Thoughts For Thursday: Nowhere To Go
Fundamentals have not changed but seems the market couldn't go higher yesterday, so it fell. That for some investors is also, called profit-taking.
Yesterday the S&P 500 closed at 5,267, down 39 points, the Dow closed at 38,442, down 411 points and the Nasdaq Composite closed at 16,921, down 99 points.
Chart: The New York Times
Most actives were led by American Airlines (AAL), down 13.5%, followed by Advanced Micro Devices (ADM), down 3.8% and Nvidia (NVDA), up 0.7%.
Chart: The New York Times
In morning futures trading, S&P 500 market futures are down 21 points, Dow market futures are down 303 points and Nasdaq 100 market futures are down 70 points.
TalkMarkets contributor Michael J. Kramer notes The Winds Of Market Change Are Blowing.
"Sentiment was undoubtedly in a risk-off mood on Wednesday across the market, following the trends on Tuesday. The bigger question is whether this is the start of a shift in longer-term trends towards tighter financial conditions or a little pause in an otherwise risk-on market. Starting tomorrow and running into next Friday, June 7, there will be a lot of data that will determine where the trends go from here.
The CDX high-yield credit spread index rose, and as noted yesterday, the trend appears favorable to its further rise. If today’s move marks a breakout of that index, with it popping above the downtrend, that could be important, as it could lead to a significant widening of credit spreads.
Treasury rates were also sharply higher on the day and got an extra boost following a pretty tepid 7-year Treasury auction. The 10-year is approaching that resistance region around 4.7% again, and the last time the 10-year rate was here, the S&P 500 was trading closer to 5,000, so a continued gain in rates would likely push equity markets lower."
See the full article for more charts and commentary.
Contributor Brandon Chapman in a twenty minute video notes Bond Battering Drags Stocks And Commodities Lower.
"The past few U.S. Treasury auctions have attracted weak demand, particularly from foreign buyers. That’s dragged bond prices lower and pushed yields higher.
This has upset the tenuous balance the market has achieved over the past few weeks, and we’re beginning to see the likelihood of the market’s worst fears being realized: higher for longer!
That weak demand, coupled with intractable debt and inflation fears, and a relatively tapped-out U.S. consumer means the rise in equity prices is becoming more labored.
The options market tells us that, if we’re long, we’d better be hedged. Let’s look at some signals of the underlying stress and uncertainty throwing higher equity prices into doubt."
TM contributor Crispus Nyaga gives the US Dollar Index Forecast Ahead Of US PCE Inflation Data.
- "The US dollar index (DXY) has rebounded in the past two days.
- The surge accelerated after the US published strong consumer confidence data.
- The focus now shifts to the upcoming PCE inflation numbers.
The US dollar index surged after a report by the Conference Board revealed that consumer confidence jumped sharply this month. It soared to 102, the first monthly increase since February this year.
Consumer confidence is one of the most important leading indicators because their spending is the biggest part of the economy. Highly confident consumers spend more, boost economic growth, and lead to a higher inflation rate.
The next important US dollar news will be the upcoming US GDP numbers. Economists expect the data to show that the economy expanded by 1.6% in Q1, a sharp decline from the fourth quarter’s growth of 3.6%.
These numbers will have a minimal impact on the US dollar because they will be the second estimate. Therefore, traders will be focusing on the upcoming Personal Consumption Expenditure (PCE) inflation numbers.
Economists believe that the headline and core PCE figures held steady in April. The median estimate is that the two slowed to 0.3% and 0.2% on a MoM basis in April. On an annual basis, the expectation is that the two numbers slowed to 2.6% and 2.7%, respectively.
The PCE figures are seen as better inflation indicators than the Consumer Price Index (CPI) because it looks at urban and rural places. On the other hand, the CPI looks at price movements in urban areas."
US dollar index forecast
More details in the full article.
Contributor Akhtar Faruqui updates crude oil prices in WTI Drops To Near $79.00 Ahead Of Key US Economic Releases.
"West Texas Intermediate crude oil dipped slightly to around $79.00 per barrel in the Asian trading session on Thursday. Traders keep an eye out for the US crude Oil Stocks Change report from the Energy Information Administration later today. Market projections suggested that US energy firms would draw down 1.9 million barrels of crude from storage in the week ending May 24, following the addition of 1.825 million barrels the week before. In the previous week, the API Weekly Crude Oil Stock indicated a decrease of 6.49 million barrels, contrasting with the 2.48 million barrels added in the week prior.
Traders are also awaiting the upcoming meeting of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia (OPEC+), scheduled for June 2. During this meeting, member producers will discuss prolonging voluntary output cuts of 2.2 million barrels per day into the latter half of 2024. It's anticipated that the group will opt to maintain supply cuts.
Hawkish remarks from Minneapolis Fed President Neel Kashkari further fueled concerns about potential rate hikes. Higher interest rates are negatively impacting the US economic outlook, which dampens the WTI price."
Mish Shedlock reports Walgreens Cuts Prices On 1,500 Items As Did Amazon And Target.
"When the price cut headline hit this morning, one might have expected bond yields would drop. Instead, they continued their May trend of higher yields.
Walgreens (WBA) chart courtesy of Stockcharts.Com
CNN reports Walgreens Is Cutting Prices on 1,500 Items.
Walgreens is joining other retailers in cutting prices across the board, from snacks to toiletries and even Squishmallows, in an effort to lure back inflation-weary shoppers turned off by high prices.
Prices are dropping immediately on more than 1,500 items online and at its stores, which include both name and store brands, Walgreens announced Wednesday. In the past few weeks, competitors including Target, Walmart and Amazon slashed prices on thousands of household goods to rev up consumer spending.
“Walgreens understands our customers are under financial strain and struggle to purchase everyday essentials,” said Tracey D. Brown, Walgreens’ retail president and chief customer officer, in a release. “We continue to be committed to our customers by lowering prices on over a thousand additional items, something we’ve been doing since October of 2023.”
Walgreens Boots Alliance’s (WBA) most recent earnings report, released in March, revealed that the retailers’ second-quarter sales beat expectations, but lowered its full-year earnings outlook because of a “challenging retail environment in the US.”
Shares are down 40% year to date and its next earnings report isn’t expected until June. Meanwhile, a host of other retailers report earnings Thursday, including Dollar General and Costco.
The Walgreens chart is an absolute trainwreck. I suspect something beyond a challenging environment. But weak sales sure don’t help.
Today, Minneapolis Federal Reserve President Neel Kashkari says he wants to see “many more months” of positive inflation numbers before interest rates start to come down — and refused to rule out a rate hike if needed.
I believe he means positive progress towards lower inflation readings.
It’s interesting that the Fed is finally talking tough just as the economy appears to be weakening on multiple fronts."
In the "Where To Invest Department" Sweta Killa suggests Nvidia In Rush To Overtake Apple: ETFs Set To Gain Further.
"Nvidia has been on a solid run with no signs of a slowdown, driven by the flurry of continued artificial intelligence (AI) investments and blockbuster earnings. Its shares closed above the $1,100 milestone for the first time ever.
Last trading at $1,139, the AI chipmaker, the world’s third-most valuable company, is now just $100 billion away in market value from overtaking Apple (AAPL - Free Report) in a major reshuffle of Wall Street's biggest players.
Nvidia stock has more than doubled so far this year, following a nearly 240% rise in 2023, courtesy of the fast-growing adoption of its H100 AI chips. However, its valuation does not seem overstretched, given that its earnings are growing faster than the share price. Nvidia is currently trading at a P/E ratio of 46.90 versus 50.14 for Advanced Micro Devices.
Nvidia stock is expected to surge 258% from the current levels and hit a $10 trillion market valuation by 2030, according to I/O Fund tech analyst Beth Kindig.
ETFs in Focus
Strive U.S. Semiconductor ETF (SHOC - Free Report) – Nvidia occupies the top position with 30.3% of assets.
VanEck Vectors Semiconductor ETF (SMH - Free Report) - Nvidia is the top firm, accounting for 23.3% share.
Grizzle Growth ETF (DARP - Free Report) - Nvidia occupies the top position with 22.6% of the assets.
TrueShares Technology, AI, and Deep Learning ETF (LRNZ - Free Report) - Nvidia takes the top spot at 16.4% share.
Invesco PHLX Semiconductor ETF (SOXQ - Free Report) - Nvidia occupies the top position with a 14.6% share in the basket."
Caveat Emptor.
That's a wrap for today.
Peace.
More By This Author:
Tuesday Talk: Onwards And Upwards
Thoughts For Thursday: AI In Ascendence
Tuesday Talk: Relative Calm Prevails
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