%; last 0.9%) and up 10.0% yr/yr (expected 9.4%; last 9.7%). April Machine Tool Orders rose 25.0% yr/yr (last 30.2%).
- South Korea’s April trade deficit reached $2.50 bln (last deficit of $2.66 bln) as imports grew 18.6% yr/yr (last 18.6%) and exports rose 12.9% (last 12.6%).
The Day Ahead:
- 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!