Before the Open (Sep 20-24)

Good morning. Happy Friday.

The Asian/Pacific markets were mixed. Japan, Taiwan, Thailand and Singapore did well; China, Hong Kong and Singapore were weak. Europe, Africa and the Middle East are current posting big losses. Denmark, Finland, Turkey, Germany, Russia, Greece, Finland, Switzerland, Hungary, the Netherlands, Austria and Sweden are down the most. Futures in the States point towards a moderate gap down open for the cash market.

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Masterclass Overview –>> here
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The dollar is up. Oil and copper are down small amounts. Gold and silver are down. Bonds are down. Bitcoin is getting hit hard.

Stories/News from Seeking Alpha…

Yield signs

The markets are no strangers to delayed reactions as investors digest many different influences on a post-pandemic economy. And one arrived in the bond market in earnest yesterday. Treasury yields surged back to levels last seen in the middle of the summer. After taking the Fed’s hawkish tilt, telegraphing tapering and pulling forward rate liftoff expectations on the dot plot, pretty much in stride on Wednesday, traders went the other way yesterday.

The curve, as measured by the gap between the 2-year Treasury and the 10-year, had flattened after Fed chief Jay Powell’s press conference, with the gap narrowing about 4 basis points. Yesterday saw steepening, with the gap jumping more than 10 basis points. It now stands around 117 basis points. The 10-year yield saw its biggest one-day move since February, pushing above 1.4% for the first time since early July. It’s seen a ceiling of about 1.8% this year.

“Take a step back and just think about how low yields are even relative to where we were in the first quarter of this year,” Zachary Griffiths, Wells Fargo macro strategist, told Reuters. “We do have very high inflation, high economic growth forecasts and it’s really been kind of hard to justify where yields have been up to this point.”

The 30-year Treasury yield surged more than 13 basis points for its biggest one-day move since March 2020 when the Fed announced QE round one. (NYSEARCA:TBT) (NASDAQ:TLT) Real yields, the difference between nominal yields and inflation, were a driver of the move, with the 10-year TIPS now at -0.9%. (NYSEARCA:TIP). That puts the 10-year breakeven inflation expectation at 2.33%, around the lowest they’ve been since the highs in May.

LPL Financial’s Ryan Detrick says the 10-year yield could break out of its range this week, with today’s trading crucial to the weekly chart. It’s “on the verge of moving higher,” he says.

Delayed Reaction: The run-up in yields didn’t really start until just before stocks opened on Thursday, underscoring the argument that investors should be wary of Fed-day moves. A lot of short and long positions are unwound in a very short space of time right after the FOMC statement is released. But by the next day, the market began to look at a global landscape where central banks, the ECB excluded, are removing historically high accommodation.

“A hawkish Fed meeting, with the dots increasing and the end of QE potentially accelerated, didn’t quite have the ability to move markets but the global dam finally broke yesterday with Norway being the highest profile developed country to raise rates this cycle (expected), but more importantly a Bank of England meeting that saw the market reappraise rate hikes,” Deutsche Bank’s Paul Reid writes in a note. In addition, as bond prices fell, sell stops were triggered, adding to the technical impact of the move.

Stocks holding up: Even with the pressure higher yields puts on megacaps and other stocks with high valuations that have underpinned the stock market, the major averages closed higher thanks to reflation plays. The S&P 500 (SP500) (NYSEARCA:SPY) is now in positive territory for the week and closed above its 50-day moving average, providing some support for today’s trading. Equity investors appear to be looking at the Fed moves as a sign of confidence in the recovery and a commitment to combat inflation.

“While we are far from the end of QE and near-zero rates, the tide seems to be beginning to change,” Anu Gaggar, global investment strategist at Commonwealth Financial Network, told Bloomberg. “So far, the market had welcomed bad news as good news, but a market reacting to signs of an economy able to stand on its own without the monetary policy crutches is a refreshing change.”

NIKE trips

NIKE (NYSE:NKE) shares are down premarket after the company’s fifth consecutive earnings beat. Revenue for the quarter ended Aug 31, 2021, was slightly below expectations at $12.2B (+16% Y/Y), missing by $220M, and down $100M sequentially due to global supply chain issues and the Vietnam lockdown.

The company reports that its owned physical retail stores have surpassed pre-pandemic levels, growing 24% Y/Y. Digital sales were up 25%, led by a 43% increase in North America. Gross margin expanded 170 bps from last year and 70 bps from the prior quarter to 46.5%, driven by NIKE Direct business margin expansion and fewer promotions, offset by higher freight costs.

iFootball

The NFL is leaning toward Apple (NASDAQ:AAPL) as the new home for the premium Sunday Ticket programming package, The Athletic reports. That’s a report contrary to conventional wisdom, which points to Amazon.com (NASDAQ:AMZN) putting in a strong bid for the out-of-market games, or ESPN (NYSE:DIS) taking it on.

And that may be due to changes the league might like to see from the traditional one-price, all-the-games menu. Apple is reportedly considering allowing fans to pay for just one team’s out-of-market games – or even individual games a la carte.

There’s still a while to go in negotiations, but one thing that seems clear is that DIRECTV (recently divested by AT&T (NYSE:T), which maintains an interest) won’t keep the Sunday Ticket rights it’s held for decades.

China plane demand

Boeing (NYSE:BA) slightly raises the 20-year forecast for China’s airline market, forecasting the country will need 8,700 new aircraft valued at $1.47T by 2040 to meet rising air travel demand. In its annual commercial market outlook, Boeing notes the Chinese market’s resilience during COVID-19 and estimates the market opportunity for commercial aviation services in the region at nearly $1.8T.

China’s economic fundamentals and a middle-income demographic that is expected to double in two decades underpin the anticipated increase in air travel, Boeing says.

Buybacks rebounding

“Despite remaining cautious with their buyback expenditures,” S&P 500 companies’ stock buybacks for Q2 rose 11.6% Q/Q to $198.8B, up 124.3% from the year-ago period, S&P Dow Jones Indices says. Buybacks are 11% off the all-time high of $223B set in Q4 2018.

China crypto crackdown

China’s crackdown on cryptos is escalating, with the People’s Bank of China taking aim at transactions and Beijing making more moves to curb mining, Bloomberg reports. Bitcoin (BTC-USD) is down 1.7% and Ethereum (ETH-USD) falling 6%.

Today’s Economic Calendar
8:45 Fed’s Mester: “Bouncing Back in the Post-Pandemic Economy”
10:00 New Home Sales
10:00 Jerome Powell: “Fed Listens: Perspective on the Pandemic Recovery”
10:00 Fed’s Bowman: “Fed Listens: Perspective on the Pandemic Recovery”
10:00 Fed’s Clarida: “Fed Listens: Perspective on the Pandemic Recovery”
10:00 Fed’s George: U.S. Economic Outlook and Monetary Policy
12:00 PM Fed’s Bostic: “From Policy to Progress: Partnering to Create Equitable Community Development”
1:00 PM Baker-Hughes Rig Count

Companies reporting earnings today »

What else is happening…

Twitter (NYSE:TWTR) to add Bitcoin payments in its mobile app.

Costco (NASDAQ:COST) reports double-digit sales growth in all segments.

Federal agency calls for more regulation of Texas power grid, natural gas.

COVID-19 test maker Cue Health (NASDAQ:HLTH) prices 12.5M-share IPO at $16.

Brent crude (CO1:COM) settles near three-year high; WTI (CL1:COM) best since July.

HIVE Blockchain Technologies (NASDAQ:HIVE) reports full year results.

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Good morning. Happy Thursday.

The Asian/Pacific markets posted solid gains. China, Hong Kong, India, New Zealand, Taiwan, Australia, Malaysia, Indonesia, Singapore and Thailand did great; South Korea was weak. Europe, Africa and the Middle East are also doing great. Denmark, France, Germany, Finland, Switzerland, Norway, Hungary, Spain, the Netherlands, Italy, Portugal, Israel, the Czech Republic and Sweden are leading. Futures in the States point towards a moderate gap up open for the cash market.

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Leavitt Brothers Overview –>> here
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The dollar is down. Oil and copper are down. Gold and silver are down. Bonds are mixed. Bitcoin is up.

Stories/News from Seeking Alpha…

Fed evolution

The Federal Reserve avoided a shock to equities in an already weak September, but will investors remain comfortable with the hawkish tilt?

As expected from its decision yesterday, members pulled forward rate-hike expectations on the dot plot. And Fed chief Jay Powell telegraphed a tapering announcement at the next meeting in November. Tapering is expected to end around mid-2022 and liftoff could occur after that, although 2023 still seems the most likely timing for the start of rate hikes for now.

“What is clear is that inflation is likely to be the determining factor for liftoff and the pace of rate hikes,” Deutsche Bank Chief U.S. Economist Matthew Luzzetti writes in a note. “If inflation is at or below the Fed’s current forecast next year of 2.3% core PCE, liftoff is likely to come in 2023, consistent with our view. However, if inflation proves to be higher with inflation expectations continuing to rise, the first rate increase could well migrate into 2022.”

Scott Ruesterholz, portfolio manager at Insight Investment, is expecting a gradual liftoff and notes the Fed “is expecting inflation to run above 2% through 2024 even as they keep rates below their neutral 2.5% estimate.” “That shows how committed they are to fostering as strong of a labor market recovery as possible.” But was also the discussion and debate about asset purchases and how to communicate a taper within the FOMC and the markets a waste of energy?

“All the time spent deliberating on prospective tapering, and the hours of market-participant focus on it, could be much more efficiently spent elsewhere,” Rick Rieder, BlackRock CIO of Global Fixed Income writes. “We have argued for some time now that the economic conditions were ripe for a more normalized monetary policy, and that this, in fact, could mitigate the possibility for rising unintended consequences that could risk undermining the recovery that the Fed helped to engineer.”

Yesterday “we learned a bit more about the extremely deliberate evolution at the Fed, which now seems to be moving similarly to some other developed market central banks (Bank of Canada, Bank of Korea and the Bank of England) to take the first steps toward normalizing policy in the wake of the pandemic,” Rieder adds.

Stock rise, yield curve flattens: The broader stock market had a choppy reaction to the Fed yesterday, finishing solidly up, but well off the highs of the day. Investors look to be balancing the positives of the central bank dealing with inflation with the negatives of removing accommodation, even with rates still at zero.

Still, the S&P (SP500) (NYSEARCA:SPY) has a chance to finish the week higher with two strong sessions. It’s currently 37 points off the flatline and futures (SPX) are up more than 0.5%. The 10-year Treasury yield (NYSEARCA:TBT) (NASDAQ:TLT) is flat at 1.33% and the yield curve flattened yesterday, with short-term rates moving up (NYSEARCA:SPTS) (NASDAQ:VGSH).

“So the market seems to believe the more hawkish the Fed gets the more likely they’ll control inflation and/or choke the recovery,” Deutsche Bank’s Jim Reid says. “The puzzle is that even if the dots are correct, real fed funds should still be negative and very accommodative historically for all of the forecasting period. As such the market has a very dim view of the ability of the economy to withstand rate hikes or alternatively that the QE technicals are overpowering everything at the moment.”

But Ruesterholz notes “an economy benefiting from very accommodative policy with significant excess savings,” and says “markets continue to benefit from a ‘wall of cash’ looking to buy dips and find yield.”

Evergrande climbs

Evergrande (OTCPK:EGRNF, OTCPK:EGRNY) is rallying in Hong Kong, with the market open after a holiday, but shares eased off an earlier spike.

The People’s Bank of China put 120B yuan ($18.6B) into the banking system through reverse repo agreements, the net injection is 90B yuan, according to Bloomberg. But there is still some uncertainty about the property company’s dollar-denominated debt payments.

Another billionaire divorce

Described as ‘epic’ by Page Six, hedge fund manager John Paulson is headed for divorce, joining a list of high-profile billionaires, like Bill and Melinda Gates, and Jeff Bezos and Mackenzie Scott in seeing their nuptials come to an end.

Paulson rose to fame for his bet against the housing market preceding the financial crisis, making billions for himself and his investors. After the assets under management dwindled in the ensuing years, Paulson announced earlier this year that his fund, Paulson & Co. would be turning into a family office, thereby returning outside capital.

That said, his fund still owns sizable assets in the financial markets, and, given the fact that he and his wife did not have a prenup, according to Page Six, it may prove challenging to divide assets cleanly.

Cathie Wood on bubbles

Cathie Wood, CEO of ARK Investment Management, points out that the five technologies – DNA sequencing, robotics, energy storage, artificial intelligence, and blockchain technology – that her firm focuses on are evolving together.

She argues that disruptive tech companies are not in a bubble. “I think what the market is missing is the convergence among platforms,” she said at a Morningstar Investment Conference session.

And that convergence of the tech platforms is particularly good for Tesla (NASDAQ:TSLA) since it incorporates three of them: energy storage, artificial intelligence and robotics.

Facebook falls

Facebook (NASDAQ:FB) dropped 4% yesterday after an out-of-cycle update on advertising performance on its business blog, acknowledging issues that advertisers are encountering with the new Apple iOS update.

“We’ve heard from many of you that the impact on your advertising investment has been greater than you expected,” Product Marketing VP Graham Mudd says. “The cost of achieving your business outcome may have increased and it’s also gotten harder to measure your campaigns on our platform.” Some of that is due to underreporting, he says, adding that “we believe that real world conversions, like sales and app installs, are higher than what is being reported for many advertisers.”

Booster shots

The FDA has granted Emergency Use Authorization for a booster dose of Pfizer (NYSE:PFE)/BioNTech’s (NASDAQ:BNTX) COVID-19 vaccine for those 65 and older, those who work in healthcare settings, and adults at high risk of severe COVID-19.

The authorization includes people whose “frequent institutional or occupational exposure to SARS-CoV-2 puts them at high risk of serious complications of COVID-19.” The agency said individuals in these groups can get a booster dose as long as it has been at least six months since they received a second shot.

Today’s Economic Calendar
8:30 Initial Jobless Claims
8:30 Chicago Fed National Activity Index
9:45 PMI Composite Flash
10:00 Leading Indicators
10:30 EIA Natural Gas Inventory
11:00 Kansas City Fed Mfg Survey
4:30 PM Fed Balance Sheet

Companies reporting earnings today »

What else is happening…

FireEye (NASDAQ:FEYE) to relaunch as Mandiant in October.

Facebook (NASDAQ:FB) tech chief to exit role; Hardware head taking over.

U.S. crude (CL1:COM) stockpiles post seventh straight weekly decline.

Will Nike (NYSE:NKE) overcome its Vietnam, China issues and post Q1 earnings surprise?

Remittances provider Remitly (NASDAQ:RELY) prices IPO above range at $43.

Crypto mining firm Argo (ARBK) prices 7.5M-ADS IPO at $15.

Identity verification provider Sterling (NASDAQ:STER) prices 14.3M-share IPO above range at $23.

Equinor (NYSE:EQNR) a likely winner from surging European natural gas prices, HSBC says.

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Good morning. Happy Wednesday.

The Asian/Pacific markets were mixed. Hong Kong, South Korea and Indonesia did well, Japa, China and Taiwan were weak. Europe, Africa and the Middle East are doing great. The UK, Poland, France, Germany, Russia, South Africa, Finland, Norway, Spain, Italy, Portugal, Austria and Sweden are leading. Futures in the States point towards a moderate gap up open for the cash market.

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The dollar is up a small amount. Oil and copper are up. Gold is down; silver is up. Bonds are up. Bitcoin is down.

Stories/News from Seeking Alpha…

Fed meeting finesse

The Federal Reserve takes center stage, but the decision could well be a dud for a market that’s been hyping up big macro events lately. This is certainly the most important FOMC meeting since, well, the last FOMC meeting. But if Chairman Jay Powell and company avoid taper talk and keep rate forecasts steady, Wall Street could shrug it off, like recent jobs and inflation reports. While nobody expects a rate hike when the statement arrives, there’s plenty for the FOMC to try and finesse in its statement and for Powell to address at his Q&A.

The “Fed has to navigate desire to taper asset purchases through land mines of uncertainties about the economy and the risks posed by variants, debt ceiling politics, China & inflation,” Diane Swonk, chief economist at Grant Thornton, tweeted yesterday. Stock index futures are higher after dip-buying faded yesterday and the broader market closed lower again. The 10-year Treasury yield is up 1 basis point to 1.33%. There is some speculation that the recent market selloff, with the S&P looking at its worst monthly performance in a year, could make Fed members gun-shy about a hawkish tilt. But Renaissance Macro Research says the current selloff is “not even close to having the Fed shift course.”

The “S&P 500 (SP500) (NYSEARCA:SPY) is basically flat since the Fed’s July 28 confab,” RenMac tweets. “When we think about the last few times China was the source of the concern 2015/2016, the US equity decline was far more pronounced.”

Asset purchase tapering: Calls for the Fed to trim its $120B per month in asset purchases are growing as inflation heats up. But the consensus is that there will be no official announcement today. Two-thirds of 52 economists surveyed by Bloomberg expect a November announcement, with more than half expecting the Fed to start the taper in December. Still, Powell has been adamant he will give ample notice for any moves. The August jobs report gave “the doves on the Federal Reserve’s board, essentially where we think the Chair resides today, some fodder for postponing a tapering of the QE asset purchase program, though we think this would be a mistake,” BlackRock’s Rick Rieder writes. “Yet, we do believe that we will learn more details in September from the FOMC meeting, relative to what the Fed’s schedule for tapering will be.”

A change in the wording of the statement may be where the market gets that signal. “If the Fed signals any change, expect different language in the third paragraph of its statement, where the committee may update the risk to the outlook as balanced, which may signal tapering before the end of the year,” economist Joseph Brusuelas writes in his Real Economy Blog. “In 2013, before its previous round of tapering, the Fed used its statement to signal coming policy action, so it may choose to take that approach this week.” Mohamed El-Erian says the Fed needs to act as the window to tapering is closing.

Dissecting the dot plot: The latest dot plot chart of Fed member interest rate projections, which caused a stir last time, will also be closely watched, much to the chagrin of Powell. The “sole purpose” of the “fabled dot plot … is to increase confusion and misunderstanding in financial markets,” UBS Chief Economist Paul Donovan writes. The dot plot is meant to illustrate where individual members see rates going, but not where they will or necessarily want them to go and the Fed chief has said it is not a great forecaster. But if three members raise their 2022 dots, the new median will be for a quarter-point hike that year, and Wall Street banks have been aggressively marketing short-term interest rate derivatives that would pay off with tightening pulled forward, Bloomberg reports. “Watch the dots – likely will see initial rate hike pulled into 2022 with more in 2023,” Kathy Jones, chief fixed income strategist for Schwab, tweets. “Look out for (jobless) projections – (that) will indicate what Fed sees as ‘full employment.'”

Ethics questions: Beyond monetary policy, Powell may face some difficult questions about the recent controversy of the asset portfolios of Fed governors. Dallas Fed President Robert Kaplan’s trading in individual stocks last year, including several megacaps that tend to benefit from lower interest rates, prompted the Fed chairman to open an ethics review. And Powell and two other Fed members owned securities that the central bank was buying last year.

Permian purchase

ConocoPhillips (NYSE:COP) will become the second-largest oil and gas producer in the Lower 48 U.S. states following its $9.5B acquisition of Shell’s assets in the Permian Basin, as the pecking order is reshuffled among top U.S. shale drillers.

Adding an estimated 200K boe/day will put Conoco within striking distance of leader Exxon Mobil (NYSE:XOM), which is expected to produce about 1M boe/day from the Lower 48 this year.

Conoco’s deal will propel it past Chevron (NYSE:CVX), EQT Corp. (NYSE:EQT), Occidental Petroleum (NYSE:OXY) and EOG Resources (NYSE:EOG), according to consulting firm Rystad Energy.

Cashing in on shorts

AMC Entertainment (NYSE:AMC) and Blackstone (NYSE:BX) top the list of stocks that short sellers might be tempted to cash in on.

S3 Partners’ Ihor Dusaniwsky breaks down the one-day return for stocks with a short interest level of over $1B as he factors in the gains on a percentage basis. The mark-to-market gains are seen making those stocks more likely to be cashed in by short sellers.

Adobe earnings

Adobe (NASDAQ:ADBE) fell in extended-hours trading after it reported fiscal third-quarter earnings where it beat consensus on top and bottom lines and guided above expectations for the current quarter.

Revenue rose 22% to a record $3.94 billion, with gains spread broadly. Gross profit jumped to $3.47 billion from $2.8B, a year ago. Non-GAAP operating income came to $1.81 billion.

Toast IPO

Toast (NYSE:TOST), a restaurant-specific software platform priced its IPO of 21.7M common shares at $40/share, significantly above its expected range of $34-$36, upped from the previous price of $30-$33.

The company will raise $869.6M for a valuation of about $20B. Shares are set to begin trading Wednesday on NYSE. Founded in 2011, Toast makes software for restaurants to manage functions like business operations, online ordering and delivery, and integrated payments.

Evergrande interest payments

Bloomberg reports that Hengda Real Estate – the main unit of troubled Chinese property developer Evergrande – will make its Thursday bond coupon payment.

This hardly means Evergrande is out of the woods. Indeed, a restructuring at some point still remains likely. But a disorderly unwind seems off the table at the moment.

Today’s Economic Calendar
7:00 MBA Mortgage Applications
10:00 Existing Home Sales
10:30 EIA Petroleum Inventories
11:30 Results of $26B, 2-Year FRN Auction
2:00 PM FOMC Announcement
2:30 PM Chairman Press Conference

Companies reporting earnings today »

What else is happening…

Morgan Stanley (NYSE:MS) eyes a correction, S&P 500 (SP500) falling as much as 20%.

QuantumScape (NYSE:QS) soars after another deal with ‘top ten’ automaker.

Freshworks (FRSH) prices 28.5M-share IPO above range at $36.

U.S. nat gas (NG1:COM) slides to two-week low on more bearish weather outlook.

Facebook (NASDAQ:FB) debuts new portable Portal video device.

AT&T’s (NYSE:T) Stankey: HBO Max deserved value unlock; Cost cuts one-third complete.

DOJ, six states sue American Airlines (NASDAQ:AAL), JetBlue (NASDAQ:JBLU) over alleged anticompetitive partnership.

Office REIT stocks make headway after Google’s (GOOG, GOOGL) $2.1B office deal reported.

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Good morning. Happy Tuesday.

The Asian/Pacific markets bounced back. China, South Korea, India, Singapore and Thailand did well; Japan was weak. Europe, Africa and the Middle East are doing well. The UK, Denmark, France, Germany, Russia, South Africa, Finland, Norway, Spain, the Netherlands, Italy, Portugal and Austria are posting solid gains. Futures in the States point towards a moderate gap up open for the cash market.

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FREE Webinar tomorrow (Sep 22) at 1:45 EST –>> Playing Bottoming Patterns
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The dollar is down. Oil and copper are up. Gold and silver are up. Bonds are down. Bitcoin is down.

Stories/News from Seeking Alpha…

Buying the dip

The dip-buyers who stepped in during the last hour of Wall Street trading yesterday are back again today, pushing stocks higher around the world. S&P futures (SPX), Nasdaq 100 futures (NDX:IND) and Dow Jones futures (INDU) are all up about 1%.

In Asia, Japan’s NIKKEI (NKY:IND) is lower, catching up with trading after a holiday on Monday, but Hong Kong’s Hang Seng (HSI) is up more than half a percent. In Europe, the benchmark indexes in Frankfurt, London and Paris are more than 1% higher, with the broader STOXX 600 (STOXX) up 1%.

Rates are paring losses, with the 10-year Treasury yield (NYSEARCA:TBT) (NASDAQ:TLT) up 3 basis points to 1.34%. And volatility is ebbing. The S&P VIX Index (VIX), also referred to as the fear gauge, is down 12% after a surge yesterday. The VIX “traded north of 25 for the first time since May, a rise which is likely to have exacerbated some of the declines, with risk models forcing positions to be trimmed as volatility climbs, thus increasing selling, fueling a further increase in volatility; and so on, and so forth,” Michael Brown, senior market analyst at Caxton writes.

No Lehman moment: Jitters about the impact of China’s Evergrande defaulting on interest payments have eased overnight. S&P Global Ratings says that a government bailout is unlikely unless there is systemic risk and “far-reaching” contagion from Evergrande. But the S&P analysts also say the property company “failing alone would unlikely result in such a scenario.”

“The crisis at Evergrande and in the Chinese real estate sector was the catalyst (for a selloff) most people were talking about, but truth be told, the market rout we’re seeing is reflecting a wider set of risks than just Chinese property, and comes after increasing questions have been asked about whether current valuations could still be justified, with talk of a potential correction picking up,” Deutsche Bank strategist Jim Reid writes today. “Remember that 68% of respondents to my survey last week thought there would be at least a 5% correction in equity markets before year end. So this has been front and center of people’s mind even if the catalyst hasn’t been clear,” he adds.

Time to buy?: Monday’s tumble brought some bullish calls from Wall Street banks, where several strategists still see the path of the broader market moving up and to the right.

“The market sell-off that escalated overnight we believe is primarily driven by technical selling flows (CTAs and option hedgers) in an environment of poor liquidity, and overreaction of discretionary traders to perceived risks,” Marko Kolanovic, chief global market strategist at JPMorgan, wrote in a note yesterday. “Our fundamental thesis remains unchanged, and we see the sell-off as an opportunity to buy the dip.”

From a technical perspective, Piper Sandler strategist Craig W. Johnson called this week a “key test for the buy the dip crowd” and that a failure to defend the S&P’s 50-day moving average around 4,436 “would suggest the broader market is at risk for a deeper pullback.” But Thomas Lee, head of research at Fundstrat, agreed with Kolanovic, saying on CNBC the time was right to look at adding to positions. “I would look at selloffs like this, which is sort of broad-based selling, as a time to add incrementally,” Lee said.

Evergrande bailout unlikely

Evergrande (OTCPK:EGRNF, OTCPK:EGRNY) is looking at default as interest payments loom, with direct assistance from the government unlikely, S&P Global Ratings says.

“We believe Beijing would only be compelled to step in if there is a far-reaching contagion causing multiple major developers to fail and posing systemic risks to the economy,” S&P analysts wrote in a note yesterday. “Evergrande failing alone would unlikely result in such a scenario,” S&P added.

Consumer wall of worry

Consumer stocks tumbled along with the rest of the market yesterday on broad concerns over what the China property market debacle signals for riskier assets and increased apprehension on the U.S. debt ceiling negotiations between Democrats and Republicans in D.C.

The topper could be the FOMC meeting in a few days during which a sharp focus will be on tapering wording.

Analysts are pointing out that the nervous trading has been building with the Dow down for three straight weeks, which has not happened since September of 2020.

Robinhood crypto wallet

Robinhood (NASDAQ:HOOD) is testing a cryptocurrency wallet feature on a beta version of its iPhone app so users can transact with digital currencies without having to convert them to dollars, Bloomberg reports.

The software includes a hidden image showing a waitlist page for users signing up for the new feature. The app also has a code referring to crypto transfers. Bloomberg notes that crypto wallets also provide a single place for users to store their crypto, protected by a private key.

Apple expectations

We’re fresh off the details of the newest iPhone 13 (NASDAQ:AAPL), but TF International/KGI analyst Ming-Chi Kuo is already setting expectations with predictions for the iPhone 14, including a new hole-punch camera design to replace the noted Apple notch.

“Hardware selling points for 2022 iPhones include (1) a new iPhone SE with 5G support (1H22), (2) a new and more affordable 6.7″ iPhone (2H22), and (3) two new high-end models equipped with a punch-hole display (replacing the notch area design) and a 48MP wide camera (2H22),” Kuo says.

Those top-end iPhone 14s are expected to come in 6.1-inch and 6.7-inch screen sizes and drawing conclusions from the current lineup points to a four-model matrix: iPhone 14 and iPhone 14 Max, and iPhone 14 Pro and iPhone 14 Pro Max, with the Pro models switching to the new hole-punch camera design.

Kids vaccine

Based on the new data released by Pfizer (NYSE:PFE) and BioNTech (NASDAQ:BNTX) in kids, President Joe Biden’s chief medical adviser Dr. Anthony Fauci said that a COVID-19 vaccine for children ages 5 to 11 will likely be available before Halloween.

“There’s a really good chance it will be” available before the Oct. 31 holiday, Fauci said during an interview on MSNBC. He also said he would be in favor of schools mandating shots for kids once they are fully approved.

Today’s Economic Calendar
FOMC meeting begins
8:30 Housing Starts and Permits
8:30 Current Account
8:55 Redbook Chain Store Sales
1:00 PM Results of $24B, 20-Year Bond Auction

Companies reporting earnings today »

What else is happening…

Lennar (LEN, LEN.B) dips following revenue miss, supply chain challenges.

Electric vehicle stocks hammered amid China woes but Lucid (NASDAQ:LCID), Electric Last Mile (NASDAQ:ELMS) and Li-Cycle (NYSE:LICY) stand tall.

India to receive first J&J (NYSE:JNJ) COVID-19 vaccine doses in October.

Shell (RDS.A, RDS.B) confirms sale of Permian Basin assets to ConocoPhillips (NYSE:COP) for $9.5B.

Early iPhone 13 pre-orders seen as solid ahead of Friday’s official release.

Peloton (NASDAQ:PTON) turning to hotel chains, commercial businesses in push for growth.

Michael Jordan increases investment in Sportradar (NASDAQ:SRAD), assumes special advisor role.

Activision Blizzard (NASDAQ:ATVI) dips on report SEC opens wide probe into practices.

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Good morning. Happy Monday. Hope you had a good weekend.

The Asian/Pacific markets suffered big losses. Japan and China were closed. Hong Kong, India, Australia, Malaysia, Indonesia, Singapore and Thailand were all weak. Europe, Africa and the Middle East are getting crushed. The UK, Denmark, Poland, France, Turkey, Germany, Russia, Greece, South Africa, Finland, Switzerland, Norway, Hungary, Spain, the Netherlands, Italy, Portugal, Austria, Sweden and the Czech Republic are all down huge amounts. Futures in the States point towards a giant gap down open for the cash market.

—————
Leavitt Brothers Overview –>> here
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The dollar is up. Oil and copper are down. Gold and silver are up. Bonds are up. Bitcoin is down big.

Stories/News from Seeking Alpha…

China property crisis

The possibility of China property company Evergrande collapsing and overall worries about China’s crackdown on indebted firms is taking its toll on Hong Kong shares. The Hang Seng Index (HSI) is down more than 3% with China and Japan closed for a holiday. The benchmark index hit an 11-month low earlier, with the index tracking construction and property off more than 6%. Evergrande (OTCPK:EGRNF) (OTCPK:EGRNY) is down more than 11% today and has fallen more than 80% this year as it struggles to meet debt payments. The company has more than $300B in debt and has warned about default. It has an $83.5M interest payment due on Thursday for a March 2022 bond, according to Reuters.

Domino effect: A collapse of Evergrande would have a domino effect on other China and Hong Kong property developers and a systemic effect on the rest of the economy, according to Jenny Zeng, co-head of Asia fixed income at AllianceBernstein.

“In the offshore dollar market, there is a considerable large portion of developers (who) are implied to be highly distressed,” Zeng said on CNBC. Developers “can’t survive much longer” if the refinancing channel continues to be shut. But she played down the possibility of Evergrande being akin to the collapse of Lehman Bros., noting the fragmentation of the China property market.

“Despite Evergrande’s size, we all know it is the largest developer in China, probably the largest in the world, (the company) still accounts for only 4% and now it’s even less of the total annual sales market,” Zeng says. “The debt, particularly the onshore debt, is well collateralized.”

Regulatory crackdown: Along with Evergrande, pressure is on the Hong Kong market as China’s leaders look to rein in what it calls monopoly behavior, much like it has taken aim at the tech sector. But also like the moves against big tech companies, the exact actions the government will take are unclear. It is part of President Xi Jinping’s “common prosperity” plan to address inequality.

“People may be worried about whether they have to take up extra responsibility to build more subsidized housing,” Philip Tse, head of Hong Kong and China property research at BOCOM International, says, according to Bloomberg. “Foreign investors will be concerned if administrative matters in China will lead to a price cap, more stringent purchasing limits, or some tax-payment proof is required in order to pay for buying a flat.”

“The price action across several asset classes in Asia today is horrendous due to rising fears over Evergrande and a few other issues, but it could be an overreaction due to all of the market closures in the region,” Brian Quartarolo, portfolio manager at Pilgrim Partners Asia, says.

IPO arrivals

FTSE Russell has added a record 62 recent IPOs to its popular Russell 2000 index, which could boost stocks like Krispy Kreme (NASDAQ:DNUT) and Flywire (NASDAQ:FLYW) as early as Monday because index funds will have to buy some shares.

“A rising tide lifts all boats, so it’s not surprising that the continued influx of capital into the stock market has pushed up valuations for IPO companies, lifting more of them into the index at an earlier stage,” said Donovan Jones, a Seeking Alpha contributor who follows initial public offerings.

The Russell 2000 tracks 2,000 of the market’s small-cap stocks, making it the basis for popular small-cap index funds like the iShares Russell 2000 ETF (NYSEARCA:IWM). Because small-cap stocks are typically more volatile and riskier than large-cap stocks, investors expect bigger rewards from them. As a result, IWM frequently outperforms the large-cap SPDR S&P (NYSEARCA:SPY), as has happened over the past year.

Streaming pause

Streaming’s share of television viewing, inching forward steadily in recent months, has taken a pause to go back to school. Three months of growth in streaming share turned flat in August, according to “The Gauge” from Nielsen, its monthly macro look at TV delivery platforms.

And there’s a definitive back-to-school effect, as streaming share was flat at 28% but with a more pronounced drop in viewership among children aged 6-17 (down 7.5% from July).

Broadcast, which had bounced back from steady declines last month to touch 24% (with the help of live sports timing), was also flat, as was cable (which had taken a step back last month to land at 38%, still the leading option but in secular decline).

Dot plot coming

The Federal Reserve meets on Tuesday and Wednesday this week to discuss monetary policy. The central bank has already said they’re not planning to start reducing asset purchases yet – the much-discussed taper. In addition, Fed Chairman Jerome Powell has explicitly said the Fed won’t raise rates until well after tapering of its asset purchases starts.

Still, investors will be looking for hints of when the central bank will ease off the gas that it’s been providing since the start of the pandemic. Economists surveyed by Bloomberg expect the Fed to make a formal announcement on reducing its purchases of Treasurys and mortgage-backed securities at the end of the November meeting.

Two-thirds of the 52 economists surveyed expect a November announcement, with more than half expecting the Fed to start the taper in December. As a reminder, the Fed is currently purchasing $80B of Treasurys and $40B of MBS per month.

At least five of the 12 Fed district bank presidents expect tapering to start this year, in comments they’ve publicly made starting in late August. Earlier this month, Atlanta Fed President Raphael Bostic said he expects the Fed to reduce its pace of asset purchases this year, but not this month.

Monster reallocation

Cash poured into equities this past week and out of money market funds. Capital outflows from money market funds were $45.3B, the biggest of the year according to Refinitiv Lipper.

The market is seeing a “monster reallocation cash-to-stocks as tax redistribution threat recedes & Fed expected to remain Wall St-friendly (liquidity easiest since Jul’07),” Michael Hartnett, BofA chief investment strategist, wrote in the “Flow Show” note on Friday.

There was the largest inflow into U.S. large-cap funds ever at $28.3B. U.S. growth funds saw inflows of $6.9B, small-cap funds had inflows of $4.2B, with $1.6B to U.S. value. Among large-caps, tech had its 12th week of inflows and the most since March.

Today’s Economic Calendar
10:00 NAHB Housing Market Index

Companies reporting earnings today »

What else is happening…

Li Auto (NASDAQ:LI) cuts Q3 delivery outlook amid chip supply shortage.

Johnson & Johnson’s (NYSE:JNJ) reports Rybrevant + lazertinib data in lung cancer at ESMO 2021.

Sorrento (NASDAQ:SRNE) reports results of Covistix and Panbio antigen rapid tests for COVID-19 detection.

Brookfield (NYSE:BAM) makes $7B offer for Australian power infrastructure firm.

Rights offerings: What are they and how do they affect share price?.

PG&E (NYSE:PCG) warns of more power cuts in fire-prone areas following Dixie Fire.

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