STATE OF THE MARKETS
Stocks mixed on negative breadth. US stocks closed mixed on Thursday, with Dow (-0.17%) sliding lower while Nasdaq (+0.45%) and S&P (+0.34%) rebounded on negative breadth, after earnings from Macy’s (M), Kohl’s (KSS) and NVIDIA (NVDA) sent bidders to consumer discretionary and technology sectors. Dollar rebounded to 96.20 mark as the 10Y benchmark fell further to 1.55% on bond demands.
In the commodities market, crude rebounded to $78.30/bl before bids were lost and the black gold spiraling lower to $75.80/bl after reports of net energy importers like Japan and South Korea that may be releasing their energy reserves. Gold was in a tight range of $1,875 – $1,860/oz while iron ore was $92.80 – $92.00/tn as Dollar strengthened back to the 96.20 mark.
In the FX space, long term sentiments were more bearish as Swiss exceeded Dollar in demand while Kiwi remained in lead for yields seeking investors. On Friday markets look for earnings reports from Foot Locker (FL) and Buckle (BKE) while waiting for a speech from Fed’s Richard Clarida on inflation.
OUR PICK – No New Pick
No new pick going into the weekend. Continuing outflows from equities has become the new norm for the past four months and we do not expect the trend to reverse in the near term. Apparently super long term investors are cashing out and running for Dollar and/or treasuries. If inflation continues to rise, which we suspected due to wage increase, then stocks may correct steeper than what we have seen so far (2-3%). Undervalued and bargain stocks, however, will remain in bids as we see it.
Equities: Currently we are holding 8 stocks – 7 longs and 1 short. We are long AUY (19% undervalued) with dividends yielding 2.69%, T (21% undervalued) at 8.53% yields and COG (CTRA) (7% undervalued) yielding 2.41%. CLVS is currently 21% overvalued with -7.19 z-score but Tudor Investment had stepped in recently and we decided to hold. We remain bullish with VIPS (44% undervalued with 5.59 z-score), GT (40% undervalued with 1.28 z-score) and CRON (14% undervalued with 9.18 z-score) while bearish GE (15% overvalued with 1.43 z-score).
FX & Commodities: Sterling hit SL before rebounded and reached targets while Aussie didn’t quite work as planned.
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