* Major U.S. indexes advance; DJI posting ~1.7% gain
* Energy leads among S&P 500 sectors; real estate sole loser
* Dollar, gold fall; crude, bitcoin gain
* U.S. 10-Year Treasury yield ~1.40%; highest since mid-July
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ANOTHER SLICE OF "YELLOWCAKE" - SPROTT INTENDS TO KEEP
BUYING URANIUM (1415 ETF/1815 GMT)
Clean energy plays have been a strong investor focus this
year, but an increasingly popular way to play this theme has
been through the uranium market.
Uranium prices <UX-U3O8-SPT> have leapt over 60% to $50.25 a
pound, the highest levels since 2012.
But of those yearly gains, the nuclear fuel has jumped 55%
since the inception of the Sprott Physical Uranium Trust in July
.
The trust, physically backed by uranium, has stockpiled 28.4
million pounds of U3O8 (triuranium octoxide), adding 10 million
pounds of uranium to its holdings in the last month.
"We believe that we have acquired approximately 75% of
physical uranium traded in the spot market over this time,"
Sprott Asset Management CEO John Ciampaglia told the Reuters
Global Markets Forum https://refini.tv/3dnOb1f on Wednesday.
Ciampaglia told the forum that Sprott intends to continue
adding to its holdings, but does not think the trust risks
cornering the market of so-called "yellowcake," as demand should
be more moderate going forward.
Meanwhile, Canada-listed shares of the trust have soared 63%
since inception, with its total net assets rising 53% to $1.46
billion.
In the U.S., stocks of uranium producers have jumped. The
Global X Uranium ETF and the North Shore Global Uranium
Mining ETF are up 60% and 90%, respectively for the
year.
Sprott expects uranium prices to continue rising, as
increased investor interest could catalyze utilities to renew
longer-term supply contracts, while higher prices are needed to
incentivize uranium producers to resume production at idled
facilities.
"There is a growing realization that solar and wind are not
sufficiently reliable to meet base load energy needs," he added,
noting a more favorable stance on nuclear energy from both the
Biden administration and the European Union.
Ciampaglia said Sprott is pursuing a U.S. listing for their
uranium trust, but doesn't expect to complete the process until
the first half of 2022.
(Lisa Mattackal)
*****
CHINA MAY DODGE A FULL-BLOWN CREDIT CRISIS, BUT GROWTH MAY
NOT BE SO LUCKY (1347 EDT/1747 GMT)
Jack Ablin, chief investment officer and founding partner at
Cresset, is out with some thoughts on China's Evergrande
situation, and what it all may mean for Chinese growth.
Ablin believes that Evergrande fallout has the potential to
tighten China’s credit conditions if lenders and financial
institutions become more risk averse.
"The company’s fate threatens China’s broader property
sector and, potentially, its financial system, testing
policymakers’ desire to clean up the country’s corporate
culture."
According to Ablin, Evergrande concerns, when added to
China’s broader regulatory crackdown, represent significant
headwinds to both economic growth in the world’s second-largest
economy, and its stock market. Additionally, he says debt
recovery efforts would put additional downward pressure on
property prices and crimp profit margins across the supply
chain.
As Ablin sees it, allowing Evergrande to fail, however,
would "send shockwaves throughout China, leading to financial
turmoil and civil unrest, two things that Beijing strives to
avoid."
Therefore, Cresset expects policymakers to restructure
Evergrande’s bonds, inflicting pain on shareholders and
bondholders, but protecting the millions of customers who have
paid for unfinished apartments.
Ablin thinks that the PBoC can probably engineer a
restructuring while avoiding a full-blown credit crisis.
However, he doesn't think they can prevent a property market
downturn that would weigh on China’s economic growth.
"The Chinese government and PBoC would likely stand ready to
intervene to limit the social and economic damage, and have the
wherewithal to cushion the financial blow from the Evergrande
bubble. That said, President Xi’s 'common prosperity' philosophy
will weigh on growth for several years to come."
(Terence Gabriel)
*****
FED’S RATE HIKES MAY BE LESS HAWKISH THAN INDICATED –
GOLDMAN (1213 EDT/1613 GMT)
The Federal Reserve’s likely interest rate path may not be
as aggressive as it indicated on Wednesday, as the policymakers
showed a wide range of opinions and Fed Chair Jerome Powell is
likely more dovish than the median, according to economists at
Goldman Sachs.
The Fed said on Wednesday it will likely begin reducing its
monthly bond purchases as soon as November and signaled interest
rate increases may follow more quickly than expected, with nine
of 18 Fed officials ready to raise interest rates next year in
response to inflation that the central bank now expects to run
at 4.2% this year.
However, “we see the overall message as a bit less hawkish,”
Goldman economists including said Jan Hatzius said in a report.
This is because the split vote for hikes next year come along
with a median core inflation forecast of 2.3% that year, and the
bank’s “best guess” is that Powell’s projections show no hikes
in 2022, two in 2023 and two in 2024, which is a more dovish
path that the median projections.
There is also a wide range of forecasts for 2024, with some
Fed members expecting four hikes in total by then, while others
projecting four hikes per year at that stage, Goldman said.
“This suggests to us that there is still a range of opinion
on the FOMC about what pace of tightening the new monetary
policy framework would call for if inflation eventually calms
down to 2% or only modestly higher, as most participants
expect,” the economists said.
(Karen Brettell)
*****
THURSDAY DATA: A SERIES OF UNFORTUNATE EVENTS (1055 EDT/1455
GMT)
A data triptych released on Thursday reiterated the
challenges faced by the U.S. economy as it limps back to full
health, challenges which include hobbled supply chains, a labor
drought, hurricanes and fires.
Tune in next week for locusts and frogs.
The number of U.S. workers filing first-time applications
for unemployment benefits unexpectedly rose by
nearly 5% last week to 351,000, according to the Labor
Department.
The data's upward zig ran contrary to the consensus zag,
which saw claims declining to 320,000.
The jump could be at least partly attributed to lingering
effects from Hurricane Ida, which hobbled energy production in
the Gulf of Mexico and caused severe flooding across a large
swath of the United States.
Still, the fact that these upticks are occurring even as
emergency benefits expire suggests the labor market recovery
still has some steep road ahead of it.
And while the four-week moving average of initial claims
inched a hair lower - suggesting the overall trend remains on a
downward trajectory - the number remains well above the 200,000
to 250,000 range economists associate with healthy labor market
churn.
"We expect initial claims to return to their downward path
in the weeks ahead," writes Nancy Vanden Houten, lead U.S.
economist at Oxford Economics. "But the data will be more uneven
as claims get closer to pre-pandemic levels."
Continuing claims, reported on a one-week lag, bumped higher
to 2.845 million, also running in the opposite direction from
expectations. For context, the number of folks receiving ongoing
continuing claims could populate the city of Dallas twice, and
them some.
Separately, the growth of U.S. business activity has lost
momentum this month.
Global financial information firm IHS Markit released its
initial "flash" purchasing managers index (PMI) print for
September, which showed the expansion manufacturing
and services sector indexes edging down to
respective readings of 60.4 and 54.4, for a composite
of 54.5.
A PMI reading above 50 signifies expanded activity from the
previous month.
"The slowdown was led by a cooling of demand in the service
sector, linked in part to the Delta variant spread," says Chris
Williamson, IHS Markit's chief business economist. "However,
while manufacturers have seen far more resilient demand,
factories face growing problems in sourcing enough supplies and
labour to meet orders."
Williamson also tagged "yet another month of sharply rising
prices," thereby adding credence to the Fed's increasing
inflation estimates.
Finally, the rosiest bit of data came courtesy of the
Conference Board, which posted its leading indicators data
for the month of August.
The index jumped 0.9% last month, more robust than the 0.7%
consensus, and stands on the shoulders of July's 0.8% increase.
"While the Delta variant—alongside rising inflation
fears—could create headwinds for labor markets and the consumer
spending outlook in the near term, the trend in the LEI is
consistent with robust economic growth in the reminder of the
year," says Ataman Ozyildirim, the Conference Board's senior
director of economic research.
Still, as shown by the graphic below, the Conference Board's
own data also suggests U.S. consumers have yet to receive the
memo:
Wall Street, among the most leading of all leading
indicators, shared little of the data's gloom in morning
trading.
All three major U.S. stock indexes were driven sharply
higher in a broad rally following Wednesday's Fed statement,
which provided some new clarity regarding the central bank's
timeline for tapering asset purchases and raising key interest
rates from near zero.
(Stephen Culp)
*****
STOCKS OPEN HIGHER AFTER FED’S “HAWKISH HOLD” (0955 EDT/1355
GMT)
Stocks opened stronger on Thursday, a day after the Federal
Reserve cleared the way to ease monthly bond purchases "soon"
and as investors were cheered by forecast raises from Accenture
and Salesforce.
Treasury yields are expected to stay relatively low even as
the Fed pares back its extraordinary stimulus, which will
maintain strong demand for stocks.
That said, the interest rate sensitive financials sector
is the best performer on the day, while real estate
is the worst, as investors positioned for higher
yields.
The Dow Jones Industrial Average is leading gains in
the major indexes.
Here is where markets stand in early trade:
(Karen Brettell)
*****
S&P 500: HAND-TO-HAND COMBAT IN THE CHART TRENCHES (0900
EDT/1300 GMT)
A close up of the S&P 500's shorter-term chart action
reveals a pretty intense struggle as bulls and bears battle it
out in the trenches:
One potential Elliott Wave count down from the 4,545.85
Sept. 2 intraday high into the Sept. 20 low, is an a-b-c 3-wave
corrective structure. Of note, in this event, wave c was almost
an exact 1.618 Fibonacci projection of wave a.
On Monday, the SPX fell to a low of 4,305.91, or a little
more than 1 point below the 1.618 projection at 4,307.26.
Meanwhile, the daily RSI ended at its most oversold level since
March 2020.
If Monday's SPX low marked the end of a correction, traders
may look for the SPX to overlap the September 14 low, at
4,435.46, reclaim the 20-day moving average (DMA), which ended
Wednesday at around 4,476, and see the RSI muster enough
strength to move back above the 70.00 overbought threshold.
Of some concern against this scenario, however, is that the
20-DMA's 3-day rate-of-change is its weakest since
early-November 2020, so something more may be afoot.
If the September 20 low instead marked the end of a
third-wave decline, then the SPX should retrace a portion of the
Sept. 16-20 decline, which would form a fourth wave in a
developing five-wave structure. It would then slide to marginal
new lows for now, in wave 5.
Of note, with Wednesday's push, the SPX accomplished a near
perfect 61.8% Fibonacci retracement of the Sept. 16-20 fall,
before selling back into the close. The SPX hit 4,416.75 vs a
4,417.13 retracement level.
A break of the Sept. 21 trough, at 4,347.96, can clear the
way for new lows. In that event, however, if the RSI takes out
its recent low, and market internals turn increasingly negative,
it could instead suggest a more virulent structure, with
potential for a much deeper fall.
(Terence Gabriel)
*****
FOR THURSDAY'S LIVE MARKETS' POSTS PRIOR TO 0900 EDT/1300
GMT - CLICK HERE:
(Terence Gabriel is a Reuters market analyst. The views
expressed are his own)