From Barron’s, April 8, 2024 (Part 1, Market Week+)
Apr 6, 2024 10:24:57 GMT
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Post by yogibearbull on Apr 6, 2024 10:24:57 GMT
From Barron’s, April 8, 2024 (Part 1, Market Week+)
Pg 27, TRADER. APRIL hasn’t been bad for stocks (it’s the last month of geed seasonality, Nov 1 – April 30). The SP500 is 2.4% above 50-dMA. The jobs report was good. The Q1 earnings are expected to grow at a slower pace. Of course, there are worries – the Fed, inflation, oil, geopolitics. But those looking for correction may have to wait at least until May.
In the 2014/Q1 EARNINGS season starting Friday, the earnings growth should be slower with SP500 earnings growth +4% to 5%; revenue growth should be strong. Pay attention to the guidance provided. SP500 fwd P/E is 20.1 and the current rally is from P/E expansion.
USED-CAR retailer CarMax (KMX; fwd P/E 22.1) should continue to rally with an expected good report. Used-car prices are up due to reduced supply. Some are using tax refunds to buy cars. It owns Edmunds.com.
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 5/1/24+ hold (cycle peak 5.25-5.50%)
FOMC 6/12/24+ hold
FOMC 7/31/24+ cut
FOMC 9/18/24+ cut
FOMC 11/7/24+ hold
(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 -2.27%, SP500 -0.95%, Nasdaq Comp -0.80%, R2000 -2.87%. DJ Transports -1.80%; DJ Utilities -1.42%. (Rotating spot energy XLE +3.89%) US$ index (spot) -0.26% (remains too strong over 100), oil/WTI futures +4.50%, gold futures +4.88%.
YTD (index changes only), DJIA +3.22%, SP500 +9.11%, Nasdaq Comp +8.24%. (Rotating spot energy XLE +16.98%)
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 1:2
FUND INFLOWS +/OUTFLOWS-: Stocks +|-, taxable bonds +|-, munis +|-, money-market funds +|+. (NEW FORMAT: 4wMA|weekly change)
AAII Bull-Bear Spread +25.1% (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 64.64% (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 79.5% (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 29, INTERNATIONAL TRADER. Dubai/UAE has new regulations for cryptos. Its Virtual Assets Regulatory Authority (VARA) dates to 2022 and there are advantages to starting fresh on crypto regulations (vs Singapore, HK, Monaco, Luxembourg where they have to fit into existing regulations). About half of all property purchases in Dubai are with cryptos and that has provided a boost to its property sector. Action in cryptos has shifted from the developed world to the developing world. That’s an amazing contrast with the US in anti-crypto mode. If your wealth is in dollars or euros, you may sleep well, but in the rest of the world, people are converting their local wealth into cryptos and cashing it out in Dubai, HK etc.
Pg 30, OPTIONS. Be prepared for the possibility that the FED doesn’t cut rates in JUNE. Economic news has been good, but the inflation news is just so-so. While large-cap SP500 VIX is low, small-cap R2000 RVX is elevated, reflecting this Fed rate uncertainty. Recommended are SP500 puts for hedging.
SP500 VIX 16.04 (low), Nasdaq 100 VXN 19.23, options SKEW 142.64 (high), bond MOVE 94.31 (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 43: A bad week in EUROPE (Norway +1.80%, Italy -2.05%) and a down week in ASIA (India +2.45%, Japan -2.43%) (Taiwan market not impacted by the earthquake).
TREASURY* 3-mo yield 5.43%, 1-yr 5.05%, 2-yr 4.73%, 5-yr 4.38%, 10-yr 4.39%, 30-yr 4.54%;
REAL yields 5-yr 1.93%, 10-yr 2.02%, 30-yr 2.22%;
FRNs Index** 5.30% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
DOLLAR fell ^DXY 104.29, -0.25% (pg 46). GOLD rose to 2,299, +4% (Handy & Harman spot, Thursday; pg 48); the gold-miners rose. (^XAU was at 136.35, +7.36% 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 16, COVER STORY, “Big PHARMA stocks Need a Rethink. Investors Keep Making the Same Mistakes”. Drug PATENT EXPIRATIONS are great for consumers, but terrible for pharma (PFE, MRK, JNJ, BMY, GSK, SNY). They support new drug pipeline through R&D, capex, M&A, but blockbuster drugs are few and far between (now from NVO, LLY). New 2022 law allowed Medicare to negotiate some drug prices and that has been a negative for the industry. PFE is confounding – so much seems to be going for it, but it cannot get ahead, possibly due to its huge size. The big pharma business model has also changed. They are now more focused on prescription drugs, but that has added risks of patent expiry/cliffs and new drug trial failures. They are now acting like the risky big biotech of the past. But higher prices for a few successful new drugs not only create bad PR but lead to cyclical growth. Biosimilars are also cutting into profits. But retail investors are still thinking of big pharma as reliable steady growers, while they must switch to trading strategies for pharma.
Pg 6, UP & DOWN WALL STREET. The JOBS report was quite strong and that may push the FED rate cut beyond June. INFLATION is more than +2% average target (the next CPI is on Wednesday). The Fed may make some ad-hoc surgical cuts in 2024 rather than starting a series of rate cuts. Some open-mouths of FOMC were already calling for no cuts in 2024 (really, trial balloons; Powell himself would never float those). The CME FedWatch now projects a cut in July, but still shows 3 cuts in 2024 (July, September, December, but with low convictions). The bond yields rose. Gold and oil rallied. Stocks haven’t fully grasped all this (as the bad seasonality period approaches, May 1 – October 30).
Geopolitical risks have caused both GOLD and ENERGY to rally, but this may not be good news for the stock market. Hedging stocks with index puts has been ineffective. Central banks have been buying gold for reserve diversification (i.e. move away from dollar), including the Chinese PBOC. With Chinese stocks and properties performing poorly, many Chinese have turned to gold. Interestingly, there have been outflows from gold bullion ETFs. Mentioned are GDX; GLD, SLV; XLE, XOP, CRAK.
Pg 9, STREETWISE. APPAREL stocks sold off and PVH (brands Calvin Klein, Tommy Hilfiger) took the worst hit. No, AI didn’t make undergarments obsolete. The problem was slow growing Europe. PVH was overexposed to Europe, and its stock had run up recently, so it tumbled badly. But things should improve in 1-2 years. Are loose pants coming back? Looks like from the experience of LEVI, but where does that leave LULU?
(More later….)
LINK
Pg 27, TRADER. APRIL hasn’t been bad for stocks (it’s the last month of geed seasonality, Nov 1 – April 30). The SP500 is 2.4% above 50-dMA. The jobs report was good. The Q1 earnings are expected to grow at a slower pace. Of course, there are worries – the Fed, inflation, oil, geopolitics. But those looking for correction may have to wait at least until May.
In the 2014/Q1 EARNINGS season starting Friday, the earnings growth should be slower with SP500 earnings growth +4% to 5%; revenue growth should be strong. Pay attention to the guidance provided. SP500 fwd P/E is 20.1 and the current rally is from P/E expansion.
USED-CAR retailer CarMax (KMX; fwd P/E 22.1) should continue to rally with an expected good report. Used-car prices are up due to reduced supply. Some are using tax refunds to buy cars. It owns Edmunds.com.
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 5/1/24+ hold (cycle peak 5.25-5.50%)
FOMC 6/12/24+ hold
FOMC 7/31/24+ cut
FOMC 9/18/24+ cut
FOMC 11/7/24+ hold
(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 -2.27%, SP500 -0.95%, Nasdaq Comp -0.80%, R2000 -2.87%. DJ Transports -1.80%; DJ Utilities -1.42%. (Rotating spot energy XLE +3.89%) US$ index (spot) -0.26% (remains too strong over 100), oil/WTI futures +4.50%, gold futures +4.88%.
YTD (index changes only), DJIA +3.22%, SP500 +9.11%, Nasdaq Comp +8.24%. (Rotating spot energy XLE +16.98%)
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 1:2
FUND INFLOWS +/OUTFLOWS-: Stocks +|-, taxable bonds +|-, munis +|-, money-market funds +|+. (NEW FORMAT: 4wMA|weekly change)
AAII Bull-Bear Spread +25.1% (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 64.64% (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 79.5% (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 29, INTERNATIONAL TRADER. Dubai/UAE has new regulations for cryptos. Its Virtual Assets Regulatory Authority (VARA) dates to 2022 and there are advantages to starting fresh on crypto regulations (vs Singapore, HK, Monaco, Luxembourg where they have to fit into existing regulations). About half of all property purchases in Dubai are with cryptos and that has provided a boost to its property sector. Action in cryptos has shifted from the developed world to the developing world. That’s an amazing contrast with the US in anti-crypto mode. If your wealth is in dollars or euros, you may sleep well, but in the rest of the world, people are converting their local wealth into cryptos and cashing it out in Dubai, HK etc.
Pg 30, OPTIONS. Be prepared for the possibility that the FED doesn’t cut rates in JUNE. Economic news has been good, but the inflation news is just so-so. While large-cap SP500 VIX is low, small-cap R2000 RVX is elevated, reflecting this Fed rate uncertainty. Recommended are SP500 puts for hedging.
SP500 VIX 16.04 (low), Nasdaq 100 VXN 19.23, options SKEW 142.64 (high), bond MOVE 94.31 (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 43: A bad week in EUROPE (Norway +1.80%, Italy -2.05%) and a down week in ASIA (India +2.45%, Japan -2.43%) (Taiwan market not impacted by the earthquake).
TREASURY* 3-mo yield 5.43%, 1-yr 5.05%, 2-yr 4.73%, 5-yr 4.38%, 10-yr 4.39%, 30-yr 4.54%;
REAL yields 5-yr 1.93%, 10-yr 2.02%, 30-yr 2.22%;
FRNs Index** 5.30% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
DOLLAR fell ^DXY 104.29, -0.25% (pg 46). GOLD rose to 2,299, +4% (Handy & Harman spot, Thursday; pg 48); the gold-miners rose. (^XAU was at 136.35, +7.36% 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 16, COVER STORY, “Big PHARMA stocks Need a Rethink. Investors Keep Making the Same Mistakes”. Drug PATENT EXPIRATIONS are great for consumers, but terrible for pharma (PFE, MRK, JNJ, BMY, GSK, SNY). They support new drug pipeline through R&D, capex, M&A, but blockbuster drugs are few and far between (now from NVO, LLY). New 2022 law allowed Medicare to negotiate some drug prices and that has been a negative for the industry. PFE is confounding – so much seems to be going for it, but it cannot get ahead, possibly due to its huge size. The big pharma business model has also changed. They are now more focused on prescription drugs, but that has added risks of patent expiry/cliffs and new drug trial failures. They are now acting like the risky big biotech of the past. But higher prices for a few successful new drugs not only create bad PR but lead to cyclical growth. Biosimilars are also cutting into profits. But retail investors are still thinking of big pharma as reliable steady growers, while they must switch to trading strategies for pharma.
Pg 6, UP & DOWN WALL STREET. The JOBS report was quite strong and that may push the FED rate cut beyond June. INFLATION is more than +2% average target (the next CPI is on Wednesday). The Fed may make some ad-hoc surgical cuts in 2024 rather than starting a series of rate cuts. Some open-mouths of FOMC were already calling for no cuts in 2024 (really, trial balloons; Powell himself would never float those). The CME FedWatch now projects a cut in July, but still shows 3 cuts in 2024 (July, September, December, but with low convictions). The bond yields rose. Gold and oil rallied. Stocks haven’t fully grasped all this (as the bad seasonality period approaches, May 1 – October 30).
Geopolitical risks have caused both GOLD and ENERGY to rally, but this may not be good news for the stock market. Hedging stocks with index puts has been ineffective. Central banks have been buying gold for reserve diversification (i.e. move away from dollar), including the Chinese PBOC. With Chinese stocks and properties performing poorly, many Chinese have turned to gold. Interestingly, there have been outflows from gold bullion ETFs. Mentioned are GDX; GLD, SLV; XLE, XOP, CRAK.
Pg 9, STREETWISE. APPAREL stocks sold off and PVH (brands Calvin Klein, Tommy Hilfiger) took the worst hit. No, AI didn’t make undergarments obsolete. The problem was slow growing Europe. PVH was overexposed to Europe, and its stock had run up recently, so it tumbled badly. But things should improve in 1-2 years. Are loose pants coming back? Looks like from the experience of LEVI, but where does that leave LULU?
(More later….)
LINK