STATE OF THE MARKETS
Stocks tumble as yields surged. US stocks slid into the red on Thursday after comments from Fed Chair Powell triggered a sell-off in bonds, sending yields surging higher. Dow (-1.05%), S&P (-1.48%) and Nasdaq (-2.07%), including Russell (-2.29%) tumbled as the 10Y benchmark hit 2.95%, the highest in 3 years. The news of a more aggressive rate hike plan, sent the Dollar index to reclaim the 100.50 minor handle.
In the commodities market, Dollar strength failed to push crude lower, instead the black gold climbed higher to close above $103.80/bl while gold was sold off to as low as $1,936.60s/oz before bidders emerged to settle the metal higher around $1,951.20s. Elsewhere, iron ore stalled around $154.40/tn while investors waited for the next catalysts.
In the FX space, short term traders were quick to take profits in the rise of the comdolls trio and sent the commodity currencies back to offers, while bidding Euro, Dollar and Sterling. King Dollar returned to the helm of demand in the medium term, alongside Loonie and Euro as the long term accounts demand more Dollar than Kiwi. Overall sentiments remain bearish.
On Friday, the Russia-Ukraine war seemed like an old news and markets look forward to seeing earning reports from American Express (AXP), Kimberly-Clark (KMB), Newmont (NEM), SAP SE (SAP), Schlumberger (SLB), Verizon (VZ) and HCA Healthcare (HCA) as well as the latest PMI composite figures.
OUR PICK – No New Pick
No new pick going into the weekend. The Fed’s announcement alone to taper the balance sheets has caused bonds to be sold off and commodities to pull back in favor of the higher yielding Dollar. Given 8.5% annual inflation and 2.95% 10Y coupon, real yields remained in negative territories. That is why investors continue to be vested in equities, especially dividend paying and value companies. The US may have to follow the Swiss and Japanese in solving their ever expanding debt. Negative rates policy might be near if the Feds failed to raise rates to match inflation.
Trades updates:
Equities: AUY (19% undervalued, 1.98% yields) remained well bid and we expect to meet the final target in the coming weeks. We remain bullish CTRA (COG) (20% undervalued, 1.94% yields) and revised target to $35.30, T (23% undervalued, 5.71% yields) fell after Wells Fargo revised target lower to $21, MO (21% undervalued, 6.50% yields) has reach first target and we update stop to $54, VIPS (47% undervalued with 4.79 z-score) remained well bid after UBS maintain neutral rating but reduced target by 10 cents, CRON (22% undervalued with 27.69 z-score) and WBA (31% undervalued, 4.08% yields) had pulled back and now back around $47 – the level after news of potential bids from India’s Reliance.
FX & Commodities: We may re-enter silver, AUD/CAD and AUD/USD have reached their first target.
For high probability picks, please use our Trading Central services. You could also join us at MFM’s TradeCopy
Risk Disclaimer:
This article is for general information purpose only. It is not an investment advice or a solicitation to buy or sell any securities/oz. 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.