STATE OF THE MARKETS
Stocks mixed with positive breadth. US stocks closed mixed on Thursday, after news of April PPI that spiked more than expected (11% vs 10.7%) fueling worries that inflation is yet to peak. Nasdaq (+0.06%) and Russell (+1.24%) eked some gains while Dow (-0.33%) and S&P (-0.13%) edged lower as the Dollar index remained bid above the 104.70 mark. Flows to safety remains high, with bond yields continuing to slide lower, as the inversion between 7Y (2.88%) and 10Y (2.86%) remains.
In the commodities market, crude continued its upward trajectory after news of OPEC+ missed production target and settled around $105.05/bl as New York closed. Gold remained under pressure and closed below $1,821.60/oz as markets expect higher rates from Feds. Elsewhere, global growth concerns continue to weigh on iron ore and the commodity fell to deeper support around $132/tn.
In the FX space, short and medium term traders took advantage of the oversold Sterling to bid while sending more Swiss to offers. Long term investors seem more bearish as Yen advanced further alongside Dollar in demand, surpassing Loonie and Euro.
On Friday, markets continue to weigh the war in Ukraine while looking forward to seeing earning reports from Consolidated Water (CWCO), ProPhase Labs (PRPH), Honest Company (HNST), PLx Pharma (PLXP), ReWalk Robotics (RWLK) and AirSculpt Tech (AIRS) as well as the latest figures in US import/export prices and consumer sentiment.
OUR PICK – No New Pick
No new pick going into the weekend. There is no doubt that long term investors are cashing out in recent market rout as this week pointed to another outflow across the board. $6.4b out of equity, $6.7b out of taxable bonds and $5.8b out of money markets drove cash demand higher than usual and set the Dollar index at the highest since December 2002. At some point, this cash will be deployed, and we believe commodities/commodities related stocks will be among the top inflows.
Equities: AUY (20% undervalued, 2.45% yields) was stopped out. We remain bullish CTRA (COG) (23% undervalued, 2.06% yields) and maintained target at $35.30, T (20% undervalued, 5.63% yields), VIPS (38% undervalued with 4.78 z-score) remained well bid after UBS maintain neutral rating but reduced target by 10 cents, CRON (22% undervalued with 27.69 z-score), WBA (28% undervalued, 4.43% yields) had pulled back further to $42 and we remained bullish, and M (45% undervalued, 2.97% yields).
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