Coffee With Greta: Can Wall Street Shake Off September?
DJIA Futures: +296 (+1.0%) SPX Futures: +34 (+0.9%) NASDAQ Futures: +71 (+0.7%) Good morning friends! Futures are rebounding as the market looks to start off the new quarter on a positive note. Let’s get right to it! Stocks Rise, Yields Fall Ahead of Big Week Stocks are rising as Treasury yields are dropping ahead of new economic data. The 2-year yield is down 14 basis points to 4.13% with the 10-year yield falling 12 basis points to 3.71%. The biggest data on the schedule today is the S&P Global and ISM manufacturing PMI’s at 10:00 a.m. ET. This week also includes key labor market data for the Fed. That starts with the August job openings and labor turnover survey (JOLTS) on Tuesday. ADP releases its private payroll report for September on Wednesday, with weekly jobless claims on Thursday, and the official September jobs report on Friday. Tesla Slides Despite Record Q3 Deliveries Tesla (TSLA) shares are down 5% ahead of the open despite reporting record deliveries in the third quarter. The electric automaker delivered 343,000 vehicles last quarter. That was an all-time high for quarterly deliveries but fell short of analysts’ expectations for 364,660. Total production rose to 365,000 vehicles from 258,580 in Q2. That included nearly 20,000 Model S and X vehicles and more than 345,000 Model 3 and Y vehicles. Credit Suisse Drops On Concerns Over Financial Health Credit Suisse (CS) shares are falling 4.6% in premarket trade amid concerns over the lender’s financial health. The Financial Times reported overnight that executives spent the weekend calling major investors to reassure them the business is fine. This comes after spreads of the bank’s credit default swaps jumped sharply on Friday. That jump came after reports the lender is looking to raise capital. Credit Suisse told CNBC it will provide updates on its strategy when it reports earnings October 27. Sources say part of that strategy may be pulling out of the U.S. market entirely. The share price has hit record lows this year and the lender has struggled amid higher borrowing costs. Peloton Reaches Deal With Hilton Peloton (PTON) shares are up 4.8% ahead of the open after announcing a partnership with Hilton (HLT). As part of the deal Peloton will put its bikes in all 5,400 Hilton-owned hotels across the United States. Hilton Honors members will also receive a free 90-day trial of the Peloton app. The majority of locations will be equipped by the end of the year with rollout beginning in the coming weeks. Oil Prices Jump Ahead of OPEC+ Meeting Oil prices are higher today as the market remains on edge for this week’s OPEC+ meeting. West Texas Intermediate crude futures are up 4.9% to over $83 bbl while Brent crude futures are up 4.2% to just under $89 bbl. OPEC+ meets on Wednesday and is said to be considering an output cut of more than 1 million barrels per day. The cuts would be an effort to support prices amid the declining global demand outlook. U.K. Reverses On Tax Cuts for High Earners The U.K. government reversed its plan to cut the top rate of income tax which caused extreme market turmoil last week. The government had previously announced a plan to cut the top rate paid on incomes over £150,000 ($166,770) from 45% to 40%. Following that announcement, the pound plunged to a record-low, mortgage deals were pulled from the market, and the U.K. bond market collapsed. That caused the Bank of England to step in and buy government bonds in an effort to stabilize the market. The Finance Minister said today, “It is clear that the abolition of the 45p tax rate has become a distraction from our overriding mission to tackle the challenges facing our economy. As a result, I’m announcing we are not proceeding with the abolition of the 45p tax rate. We get it, and we have listened.” The British pound rose sharply after that announcement, up 0.8% against the dollar at one point, but has since settled to around $1.12. 10-year gilt yields are also down sharply, with those moves trickling into the U.S. bond market as well.
Continue Reading -->Credit Suisse = New Lehman?
We have mixed markets around the world after an erratic SPX futures night. Europe is off the lows. The UK government reversed course and abandoned a plan to scrap the top 45% tax rate. Gilts aren’t moving much. Brent prices are up with OPC cuts, and Putin didn’t do anything crazy. Ukraine took back some stolen land. Credit Suisse remains in a news doom loop. Some are saying it’s not a Lehman moment. But let’s focus on levels first and headlines second. SPX futures are +25 after they were down 35 last night. We’ll see if new flows try and bounce the tape. There’s resistance at 3610-3636. The bears need to reject price there to keep active pressure on. Now let’s go through the major ETF’s I’m watching today: ARKK didn’t make new lows on the year. We’ll see if that means anything when this market wants to bounce. $37ish is pivot support to watch. Biotech acts better than most sectors but it’s hard to get excited. Active support is XBI $77.57. Resistance is $82ish. XLE acted better over the past two sessions as most sectors made new lows on the year. Oil is up this morning on news of an OPEC cut. There’s a gap to fill up to $75ish. It’s probably a better sale than add. XLF is trying to create a lower tight pivot area to resolve at some point. There is lots of talk about CS and comparisons to Lehman or Bear. This sector doesn’t act compelling. Watch $30.12 for market clues. Positions Disclosure
Continue Reading -->How Bear Markets Work – David Prince Talks Anxiety, Pain, and the Light at the End of the Tunnel
Want to learn how to trade through a bear market while keeping your sanity and wallet intact? Then check out this interview with David Prince, Founder of our Inner Circle community. David delivers the cold, hard truth about bear markets, including: What a bear market is beyond a mere 20% decline in the SPX The psychological toll the market takes on your brain How to keep your head screwed on straight when volatility is high Where he is finding opportunity The stocks he is watching for 2023 and 2024 What’s different about the oil sector What he sees in the semiconductor and housing markets What a bottom really looks like And more! FULL INTERVIEW TRANSCRIPT Note: this interview has been edited for length and clarity. Michael Comeau: David, I’ll start by asking you a simple question: What is a bear market? David Prince: There’s the classic definition of a being 20% down from the highs. But the way I see it, a bear market is a market that is trending lower and has not hit a bottom, and doesn’t have one in the foreseeable future. MC: Can you talk about the psychological impact of a bear market? What is that doing to people’s minds right now? DP: Sure. You have the initial reaction: “Oh my God, it’s not easy anymore the way it used to be.” Then you have the “Okay ,I hope it gets better” phase. Then you’re in the “hope didn’t work, I’ve lost money, and this is starting to get painful” phase. Then you have the “I need to find a new career” phase. Finally, you have the panic and distaste and lack of interest. It’s a long process that many people don’t adjust to or recognize until they’re halfway through. Sometimes you have angry people. And course, there are happy aggressive traders that love downside momentum because things go down much faster than they go up. For some people, bear markets are great. MC: How do you view the temperature out there now? The VIX is up about 65% in the last few weeks and all the sentiment indicators are very negative. Are people pessimistic enough? DP: No. We saw so many bullish extremes in 2021 and I expect more of the same on the downside. I’ve been around for a while and I’ve seen a lot of crazy things happen, but nothing like JPEGs selling for millions of dollars or Plug Power (PLUG) hitting $70. And cockamamie companies that have been around for decades losing money becoming hot stocks. You had names like Snowflake (SNOW) come off the lows from earnings and go up something like 70-80%. That’s not indicative of everyone being despondent and it’s not anywhere near the way you bottom. There is not that ever-present fear, like people waking up and asking “how much money am I going to lose?” I haven’t seen that yet. MC: So let’s talk about the silly stuff. We saw a boom in things like NFT’s, Rolex watches, sports cars, electric guitars, trading card games, cryptos. Has that stuff bottomed? DP: It’s sort of irrelevant to me. I won’t judge Where we are in the marketplace by really like how far Bitcoin has dropped. It Doesn’t have to go to $10,000 or $12,000 to create a bottom in risk assets. I almost don’t care. I don’t think the lows are in for the art market and the watch market. I’m into collectables, like sneakers, art, you name it. The point is that market has only barely come up. The car market is just beginning to implode. There will be upside down Lamborghinis everywhere you look over the next couple of years. You’ll be able to buy them for pennies on the dollar. There’s further to go, but I don’t paint them all with the same brush. MC: Months ago, inside Inner Circle, you talked about the semiconductor industry moving into a state of oversupply. Now JP Morgan is talking about oversupply of everything. Do you think that’s priced in? DP: It’s a process and it’s not a one-quarter deal. It’s often two to three quarters. And the difference this time is the amount of orders – the that double and triple catch-up to what they thought demand could be. The downside here might be longer and more severe than we normally see. These stocks will bottom before the news flow changes. But I don’t think they’ve hit bottom yet because of the ordering that every major chip company did in 2020 and 2021. MC: It feels like a lot of high-profile market people are catching flack. Like Cathie Wood wrote that letter to the Fed and people laughed. And Jim Cramer has been catching a lot of flack with the inverse ETF and those sorts of things. It seems like we’re in hero-killing mode, symbolically. Do you think that’s fair to them? DP: When you put yourself out there publicly, it comes with the territory, right? Movie stars complain about not having privacy, but then they make $20 million on their next film. So the direct answer is how they handle it. I think, in both instances, neither has humility. I think Cramer is beyond bright. If he was just a little bit more humble and talked about his mistakes, it would be better. And Cathie never said “I probably made a mistake here.” Neither of them had any humility, and that’s why they’re so attacked. I make mistakes all the time, but at least I come clean. Josh Brown made a bad call on the CPI and he came clean and said he was wrong. No one thinks about it anymore because he was humble about it. So I think they deserve it because they pretend they don’t make mistakes. MC: Let’s talk about humility. I felt like a genius in 2020, less smart in 2021, and a moron this year because I see an awful lot of red in my account. What advice do
Continue Reading -->Coffee With Greta: Fed’s Fave Inflation Gauge Comes in Hot
DJIA Futures: +7 (+0.02%) SPX Futures: +5 (+0.1%) NASDAQ Futures: +8 (+0.1%) Good morning friends! Futures are swinging between positive and negative territory as traders gear up for the final day of Q3. Let’s get right to it! PCE Inflation Pushes Higher in August Another hot inflation reading is not what the Fed wants to see. The Bureau of Economic Analysis’ personal consumption expenditures (PCE) price index rose 0.3% monthly and 6.2% year over year in August. That was up from the -0.1% monthly reading in July but a slowdown from 6.4% annually. The core PCE price index, which excludes food and energy and is the Fed’s preferred measure, rose 0.6% monthly and 4.9% annually. That was also up from 0.1% monthly and 4.7% annually in July. The jump in core inflation pressures shows rising prices extending past just oil, gas, and food. Treasury Yields Slip Treasury yields are slipping this morning as stocks try to rebound. The 2-year yield is down 4 basis points to 4.18% while the 10-year yield is off 8 basis points to 3.71%. Bonds have seen a volatile week alongside stocks as the market remains on edge about the Fed’s plans to continue aggressive rate hikes. Several more Fed officials are set to give speeches today including the Richmond and New York Fed Presidents, as well as Fed Vice Chair Lael Brainard. Eurozone Inflation Jumps to Record High New data from Eurostat shows inflation jumped to a record high of 10% across Europe in December. That’s up from 9.1% in August and higher than 9.7% expected. Nearly all segments of the economy saw increases in prices. Energy prices soared 40.8% year over year vs 38.6% in August. Food and alcohol prices saw the second largest increase at 11.8% vs 10.6% in August. Core inflation rose just 4.8% annually, up from 4.3% the prior month. This new data increases pressure on the European Central Bank to hike rates aggressively at its meeting in October. Nike Drops As Supply Chain and Inventory Issues Weigh on Earnings Nike (NKE) shares are down 12.3% ahead of the open despite topping fiscal Q1 expectations. Here’s how the sneaker giant’s results compared to analysts’ expectations: EPS: $0.93 vs $0.92 expected Revenue: $12.69 billion vs $12.27 billion expected Earnings were down 22% year over year while revenue rose 4%. Sales in China dropped 16% compared to a year ago while sales in North America increased 13%. The company continued to struggle with supply chain issues like higher shipping costs and longer shipping times. That caused inventory on its balance sheet to swell 44% to $9.7 billion. The company said it will offer more discounts this holiday season in an effort to reduce those inventory levels. Nike said its direct sales grew by 8% in the quarter and its digital-brand sales rose 16%. The company has been focusing on selling its products directly to consumers and scaling back on wholesale partners like Foot Locker (FL). Nike’s wholesale business sales rose by just 1%. Oil on Track for First Quarterly Loss Since 2020 Oil prices are mixed this morning but on track to post their first quarterly loss since 2020. West Texas Intermediate crude futures are down 0.5% to under $81 bbl while Brent crude futures are up 0.1% to under $89 bbl. The market is looking ahead to next week’s OPEC+ meeting. The group is expected to discuss cutting its output in order to support prices that have been hit by lower demand. OPEC+ is said to be considered a 500,000 barrel per day reduction to production. In Case You Missed It Apple (AAPL) shares tumbled 4.9% on Thursday after the stock got hit with a rare analyst downgrade. Bank of America analysts downgraded the stock from buy to neutral and cut the price target to $160 from $185 per share. The group said they anticipate “weaker consumer demand” over the next year. The drop prompted a broader tech sell-off with Alphabet (GOOGL) and Microsoft (MSFT) both hitting fresh 52-week lows.
Continue Reading -->Coffee With Greta: Are We Already In A Recession?
DJIA Futures: -313 (-1.1%) SPX Futures: -49 (-1.3%) NASDAQ Futures: -182 (-1.6%) Good morning friends! Futures are dropping, reversing most of Wednesday’s big rally. Let’s get right to it! Final Revision Confirms Q2 GDP Contraction The Commerce Department’s final revision of second-quarter GDP confirms the U.S. economy contracted in the first half of the year. The revision was unchanged at -0.6% as expected. Consumer spending was revised higher while exports were revised lower. The revision also showed higher inflation pressures in the quarter with the PCE price index rising 7.3% vs 7.1% previously and the core PCE price index up 4.7% vs 4.4% prior. That marks two consecutive quarters of contraction after the economy shrank 1.6% in Q1 which is considered a technical indicator of a recession. Weekly Jobless Claims Tumble to 5-Month Low Weekly jobless claims dropped last week to the lowest level since late-April. The Labor Department reported 193,000 Americans filed initial claims for unemployment benefits, down 16,000 from the previous week. That beat expectations for an increase to 215,000. Continuing claims fell by 29,000 to 1.35 million in the week ending September 17. Bed Bath & Beyond Slips After Earnings Bed Bath & Beyond (BBBY) shares are down 4.2% ahead of the open after reporting a wider loss than expected in fiscal Q2. Here’s how the retailers results compared with analysts’ expectations: Adjusted loss per share: $3.22 vs $1.85 expected Revenue: $1.44 billion vs $1.47 billion Total sales plunged 28% year over year with comparable sales down 26%> Bed Bath & Beyond expects comparable sales to decline about 20% in the second half of the year and reiterated its full-year outlook. CarMax Tumbles On Huge Earnings Miss CarMax (KMX) shares are tumbling 17.1% in premarket trade after sharply missing fiscal Q2 expectations. Here’s how the used-car dealer’s results compared to analysts’ expectations: EPS: $0.79 vs $1.39 expected Revenue: $8.1 billion vs $8.5 billion expected The company’s expenses rose 16% year over year to $666 million due to increased staffing, higher wages, and investments in technology. But CarMax’s comparable-store used vehicle unit sales dropped 8.3% as “inflationary pressures, as well as climbing interest rates and low consumer confidence” caused affordability problems. CarMax is dragging down Carvana (CVNA) ahead of the open as well with the stock falling 9.9%. Peloton Announces Partnership with Dick’s Peloton (PTON) shares are up 1.6% ahead of the open after announcing a retail partnership with Dick’s Sporting Goods (DKS). Dick’s will become the first brick and mortar retailer to sell the Peloton equipment outside of its namesake stores. Dick’s will sell the Peloton Bike, Bike+, Tread, and Guide as well as some accessories. The companies did not unveil a launch date for the partnership but said they aim to have Peloton products in more than 100 Dick’s stores before the holiday shopping season. Prices will not vary between Peloton’s direct sales and products sold at Dick’s. Peloton’s senior vice president of global direct sales said, “This partnership [with Dick’s] is a natural fit for our brand and our Member acquisition goals.” In Case You Missed It Pending home sales fell by 2% in August vs expectations for a 1.4% decline. It was the third straight monthly drop reported by the National Association of Realtors. Contract signings fell by double-digits in all 4 regions across the country as mortgage rates shoot higher. This was the ninth drop in pending sales in the past 10 months.
Continue Reading -->Coffee With Greta: Bank of England Steps In
DJIA Futures: +175 (+0.6%) SPX Futures: +17 (+0.5%) NASDAQ Futures: +10 (+0.1%) Good morning friends! Futures are once again attempting to rebound after failing to rally on Tuesday. Let’s get right to it! Bank of England Steps In to Stabilize Bond Market The Bank of England announced today it will buy long-dated government bonds to stabilize the financial market following the collapse of the pound. The bank said it will buy as many as needed between now and October 14. The B of E is also delaying the start of its program to sell down the bonds it already holds, which was set to begin next week. Following a sharp increase in U.K. bond yields on Tuesday, the bank said, “Were dysfunction in this market to continue or worsen, there would be a material risk to UK financial stability. This would lead to an unwarranted tightening of financing conditions and a reduction of the flow of credit to the real economy.” Yields on the U.K. 30-year and 10-year gilts dropped by more than 30 basis points after the announcement. U.S. Treasury Yields Cool The stabilization of the U.K. bond market is also cooling U.S. Treasury yields today. The 10-year yield is down 8 basis points to 3.87%, after topping 4% for the first time since 2008 overnight. The 2-year yield is down 18 basis points to 4.11%. The volatility in the U.K. bond market was weighing on an already volatile U.S. bond market as investors prepare for more large rate hikes from the Fed. Mortgage Demand Slides Further Mortgage demand tumbled again last week as rates rose following the Fed’s latest fed funds rate hike. The Mortgage Bankers Association says overall application volume was down 3.7% last week. That was led by an 11% drop in refinance applications, which were down 84% year over year. Purchase applications fell 0.4% weekly and 29% annually. The drop came as the average 30-year fixed contract rate rose to 6.52% from 6.25%, the highest since mid-2008. According to Mortgage News Daily, average rates have since crossed 7%. Oil Prices Stable Amid Production Outages Oil prices are higher again today as production remains shutdown in the Gulf of Mexico as Hurricane Ian bears down on Florida. West Texas Intermediate crude futures are up 1.9% to $80 bbl while Brent crude futures are up 1.4% to $87.50 bbl. About 190,000 barrels per day of production is currently shutdown in the Gulf, about 11% of the region’s total daily production. The American Petroleum Institute reported crude inventories rose by 4.2 million barrels last week while gasoline stockpiles fell by 1 million barrels. The Energy Information Administration reports official supply levels later today. Coming Up: August Pending Home Sales The National Association of Realtors reports pending home sales for August at 10:00 a.m. ET. That’s expected to show pending sales declined 1.4% last month after a 1% drop in July. Pending sales represent contracts signed during the month with those sales expected to close in 30 to 60 days. In Case You Missed It U.S. home price growth cooled at the fastest pace in the history of the S&P Case-Shiller Index in July. The national index rose 15.8% year over year, down 2.3% from June. The 20-city index rose 16.1% annually, down 2.6% from June. And the 10-city index rose 14.9% annually, down 2.5% from June. Consumer confidence rose to a 5-month high this month as gas prices fall. The Conference Board’s consumer confidence index jumped to 108 from 103.6. That was higher than expectations for 104.5. The six-month expectations index rose to 80.3 from 75.8, the highest level in seven months.
Continue Reading -->Coffee With Greta: Stocks Bounce, Bond Yields Dip
DJIA Futures: +331 (+1.1%) SPX Futures: +53 (+1.4%) NASDAQ Futures: +191 (+1.7%) Good morning friends! Futures are up as the market bounces back from a severe sell-off. Let’s get right to it! Chicago Fed President Nervous About Going Too Far Chicago Fed President Charles Evans told CNBC today that he’s a bit nervous about going too far, too fast on interest rate hikes. He said he’s still “cautiously optimistic” the U.S. can avoid a recession through the Fed’s battle against inflation. His comments come after the Boston Fed President, Atlanta Fed President, and Cleveland Fed President all spoke at different events on Monday. They all signaled the Fed will continue prioritizing aggressive action on inflation even if it causes pain for the economy. Evans said he is “a little nervous” the Fed is not waiting long enough to assess the real impact of its interest rate hikes so far. He said, “There are lags in monetary policy and we have moved expeditiously. We have done three 75 basis point increases in a row and there is a talk of more to get to that 4.25% to 4.5% by the end of the year, you’re not leaving much time to sort of look at each monthly release.” Treasury Yields Take a Breather While stocks are bouncing higher, U.S. Treasury yields are pulling back. The 2-year yield is down 6 basis points today to 4.24%, after hitting a fresh 15-year record on Monday. The 10-year yield is down 9 basis points to 3.83%, after soaring to the highest level since 2010 on Monday. Durable Goods Orders Dip U.S. durable goods orders fell less than expected in August, dipping for the second straight month. The Census Bureau reported durable goods orders fell 0.2% last month to $272.7 billion. That was smaller than economists’ expectations for a 0.5% decline. Durable goods are products manufactured in the U.S. that are meant to last three years or more. Transportation equipment led the overall decline, dropping 1.1% to $92 billion. Excluding transportation, new orders rose 0.2%. Excluding defense, new orders fell 0.9%. Oil Bounces From 9-Month Low Oil prices are bouncing back after hitting a 9-month low on Monday. West Texas Intermediate crude futures are up 1.6% to just under $78 bbl while Brent crude futures are up 1.8% to over $85.50 bbl. The jump comes as oil production in the Gulf of Mexico has been shutdown as Hurricane Ian approaches Florida. Prices are also getting support from expectations that OPEC+ will cut its supply targets when it meets next week. Coming Up: Home Price Data, New Home Sales, Consumer Confidence The upcoming economic data of the day is focused on the slowing U.S. housing market. The S&P Case-Shiller U.S. home price index and the FHFA U.S. home price index for July will both be out just after 9:00 a.m. ET. The pace of home price growth has slowed dramatically in recent weeks as mortgage rates surge, putting pressure on The Census Bureau will then report August new home sales at 10:00 a.m. ET. That’s expected to show the pace of new home sales slowed to 500,000 units last month from 511,000 in July. The Conference Board releases its September consumer confidence index at 10:00 a.m. ET. That survey is expected to show an improvement to 104.5 from 103.2. In Case You Missed It The Dow Jones became the last major index to officially close in a bear market on Monday. The index closed 1.1% lower at 29,260.81, down more than 20% from its most recent record high. It’s the first bear market for the blue-chip index since March 2020. The S&P 500 meantime, notched a new closing low for the year dropping more than 1% to close at 3,655.04.
Continue Reading -->Coffee With Greta: Surging Dollar Squeezes Stocks
DJIA Futures: -131 (-0.4%) SPX Futures: -19 (-0.5%) NASDAQ Futures: -37 (-0.3%) Good morning friends! Futures are tumbling as the U.S. dollar continues to surge. Let’s get right to it! Dollar Surges Higher The major indexes are all set to slide further at the open as the U.S. dollar continues to surge higher. The British pound plunged to a record low against the dollar overnight following the U.K. government’s announcement of new tax cuts last week. It hit an all-time low of $1.0382 but has since recovered some of those losses. The euro also hit the lowest level against the dollar since 2002. Morgan Stanley’s chief U.S. equity strategist said in a note, “Such U.S. dollar strength has historically led to some kind of financial/economic crisis. If there was ever a time to be on the lookout for something to break, this would be it.” Traders are watching the S&P 500 for any break below its low close for the year of 3,666.77. The Dow Jones is expected to officially fall into a bear market today after closing just above that threshold Friday. Bostic Says the Fed Can Lower Inflation Without Killing the Economy Atlanta Fed President Raphael Bostic expressed optimism about the bank’s battle against inflation in a “Face the Nation” interview Sunday. While he admitted the Fed’s efforts will likely cause job losses, he said, “there is a really good chance that if we have job losses it will be smaller than what we’ve seen in other situations.” Bostic said he sees “positive momentum” in the U.S. economy. “We’re still creating lots of jobs on a monthly basis. And so I actually think that there is some ability for the economy to absorb our actions,” he said. Bostic is among several Fed officials speaking at public events today. The Boston Fed President, Dallas Fed President, and Cleveland Fed President are all scheduled for speeches throughout the day as well. Fed Chair Jerome Powell speaks at events on both Tuesday and Wednesday. More Fed officials will speak at events throughout the week. Surging Dollar Beats Down Oil Oil prices are falling as the strength of the dollar weighs on the market. West Texas Intermediate crude futures are down 0.7% to $78 bbl while Brent crude futures are down 0.9% to $85 bbl. The recent drop in oil prices has been caused by the strength of the dollar, triggering fresh fears of a recession. Commodities are dollar-denominated assets, meaning they are more susceptible to large swings caused by the movement of the dollar. Housing Data Ahead This Week Traders will get more data on the U.S. housing market this week, as buyer activity has slowed sharply due to surging mortgage rates. The latest home price index will be out tomorrow morning followed by August new home sales tomorrow as well. On Wednesday, the National Association of Realtors reports pending home sales for August. The housing market has ground to a halt in recent weeks as average 30-year mortgage rates topped 6% for the first time since 2008. GDP, Inflation Data On Deck This week also includes some key economic data for traders. The Commerce Department releases its second revision of Q2 GDP on Thursday morning. Then the Bureau of Economic Analysis releases the August Personal Consumption Expenditures (PCE) Price Index on Friday. The Core PCE Price Index is the Fed’s preferred measure of inflation. Economists expect that index to show core prices rose 0.5% monthly and 4.7% annually in August, up from 0.1% and 4.6% in July, Inflation has been holding steady and even pushing higher despite the Fed’s three 0.75% rate hikes in a row.
Continue Reading -->Are We Oversold Enough Now?
We have mixed markets around the world as Europe is flattish and Asia is broadly lower. Lots of currency moves are adding pressure to equities. The Fed funds ceiling forecast is now 4.75%, higher than the Dot Plot. Some think the BOE needs to do a pre-meeting hike to calm things down. SPX futures are -21 and we’ll see if the market is oversold enough to hold the 3636-3647 area this week. The active bearish sequence continues. The hot CPI brought some pressure, and then last Wednesday there was a Red Dog Reversal sell around the $386.25 pivot. Can the SPY hold $362-$363.29 to attempt an oversold bounce? We shall see. The Oscillator is -100 so it’s hard to short, but you can’t blindly buy either. Now let’s go through the major tech names I’m watching today: AAPL did a Red Dog Reversal sell on Fed day to get most long out around $158. It hit a low near $148.50 Friday. It will be important over the next day or so. It will be hard for SPY and QQQ to break the June lows if AAPL holds that spot. If it breaks and closes below, the bears will growl. TSLA played downside catch-up fast. It broke $305 and then $290 to lose any upper support. Now see if it can hold the $272 area for a day or so. If not, $265 is support below, MSFT led the tape lower over the past week or so. We’ll see if it can hold $235.20 for a tactical bounce. AMZN is in no man’s land. It’s not special, but it’s not at the lows of the year. $112ish is Friday’s low to use for today. Maybe it tries to go red to green. Positions Disclosure
Continue Reading -->Coffee With Greta: Is the Fed Overdoing It?
DJIA Futures: -389 (-1.3%) SPX Futures: -53 (-1.4%) NASDAQ Futures: -162 (-1.4%) Good morning friends! Futures are tumbling as traders fear the Fed may be overdoing it with rate hikes. Let’s get right to it! Goldman Sachs Cuts S&P 500 Price Target Goldman Sachs (GS) slashed its end-of-the-year price target for the S&P 500 as the bank sees the Fed’s tightening policy ending in a “hard landing”. Goldman cut that target by about 16% to 3,600 points. Analyst David Kostin said, “Based on our client discussions, a majority of equity investors have adopted the view that a hard landing scenario is inevitable and their focus is on the timing, magnitude and duration of a potential recession and investment strategies for that outlook.” The major indexes are all set to open lower today and log large losses for the week amid fears the Fed is overdoing it and will cause an economic downturn. The Dow Jones is on track to open well below 30,000. Treasury Yields Continue Surge U.S. Treasury yields are marching higher today with the 2-year hitting a fresh 15-year high. The 2-year yield is currently up 8 basis points to 4.21% after hitting a high of 4.266% earlier this morning. The 10-year yield is up 5 basis points to 3.78%, trading around its highest levels seen since 2011. FedEx Announces Price Hikes, Cost-Cutting Measures FedEx (FDX) shares are down 3.2% ahead of the open after announcing price hikes and cost-cutting efforts. The shipping giant said its Express, Ground, and Home delivery rates will all increase by 6.9% on average while Freight rates will rise by 6.9%-7.9%. The company also intends to save between $1.5 billion and $1.7 billion by parking planes and reducing its flights. Other cost-saving moves include closing some locations, suspending some Sunday operations, reducing vendor use, and deferring projects. The CEO said, “We’re moving with speed and agility to navigate a difficult operating environment, pulling cost, commercial, and capacity levers to adjust to the impacts of reduced demand.” For fiscal 2023, FedEx expects total cost savings of $2.2 billion to $2.27 billion. Costco Tops Fiscal Q4 Expectations Costco (COST) shares are slipping 2.2% in premarket trade despite beating fiscal Q4 expectations on the top and bottom line. Here’s how the retailer’s results compared with analysts’ expectations: EPS: $4.20 vs $4.17 expected Revenue: $70.8 billion, in line with expectations Same-store sales: +13.7%, in line with expectations Costco’s full-year profits and sales were also in line with consensus estimates. But traders soured on the stock as the company’s margins contracted in the quarter. Gross margins came in at 10.1%, down 74 basis points year over year. Costco said it is continuing to see pressure from higher wages, commodities, and transportation costs. The CFO also announced Costco would not be raising its membership fees at this time to help pad those thin margins. Oil Prices Tumble on Recession Fears Oil prices are falling today as recession fears take over the market. West Texas Intermediate crude futures are down 3.3% to under $81 bbl, while Brent crude futures are down 2.8% to under $88 bbl. The Fed’s plan to stay aggressive on rate hikes has increased the chances of a recession in the U.S. economy. For the oil market, a recession comes with lower demand. In Case You Missed It The Conference Board’s leading economic indicators index fell for the sixth month in a row. The index dropped 0.3% in August, which was higher than economists’ expectations for a 0.1% decline. Most components of the index declined, except for new jobless claims and the interest-rate spread. But the measure of current economic conditions rose by 0.1% while the lagging index rose by 0.7%.
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