Saturday, 27 February 2021

Nikkei plunges, US Treasury yields soften

Markets fell on Friday.

The Nikkei 225 plunged 4.0 percent, the S&P 500 fell 0.5 percent and the STOXX Europe 600 tumbled 1.6 percent.

US Treasury yields softened on Friday but investors remained jittery.

“Investors are actually looking at the pace at which yields drop and the current speed is quite concerning for equity markets,” said Roland Kaloyan, a strategist at SocGen.

“If the market begins to believe that the Fed has somehow lost control of where the bond market is going, all that idea of a taper tantrum will show up,” said Art Cashin, director of floor operations at UBS.

In the meantime, Quincy Krosby, Prudential Financial’s chief market strategist, noted that “credit spreads remained contained”.

Indeed, some analysts appeared sanguine.

“Yields are rising because investors are optimistic,” said Kathy Lien, managing director of foreign exchange strategy at BK Asset Management.

Keith Temperton, an equity sales trader at Forte Securities, said that “the near-to-mid-term outlook for equities seems positive”.

Friday, 26 February 2021

US stocks plunge as Treasury yields top 1.6 percent

US stocks plunged on Thursday. The S&P 500 tumbled 2.5 percent and the Nasdaq sank 3.5 percent.

US stocks fell after the 10-year Treasury yield briefly topped the 1.6 percent level on Thursday and traded at its highest level in more than a year.

Yields moved higher in afternoon trading following an auction of 7-year Treasury bonds where dealers were stuck with a much higher percentage of the bonds than the 12-month average.

“Could there be more inflation coming than what most think? Although the Fed isn’t worried about that, the market might be,” said Ryan Detrick, chief market strategist for LPL Financial.

“The Nasdaq will continue to lead the slide lower,” said Edward Moya, senior market analyst at OANDA.

Strategist Albert Edwards of Societe Generale said that “the risk is growing that with so many bubbles blown by the Fed something will burst soon”.

Thursday, 25 February 2021

Markets mixed, “dips are meant to be bought”

Markets were mixed on Wednesday.

The S&P 500 rose 1.1 percent and the STOXX Europe 600 rose 0.5 percent. However, th Shanghai Composite plunged 2.0 percent.

Christopher Metli, a quantitative and derivative strategist at Morgan Stanley, said that “dips in the equity market are meant to be bought in this environment”.

Similarly, Mehvish Ayub, senior investment strategist at State Street Global Advisors, told CNBC that fundamentals are “very good” and “this is an opportunity to buy on the dip”.

However, Ed Clissold, chief US strategist at Ned David Research, said: “Higher interest rates could moderate broad market gains, multiples should compress, and the last phase of early cycle themes could lead to Value exerting much-awaited leadership over Growth.”

Similarly, Fundstrat Global Advisors’ co-founder and head of research Tom Lee told CNBC that tech stocks will not be doing as well as the economy re-opens.

“You’re going to really want to be in asset-heavy, cyclical, economically sensitive companies,” he said.

Wednesday, 24 February 2021

Markets mixed, Powell eases inflation concerns

Markets were mixed on Tuesday.

The S&P 500 reversed a 1.8 percent loss during the session to end 0.1 percent higher.

Elsewhere, the STOXX Europe 600 fell 0.4 percent and the Shanghai Composite fell 0.2 percent.

US stocks turned around from early sharp losses after Federal Reserve Chair Jerome Powell said in his testimony to Congress that inflation is still “soft” and the economic outlook is still “highly uncertain”, easing concerns of a policy change by the central bank.

“The Fed is focused on employment and seems very willing to absorb higher inflation and excesses in financial market that brings financial instability in hopes of getting there,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group.

Tuesday, 23 February 2021

Markets fall, Nasdaq plunges

Markets fell on Monday.

The S&P 500 fell 0.8 percent while the Nasdaq Composite plunged 2.5 percent.

Elsewhere, the STOXX Europe 600 fell 0.4 percent and the Shanghai Composite tumbled 1.5 percent.

Matt Maley, chief market strategist at Miller Tabak, said that the recent rise in US Treasury yields “should be something that investors keep a close eye on”.

However, Keith Lerner, chief market strategist at Truist, said: “Given that we are in the early stages of an economic recovery, monetary and fiscal policy remains supportive, the sharp rebound in earnings, and favorable relative valuations, we maintain our overweight to equities.”

Monday, 22 February 2021

US stock market performance “dwarfs all previous bull markets”

The S&P 500 fell 0.7 percent last week, declining in all four trading sessions.

Still, the index is up 75 percent from its low in March last year, a performance that, according to Bloomberg, “dwarfs all previous bull markets at this stage of the cycle since the 1930s”.

“Dated from the last bear-market bottom, the boom cycle is young,” the Bloomberg report noted. “But its velocity makes up for the age.”

“I don’t think we’re at bubble levels yet, but there are certainly some red flags that would indicate folks are all-in on stocks and risk,” Michael Arone, chief investment strategist for the US SPDR exchange-traded fund business at State Street Global Advisors, was quoted as saying.

Saturday, 20 February 2021

Markets mixed amid “a little bit of inflation fear”

Markets were mixed on Friday.

The S&P 500 fell 0.2 percent but the STOXX Europe 600 rose 0.5 percent.

Earlier in Asia, the Nikkei 225 fell 0.7 percent but the Shanghai Composite rose 0.6 percent.

US stocks had been mostly higher in the morning after Treasury Secretary Janet Yellen said on Thursday that a large fiscal stimulus package is necessary.

However, the US 10-year Treasury yield rose again on Friday to 1.34 percent, and JJ Kinahan, chief market strategist at TD Ameritrade, suggested that “this week may have put a little bit of inflation fear into people”.

The rising inflation concern comes amid better expectations for US economic growth.

Calculated Risk noted that forecasts for US first quarter GDP have risen, while New Deal democrat at the Bonddad blog said that strength in house and car purchases “is going to expand into the broader economy over the next 3 to 6 months unless there is an unexpected setback in the abatement of the pandemic”.

Friday, 19 February 2021

Markets fall, US job growth “will remain soft”

Markets were mostly lower on Thursday.

The S&P 500 fell 0.4 percent, the STOXX Europe 600 fell 0.8 percent and the Nikkei 225 fell 0.2 percent.

“Stocks are sliding across the board with high-multiple growth names getting hit the hardest thanks to the unrelenting rise in yields,” said Adam Crisafulli, founder of Vital Knowledge.

However, the rise in US Treasury yields paused on Thursday after a report showed that inital claims for unemployment insurance totalled 793,000 last week, above the 760,000 forecast from economists.

Gus Faucher, chief economist at PNC Financial Services Group, said that “job growth will remain soft for the next few months as the nation continues to struggle with the pandemic” but “will pick up in the spring”.

Wednesday, 17 February 2021

Markets mixed as US Treasury yields rise

Markets were mixed on Tuesday.

The S&P 500 dipped 0.1 percent and the STOXX Europe 600 closed fractionally lower.

However, in Asia, the Nikkei 225 jumped 1.3 percent and the Hang Seng surged 1.9 percent.

The US 10-year Treasury yield jumped 9 basis points on Tuesday to top 1.30 percent, a level not seen since February 2020.

Some analysts see rising yields as a threat to markets.

“The market can digest rising yields, especially when they are going up for the right reason, but not when they go up in a linear fashion,” said Art Hogan, National Securities chief market strategist.

Tuesday, 16 February 2021

Stocks rise, oil hits pandemic high

Markets rose on Monday.

The STOXX Europe 600 jumped 1.3 percent while the Nikkei 225 surged 1.9 percent to close above 30,000 for the first time in more than 30 years. US markets were closed for a holiday.

Oil prices rose, Brent crude rising 1.3 percent, a 13-month high.

“Frigid weather means that many oil wells may be shut in,” wrote oil analyst Andy Lipow wrote over the weekend.

Monday, 15 February 2021

Is a stock market crash coming?

Jonathan Ponciano at Forbes sees signs of a stock market bubble and a possible crash.

“A 12-year-old bull market; SPAC mania; IPOs that more than double on the first trading day; an army of amateur traders and GameStop mania. It certainly feels like irrational exuberance–and it triggers alarms for those who remember the dot-com bubble of the late 1990s,” he wrote.

“The parallels we have today are historically very, very concerning,” he quoted Jim Stack, president of Whitefish, Montana’s InvesTech Research and Stack Financial Management, as saying.

Ponciano wrote that out of 11 key market metrics that flashed warning signs just before the stock market crashed in March 2000, seven are signalling bearish, three bullish and one neutral.

Saturday, 13 February 2021

S&P 500 hits record high, “long way away from bubble territory”

Markets were mostly higher on Friday.

The S&P 500 rose 0.5 percent to a record high while the STOXX Europe 600 rose 0.6 percent.

However, the Nikkei 225 fell 0.1 percent, snapping a four-session winning streak.

“Between the ongoing medical and economic improvements, markets continue to expect a much better 2021 and that has supported prices,” Brad McMillan, chief investment officer at Commonwealth Financial Network, said in a note.

As for fears of a stock market bubble, Goldman Sachs' Sharmin Mossavar-Rahmani, head of the bank's Investment Strategy Group and CIO of its Wealth Management division, told Yahoo Finance Live on Friday that US equity markets are a “long way away from being in bubble territory”.

Investors shrugged off a report on Friday showing that the UK economy contracted 9.9 percent in 2020, its biggest annual fall in output since modern records began.

Friday, 12 February 2021

Stocks, US Treasury yield rise

Markets rose on Thursday.

The S&P 500 rose 0.2 percent to a record high while the STOXX Europe 600 rose 0.5 percent.

“The fiscal and monetary side of the equation seems priced into the market,” said Gregory Faranello, head of US rates trading at AmeriVet Securities.

The US 10-year Treasury yield rose on Thursday, reversing Wednesday's decline.

Ross Mayfield, investment strategy analyst at Baird, said that rising bond yields could become “a headwind to the equity markets”.

Thursday, 11 February 2021

Markets mixed, massive stimulus “should keep equities moving higher”

Markets were mixed on Wednesday.

In the US, the Dow Jones Industrial Average rose 0.2 percent to a record high but the S&P 500 fell less than 0.1 percent.

Elsewhere, the STOXX Europe 600 fell 0.2 percent but Asian markets rose, with the Shanghai Composite up 1.4 percent.

“One of the concerns is that inflation will start to take hold due to so much monetary and fiscal stimulus, which will cause the Treasury and the Fed to intervene,” said Keith Buchanan, senior portfolio manager at Globalt.

However, Federal Reserve Chairman Jerome Powell said on Wednesday that monetary policy needs to stay “patiently accommodative” to support the economy.

“Massive fiscal stimulus and an extremely accommodative Federal Reserve should keep equities moving higher,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.

Wednesday, 10 February 2021

Markets mixed, Fed to remain accommodative “for a very long time”

Markets were mixed on Tuesday.

The S&P 500 fell 0.1 percent, ending a six-day winning streak. The STOXX Europe 600 also fell 0.1 percent.

Earlier in Asia, though, the Shanghai Composite jumped 2.0 percent and the Nikkei 225 rose 0.4 percent.

“We expect a buyable 5-10% Q1 correction as the big ‘unknowns’ coincide with exuberant positioning, record equity supply, and ‘as good as it gets’ earnings revisions,” said Jared Woodard, investment and ETF strategist at Bank of America.

A correction could well be “buyable” if the Federal Reserve remains determined to keep monetary policy easy.

“We’re going to be accommodative for a very long time because the economy just needs it to get back on its feet,” said Cleveland Fed President Loretta Mester on Monday.

Tuesday, 9 February 2021

Markets rise, US COVID-19 cases fall

Markets rose on Monday.

The S&P 500 rose 0.7 percent to a record high, the STOXX Europe 600 rose 0.3 percent and the Nikkei 225 surged 2.1 percent.

“We are still very much in a bull market at the early stages of an economic recovery that’s gaining momentum,” said Michael Wilson, chief US equity strategist at Morgan Stanley in a note.

Tony Dwyer, chief market strategist at Canaccord Genuity, said that “it would take an epic unforeseen failure in the rollout of the various vaccines to prevent the domestic and economic engine from ramping greater than most expect”.

Indeed, the US reported a 25 percent drop in new cases of COVID-19 to about 825,000 last week, the biggest fall since the pandemic started, and the fourth consecutive weekly decline in cases.

Monday, 8 February 2021

Hussman: Market in a “trap door” situation

The S&P 500 rose 4.7 percent last week, finishing at a record high.

However, even as the bull market continues, John Hussman sees a trap door opening for investors.

“I view the current combination of hypervaluation, price overextension, lopsided bullishness, and unfavorable market internals as a ‘trap door’ situation,” he wrote in his latest market commentary.

“In order to simply touch run-of-the-mill historical valuation norms, the S&P 500 would have to lose somewhere in the range of 65-70% over the completion of this cycle,” he said.

Saturday, 6 February 2021

Markets mixed, US reports weak January job growth

Markets were mixed on Friday.

The S&P 500 rose 0.4 percent to a record high but the STOXX Europe 600 was flat.

Earlier in Asia, the Nikkei 225 jumped 1.5 percent but the Shanghai Composite fell 0.2 percent.

A report on Friday showed that the US economy added 49,000 jobs in January while the data for December was revised to show 227,000 jobs lost instead of 140,000 as previously reported.

“The weakness portrayed in today’s labor report opens the door for the Biden administration to push forward with a higher spending package and provide relief for many Americans and businesses that continue to struggle with the pandemic,” said Charlie Ripley, senior investment strategist at Allianz Investment Management.

Still, some economists are hopeful that January marks the low point for US employment.

“Much stronger jobs figures are likely from the second quarter onwards,” said James Knightley, chief international economist at ING in New York.

Friday, 5 February 2021

S& 500 hits record high, in “early stages” of bull market

Markets were mixed on Thursday.

The S&P 500 rose 1.1 percent to a record high while the STOXX Europe 600 rose 0.6 percent. However, the Nikkei 225 fell 1.1 percent.

“We believe that we are still in the early stages of a new bull market,” said Peter Oppenheimer, chief global equity strategist at Goldman Sachs.

“Stay overweight equities and commodities versus bonds and cash,” JPMorgan said in a note on Thursday.

Thursday, 4 February 2021

Markets rise, yield curve steepens

Markets were mostly higher on Wednesday.

The S&P 500 rose 0.1 percent, the STOXX Europe 600 rose 0.3 percent and the Nikkei 225 rose 1.0 percent.

With a report on Wednesday from ADP showing private firms added 174,000 jobs in January, Mike Loewengart, managing director of investment strategy at E-Trade Financial, said that “a positive full picture is emerging” in the US.

Indeed, some analysts have noticed that the Treasury yield curve is now at its steepest since May 2017.

“It’s being driven by the fact that policy, fiscal and monetary, is allowing there to be stronger economic growth for longer, without the Fed getting in the way, and that basically is allowing the economic cycle to extend further into the future,” said Jim Caron, head of global macro strategies on the global fixed income team at Morgan Stanley Investment Management.

Wednesday, 3 February 2021

Markets rise but “huge amount of leverage” poses risk

Markets rose on Tuesday.

The S&P 500 jumped 1.4 percent, the STOXX Europe 600 rose 1.3 percent and the Shanghai Composite rose 0.8 percent.

Broad market indices rose as speculative, retail-driven stocks fell sharply. GameStop fell 60 percent while AMC Entertainment fell 41 percent.

“Upon seeing that gravity still works and fundamentals do matter, other market participants are once again comfortable going back into the market and that’s likely been driving this week’s comeback rally,” said Max Gokhman, head of asset allocation at Pacific Life Fund Advisors.

Michael Bapis, managing director at Vios Advisors at Rockefeller Capital, told CNBC that the recent weakness spells opportunity.

“We look to buy on dips right now because there is so much cash on the sidelines that people are just waiting for the time to jump in,” he said.

Matt Maley, chief market strategist at Miller Tabak, was more cautious.

“When we saw this sell-off in the market last week, it was forced selling, it came from a huge amount of leverage in the system,” he said. “What it tells me is that, at some point, some of that margin debt, that leverage, is going to be unwound.”

While that unwinding “will create a great buying opportunity”, there “will be a deep correction”.

Tuesday, 2 February 2021

Markets rise, “pressure is now behind us"

Markets rose on Monday.

The S&P 500 jumped 1.6 percent, the STOXX Europe 600 rose 1.2 percent and the Nikkei 225 rose 1.5 percent.

However, GameStop fell 30.8 percent as it continued to diverge from the performance of the wider market.

Some analysts think that the risk to the bull market posed by retail-driven stocks like GameStop is small.

“The return of volatility over the past week has been driven by market positioning rather than worries over growth,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.

Haefele added that “given the speed and magnitude of flows in recent days, we think most of the pressure is now behind us”.

Sam Stovall, chief investment strategist at CFRA, said that “we don’t see the advent of a 1998-style liquidity crisis” and “we don’t think the bull has come to an end”.

Monday, 1 February 2021

Market action “reminiscent of the dot-com bubble”

The S&P 500 fell 3.3 percent last week, ending January with a 1.1 percent decline.

One stock that defied the negativity last week was GameStop, which surged 400 percent.

The rise in the video game chain’s stock came amid a tussle between retail investors buying the stock and Wall Street professionals selling it.

“Just the fact that you have a group of investors that are really chasing abnormal gains, that’s what is reminiscent of the dot-com bubble,” said James Ragan, director of wealth management research at DA Davidson.

Volatility in the US stock market rose last week, with the CBOE volatility index closing above 30 points for the first time since early November.

That volatility can become a risk for the market, especially since, as Goldman Sachs noted on Friday, “hedge fund net and gross exposures on a mark-to-market basis both remain close to the highest levels on record, indicating ongoing risk of positioning-driven sell-offs”.