STATE OF THE MARKETS
Dollar dropped amid falling yields . While US stocks climbed higher on Thursday as investors see lower rate hike in February, the Dollar has dropped near the 102 handle on repricing. The small cap Russell (+1.74%) climbed the most, followed by Nasdaq (+0.64%), Dow (+0.64%) and S&P (+0.34%) as investors continue to buy US treasuries. The shorter 2Y yields dropped further to 4.11% while the 10Y benchmark fell to 3.42% before New York closed.
In the commodity markets, Dollar weakness has benefitted major commodities with crude oil gaining more than 1% to settle near $78.50/bl while gold spiked past $1,900/oz as New York closed. Iron ore, however, stalled near the $121.20/tn barrier as short term traders took some profits before the weekend.
In the FX space, Yen, Euro and Aussie dominate the demand territories across the board while Sterling, Kiwi and Dollar were sold off in the long term accounts. Dollar, Swiss and Loonie were sold off in the medium term accounts while short term traders sold Kiwi, Dollar and Swiss.
On Friday, markets expected to remain bullish stocks as falling yields in the bond market called for the Federal Reserve to pause rate hikes at some points. Friday also marked the beginning of earnings seasons for Q4 2022 with banks and money centers to kick off earnings releases. United Health (UNH), JPMorgan Chase (JPM), Bank of America (BAC), Wells Fargo (WFC), BlackRock (BLK), Citigroup (C), Bank of New York Mellon (BK), Delta Airlines (DAL) and First Republic Bank (FRC) will be of interests to investors, on top of import/export prices and consumer sentiments from University of Michigan.
** Starting the 16th of February, State of the Markets will be on hiatus until further notice. We thank our readers for your time. We hope to be back soon. **
OUR PICK – No New Picks
No new picks going into the weekend. Another week of outflows in equities (-$1.8 billion) alongside the short term money markets (-$9.4 billion) while close to $11 billion flowed into taxable bond funds. This may signal that the markets are near content with current long term yields. The FedWatch projects a 95% probability of a 25 points hike in February and 78% probability of another 25 points hike in March to arrive at 5% that is seen as terminal for now.
Trades updates:
Equities: While M (42% undervalued, 2.92% yields), SQ (about 10% overvalued with 3.88 z-score), CRON (31% undervalued with 19.32 z-score), AUY (11% undervalued, 2.06% yields) and T (about fairly valued, 5.78% yields) continue to climb higher this week; WBA (12% undervalued, 5.12% yields) and VIPS (35% undervalued with 3.93 z-score) pulled back on profit taking but held on steady.
FX & Commodities: NZD/USD was stopped out.
Disclaimer:
This article is for general information purpose only. It is not an investment advice or a solicitation to buy or sell any securities. Opinions expressed are of the authors and not necessarily of MFM Securities Limited or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.