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LIVE MARKETS U.S.-Retail investors rode the U.S. dollar bull train in March

Thu 18th June, 2020 7:14pm
* Major averages mixed: Dow down, S&P edges up, Nasdaq gaining * Energy leads sector gainers; real estate is biggest laggard * Dollar, crude rise; gold dips; US 10-yr yield ~0.70% June 18 (Reuters) - Welcome to the home for real-time coverage of U.S. equity markets brought to you by Reuters stocks reporters and anchored today by Terence Gabriel. Reach him on Messenger to share your thoughts on market moves: RETAIL INVESTORS RODE THE U.S. DOLLAR BULL TRAIN IN MARCH (1358 EDT/ 1758 GMT) While retail investors may have contributed to the U.S. equity rally in the last few months, ING, in a research note citing data from trading platform Robinhood, said they may have also taken part in the dollar's rally in March as the coronavirus pandemic took over the world. The number of users holding the US Dollar Index Bullish ETF, which tracks the performance of the U.S. dollar versus a basket of six currencies, rose sharply around mid-March, consistent with the jump in the greenback according to ING. (Gertrude Chavez-Dreyfuss) ***** IT WOULD BE NICE TO HEAR: PLAY BALL! (1346 EDT/1746 GMT) UBS is out with a note in which they discuss current issues surrounding stadium financing and the municipal market. Indeed, stay-at-home orders and social distancing has had a significant impact on events. In the piece, Jeannine Lennon, Municipal Credit Strategist Americas, says that major league baseball reported that teams will lose an average $640k per game with no fans in the stands. According to Lennon, S&P recently downgraded Queen's Ballpark Co (New York Mets) bonds, and also placed the New York City Industrial Development Authority (New York Yankees) stadium bonds on watch with negative implications. Lennon notes that these types of bonds tend to be supported by a debt service reserve fund. She says that although the Yankees have already funded this year's debt service, the Mets may lack sufficient revenues for its December payment according to S&P. Mets' management has already indicated the team is likely to provide equity support for the payment rather than draw on its reserves. Lennon says that stadium financings account for a very small part of the overall muni market, and that these types of bonds can be secured by a variety of means including "ticket sales, parking revenue, sales taxes, hotel occupancy taxes" or ultimately by "a general obligation or lease by a sponsoring government." In any event, she says some debt obligations will remain fairly stable. Others, however, may become deeply distressed because of the loss of events. (Terence Gabriel) ***** U.S.-CHINA TENSIONS MAY OFFSET OVERSEAS SALES BOOST FROM WEAK DOLLAR (1235 EDT/1635 GMT) S&P 500 company sales to customers outside of the US dipped to 29% of total revenue in 2019, down from 30% in 2018. That is the lowest percent in 10 years, according to research from Goldman Sachs. The largest foreign sales came from the Asia Pacific region at $1 trillion or 9% compared to $750 billion or 6% in Europe, David Kostin, Chief U.S. equity strategist, wrote noting that only 2% of S&P revenue, or $240 billion was from Greater China with the tech sector bringing in 12% of that portion. Despite resurfacing tensions between the United States and China, U.S. stocks with high China sales exposure have outperformed as "investors have focused more on the growth outlook than the political environment." Goldman's FX strategists estimate that the U.S. dollar could fall more than 20% from its recent peak and in doing so benefit firms that draw a lot of their revenue from overseas vs. more domestic facing companies. On the other hand though, they expect that increased U.S.-China tensions ahead of the November U.S. presidential election will weigh on stocks with high China exposure and that the more domestic companies should be more insulated from this. The firm highlights 10 stocks in the Russell 1000 .RUI with 44% or more of their revenue coming from Greater China and another 10 with 36%-42% of revenue from China, based on 2019 data. Top 10 companies include Yum China Holdings YUM.N , hotels such as Wynn Resorts WYNN.O and technology companies such as Nvidia Corp NVDA.O , KLA Corp KLAC.O and Texas Instruments TXN.O . Here is Goldman's break down of foreign exposure by S&P sector: (Sinéad Carew) ***** NASDAQ COMPOSITE: ENOUGH THRUST TO AVOID ANOTHER BUST? (1141 EDT/1541 GMT) The Nasdaq Composite .IXIC has staged an impressive rally off its March trough. The tech-laden index advanced more than 50% from that low and hit fresh record highs this month. (Click on chart below) However, a lagging monthly momentum measure is warning this most recent climb may be lacking sufficient thrust to sustain such high altitudes. (Click on chart below) Indeed, the monthly RSI is rising, but its rate of ascent is waning just as it nears the resistance line from its early 2018 high. Meanwhile, it remains well shy of its peaks going back to that 2018 top, despite the Composite being on track for its highest monthly close ever.*:nL1N2DN0T3*:nL1N2DE0JO This lagging action offers the potential for a negative divergence to solidify in the event readings turn down. Of note, just looking back to 2013, IXIC declines of varying severity were preceded by protracted monthly momentum divergence. In the event the RSI can continue to rise, and challenge even its early 2020 high, the Composite still has to contend with a more than 2-year resistance line that now offers a hurdle at about 10,225. That barrier is only 1.4% above this month's high, and about 3% above current levels. Thus, if the forces of gravity ultimately prove to be too much, this line may offer a ceiling of some degree.*:nL1N2DP14C (Terence Gabriel) ***** JOBLESS CLAIMS, PHILLY FED: L*U*V - PICK A SHAPE (1007 EDT/1407 GMT) Data released on Thursday provided differing shapes of economic recovery, with frustratingly high jobless claims suggesting a more protracted, U- or L-shaped recovery and Atlantic factory data hinting at a quicker, V-shaped rebound. The number of Americans applying for unemployment benefits USJOB=ECI declined slightly last week to a still-bruising 1.51 million, according to the Labor Department.*:nL1N2DU2J7 While marking the 11th straight weekly decline, down 1.57 from the previous week, the number was worse than the 1.3 million consensus. Continuing claims USJOBN=ECI , reported on a one-week lag, remain above 20 million at a staggering 20.54 million, well above the 19.8 million analysts expected. "The high pace of layoffs is indicative of ongoing strains in the labor market," writes Rubeela Farooqi, chief U.S. economist at High Frequency Economics, noting "initial filings have totaled 45.7 million over the last twelve weeks." In a separate report, mid-Atlantic business activity came roaring back to life this month, according to the Philadelphia Federal Reserve.*:nL1N2DV0PU The Philly Fed Business index USPFDB=ECI showed a reading of 27.5, blowing past the -23 reading forecast by economists and landing firmly in expansion territory. The data, which follows a better-than-expected June reading from the New York Fed's Empire State index, suggests manufacturing activity on Atlantic region is making a comeback. But "buoyant sentiment may not translate into stronger activity if prevailing risks do not diminish," warns Oren Klachkin, lead U.S. economist at Oxford Economics. "Weak demand, supply chain disruptions and elevated uncertainty will constrain the pace of the rebound and delay manufacturing’s recovery back to pre-coronavirus levels of activity until early-2022." Stocks were mixed in early trading in an instant replay of Wednesday, with the Dow on course for a second straight decline, while the S&P is flat and the Nasdaq in positive territory. (Stephen Culp) ***** FUTURES OFF LOWS, POINT TO MIXED OPEN (0858 EDT/1258 GMT) Dow 1YMcv1 and S&P EScv1 e-mini futures are off earlier lows and pointing to modest opening weakness. Nasdaq futures NQcv1 have also recovered, and are now roughly flat. In any event, there is caution over an uptick in COVID-19 infections in parts of the United States and China. .N .N With this, the market is now sorting through today's economic data. Closely watched jobless claims, for week ending June 13, came in at 1.508 million vs. a 1.3 million estimate. However, the Philly Fed Business Index for June printed positive at 27.5, vs. the Reuters poll calling for a minus 23 reading. Meanwhile, airline stocks are under pressure in premarket trade. Delta DAL.N made comments including remarks on how the coronavirus has impacted its employee ranks.*:nFWN2DV02K The US Global Jets ETF JETS.P is down more than 2% ahead of the opening bell. Here is your premarket snapshot: (Terence Gabriel) ***** <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ premarket06182020 Jobless claims Philly Fed IXIC06182020TG Tech leads non U.S. revenue among S&P sectors ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Terence Gabriel is a Reuters market analyst. The views expressed are his own) (( 646-223-4122))
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