* Nasdaq, S&P 500, Dow end Friday in green
* For the week, all three major indexes end lower
* All 11 S&P sectors close higher
* Bitcoin surges, gold slightly up; dollar, oil lower
* U.S. 10-year Treasury yield ~1.26%
Aug 20 - 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
WALL STREET JUMPS BUT BIG QUESTIONS LINGER (1620 EDT/2020
GMT)
Wall Street surged on Friday after stocks almost breached
their 50-day moving average to the downside the day before, a
resistance level that suggests investors will bid up the market
though which sectors and other questions remain unclear.
All 11 sectors of the S&P 500 rose, with information
technology up 1.30% to lead the charge and growth-oriented
shares outperforming economically sensitive value stocks.
Advancing shares outnumbered decliners by more than 2:1 both
on the New York Stock Exchange and Nasdaq.
But the Nasdaq, S&P 500 and Dow all posted weekly losses
after the S&P 500 and Dow closed Monday at record highs before
tumbling mid-week, only to rebound on Friday.
"Things right now are about as clear as mud when it comes to
the reopening, the direction of interest rates, (expected) Fed
commentary at Jackson Hole and tech stocks' continued
outperformance," said Michael James, managing director of equity
trading at Wedbush Securities in Los Angeles.
The market has tested the downside every month since April,
but the uptrend has remained intact, he said.
"That's a sign the bulls continue to be in control of this
market," he said.
Opinions vary significantly among institutional investors
and hedge funds regarding multiple sectors and the market as a
whole, he said.
"That's why you're not seeing anything really take hold in
terms of being able to make a definitive directional call on the
overall market or individual sectors," James said.
The Russell 1000 Growth index rose 1.08%, outpacing a
0.61% gain in the Russell 1000 Value index.
Here is where markets ended the session:
(Herbert Lash)
*****
HIGH PRICES, LOW RATES SPELL HOUSING BUBBLE - AAII SURVEY
(14:33 EDT/18:33 GMT)
A look at housing in the latest American Association of
Individual Investors (AAII) survey showed almost two out of five
respondents perceive that market as being in a bubble.
Many of the 38% who see a bubble cited high prices and low
interest rates as causes for a market they see is overheating
and out of control, AAII said.
Another 19% of respondents have a negative outlook on
housing, with many expecting the market to crash in the short to
medium term.
About 17% of respondents have a mixed outlook and expect
prices to continue to rise in the short term, but eventually
begin to cool off.
Just 13% of respondents expressed a positive or strong
perception of the market, especially in areas of states such as
California with healthy outlooks.
About 7% of respondents indicated demand in the housing
market is greater than supply, a sign that sellers can benefit
greatly in current market conditions.
(Herbert Lash)
*****
RECORD STOCK ISSUANCE SHOULD HAVE "GOTHAM ON EDGE" -GMO
(1400 EDT/1600 GMT)
Despite Wall Street touching fresh records in recent weeks,
there are plenty of indications that investors are getting
nervous about how much longer equity markets can run hot.
Measures such as the CBOE Volatility Index are
rising, the SKEW index remains elevated and growth
stocks are historically at some of their most expensive
valuations ever.
While there's never a clear or easy "bat signal" to indicate
a market's peak, GMO's asset allocation team says another metric
that should have "Gotham on edge": record high stock issuance.
"Stock issuance in 2021 is blowing away the last high set in
the run-up to the Tech Bubble. This is a dubious item to
celebrate if history is any guide," GMO writes.
Companies such as AMC, GameStop and others
have taken advantage of retail trading frenzies to raise capital
through share offerings in recent months.
IPOs and special purpose acquisition companies (SPAC) are
also on fire, as plenty of commentators have noted. GMO notes
that more SPAC capital has been raised between January and June
of this year than in the past 20 years.
Still, it's not just SPACs and meme stocks getting in on the
issuance party. GMO says that even seasoned companies are
issuing stock at record levels as well.
"Wall Street knows an eager, price-insensitive buyer when it
sees one. When the ducks are quacking, it’s time to feed ‘em."
(Lisa Mattackal)
*****
BEARISH EXPECTATIONS AT HIGHEST IN SIX MONTHS: AAII SURVEY
(1230 EDT/1630 GMT)
Bearish sentiment, or expectations stock prices will fall
the next 180 days, is at its highest in more than six months,
while the outlook of investors who are "bullish" pulled back,
the American Association of Individual Investors (AAII) said.
Bearish sentiment rose 3.6 percentage points to 35.1% and
was last higher on Feb. 3 at 35.6%, AAII said in its latest
sentiment survey.
The rise marks the third consecutive week and the fourth
time in 28 weeks that bearish sentiment is above the historical
average of 30.5%, AAII said.
Bullish sentiment, or expectations stock prices will rise
the next six months, fell 3.8 percentage points to 33.2%, AAII
said. The decline is the sixth consecutive week that optimism is
below the historical average of 38.0%.
Expectations stock prices will stay essentially unchanged
over the next six months rose 0.2 percentage points to 31.7%.
Neutral sentiment has been at or above its historical average of
31.5% for 16 of the past 17 weeks, AAII said.
All three readings - bullish, bearish and neutral - are
within their typical historical ranges.
(Herbert Lash)
*****
LOW RISK OF HIGH-YIELD BOND DEFAULTS AHEAD - BOFA (1145
EDT/1545 GMT)
The risk of high-yield corporate bond defaults over the next
12 months is relatively low, while valuations in some sectors
have improved, according to a BofA Global Research report on
Friday.
The energy, utilities and media sectors have the highest
projected default rates at around 3.5%, which "are moderately
low by historical standards," the report said.
Metals, food producers, retail and real estate sectors have
the lowest projected rates at around 1%, although BofA noted
that "realistically speaking," zero defaults are likely for most
of them.
Sectors with the highest projected total returns over the
next 12 months included gaming, transportation, cable, services
and travel.
"This picture reinforces our view that valuations in some of
the key reopening sectors have returned to attractive levels,
compensating investors for increased risks associated with the
delta variant; this includes gaming, transports and travel," the
report said.
The telecoms, metals, and technology sectors have the lowest
projected total returns.
The spread on the ICE BofA U.S. High Yield Index,
a commonly used benchmark for the junk bond market, was up 7
basis points on Thursday at 342 basis points, the highest level
since early August, according to Refinitiv data.
It hit a multi-month high of 344 basis points on July 19.
(Karen Pierog)
*****
TWO STEPS FORWARD, ONE STEP BACK: THE DELTA DETOUR (1030
EDT/1430 GMT)
The unwelcome and highly contagious Delta variant of COVID-19
appears to have tossed a temporary monkey wrench into the U.S.
recovery from its most abrupt recession in history.
Global financial information firm Oxford Economics' (OE)
most recent Recovery Tracker fell 0.3 percentage points to 96.4%
from where it was in January 2020, before efforts to contain the
pandemic hobbled the global economy.
"Greater consumer caution weakened demand and mobility,
which fell to multi-week lows," writes Gregory Daco, chief U.S.
economist at OE. "Employment soured, production retrenched, and
the health tracker fell on surging Delta variant contagion."
OE follows 23 discrete metrics and groups them into six
baskets: financial, mobility, production, employment, demand,
and health.
In the week ended Aug. 6 - the most recent data point
available - five of those groupings edged lower.
"Contractions in five of the six subcomponents signal that
gains will be harder to come by as we move past peak growth,"
Daco adds. "Robust future gains will be harder to come by until
health conditions improve.
The demand tracker suffered the biggest drop, pulled down
1.7 ppts by decreased hotel occupancy, credit/debit card
spending and restaurant bookings. Weaker gasoline demand and a
pull-back in commercial air traffic were behind the 1.6 ppt
slide in the mobility component, according to the note.
The health element lost 0.5 ppts due to an increases in new
COVID cases per million and the positive test rate.
For Reuters' interactive graphic on the worldwide vaccine
rollout, click here https://graphics.reuters.com/world-coronavirus-tracker-and-maps/vaccination-rollout-and-access.
The employment and production trackers shed 0.3 ppts each.
The financial component was the sole gainer, adding 2.3 ppts
as equities scaled new heights and Treasuries traded in a
tightened range, the note says.
The chart below, courtesy of OE, shows a history of the
recovery tracker broken down by its six major components:
(Stephen Culp)
*****
WHAT ABOUT INFLATION, THE TAPER WHEN WALL STREET GAINS?
(1010 EDT/1410 GMT)
The Nasdaq, S&P 500 and Dow rose on Friday as investors
shrugged off concerns about inflation, the Federal Reserve's
plans to taper its bond purchases and a jump in COVID-19 cases.
Before the gains on Friday, the Dow and the S&P 500 were on
course for their worst week since mid-June.
Information technology followed by healthcare
led nine of the 11 S&P sectors higher, with energy
leading declining shares.
Investors have been wrestling with what Art Hogan, chief
market strategist at National Securities, calls a cauldron of
concerns that is juxtaposed with a market hovering near all-time
highs in a month that has been historically investor unfriendly.
"The natural instinct of some investors has been to lean
into the negative narrative and take profits," Hogan said in his
morning note.
Growth-oriented shares outpaced economically sensivite value
stocks, with the Russell 1000 Growth index up 1.08% and the
Russell 1000 Value index gaining 0.61%.
In Europe, the broad STOXX Europe 600 index rose
0.33%.
Here is where markets stand in early trade:
(Herbert Lash)
*****
CHINA ADRS FUEL WORST 6-MONTH HEDGE FUND PERFORMANCE SINCE
2008 (0900 EDT/1300 GMT)
Unusually weak performance at high risk but high return
funds in the past six months can be chalked up to China ADRs, as
they made up one-third of the most popular hedge funds' long
positions, research by Goldman Sachs shows.
A basket of VIP hedge funds lagged the S&P 500
by 13 percentage points over the last six months,
matching late 2008 as its worst stretch on record, GS
strategists wrote in a note.
In fact, U.S.-listed China stocks reeling from an onslaught
of tightening regulation in Beijing has put the Invesco Golden
Dragon China ETF on path for its longest streak of
weekly losses in a decade.
Among FAAMG names: Amazon.com Inc ranked as one of
the "rising star" stocks with the largest increase in hedge fund
popularity last quarter, while Microsoft Corp landed in
the "falling stars" list of declining popularity, strategists
said.
A basket of stocks with the highest short interest as a
share of float (.GSCBMSAL) has underperformed the S&P 500 by 16
percentage points since late June alongside a decline in retail
trading activity, strategists note.
Meanwhile, hedge funds rotated modestly toward growth stocks
in Q2, ending a sharp year-long move toward value stocks,
according to the report.
(Medha Singh)
*****
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