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 | Komentar awal. submitted by CVAquilaPutri to indonesia [link] [comments] Penafian: gak buat digoreng sirkel PNS anon di Twitter. Saya tahu kalian itu selalu haus buat ngetai-taiin Kementerian Keuangan dan sekolah kedinasan yang ia naungi. Now's not the time. Meet my friend, Muhammad Ary Adithya Hasibuan. (Bisa dilihat akun Instagram almarhum.) He was a good friend of mine di kampus, and he had the every will to improve his and his family's economic situation thanks to that strong Medan perantauan spirit. Sebelum masuk PKN STAN, almarhum sempat kuliah dua tahun di salah satu politeknik negeri di Medan. Dan selama dua tahun itu he fought tooth and nail (listen to his struggle here!). Di tahun terakhir percobaannya (karena STAN cuma bisa tiga kali percobaan ujian masuk), dia akhirnya lulus. Sama seperti saya, dia merupakan mahasiswa prodip D III Akuntansi. Berkat kesamaan nasib dan sama-sama wibu, we found a commonality and became pretty close meskipun gak pernah sekelas. Being not from a very wealthy family, kehidupan dia selama di kampus agak prihatin, to put it mildly. But despite the odds stacked against him, entah itu financial-wise, nilai-wise, sampai dibully padahal dia ketua kelas, Almarhum Ary berhasil lulus dengan IPK yang cukup memuaskan. Waktu tiba masanya pemilihan instansi setelah lulus, karena dia masuk formasi non-Kemenkeu, otomatis Kemenkeu terkunci buat almarhum. Jadi dipilih olehnya BPK, BPKP, sama apa satu lagi lupa. Eh, nasib mengantarkan dia jadi pegawai Bakamla. Now, Bakamla is quite infamous di letting saya. Dari 30 orang lulusan PKN STAN yang masuk Bakamla, nggak ada sama sekali dari mereka yang menaruh Bakamla di pilihan mereka - baik itu pilihan 1, 2, atau 3. Dengan kata lain, Bakamla itu "instansi buangan". Selain itu, Bakamla sebagai institusi nggak mengadakan outreach sama sekali kepada CPNS barunya selama nyaris 4 bulan (dari Desember sampai Maret). Complete radio silence. Ya ada sih, tapi sebagai kating pada dekting, bukan sebagai institusi kepada pegawai barunya. It got so bad sampai CPNS barunya ada yang kabur duluan. (Saya pernah ngomel-ngomel soal itu di komentar ini.) Gak tahu itu maksudnya biar dibarengin sama penerimaan umum atau gimana wallahu a'lam. Syukurnya akhirnya almarhum bersama seluruh anggota letting STA'18 di Bakamla (minus satu orang) akhirnya melewati rangkaian proses orientasi dan pelatihan CPNS baru. Pelatihan kecakapan organisasi, latsar, the whole shebang. Hell, almarhum selesai latsar terlebih dahulu sebelum saya. You'd thought that kalo udah selesai latsar, berarti dia udah nunggu pengangkatan doang sebagai PNS betulan. Nope, ternyata Bakamla masih ada latihan wajib militer. Tanggal 30 Agustus kemarin, Ary mengunggah story WA yang bilang almarhum "inaktif sampai 1 Desember 2022". Karena ada teman sekelas yang mengunggah story IG (Gambar 1), saya jadi tahu kalau almarhum akan berangkat latihan militer. Ya sudah, dadah dadah tuh di grup, selamat ya, hati-hati, the works. We thought "njir Ary latihan militer 3 bulan, we'll miss him tapi Desember kan gak selama itu ya kan?" Boy will we miss him. Tiba-tiba tadi jam 7.30 pagi grup bapak-bapak kami digegerkan dengan dikirimnya Gambar 2. Gilak. Onii-chan kami (almarhum kelahiran 1998, jadi tua sendiri.) gak ada kabar, tiba-tiba meninggal saat latihan militer. Menurut kabar yang beredar, almarhum meninggal karena fisiknya terlalu diforsir, terlalu dipaksakan. True enough, sekitar jam 9 pagi ada broadcast yang menjelaskan kronologi kematian almarhum. Berikut transkripnya. Mohon ijin melaporkan kronologi kejadian meninggalnya Siswa CGBT atas nama Siswa Ary Aditya Hasibuan.
Demikian kami laporkan, mohon arahanShit man! Kalian tahu kalau almarhum sudah mengeluhkan sakit nyeri sendi dehidrasi dan paru paru basah, and yet you didn't manage to make him stay out of aktivitas fisik. Entah para pelatih ini kurang mempan discouragenya (atau malah gak berani melarang?), atau ada sesuatu yang membuat almarhum "memaksakan diri" despite his limitations. Lagipula pegawai-pegawai lulusan sekolah kedinasan yang barely sekolah kedinasan ini lho kerjanya bakal di balik meja dan komputer! Susun laporan keuangan, bikin SPM terus ngirim ke KPPN, (kasarnya) paper pushing! Bukannya naik ke atas kapal disuruh patroli dua minggu di atas air! Anak-anak ini bukan anak Secata atau Secaba! Tiga bulan, buset! At least kalau mau latihan militer yang "serius", tiru aja Samapta-nya Bea Cukai. Buat gue Bakamla sudah memantapkan diri sebagai sebuah institusi yang nggak bisa properly ngemong pegawai barunya. Sudah kemarin ditelantarkan hampir 4 bulan, sekarang ada yang meninggal waktu latihan. You have blood on your hands. Dan Biro SDM Kemenkeu juga, karena mereka yang menentukan lulusan PKN STAN ke mana aja. Kalo BSDM gak naroh Ary di Bakamla, gak bakal meninggal temen gue itu. I really hope BSDM tahun depan gak bakal menggubris permohonan pegawai baru lulusan STAN dari Bakamla tahun depan. Cuci dulu tuh darah almarhum temen gue, Muhammad Ary Adithya Hasibuan, dari tangan-tangan kalian. Temen gue, yang harusnya bisa memperbaiki keadaan ekonomi keluarganya, meninggal gara-gara negligence in training. Rest in peace, buddy boy. You will sorely be missed. (Buat orang Setjen dan/atau Itjen yang lurking di Reddit dan nemu post saya ini, by all means, silahkan gelandang saya buat diinterogasi di Dhanapala. Ini bukan cuma perkara sesama lulusan STA'18. Ini temen saya yang meninggal ini.) Gambar 1. Foto terakhir almarhum (ditandai pakai panah). Gambar 2. Kabar kematian almarhum. |
 | Morning traders, hope you are all well and safe submitted by sarfaraj_patel786 to Daytrading [link] [comments] US STOCKS ended a four-day winning streak as the rally of tech eased, with investors closely watching the yield curve inversion. ADP data beat estimates in March while Q4 GDP was unexpectedly revised down to 6.9%. European and Asian indices closed mixed. The Biden Administration is looking to release a reported 1m bbl/day of oil from the SPR to ease the inflation situation in the country. DXY dropped below 98 as the Treasury yield eased across the curve just a day after a brief inversion of the 2s10s curve. US jobless claims, PCE, personal spending and income is scheduled for release today. The latest Fedspeak largely reiterated support for the possibility of a 50-bps hike in the next central bank meeting. A notable comment from FOMC member George stated that the Fed’s balance sheet should fall significantly to allow longer-term rates to increase along with shorter-term policy rates. MAJOR FOREX EURUSD extended the recovery to 1.1157 amid the dollar weakness. Germany's inflation jumped to 7.6%, the highest since 1985 and two-year bund yield surged sharply for a second session. GBPUSD climbed above 1.3100 and USDJPY traded below 122. AUDUSD was little changed at 0.7510 and NZDUSD edged higher to 0.6975. USDCAD hit the fresh yearly low of 1.2477 before closing at 1.2481. OIL-BITCOIN-GOLD WTI crude rose to $108.78 on talks of new sanctions on Russian oil. US crude inventory fell by more than expected last week. Gold jumped to $1932.50 as Russia downplayed the peace talk progress. Scepticism grew over the previously positive development of the Russian-Ukraine negotiations, reviving demand for safe-haven assets. The precious metal also has inflation-led bids underpinning a further rise. Bitcoin came under pressure below the 200-day SMA at $47,248. News today GER-EUR-ITA Unemployment Rate (Mar) Unemployment Change (Mar) Unemployed Persons (Mar) USD Personal Income MoM (Feb) PCE Price Index MoM (Feb) PCE Price Index YoY (Feb) Personal Spending MoM (Feb) Core PCE Price Index MoM (Feb) Core PCE Price Index YoY (Feb) Jobless Claims 4-week Average (26/Mar) Continuing Jobless Claims (19/Mar) Initial Jobless Claims (26/Mar) TRade safe , stay safe https://preview.redd.it/gtzdvrkq7qq81.png?width=322&format=png&auto=webp&s=ae504227c10c48ceb79a07accc0c6a62838e8619 |
Federal Reserve Chair Jerome Powell testifies before Congress in the week ahead, and markets will hang on what he says regarding how the Russia-Ukraine conflict could affect Fed policy.
Russia’s invasion of Ukraine will continue to be a major focus, as wary investors watch fresh inflation data and the rising price of oil in the week ahead.
Stocks in the past week sold off in volatile trading, as oil rose more than 20% and a whole host of other commodities rose on supply worries. Investors sought safety in bonds, driving prices higher and the 10-year Treasury yield to 1.72% Friday. The dollar rallied, pushing the dollar index up 2% on the week.
“We just don’t know what can happen over the weekend. It looks like the Russians are amping themselves up and they’re getting more aggressive,” said Jim Caron, Morgan Stanley Investment Management head of macro strategies for global fixed income.
“If nothing happens over the weekend, or if there’s some peace talks coming, then the 10-year note yield could go up 10 to 15 basis points. It could have that swing,” said Caron. Yields move opposite price. (1 basis point equals 0.01%.)
The Federal Reserve will also be top of mind, as investors focus on its pending interest rate hike on March 16. But Fed officials will not be making public addresses in the quiet period leading up to their meeting.
The economic calendar is relatively light in the coming week, with the exception of Thursday’s report of February’s consumer price index.
According to Dow Jones, economists expect headline inflation to rise to 7.8% year-over-year, from 7.5% in January, the highest since 1982. Headline inflation includes food and energy prices.
“The risk is to the upside. It will be a shocker if we get an 8% handle,” said Marc Chandler, chief market strategist at Bannockburn Global Forex.
Investors will also focus on how the market itself is trading. The S&P 500 fell 1.3% to 4,328 in the past week, while the Nasdaq lost 2.8% to 13,313.
“The major averages are all in a downtrend here. They seem to rally and then run out of steam,” said Paul Hickey, co-founder of Bespoke. “Until you get some kind of break of that, you want to be a little cautious. It’s definitely concerning, all this stuff.”
Hickey said that the market is behaving similarly as it did in other conflicts.
“In the short run, there’s a lot of uncertainty,” said Hickey “I think the playbook is similar. You tend to see a lot of sloshing around - big swings up and down — and then eventually things start to stabilize a few months later...The question is where does this one go?”
Boiling oil
Following a week of gains, oil jumped sharply again Friday, with West Texas Intermediate rising above $115 for the first time since 2008. WTI rose 7.4% Friday and was up 26% for the week, to settle at $115.68. Russia’s battle for control of Europe’s largest nuclear power plant early Friday spooked investors.
The Russian invasion of Ukraine has stirred up more fear of inflation, and economists are already raising their inflation forecasts, due to rising oil prices. The whole commodities complex has shifted higher, since Russia is such a key producer of wheat, palladium, aluminum and other commodities.
Rising oil prices can be a worry since they can generate one of the biggest hits to inflation and do so quickly.
Russia is unique in that it is a very large commodity exporter and has the ability to impact many markets. It is one of the world’s largest exporters of crude and natural gas, with its primary customer Europe. It is the largest exporter of both palladium and wheat.
The jump in oil has already been hitting U.S. consumers at the pump. Gasoline prices were $3.83 per gallon of unleaded Friday, up 11 cents in just a day and 26 cents in a week, according to AAA.
“The national average could get to $4 a gallon next week,” said John Kilduff, partner with Again Capital.
In the oil market, Kilduff said there was brisk buying Friday. “There’s still room to grind higher, as we continue to price in the loss of Russian crude oil,” he said.
The U.S. and its allies did not sanction Russian energy, but the sanctions did inhibit buyers, banks and shippers who fear running afoul of sanctions on the Russian financial system.
“It’s pretty clear nobody wanted to be short going into the weekend,” said Kilduff. “There’s still room to grind higher as we continue to price in the loss of Russian crude oil.”
Oil traders are also watching to see if Iran is able to strike a deal that would allow it sell its oil on the market, in exchange for an end to its nuclear programs. It could then bring 1 million barrels back on to the market, but analysts say there will still be a shortfall.
Will Ukraine and Russia Impact The Usually Bullish March?
Good riddance to February. It was another negative month for stocks, but the clear headline was Russia invading Ukraine and the potential impacts that would have on the global economy and stock market.
First things first, this means the first two months of 2022 have been in the red for the S&P 500 Index. “Seeing the first two months of a new year in the red isn’t a great feeling, but the good news is lately it hasn’t been a major warning sign,” explained LPL Financial Chief Market Strategist Ryan Detrick. “The first two months of 2016 and 2020 were both negative, but stocks were able to claw back and finish higher those years.”
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It is important to remember that this is a midterm year and early in midterm years, stocks tend to have some trouble. That has played out once again in 2022, but don’t forget later in these years tend to see a very strong rally.
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Another angle on this is looking at how stocks do each quarter, but broken up by the four-year presidential cycle. Again, investors need to know that this quarter and the next two are some of the weakest out of the entire four-year cycle.
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Although midterm years tend to see overall weakness until late, be aware that March is one of the best months of the year.
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Lastly, looking purely at March based on seasonality shows that this is a solid month. In a midterm year, it is the fourth best month and the past 20 years it is fifth best. Since 1950, it is more in the middle at the sixth strongest. Of course, it would have been better, but the 12.5% drop in March 2020 is skewing things.
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Clearly headlines will move stocks in the near-term, but we continue to expect the overall economic growth in the U.S. to remain quite strong and likely push stocks back up to our fair value target of 5,000 on the S&P 500 by year-end.
Banks (KRE) Swing Wildly
While Financials are the best performing sector so far in today's session, leading into today it was the worst-performing sector over the past week thanks in large part to a 3.7% decline on Tuesday; the sector's worst single day since June 2020. Looking more specifically at bank stocks, using the SPDR S&P Regional Banking ETF (KRE) as a proxy, yesterday saw an even more dramatic decline of 5.47% marking the largest decline since November 2020. That drop also ranks in the bottom 1% of all daily changes on record since the ETF began trading in 2006. The over 3.5% rebound today, meanwhile, ranks in the top 5% of all days on record as yesterday's decline was not quite enough to drop the industry below its 200-DMA; a support level that has now held multiple times in the past year.
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As previously mentioned, it is rare for KRE to fall over 5% in a single day. Excluding yesterday, there were 68 other times this happened but only a dozen of those occurred with at least 3 months between the prior instance. In the table below, we show the performance of KRE after each of those periods.
While it is far from the case today, typically, the next day has often seen KRE fall further after a 5% drop. Instead, today it is seeing the second-best next-day performance of these instances. As for where things go from here though, returns have been weaker than the norm one week and one month following these past occurrences. KRE has then tended to outperform all other periods three, six, and twelve months out.
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S&P 500 Posts Full-Year Gain 47.1% of Time When January & February Are Both Down
The combination of a down January and a down February has come about 18 times, including this year, going back to 1950. Rest of the year and full-year performance has taken a rather sizable hit following the previous 17 occurrences. March through December S&P 500 average performance drops to 3.78% compared to 8.20% in all years. Full-year performance is even worse with S&P 500 average turning to a loss of -3.67% compared to an average gain of 9.48% in all years. All hope for 2022 is not lost as eight of the 17 past down January and down February years did go on to log gains over the last 10 months and full year while seven enjoyed double-digit gains from March to December.
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Are Corporate Credit Markets Starting to Crack?
Within the fixed income markets, the corporate credit markets can, at times, act like a canary in the economic coalmine. The return distribution for credit investors is asymmetrical, which means the potential for losses can be magnitudes larger than the potential for gains. So, credit markets tend to react quickly when economic conditions or corporate credit conditions start to deteriorate. And while fixed income markets broadly are down on the year, corporate credit markets (both investment grade and non-investment grade) are among the worst performing markets in the U.S. this year. Should investors take this as a sign that corporate credit markets are showing signs of stress? We don’t think so.
“U.S. corporate credit markets have underperformed this year but not because of increased credit risks, in our view,” noted LPL Financial Fixed Income Strategist Lawrence Gillum. “That we’re seeing broad based negative returns across most fixed income asset classes is largely due to higher Treasury yields and not deteriorating credit fundamentals.”
A Credit Default Swap Index (CDX) is a benchmark index that tracks a basket of U.S. corporate credit issuers and tends to act like an insurance policy in the case of an issuer’s default. In essence, credit default swaps strip out most of the interest rate risk of an issuesecurity and measures just the credit risk. As seen in the LPL Chart of the Day, credit default swap indexes have increased this year but remain well within normal ranges.
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As inflationary pressures have broadened this year, Treasury yields, across the curve, have increased due to expectations of Federal Reserve (Fed) interest rate hikes. That’s been the main driver of broad-based bond losses and we don’t think it should raise concerns about credit fundamentals. Moreover, we’re seeing the costs to insure the higher rated cohorts (the investment grade issuers) increase at a faster pace than the more default prone, non-investment grade cohort, confirming for us that the increase in cost is due to higher Treasury yields and not a deterioration in corporate credit conditions.
From a fundamental perspective, corporate balance sheets are still in good shape. Leverage ratios have increased recently, but net debt ratios (debt minus cash on the balance sheets) remain within historical norms. Also, due to the record amount of issuance over the last few years, companies were able to refinance debt at very low interest rates and push back when that debt was set to mature. As such, interest expenses have come down and now many corporations don’t need to access the capital markets anytime soon. We do continue to watch how these companies manage capital allocation decisions. Increases in M&A activity, share buybacks, and outsized dividends are all risks to bondholders and things that may lead to deteriorating credit fundamentals.
High Levels of Volatility
It's been a volatile start to 2022 so far. With an average intraday trading range of two percentage points, the S&P 500's average intraday range in the first 41 trading days of the year has been the widest since 2009, and the only other year besides 2009 where the average range was wider was 2008.
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High levels of intraday volatility tend to coincide with periods of elevated uncertainty among investors and typically occur during periods when the market is lower. When the average daily range of the S&P 500 has been more than 1.5 percentage points during the first 41 trading days of the year, the average YTD performance of the S&P 500 was a decline of 5.7% (median: -4.3%). This significantly trails the average gain of 1.3% (median: 2.0%) of all years since 1983. So far this year, the S&P 500 has had the second-worst start since 1983 trailing just 2009, when the S&P 500 tanked 25.3% in the first 41 trading days.
Regarding forward returns after these volatile starts, returns vary. Although performance over the following one and three months tended to be better than average and more consistent to the upside, over the following six months and for the rest of the year, performance was more mixed.
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Job Gains Surprise to the Upside But Fed Will Still Likely Hike by 25 Basis Points Next Meeting
The U.S. economy added 678,000 jobs in February and this strong report exceeded consensus forecast of 423,000. The unemployment rate fell to 3.8 percent from 4 percent in January, edging closer to pre pandemic levels. In February 2020, the unemployment rate was 3.5 percent.
The survey period for this report closed before Russia invaded Ukraine so no geopolitical impacts are in these data.
February jobs gains were broad based but mainly in the services sector as pandemic effects wane. Restaurants alone added 124,000 and the return to schooling pushed education jobs up by 112,000. Professional and business services added 95,000 jobs.
The participation rate is 62.3 percent, still 1.1 percentage points below February 2020. Participation rates are still lower than before the pandemic as individuals with young children may struggle to find childcare. The composition of the labor force is also changing as some baby boomers are taking early retirements.
In February, 13 percent worked remotely because of the pandemic, down from 15.4 percent last month. This percentage will likely continue to decline as more offices across the country loosen restrictions.
Another encouraging sign is the decline in people unable to work because of COVID-19-related business declines, either from closed or lost business. In February, 4.2 million reported inability to work because of business disruptions, down from 6 million last month.
“The February jobs numbers are encouraging but overall, this does not change expectations for how the FOMC will set interest rates at the next meeting. The big conundrum for policy makers right now is how to relieve inflation fatigue yet still protect the economy from geopolitical stress,” said LPL Financial Chief Economist Jeffrey Roach.
Wage growth is slowing. February average hourly earnings were unchanged from January and up 5.1 percent from a year ago. Looking ahead, wages may begin to moderate as the labor market loosens. Participation rates should continue to increase to pre-pandemic levels by the end of this year.
As shown in the LPL Chart of the Day, February posted one of the strongest reports in the last 12 months. The reopening process is supporting the services sector and hiring in services industries like leisure and hospitality strongly contributed to the headline gain in employment. This latest release from the Bureau of Labor Statistics will not likely change the minds of the FOMC in the upcoming meeting. Chairman Powell already revealed his preference for a 25 basis point hike in rates and this is the most likely action.
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- ($BLNK $ZIM $CRWD $DKS $DOCU $JD $RIVN $NIU $CIEN $VET $AMR $ORCL $SQSP $ASAN $OTLY $WOOF $ULTA $ITRN $EXPR $BMBL $MDB $SFIX $THO $MQ $EGRX $AG $IMXI $KOPN $CPB $ESTE $MTNB $UNFI $BBW $NINE $ALTO $CLVT $DM $WPM $SB $PLCE $HPK)
Monday 3.7.22 Before Market Open:
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Monday 3.7.22 After Market Close:
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Tuesday 3.8.22 Before Market Open:
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Tuesday 3.8.22 After Market Close:
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Wednesday 3.9.22 Before Market Open:
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Wednesday 3.9.22 After Market Close:
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Thursday 3.10.22 Before Market Open:
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Thursday 3.10.22 After Market Close:
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Friday 3.11.22 Before Market Open:
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Friday 3.11.22 After Market Close:
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Blink Charging Co. $22.43
Blink Charging Co. (BLNK) is confirmed to report earnings at approximately 4:00 PM ET on Thursday, March 10, 2022. The consensus estimate is for a loss of $0.39 per share on revenue of $5.43 million and the Earnings Whisper ® number is ($0.43) per share. Investor sentiment going into the company's earnings release has 57% expecting an earnings beat. Consensus estimates are for earnings to decline year-over-year by 62.50% with revenue increasing by 121.36%. Short interest has increased by 16.7% since the company's last earnings release while the stock has drifted lower by 44.5% from its open following the earnings release to be 51.1% below its 200 day moving average of $45.89. Overall earnings estimates have been revised lower since the company's last earnings release. On Wednesday, February 9, 2022 there was some notable buying of 9,113 contracts of the $30.00 call and 8,903 contracts of the $30.00 put expiring on Friday, March 18, 2022. Option traders are pricing in a 16.2% move on earnings and the stock has averaged a 10.0% move in recent quarters.
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ZIM Integrated Shipping Services Ltd. $71.88
ZIM Integrated Shipping Services Ltd. (ZIM) is confirmed to report earnings at approximately 7:00 AM ET on Wednesday, March 9, 2022. The consensus earnings estimate is $13.65 per share on revenue of $3.24 billion and the Earnings Whisper ® number is $14.23 per share. Investor sentiment going into the company's earnings release has 81% expecting an earnings beat. Consensus estimates are for year-over-year earnings growth of 291.12% with revenue increasing by 138.09%. Short interest has increased by 28.0% since the company's last earnings release while the stock has drifted higher by 35.4% from its open following the earnings release to be 39.5% above its 200 day moving average of $51.52. Overall earnings estimates have been revised higher since the company's last earnings release. On Wednesday, February 2, 2022 there was some notable buying of 1,286 contracts of the $60.00 put expiring on Friday, March 18, 2022. Option traders are pricing in a 12.0% move on earnings and the stock has averaged a 5.6% move in recent quarters.
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CrowdStrike, Inc. $179.03
CrowdStrike, Inc. (CRWD) is confirmed to report earnings at approximately 4:05 PM ET on Wednesday, March 9, 2022. The consensus earnings estimate is $0.21 per share on revenue of $410.86 million and the Earnings Whisper ® number is $0.23 per share. Investor sentiment going into the company's earnings release has 71% expecting an earnings beat The company's guidance was for earnings of $0.19 to $0.21 per share on revenue of $406.50 million to $412.30 million. Consensus estimates are for year-over-year earnings growth of 200.00% with revenue increasing by 55.08%. Short interest has increased by 17.8% since the company's last earnings release while the stock has drifted lower by 13.9% from its open following the earnings release to be 22.6% below its 200 day moving average of $231.38. Overall earnings estimates have been revised higher since the company's last earnings release. On Monday, February 28, 2022 there was some notable buying of 2,946 contracts of the $220.00 call expiring on Friday, March 11, 2022. Option traders are pricing in a 13.0% move on earnings and the stock has averaged a 6.8% move in recent quarters.
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DICK'S Sporting Goods, Inc. $109.71
DICK'S Sporting Goods, Inc. (DKS) is confirmed to report earnings at approximately 7:30 AM ET on Tuesday, March 8, 2022. The consensus earnings estimate is $3.54 per share on revenue of $3.28 billion and the Earnings Whisper ® number is $3.60 per share. Investor sentiment going into the company's earnings release has 51% expecting an earnings beat. Consensus estimates are for year-over-year earnings growth of 45.68% with revenue increasing by 4.95%. Short interest has increased by 34.6% since the company's last earnings release while the stock has drifted lower by 17.5% from its open following the earnings release to be 2.8% below its 200 day moving average of $112.91. Overall earnings estimates have been revised higher since the company's last earnings release. On Wednesday, February 16, 2022 there was some notable buying of 5,395 contracts of the $115.00 call expiring on Friday, March 18, 2022. Option traders are pricing in a 13.4% move on earnings and the stock has averaged a 9.4% move in recent quarters.
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DocuSign $101.38
DocuSign (DOCU) is confirmed to report earnings at approximately 4:05 PM ET on Thursday, March 10, 2022. The consensus earnings estimate is $0.47 per share on revenue of $561.47 million and the Earnings Whisper ® number is $0.52 per share. Investor sentiment going into the company's earnings release has 48% expecting an earnings beat The company's guidance was for revenue of $557.00 million to $563.00 million. Consensus estimates are for year-over-year earnings growth of 51.61% with revenue increasing by 30.30%. Short interest has increased by 48.3% since the company's last earnings release while the stock has drifted lower by 34.5% from its open following the earnings release to be 55.0% below its 200 day moving average of $225.33. Overall earnings estimates have been revised higher since the company's last earnings release. On Friday, February 25, 2022 there was some notable buying of 10,045 contracts of the $85.00 call expiring on Friday, May 20, 2022. Option traders are pricing in a 20.4% move on earnings and the stock has averaged a 15.0% move in recent quarters.
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JD.com, Inc. $63.59
JD.com, Inc. (JD) is confirmed to report earnings at approximately 4:00 AM ET on Thursday, March 10, 2022. The consensus earnings estimate is $0.25 per share on revenue of $43.81 billion and the Earnings Whisper ® number is $0.28 per share. Investor sentiment going into the company's earnings release has 78% expecting an earnings beat. Consensus estimates are for year-over-year earnings growth of 177.78% with revenue increasing by 27.43%. Short interest has increased by 22.5% since the company's last earnings release while the stock has drifted lower by 27.7% from its open following the earnings release to be 15.4% below its 200 day moving average of $75.12. Overall earnings estimates have been revised higher since the company's last earnings release. On Thursday, March 3, 2022 there was some notable buying of 15,266 contracts of the $105.00 call expiring on Friday, May 20, 2022. Option traders are pricing in a 10.4% move on earnings and the stock has averaged a 4.4% move in recent quarters.
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Rivian Automotive, Inc. $47.39
Rivian Automotive, Inc. (RIVN) is confirmed to report earnings at approximately 4:10 PM ET on Thursday, March 10, 2022. The consensus estimate is for a loss of $1.58 per share on revenue of $61.67 million and the Earnings Whisper ® number is ($1.65) per share. Investor sentiment going into the company's earnings release has 31% expecting an earnings beat. The stock has drifted lower by 52.6% from its open following the earnings release. Overall earnings estimates have been revised lower since the company's last earnings release. On Thursday, March 3, 2022 there was some notable buying of 2,900 contracts of the $50.00 put expiring on Friday, March 11, 2022. Option traders are pricing in a 18.6% move on earnings and the stock has averaged a 10.3% move in recent quarters.
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Niu Technologies $10.44
Niu Technologies (NIU) is confirmed to report earnings at approximately 2:00 AM ET on Monday, March 7, 2022. Investor sentiment going into the company's earnings release has 62% expecting an earnings beat The company's guidance was for revenue of $131.57 million to $142.54 million. Short interest has increased by 2.7% since the company's last earnings release while the stock has drifted lower by 52.1% from its open following the earnings release to be 55.0% below its 200 day moving average of $23.20. Overall earnings estimates have been revised lower since the company's last earnings release. Option traders are pricing in a 24.7% move on earnings and the stock has averaged a 7.0% move in recent quarters.
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Ciena Corporation $65.94
Ciena Corporation (CIEN) is confirmed to report earnings at approximately 7:00 AM ET on Monday, March 7, 2022. The consensus earnings estimate is $0.45 per share on revenue of $894.85 million and the Earnings Whisper ® number is $0.43 per share. Investor sentiment going into the company's earnings release has 50% expecting an earnings beat The company's guidance was for revenue of $870.00 million to $910.00 million. Consensus estimates are for earnings to decline year-over-year by 11.76% with revenue increasing by 18.19%. Short interest has increased by 45.6% since the company's last earnings release while the stock has drifted lower by 5.7% from its open following the earnings release to be 9.6% above its 200 day moving average of $60.14. On Tuesday, February 15, 2022 there was some notable buying of 516 contracts of the $75.00 call expiring on Friday, March 18, 2022. Option traders are pricing in a 12.7% move on earnings and the stock has averaged a 9.3% move in recent quarters.
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Vermilion Energy Inc. $19.70
Vermilion Energy Inc. (VET) is confirmed to report earnings at approximately 2:00 AM ET on Monday, March 7, 2022. The consensus earnings estimate is $0.53 per share on revenue of $392.86 million and the Earnings Whisper ® number is $0.70 per share. Investor sentiment going into the company's earnings release has 64% expecting an earnings beat. Consensus estimates are for year-over-year earnings growth of 352.38% with revenue increasing by 61.91%. Short interest has increased by 10.7% since the company's last earnings release while the stock has drifted higher by 69.8% from its open following the earnings release to be 86.8% above its 200 day moving average of $10.55. Overall earnings estimates have been revised higher since the company's last earnings release. On Friday, March 4, 2022 there was some notable buying of 1,681 contracts of the $17.50 put expiring on Friday, September 16, 2022. Option traders are pricing in a 16.1% move on earnings and the stock has averaged a 10.0% move in recent quarters.
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Federal Reserve Chair Jerome Powell testifies before Congress in the week ahead, and markets will hang on what he says regarding how the Russia-Ukraine conflict could affect Fed policy.
Russia’s invasion of Ukraine will continue to be a major focus, as wary investors watch fresh inflation data and the rising price of oil in the week ahead.
Stocks in the past week sold off in volatile trading, as oil rose more than 20% and a whole host of other commodities rose on supply worries. Investors sought safety in bonds, driving prices higher and the 10-year Treasury yield to 1.72% Friday. The dollar rallied, pushing the dollar index up 2% on the week.
“We just don’t know what can happen over the weekend. It looks like the Russians are amping themselves up and they’re getting more aggressive,” said Jim Caron, Morgan Stanley Investment Management head of macro strategies for global fixed income.
“If nothing happens over the weekend, or if there’s some peace talks coming, then the 10-year note yield could go up 10 to 15 basis points. It could have that swing,” said Caron. Yields move opposite price. (1 basis point equals 0.01%.)
The Federal Reserve will also be top of mind, as investors focus on its pending interest rate hike on March 16. But Fed officials will not be making public addresses in the quiet period leading up to their meeting.
The economic calendar is relatively light in the coming week, with the exception of Thursday’s report of February’s consumer price index.
According to Dow Jones, economists expect headline inflation to rise to 7.8% year-over-year, from 7.5% in January, the highest since 1982. Headline inflation includes food and energy prices.
“The risk is to the upside. It will be a shocker if we get an 8% handle,” said Marc Chandler, chief market strategist at Bannockburn Global Forex.
Investors will also focus on how the market itself is trading. The S&P 500 fell 1.3% to 4,328 in the past week, while the Nasdaq lost 2.8% to 13,313.
“The major averages are all in a downtrend here. They seem to rally and then run out of steam,” said Paul Hickey, co-founder of Bespoke. “Until you get some kind of break of that, you want to be a little cautious. It’s definitely concerning, all this stuff.”
Hickey said that the market is behaving similarly as it did in other conflicts.
“In the short run, there’s a lot of uncertainty,” said Hickey “I think the playbook is similar. You tend to see a lot of sloshing around - big swings up and down — and then eventually things start to stabilize a few months later...The question is where does this one go?”
Boiling oil
Following a week of gains, oil jumped sharply again Friday, with West Texas Intermediate rising above $115 for the first time since 2008. WTI rose 7.4% Friday and was up 26% for the week, to settle at $115.68. Russia’s battle for control of Europe’s largest nuclear power plant early Friday spooked investors.
The Russian invasion of Ukraine has stirred up more fear of inflation, and economists are already raising their inflation forecasts, due to rising oil prices. The whole commodities complex has shifted higher, since Russia is such a key producer of wheat, palladium, aluminum and other commodities.
Rising oil prices can be a worry since they can generate one of the biggest hits to inflation and do so quickly.
Russia is unique in that it is a very large commodity exporter and has the ability to impact many markets. It is one of the world’s largest exporters of crude and natural gas, with its primary customer Europe. It is the largest exporter of both palladium and wheat.
The jump in oil has already been hitting U.S. consumers at the pump. Gasoline prices were $3.83 per gallon of unleaded Friday, up 11 cents in just a day and 26 cents in a week, according to AAA.
“The national average could get to $4 a gallon next week,” said John Kilduff, partner with Again Capital.
In the oil market, Kilduff said there was brisk buying Friday. “There’s still room to grind higher, as we continue to price in the loss of Russian crude oil,” he said.
The U.S. and its allies did not sanction Russian energy, but the sanctions did inhibit buyers, banks and shippers who fear running afoul of sanctions on the Russian financial system.
“It’s pretty clear nobody wanted to be short going into the weekend,” said Kilduff. “There’s still room to grind higher as we continue to price in the loss of Russian crude oil.”
Oil traders are also watching to see if Iran is able to strike a deal that would allow it sell its oil on the market, in exchange for an end to its nuclear programs. It could then bring 1 million barrels back on to the market, but analysts say there will still be a shortfall.
Will Ukraine and Russia Impact The Usually Bullish March?
Good riddance to February. It was another negative month for stocks, but the clear headline was Russia invading Ukraine and the potential impacts that would have on the global economy and stock market.
First things first, this means the first two months of 2022 have been in the red for the S&P 500 Index. “Seeing the first two months of a new year in the red isn’t a great feeling, but the good news is lately it hasn’t been a major warning sign,” explained LPL Financial Chief Market Strategist Ryan Detrick. “The first two months of 2016 and 2020 were both negative, but stocks were able to claw back and finish higher those years.”
(CLICK HERE FOR THE CHART!)
It is important to remember that this is a midterm year and early in midterm years, stocks tend to have some trouble. That has played out once again in 2022, but don’t forget later in these years tend to see a very strong rally.
(CLICK HERE FOR THE CHART!)
Another angle on this is looking at how stocks do each quarter, but broken up by the four-year presidential cycle. Again, investors need to know that this quarter and the next two are some of the weakest out of the entire four-year cycle.
(CLICK HERE FOR THE CHART!)
Although midterm years tend to see overall weakness until late, be aware that March is one of the best months of the year.
(CLICK HERE FOR THE CHART!)
Lastly, looking purely at March based on seasonality shows that this is a solid month. In a midterm year, it is the fourth best month and the past 20 years it is fifth best. Since 1950, it is more in the middle at the sixth strongest. Of course, it would have been better, but the 12.5% drop in March 2020 is skewing things.
(CLICK HERE FOR THE CHART!)
Clearly headlines will move stocks in the near-term, but we continue to expect the overall economic growth in the U.S. to remain quite strong and likely push stocks back up to our fair value target of 5,000 on the S&P 500 by year-end.
Banks (KRE) Swing Wildly
While Financials are the best performing sector so far in today's session, leading into today it was the worst-performing sector over the past week thanks in large part to a 3.7% decline on Tuesday; the sector's worst single day since June 2020. Looking more specifically at bank stocks, using the SPDR S&P Regional Banking ETF (KRE) as a proxy, yesterday saw an even more dramatic decline of 5.47% marking the largest decline since November 2020. That drop also ranks in the bottom 1% of all daily changes on record since the ETF began trading in 2006. The over 3.5% rebound today, meanwhile, ranks in the top 5% of all days on record as yesterday's decline was not quite enough to drop the industry below its 200-DMA; a support level that has now held multiple times in the past year.
(CLICK HERE FOR THE CHART!)
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As previously mentioned, it is rare for KRE to fall over 5% in a single day. Excluding yesterday, there were 68 other times this happened but only a dozen of those occurred with at least 3 months between the prior instance. In the table below, we show the performance of KRE after each of those periods.
While it is far from the case today, typically, the next day has often seen KRE fall further after a 5% drop. Instead, today it is seeing the second-best next-day performance of these instances. As for where things go from here though, returns have been weaker than the norm one week and one month following these past occurrences. KRE has then tended to outperform all other periods three, six, and twelve months out.
(CLICK HERE FOR THE CHART!)
S&P 500 Posts Full-Year Gain 47.1% of Time When January & February Are Both Down
The combination of a down January and a down February has come about 18 times, including this year, going back to 1950. Rest of the year and full-year performance has taken a rather sizable hit following the previous 17 occurrences. March through December S&P 500 average performance drops to 3.78% compared to 8.20% in all years. Full-year performance is even worse with S&P 500 average turning to a loss of -3.67% compared to an average gain of 9.48% in all years. All hope for 2022 is not lost as eight of the 17 past down January and down February years did go on to log gains over the last 10 months and full year while seven enjoyed double-digit gains from March to December.
(CLICK HERE FOR THE CHART!)
Are Corporate Credit Markets Starting to Crack?
Within the fixed income markets, the corporate credit markets can, at times, act like a canary in the economic coalmine. The return distribution for credit investors is asymmetrical, which means the potential for losses can be magnitudes larger than the potential for gains. So, credit markets tend to react quickly when economic conditions or corporate credit conditions start to deteriorate. And while fixed income markets broadly are down on the year, corporate credit markets (both investment grade and non-investment grade) are among the worst performing markets in the U.S. this year. Should investors take this as a sign that corporate credit markets are showing signs of stress? We don’t think so.
“U.S. corporate credit markets have underperformed this year but not because of increased credit risks, in our view,” noted LPL Financial Fixed Income Strategist Lawrence Gillum. “That we’re seeing broad based negative returns across most fixed income asset classes is largely due to higher Treasury yields and not deteriorating credit fundamentals.”
A Credit Default Swap Index (CDX) is a benchmark index that tracks a basket of U.S. corporate credit issuers and tends to act like an insurance policy in the case of an issuer’s default. In essence, credit default swaps strip out most of the interest rate risk of an issuesecurity and measures just the credit risk. As seen in the LPL Chart of the Day, credit default swap indexes have increased this year but remain well within normal ranges.
(CLICK HERE FOR THE CHART!)
As inflationary pressures have broadened this year, Treasury yields, across the curve, have increased due to expectations of Federal Reserve (Fed) interest rate hikes. That’s been the main driver of broad-based bond losses and we don’t think it should raise concerns about credit fundamentals. Moreover, we’re seeing the costs to insure the higher rated cohorts (the investment grade issuers) increase at a faster pace than the more default prone, non-investment grade cohort, confirming for us that the increase in cost is due to higher Treasury yields and not a deterioration in corporate credit conditions.
From a fundamental perspective, corporate balance sheets are still in good shape. Leverage ratios have increased recently, but net debt ratios (debt minus cash on the balance sheets) remain within historical norms. Also, due to the record amount of issuance over the last few years, companies were able to refinance debt at very low interest rates and push back when that debt was set to mature. As such, interest expenses have come down and now many corporations don’t need to access the capital markets anytime soon. We do continue to watch how these companies manage capital allocation decisions. Increases in M&A activity, share buybacks, and outsized dividends are all risks to bondholders and things that may lead to deteriorating credit fundamentals.
High Levels of Volatility
It's been a volatile start to 2022 so far. With an average intraday trading range of two percentage points, the S&P 500's average intraday range in the first 41 trading days of the year has been the widest since 2009, and the only other year besides 2009 where the average range was wider was 2008.
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High levels of intraday volatility tend to coincide with periods of elevated uncertainty among investors and typically occur during periods when the market is lower. When the average daily range of the S&P 500 has been more than 1.5 percentage points during the first 41 trading days of the year, the average YTD performance of the S&P 500 was a decline of 5.7% (median: -4.3%). This significantly trails the average gain of 1.3% (median: 2.0%) of all years since 1983. So far this year, the S&P 500 has had the second-worst start since 1983 trailing just 2009, when the S&P 500 tanked 25.3% in the first 41 trading days.
Regarding forward returns after these volatile starts, returns vary. Although performance over the following one and three months tended to be better than average and more consistent to the upside, over the following six months and for the rest of the year, performance was more mixed.
(CLICK HERE FOR THE CHART!)
Job Gains Surprise to the Upside But Fed Will Still Likely Hike by 25 Basis Points Next Meeting
The U.S. economy added 678,000 jobs in February and this strong report exceeded consensus forecast of 423,000. The unemployment rate fell to 3.8 percent from 4 percent in January, edging closer to pre pandemic levels. In February 2020, the unemployment rate was 3.5 percent.
The survey period for this report closed before Russia invaded Ukraine so no geopolitical impacts are in these data.
February jobs gains were broad based but mainly in the services sector as pandemic effects wane. Restaurants alone added 124,000 and the return to schooling pushed education jobs up by 112,000. Professional and business services added 95,000 jobs.
The participation rate is 62.3 percent, still 1.1 percentage points below February 2020. Participation rates are still lower than before the pandemic as individuals with young children may struggle to find childcare. The composition of the labor force is also changing as some baby boomers are taking early retirements.
In February, 13 percent worked remotely because of the pandemic, down from 15.4 percent last month. This percentage will likely continue to decline as more offices across the country loosen restrictions.
Another encouraging sign is the decline in people unable to work because of COVID-19-related business declines, either from closed or lost business. In February, 4.2 million reported inability to work because of business disruptions, down from 6 million last month.
“The February jobs numbers are encouraging but overall, this does not change expectations for how the FOMC will set interest rates at the next meeting. The big conundrum for policy makers right now is how to relieve inflation fatigue yet still protect the economy from geopolitical stress,” said LPL Financial Chief Economist Jeffrey Roach.
Wage growth is slowing. February average hourly earnings were unchanged from January and up 5.1 percent from a year ago. Looking ahead, wages may begin to moderate as the labor market loosens. Participation rates should continue to increase to pre-pandemic levels by the end of this year.
As shown in the LPL Chart of the Day, February posted one of the strongest reports in the last 12 months. The reopening process is supporting the services sector and hiring in services industries like leisure and hospitality strongly contributed to the headline gain in employment. This latest release from the Bureau of Labor Statistics will not likely change the minds of the FOMC in the upcoming meeting. Chairman Powell already revealed his preference for a 25 basis point hike in rates and this is the most likely action.
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Monday 3.7.22 Before Market Open:
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Monday 3.7.22 After Market Close:
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Tuesday 3.8.22 Before Market Open:
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Tuesday 3.8.22 After Market Close:
(CLICK HERE FOR TUESDAY'S AFTER-MARKET EARNINGS TIME & ESTIMATES!)
Wednesday 3.9.22 Before Market Open:
(CLICK HERE FOR WEDNESDAY'S PRE-MARKET EARNINGS TIME & ESTIMATES!)
Wednesday 3.9.22 After Market Close:
(CLICK HERE FOR WEDNESDAY'S AFTER-MARKET EARNINGS TIME & ESTIMATES!)
Thursday 3.10.22 Before Market Open:
(CLICK HERE FOR THURSDAY'S PRE-MARKET EARNINGS TIME & ESTIMATES!)
Thursday 3.10.22 After Market Close:
(CLICK HERE FOR THURSDAY'S AFTER-MARKET EARNINGS TIME & ESTIMATES LINK #1!)
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Friday 3.11.22 Before Market Open:
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Friday 3.11.22 After Market Close:
([CLICK HERE FOR FRIDAY'S AFTER-MARKET EARNINGS TIME & ESTIMATES!]())
(NONE.)
(T.B.A. THIS WEEKEND.)
(T.B.A. THIS WEEKEND.) (T.B.A. THIS WEEKEND.).
(CLICK HERE FOR THE CHART!)
Federal Reserve Chair Jerome Powell testifies before Congress in the week ahead, and markets will hang on what he says regarding how the Russia-Ukraine conflict could affect Fed policy.
Russia’s invasion of Ukraine will continue to be a major focus, as wary investors watch fresh inflation data and the rising price of oil in the week ahead.
Stocks in the past week sold off in volatile trading, as oil rose more than 20% and a whole host of other commodities rose on supply worries. Investors sought safety in bonds, driving prices higher and the 10-year Treasury yield to 1.72% Friday. The dollar rallied, pushing the dollar index up 2% on the week.
“We just don’t know what can happen over the weekend. It looks like the Russians are amping themselves up and they’re getting more aggressive,” said Jim Caron, Morgan Stanley Investment Management head of macro strategies for global fixed income.
“If nothing happens over the weekend, or if there’s some peace talks coming, then the 10-year note yield could go up 10 to 15 basis points. It could have that swing,” said Caron. Yields move opposite price. (1 basis point equals 0.01%.)
The Federal Reserve will also be top of mind, as investors focus on its pending interest rate hike on March 16. But Fed officials will not be making public addresses in the quiet period leading up to their meeting.
The economic calendar is relatively light in the coming week, with the exception of Thursday’s report of February’s consumer price index.
According to Dow Jones, economists expect headline inflation to rise to 7.8% year-over-year, from 7.5% in January, the highest since 1982. Headline inflation includes food and energy prices.
“The risk is to the upside. It will be a shocker if we get an 8% handle,” said Marc Chandler, chief market strategist at Bannockburn Global Forex.
Investors will also focus on how the market itself is trading. The S&P 500 fell 1.3% to 4,328 in the past week, while the Nasdaq lost 2.8% to 13,313.
“The major averages are all in a downtrend here. They seem to rally and then run out of steam,” said Paul Hickey, co-founder of Bespoke. “Until you get some kind of break of that, you want to be a little cautious. It’s definitely concerning, all this stuff.”
Hickey said that the market is behaving similarly as it did in other conflicts.
“In the short run, there’s a lot of uncertainty,” said Hickey “I think the playbook is similar. You tend to see a lot of sloshing around - big swings up and down — and then eventually things start to stabilize a few months later...The question is where does this one go?”
Boiling oil
Following a week of gains, oil jumped sharply again Friday, with West Texas Intermediate rising above $115 for the first time since 2008. WTI rose 7.4% Friday and was up 26% for the week, to settle at $115.68. Russia’s battle for control of Europe’s largest nuclear power plant early Friday spooked investors.
The Russian invasion of Ukraine has stirred up more fear of inflation, and economists are already raising their inflation forecasts, due to rising oil prices. The whole commodities complex has shifted higher, since Russia is such a key producer of wheat, palladium, aluminum and other commodities.
Rising oil prices can be a worry since they can generate one of the biggest hits to inflation and do so quickly.
Russia is unique in that it is a very large commodity exporter and has the ability to impact many markets. It is one of the world’s largest exporters of crude and natural gas, with its primary customer Europe. It is the largest exporter of both palladium and wheat.
The jump in oil has already been hitting U.S. consumers at the pump. Gasoline prices were $3.83 per gallon of unleaded Friday, up 11 cents in just a day and 26 cents in a week, according to AAA.
“The national average could get to $4 a gallon next week,” said John Kilduff, partner with Again Capital.
In the oil market, Kilduff said there was brisk buying Friday. “There’s still room to grind higher, as we continue to price in the loss of Russian crude oil,” he said.
The U.S. and its allies did not sanction Russian energy, but the sanctions did inhibit buyers, banks and shippers who fear running afoul of sanctions on the Russian financial system.
“It’s pretty clear nobody wanted to be short going into the weekend,” said Kilduff. “There’s still room to grind higher as we continue to price in the loss of Russian crude oil.”
Oil traders are also watching to see if Iran is able to strike a deal that would allow it sell its oil on the market, in exchange for an end to its nuclear programs. It could then bring 1 million barrels back on to the market, but analysts say there will still be a shortfall.
Will Ukraine and Russia Impact The Usually Bullish March?
Good riddance to February. It was another negative month for stocks, but the clear headline was Russia invading Ukraine and the potential impacts that would have on the global economy and stock market.
First things first, this means the first two months of 2022 have been in the red for the S&P 500 Index. “Seeing the first two months of a new year in the red isn’t a great feeling, but the good news is lately it hasn’t been a major warning sign,” explained LPL Financial Chief Market Strategist Ryan Detrick. “The first two months of 2016 and 2020 were both negative, but stocks were able to claw back and finish higher those years.”
(CLICK HERE FOR THE CHART!)
It is important to remember that this is a midterm year and early in midterm years, stocks tend to have some trouble. That has played out once again in 2022, but don’t forget later in these years tend to see a very strong rally.
(CLICK HERE FOR THE CHART!)
Another angle on this is looking at how stocks do each quarter, but broken up by the four-year presidential cycle. Again, investors need to know that this quarter and the next two are some of the weakest out of the entire four-year cycle.
(CLICK HERE FOR THE CHART!)
Although midterm years tend to see overall weakness until late, be aware that March is one of the best months of the year.
(CLICK HERE FOR THE CHART!)
Lastly, looking purely at March based on seasonality shows that this is a solid month. In a midterm year, it is the fourth best month and the past 20 years it is fifth best. Since 1950, it is more in the middle at the sixth strongest. Of course, it would have been better, but the 12.5% drop in March 2020 is skewing things.
(CLICK HERE FOR THE CHART!)
Clearly headlines will move stocks in the near-term, but we continue to expect the overall economic growth in the U.S. to remain quite strong and likely push stocks back up to our fair value target of 5,000 on the S&P 500 by year-end.
Banks (KRE) Swing Wildly
While Financials are the best performing sector so far in today's session, leading into today it was the worst-performing sector over the past week thanks in large part to a 3.7% decline on Tuesday; the sector's worst single day since June 2020. Looking more specifically at bank stocks, using the SPDR S&P Regional Banking ETF (KRE) as a proxy, yesterday saw an even more dramatic decline of 5.47% marking the largest decline since November 2020. That drop also ranks in the bottom 1% of all daily changes on record since the ETF began trading in 2006. The over 3.5% rebound today, meanwhile, ranks in the top 5% of all days on record as yesterday's decline was not quite enough to drop the industry below its 200-DMA; a support level that has now held multiple times in the past year.
(CLICK HERE FOR THE CHART!)
(CLICK HERE FOR THE CHART!)
As previously mentioned, it is rare for KRE to fall over 5% in a single day. Excluding yesterday, there were 68 other times this happened but only a dozen of those occurred with at least 3 months between the prior instance. In the table below, we show the performance of KRE after each of those periods.
While it is far from the case today, typically, the next day has often seen KRE fall further after a 5% drop. Instead, today it is seeing the second-best next-day performance of these instances. As for where things go from here though, returns have been weaker than the norm one week and one month following these past occurrences. KRE has then tended to outperform all other periods three, six, and twelve months out.
(CLICK HERE FOR THE CHART!)
S&P 500 Posts Full-Year Gain 47.1% of Time When January & February Are Both Down
The combination of a down January and a down February has come about 18 times, including this year, going back to 1950. Rest of the year and full-year performance has taken a rather sizable hit following the previous 17 occurrences. March through December S&P 500 average performance drops to 3.78% compared to 8.20% in all years. Full-year performance is even worse with S&P 500 average turning to a loss of -3.67% compared to an average gain of 9.48% in all years. All hope for 2022 is not lost as eight of the 17 past down January and down February years did go on to log gains over the last 10 months and full year while seven enjoyed double-digit gains from March to December.
(CLICK HERE FOR THE CHART!)
Are Corporate Credit Markets Starting to Crack?
Within the fixed income markets, the corporate credit markets can, at times, act like a canary in the economic coalmine. The return distribution for credit investors is asymmetrical, which means the potential for losses can be magnitudes larger than the potential for gains. So, credit markets tend to react quickly when economic conditions or corporate credit conditions start to deteriorate. And while fixed income markets broadly are down on the year, corporate credit markets (both investment grade and non-investment grade) are among the worst performing markets in the U.S. this year. Should investors take this as a sign that corporate credit markets are showing signs of stress? We don’t think so.
“U.S. corporate credit markets have underperformed this year but not because of increased credit risks, in our view,” noted LPL Financial Fixed Income Strategist Lawrence Gillum. “That we’re seeing broad based negative returns across most fixed income asset classes is largely due to higher Treasury yields and not deteriorating credit fundamentals.”
A Credit Default Swap Index (CDX) is a benchmark index that tracks a basket of U.S. corporate credit issuers and tends to act like an insurance policy in the case of an issuer’s default. In essence, credit default swaps strip out most of the interest rate risk of an issuesecurity and measures just the credit risk. As seen in the LPL Chart of the Day, credit default swap indexes have increased this year but remain well within normal ranges.
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As inflationary pressures have broadened this year, Treasury yields, across the curve, have increased due to expectations of Federal Reserve (Fed) interest rate hikes. That’s been the main driver of broad-based bond losses and we don’t think it should raise concerns about credit fundamentals. Moreover, we’re seeing the costs to insure the higher rated cohorts (the investment grade issuers) increase at a faster pace than the more default prone, non-investment grade cohort, confirming for us that the increase in cost is due to higher Treasury yields and not a deterioration in corporate credit conditions.
From a fundamental perspective, corporate balance sheets are still in good shape. Leverage ratios have increased recently, but net debt ratios (debt minus cash on the balance sheets) remain within historical norms. Also, due to the record amount of issuance over the last few years, companies were able to refinance debt at very low interest rates and push back when that debt was set to mature. As such, interest expenses have come down and now many corporations don’t need to access the capital markets anytime soon. We do continue to watch how these companies manage capital allocation decisions. Increases in M&A activity, share buybacks, and outsized dividends are all risks to bondholders and things that may lead to deteriorating credit fundamentals.
High Levels of Volatility
It's been a volatile start to 2022 so far. With an average intraday trading range of two percentage points, the S&P 500's average intraday range in the first 41 trading days of the year has been the widest since 2009, and the only other year besides 2009 where the average range was wider was 2008.
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High levels of intraday volatility tend to coincide with periods of elevated uncertainty among investors and typically occur during periods when the market is lower. When the average daily range of the S&P 500 has been more than 1.5 percentage points during the first 41 trading days of the year, the average YTD performance of the S&P 500 was a decline of 5.7% (median: -4.3%). This significantly trails the average gain of 1.3% (median: 2.0%) of all years since 1983. So far this year, the S&P 500 has had the second-worst start since 1983 trailing just 2009, when the S&P 500 tanked 25.3% in the first 41 trading days.
Regarding forward returns after these volatile starts, returns vary. Although performance over the following one and three months tended to be better than average and more consistent to the upside, over the following six months and for the rest of the year, performance was more mixed.
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Job Gains Surprise to the Upside But Fed Will Still Likely Hike by 25 Basis Points Next Meeting
The U.S. economy added 678,000 jobs in February and this strong report exceeded consensus forecast of 423,000. The unemployment rate fell to 3.8 percent from 4 percent in January, edging closer to pre pandemic levels. In February 2020, the unemployment rate was 3.5 percent.
The survey period for this report closed before Russia invaded Ukraine so no geopolitical impacts are in these data.
February jobs gains were broad based but mainly in the services sector as pandemic effects wane. Restaurants alone added 124,000 and the return to schooling pushed education jobs up by 112,000. Professional and business services added 95,000 jobs.
The participation rate is 62.3 percent, still 1.1 percentage points below February 2020. Participation rates are still lower than before the pandemic as individuals with young children may struggle to find childcare. The composition of the labor force is also changing as some baby boomers are taking early retirements.
In February, 13 percent worked remotely because of the pandemic, down from 15.4 percent last month. This percentage will likely continue to decline as more offices across the country loosen restrictions.
Another encouraging sign is the decline in people unable to work because of COVID-19-related business declines, either from closed or lost business. In February, 4.2 million reported inability to work because of business disruptions, down from 6 million last month.
“The February jobs numbers are encouraging but overall, this does not change expectations for how the FOMC will set interest rates at the next meeting. The big conundrum for policy makers right now is how to relieve inflation fatigue yet still protect the economy from geopolitical stress,” said LPL Financial Chief Economist Jeffrey Roach.
Wage growth is slowing. February average hourly earnings were unchanged from January and up 5.1 percent from a year ago. Looking ahead, wages may begin to moderate as the labor market loosens. Participation rates should continue to increase to pre-pandemic levels by the end of this year.
As shown in the LPL Chart of the Day, February posted one of the strongest reports in the last 12 months. The reopening process is supporting the services sector and hiring in services industries like leisure and hospitality strongly contributed to the headline gain in employment. This latest release from the Bureau of Labor Statistics will not likely change the minds of the FOMC in the upcoming meeting. Chairman Powell already revealed his preference for a 25 basis point hike in rates and this is the most likely action.
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Monday 3.7.22 Before Market Open:
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Blink Charging Co. $22.43
Blink Charging Co. (BLNK) is confirmed to report earnings at approximately 4:00 PM ET on Thursday, March 10, 2022. The consensus estimate is for a loss of $0.39 per share on revenue of $5.43 million and the Earnings Whisper ® number is ($0.43) per share. Investor sentiment going into the company's earnings release has 57% expecting an earnings beat. Consensus estimates are for earnings to decline year-over-year by 62.50% with revenue increasing by 121.36%. Short interest has increased by 16.7% since the company's last earnings release while the stock has drifted lower by 44.5% from its open following the earnings release to be 51.1% below its 200 day moving average of $45.89. Overall earnings estimates have been revised lower since the company's last earnings release. On Wednesday, February 9, 2022 there was some notable buying of 9,113 contracts of the $30.00 call and 8,903 contracts of the $30.00 put expiring on Friday, March 18, 2022. Option traders are pricing in a 16.2% move on earnings and the stock has averaged a 10.0% move in recent quarters.
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ZIM Integrated Shipping Services Ltd. $71.88
ZIM Integrated Shipping Services Ltd. (ZIM) is confirmed to report earnings at approximately 7:00 AM ET on Wednesday, March 9, 2022. The consensus earnings estimate is $13.65 per share on revenue of $3.24 billion and the Earnings Whisper ® number is $14.23 per share. Investor sentiment going into the company's earnings release has 81% expecting an earnings beat. Consensus estimates are for year-over-year earnings growth of 291.12% with revenue increasing by 138.09%. Short interest has increased by 28.0% since the company's last earnings release while the stock has drifted higher by 35.4% from its open following the earnings release to be 39.5% above its 200 day moving average of $51.52. Overall earnings estimates have been revised higher since the company's last earnings release. On Wednesday, February 2, 2022 there was some notable buying of 1,286 contracts of the $60.00 put expiring on Friday, March 18, 2022. Option traders are pricing in a 12.0% move on earnings and the stock has averaged a 5.6% move in recent quarters.
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CrowdStrike, Inc. $179.03
CrowdStrike, Inc. (CRWD) is confirmed to report earnings at approximately 4:05 PM ET on Wednesday, March 9, 2022. The consensus earnings estimate is $0.21 per share on revenue of $410.86 million and the Earnings Whisper ® number is $0.23 per share. Investor sentiment going into the company's earnings release has 71% expecting an earnings beat The company's guidance was for earnings of $0.19 to $0.21 per share on revenue of $406.50 million to $412.30 million. Consensus estimates are for year-over-year earnings growth of 200.00% with revenue increasing by 55.08%. Short interest has increased by 17.8% since the company's last earnings release while the stock has drifted lower by 13.9% from its open following the earnings release to be 22.6% below its 200 day moving average of $231.38. Overall earnings estimates have been revised higher since the company's last earnings release. On Monday, February 28, 2022 there was some notable buying of 2,946 contracts of the $220.00 call expiring on Friday, March 11, 2022. Option traders are pricing in a 13.0% move on earnings and the stock has averaged a 6.8% move in recent quarters.
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DICK'S Sporting Goods, Inc. $109.71
DICK'S Sporting Goods, Inc. (DKS) is confirmed to report earnings at approximately 7:30 AM ET on Tuesday, March 8, 2022. The consensus earnings estimate is $3.54 per share on revenue of $3.28 billion and the Earnings Whisper ® number is $3.60 per share. Investor sentiment going into the company's earnings release has 51% expecting an earnings beat. Consensus estimates are for year-over-year earnings growth of 45.68% with revenue increasing by 4.95%. Short interest has increased by 34.6% since the company's last earnings release while the stock has drifted lower by 17.5% from its open following the earnings release to be 2.8% below its 200 day moving average of $112.91. Overall earnings estimates have been revised higher since the company's last earnings release. On Wednesday, February 16, 2022 there was some notable buying of 5,395 contracts of the $115.00 call expiring on Friday, March 18, 2022. Option traders are pricing in a 13.4% move on earnings and the stock has averaged a 9.4% move in recent quarters.
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DocuSign $101.38
DocuSign (DOCU) is confirmed to report earnings at approximately 4:05 PM ET on Thursday, March 10, 2022. The consensus earnings estimate is $0.47 per share on revenue of $561.47 million and the Earnings Whisper ® number is $0.52 per share. Investor sentiment going into the company's earnings release has 48% expecting an earnings beat The company's guidance was for revenue of $557.00 million to $563.00 million. Consensus estimates are for year-over-year earnings growth of 51.61% with revenue increasing by 30.30%. Short interest has increased by 48.3% since the company's last earnings release while the stock has drifted lower by 34.5% from its open following the earnings release to be 55.0% below its 200 day moving average of $225.33. Overall earnings estimates have been revised higher since the company's last earnings release. On Friday, February 25, 2022 there was some notable buying of 10,045 contracts of the $85.00 call expiring on Friday, May 20, 2022. Option traders are pricing in a 20.4% move on earnings and the stock has averaged a 15.0% move in recent quarters.
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JD.com, Inc. $63.59
JD.com, Inc. (JD) is confirmed to report earnings at approximately 4:00 AM ET on Thursday, March 10, 2022. The consensus earnings estimate is $0.25 per share on revenue of $43.81 billion and the Earnings Whisper ® number is $0.28 per share. Investor sentiment going into the company's earnings release has 78% expecting an earnings beat. Consensus estimates are for year-over-year earnings growth of 177.78% with revenue increasing by 27.43%. Short interest has increased by 22.5% since the company's last earnings release while the stock has drifted lower by 27.7% from its open following the earnings release to be 15.4% below its 200 day moving average of $75.12. Overall earnings estimates have been revised higher since the company's last earnings release. On Thursday, March 3, 2022 there was some notable buying of 15,266 contracts of the $105.00 call expiring on Friday, May 20, 2022. Option traders are pricing in a 10.4% move on earnings and the stock has averaged a 4.4% move in recent quarters.
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Rivian Automotive, Inc. $47.39
Rivian Automotive, Inc. (RIVN) is confirmed to report earnings at approximately 4:10 PM ET on Thursday, March 10, 2022. The consensus estimate is for a loss of $1.58 per share on revenue of $61.67 million and the Earnings Whisper ® number is ($1.65) per share. Investor sentiment going into the company's earnings release has 31% expecting an earnings beat. The stock has drifted lower by 52.6% from its open following the earnings release. Overall earnings estimates have been revised lower since the company's last earnings release. On Thursday, March 3, 2022 there was some notable buying of 2,900 contracts of the $50.00 put expiring on Friday, March 11, 2022. Option traders are pricing in a 18.6% move on earnings and the stock has averaged a 10.3% move in recent quarters.
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Niu Technologies $10.44
Niu Technologies (NIU) is confirmed to report earnings at approximately 2:00 AM ET on Monday, March 7, 2022. Investor sentiment going into the company's earnings release has 62% expecting an earnings beat The company's guidance was for revenue of $131.57 million to $142.54 million. Short interest has increased by 2.7% since the company's last earnings release while the stock has drifted lower by 52.1% from its open following the earnings release to be 55.0% below its 200 day moving average of $23.20. Overall earnings estimates have been revised lower since the company's last earnings release. Option traders are pricing in a 24.7% move on earnings and the stock has averaged a 7.0% move in recent quarters.
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Ciena Corporation $65.94
Ciena Corporation (CIEN) is confirmed to report earnings at approximately 7:00 AM ET on Monday, March 7, 2022. The consensus earnings estimate is $0.45 per share on revenue of $894.85 million and the Earnings Whisper ® number is $0.43 per share. Investor sentiment going into the company's earnings release has 50% expecting an earnings beat The company's guidance was for revenue of $870.00 million to $910.00 million. Consensus estimates are for earnings to decline year-over-year by 11.76% with revenue increasing by 18.19%. Short interest has increased by 45.6% since the company's last earnings release while the stock has drifted lower by 5.7% from its open following the earnings release to be 9.6% above its 200 day moving average of $60.14. On Tuesday, February 15, 2022 there was some notable buying of 516 contracts of the $75.00 call expiring on Friday, March 18, 2022. Option traders are pricing in a 12.7% move on earnings and the stock has averaged a 9.3% move in recent quarters.
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Vermilion Energy Inc. $19.70
Vermilion Energy Inc. (VET) is confirmed to report earnings at approximately 2:00 AM ET on Monday, March 7, 2022. The consensus earnings estimate is $0.53 per share on revenue of $392.86 million and the Earnings Whisper ® number is $0.70 per share. Investor sentiment going into the company's earnings release has 64% expecting an earnings beat. Consensus estimates are for year-over-year earnings growth of 352.38% with revenue increasing by 61.91%. Short interest has increased by 10.7% since the company's last earnings release while the stock has drifted higher by 69.8% from its open following the earnings release to be 86.8% above its 200 day moving average of $10.55. Overall earnings estimates have been revised higher since the company's last earnings release. On Friday, March 4, 2022 there was some notable buying of 1,681 contracts of the $17.50 put expiring on Friday, September 16, 2022. Option traders are pricing in a 16.1% move on earnings and the stock has averaged a 10.0% move in recent quarters.
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Federal Reserve Chair Jerome Powell testifies before Congress in the week ahead, and markets will hang on what he says regarding how the Russia-Ukraine conflict could affect Fed policy.
Russia’s invasion of Ukraine will continue to be a major focus, as wary investors watch fresh inflation data and the rising price of oil in the week ahead.
Stocks in the past week sold off in volatile trading, as oil rose more than 20% and a whole host of other commodities rose on supply worries. Investors sought safety in bonds, driving prices higher and the 10-year Treasury yield to 1.72% Friday. The dollar rallied, pushing the dollar index up 2% on the week.
“We just don’t know what can happen over the weekend. It looks like the Russians are amping themselves up and they’re getting more aggressive,” said Jim Caron, Morgan Stanley Investment Management head of macro strategies for global fixed income.
“If nothing happens over the weekend, or if there’s some peace talks coming, then the 10-year note yield could go up 10 to 15 basis points. It could have that swing,” said Caron. Yields move opposite price. (1 basis point equals 0.01%.)
The Federal Reserve will also be top of mind, as investors focus on its pending interest rate hike on March 16. But Fed officials will not be making public addresses in the quiet period leading up to their meeting.
The economic calendar is relatively light in the coming week, with the exception of Thursday’s report of February’s consumer price index.
According to Dow Jones, economists expect headline inflation to rise to 7.8% year-over-year, from 7.5% in January, the highest since 1982. Headline inflation includes food and energy prices.
“The risk is to the upside. It will be a shocker if we get an 8% handle,” said Marc Chandler, chief market strategist at Bannockburn Global Forex.
Investors will also focus on how the market itself is trading. The S&P 500 fell 1.3% to 4,328 in the past week, while the Nasdaq lost 2.8% to 13,313.
“The major averages are all in a downtrend here. They seem to rally and then run out of steam,” said Paul Hickey, co-founder of Bespoke. “Until you get some kind of break of that, you want to be a little cautious. It’s definitely concerning, all this stuff.”
Hickey said that the market is behaving similarly as it did in other conflicts.
“In the short run, there’s a lot of uncertainty,” said Hickey “I think the playbook is similar. You tend to see a lot of sloshing around - big swings up and down — and then eventually things start to stabilize a few months later...The question is where does this one go?”
Boiling oil
Following a week of gains, oil jumped sharply again Friday, with West Texas Intermediate rising above $115 for the first time since 2008. WTI rose 7.4% Friday and was up 26% for the week, to settle at $115.68. Russia’s battle for control of Europe’s largest nuclear power plant early Friday spooked investors.
The Russian invasion of Ukraine has stirred up more fear of inflation, and economists are already raising their inflation forecasts, due to rising oil prices. The whole commodities complex has shifted higher, since Russia is such a key producer of wheat, palladium, aluminum and other commodities.
Rising oil prices can be a worry since they can generate one of the biggest hits to inflation and do so quickly.
Russia is unique in that it is a very large commodity exporter and has the ability to impact many markets. It is one of the world’s largest exporters of crude and natural gas, with its primary customer Europe. It is the largest exporter of both palladium and wheat.
The jump in oil has already been hitting U.S. consumers at the pump. Gasoline prices were $3.83 per gallon of unleaded Friday, up 11 cents in just a day and 26 cents in a week, according to AAA.
“The national average could get to $4 a gallon next week,” said John Kilduff, partner with Again Capital.
In the oil market, Kilduff said there was brisk buying Friday. “There’s still room to grind higher, as we continue to price in the loss of Russian crude oil,” he said.
The U.S. and its allies did not sanction Russian energy, but the sanctions did inhibit buyers, banks and shippers who fear running afoul of sanctions on the Russian financial system.
“It’s pretty clear nobody wanted to be short going into the weekend,” said Kilduff. “There’s still room to grind higher as we continue to price in the loss of Russian crude oil.”
Oil traders are also watching to see if Iran is able to strike a deal that would allow it sell its oil on the market, in exchange for an end to its nuclear programs. It could then bring 1 million barrels back on to the market, but analysts say there will still be a shortfall.
Will Ukraine and Russia Impact The Usually Bullish March?
Good riddance to February. It was another negative month for stocks, but the clear headline was Russia invading Ukraine and the potential impacts that would have on the global economy and stock market.
First things first, this means the first two months of 2022 have been in the red for the S&P 500 Index. “Seeing the first two months of a new year in the red isn’t a great feeling, but the good news is lately it hasn’t been a major warning sign,” explained LPL Financial Chief Market Strategist Ryan Detrick. “The first two months of 2016 and 2020 were both negative, but stocks were able to claw back and finish higher those years.”
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It is important to remember that this is a midterm year and early in midterm years, stocks tend to have some trouble. That has played out once again in 2022, but don’t forget later in these years tend to see a very strong rally.
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Another angle on this is looking at how stocks do each quarter, but broken up by the four-year presidential cycle. Again, investors need to know that this quarter and the next two are some of the weakest out of the entire four-year cycle.
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Although midterm years tend to see overall weakness until late, be aware that March is one of the best months of the year.
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Lastly, looking purely at March based on seasonality shows that this is a solid month. In a midterm year, it is the fourth best month and the past 20 years it is fifth best. Since 1950, it is more in the middle at the sixth strongest. Of course, it would have been better, but the 12.5% drop in March 2020 is skewing things.
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Clearly headlines will move stocks in the near-term, but we continue to expect the overall economic growth in the U.S. to remain quite strong and likely push stocks back up to our fair value target of 5,000 on the S&P 500 by year-end.
Banks (KRE) Swing Wildly
While Financials are the best performing sector so far in today's session, leading into today it was the worst-performing sector over the past week thanks in large part to a 3.7% decline on Tuesday; the sector's worst single day since June 2020. Looking more specifically at bank stocks, using the SPDR S&P Regional Banking ETF (KRE) as a proxy, yesterday saw an even more dramatic decline of 5.47% marking the largest decline since November 2020. That drop also ranks in the bottom 1% of all daily changes on record since the ETF began trading in 2006. The over 3.5% rebound today, meanwhile, ranks in the top 5% of all days on record as yesterday's decline was not quite enough to drop the industry below its 200-DMA; a support level that has now held multiple times in the past year.
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As previously mentioned, it is rare for KRE to fall over 5% in a single day. Excluding yesterday, there were 68 other times this happened but only a dozen of those occurred with at least 3 months between the prior instance. In the table below, we show the performance of KRE after each of those periods.
While it is far from the case today, typically, the next day has often seen KRE fall further after a 5% drop. Instead, today it is seeing the second-best next-day performance of these instances. As for where things go from here though, returns have been weaker than the norm one week and one month following these past occurrences. KRE has then tended to outperform all other periods three, six, and twelve months out.
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S&P 500 Posts Full-Year Gain 47.1% of Time When January & February Are Both Down
The combination of a down January and a down February has come about 18 times, including this year, going back to 1950. Rest of the year and full-year performance has taken a rather sizable hit following the previous 17 occurrences. March through December S&P 500 average performance drops to 3.78% compared to 8.20% in all years. Full-year performance is even worse with S&P 500 average turning to a loss of -3.67% compared to an average gain of 9.48% in all years. All hope for 2022 is not lost as eight of the 17 past down January and down February years did go on to log gains over the last 10 months and full year while seven enjoyed double-digit gains from March to December.
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Are Corporate Credit Markets Starting to Crack?
Within the fixed income markets, the corporate credit markets can, at times, act like a canary in the economic coalmine. The return distribution for credit investors is asymmetrical, which means the potential for losses can be magnitudes larger than the potential for gains. So, credit markets tend to react quickly when economic conditions or corporate credit conditions start to deteriorate. And while fixed income markets broadly are down on the year, corporate credit markets (both investment grade and non-investment grade) are among the worst performing markets in the U.S. this year. Should investors take this as a sign that corporate credit markets are showing signs of stress? We don’t think so.
“U.S. corporate credit markets have underperformed this year but not because of increased credit risks, in our view,” noted LPL Financial Fixed Income Strategist Lawrence Gillum. “That we’re seeing broad based negative returns across most fixed income asset classes is largely due to higher Treasury yields and not deteriorating credit fundamentals.”
A Credit Default Swap Index (CDX) is a benchmark index that tracks a basket of U.S. corporate credit issuers and tends to act like an insurance policy in the case of an issuer’s default. In essence, credit default swaps strip out most of the interest rate risk of an issuesecurity and measures just the credit risk. As seen in the LPL Chart of the Day, credit default swap indexes have increased this year but remain well within normal ranges.
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As inflationary pressures have broadened this year, Treasury yields, across the curve, have increased due to expectations of Federal Reserve (Fed) interest rate hikes. That’s been the main driver of broad-based bond losses and we don’t think it should raise concerns about credit fundamentals. Moreover, we’re seeing the costs to insure the higher rated cohorts (the investment grade issuers) increase at a faster pace than the more default prone, non-investment grade cohort, confirming for us that the increase in cost is due to higher Treasury yields and not a deterioration in corporate credit conditions.
From a fundamental perspective, corporate balance sheets are still in good shape. Leverage ratios have increased recently, but net debt ratios (debt minus cash on the balance sheets) remain within historical norms. Also, due to the record amount of issuance over the last few years, companies were able to refinance debt at very low interest rates and push back when that debt was set to mature. As such, interest expenses have come down and now many corporations don’t need to access the capital markets anytime soon. We do continue to watch how these companies manage capital allocation decisions. Increases in M&A activity, share buybacks, and outsized dividends are all risks to bondholders and things that may lead to deteriorating credit fundamentals.
High Levels of Volatility
It's been a volatile start to 2022 so far. With an average intraday trading range of two percentage points, the S&P 500's average intraday range in the first 41 trading days of the year has been the widest since 2009, and the only other year besides 2009 where the average range was wider was 2008.
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High levels of intraday volatility tend to coincide with periods of elevated uncertainty among investors and typically occur during periods when the market is lower. When the average daily range of the S&P 500 has been more than 1.5 percentage points during the first 41 trading days of the year, the average YTD performance of the S&P 500 was a decline of 5.7% (median: -4.3%). This significantly trails the average gain of 1.3% (median: 2.0%) of all years since 1983. So far this year, the S&P 500 has had the second-worst start since 1983 trailing just 2009, when the S&P 500 tanked 25.3% in the first 41 trading days.
Regarding forward returns after these volatile starts, returns vary. Although performance over the following one and three months tended to be better than average and more consistent to the upside, over the following six months and for the rest of the year, performance was more mixed.
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Job Gains Surprise to the Upside But Fed Will Still Likely Hike by 25 Basis Points Next Meeting
The U.S. economy added 678,000 jobs in February and this strong report exceeded consensus forecast of 423,000. The unemployment rate fell to 3.8 percent from 4 percent in January, edging closer to pre pandemic levels. In February 2020, the unemployment rate was 3.5 percent.
The survey period for this report closed before Russia invaded Ukraine so no geopolitical impacts are in these data.
February jobs gains were broad based but mainly in the services sector as pandemic effects wane. Restaurants alone added 124,000 and the return to schooling pushed education jobs up by 112,000. Professional and business services added 95,000 jobs.
The participation rate is 62.3 percent, still 1.1 percentage points below February 2020. Participation rates are still lower than before the pandemic as individuals with young children may struggle to find childcare. The composition of the labor force is also changing as some baby boomers are taking early retirements.
In February, 13 percent worked remotely because of the pandemic, down from 15.4 percent last month. This percentage will likely continue to decline as more offices across the country loosen restrictions.
Another encouraging sign is the decline in people unable to work because of COVID-19-related business declines, either from closed or lost business. In February, 4.2 million reported inability to work because of business disruptions, down from 6 million last month.
“The February jobs numbers are encouraging but overall, this does not change expectations for how the FOMC will set interest rates at the next meeting. The big conundrum for policy makers right now is how to relieve inflation fatigue yet still protect the economy from geopolitical stress,” said LPL Financial Chief Economist Jeffrey Roach.
Wage growth is slowing. February average hourly earnings were unchanged from January and up 5.1 percent from a year ago. Looking ahead, wages may begin to moderate as the labor market loosens. Participation rates should continue to increase to pre-pandemic levels by the end of this year.
As shown in the LPL Chart of the Day, February posted one of the strongest reports in the last 12 months. The reopening process is supporting the services sector and hiring in services industries like leisure and hospitality strongly contributed to the headline gain in employment. This latest release from the Bureau of Labor Statistics will not likely change the minds of the FOMC in the upcoming meeting. Chairman Powell already revealed his preference for a 25 basis point hike in rates and this is the most likely action.
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- ($NIU $DKS $WOOF $DM $KOPN $MDB $SFIX $ABM $BMBL $CASY $SUMO $GWRE $ZIM $THO $OTLY $EXPR $CPB $UNFI $CRWD $CVGW $MQ $ACEL $JD $BBW $DESP $ATY $VITL $DOCU $ORCL $ULTA $FUTU)
Monday 3.7.22 Before Market Open:
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Monday 3.7.22 After Market Close:
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Tuesday 3.8.22 Before Market Open:
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Tuesday 3.8.22 After Market Close:
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Wednesday 3.9.22 Before Market Open:
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Wednesday 3.9.22 After Market Close:
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Thursday 3.10.22 Before Market Open:
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Thursday 3.10.22 After Market Close:
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Friday 3.11.22 Before Market Open:
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Friday 3.11.22 After Market Close:
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(NONE.)
(T.B.A. THIS WEEKEND.)
(T.B.A. THIS WEEKEND.) (T.B.A. THIS WEEKEND.).
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