Wake Up Wall Street (SPY) (QQQ): Rally to carry on, but for how long?
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UNLOCK OFFERHere is what you need to know on Friday, June 24:
Bond yields continue to look more accommodative for equities, and this equity rally continued yesterday with the sell-off in bond markets. This sell-off has taken place despite an increasingly hawkish Fed. Bond markets now feel a recession is odds on and are scaling back projections for the long end of the curve. Probabilities for the end of year rate hiking cycle are being lowered, which is seeing the yield curve flatten. A clear recession signal and one that makes sense. The yield curve flattens when far out yields (i.e. US 10-year) begins to fall near or below nearer term yields (i.e. US 2-year). This is currently happening as the Fed is hiking, so short-term yields move up, but 10-year yields are falling as a recession becomes more likely. The Fed cuts interest rates in a recession, all things being equal. This time though all things are not equal, and inflation is running high. The worst case is a recession with inflation, meaning rates have to stay high. That will deepen the recession and prolong it. For now, markets are not betting on this scenario.
Falling yields sees rising equities, especially in the beaten down tech sector. The Nasdaq outperformed on Thursday and looks set to repeat the trick on Friday. Equity positioning and sentiment also looked to have gotten to extreme bear levels and so a bear market rally ensued. How long this goes on for is the question and with half year-end approaching, we are likely to see some position closing, which goes against the prevailing trend for that period. In this case, that means more buying. Not long after we head into earnings season, and we expect a poor one with analyst downgrades. That should then see more pressure back on the main indices.
The dollar is flat at 104.40 for the dolar index. Oil is up 2% at $106, and Gold is at $1,822. Bitcoin is at $21,200.
European markets are higher: Eurostoxx +1.7%, FTSE +1.7% and Dax +1%.
US futures are also higher: S&P +0.9%, Dow +0.7% and Nasdaq +1%.
Wall Street top news (SPY) (QQQ)
Russia pays bonds in Roubles, likely triggering default.
Fed's Bullard says no sign of households pulling back yet.
IFO Economist says no sign of recession.
Australian Central Bank says no sign of recession. Maybe we are all mistaken then!
German IFO Expectations Index worse than expected though. We all see a recession, but the central bankers do not. It must be transitory!
UK retail sales worse than expected.
UK Government under pressure again after losing seats.
Tesla (TSLA): Credit Suisse cuts price target. Author is short Tesla.
GGPI becomes Polestar (PSNY) today.
Revlon (REV) finally has a down day on Thursday!
CarMax (KMX) beats on top and bottom lines.
ZenDesk (ZEN) soars on buyout reports.
FedEx (FDX) up on strong guidance.
Microsoft (MSFT): Citi names as a top pick.
BlackBerry (BB): Remember that one from the meme days. Up on earnings beat. Bausch Health (BHC) chairman steps down.
Lending Tree (TREE) cuts guidance, shares fall sharply.
Wolfspeed (WOLF) upgraded by Goldman.
Altria (MO) upgraded by Morgan Stanley, equal weight from underweight.
Upgrades and downgrades
Source: WSJ.com
Economic releases
Here is what you need to know on Friday, June 24:
Bond yields continue to look more accommodative for equities, and this equity rally continued yesterday with the sell-off in bond markets. This sell-off has taken place despite an increasingly hawkish Fed. Bond markets now feel a recession is odds on and are scaling back projections for the long end of the curve. Probabilities for the end of year rate hiking cycle are being lowered, which is seeing the yield curve flatten. A clear recession signal and one that makes sense. The yield curve flattens when far out yields (i.e. US 10-year) begins to fall near or below nearer term yields (i.e. US 2-year). This is currently happening as the Fed is hiking, so short-term yields move up, but 10-year yields are falling as a recession becomes more likely. The Fed cuts interest rates in a recession, all things being equal. This time though all things are not equal, and inflation is running high. The worst case is a recession with inflation, meaning rates have to stay high. That will deepen the recession and prolong it. For now, markets are not betting on this scenario.
Falling yields sees rising equities, especially in the beaten down tech sector. The Nasdaq outperformed on Thursday and looks set to repeat the trick on Friday. Equity positioning and sentiment also looked to have gotten to extreme bear levels and so a bear market rally ensued. How long this goes on for is the question and with half year-end approaching, we are likely to see some position closing, which goes against the prevailing trend for that period. In this case, that means more buying. Not long after we head into earnings season, and we expect a poor one with analyst downgrades. That should then see more pressure back on the main indices.
The dollar is flat at 104.40 for the dolar index. Oil is up 2% at $106, and Gold is at $1,822. Bitcoin is at $21,200.
European markets are higher: Eurostoxx +1.7%, FTSE +1.7% and Dax +1%.
US futures are also higher: S&P +0.9%, Dow +0.7% and Nasdaq +1%.
Wall Street top news (SPY) (QQQ)
Russia pays bonds in Roubles, likely triggering default.
Fed's Bullard says no sign of households pulling back yet.
IFO Economist says no sign of recession.
Australian Central Bank says no sign of recession. Maybe we are all mistaken then!
German IFO Expectations Index worse than expected though. We all see a recession, but the central bankers do not. It must be transitory!
UK retail sales worse than expected.
UK Government under pressure again after losing seats.
Tesla (TSLA): Credit Suisse cuts price target. Author is short Tesla.
GGPI becomes Polestar (PSNY) today.
Revlon (REV) finally has a down day on Thursday!
CarMax (KMX) beats on top and bottom lines.
ZenDesk (ZEN) soars on buyout reports.
FedEx (FDX) up on strong guidance.
Microsoft (MSFT): Citi names as a top pick.
BlackBerry (BB): Remember that one from the meme days. Up on earnings beat. Bausch Health (BHC) chairman steps down.
Lending Tree (TREE) cuts guidance, shares fall sharply.
Wolfspeed (WOLF) upgraded by Goldman.
Altria (MO) upgraded by Morgan Stanley, equal weight from underweight.
Upgrades and downgrades
Source: WSJ.com
Economic releases
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