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Money Daily has been providing business and financial market news, views, and coverage on a nearly continuous basis since 2006. Complete archives are available at moneydaily.blogspot.com.
PRIOR COVERAGE:
8/7-8/13/2022
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Stocks Looking to Extend Gains, But Options Expiry and Retail Results May Prove Otherwise Friday, August 19, 2022, 8:22 am ET Being the third Friday of the month, a big options expiry is on tap. Some of the more savvy options traders - those who speak the lingo of delta, gamma, open interest, and implied volatility - have suggested that today's events could result in a rather large drawdown. Here at Money Daily, there's less interest in details and jargon and better focus on flow and supply, leverage, relative strength and the big macro picture. Surely, any quants worthy of their rich pay grade accept the fact that results matter, whether the math is right or wrong. In this turbulent market, being right can be extremely fruitful, whereas being wrong can devastate a portfolio and destroy positions and cash flows. As is usually the case, current futures are not going to provide answers, unless, as European stocks are selling off and US futures are sliding fast, there's a sizable gap lower at the open. Even the most experienced traders can fall into a trap like this. Witness many days this year when stocks opened sharply to the downside or upside and then reversed course hours later. Today may turn out to be one of those days, though shorts are poised to make a rousing comeback. There have been signs of weakness in retail and housing throughout the week, and Friday's action could be volatile to the extreme. With gold, silver, and especially, oil, down and the dollar rallying early this morning, this appears to be the ideal setup for a revenge move on the short side. In case you're positioned in that direction, it would be advisable to have some fairly tight stops in place in case the algos or the PPT or NY Fed's trading desk sees an opportunity to crush to the upside. That's been the play since the middle of June and there's the distinct possibility that another rout of the shorts could be in the cards. Major US indices are looking for a positive week, which would run the gains to five straight on the S&P and NASDAQ, and four of the last five on the Dow and NYSE. WIll the "strong economy" narrative hold or will the big money take the opportunity to cash in some chips and head to the hills? One of the indicators that's been a fairly reliable predictor has been bitcoin, which is down more than $2000 this morning, crashing nearly nine percent to around $21,450. Bitcoin has been used as a proxy for the NASDAQ over the past six to eight months and a move such as the one taken place presently bodes ill for tech longs and equities in general. Adding to the indicators for clues have been the retail companies reporting second quarter results this week. WalMart (WMT) beat lowered expectations, while Kohl's (KSS) was hung out to dry after a big miss on revenue and EPS, subsequently lowering expectations for the remainder of the year. After the close Thursday, Ross Stores (ROST) posted some questionable figures:
DUBLIN, Calif., August 18, 2022--(BUSINESS WIRE)--Ross Stores, Inc. (NASDAQ: ROST) today reported earnings per share for the 13 weeks ended July 30, 2022 of $1.11 on net income of $385 million. These results compare to $1.39 per share on net earnings of $494 million for the 13 weeks ended July 31, 2021. Sales for the second quarter of 2022 were $4.6 billion versus $4.8 billion in the prior year period. Comparable store sales were down 7% on top of a robust 15% gain in the second quarter of 2021, which was the strongest period of last year. Every metric is looking lower for Ross and pre-market has the stock down about one percent. ROST is down more than 18% year-to-date. Earlier this morning, Applied Materials (AMAT) reported a winning quarter in revenue and earnings along with an optimistic view on the chips sector. Shares are cautiously higher - less than one percent - in the pre-market. Foot Locker (FOOT) is roaring prior to the opening bell with the following bullet points:
The Company reported net income of $94 million, or $0.99 per share, for the quarter, compared with net income of $430 million, or $4.09 per share, for the corresponding prior-year period. On a non-GAAP basis, they earned $1.10 per share, compared with non-GAAP earnings of $2.09 per share in the prior-year period. Judging by those results, somebody on the inside knows something or everybody is just looking to get into mass formation psychosis on this one. Shares are up 21% pre-open. That one's a real head-scratcher. FOOT looks like another meme stock. Finally, Buckle (BKE) reported modestly better results year-over-year and its quarter and outlook appear legitimate. It's up nearly four percent in the pre-market. It would be unwise to leave the Fed out of the equation today and on a forward basis. In what appears to be a slightly delayed reaction, a review of FOMC minutes from July turned out to be more hawkish than dovish, especially after president of the Federal Reserve Bank of St. Louis, James Bullard, gave his blessing to a third straight 75 basis point rate hike in September. The "pivot" so many have been touting over the past two months may have been more of a head fake than actionable reality. The Fed is going to continue tightening until they're convinced inflation is under control and that may still be quite a way off. Bets for continued hikes through the remainder of 2022 and into 2023 are on the rise. This is a pure negative for stocks and the economy. There's little doubt that the Fed caused the current inflation and that they will likely trigger a recession, which, in some minds, is already upon us. Trade like a warrior and take no prisoners!
At the Close, Thursday, August 18, 2022:
Thursday, August 18, 2022, 9:06 am ET Buh-bye Liz Cheney; hello BJ's Wholesale. RINO Republican and vice chair of the select committee on January 6 (which, incidentally, may not be constitutionally valid), Liz Cheney, was soundly defeated Tuesday by Trump-endorsed Harriet Hageman in the Wyoming Republican primary, 66% to 29%, thus ending Cheney's third term as the lone House representative of the state. Cheney will not stand for re-election in November. Her term expires midnight, January 2, 2023. Hageman is favored to win the seat over Democratic challenger Lynette Grey Bull. Cheney's defeat was a huge repudiation of the January 6 committee work and the anti-Trump movement spearheaded by congressional Democrats. Additionally, of the 10 Republicans who voted to impeach President Trump back in 2020-21, eight of them have been defeated in primaries. Moving ahead to Thursday morning, a number of retailers released fiscal second quarter 2022 financial results, including Estee Lauder (EL), Kohl's (KSS) and BJ's Wholesale (BJ). Of the three, BJ's easily delivered the best results, showing an increase in comparable club sales of 19.8% year-over-year and knocking EPS out of the park with $1.03 versus $0.80 in the comparable year-ago quarter. The company, which operates 229 clubs and 160 BJ's Gas locations in 17 states, reported healthy gains in operational cash flows and plans to open 11 new locations in fiscal 2022. BJ's stock was seen trading up more than five percent in the pre-market and will likely open at a new all-time high, above 71.93 (11/18/21). On the other side of the profit/loss coin is Kohl's, which missed badly on EPS, returning $1.11 per share, compared to $2.48 a year ago. Comparable sales decreased 7.7% and net sales decreased 8.5% in the quarter. Total revenue declined 8.1% year-over-year. Kohl's operates 1100 stores in 49 states and is among the top 25 retailers, by sales, in the United States. Shares were trending lower, by as much as eight percent, prior to the opening bell. The company slashed expected 2022 earnings per share to $2.80 to $3.20, down from the $6.45 to $6.85 range estimated previously and anticipated 2022 net sales to fall between 5% and 6%, compared with its previous forecast of flat to 1% growth. Kohl's management also announced a $500 million accelerated share repurchase agreement, designed to keep its share price from falling into an abyss. As of Wednesday's close, Kohl's was down 31.52% year-to-date. Estee Lauder (EL), a global retail brand, reported full year net sales increase of 9% and diluted EPS falling to $6.55 from $7.79. Shares are down less than two percent in the pre-market. All of this is important to note as the US and generally, the world, suffers through the largest inflationary spike since the 1970s and American consumers, who comprise 70% of US GDP, are changing buying habits in line with price hikes, focusing on essentials above discretionary items. Dollar stores and discount retailers like Costco and JB's are thriving in this environment, while stand-alone retailers in clothing and home furnishing, like Kohl's, are suffering with bloated inventory and slower sales. With inflation showing few signs of abating, these trends are likely to remain in place and accelerate as consumers pull back on their spending. Rounding out the top news items from Thursday morning, initial unemployment claims in the week ending August 13, was 250,000, a decrease of 2,000 from the previous week's revised level, according to the Department of Labor. The previous week's level was revised down by 10,000 from 262,000 to 252,000. This is the 13th straight week initial claims have topped 200,000. Recapping Wednesday's market action, as expected, no clues to future Fed rate moves were detected in the July FOMC minutes, which crossed the wires at 2:00 pm ET. There was an initial burst higher at the release, all of which was sold back to levels just prior to the release. Stocks appear now to be in a state of limited hang-out, favoring bearish bets over the short term. Longer term is highly dependent on a variety of moving factors, including jobs, inflation, interest rates, credit card spending, and geo-politics. Friday's option expiration looms large, with anticipation of a possibly sizable drawdown. Thursday's trading ought to give clues about how stocks end the week. Thanks largely to WalMart, the Dow is up on the week, while the rest of the major indices are showing losses. Happy hunting!
At the Close, Wednesday, August 17,2022:
Wednesday, August 17, 2022, 9:00 am ET CORRECTION: On Tuesday (yesterday), Money Daily inadvertently gave the impression that July FOMC minutes would be released on Tuesday. That was incorrect. They are being released today, Wednesday, August 17. The analysis stands:
Equity traders are eagerly awaiting minutes from the July FOMC meeting, to be released at 2:00 pm ET, hoping to read the tea leaves for any insight to the Fed's policy stance. The next FOMC meeting is September 20-21, at which time the Fed will make a major announcement on the key federal funds rate. Opinions on what they will do range from pausing their rate hikes to a one percent advance, which would put the rate at 3.25-3.50%. Stocks were mixed on Tuesday, though the S&P added a few more points to the upside and the Dow has now gained over five consecutive sessions, adding 1,378 points across that span. With markets looking a bit frothy, a mid-day pullback erased some gains in what was another herky-jerky PPT-aided session. The rally since mid-June has looked like it was about to peter out at a variety of junctures, but never has done so. Traders were awaiting the July retail sales report on Wednesday morning, with futures taking a big hit prior to their release, partly due to second quarter earnings reports from Target (TGT), Lowe's (LOW), and TJX Companies (TJX). Wall Street forecast Target would earn 79 cents per share on $26 billion in sales, but the company earned just 39 cents per share, a 89% drop year-over-year. The company reported a 3% rise in revenue with $26 billion in the second quarter. Same store sales grew 2.6% in Q2 and its operating income margin was 1.2%. Lowe's beat, but same-store sales fell 0.3%, below expectations of an increase of 2.1%. TJX, which may be a better indicator that any retailer, saw US comp store sales fall 5% versus a 21% increase in US open-only comp store sales in the second quarter of Fiscal 2022. Net income for the second quarter of Fiscal 2023 was $809 million, and diluted earnings per share were $.69 versus $.64 per share in the second quarter of Fiscal 2022, which included a debt extinguishment charge of $.15 per share. Target and TJX were trading lower, Lowe's higher, in the pre-market. Retail sales came in flat for July after rising 0.8% in June, a big disappointment. Stock futures fell even further after the report was released. A half-hour prior to the opening bell, Dow futures were off more than 200 points, S&P off 32, and NASDAQ down 105.
At the Close, Tuesday, August 16, 2022:
Tuesday, August 16, 2022, 9:13 am ET After warning about high inventory levels and lower profits on July 25, retail giant WalMart (WMT) released second quarter results Tuesday morning, beating lowered expectations ($1.63) with EPS of $1.77 and a generally upbeat report with improved guidance. Shares are higher by four percent in pre-market trading. Home Depot (HD) also reported earnings that beat estimates, but investors were unimpressed, sending shares of the home improvement firm about one percent lower. Stock futures barely budged on the reports from the two Dow components and have headed lower with the opening bell 30 minutes away. Gold and silver were crushed on Monday as the US dollar advanced, reconfirming the inverse relationship between a strong dollar and weaker precious metals prices. No surprise there, as the stronger dollar boosts gold and silver prices in markets outside the US. Equity traders are eagerly awaiting minutes from the July FOMC meeting, to be released at 2:00 pm ET, hoping to read the tea leaves for any insight to the Fed's policy stance. The next FOMC meeting is September 20-21, at which time the Fed will make a major announcement on the key federal funds rate. Opinions on what they will do range from pausing their rate hikes to a one percent advance, which would put the rate at 3.25-3.50%. While a one percent hike is probably not under serious consideration, the Fed's next move should be crucial in its effort to be seen as combatting inflation. Minutes from last month's meeting aren't likely to shed much light, but the financial press needs something to attract and distract eyeballs. Ho-hum. Everything's a moving target these days. Sadly, there are times when politics takes precedence over economics. This is one of those times. Insofar as US politics are being largely directed by a misguided congress and illegitimate occupants of the White House, it needs to be said that if you're not outraged at what's happened since November, 2020, you're already dead. Watch Tucker Carlson's response to the FBI raid on Mar a Lago, the home of a former president, Donald J. Trump:
This ongoing nightmare needs to stop before the USA turns into the former East Germany, unless - and this is a real possibility - we're already there. Later today, Liz Cheney, co-chair of the unconstitutional January 6 committee, will be defeated in a Wyoming primary as a candidate for the House seat she currently holds. If she isn't, this country is in grave danger. Good luck playing in the completely fabricated, PPT-boosted markets. If the current leadership succeeds toward their goals, there eventually won't be any stock market, no constitution, no Bill of Rights, and no freedom, so, enjoy it while you have it. Maybe, some people will do something to defend it. Change is needed, though hoping for it is not a solid strategy.
At the Close, Monday, August 15, 2022:
Sunday, August 14, 2022, 11:02 am ET It was another simply smashing week for equities, as the NASDAQ and S&P ended positively for the fourth straight week. The Dow and NYSE Composite have registered gains in three of the past four weeks, as the rally off the mid-June lows continued apace.
The major indices put in two very strong rallies Wednesday and Friday, helping to move the major indices to levels not seen since early May. The Wednesday Rally came on the back of the CPI report for July, which came in flat on a monthly basis and showed an 8.5% increase compared to a year ago. Friday's bounce higher seemed more like FOMO than anything substantial, though Thursday's July PPI helped confirm the good news on inflation. Final PPI on headline dropped to -0.5% month over month, down from a downwardly revised +1.0% for June. Year-over-year was less encouraging, as the totals were +9.8%, +7.6% on core. They came with month over month drops, from +10.5% and +8.2% respectively. There were also no down-pitched surprises. In fact, the Dow and general market got a boost from Disney (DIS), which reported strong second quarter results on Thursday, including the boast that they surpassed Netflix (NFLX) in total subscribers, 221 million to 220, across its streaming offerings such as Disney+, ESPN+, etc. With the current earnings season winding down, there have been fewer upward surprises than lowered expectations, but the market was satisfied that the wheels hadn't come off the economy, despite the dual headwinds of "no recession" and inflation. The coming week offers some intrigue, as major retailers are set to report. The drama begins Tuesday morning prior to the open with WalMart (WMT) and Home Depot (HD) reporting. Wednesday morning has Target (TGT), Lowe's (LOW), and TJX Companies (TJX) queued up. Cisco Systems (CSCO) reports after the bell. Thursday has Kohl's (KSS), Estee Lauder (EL) and BJ's Wholesale (BJ) before the bell, and Applied Materials (AMAT) and Ross (ROST) after. Friday rounds out the roster with John Deere (DE), Foot Locker (FOOT), and Buckle (BKE). The question on many minds is how far the rally can continue. There was some discussion of the importance of a 50% Fibonacci retracement on the S&P from the intraday high of 4,818.62 on January 4 to the low 3,636.87 on June 17, a loss of 1181.75 points. Friday's intraday high, 4,280.47, was just a few cents off the close, and represents a rebound of 643.60, well beyond a 50% retrace (590.88). For some perspective, 50% is not an actual Fibonacci ratio, but has been added into the overall mix simply because of it's round-number nature. The true numbers are 23.6%, 38.2%, 61.8%, and, of course, 100%. The next leg of the sequence is 61.8%, which would require a gain of 730.32 points off the low. That means the S&P needs another 87 points for confirmation, which really would be something of a testing point for the markets. It is not far off and probably is achievable, considering the gusty winds blown by the bulls of late. With no huge data releases upcoming in the next week, look for geo-politics to take center stage, though those retail earnings may prove critical.
To offer an accurate understanding of the treasury market would likely take up a full semester at Wharton or Oxford, so there's no use in trying in this limited space. Suffice to say that it is very much not a curve, but appearing more as a broken walking stick, with inversion occurring from 6-months (3.13%) out to the 10-year note (2.84%), plus a 50 basis point bump to the 20-year bond (3.34%), back down to the 30-year (3.12%). In every sense, it's a mess, fully created and maintained by the Federal Reserve, the overall largest buyer of such securities. With the 2s-10s holding at 41 basis points, it can safely be assumed that a recession, if not already in place, will occur in short order and it will be deep and long. Of course, the bond market, being beyond the understanding of 90% or more of the population, has become more murky and mysterious than ever before. There's a very good chance that even the scholarly fellows at the Fed don't understand exactly what's occurring. Just for openers, why would anybody borrow at 3.25% over two years, when they could get a rate of 2.84% over ten? It's bizarre and weird and indicative of a great deal of trouble, past, present, and future as real rates are solidly negative due to inflation, despite Chairman Powell's constipated opinion that 2.25% is the "neutral" rate. What used to be a space reserved for conservative portfolios has devolved into a viper's den, full of potholes and canyons which would make Keynes cringe. Presently, it is best to avoid anything longer than 6-months duration because the "curve" has been shown to swing wildly in either direction, but mostly towards further dislocation and confusion.
WTI crude oil closed out the week at $91.88, rising as high as $94.34/barrel after ending the prior week (August 5) at $89.01. While there is scant evidence of demand destruction from people driving less, supply has been building over the past four to six weeks. There seems to be no supply disruptions other than with Russian oil, which was never a big factor in US consumption at any time. Europe's situation is vastly different. Like everything else under the current economic regime, there's no basis for making a call either to the upside or down. Fundamental and technical analysis are both at a disadvantage in this market. Until November, all bets are off concerning oil for obvious, political reasons. According to gasbuddy.com, the US national average for a gallon of regular was down again this week, to $3.94, the lowest price since early March, just as the conflict in Ukraine was escalating. Today's price compares with around $3.15 a year ago and $2.10 from August, 2020. Texas was lowest at $3.43; California highest at $5.33. More than half the states are now below $4.00. Those states above $4.00 are all in the Northeast and West, plus Illinois, primarily due to the high state tax on fuel. Gas is the least expensive in the Southeastern states, from the Carolinas to Nebraska, Kansas and Oklahoma. The price of gas at the pump began rising right after the November election in 2020. That was no accident, as the policies of the Brandon administration were geared to be harmful to end consumers. During the presidency of Donald J. Trump, the national average never exceeded $3.00/gallon. It has been above that level since late May of 2021.
The crypto Ponzi scheme got a kick in the rear end from the masters of money pits as Blackrock announced a partnership with the largest US exchange, Coinbase, to market digital products to high-end investors with the latest news direct exposure to bitcoin via a trust for Blackrock clientele. Wall Street has hailed this as a victory for crypto, but anybody with working knowledge of the entire crypto universe is still on alert and aware of the volatile nature of digital anything. Being backed by faith and algorithms, expect the Blackrock family to proclaim genius status as bitcoin rises and Blackrock insiders make profits trading it, both short and long. The riskiest of all asset classes, crypto is likely a worse investment vehicle than sports betting or pari-mutuel wagering on dogs or horses. At least with those set-ups you can get decent odds and quick gains or losses. With crypto, more often than not, losses can be booked on a regular basis. Still, the hodlers and loyalists are crowing over bitcoin's rise to a present price of $24,536.30 after briefly touching $25,000 Sunday morning, its highest price since June 14.
Both gold and silver were boosted higher on Friday for no apparent reason, but the result was a sharply higher close over the week-ago price. Gold's rally has been consistent and seemingly without much resistance. Silver, having eased off the prior week with a slight decline, was back higher again, posting its best number in six weeks. It goes without saying that the metals are in demand as fiat currencies continue their race to worthlessness. The process is very drawn out, but events such as the Covid, 2020 election, and last week's FBI raid on a former president have hardened people's resolve to find alternatives. Lurking in the background are the BRICS and the threat of a competing reserve currency to the US dollar, a condition exacerbated by the aggressions in Ukraine and mendacious, belligerent posture of the EU, UK, and the USA towards Russia in particular and the rest of the world, overall. While there hasn't been an end to the price-fixing by the LBMA and COMEX cohorts, their grip on the market is weakening. There may not be a singular event that breaks the backs of the price riggers, but rather a slow death by many cuts. Holding physical in one's own possession and continuing to acquire more is the proper posture in these turbulent times.
Gold price 07/15: $1,706.50
Silver price 07/15: $18.66 Silver/Gold Ratio: 87.28 Below are the latest prices for common one ounce gold and silver items sold on eBay (numismatics excluded, free shipping included):
The Single Ounce Silver Market Price Benchmark (SOSMPB) leapt higher over the course of the week, to $37.35, a gain of $1.81 from the August 7 price of $35.54.
Stocks had the best week, though Friday's gains on gold and silver were more than enough to deserve honorable mention. If the stock market seems unfathomable to anybody, it's because it's been bounced around for so long, investors, gamblers, speculators and even casual plungers have gotten beaten on the long and short sides evenly this year. Only the best - or luckiest - traders have positive returns and this environment is made not for rookies or even for long-term decisions as the chances of collapse continue to outweigh those of new highs. The best that can be said about the stock market is that it offers opportunity to make money without working. Current conditions are so out of control and beyond the pale that cash, precious metals and other hard assets such as real estate, art, and collectibles may be preferred.
At the Close, Friday, August 12, 2022:
For the Week
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