From Barron’s, January 22, 2024 (Part 1, Market Week+)
Jan 20, 2024 10:59:14 GMT
chang, rhythmmethod, and 10 more like this
Post by yogibearbull on Jan 20, 2024 10:59:14 GMT
From Barron’s, January 22, 2024 (Part 1, Market Week+)
Pg 27, TRADER. The stock market overcame a slow start, ignored some poor earnings, and made NEW HIGHS. The Q4 earnings overall should be better – lots of companies have yet to report. However, guidance has been tentative.
The new bipartisan tax proposal by WYDEN (D-OR) & SMITH (R-MO) will benefit businesses with R&D (with retroactive application), capex, and interest costs.; there are also provisions for additional child and low-income tax credits. However, it will add to future deficits. Critics also say that companies may use windfalls for dividends and buybacks.
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes (+/- 0.25%). In the list below, more than 50% probability is used to indicate rate hike; “+” is shown after the FOMC date to indicate that rate hike can be at that or a later FOMC.
FOMC 1/31/24+ hold (cycle peak 5.25-5.50%)
FOMC 3/20/24+ hold
FOMC 5/1/24+ cut
FOMC 6/12/24+ cut
FOMC 7/31/24+ cut
(Expectations came down a bit but still unrealistic) (Probabilities for some rate-ranges aren’t high, so there can be some unexpected moves.)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +0.72%, SP500 +1.17%, Nasdaq Comp +2.26%, R2000 -0.34%. DJ Transports +0.79%; DJ Utilities -3.72%. (Rotating spot semi SOXX +7.87%) US$ index (spot) +0.82% (remains too strong over 100), oil/WTI futures +1.00%, gold futures -0.99%.
52-Week (index changes only), DJIA +13.45%, SP500 +21.83%, Nasdaq Comp +37.44%. (Rotating spot semi SOXX +55.95%) (SWITCHED to 52-week until YTD becomes meaningful)
SENTIMENTS
(ALL sentiments remain OK but there has been a significant deterioration)
NYSE cumulative (5-day) A/D LINE fell (!); ratio of winners:losers 2:3. (poor breadth)
FUND INFLOWS +/OUTFLOWS - (4-weekMA). Stocks -, taxable bonds +, munis + (barely), money-market funds +.
AAII Bull-Bear Spread +13.6% (above average). (Thursday-Wednesday)
ybbpersonalfinance.proboards.com/thread/141/aaii-sentiment-survey-weekly?page=12&scrollTo=1285
%Above 50-dMA for NYSE-listed stocks 65.68% (positive; topped in mid-December); (StockCharts $NYA50R for NYSE; $SPXA50R for the SP500 in the bottom panel),
stockcharts.com/h-sc/ui?s=%24NYA50R&p=D&b=5&g=0&id=p91704957718 .
Delta MSI 85.3% (overbought); a proprietary index for %Above 75-dMA for selected 1,800 stocks that is published midweek but is updated by Barron’s only on late-Fridays (so, it typically LAGS). The all-cap $NYA50R is typically closer to it than the large-cap $SPXA50R.
(Common Scale: oversold < 30, negative < 50, positive > 50, overbought > 70; note that Delta MSI itself uses all in/out using 50% neutral value, but the same graduated scale is used here for both sources of %Above.)
Pg 30, INTERNATIONAL TRADER. HK is fading as a global financial hub. HK stocks have sold off sharply, the dealmaking and underwriting are also down sharply, and China is gradually diluting (stepping away from?) the old one-country, two-systems approach. Financial services jobs in HK peaked in 2018. Covid policies are still hurting. The number of foreign businessmen in HK is only 30%; fluent Mandarin is now necessary for business. There are stock-connect systems between Mainland and HK, and also fast train links. While China still benefits from HK due to its dollar-based trading and transactions, many businesses have shifted to Singapore. There is still hope that HK will rebound when China does, but it may not reach its former glory. These developments have also boosted the nationalist sentiments in Taiwan, adding to China-Taiwan frictions.
Pg 31, OPTIONS. Stock accidents do happen – just look at Boeing/BA. Beware of this risk in the market rally with very narrow leadership. Options may help, but no specific recommendations are offered.
(SP500 VIX 13.30 (low), Nasdaq 100 VXN 17.40 (low), options SKEW 148.15 (high), bond MOVE 104.97 (Yahoo Finance data).
(Low VIX, high SKEW combo is a sign of nervous bulls)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 45: A bad week in EUROPE (Netherlands +1.48%, Finland -3.59%) and a bad week in ASIA (Taiwan +1.51%, China -5.47%). (Taiwan up on elections; China & HK slump continued.)
TREASURY* 3-mo yield 5.45%, 1-yr 4.84%, 2-yr 4.39%, 5-yr 4.08%, 10-yr 4.15%, 30-yr 4.36%;
REAL yields 5-yr 1.78%, 10-yr 1.81%, 30-yr 2.03%;
FRNs Index** 5.295% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
DOLLAR rose to ^DXY 103.24, +0.8% (pg 50). GOLD fell to 2,029, -1.3% (Handy & Harman spot, Thursday; pg 52); the gold-miners slumped. (^XAU was at 112.94, -6.38% for the week)
Top FDIC insured savings deposit rates*** (This feature has been discontinued but see the link below)
US SAVINGS I-Bonds**, NEW rate from November 1, 2023, is 5.27%; the fixed rate is +1.30%, the semiannual inflation is +1.97%.
(NOTE – The Social Security COLA for 2024, based on the Q3 average of CPI-W, is +3.2%)
*Treasury Yield-Curve home.treasury.gov/policy-issues/financing-the-government/interest-rate-statistics?data=yield
**Treasury Direct (I-Bonds + T-Bills/Notes/Bonds, FRNs, TIPS)
www.treasurydirect.gov/auctions/announcements-data-results/frn-daily/
www.treasurydirect.gov/marketable-securities/
***For local rates www.depositaccounts.com/banks/rates-map/
(BONUS from Part 2 include Cover Story, Up and Down Wall Street, Streetwise and these won’t be repeated in Part 2)
Pg 14, COVER STORY, “2024 Barron’s ROUNDTABLE”. It’s hard to summarize with attributions, so only the topics discussed are highlighted. A full day of meeting was held on January 8 in the NYC & 11 Panelists’ (alphabetically below). This Part 2 has recommendations from BLACK, DESAI, GIROUX, ROGERS, PRIEST; Part 1 recommendations are retained. The remaining recommendations will be in Part 3 next week.
Todd AHLSTEN, Parnassus CIO & PRBLX: DE (precision-ag, profitable finance arm), ICE (exchanges, financial technologies & servicing), INTC (value-tech with turnaround potential), MAR (strong EBITDA, ROC; 31 brands), ORCL (interesting AI & cloud computing play), TMO (life sciences tools, growth via M&A)
Scott BLACK, Delphi Management: EG (reinsurance & insurance), FANG (independent oil/gas producer), GPN (fintech – payment services), OSK (farm & construction machinery, fire & emergency equipment)
Abby COHEN, Columbia U:
Sonal DESAI, Franklin Templeton (only recommends bond & hybrid funds from her firm & others): EADOX, FDAAX, FHYVX, FRIAX, IGSB, IUSB, LMNVX, PAMYX
Henry ELLENBOGEN, Durable Capital Partners:
Mario GABELLI, Gabelli Funds:
David GIROUX, T Rowe Price CIO & PRWCX (PRCFX, TCAF): BIIB (new CEO, 11/2022- ), CNQ (Canadian oil-sands), FTV (instrumentation & testing), RTX (aerospace & defense), WCN (waste management)
Rajiv JAIN, GQG Partners:
William PRIEST, Epoch: EVVTY (Sweden; B2B online casino services), KYCCF (Japan; automation & inspection), META (largest social-media company, but often hated), ON (semi chips for auto & industrial companies), RELX (business analytics)
John ROGERS, Ariel Investments: ATGE (for-profit healthcare education), LESL (housing services – pools & spas), NVST (dental manufacturing), SPHR (novel arena for concerts & sports, display ads; spinoff from MSGE), SRCL (medical waste management, document shredding)
Meryl WITMER, Eagle Capital Partners: GHC (education, student housing, media, manufacturing, healthcare, auto dealerships, other), WTFC (holding company with 15 community-bank subsidiaries in the Midwest (IL, WI))
Pg 4, UP AND DOWN WALL STREET. The stock market forgot about the Fed worries and made NEW HIGHS. Amazing considering how this year started (and it is only 3 weeks). The economy is chugging along. Bond spreads have narrowed. The market is getting comfortable with the notion of slower growth and fewer rate cuts. The RALLY may broaden and lagging value and small-caps may catch up with Magnificent 6 (formerly 7 minus TSLA). However, risks have also increased with higher rates. Companies with high disparity between the management and analyst views can have surprises: A, J, NEE, URI.
Earnings season hasn’t been good for BANKS and FINANCIALS. So, one should look at prospects going forward and that means ugly ducklings GS and C. After several missteps in consumer finance, GS is on a path to recovery and has better potential now than MS. C has done a lot of self-help already and looks better than its banking peers.
Pg 6, STREETWISE. BURGER KING (B-K) is finally turning around. After many past lives, it has most recently been owned by Restaurant Brands International (QSR; yield 2.9%; fwd P/E 22; other brands include Tim Hortons, Popeyes, Firehouse Subs, etc). The Executive Chairman J Patrick DOYLE (11/2022- ) was formerly at Domino’s where he focused on the app (despite appearances, it’s not really a real-time app) & delivery. Many B-K stores have been remodeled, and most have drive-throughs; several new products have been launched. Now, it’s buying its largest franchisee Carrols/TAST (1,000+ B-Ks). These stores will be remodeled, some will be kept as company stores, but the rest will be refranchised. This hybrid model (followed by MCD, etc) is a huge shift from its previous franchise-only model. Some skeptics say that QSR should have just bought back more stock. QSR reports on Feb 13, and the investor day is on Feb 15.
(EXTRAS from online Friday that didn’t make the weekend paper version)
See Column Topics. It seems some consolidation/rearrangement of Columns is going on.
(More later….)
LINK
Pg 27, TRADER. The stock market overcame a slow start, ignored some poor earnings, and made NEW HIGHS. The Q4 earnings overall should be better – lots of companies have yet to report. However, guidance has been tentative.
The new bipartisan tax proposal by WYDEN (D-OR) & SMITH (R-MO) will benefit businesses with R&D (with retroactive application), capex, and interest costs.; there are also provisions for additional child and low-income tax credits. However, it will add to future deficits. Critics also say that companies may use windfalls for dividends and buybacks.
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes (+/- 0.25%). In the list below, more than 50% probability is used to indicate rate hike; “+” is shown after the FOMC date to indicate that rate hike can be at that or a later FOMC.
FOMC 1/31/24+ hold (cycle peak 5.25-5.50%)
FOMC 3/20/24+ hold
FOMC 5/1/24+ cut
FOMC 6/12/24+ cut
FOMC 7/31/24+ cut
(Expectations came down a bit but still unrealistic) (Probabilities for some rate-ranges aren’t high, so there can be some unexpected moves.)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +0.72%, SP500 +1.17%, Nasdaq Comp +2.26%, R2000 -0.34%. DJ Transports +0.79%; DJ Utilities -3.72%. (Rotating spot semi SOXX +7.87%) US$ index (spot) +0.82% (remains too strong over 100), oil/WTI futures +1.00%, gold futures -0.99%.
52-Week (index changes only), DJIA +13.45%, SP500 +21.83%, Nasdaq Comp +37.44%. (Rotating spot semi SOXX +55.95%) (SWITCHED to 52-week until YTD becomes meaningful)
SENTIMENTS
(ALL sentiments remain OK but there has been a significant deterioration)
NYSE cumulative (5-day) A/D LINE fell (!); ratio of winners:losers 2:3. (poor breadth)
FUND INFLOWS +/OUTFLOWS - (4-weekMA). Stocks -, taxable bonds +, munis + (barely), money-market funds +.
AAII Bull-Bear Spread +13.6% (above average). (Thursday-Wednesday)
ybbpersonalfinance.proboards.com/thread/141/aaii-sentiment-survey-weekly?page=12&scrollTo=1285
%Above 50-dMA for NYSE-listed stocks 65.68% (positive; topped in mid-December); (StockCharts $NYA50R for NYSE; $SPXA50R for the SP500 in the bottom panel),
stockcharts.com/h-sc/ui?s=%24NYA50R&p=D&b=5&g=0&id=p91704957718 .
Delta MSI 85.3% (overbought); a proprietary index for %Above 75-dMA for selected 1,800 stocks that is published midweek but is updated by Barron’s only on late-Fridays (so, it typically LAGS). The all-cap $NYA50R is typically closer to it than the large-cap $SPXA50R.
(Common Scale: oversold < 30, negative < 50, positive > 50, overbought > 70; note that Delta MSI itself uses all in/out using 50% neutral value, but the same graduated scale is used here for both sources of %Above.)
Pg 30, INTERNATIONAL TRADER. HK is fading as a global financial hub. HK stocks have sold off sharply, the dealmaking and underwriting are also down sharply, and China is gradually diluting (stepping away from?) the old one-country, two-systems approach. Financial services jobs in HK peaked in 2018. Covid policies are still hurting. The number of foreign businessmen in HK is only 30%; fluent Mandarin is now necessary for business. There are stock-connect systems between Mainland and HK, and also fast train links. While China still benefits from HK due to its dollar-based trading and transactions, many businesses have shifted to Singapore. There is still hope that HK will rebound when China does, but it may not reach its former glory. These developments have also boosted the nationalist sentiments in Taiwan, adding to China-Taiwan frictions.
Pg 31, OPTIONS. Stock accidents do happen – just look at Boeing/BA. Beware of this risk in the market rally with very narrow leadership. Options may help, but no specific recommendations are offered.
(SP500 VIX 13.30 (low), Nasdaq 100 VXN 17.40 (low), options SKEW 148.15 (high), bond MOVE 104.97 (Yahoo Finance data).
(Low VIX, high SKEW combo is a sign of nervous bulls)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 45: A bad week in EUROPE (Netherlands +1.48%, Finland -3.59%) and a bad week in ASIA (Taiwan +1.51%, China -5.47%). (Taiwan up on elections; China & HK slump continued.)
TREASURY* 3-mo yield 5.45%, 1-yr 4.84%, 2-yr 4.39%, 5-yr 4.08%, 10-yr 4.15%, 30-yr 4.36%;
REAL yields 5-yr 1.78%, 10-yr 1.81%, 30-yr 2.03%;
FRNs Index** 5.295% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
DOLLAR rose to ^DXY 103.24, +0.8% (pg 50). GOLD fell to 2,029, -1.3% (Handy & Harman spot, Thursday; pg 52); the gold-miners slumped. (^XAU was at 112.94, -6.38% for the week)
Top FDIC insured savings deposit rates*** (This feature has been discontinued but see the link below)
US SAVINGS I-Bonds**, NEW rate from November 1, 2023, is 5.27%; the fixed rate is +1.30%, the semiannual inflation is +1.97%.
(NOTE – The Social Security COLA for 2024, based on the Q3 average of CPI-W, is +3.2%)
*Treasury Yield-Curve home.treasury.gov/policy-issues/financing-the-government/interest-rate-statistics?data=yield
**Treasury Direct (I-Bonds + T-Bills/Notes/Bonds, FRNs, TIPS)
www.treasurydirect.gov/auctions/announcements-data-results/frn-daily/
www.treasurydirect.gov/marketable-securities/
***For local rates www.depositaccounts.com/banks/rates-map/
(BONUS from Part 2 include Cover Story, Up and Down Wall Street, Streetwise and these won’t be repeated in Part 2)
Pg 14, COVER STORY, “2024 Barron’s ROUNDTABLE”. It’s hard to summarize with attributions, so only the topics discussed are highlighted. A full day of meeting was held on January 8 in the NYC & 11 Panelists’ (alphabetically below). This Part 2 has recommendations from BLACK, DESAI, GIROUX, ROGERS, PRIEST; Part 1 recommendations are retained. The remaining recommendations will be in Part 3 next week.
Todd AHLSTEN, Parnassus CIO & PRBLX: DE (precision-ag, profitable finance arm), ICE (exchanges, financial technologies & servicing), INTC (value-tech with turnaround potential), MAR (strong EBITDA, ROC; 31 brands), ORCL (interesting AI & cloud computing play), TMO (life sciences tools, growth via M&A)
Scott BLACK, Delphi Management: EG (reinsurance & insurance), FANG (independent oil/gas producer), GPN (fintech – payment services), OSK (farm & construction machinery, fire & emergency equipment)
Abby COHEN, Columbia U:
Sonal DESAI, Franklin Templeton (only recommends bond & hybrid funds from her firm & others): EADOX, FDAAX, FHYVX, FRIAX, IGSB, IUSB, LMNVX, PAMYX
Henry ELLENBOGEN, Durable Capital Partners:
Mario GABELLI, Gabelli Funds:
David GIROUX, T Rowe Price CIO & PRWCX (PRCFX, TCAF): BIIB (new CEO, 11/2022- ), CNQ (Canadian oil-sands), FTV (instrumentation & testing), RTX (aerospace & defense), WCN (waste management)
Rajiv JAIN, GQG Partners:
William PRIEST, Epoch: EVVTY (Sweden; B2B online casino services), KYCCF (Japan; automation & inspection), META (largest social-media company, but often hated), ON (semi chips for auto & industrial companies), RELX (business analytics)
John ROGERS, Ariel Investments: ATGE (for-profit healthcare education), LESL (housing services – pools & spas), NVST (dental manufacturing), SPHR (novel arena for concerts & sports, display ads; spinoff from MSGE), SRCL (medical waste management, document shredding)
Meryl WITMER, Eagle Capital Partners: GHC (education, student housing, media, manufacturing, healthcare, auto dealerships, other), WTFC (holding company with 15 community-bank subsidiaries in the Midwest (IL, WI))
Pg 4, UP AND DOWN WALL STREET. The stock market forgot about the Fed worries and made NEW HIGHS. Amazing considering how this year started (and it is only 3 weeks). The economy is chugging along. Bond spreads have narrowed. The market is getting comfortable with the notion of slower growth and fewer rate cuts. The RALLY may broaden and lagging value and small-caps may catch up with Magnificent 6 (formerly 7 minus TSLA). However, risks have also increased with higher rates. Companies with high disparity between the management and analyst views can have surprises: A, J, NEE, URI.
Earnings season hasn’t been good for BANKS and FINANCIALS. So, one should look at prospects going forward and that means ugly ducklings GS and C. After several missteps in consumer finance, GS is on a path to recovery and has better potential now than MS. C has done a lot of self-help already and looks better than its banking peers.
Pg 6, STREETWISE. BURGER KING (B-K) is finally turning around. After many past lives, it has most recently been owned by Restaurant Brands International (QSR; yield 2.9%; fwd P/E 22; other brands include Tim Hortons, Popeyes, Firehouse Subs, etc). The Executive Chairman J Patrick DOYLE (11/2022- ) was formerly at Domino’s where he focused on the app (despite appearances, it’s not really a real-time app) & delivery. Many B-K stores have been remodeled, and most have drive-throughs; several new products have been launched. Now, it’s buying its largest franchisee Carrols/TAST (1,000+ B-Ks). These stores will be remodeled, some will be kept as company stores, but the rest will be refranchised. This hybrid model (followed by MCD, etc) is a huge shift from its previous franchise-only model. Some skeptics say that QSR should have just bought back more stock. QSR reports on Feb 13, and the investor day is on Feb 15.
(EXTRAS from online Friday that didn’t make the weekend paper version)
See Column Topics. It seems some consolidation/rearrangement of Columns is going on.
(More later….)
LINK