* Major U.S. indexes end higher; Nasdaq leads
* Consumer disc leads S&P sector gainers; utilities weakest
group
* Dollar, gold dip; crude ~flat; bitcoin rises >3%
* U.S. 10-Year Treasury yield ~1.47%
June 22 - 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
NASDAQ HITS RECORD, GROWTH STOCKS LEAD (1610 EDT/2010 GMT)
The Nasdaq posted a record high and the Dow and S&P
500 ended up on Tuesday, helped by gains in technology
and other growth shares.
Stocks added slightly to gains after comments by Federal
Reserve Chair Jerome Powell in a hearing before a U.S. House of
Representatives panel.
Powell reaffirmed the U.S. central bank's intent to
encourage a "broad and inclusive" recovery of the job market,
and not to raise interest rates too quickly based only on the
fear of coming inflation.
Technology rose 0.9% and consumer discretionary
climbed 1%, leading gains among S&P 500 sectors.
Among the so-called meme stocks, Torchlight Energy
dropped 29.4%, Clover Health advanced 12.4%, Alfi Inc
rose 108.8% and AMC Entertainment was up 4.6%.
Here is the closing U.S. market snapshot:
(Caroline Valetkevitch)
*****
CHOCK FULL OF IPOS (1440 EDT/1840 GMT)
Investors will have plenty of deals to choose from with
about 20 IPOs slated to price by the end of next week.
China's Full Truck Alliance opened up this week's
floodgates with a nearly $1.6 billion haul after its U.S. IPO
priced at $19 on Tuesday.
Wall Street's record-breaking run of new listings appears to
be picking up more steam. Through mid-June, IPOs and
special-purpose acquisition companies (SPACs) have already
raised $171 billion, surpassing the 2020 record of $168 billion,
according to Dealogic.
Below is a near-term list of IPOs, by expected debut date
and approximate deal size:
June 23:
First Advantage Corp (US, background checks) ($300M)
Sprinklr (cloud collaboration software) ($360M)
June 24:
Bright Health (health insurance) ($1.3B)
Confluent (data infrastructure software) ($700M)
Doximity (physician telehealth software) ($500M
Monte Rosa Therapeutics (biotech) ($175M)
Soulgate (China, social networking) ($185M)
June 25:
Alpha Teknova (biopharmaceutical reagents) ($75M)
AMTD Digital (Hong Kong, financial svcs) ($50M)
Elevation Oncology (biotech) ($100M)
GH Research (Ireland, biotech) ($125M)
Graphite Bio (biotech) ($200M)
Mister Car Wash (car washes) ($600M)
June 29:
Missfresh (China, grocery app) ($300M)
June 30:
Intapp (software) ($290M)
Integral Ad Science (digital advertising) ($250M)
LegalZoom (legal software) ($500M)
SentinelOne (cybersecurity) ($900M)
Xometry (3D printing) ($275M)
July 1:
Krispy Kreme (donut chain) ($600M)
(Lance Tupper)
*****
ACTIVE FUND MANAGERS MIGHT BE TOO GOOD AT THEIR JOBS (1345
EDT/1745 GMT
Index-tracking funds received record inflows in May, leaving
the debate over active versus passive fund management far from
settled.
Active fund managers' skill may actually be driving capital
to passively managed funds, according to Ted Seides, author of
"Capital Allocators: How the world's elite money managers lead
and invest" and host of the Capital Allocators podcast.
"Active managers are more skilled than they have ever been
before ... on a relative basis, it makes it harder to
outperform," Seides told the Reuters Global Markets Forum https://refini.tv/3dnOb1f.
However, there are upsides for active management.
While passive investment vehicles are readily available for
the United States and other developed markets, Seides notes
there are fewer such opportunities for areas such as private
equity and venture capital.
Additionally, with lower returns on stocks and bonds, Seides
thinks capital market pricing has "squeezed a lot of juice out
of the lemon," in markets where passive investing is dominant.
Looking at the hedge fund industry as a whole, Seides notes
while many funds are posting lower-than-expected returns,
industry assets are at all-time highs.
The Goldman Sachs Hedge Fund VIP Index ETF, which
holds the most popular stocks among hedge fund portfolios, has
risen about 9.5% this year, underperforming the S&P 500's
12.9% rise. Meanwhile, IQ Hedge Multi-Strategy Tracker ETF
- which aims to replicate the risk-adjusted returns of
different hedge fund investment styles - has edged up just 0.8%.
Seides sees more funds focusing on strategies with less
market correlation and "alternative alternatives" like
structured credit, while riskier activist and macro hedge funds
will have a "continuing place in the ecosystem."
(Lisa Mattackal, Aaron Saldanha)
*****
U.S. OVERNIGHT SWAP MARKET PRICED FOR FED HIKE IN DEC 2022
-BCA (1308 EDT/1708 GMT)
U.S. rate expectations embedded in overnight index swaps
(OIS) have moved up after a rise in rate forecasts from the
Federal Reserve last week. The OIS curve is now priced for a Fed
rate hike in December 2022, with a total of 87 basis points of
tightening by the end of 2023, according to BCA in a research
note on Tuesday.
Prior to last week's meeting, the OIS curve was priced for
Fed liftoff in April 2023 and for a total of 78 basis points of
rate hikes by end-2023.
BCA U.S. bond strategist Ryan Swift said the firm shares the
same rate outlook as the OIS curve, noting that "maximum
employment" as envisioned by the Fed will be met by December
2022.
"It is much more likely that any increase in inflation that
isn't matched by a tight labor market will continue to be
written off as 'transitory'," said Swift.
With a potential December 2022 rate hike, or 18 months away
from a tightening cycle, BCA believes the yield curve will
continue to flatten rather than steepen.
In past cycles, 18 months prior to liftoff was pretty close
to the inflection point between curve steepening and flattening,
whether it's based on 2/10, 5/30 or 2/5 curves, Swift said.
On Tuesday, however, the 2/10 yield curve steepened to 123.8
basis points.
(Gertrude Chavez-Dreyfuss)
*****
THE BURNER IS ON FOR HIGHER OIL DEMAND AND OIL PRICES (1250
EDT/1650 GMT)
John LaForge, head of real asset strategy at the Wells Fargo
Investment Institute (WFII), is out with some comments on oil,
or one market where he says demand is the key.
According to LaForge, when it comes to the most used
commodity globally, many drivers are responsible for its price.
Among other factors besides demand that he notes are: sentiment,
super cycles, interest rates, investor positioning, and
geopolitics.
LaForge says that for most of last year, oil prices were
primarily driven by the other factors, rather than demand. This
because the market had a "hard time pinning down the true supply
and demand mix at any given time."
However, now that there is a return to more normal
conditions, he believes demand is slowly becoming a main driver
of prices once again, and he suspects it could be the - key -
driver throughout 2021 and 2022.
With this, LaForge thinks "oil prices should rise as long as
global demand growth remains slow and consistent - oil suppliers
have an incentive to match demand, but not much more."
In fact, he thinks this dynamic could be in place for some
time since global demand is recovering, but not yet back to
pre-coronavirus levels. He underscores that U.S. demand for
gasoline, jet fuel, and distillates has been grinding slowly
higher, but is still below pre-Covid levels. However, LaForge
says that considering the amount of money central banks are
ploughing into global economies these days, it's reasonable to
expect that fuel demand should eventually trend higher.
"The bottom line is that we believe oil demand and oil
prices probably have a ways to run before they run out of fuel."
Separately, he is a rebasing chart of the year-to-date
performance of NYMEX crude futures and the Energy Select
Sector SPDR FUND:
(Terence Gabriel)
*****
HISTORY SEES NO NEED FOR A FLIP-FLOP FREAKOUT (1214 EDT/1614
GMT)
The S&P 500 has been having some fits and starts recently
with four days of declines last week, which involved an intraday
record-high on Tuesday and a 1.3% drop on Friday, followed this
week by Monday's 1.4% gain and a more modest 0.3% gain so far in
Tuesday's session.
While some investors may be worried that "volatility and
indecision so close to a record high is a sign of instability,
Bespoke Investment Group is out with a research note using
historical data to ease any frazzled nerves.
Since World War II there are 21 times the S&P 500 fell more
than 1% after closing within 1% of a record high and immediately
bounced back 1% the following day.
But in the six and 12 months after these 'flip flops,'
average and median returns over the following were actually
modestly better than average, according to Bespoke.
The average gain after a flip flop in this timeframe was
4.7% for the six months following and 10.24% for the 12 months
following compared with the average gain of 4.33% for all six
month periods since 1945 and 8.79% for all 12-month periods
since 1945, according to Bespoke data.
"While the performance figures are only marginally better
than average and don't provide a compelling argument for further
outperformance, they also don't support any idea that this type
of volatility within such close levels of an all-time high is
any sort of ominous signal," Bespoke wrote.
(Sinéad Carew)
*****
THE HOUSE BEGAN TO PITCH: EXISTING HOME SALES EXTEND THEIR
DECLINE (1105 EDT/1505 GMT)
Remember that movie where a calamity sent a house spinning
into the sky? You'll recall it came back down and a certain
witch had a bad day.
Existing home sales have come back to earth.
Sales of previously-owned U.S. homes eased by
0.9% in May to 5.8 million units at a seasonally adjusted
annualized rate (SAAR), according to the National Association of
Realtors (NAR).
While the number extended April's 2.7% drop, it came in
above the 5.72 million units SAAR expected by economists.
Until recently, the housing market has been the undisputed
star of the COVID recovery, as social distancing restrictions
and the new, work-from-home normal sent homebuyers stampeding
for the suburbs in search of elbow room and home office space.
That demand surge sent housing inventories to all-time lows,
which in turn, launched home prices to the moon and well beyond
the grasp of many potential buyers, particularly at the lower
end of the market.
With this latest data, existing home sales are right about
at February 2020 levels.
"Lack of inventory continues to be the overwhelming factor
holding back home sales, but falling affordability is simply
squeezing some first-time buyers out of the market," writes
Lawrence Yun, chief economist at NAR.
"The market's outlook, however, is encouraging," Yun adds.
"Supply is expected to improve, which will give buyers more
options and help tamp down record-high asking prices for
existing homes."
Indeed supply has improved.
The scarcity of single-family homes on the market has begun
to recover. It would now take 2.5 months to sell all available
homes on the market, up from 1.8 months at the beginning of the
year:
Housing stocks have largely outshone the broader market
throughout the health crisis.
The 12-month performances of the Philadelphia SE Housing
index and the S&P 1500 Homebuilding index
have handily outperformed the S&P 500.
As seen in the chart below, that outperformance started
losing momentum about six weeks ago, but appears to have found a
second wind in recent sessions:
Wall Street was once again range-bound and languid.
By mid-morning, the three major U.S. stock indexes were
barely higher, but hadn't strayed far from the starting line.
But smallcaps, like the witch, have had better days.
(Stephen Culp)
*****
WALL STREET FLATTISH, BRACING FOR POWELL (1015 EDT/1415 GMT)
The three major U.S. stock indexes are mixed, and near flat,
in early trading Tuesday, as investors brace for comments from
Federal Reserve Chair Jerome Powell.
Powell is to testify Tuesday before the U.S. House of
Representatives Select Subcommittee on the Coronavirus Crisis.
In his prepared remarks for Tuesday released late Monday,
Powell said the U.S. economy continues to show "sustained
improvement" from the impact of the coronavirus pandemic and
ongoing job market gains, but inflation has "increased notably
in recent months."
Financials, down 0.4%, are leading declines among
S&P 500 sectors.
Meanwhile, so-called meme stocks are leading the charge in
U.S. trading volumes, with ContextLogic, down 3.0%, the
most heavily traded stock with more than 92 million shares
changing hands so far. Next comes Torchlight Energy,
down 5.3% with 69.5 million shares traded so far and Clover
Health following with 57 million shares and a 19.2%
advance. In fourth place is Alfi Inc, up 47.8%, with
47.4 million shares exchanged, and AMC Entertainment is
fifth, with volume of 47 million shares.
Here is the morning U.S. market snapshot:
(Caroline Valetkevitch, Sinéad Carew)
*****
PEERING BELOW THE SURFACE (1004 EDT/1404 GMT)
As investors digested last week's market selloff following
the Federal Reserve's meeting, one dynamic that stood out were
signs that the average stock struggled more than the overall
benchmark index.
While the S&P 500 fell 1.9% last week, the
equal-weight version of the index dropped 3.7%. That
was the biggest weekly percentage drop for the equal-weight S&P
500 since late January.
"As much as the market pulled back a little bit at the
headline level last week, below the surface the pullback was
much sharper," said Keith Lerner, chief market strategist at
Truist Advisory Services in Atlanta.
Lerner points out that the relative strength in the
heavyweight technology sector, which edged up 0.1%
last week for its fifth straight week of gains, helped keep the
benchmark S&P 500 from logging more severe declines.
The strength of the equal-weight gauge this year has been an
encouraging sign for those investors seeking a broader rally, as
it suggests more stocks on average are doing well, rather than
only those with the biggest market caps.
Indeed, after bouncing back on Monday, the S&P 500 equal
weight index was up 16.9% so far in 2021 through yesterday's
close, versus a 12.5% rise for the overall S&P 500. If that
holds, it would be the first time since 2016 that the
equal-weight version outperformed for a calendar year.
(Lewis Krauskopf)
*****
FANG INDEX: STILL INSIDE THE LINES (0900 EDT/1300 GMT)
Since peaking in February at 7,370.72, and then declining
into an early March low at 6,095,23, the NYSE FANG+TM Index
has been serving up swings contained by numerous lines
on the charts :
After establishing the early March trough, an initial upward
reaction essentially stalled at the 50% retracement of the
February-March slide.
In the wake of a marginal new intraday low in late March at
6,086.32, NYFANG quickly rallied, and with its 7,107.70 April 14
high, ultimately retraced 79.4% of the mid-February to
early-March slide on an intraday basis. However, the index
failed to close above the 76.4%/78.6% Fibonacci retracement zone
of that decline in the 7,069.70/7,097.77 area.
A resumption of weakness led to a test of the March troughs
with the 6,106.50 mid-May low.
The index has since bounced again, hitting an intraday high
of 6,897.64 on Friday. However, the index has so far failed to
end back above the 61.8% retracement of the February-March slide
at 6,883.48, or the 76.4%/78.6% retracement zone of the
April-May down-leg in the 6,871.42/6,893.44 area.
The index slid during Monday's session, before recovering,
and posting a small rise. Now in premarket trade on Tuesday, 7
of the 10 NYFANG members are quoted down, suggesting the index
may be poised to trade lower early in the regular session.
With yields snapping back, potentially putting the recent
growth stock relative resurgence at risk, NYFANG
may be facing a sudden headwind. A close back below its 50-day
moving average, which ended Monday at around 6,677, may see
downside pressure intensify again.
However, if NYFANG is forming a bullish triangle since its
February peak, the 2021 lows should contain weakness.
(Terence Gabriel)
*****
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(Terence Gabriel and Lance Tupper are Reuters market analysts.
The views expressed are their own)