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March 15 - Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com
NEW MONEY BEATS OLD MONEY AS WALL STREET RALLIES (1610 EDT/2010 GMT)
Wall Street rebounded on Tuesday as sliding oil prices and other commodities helped ease concerns about the potential for stagflation and the conundrum it poses for the Federal Reserve.
Apple Inc <AAPL.O, Microsoft Corp and Amazon.com Inc led a rally driven by big tech, while Exxon Mobil Corp and Chevron Corp drove a decline in oil and related stocks.
Ten of the 11 S&P 500 sectors rose, led by a 3.4% gain in information technology. Energy was the only declining sector, sliding 3.7%, as crude oil fell more than 7.0%.
Growth rose 3.0%, handily outpacing a 1.3% gain in value stocks.
Investors are focused on the FOMC two-day policy-setting meeting that ends Wednesday, when the Fed is expected to raise interest rates by 25 basis points to address rising inflation.
A Labor Department report on producer prices offered more evidence that inflation would remain high in the months ahead, even as pricing pressures at the factory gate rose moderately in February.
Talks between Russia and Ukraine resumed, with Ukrainian officials hinting the war could end sooner than expected, helping to drive sentiment on Wall Street.
A senior Ukrainian presidential aide later said talks with Russia are very difficult, but
there is room for compromise.
Here is the closing market snapshot:
S&P 500 CHARTS A "DEATH CROSS" (1335 EDT/1735 GMT)
A "death cross" occurred on the S&P 500's daily chart on Monday. That is, its 50-day moving average ended below its 200-day moving average for the first time since July 8, 2020:
Traders look at various combinations of short-, intermediate- and longer-term moving average crossovers, across markets and instruments, to aid in assessing the potential for trend change. There can be nuances involved including whether the slope of the longer-term moving average is positive or negative when the cross occurs.
In any event, a death cross can signal the potential for a major bear turn in a market. That said, given the death cross requires a shorter-term moving average to violate a longer-term moving average, a death cross occurs in the wake of a high.
For example, major bear markets that kicked off in 1929 and 1973 saw death crosses occur 49 and 73 trading days (tds) after the SPX had peaked. At those points, the SPX had already lost 32% and 7.6%. Even so, in those cases the SPX went to lose another 79% and 45% of its value into its absolute low.
Monday's signal came with the SPX already down 13% from its early January peak, over 48 tds.
Of note, prior to Monday, just looking at more modern history since 2000, and counting all crossovers regardless of slope considerations, the SPX has seen 10 death crosses. The record is clearly quite spotty:
The signals in 2000 and 2007 did end up working spectacularly well. However, in half of the instances, the death cross occurred either the day of, or relatively shortly after, the SPX had already bottomed.
Death Cross signals really aren't so bad, according to Mark Newton, head of technical strategy at Fundstrat. After 48 occurrences since 1929, the average return on a three-, six- and 12-month timeframe were all positive for SPX with an average three-month return of 2.1%.
It now remains to be seen what path the S&P 500 will now chart.
EUROPE ENDS LOWER, MINERS WEIGH (1315 EDT/1715 GMT)
European shares ended Tuesday with losses as the war in Ukraine, rising COVID cases in China and upcoming policy announcements from the Fed and Bank of England weighed on confidence.
Miners underperformed with Russian-exposed precious metals miner Polymetal leading the declines after cratering another 23%. Shares are now down 90% year-to-date.
UK-listed mining companies Rio Tinto, Glencore and Antofagasta ended the trading session lower by between 1.6% and 4.4%.
At the close, the STOXX 600 and FTSE 100 were both down 0.3%, Germany's DAX ended lower by 0.1%.
The media sector outperformed, led higher by Pearson after shares gained over 8.6%.
The publishing company announced on Friday it had rejected two takeover approaches from Apollo, the latest being an $8.5 billion cash offer that they said "significantly undervalued" the company.
Informa, which also publishes educational materials, saw its shares rise 3.6% after full year results.
Here is the snapshot at the European close:
TWO SUPPLY SHOCKS POSE STAGFLATION FOR EUROPE -GS (1212 EDT/1612 GMT)
The supply shock of the COVID-19 pandemic and a second one sparked by Russia's invasion of Ukraine have combined to pose a serious risk of stagflation in Europe.
The prospect that the Ukraine war deals a crippling economic blow due to Europe's dependence on Russian energy, could lead to a stagflationary period of persistently higher inflation and low, or even negative, growth, Goldman Sachs says.
The growth risks posed by alarmingly high inflation also drive the prospect of a policy mistake by the Federal Reserve, Goldman says in its "Top of Mind" research note.
"The (Ukraine) conflict is a stagflationary shock in the sense that it both hits growth and boosts inflation, which have somewhat offsetting implications for Fed policy," said Jan Hatzius, chief economist and head of global investment research at Goldman Sachs.
"The conflict shouldn't push central banks to do materially less than they otherwise would have given the inflation backdrop," he said.
Stagflation risks in Europe have grown as the conflict-induced supply shock comes after a pandemic-induced one that likely results in more persistent inflation at a time that the economy faces a large hit to growth, said Philipp Hildebrand, vice chairman of BlackRock, in Goldman's research note.
"Stagflation risk is a real concern today," he said. "We are looking at a supply shock layered on top of a supply shock."
The supply shock from commodities will shave expectations of growth in the year to the fourth quarter from above 3% by about 2.5 percentage points, Hildebrand said.
"Even without a deterioration in the geopolitical situation, we expect to be uncomfortably close to a zone where stagflation is a real risk in the Euro area," he said.
PPI, EMPIRE STATE: BEWARE THE IDES (1055 EDT/1455 GMT)
A toga-clad emperor named after a salad took a lovely stroll which quickly took a turn for the worse on this day in 44 BC. So did the economic data released Tuesday on the anniversary.
The prices U.S. companies get for their goods and services at the proverbial factory door came in a bit cooler than expected in February, in a welcome sign that the decidedly un-transitory inflation wave might at last be cresting.
The Labor Department's producer price index (PPI) showed headline monthly growth decelerating to 0.8% from January's 1%, coming a hair below the 0.9% consensus.
Year-on-year, however, headline PPI prices accelerated as expected to a red-hot 10%, inline with expectations.
But the news was sunnier once volatile items are stripped away. This is particularly true with respect to energy prices, which have come under increasing pressure after Russia - which produces about one-tenth of the world's oil supply - invaded Ukraine and launched crude prices into orbit.
Jeffrey Roach, chief economist at LPL Financial, said he wasn't surprised that a stronger dollar softened the impact of rising prices for producers in February. But it's unlikely that the Russia effect is entirely baked in to last month's numbers. "Next month's report will include the geopolitical shocks from the Russian invasion," he wrote. "So we expect volatility in the underlying data given the spikes in commodity prices."
So-called "core" PPI, which strips away food, energy and trade services prices, decelerated sharply to a mere 0.2%, and rose 6.6% on an annual basis - a welcome decline.
Still, as seen in the chart below, core PPI - along with other indicators - still cruises well above the Fed's average annual 2% inflation target.
As Rubeela Farooqi, chief U.S. economist at High Frequency Economics, puts it: "(The) readings are high enough to keep the Fed on track to remove policy accommodation."
Oh look. Here comes Brutus.
Activity in New York state's manufacturing sector unexpectedly contracted this month.
The New York Fed's Empire State index plummeted to -11.80, in stark contrast to a reading of 7 economists predicted. It was the lowest print since May 2020, when the economy was freshly punch drunk from abrupt shutdown mandates to contain the pandemic.
An Empire State number below zero indicates a contraction from the previous month.
Glimmers of optimism could be found in a slight easing in the "prices paid" component, and the employment reading, while posting a marked slow-down, still landed on the "expansion" side of zero.
The headline plunge "looks like a knee-jerk reaction to the invasion of Ukraine and the accompanying surge in oil and other commodity prices," says Ian Shepherdson, chief economist at Pantheon Macroeconomics. "We expect a rebound in April, but the uncertainty triggered by the conflict will persist until it is over."
The Philly Fed index, expected on Thursday, will provide a fuller picture of the state of east coast manufacturing.
WALL STREET REBOUNDS AS COMMODITY PRICES SLIDE (1000 EDT/1400 GMT)
Wall Street is rebounding on Tuesday as sliding oil prices and other commodities helped ease concerns, despite solid gains in U.S. producer prices in February, about stagflation on the horizon and the conundrum it poses for the Federal Reserve.
Wall Street opened higher, with 9 of the 11 major S&P 500 sectors rising, with the exception of energy, down 4.6%, and materials.
Tech is providing the biggest upside to the S&P 500, followed by healthcare .
Growth is outpacing gains in value, helped by a falling Treasury yields and a more than 6% drop in oil prices.
Inflation may remain hot, however, as much of the data does not capture the recent spike in crude oil and other commodity prices following Russia's invasion of Ukraine on Feb. 24.
U.S. Treasury yields eased from more than two-year highs reached overnight but remain elevated as the Fed is expected to boost interest rates by 25 basis points at the end of a policy meeting on Wednesday.
Here is the early market snapshot:
RECORD EUROPEAN OUTFLOWS: IS THIS CAPITULATION? (0935 EDT/1335 GMT)
Outflows from European equities hit a record level for the second straight week over the past seven days with a combined $20 billion of selling, per data from fund tracker EPFR.
Given the magnitude of the bleeding, one may wonder whether this is a sign of investor
capitulation, and if further outflows from the region's stock markets can be expected.
Bernstein strategists Mark Diver and Sarah McCarthy have looked into that to say that even though more outflows cannot be ruled out, the issue is more complicated than it seems, and it is too early to talk about capitulation.
"The largest weeks of selling in previous crisis periods didn't represent the final outflows from the regions funds and were often followed by further, but smaller weekly outflows before buying activity resumed," they wrote.
That being said, Diver and McCarthy highlight how the previous patterns of flows seen since 2015 have not really applied to European equity funds in recent years.
"Since 2018 European equity funds have seen mostly persistent selling, punctuated with short periods of inflows. With sentiment towards the region being so weak over a period of 4 years a flow reversal this time round may come after outflows over a shorter time frame than usual or with smaller total outflows than in previous crisis periods," they added.
NASDAQ VS COMMODITIES: ROOM FOR REPRIEVE? (0900 EDT/1300 GMT)
As commodity prices suddenly unravel, might the tech-laden Nasdaq be ripe for a relative bounce?
Since spiking to a high of $130.50 early last week, and becoming severely extended on the charts, NYMEX crude futures have seen a spectacular reversal. In fact, they have now lost around a quarter of their value from the intraday high as ceasefire talks between Russia and Ukraine eased fears of further supply disruptions and surging COVID-19 cases in China fueled concerns about slower demand.
With this, energy stocks, are suddenly on the back foot as well.
Grains are not being spared either. After almost tagging a near-50 year resistance line, a composite of CBoT corn, soybean and wheat futures, has taken a more than 10% hit:
Gold is seeing a similar fate. After nearly tagging its record high last week, it too is reversing, hitting a two week low.
Meanwhile, since a 2020 peak, the Nasdaq Composite has seen a major trend change vs the Refinitiv/CoreCommodity CRB index. And, since late December of last year, the Nasdaq/TRCCRB ratio has just fallen out of bed:
Through last week, with the Nasdaq falling into bear-market territory, the ratio is down 10 out of the past 11 weeks.
However, at 43.616, it is on track to tick up slightly this week for the first time since late February. Of note, it has not risen two-straight weeks since early December.
Longer-term, the ratio's Y2K top, and support line from 2008, may still be magnets. If so, the Nasdaq would still be in for more pain vs the commodities basket.
However, there certainly is room for a substantial reprieve given the disparity between the ratio, and its 100-week moving average, which now resides around 69.00.
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