The stock markets continued with no fear in a FOMO bear market rally. All this when Walmart had it’s biggest daily fall since 1987 and Fed chair Powell reiterated raising rates and cutting free credit. Never mind, the S&P 500 rose 2.0% on Tuesday, Nasdaq Composite (+2.8%) and Russell 2000 (+3.2%) while the Dow Jones Industrial Average rose 1.3%.
Total retail sales increased 0.9% month-over-month in April (consensus 1.1%) following an upwardly revised 1.4% increase (from 0.5%) in March. The 2-yr yield rose nine basis points to 2.67%, and the 10-yr yield rose nine basis points to 2.97%. The U.S. Dollar Index fell 0.8% to 103.35. WTI crude futures fell 1.4%, or $1.59, to $112.21/bbl.
We look at the indices, $AAPL $WMT $TSLA $HD $DOCO 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
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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 settled down 1.4%, or $1.59, to $112.21/bbl.
- WTI off the high price of $129.44. The highest in 2008 was $147.27.
- Brent Crude Futures 112.83 0.90 0.80
- Natural Gas Futures 8.426 0.032 0.38
- Unleaded Gasoline Futures 3.9558 0.0141 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 fell 0.8% to 103.35.
- Gold futures settled $4.90 higher (+0.3%) to $1,818.90/oz, aided in part by a decline in the greenback.
- Silver Futures 21.650 -0.100 -0.46
- Copper Futures 4.2390 0.0000 0.00
- Corn Futures 801.75 -7.75 -0.96
- Wheat Futures 1279.75 32.25 2.59
- Bloomberg Commodity Index 131.63 0.79 0.60
- Bitcoin USD 30294 213 0.71
- Ethereum USD 2074.92 23.02 1.12
- Ripple USD 0.4345 0.0017 0.40
US Indices & S&P 500 sector watch:
- Dow industrial average rose 431.15 points or 1.34% at 32654.60
- S&P index rose 8.82 points or 2.02% at 4088.84
- NASDAQ index rose 321.74 points or 2.76% at 11984.53
- Russell 2000 rose 56.87 points or 3.19% at 1840.29
- NYSE Composite 15541.91 282.10 1.85
- CBOE Volatility 26.10 -1.37 -4.99
- NYSE Adv 2281 Dec 821 Vol 1.0 bln
- Nasdaq Adv 3290 Dec 1134 Vol 4.9 bln
- Of the S&P 500 sectors Ten of the 11 closed higher by at least 1.0%, including five sectors with gains over 2.0%.
- The information technology sector (+2.9%), while the consumer staples sector (-1.2%) was the lone holdout amid an 11% drop in Walmart (WMT 131.35, -16.86, -11.4%) following its disappointing earnings results and guidance.
- The contrarian mindset rooted in a BofA Global Fund Manager Survey that showed cash levels at their highest position (6.1%) since 9/11 and the largest underweight position in equities since May 2020.
Key After Hours
- Appian (APPN) reaffirms guidance for Q2 and FY22; Chief Revenue Officer to leave by end of June… APPN up 1.9%
- dLocal Limited (DLO) misses by $0.01, beats on revs… DLO up 18.8%
- Digital Turbine (APPS) to restate results for JunQ, SepQ and DecQ following a review of revenue net of license fees and revenue share for the co’s recently acquired businesses… APPS up 0.2%
- Doximity (DOCS) beats by $0.06, beats on revs; guides JunQ revs below consensus; guides FY23 revs above consensus; authorizes up to $70 mln for share buybacks… DOCS down 17.1%
- Keysight (KEYS) beats by $0.15, beats on revs; guides JulQ EPS in-line, revs in-line; guides FY22 EPS above consensus, revs above consensus… KEYS down 1.2%
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 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 ended Tuesday lower. The the 5-yr note leading the selling. The 2-yr yield rose nine basis points to 2.67%, and the 10-yr yield rose nine basis points to 2.97%.
- 2-yr: +9 bps to 2.67%
- 3-yr: +13 bps to 2.86%
- 5-yr: +13 bps to 2.95%
- 10-yr: +9 bps to 2.97%
- 30-yr: +8 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%.
- 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 retail sales increased 0.9% month-over-month in April (consensus 1.1%) following an upwardly revised 1.4% increase (from 0.5%) in March. Excluding autos, retail sales rose 0.6% (consensus 0.3%) after increasing an upwardly revised 2.1% (from 1.1%) in March.
- Total industrial production increased 1.1% month-over-month in April (consensus 0.5%), marking the fourth consecutive month of gains of 0.8% or greater. The capacity utilization rate increased to 79.0% (Briefing.com consensus 78.6%) from a downwardly revised 78.2% (from 78.3%) in March.
- The NAHB Housing Market Index for May decreased to 69 (consensus 75) from 77 in April.
- Business inventories increased 2.0% m/m in March (consensus 1.9%) following a revised 1.8% increase (from +1.5%) in February.
- Home Depot Delivers Record Sales and Raises Guidance and Margins – TRADERS COMMUNITY
- Walmart Earnings Hit by Inflation, Lowers Forward Guidance – TRADERS COMMUNITY
- Around The Barrel – Crude Oil and Gasoline Outlook – 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
- Dutch Central Bank Chief First ECB Governor To Raise Prospect of 50Bps Rate Rise – TRADERS COMMUNITY
- Bank of England Governor Bailey said that the BoE has major concerns about second round effects from high inflation.
- Eurozone’s Q1 GDP expanded 0.3% qtr/qtr (expected 0.2%; last 0.2%), growing 5.1% yr/yr (expected 5.0%; last 5.0%). Q1 employment increased by 0.5% qtr/qtr (last 0.4%).
- U.K.’s March Average Earnings Index + Bonus rose 7.0% yr/yr (expected 5.4%; last 5.6%). April claimant count decreased by 56,900 (expected -42,500; last -81,600) and March three-month employment increased by 83,000 (expected 5,000; last 10,000).
- France’s Q1 Unemployment Rate dipped to 7.3% from 7.4% (expected 7.4%).
- Italy’s April CPI was down 0.1% m/m (expected 0.2%; last 1.0%) but up 6.0% yr/yr (expected 6.2%; last 6.5%).
- Spain’s March trade deficit reached EUR4.60 bln (last deficit of EUR4.30 bln).
- Japan will reportedly allow small groups of tourists to enter the country this month.
- The latest meeting minutes from the Reserve Bank of Australia showed that policymakers expect more rate hikes since the conditions for higher rates have been met.
- India’s April WPI Inflation rose 15.08% yr/yr (expected 14.48%; last 14.55%).
- Singapore’s April trade surplus reached SGD4.28 bln (last SGD4.191 bln) as non-oil exports fell 3.3% m/m (expected -1.3%; last -2.3%).
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, firstname.lastname@example.org 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, email@example.com 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 firstname.lastname@example.org
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, email@example.com
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, firstname.lastname@example.org
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, email@example.com 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, firstname.lastname@example.org
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!