Digital Finance Analytics (DFA) Blog
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Market volatility continues, following falls earlier in the week, now we see a boost for US markets, as hopes of a debt ceiling resolution appears closer.
Plus there was more positive news on the Regional Banking issues.
That said, Fed Officials are still taking rates higher and earnings are looking weaker as consumers pull back, so recession is still a potential risk.
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The financial markets have been fighting the Fed since October of last year, especially since the start of this year, in two ways. The first involves bidding-up stock prices in anticipation of a ‘Fed pivot’, which is probably a self-defeating strategy. The second involves factoring lower interest rates into bond prices.
The backdrop is mounting economic uncertainty as Finance leaders of the Group of Seven (G7) nations warned on Saturday in a subdued end to a three-day meeting overshadowed by concerns about the U.S. debt stalemate and fallout from Russia’s invasion of Ukraine.
The gathering in the Japanese city of Niigata came as global policymakers – already preoccupied by U.S. bank failures and efforts to reduce reliance on China – are now forced to grapple with a potential default by the world’s largest economy. While the communique made no mention of the U.S. debt ceiling stalemate, it figured constantly in discussions.
U.S. stocks ended slightly lower on Friday, led by weaker megacap shares following their recent rally, as data showed U.S. consumer sentiment dropped to a six-month low. The Dow was barely lower in its fifth straight day of declines, the blue-chip index’s longest losing streak in two months.
May consumer sentiment dropped to its lowest since November. The University of Michigan’s consumer sentiment reading for May came in at 57.7, much lower than the 63 expected and down from 63.5 in April.
Treasury yields rose in the bond market following the consumer-sentiment report. The yield on the 10-year Treasury erased an earlier dip and climbed to 3.46 per cent from 3.39 per cent late Thursday. It helps set rates for mortgages and other important loans.
The risks are building, and recession is becoming more likely!
CONTENT
0:00 Start
0:15 Introduction
0:50 G7 Warnings
4:44 US Markets
6:50 US Consumer Sentiment Crashes
7:50 Bonds
9:15 Debt Default?
11:22 Europe
13:40 Oil and Gold
15:40 Asia
17:45 Australia
21:20 Bitcoin Halving
23:16 Summary and Conclusion
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Join me for a live discussion with Tony Locantro from Alto Capital for a realistic assessment of the current market, and outlook. You can ask a question live.
https://www.altocapital.com.au/
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
We continue to see massive swings in prices, and I need to remind you that while major players continue to benefit from these wild gyrations in perceived value – as shown in recent trading results, (not least because they can programme trades using algos, and harvest income from the movements) – retail investors hardly benefit, because they are always behind the trade, unable to benefit from the dark pools and high-speed trading. It is an unequal game.
Take Friday, for example, where U.S. stocks rallied with the Dow posting its biggest one-day percentage gain since Jan. 6, as shares of Apple surged more than 4% after upbeat results and U.S. jobs data pointed to a resilient labor market.
Adding to the bullish momentum, regional bank shares rebounded from declines tied to the collapse of First Republic Bank. Analysts upgraded a number of lenders they said were oversold. PacWest Bancorp rallied 81.7% and Western Alliance Bancorp jumped 49.2%, while the KBW regional bank index advanced 4.7%.
Apple’s quarterly results also cheered investors worried about a potential recession. The iPhone maker’s shares hit their highest level in about nine months, and the stock ended up 4.7% in its biggest daily percentage gain since November. The stock was the biggest positive influence on all three major U.S. stock indexes.
The U.S. Labor Department report showed job growth accelerated in April and wage gains increased solidly, suggesting the labor market has stayed strong despite recent interest rate hikes from the Federal Reserve.
All in all, the wild market rides continues…
CONTENT
0.00 Start
0.13 Introduction
1:00 US Markets
2:10 US Labor Markets
6:30 US Earnings
7:00 Europe
9:05 Oil
9:30 Gold
11:57 Asia
13:52 Australia
17:00 Crypto
17:50 Summary and Close
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The continued pressures on US Regional Banks highlight the risks created by the changed interest rate environment – even if the scenarios are different from the 2007-8 GFC. But banks are under pressure as margins are compressed, and are needing to revisit their strategies, as both ANZ and Macquarie reposted this week. In fact, a credit crunch could well be on the cards.
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This was the first in our new live series. Damien Klassen from Walk The World Funds and Nucleus Wealth joined me to discuss the latest market developments. We looked at inflation, earnings estimates, and AI among many other things.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
The leading indicators relating to the US economy are screaming Stagflation, as the FED meets this coming week. Yet rates are likely to go higher to tackle rising costs, even as a credit crunch in underway. Not pretty.
The latest edition of our finance and property news digest with a distinctively Australian flavour.
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Go to the Walk The World Universe at https://walktheworld.com.au/
Once again, we saw contention in the markets, as US equities extended a rally Friday as investors weighed strong corporate earnings against concerns about regional banks and inflation. Treasuries rose. investors may still be cautious ahead of Apple’s results due next week and the Federal Open Market Committee (FOMC) meeting and the U.S. jobs report for April.
And later in the day, First Republic once again stole the show.
CONTENTS
0:00 Start
0:15 Introduction
0:40 US Markets
2:14 First Republic
3:26 Sentiment and Positioning
4:50 Economic Data
6:30 Oil
7:10 Europe
8:20 ECB Rate Rises?
9:30 ECB Debt As Government Debt
13:15 Asia
16:20 Australia
20:10 RBA Rate Rises?
20:40 Bitcoin Volatility
22:40 Summary and Close
Overall, the S&P 500 gained 0.8% after better-than-expected earnings from the likes of Exxon Mobil Corp. and Intel Corp., up 1.3% and 4% respectively.
However, the gains proved precarious in midday trading after Federal Reserve officials called for broad changes to bank rules in the wake of Silicon Valley Bank’s collapse and promised tougher supervision and stricter rules for banks.
The Nasdaq 100 rose 0.7%, weighed down by Amazon.com Inc.’s 4% loss after a warning over growth in its key cloud computing business.
Meanwhile, After the market close, First Republic Bank tumbled 49% to $1.77 after reports the regional lender was headed for receivership. That was after the bank’s 43% decline in the regular trading session.
In fact the U.S. Federal Deposit Insurance Corp has asked banks including JPMorgan Chase and PNC Financial Services Group to submit final bids for First Republic Bank by Sunday after gauging their initial interest earlier in the week, Bloomberg News reported today.
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Go to the Walk The World Universe at https://walktheworld.com.au/
US markets remain jittery as fears of a recession continue to build, despite some better than expected earrings reports, form tech. But the key issue relates to financial stability in the regional banking sector as the fall out from First Republic Bank continues. Indeed the regulators and banks are playing chicken – not good considering the 100 or so other institutions which to a greater of lesser effect have the same pressures derived from the rapid rate hike cycle.
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Go to the Walk The World Universe at https://walktheworld.com.au/
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The VIX – or fear index is sitting below 20.00 and some are claiming this means the markets are showing signs of a recovery. However, in fact more options trades are being done on shorter terms than the VIX represents, so it is possible the VIX is broken as a distressed market signal.
Perhaps no surprise to see the CBOT will be releasing a new index, based on zero day options, where nearly half of all business is being written.
So today we discuss the rationale, and consider the consequences. Perhaps the existing VIX is giving a false signal!
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/