$128.81 128.8  0.0%

Market Cap £n/a
Enterprise Value £n/a
Revenue £n/a
Position in Universe th / 1809

LIVE MARKETS-Volatility rockets ahead of U.S. Senate runoffs

Mon 4th January, 2021 6:43pm
* Wall Street's three main equity indexes down ~1.6% * Real estate weakest S&P sector; energy shows gains * Dollar up, crude down; spot gold jumps * US 10-Year yield ~0.91% Jan 4 - Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at VOLATILITY ROCKETS AHEAD OF U.S. SENATE RUNOFFS Wall Street's "fear gauge" is soaring as investors fret over the outcome of two Senate runoffs in Georgia. The races will determine whether Republicans or Democrats control Congress and hence could influence the agenda of President-elect Joe Biden's administration. A "blue sweep," or Democratic control, could pave the way for greater corporate regulation and higher taxes, though also for greater fiscal spending. John Stoltzfus, chief investment strategist at Oppenheimer Asset Management, wrote on Monday that he expects the S&P 500 .SPX to drop 6% to 10% if Democrats take both Senate seats. Other investors appear to be bracing for a negative scenario as well. The Cboe Volatility Index .VIX , last up more than 4 points at around 27, is on track for its biggest one-day jump since late October. The VIX futures curve, which reflects longer-term expectations for market gyrations, has also inverted for the first time since the U.S. presidential election in November. An inversion of the curve suggests that investors view the short-term as more uncertain than the longer-term. Yet the gap between historical volatility and implied volatility is near its widest level over the past two years for ETFs tracking the S&P 500 and the Nasdaq 100 .NDX , according to data from Susquehanna Financial Group. In other words, investors are bracing for market moves much greater than those that have occurred recently. ETFs tracking the technology and healthcare sectors, which could face greater regulation under a "blue sweep," also have large gaps between historical and implied volatility. So do ETFs tied to silver and oil. Christopher Murphy, co-head of derivatives strategy at Susquehanna, said commodity-focused ETFs have recently seen a flurry of activity as some investors hedge against the possibility of higher inflation as a result of greater fiscal stimulus. Arnim Holzer, macro and correlation defense strategist at EAB Investment Group, has recommended that his clients buy calls on a silver ETF SLV.P and puts on a long-duration Treasury ETF TLT.O . Those tactics would benefit from a rise in silver prices and Treasury yields. Such trades "look like excellent inflation fear hedges," he wrote. (April Joyner) ***** BITCOIN: THAT "TOO FAR, TOO FAST" LOOK AGAIN? (1242 EST/1742 GMT) Bitcoin BTC=BTSP has kicked off the new year with quite a swing. After rallying around 20% in just the first 3 days of the year, the cryptocurrency slid as much as 20% Monday. It has since snapped off its low, and is now showing a loss of around 7% for the day. In any event, bitcoin was one of 2020's star performers, with an advance of nearly 305% on a closing basis. That thrust, however, was a far-cry from its 2017 gain of 1,336% or its 2013 advance of 5,428%. Nevertheless, with last year's surge, bitcoin's weekly chart has once again taken on that parabolic look, that can suggest a market may be rising too far, too fast: Indeed, a parabolic rise is an exponential move, where the angle of ascent increases to such a point, it becomes unsustainable. This can lead to a very sharp reversal once the parabolic curve is broken. This because a parabolic rise can be the result of extreme greed, and/or manic behavior, on the part of investors and traders. Of note, after its stellar gains of 2013 and 2017, the following years, bitcoin suffered. It lost around 56% in 2014, and 73% in 2018. For some additional perspective, it might be worth noting that leading up to the Nasdaq's .IXIC Y2K top, the tech-laden index surged about 86% in 1999. Although, in many ways just a blip compared the kind of rises bitcoin has seen, it was, and remains, the Nasdaq's best yearly gain ever. Nasdaq did not see a new high until 2015. Spot gold's XAU= 1979 rise of nearly 127%, which was the year before its 1980 top, stands as its best yearly gain ever. After its 1980 top, gold entered a multi-decade bear market, and did not see a new high again until 2007. Clearly, there is no absolute level of increase, or rate of ascent, that signaled the end to the highlighted advances in any of these markets. Nevertheless, the extent of the rallies mentioned were especially sharp on a relative basis. Thus, it now remains to be seen if bitcoin, in the wake of its 3rd best yearly gain ever, can sustain its thrust, or if another burnout, awaits. (Terence Gabriel) ***** SEMIS, ENERGY OUTPERFORM IN A BLEAK MARKET (1206 EST/1706 GMT) While U.S. stocks are a sea of red on Monday, the semiconductor sector was the only gainer for much of the morning. That said, even chips have lost their lustre, though they are still among the best performers on a relative basis in a dreary market. The energy sector .SPNY is also holding up better than much of the market after in early afternoon trade. One reason chips were doing better than most on Monday morning may be uncertainty about the future, according to Kim Forrest, chief investment officer at Bokeh Capital Partners in Pittsburgh: "It’s the easy thesis: We don’t know what the future holds, with respect to what technology will be a winner this year, but we know there is demand for more computers and connection from the analog to the digital world." These uncertainties about the future, including Tuesday's Georgia Senate run-off election as well as restrictions that could come from rising covid cases, cast a pall over the broader market. .N And after rising as much as 2.7% earlier in the session, confidence even in semis waned sharply and the Philadelphia Semiconductor index .SOX was last down 0.5%. Even Micron Technology MU.N , couldn't resist the general flow and was last down ~1% even after its positive news in the form of price traget increases from UBS to $90 from $82 and from Morgan Stanley to $88 from $80. In comparison Wall Street's three major indexes are all down around 2%, and while the broad S&P technology sector .SPLRCT is down 2.3%. Gold XAU= is up 2% gain. Here is you mid-session snapshot: (Sinéad Carew) ***** IN WITH THE NEW: 2021 STARTS WITH STRONG PMI, CONSTRUCTION DATA (1105 EST/1605 GMT) Two indicators released on Monday helped investors ease their way into the new year with welcome signs of economic recovery from the pandemic recession, now entering its 12th month. The National Bureau of Economic Research determined the United States economy entered recession in February 2020. Activity in the U.S. manufacturing sector grew in December at a faster pace than previously reported, according to global financial information firm IHS Markit. Markit's final purchasing managers index (PMI) USMPMF=ECI hit a reading last month of 57.1, finishing a tumultuous year at a six-year high.*:nZON0012LK The data marks an increase from the 56.5 rate originally reported. A PMI number above 50 indicates activity in the sector expanded from the prior month. "Producers of machinery and equipment reported sustained strong demand, suggesting companies are increasing their investment spending," writes Chris Williamson, chief business economist at Markit. The news, however, is not all rainbows and lollipops. "The survey also highlights how manufacturers are now not only facing weaker demand conditions due to the pandemic, but are also seeing COVID-19 disrupt supply chains further, causing shipping delays," Williamson adds. "These delays are limiting production capabilities as well as driving producers' input prices sharply higher, adding to the sector's woes." On Tuesday, the Institute for Supply Management's (ISM) more closely-watched PMI report is expected to come in at 56.6. ISM and Markit PMI differ in the weight they give subcomponents such as new orders, employment and inventories. The chart below shows how widely the two indexes can differ although in recent months they appear closer to agreeing: A separate report from the Commerce Department showed expenditures on construction projects USTCNS=ECI increased by 0.9% in November, a hair slower than the 1% analysts expected.*:nL1N2JF14E Still, this is on the back of October's upwardly-revised 1.6% growth. The gains were driven by a 2.7% jump in spending on residential projects, as homebuilders struggle to keep pace spiking demand for lower-density communities and work-from-home office space amid pandemic restrictions. The headline number was limited, however, by decreases in nonresidential and public projects, which eased by 0.8% and 0.2%, respectively. Strong residential activity has driven construction past pre-pandemic levels, but non-residential outlays remain nearly 6% below their early 2020 pace," says Nancy Vanden Houten, lead U.S. economist at Oxford Economics. Market participants were unimpressed however and all three major U.S. stock indexes reversed early gains in morning trading. (Stephen Culp) ***** WALL STREET TAKES A NEW YEAR'S DIP TO KICK OFF 2021 (1025 EST/1525 GMT) Wall Street's three major averages are having a bumpy start to the trading year, starting higher before losing gains. .N One thing on investors minds was Tuesday's twin U.S. Senate runoff elections in Georgia, which will determine control of the chamber and, effectively, the fate of President-elect Joe Biden's agenda including rewriting the tax code, boosting stimulus and infrastructure spending.*:nL1N2JE0F6 Encouraging progress in COVID-19 vaccines came with news of surging cases and restrictions. Moderna MRNA.O is up almost 4% after raising its 2021 vaccine output forecast.*:nL4N2JF30F But as Britain was first to began vaccinations with Oxford University and AstraZeneca's AZN.L COVID-19 shot on Monday, a new surge of cases threatened to overwhelm its hospitals. Scottish First Minister Nicola Sturgeon imposed the most stringent lockdown since last spring.*:nL8N2JF13G In the United States the U.S. Centers for Disease Control and Prevention (CDC) on Sunday reported 349,246 deaths from the new coronavirus, a rise of 2,321 deaths from its previous count.*:nL4N2JE08X Vaccinations here have fallen far short of early targets, as officials had hoped to have 20 million people vaccinated by the end of the 2020.*:nL1N2JB0Q1 Among S&P 500 major industry sectors only two were in solidly positive territory with the biggest gains in the energy sector .SPNY and materials .SPLRCM , both up almost 1%. Here is your opening snapshot: (Sinéad Carew) ***** S&P 500: ANOTHER DASHBOARD LIGHT TURNS ON (0900 EST/1400 GMT) The S&P 500 .SPX ended Friday at a fresh record high after tacking on 16.3% in 2020. To get there, the benchmark index advanced about 68% off its March 2020 closing low. With this, in a sign of what may be an especially overheated market, the percentage of S&P 500 stocks above their 200-day moving average reached a more than 10-year high in early December, when it hit 91.68%. After dipping to about 88% on December 22, this measure ended the year at about 91%. Although, only slightly below the early December peak, it is nevertheless, weaker, despite the SPX going to higher highs.*:nL1N2JB11Z That said, it remains to be seen if this slight divergence is enough to ultimately coincide with a SPX top of some form. Of note, when the SPX peaked in February this measure had weakened from a high of nearly 85% in January to about 76% when the SPX topped on February 19th. Meanwhile, another measure, based on the CBOE equity/put call ratio, which can act as a contrarian measure of sentiment, is suggesting the market is vulnerable to a reversal.*:nL1N2JA0UP (Terence Gabriel) ***** FOR MONDAY'S LIVE MARKETS' POSTS PRIOR TO 0900 EST/1400 GMT - CLICK HERE:*:nL1N2JF0Q6 <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ SPX200d01042021 Wall Street starts the year with declines Markit PMI ISM v Markit Construction spending Wall St tumbles with semis, energy outperforming Bitcoin01042021 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Terence Gabriel is a Reuters market analyst. The views expressed are his own)
© Stockopedia 2021, Refinitiv, Share Data Services.
This site cannot substitute for professional investment advice or independent factual verification. To use it, you must accept our Terms of Use, Privacy and Disclaimer policies.