From Barron’s, February 5, 2024 (Part 1, Market Week+)
Feb 3, 2024 11:56:25 GMT
fishingrod, steadyeddy, and 6 more like this
Post by yogibearbull on Feb 3, 2024 11:56:25 GMT
From Barron’s, February 5, 2024 (Part 1, Market Week+)
Pg 25, TRADER. This stock RALLY has become shaky due to hawkish POWELL and strong JOBS report and other economic data. It would be hard to replace the current big-tech market leadership. Breadth is poor and the equal-weight SP500 RSP is lagging. Remember how stocks fell sharply after peaking in early-01/2022? (That is the danger if the rally doesn’t broaden)
Beneficiaries of rebounding Dr COPPER include FCX and SCCO.
PM (yield 5.6%; fwd P/E 14) has good prospects from its iQOS smokeless/heated TOBACCO business.
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 3/20/24+ hold (cycle peak 5.25-5.50%)
FOMC 5/1/24+ cut
FOMC 6/12/24+ cut
FOMC 7/31/24+ cut
FOMC 9/18/24+ cut
(Probabilities for some rate-ranges aren’t high, so there can be some unexpected moves.) (These expectations differ a lot from those by the FOMC)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +1.43%, SP500 +1.38%, Nasdaq Comp +1.12%, R2000 -0.79%. DJ Transports -0.64%; DJ Utilities +0.21%. (Rotating spot communications XLC +2.65%) US$ index (spot) +0.51% (remains too strong over 100), oil/WTI futures -7.35% (but news after the markets closed), gold futures +0.96%.
52-Week (index changes only), DJIA +13.94%, SP500 +19.88%, Nasdaq Comp +30.17%. (Rotating spot communications XLC +37.01%) (SWITCHED to 52-week until YTD becomes meaningful)
NOTE. Communications XLC top holding are META (news) & GOOG/GOOGL for 47% of AUM.
SENTIMENTS
(ALL sentiments remain OK but peaked in mid-December)
NYSE cumulative (5-day) A/D LINE rose for a 2nd week; ratio of winners:losers 1:1+ (note poor breadth).
FUND INFLOWS +/OUTFLOWS - (4-weekMA). Stocks -|+, taxable bonds +|0, munis +|+, money-market funds +|-. (NEW FORMAT: 4wMA|Weekly change)
AAII Bull-Bear Spread +24.6% (high). (Thursday-Wednesday)
ybbpersonalfinance.proboards.com/thread/141/aaii-sentiment-survey-weekly?page=12&scrollTo=1285
%Above 50-dMA for NYSE-listed stocks 59.15% (positive); (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 84.3% (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 28, INTERNATIONAL TRADER. BRAZILIAN stocks (EWZ) and bonds are attractive. Strong sectors include commodities, financials, property. The sovereign credit rating has been upgraded by S&P and Fitch. Central back has been slashing rates; a concern is that soon, it will have most appointees by President LULA. Finance Minister has more fiscal discipline than Lula and that may become an issue later.
Pg 29, OPTIONS. Current VIX is low, but VIX future expiries around November election are elevated. Option strangle (buying both calls and puts) is recommended as an election strategy for uncertain outcome.
(SP500 VIX 13.85 (low), Nasdaq 100 VXN 17.22 (low), options SKEW 160.02 (high), bond MOVE 106.72 (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 42: A flat week in EUROPE (Denmark +3.94%, Finland -2.30%) and an up week in ASIA (S Korea +4.57%, China -4.75%).
TREASURY* 3-mo yield 5.43%, 1-yr 4.81%, 2-yr 4.36%, 5-yr 3.99%, 10-yr 4.03%, 30-yr 4.22%;
REAL yields 5-yr 1.80%, 10-yr 1.82%, 30-yr 2.02%;
FRNs Index** 5.28% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
DOLLAR rose to ^DXY 103.96, +0.5% (pg 50). GOLD rose to 2,034, +0.8% (Handy & Harman spot, Thursday; pg 52); the gold-miners rose. (^XAU was at 114.06, +1.17% 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, “The 6% Commission for Home Sales is Under Attack. Inside the Industry’s Fight to Keep it Alive”. High real estate commissions, paid by home sellers but typicallysplit 50-50 between the selling and buying agents, have survived consumer complaints, the Internet, fintech, etc. But now a MO Court may derail the gravy train. The Court ruled that the NAR (National Association of Realtors; 1908- ) and several large real estate brokers acted anticompetitively and conspired against the consumers. It imposed a $1.8 billion fine (more damages to be determined later); the NAR has assets of $1 billion with $119 million cash. The DOJ may also get involved in this mess. The NAR has set industry “standards” (but not fees/commissions directly) for MLS (multiple listing services), listings database access, standard contracts, lockbox system, etc, and has 1.5 million members. The NAR is appealing (with required bond posted upfront) and is also shopping for friendlier courts in IL or TX arguing that those states have more “experience” in real estate issues. It is also #2 lobbyist ($52.4 million annual budget for lobbying) after #1-US Chamber of Commerce (so, it’s ahead of medical and insurance associations). There has been a leadership turmoil at the NAR (that has been in the news). The NAR says that it doesn’t set commissions, but its rules allow the selling agent to set buying agent’s commission from the deal (so, the typical 50-50 split), but those agents cannot set their commissions independently; the NAR defends its practice saying that it helps the first-time or low-income buyers. Several real estate brokers have dropped the NAR membership requirement ($156 national + additional for local affiliates); some brokers now want a mix of NAR and non-NAR agents to have flexibility on commissions. A new group AREA (American Real Estate Association) has also emerged.
Pg 5, UP AND DOWN WALL STREET. It was a hot JOBS report, but that was all from seasonal adjustments – pre-adjustments, jobs actually declined. The average hourly WAGES rose but that was from fewer hours worked due to poor weather. So, all one can say is that the jobs report was better than expected but was far from great. Atlanta Fed’s GDPNow is at +4.2%. Anyway, on these “good” economic news, the BOND prices fell, and big STOCKS hit new highs again. REGIONAL BANKs sold off as NYCB added reserves for portfolio losses from CREs and its 2013 acquisition of failing Signature Bank. The Fed fund futures market expectations changed a bit, but are still out of line with those by the FOMC. Then, there were US STRIKES late-FRIDAY on Iran-backed groups in Syria and Iraq in retaliation for the drone attacks on a US base in Jordan a few days ago – as the markets were closed, any reactions would be seen in the futures markets on SUNDAY evening and the market opening on MONDAY.
CHINESE stocks have fallen for 3 years, HK stocks for 4 years (both are now below their GFC levels). But those may be ready to rebound in the auspicious Year of the Wood Dragon. The government has started a baby-stimulus; there was no Covid stimulus in China, only the Covid policy headaches. Negative sentiments are high among domestic and foreign investors. The property sector needs some washouts. The economy is in deflation. Short-interest is high and further short-sales have been restricted. Beware of the trap of a sharp rally, but then a collapse. Some wonder what President XI is waiting for?
Pg 7, STREETWISE. Even with Allen Media’s offer for Paramount Global/PARA, its stock keeps falling. The fear is that Shari REDSTONE will reject the offer as the stock is trading at a wide discount from the offer – but may collapse further on official deal rejection. Recent 3 years have been tough for PARA – its cable business is shrinking rapidly, its streaming business has been lackluster, and it’s burning cash on content that no longer seems hot.
Expectations are low for once hot CVS that reports on Wednesday. Its retail pharmacies are a drag, and its other businesses face tough competition; fwd P/E 9 only.
(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 25, TRADER. This stock RALLY has become shaky due to hawkish POWELL and strong JOBS report and other economic data. It would be hard to replace the current big-tech market leadership. Breadth is poor and the equal-weight SP500 RSP is lagging. Remember how stocks fell sharply after peaking in early-01/2022? (That is the danger if the rally doesn’t broaden)
Beneficiaries of rebounding Dr COPPER include FCX and SCCO.
PM (yield 5.6%; fwd P/E 14) has good prospects from its iQOS smokeless/heated TOBACCO business.
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 3/20/24+ hold (cycle peak 5.25-5.50%)
FOMC 5/1/24+ cut
FOMC 6/12/24+ cut
FOMC 7/31/24+ cut
FOMC 9/18/24+ cut
(Probabilities for some rate-ranges aren’t high, so there can be some unexpected moves.) (These expectations differ a lot from those by the FOMC)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +1.43%, SP500 +1.38%, Nasdaq Comp +1.12%, R2000 -0.79%. DJ Transports -0.64%; DJ Utilities +0.21%. (Rotating spot communications XLC +2.65%) US$ index (spot) +0.51% (remains too strong over 100), oil/WTI futures -7.35% (but news after the markets closed), gold futures +0.96%.
52-Week (index changes only), DJIA +13.94%, SP500 +19.88%, Nasdaq Comp +30.17%. (Rotating spot communications XLC +37.01%) (SWITCHED to 52-week until YTD becomes meaningful)
NOTE. Communications XLC top holding are META (news) & GOOG/GOOGL for 47% of AUM.
SENTIMENTS
(ALL sentiments remain OK but peaked in mid-December)
NYSE cumulative (5-day) A/D LINE rose for a 2nd week; ratio of winners:losers 1:1+ (note poor breadth).
FUND INFLOWS +/OUTFLOWS - (4-weekMA). Stocks -|+, taxable bonds +|0, munis +|+, money-market funds +|-. (NEW FORMAT: 4wMA|Weekly change)
AAII Bull-Bear Spread +24.6% (high). (Thursday-Wednesday)
ybbpersonalfinance.proboards.com/thread/141/aaii-sentiment-survey-weekly?page=12&scrollTo=1285
%Above 50-dMA for NYSE-listed stocks 59.15% (positive); (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 84.3% (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 28, INTERNATIONAL TRADER. BRAZILIAN stocks (EWZ) and bonds are attractive. Strong sectors include commodities, financials, property. The sovereign credit rating has been upgraded by S&P and Fitch. Central back has been slashing rates; a concern is that soon, it will have most appointees by President LULA. Finance Minister has more fiscal discipline than Lula and that may become an issue later.
Pg 29, OPTIONS. Current VIX is low, but VIX future expiries around November election are elevated. Option strangle (buying both calls and puts) is recommended as an election strategy for uncertain outcome.
(SP500 VIX 13.85 (low), Nasdaq 100 VXN 17.22 (low), options SKEW 160.02 (high), bond MOVE 106.72 (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 42: A flat week in EUROPE (Denmark +3.94%, Finland -2.30%) and an up week in ASIA (S Korea +4.57%, China -4.75%).
TREASURY* 3-mo yield 5.43%, 1-yr 4.81%, 2-yr 4.36%, 5-yr 3.99%, 10-yr 4.03%, 30-yr 4.22%;
REAL yields 5-yr 1.80%, 10-yr 1.82%, 30-yr 2.02%;
FRNs Index** 5.28% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
DOLLAR rose to ^DXY 103.96, +0.5% (pg 50). GOLD rose to 2,034, +0.8% (Handy & Harman spot, Thursday; pg 52); the gold-miners rose. (^XAU was at 114.06, +1.17% 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, “The 6% Commission for Home Sales is Under Attack. Inside the Industry’s Fight to Keep it Alive”. High real estate commissions, paid by home sellers but typicallysplit 50-50 between the selling and buying agents, have survived consumer complaints, the Internet, fintech, etc. But now a MO Court may derail the gravy train. The Court ruled that the NAR (National Association of Realtors; 1908- ) and several large real estate brokers acted anticompetitively and conspired against the consumers. It imposed a $1.8 billion fine (more damages to be determined later); the NAR has assets of $1 billion with $119 million cash. The DOJ may also get involved in this mess. The NAR has set industry “standards” (but not fees/commissions directly) for MLS (multiple listing services), listings database access, standard contracts, lockbox system, etc, and has 1.5 million members. The NAR is appealing (with required bond posted upfront) and is also shopping for friendlier courts in IL or TX arguing that those states have more “experience” in real estate issues. It is also #2 lobbyist ($52.4 million annual budget for lobbying) after #1-US Chamber of Commerce (so, it’s ahead of medical and insurance associations). There has been a leadership turmoil at the NAR (that has been in the news). The NAR says that it doesn’t set commissions, but its rules allow the selling agent to set buying agent’s commission from the deal (so, the typical 50-50 split), but those agents cannot set their commissions independently; the NAR defends its practice saying that it helps the first-time or low-income buyers. Several real estate brokers have dropped the NAR membership requirement ($156 national + additional for local affiliates); some brokers now want a mix of NAR and non-NAR agents to have flexibility on commissions. A new group AREA (American Real Estate Association) has also emerged.
Pg 5, UP AND DOWN WALL STREET. It was a hot JOBS report, but that was all from seasonal adjustments – pre-adjustments, jobs actually declined. The average hourly WAGES rose but that was from fewer hours worked due to poor weather. So, all one can say is that the jobs report was better than expected but was far from great. Atlanta Fed’s GDPNow is at +4.2%. Anyway, on these “good” economic news, the BOND prices fell, and big STOCKS hit new highs again. REGIONAL BANKs sold off as NYCB added reserves for portfolio losses from CREs and its 2013 acquisition of failing Signature Bank. The Fed fund futures market expectations changed a bit, but are still out of line with those by the FOMC. Then, there were US STRIKES late-FRIDAY on Iran-backed groups in Syria and Iraq in retaliation for the drone attacks on a US base in Jordan a few days ago – as the markets were closed, any reactions would be seen in the futures markets on SUNDAY evening and the market opening on MONDAY.
CHINESE stocks have fallen for 3 years, HK stocks for 4 years (both are now below their GFC levels). But those may be ready to rebound in the auspicious Year of the Wood Dragon. The government has started a baby-stimulus; there was no Covid stimulus in China, only the Covid policy headaches. Negative sentiments are high among domestic and foreign investors. The property sector needs some washouts. The economy is in deflation. Short-interest is high and further short-sales have been restricted. Beware of the trap of a sharp rally, but then a collapse. Some wonder what President XI is waiting for?
Pg 7, STREETWISE. Even with Allen Media’s offer for Paramount Global/PARA, its stock keeps falling. The fear is that Shari REDSTONE will reject the offer as the stock is trading at a wide discount from the offer – but may collapse further on official deal rejection. Recent 3 years have been tough for PARA – its cable business is shrinking rapidly, its streaming business has been lackluster, and it’s burning cash on content that no longer seems hot.
Expectations are low for once hot CVS that reports on Wednesday. Its retail pharmacies are a drag, and its other businesses face tough competition; fwd P/E 9 only.
(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
.
