* Major U.S. indexes gain, Nasdaq out front
* Financials lead S&P sector gainers; staples weakest group
* Euro STOXX 600 down ~0.4%
* Dollar falls; gold down, crude rises, Bitcoin sub-$50k
* U.S. 10-Year Treasury yield ~1.58%
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WITH EARNINGS SEASON COMES BUYBACK ANNOUNCEMENTS (1020
EDT/1420 GMT)
As the pace of companies reporting earnings has picked up,
so have the buyback announcements, with more than $40 billion in
buybacks announced over the past week, according to TrimTabs
Investment Research, part of Informa Financial Intelligence.
Analyst Winston Chua notes that corporate buying in the form
of new cash takeovers and stock buybacks has jumped in the past
week to the largest volume in 11 weeks, with new buybacks at
$8.1 billion daily and new cash takeovers at $3.2 billion daily.
Chua points out that while U.S. companies are net buyers of
shares, "a handful of companies have accounted for most of the
buying."
Buybacks totaled $40.3 billion, with the $25 share
repurchase plan announced by Bank of America on April 15
accounting for more than half of the total.
Cash takeovers totaled more than $15 billion for a second
straight week, according to Chua, thanks to Canadian National
Railway's offer for Kansas City Southern worth
more than $10 billion in cash and Thermo Fisher's bid
for PPD adding another $5.5 billion.
Chua said that since the start of April, corporate buying of
$80.8 billion and new share offerings of $22.8 billion has
resulted in a buy/sell ratio of 3.5-to-1. Excluding Bank of
America's repurchase plan, the ratio drops to 2.4-to-1 but
remains well above the 1.4-to-1 ratio over the past 12 months.
(Chuck Mikolajczak)
*****
PICK YOUR NARRATIVE! (1004 EDT/1404 GMT)
Looking at what kind of a decade the 2020s could look like,
UBS WM CIO Mark Haefele sees three possible scenarios or
narratives going forward.
1) 'Lower for longer'
Well longer does mean longer doesn't it?
That scenario is based on an extension of last decade's
paradigm of super-low interest rates coupled with anemic
inflation and limited economic growth.
One negative consequence of such an environment is that it
very likely exacerbates inequality.
'Lower for longer' means rich individuals can borrow money
at very low cost to invest in rising assets while the modest
economic growth deprives low incomes from a substantial rise in
living standards.
Anyhow, for UBS GW, it's safe to assume that the FAANGs and
growth stocks would likely remain in big demand.
2) 'Roaring 20s'
It's undeniable there is a real hype surrounding that
expression at the moment among financial punters, probably due
to expectations of a robust post-COVID 19 recovery.
In a nutshell, that's high economic growth, high interest
rates and high inflation.
Central banks like the Fed allow prices to rise above 2% and
governments are not so concerned about fiscal orthodoxy but
willing to pay the big bucks to fight climate change notably.
Main consequence for investors? Good for equities, bad for
bonds.
3) 'Stagflation lite'
This one will probably sound familiar for those who grew up
in the 80s.
Let's imagine that the mountain of stimulus fails to
kickstart growth and that we just get a big pile of debt with
some inflation creeping in the system. The Fed has to raise
rates which weighs on growth.
That's a negative for both fixed income and equities but for
that asset class, "inflation would likely hurt growth stocks
more than value", Haefele writes.
4) #everybodywinscapitalism
That's not part of UBS GW scenarios but a quite funny take
from the twitter account of Sven Henrich at Northman traders
commenting on the exuberance of markets last week:
https://twitter.com/hashtag/everybodywinscapitalism?src=hashtag_click
(Julien Ponthus)
*****
DOW TRANSPORTS: TRYING TO DELIVER A RECORD RUN (0900
EDT/1300 GMT)
The Dow Jones Transportation Average is attempting to
rise for a 12th-straight week. Using Refinitiv data back to
early 1988, the DJT has never risen more than 11-straight weeks.
As stands, the DJT is virtually flat for the week. It
finished at 14,920.95 on Thursday, which is just a 1.4 point, or
0.01%, gain from last Friday's close of 14,919.55. It came down
to the wire last week as well, with the DJT closing up just 1.22
points.
Since closing down for the week ending January 29 of this
year, the DJT has gained around 24%. The S&P 500 and Dow
Industrials have risen around 12%-13% over this period.
In any event, given the win streak, the DJT appears
stretched to the upside. Aside from the current streak, it last
rose 11-straight weeks from late-November, 1988, to
early-February, 1989:
Momentum also appears overheated. The weekly RSI ended
Thursday at 83.775, or its most overbought since an 84.799 print
for the week ending January 12, 2018. Of note, back then, from
the following week's intraday high, the DJT collapsed around 14%
into early February.
Meanwhile, Avis is the best performing stock in the
DJT by far in 2021 with a gain of more than 112%.
However, Kansas City Southern has provided the biggest
positive impact on the index. KSU is responsible for almost a
quarter of the DJT's more than 2400 point year-to-date rise.
Just this week, Canadian National Railway Co made a
$33.7 billion bid for KSU in a cash-and-stock deal.
(Terence Gabriel)
*****
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(Terence Gabriel is a Reuters market analyst. The views
expressed are his own)