Dow -0.49%, S&P 500 -0.37%, Nasdaq + 0.21%, Russell 2000 -0.39%, SOX + 0.63%, Eurostoxx -0.78%, SMI -1.81% .
Today is Federation Day. Also, it would seem that the ECB is inviting itself at the last minute, I will return to this.
In anticipation of one of the most important meetings of the US Federal Reserve for many years, the market is persistently trying to recover from the surrender on Monday. The S & P500 (SPX) fades, spends most of its day wandering just below its equilibrium point, facing another onslaught of bears, but manages to send the plants back to its cave to retreat a little, almost checking 3,700 points (3,705.68 on minimum sessions). The volume of trades remains significant, there is still a strong smell of sulfur on the trading floors, the atmosphere is tense, today’s deadline is the most stressful, especially since the largest number of the largest number have never experienced such moments of doubt. In this context, the dollar remains supported, but stops rising, the EUR / USD pair traded at 1.0430 this morning before rebounding to 1.0483 from 7:30 am, the ECB has just announced an urgent “discussion of current market conditions.” ‘. Apart from the euro, which is very pleased with this, Italian treasury bonds are leading to a prosecco, and the future of Eurostoxx is taking off, we will continue, we do not know what will come of this meeting, but the market seems to be delighted that Christine Lagarde and his colleagues regain control.
Returning to Wall Street, where volatility fell slightly but remained high, the VIX fell 4% to 32.69. In terms of sectors, interesting changes are taking place, technologies are evolving (in particular, this was helped by Oracle, which grew by 10% after its results), as well as the search for discounts in the semiconductor sector. Keep an eye on the transport sector (TRAN), which grew by 2.12%, managed, in particular, FedEx (FDX + 14.4% after the announcement of the dividend increase). Remember that the transport index is considered the leading indicator in the world of trade. Another sector is closing in on the green, energy, which has become a huge “crowded trade”, like the dollar or commodities. On the dark side of yesterday’s result, we see sectors such as utilities, consumer goods, healthcare, real estate and even finance. These sectors have in common the best dividend yield on the stock market, but with such high returns as the yield of Treasury bills, which are considered risk-free, we are beginning to see some flight from profitable investors.
Chinese stocks listed on Wall Street are also recovering, the KWEB ETF rose 6.66% during the session after three sessions of sales pressure. The hunt for bargains (already) is trying to return.
We are talking about stocks, but today the market rate is dictated by bonds, the US yield curve is moving fast. 2-year-old trades at 3.32%, and 10-year-old – 3.38%. The next resistance is the area of 3.50-3.55%. These increases are violent, they indicate how long it took the market to wake up, now it must integrate a more aggressive Fed into its prices. As for the Fed funds, we now expect the Fed to raise the rate by 75 basis points tonight. In the future, the market predicts almost 100% probability of another 75 points in July and 50 points in September. If this scenario works, the Fed’s rate range will rise to 2.75% to 3.00% after the September meeting. A week ago, the market gave a 0.2% chance to this scenario, all said…
No one knows where the markets will go after the Fed, we know that there was a capitulation on Monday, so the market produced antibodies and began its main cleansing almost summer (no more season…), for those interested, the Fed Put, the level determined by the market , which should prompt the Fed to pull out its huge covert fire truck to avoid a stock market crash, is at 3,453 points on the SPX (source: Bank of America poll), 7.5% below current levels.
And then the ECB invites itself to the party in a completely unexpected way. We are clearly in the area of intervention, Schnabel’s speech yesterday was relatively clear in terms of the ECB’s intentions. Today’s issue is expected to underscore the intention of close monitoring. What if the envelope was allocated as part of a PEPP reinvestment? Carefully monitor…
Returning to the Fed, the market wants to know its estimate of the neutral rate. True, this is not an exact science, but the market now estimates it at just over 4% in 18 months. Is the market right? If the answer to the last question is “yes”, it will leave at the end of this FOMC an increase from 250 to 275 bp, which still needs to be done. Sure, but how fast? This morning, the market debate is no longer at 50 basis points, between the vast majority, who believe that “75 basis points is a done deal”, and financial starlets (oh, like short bets), who continue to lobby their business with “100 bases ». points – this is the minimum to restore confidence. US Treasury bonds continued to weaken, leading a 10-year period that is now approaching 3.50%, a level not seen since 2011. Despite this, despite SPX entering the bear market, despite new lows every day, retail investors continue to try to buy the weakness. Since the beginning of the year, the community’s net purchases have been $ 1.4 billion a day. In the last two days, they posted $ 1.6 billion on Monday and $ 1.8 billion yesterday. However, beware of potential margin circles with this population if bitcoin falls below $ 20,000.
Awaiting the Fed’s decision on its rates (20:00), a large series of US statistics with retail sales and the Empire State Index (14:30), then business stocks and the real estate price index (16:00), before oil stocks (16:30) ). This morning, China announced a less-than-expected decline in retail sales in May, while industrial production resumed.
Airbus: Berenberg remains on the shopping side with a target price raised from 140 to 150 euros. Kering: Jefferies is moving from holding to buying, aiming for 605 euros. Logitech: AlphaValue remains on the buying side, and the price is reduced from 93.60 to 87.60 francs. Roche: Mirabeau resumes action after the purchase, seeking 378.29 francs. Rolls-Royce: Berenberg is moving from buy to hold, aiming for 100 GBp. BP Plc hangs at 40.5% and becomes the operator of an Australian solar and wind energy project designed to produce green hydrogen. Fedex receives 14% of the bottom of the activist fund project. Clariant shows strong growth in the first quarter. Medium-term goals confirmed. Ford is recalling 49,000 Mach-E electric vehicles in the United States due to potential power loss.
Last night and this morning in Asia, indices traded loosely, Hong Kong and Shanghai rose 0.95% and 0.55%, Tokyo fell 1.14% and Seoul lost 1.83%. The future of the SPX is gaining 17 points, and Europe opens by 1.2%, excited by the announcement of the ECB meeting. Oil remains supportive but no longer rising, to $ 118.73 a barrel of WTI light crude oil, while gold is falling to $ 1,821 an ounce due to higher bond rates. Happy Federation to all.