Wake Up Wall Street (SPY) (QQQ): Wake up, it was not a nightmare
Here is what you need to know on Monday, June 13:
Friday's losses look set to see more follow-on if European markets are anything to go by. The main indices are lower, bond yields are higher and investors are heading to defensive strategies as cash positions increase. Fed funds futures at the CME are now beginning to signal the possibility that we get a 75 basis point hike this week. Unlikely in our view, but it will grow in probability ahead of the next meeting if inflation shows no signs of abating.
As it is money and futures markets have added an extra 60 basis points of hiking to the 2023 cycle. The yield curve has inverted, and the 2-year is now yielding 3.16%. Once again we are at peak fear as investor surveys will show toward the end of this week. The SPY looks set to test $380 at the open, which is the 38.2% Fibonacci retracement of the pandemic lows to the January high. It bounced from there last time out, so all eyes are focused on whether the trick can repeat.
There is though the growing acceptance that inflation will not be tamed and the US will hit recession early in 2023. Equity markets need about another 20% sell-off to price that in. Then it is up to earnings and ratios to see where we end up. The current S&P 500 P/E at 18 is just way, way too high. The P/E usually bottoms out at around 11 in times of recession. Earnings will also come down, so we may be looking a lot lower before this gets to fair value. That is probably the worst case. The hope is that inflation gets controlled quickly by a likely recession but a mild one. Oil prices sink as a result, and that allows corporate earnings to resume their upward trend in late 2023.
The dollar is unsurprisingly strong this morning at 104.70 for the dollar index. Oil is also lower at $119, and Bitcoin is having a shocker at $24,100. Gold is also lower at $1,850.
European markets are lower: Eurostoxx -2.35, FTSE -1.6% and Dax -2%.
US futures are also lower: S&P -2.1%, Dow -1.7% and Nasdaq -2.75.
Wall Street top news (SPY) (QQQ)
Fed futures show over an 80% chance of a 75 basis point hike in July.
ECB Kazimir says 50 basis points are needed in September.
Crypto stock fell sharply, COIN MSTR RIOT SI, etc.
Tesla (TSLA) upgraded by RBC, oops! Stock down 4%. (the author is short)
Pfizer (PFE) FDA document sees no new safety concerns for covid vaccine in kids.
Binance halts withdrawals due to a "stuck transition".
Crypto lender Celsius halts withdrawals.
Prologis (PLD) and Duke Realty (DRE) to merge.
Novavax (NVAX) authorized as a booster in Australia.
Redbox Entertainment (RDBX) is up nearly 30% in premarket.
DocuSign (DOCU) down on Wolfe downgrade.
Upgrades and downgrades
Source: Benzinga Pro
Economic releases
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Author
Ivan Brian
FXStreet
Ivan Brian started his career with AIB Bank in corporate finance and then worked for seven years at Baxter. He started as a macro analyst before becoming Head of Research and then CFO.
