From Barron’s, March 18, 2024 (Part 1, Market Week+)
Mar 16, 2024 10:25:26 GMT
chang, fishingrod, and 8 more like this
Post by yogibearbull on Mar 16, 2024 10:25:26 GMT
From Barron’s, March 18, 2024 (Part 1, Market Week+)
Pg 28, TRADER. Nothing has affected this Energizer Bunny BULL market. But with inflation hotter than expected, the FED may throw a monkey wrench into the works. The 2-yr yield (a proxy to the expected fed fund rate) has been rising. Watch the Fed Statement and POWELL’s presser on Wednesday for future policy guidance. The Fed typically sends signals 1-2 meetings ahead, so for the hoped-for June rate cut, this March FOMC is especially important, even though no action is expected immediately.
M&A is coming back (and the IPOs too). Potential targets are companies with digestible market-caps that are also struggling – HOG, NWL, VSCO, KSS, SRPT, QS, UAA, TDOC. These are from a MS screen and there hasn’t been any related news (yet).
Spice maker McCormick (MKC; yield 2.5%; fwd P/E 23.9) may rebound after the expected poor earnings report on March 26. Consumer-staples have lagged, but MKC had to increase prices, so it has lost market share to private label store brands. But it’s controlling costs and is introducing new flavors that should spice up the stock.
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+ hold
FOMC 6/12/24+ cut
FOMC 7/31/24+ hold
FOMC 9/18/24+ cut
(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 -0.02%, SP500 -0.13%, Nasdaq Comp -0.70%, R2000 -2.08%. DJ Transports -1.40%; DJ Utilities -0.63%. (Rotating spot long Treasuries TLT -2.91%) US$ index (spot) +0.71% (remains too strong over 100), oil/WTI futures +3.88%, gold futures -0.98%.
YTD (index changes only), DJIA +2.72%, SP500 +7.28%, Nasdaq Comp +6.41%. (Rotating spot long Treasuries TLT -6.01%)
SENTIMENTS
(ALL sentiments remain good and steady, but they peaked in mid-December)
NYSE cumulative (5-day) A/D LINE fell; ratio of winners:losers 2:3
FUND INFLOWS +/OUTFLOWS-: Stocks +|-, taxable bonds +|-, munis +|+, money-market funds +|+. (NEW FORMAT: 4wMA|weekly change)
(All flow levels are positive now. Where is the money come from?)
AAII Bull-Bear Spread +24.0% (high). (Thursday-Wednesday)
(Sentiment Scale: v low << avg - 1*SD; low < avg - 1*SD; below avg, avg, above avg for in-between; high > avg + 1*SD, v high >> avg + 1*SD)
ybbpersonalfinance.proboards.com/thread/141/aaii-sentiment-survey-weekly?page=12&scrollTo=1285
%Above 50-dMA for NYSE-listed stocks 63.48% (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 80.3% (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 for %Above: oversold < 30-; 30 < negative < 50-; 50 < positive < 70-; 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 31, INCOME. Instead of the highest yielders, look at the 2nd quartile of yield stocks as these have lower debt/EBITDA and reasonable payout ratios. Mentioned are GIS, KO, PEP, KDP, TAP (by SENYEK/Wolf Research); and SNA, DGX, TPR, SBUX, APD (by DeBUSSCHERE/22V Research). (New placement)
Pg 31, INTERNATIONAL TRADER. EM bond traders may benefit from “too big to fail” bailout of EGYPT by the IMF ($9 billion), the EU ($8 billion), and the UAE ($24 billion). The Egyptian pound has devalued by 33% and rates have been hiked to 27.75%; inflation is +35%; the annual budget deficit is 7% of GDP. Egypt faces several problems – Russia-Ukraine war has disrupted large wheat imports; Houthi rebels have hurt shipping through Suez/Red Sea; crisis in Gaza has hurt tourism in Egypt. Besides the short-term deeply under par bonds, the financial stocks may also benefit.
Pg 32, OPTIONS. Lower rates will benefit small stocks more. Play with calls on R2000 IWM (unfortunately, the options on better SC indexes IJR and SPSM aren’t as liquid).
SP500 VIX 14.41 (low), Nasdaq 100 VXN 19.25, options SKEW 138.91 (high), bond MOVE 97.82 (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: An up week in EUROPE (Spain +2.46%, Netherlands -3.34%) and a down week in ASIA (China +2.99%, India -3.13%).
TREASURY* 3-mo yield 5.48%, 1-yr 5.05%, 2-yr 4.72%, 5-yr 4.33%, 10-yr 4.31%, 30-yr 4.43%;
REAL yields 5-yr 1.94%, 10-yr 1.99%, 30-yr 2.16%;
FRNs Index** 5.32% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
DOLLAR rose ^DXY 103.45, +0.7% (pg 50). GOLD fell to 2,163, -0.4% (Handy & Harman spot, Thursday; pg 52); the gold-miners were up. (^XAU was at 120.50, +2.68% 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 18, COVER STORY, “100 Top Women in Finance”. There are (or will be) links to all 100 profiles. Some names that I recognized include Michelle BOWMAN, Fed Governor; Lael BRAINARD, WH-NEC; Lori CALVASINA, RBC Capital; Abby COHEN, Columbia U; Lisa COOK, Fed Governor; Helima CROFT, RBC Capital; Mary DALEY, San Francisco Fed; Sonali DESAI, Franklin Templeton; Thasunda Brown DUCKETT, TIAA; Jane FRASER, Citi; Adena FRIEDMAN, Nasdaq; Kristalina GEORGIEVA, IMF; Mellody HOBSON, Ariel; Abigail JOHNSON, Fidelity; Sarah KETTERER, Causeway Capital; Sallie KRAWCHECK, Ellevest; Nancy LAZAR, Piper Sandler; Saira MALIK, Nuveen (really, TIAA); Mary MEEKER, Bond Capital; Sonali PIER, Pimco; Ruth PORAT, Alphabet; Claudia SAHM, Sahm Consulting; Liz Ann SONDERS, Schwab; Savita SUBRAMANIAN, BoA; Dana TELSEY, Telsey Group, Cathie. WOOD, ARK; Janet YELLEN, the money lady, as my granddaughter calls her, and as a test to see if anyone is reading this (-😊. (That’s 27/100)
Pg 7, UP AND DOWN WALL STREET. Strange that with the current GEOPOLITICAL situation (2 wars in Ukraine and Gaza), the US and global markets are so calm. German (in near technical recession) and Israeli (GDP -19.4%) economies are in bad shape, but one wouldn’t know that from their stock markets that have done well. The global strategists point out that situations in Ukraine and Gaza aren’t spiraling out of control and are betting that they will remain contained – no WW III or nuclear Winter. OIL is behaving reasonably well – the OPEC isn’t what it used to be, and the US is now the biggest oil producer that is helping its allies. But specific SECTORS have been impacted differently – global shipping; sidelining of the ESG and climate issues; the US exporters of energy (oil and natural gas/LNG); the EM exporters (China, Turkey, etc making up for the lost trade to/from Russia); dollar diversification due to dollar diplomacy, etc. Andy SERWER is a great storyteller who started this piece with the little noticed news of Russia blacklisting the former chess champion Gary KASPAROV who is now living in NYC – he is nervous even there but finds anywhere else in the world more unsafe.
Pg 9, STREETWISE. Want a bullish piece on T? Read on. The telecom business is a triopoly with TMUS, VZ, T. There were detours by T into cable (DirectTV came & went) and media (TimeWarner came & went). There is a new management that will stick to phones, wireless, fiber broadband, and bundling. The free cash flow will cut its high debt; the capex needs for 5G rollout are less. The fwd P/E is only 7; yield 6.5% (safe; but remember that dividend was slashed in early-2022). T may not be the best telecom around, but its stock may have the best potential now.
(More later….)
LINK
Pg 28, TRADER. Nothing has affected this Energizer Bunny BULL market. But with inflation hotter than expected, the FED may throw a monkey wrench into the works. The 2-yr yield (a proxy to the expected fed fund rate) has been rising. Watch the Fed Statement and POWELL’s presser on Wednesday for future policy guidance. The Fed typically sends signals 1-2 meetings ahead, so for the hoped-for June rate cut, this March FOMC is especially important, even though no action is expected immediately.
M&A is coming back (and the IPOs too). Potential targets are companies with digestible market-caps that are also struggling – HOG, NWL, VSCO, KSS, SRPT, QS, UAA, TDOC. These are from a MS screen and there hasn’t been any related news (yet).
Spice maker McCormick (MKC; yield 2.5%; fwd P/E 23.9) may rebound after the expected poor earnings report on March 26. Consumer-staples have lagged, but MKC had to increase prices, so it has lost market share to private label store brands. But it’s controlling costs and is introducing new flavors that should spice up the stock.
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+ hold
FOMC 6/12/24+ cut
FOMC 7/31/24+ hold
FOMC 9/18/24+ cut
(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 -0.02%, SP500 -0.13%, Nasdaq Comp -0.70%, R2000 -2.08%. DJ Transports -1.40%; DJ Utilities -0.63%. (Rotating spot long Treasuries TLT -2.91%) US$ index (spot) +0.71% (remains too strong over 100), oil/WTI futures +3.88%, gold futures -0.98%.
YTD (index changes only), DJIA +2.72%, SP500 +7.28%, Nasdaq Comp +6.41%. (Rotating spot long Treasuries TLT -6.01%)
SENTIMENTS
(ALL sentiments remain good and steady, but they peaked in mid-December)
NYSE cumulative (5-day) A/D LINE fell; ratio of winners:losers 2:3
FUND INFLOWS +/OUTFLOWS-: Stocks +|-, taxable bonds +|-, munis +|+, money-market funds +|+. (NEW FORMAT: 4wMA|weekly change)
(All flow levels are positive now. Where is the money come from?)
AAII Bull-Bear Spread +24.0% (high). (Thursday-Wednesday)
(Sentiment Scale: v low << avg - 1*SD; low < avg - 1*SD; below avg, avg, above avg for in-between; high > avg + 1*SD, v high >> avg + 1*SD)
ybbpersonalfinance.proboards.com/thread/141/aaii-sentiment-survey-weekly?page=12&scrollTo=1285
%Above 50-dMA for NYSE-listed stocks 63.48% (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 80.3% (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 for %Above: oversold < 30-; 30 < negative < 50-; 50 < positive < 70-; 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 31, INCOME. Instead of the highest yielders, look at the 2nd quartile of yield stocks as these have lower debt/EBITDA and reasonable payout ratios. Mentioned are GIS, KO, PEP, KDP, TAP (by SENYEK/Wolf Research); and SNA, DGX, TPR, SBUX, APD (by DeBUSSCHERE/22V Research). (New placement)
Pg 31, INTERNATIONAL TRADER. EM bond traders may benefit from “too big to fail” bailout of EGYPT by the IMF ($9 billion), the EU ($8 billion), and the UAE ($24 billion). The Egyptian pound has devalued by 33% and rates have been hiked to 27.75%; inflation is +35%; the annual budget deficit is 7% of GDP. Egypt faces several problems – Russia-Ukraine war has disrupted large wheat imports; Houthi rebels have hurt shipping through Suez/Red Sea; crisis in Gaza has hurt tourism in Egypt. Besides the short-term deeply under par bonds, the financial stocks may also benefit.
Pg 32, OPTIONS. Lower rates will benefit small stocks more. Play with calls on R2000 IWM (unfortunately, the options on better SC indexes IJR and SPSM aren’t as liquid).
SP500 VIX 14.41 (low), Nasdaq 100 VXN 19.25, options SKEW 138.91 (high), bond MOVE 97.82 (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: An up week in EUROPE (Spain +2.46%, Netherlands -3.34%) and a down week in ASIA (China +2.99%, India -3.13%).
TREASURY* 3-mo yield 5.48%, 1-yr 5.05%, 2-yr 4.72%, 5-yr 4.33%, 10-yr 4.31%, 30-yr 4.43%;
REAL yields 5-yr 1.94%, 10-yr 1.99%, 30-yr 2.16%;
FRNs Index** 5.32% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
DOLLAR rose ^DXY 103.45, +0.7% (pg 50). GOLD fell to 2,163, -0.4% (Handy & Harman spot, Thursday; pg 52); the gold-miners were up. (^XAU was at 120.50, +2.68% 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 18, COVER STORY, “100 Top Women in Finance”. There are (or will be) links to all 100 profiles. Some names that I recognized include Michelle BOWMAN, Fed Governor; Lael BRAINARD, WH-NEC; Lori CALVASINA, RBC Capital; Abby COHEN, Columbia U; Lisa COOK, Fed Governor; Helima CROFT, RBC Capital; Mary DALEY, San Francisco Fed; Sonali DESAI, Franklin Templeton; Thasunda Brown DUCKETT, TIAA; Jane FRASER, Citi; Adena FRIEDMAN, Nasdaq; Kristalina GEORGIEVA, IMF; Mellody HOBSON, Ariel; Abigail JOHNSON, Fidelity; Sarah KETTERER, Causeway Capital; Sallie KRAWCHECK, Ellevest; Nancy LAZAR, Piper Sandler; Saira MALIK, Nuveen (really, TIAA); Mary MEEKER, Bond Capital; Sonali PIER, Pimco; Ruth PORAT, Alphabet; Claudia SAHM, Sahm Consulting; Liz Ann SONDERS, Schwab; Savita SUBRAMANIAN, BoA; Dana TELSEY, Telsey Group, Cathie. WOOD, ARK; Janet YELLEN, the money lady, as my granddaughter calls her, and as a test to see if anyone is reading this (-😊. (That’s 27/100)
Pg 7, UP AND DOWN WALL STREET. Strange that with the current GEOPOLITICAL situation (2 wars in Ukraine and Gaza), the US and global markets are so calm. German (in near technical recession) and Israeli (GDP -19.4%) economies are in bad shape, but one wouldn’t know that from their stock markets that have done well. The global strategists point out that situations in Ukraine and Gaza aren’t spiraling out of control and are betting that they will remain contained – no WW III or nuclear Winter. OIL is behaving reasonably well – the OPEC isn’t what it used to be, and the US is now the biggest oil producer that is helping its allies. But specific SECTORS have been impacted differently – global shipping; sidelining of the ESG and climate issues; the US exporters of energy (oil and natural gas/LNG); the EM exporters (China, Turkey, etc making up for the lost trade to/from Russia); dollar diversification due to dollar diplomacy, etc. Andy SERWER is a great storyteller who started this piece with the little noticed news of Russia blacklisting the former chess champion Gary KASPAROV who is now living in NYC – he is nervous even there but finds anywhere else in the world more unsafe.
Pg 9, STREETWISE. Want a bullish piece on T? Read on. The telecom business is a triopoly with TMUS, VZ, T. There were detours by T into cable (DirectTV came & went) and media (TimeWarner came & went). There is a new management that will stick to phones, wireless, fiber broadband, and bundling. The free cash flow will cut its high debt; the capex needs for 5G rollout are less. The fwd P/E is only 7; yield 6.5% (safe; but remember that dividend was slashed in early-2022). T may not be the best telecom around, but its stock may have the best potential now.
(More later….)
LINK
