Benzinga - Back from vacation and diving into a big week. The S&P 500 is just over 5% away from hitting its all-time high, FED's poised for a rate hike, second quarter GDP and big tech earnings are rolling in. Coffee in hand? Let's conquer this week together!
Market
Prices as of 4 pm EST, 7/21/23
Macro Institutional investors have never been more bearish on the US dollar.
- Net short positions on USD jumped by 18% last week.
- Driving the sentiment is continued progress on the inflation front.
- Improving inflation means a less hawkish Fed which could pose a significant headwind for the dollar.
- All eyes will be on the Fed’s next move.
Speaking of, the Fed will make its interest rate decision on Wednesday afternoon.
- With markets placing a 99.8% chance on a 25bps rate hike, investors will be parsing Powell’s words for clues on future policy.
- Following this week’s hike, markets expect the Fed funds rate to remain at 5.25-5.50% through Q1 2024.
- The first cut is seen happening in March:
CME Group
Stocks After 3 straight weeks of inflows, US equity funds saw $2.3 billion in outflows last week.
- Money still found its way into Tech, Financials, and Consumer Goods.
- In terms of positioning, investors are overweight Staples, Tech, and Telecom.
- Aggregate positioning in equities is in the 82nd percentile, according to Deutsche Bank, led by discretionary investors.
- Still lagging in exposure: hedge funds and mutual funds.
Deutsche Bank
With leadership at its narrowest in 30 years, the current rally’s breadth is worse than that of the Dotcom Bubble, according to JPMorgan.
- But bad breadth could be masking hidden opportunities.
- Goldman calculates the aggregate forward P/E of the “Magnificent 7” at 32x, putting the overall index at 20x.
- Beneath those 7, the bottom 493 carry a 17x multiple.
- Will the laggards close the gap?
Goldman Sachs
Energy Goldman Sachs and JPMorgan are predicting higher oil prices ahead.
- The former sees demand growing to all-time highs and a significant deficit in the second half.
- Both expect Brent to end the year at $86 a barrel:
JPMorgan
Earnings
Q2 earnings season update:
- 18% of S&P 500 companies have reported.
- 75% and 61% of companies have topped earnings and revenue estimates, respectively.
- Sectors reporting EPS growth: Discretionary, Communications, Industrials, Real Estate, Financials, Staples
- Sectors reporting sales growth: Financials, Discretionary, Healthcare, Staples, Real Estate, Industrials
- Blended earnings have dropped 9% while revenue has declined by 0.3%:
Fact Set
What we’re watching today:
- Cadence Design Systems (NASDAQ: CDNS)
- NXP Semiconductors (NASDAQ: NXPI)
- Alexandria Real Estate (NYSE: ARE)
- Brown & Brown (NYSE: BRO)
- Domino’s Pizza (NYSE: DPZ)
- Packaging of America (NYSE: PKG)
- Crown Holdings (NYSE: CCK)
- Logitech (NASDAQ: LOGI)
Top Headlines
- UK slowdown: Rising interest rates are hitting consumer spending and manufacturing in the UK.
- Japan inflation: The BOJ may be increasing its inflation forecast to 2.5% from 1.8%.
- Foreign investment: Chinese investment in the West has been slowing.
- Housing rally: Robert Shiller says the 10-year rally in US home prices could be ending.
- Crisis averted: Yellow struck a deal with 22,000 of its Teamsters-represented workers to avoid a strike.
- Barbenheimer: Barbie and Oppenheimer brought in a combined $235 million at the box office over the weekend.
- RIP Twitter: Musk has rebranded Twitter as “X”.
- Market narratives: These are the 2 competing market narratives according to Apollo’s Torsten Slok.
Week Ahead
- Monday: Chicago Fed National Activity Index, S&P Global Flash PMIs
- Tuesday: Redbook, Case-Shiller Home Prices, House Price Index, CB Consumer Confidence, Richmond Fed Manufacturing/Services Indexes, API stocks change
- Wednesday: MBA mortgage data, new home sales, EIA stocks change, Fed decision
- Thursday: GDP growth rate, Durable Goods orders, goods trade balance, initial jobless claims, retail/wholesale inventories, pending home sales, Kansas City Manufacturing
- Friday: Personal income/spending, PCE Price Index, Employment Cost Index, consumer sentiment
- Crypto
Prices as of 4 pm EST, 7/21/23
- HODL: Some 75% of Bitcoin’s (CRYPTO: BTC) circulating supply is controlled by long-term holders.
- BTC vol: Bitcoin’s 30-day volatility is at its lowest since mid-January.
- Risk-averse: Activity in futures markets suggests Bitcoin traders remain cautious.
- Worldcoin: Sam Altman’s Worldcoin launched its WLD token today which investors have met with open wallets.
- XRP ruling: An SEC appeal in its case against Ripple doesn’t appear to represent a significant setback for the ruling.
Deals
- Shadow bank: Bain Capital will buy Gautam Adani’s stake in his shadow bank.
- Investment banking: While big Wall Street firms downsize, smaller players are bulking up.
- M&A traders: Merger arbitrage is among this year’s worst-performing hedge fund strategies.
- Aerospace: Safran will buy Collins Aerospace’s flight controls business for $1.8 billion in cash.
- ESPN search: In its search for a strategic partner, ESPN has talked with the NBA, NFL, and MLB.
Meme Of The Day
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