* Major U.S. indexes end up, but off day's highs
* Industrials lead S&P sector gainers; energy sole loser
* Dollar ~flat; gold rises, crude drops >3%
* U.S. 10-Year Treasury yield ~1.66%
May 13 - Welcome to the home for real-time coverage of
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thoughts with us at markets.research@thomsonreuters.com
WALL STREET ENDS SHARPLY HIGHER AS INVESTORS BTD (1610
EDT/2010 GMT)
Wall Street ended higher on Thursday, with investors buying
the dip in a volatile session that saw the S&P 500 and
Dow close up over 1% each. The Nasdaq oscillated
from a strong gain to a loss, and back up again, to close 0.7%
higher.
Upbeat labor market data prompted investors to buy shares of
companies viewed as likely to outperform as the economy
recovers, putting the brakes on three straight days of losses.
New applications for unemployment insurance continue to
fall, according to jobless claims data from the Labor Department
that hit a 14-month low.
Recent economic data has prompted inflation fears as a
scarcity of materials and workers threatens to send prices
surging in the face of a demand boom. But investors on Thursday
focused on the glass-half-full side of the strengthening
unemployment insurance data.
The S&P 500 industrial and financial
indexes both jumped 1.9%, while energy dropped 1.4%, the
only one of 11 sectors to end in the red.
The S&P 500 ended the session up 1.2%, trimming its loss
this week to about 2.8%.
The Nasdaq has lost almost 5% this week and is down about 7%
from its record high close on April 26.
Here is Thursday's closing snapshot:
(Noel Randewich)
*****
TALES FROM THE CRYPTO-RISK CRYPT (1343 EDT/1743 GMT)
Bitcoin, and other cryptocurrencies, can be a
risky proposition for traders and investors.
Indeed, after Tesla Chief Executive Elon Musk
announced late Wednesday that his company will no longer accept
bitcoin for car purchases, the cryptocurrency collapsed more
than 16% in a little over two hours.
The Wells Fargo Investment Institute (WFII) is out with a
special report entitled, "The investment rationale for
cryptocurrencies", which points to risks investors should
consider.
In its report, WFII says, "We believe cryptocurrencies have
evolved into a viable investment asset." It says it views
digital assets as an alternative investment for qualified
investors via a professionally managed fund.
WFII also emphasizes a number of risks. These include the
potential for additional regulation, technology failures,
operational risks, and the heavy energy consumption cost to
produce them, along with price volatility.
Other risks WFII notes are that "there are few
cryptocurrencies that can reverse mistakes, including difficulty
in recovering funds sent to the wrong person or place," as well
as "losing access to one's private key or access code," which
"could see the cryptocurrencies vanish for good."
Additionally, WFII says that crypto-exchanges have risk of
data breaches and theft.
Finally, WFII says that with over 9,000 cryptocurrencies
available today, consolidation risk reinforces their preference
for a diversified professionally managed fund.
More broadly, WFII believes investors may need more
education on the "unique technological features that affect
cryptocurrency values."
Musk Tweets, and SNL appearances, aside.
(Terence Gabriel)
*****
U.S. SHARE BUYBACKS REBOUND AS ECONOMY RECOVERS (1213
EDT/1613 GMT)
With Wall Street wobbling as investors worry that inflation
related to the economic recovery might end the bull market,
stock buybacks appear to be taking a growing roll in supporting
share prices, according to data from S&P Dow Jones Indices.
S&P 500 component companies bought back $156 billion worth
of shares in the March quarter, up from $131 billion in the
December quarter, Senior Index Analyst Howard Silverblatt wrote
in a research note late on Wednesday. Buybacks in the first
quarter were still down compared to the $199 billion spent in
the first quarter of 2020, when the coronavirus spread around
the globe. Buybacks bottomed out at $89 billion in the second
quarter of last year as the U.S. economy shutdown due to the
pandemic.
The top 20 share repurchasers in the first quarter accounted
for 57% of all buybacks, which compares to 66% in the December
quarter and a longer-term average of 47%, Silverblatt wrote.
Companies in the S&P 500 IT sector dominated the first
quarter in buybacks, at $51 billion, but that was down 9% from
the December quarter and down 14% from the first quarter of
2020, Silverblatt wrote.
Accounting for much of the March quarter dip in tech
buybacks, Apple spent $19 billion repurchasing its
shares, down from $24 billion in the December quarter, according
to data on the iPhone maker's website.
(Noel Randewich)
*****
NASDAQ 100 STOCKS: WAVE OF TARGET CUTS COMING? (1110
EDT/1510 GMT)
Do sell-side financial analysts only follow fundamental
analysis when they set targets for the stocks they follow or is
there something more that comes into play in their research?
Neil Campling, head of TMT research at Mirabaud in London,
believes momentum trends also do matter and bigly. And that's
why -- after looking at data dug out by Reuters -- he says
Nasdaq 100 companies may face wave of downgrades.
"Reuters highlight that consensus median price targets for
Nasdaq 100 companies point to (a) 34% gain from current levels,
and the range has just 6% downside from current levels, while
the top-end of target pointing to 65% gains," he notes.
"Sell side price targets tend to be moving targets which are
primarily reflective of momentum factors rather than
fundamental. Often they are slow to react to changing fortunes
on the downside and chase things on the way up," he add.
"If the current style factors and inflation expectations
continue then you can expect a wave of reducing price targets to
follow," he concludes.
(Danilo Masoni)
*****
PRICES SPIKE, LAYOFFS DROP: PPI, CLAIMS DATA CONTINUE THE
NARRATIVE (1052 EDT/1452 GMT)
Inflation's running hot and the labor market's tightening.
That's been the recurring theme in recent days and data released
on Thursday did little to change that tune.
The number of U.S. workers submitting first-time
applications for unemployment benefits fell last
week to 473,000, according to the Labor Department.
The number came in below the 490,000 consensus, and marked a
decline from the previous week's upwardly revised 507,000.
For context, the number of claims filed last week is roughly
equivalent to the population of Miami.
Still, they're moving in the right direction as companies
grow increasingly reluctant to let workers go amid what appears
to be a labor shortage.
"The trend now is strongly downwards, as the reopening
allows firms to hold on to staff who would otherwise have been
laid off," writes Ian Shepherdson, chief economist at Pantheon
Macroeconomics. "The apparent difficulty firms are having when
trying to recruit people is another incentive to keep staff, if
possible, because hiring them back later might prove impossible
or expensive."
Ongoing jobless claims, reported on a one-week
lag, edged down to 3.66 million, still well over double the
pre-pandemic level, but down from the nose-bleed inducing 24.9
million apex reached this time last year.
In a separate report from the Labor Department, producer
prices (PPI) - or the prices U.S. goods producers
receive for their wares at the factory loading dock -
accelerated sharply in April, rising 0.6%.
The number was double the rate expected.
Consumers, freshly jabbed and flush with stimulus cash, are
driving a demand boom, and materials producers are struggling to
meet it. That imbalance has sent prices spiking and stoked
jitters, despite Fed promises that current spikes won't morph
into long-term inflation.
"We expect upward price pressures to persist in the near
term before supply constraints are resolved and base effects
fade," says Mahir Rasheed, associate economist at Oxford
Economics. "Since we believe much of the acceleration in
inflation will be transitory, we share the Fed's view that this
isn't the start of an upward inflationary spiral.
"We look for the pace of inflation to gradually cool heading
into 2022."
On a year-over-year basis, so-called "core" PPI
(which excludes food, energy, and trade services) is up by 4.6%,
joining other indicators above the Fed's average 2% annual
inflation target.
The chart below shows how five major inflation gauges stack
up against the central bank's favorite yardstick, core PCE:
In a reversal from recent sessions, stocks are sharply
higher in morning trading with tech taking the lead of a broad
rally.
Economically sensitive chips, small caps and
transports are outperforming.
(Stephen Culp)
*****
NASDAQ VS COMMODITIES: HAS TECH CEDED ITS CROWN TO "STUFF"?
(1005 EDT/1405 GMT)
The tech-laden Nasdaq Composite had been on quite a
run relative to commodities.
Indeed, on the back of strong gains in tech, and
especially chips, and FANGs, the Nasdaq
outperformed the Refinitiv/CoreCommodity CRB index for
four straight years through 2020.
However, that has flipped so far in 2021 with the IXIC
posting a rise of around 2%, while the TRCCRB, boosted by strong
gains in such commodities as crude oil, copper, corn, soybeans,
has gained around 22%. This has put the commodities index at a
6-year high, and on track for its best year since 2009.
The Nasdaq/CRB ratio, on a weekly basis, hit a record high
of 80.5 in early November of last year. Since then, however, the
Nasdaq has underperformed "stuff." In fact, the ratio is now
hitting a 13-month low:
With this, the ratio, now just over 64, is flirting with
what appears to be some significant support in the form of a
log-scale trend line from its 2011 trough, now around 64.00, as
well as the 100-week moving average (WMA), now around 63.30.
Of note, the ratio has been on a record run vs its 100-WMA.
The ratio is on pace for its 494th straight weekly close above
this long-term moving average. This current run above the
100-WMA dwarfs the ratio's 155-week streak that lasted into the
Y2K tech bubble top.
Thus, the ratio now appears to be at an important juncture.
A weekly close below the support levels can add credence to the
view that a sea change in trend is underway.
A deeper decline to threaten the March 2000 high, at 28.9,
could see the ratio lose more than half its value from current
levels.
In that event, tech would take quite the bow to "stuff."
(Terence Gabriel)
*****
U.S. STOCK FUTURES MOSTLY HIGHER AFTER MORE HOT INFLATION
DATA (0852 EDT/1252 GMT)
In the wake of more hot data on U.S. inflation, as well as
jobless claims, U.S. equity index futures are mostly higher.
April PPI printed at 0.6% month-over-month vs a 0.3%
estimate. Year-over-year, it came in at 6.2% vs a 5.9% Reuters
poll. Initial jobless claims were 473k vs a 490k estimate.
With this, Nasdaq and S&P 500 e-mini futures
are green, while Dow futures are roughly flat.
With the Nasdaq relatively stronger, tech, FANGs
, and growth shares look to outperform at the
open. Nine of the ten NYFANG components are quoted up in
premarket, while energy and financial ETFs are
slipping.
The U.S. 10-Year Treasury yield is dipping
slightly to around 1.69%.
Here is where markets stand ahead of the open:
(Terence Gabriel)
*****
FOR THURSDAY'S LIVE MARKETS' POSTS PRIOR TO 0845 EDT/1245
GMT - CLICK HERE:
(Terence Gabriel is a Reuters market analyst. The views
expressed are his own)