Live Markets: Europe: no 2022 dip to buy yet!
05/01/2022 17:00
* S&P 500 slips, Nasdaq off ~1%; DJI up, on pace for 3rd
straight
record close
* Real estate weakest major S&P sector; materials lead
gainers
* Euro STOXX 600 index ends up ~0.1%
* Dollar down; bitcoin, gold, crude rise
* U.S. 10-Year Treasury yield rises to ~1.68%
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EUROPE: NO 2022 DIP TO BUY YET! (1154 EST/1654 GMT)
The pan-European STOXX 600 has ended the day on a modest
0.1% rise which constitutes a third straight session of gains
this year.
While there's a sense of cautious optimism that comes across
market research notes when it comes to European equities,
there's equally a scarcity of pundits advising investors to go
all in.
"Given the maturing cycle, bullish consensus and elevated
positioning after an almost uninterrupted rally over the last 20
months, investors should expect bumps in the road and own
hedges", Barclays equity strategy team said in a note this
morning.
But at the end of the day, Tina (There Is No Alternatives)
is still doing her thing, they argue.
"Alternatives to equities are still lacking, with
cash/bond/dollar relative safe havens well owned, and we think
buying on dips will keep working", they added.
That being said, you need a dip to buy-the-dip and so far in
2022, there is none to be found.
While the pandemic, China's regulatory crackdown and rising
inflation risks are not putting investors off the stock market,
it's worth noting that danger could come from other directions.
Sebastien Galy at Nordea Investments wrote that "the risk to
watch for though is a political one", in a reference to the
tensions with Russia over Ukraine.
Peter Garnry, head of equity strategy at Saxo Bank takes the
view that "the biggest risk to the positive sentiment is the
ongoing energy crisis in Europe."
Anyhow, for the moment, European stocks can thank the
automotive sector for pulling the rest of the market up.
The sector reached a new record high and jumped 2.4% today,
taking its 2022 rise to a whopping 8.2%.
See: Europe's auto stocks hit record high as traders bet on
strong 2022 urn:newsml:reuters.com:*:nL8N2TL2WI
(Julien Ponthus)
*****
'21 WAS NOT A TERRIBLE YEAR FOR ANALYST STOCK PICKS (1129
EST/1629 GMT)
Last year was mixed for analysts trying to pick winning
stocks, with many of their top picks beating the broader market.
Bio Rad Laboratories BIO.N was the most favored S&P 500
.SPX stock at the start of last year, according to Refinitiv
data. The biotech ended 2022 with a gain of 30%, just above the
S&P 500's 27% annual rise.
This analysis is based on the average analyst ratings of all
of the S&P 500's current components, and excludes companies
covered by no, or only one, analyst. It does not include stocks
that exited the S&P 500 last year.
Jacobs Engineering Group JEC.N , Alphabet's class C shares
GOOG.O and Microsoft MSFT.O were the second, third and
fourth most highly recommended stocks, and they surged 28%, 65%
and 51%, respectively.
What of analysts' least liked stocks? Of the 10 stocks most
poorly rated by analysts heading into 2021, half managed to beat
the index, including a 49% surge by laboratory equipment seller
Mettler-Toledo International Inc MTD.N .
The analysts' mixed performance 2021 is comparable to
previous years and underscores how difficult it is to
consistently beat the market. In the same vein, BofA Global
Research said in a note on Tuesday that 40% of large cap
actively managed mutual funds exceeded their benchmarks last
year, their best hit rate in three years. On average since 2003,
only 37% of funds per year have beaten their benchmark,
according to BofA.
Of S&P 500 stocks in the analysis, 380 were rated "buy" or
"strong buy" at the end of 2021, up from 353 at the start of the
year, according to Refinitiv data. 124 stocks were rated "hold"
at the end of 2021, down from 148 at the start of the year. At
the start of 2021, only American Airlines Group AAL.O had an
average "sell" rating, and it went on to gain 14% by year end.
Of the stocks rated "hold" at the start of 2021, just under
half beat the S&P 500, about the same ratio as stocks rated
"buy".
As 2022 kicks off, the S&P 500's top rated stocks are
retailer LKQ Corp LKQ.O , Alphabet's class C shares and
healthcare equipment seller Steris STE.N .
The most negatively rated stock is Consolidated Edison Inc
ED.N , the only S&P 500 stock with an average rating of "sell".
That utilities company is followed by telecom Lumen Technologies
Inc LUMN.N and distillery Brown-Forman Corp BFb.N .
(Noel Randewich)
*****
NEXT STOP, PAYROLLS: WEDNESDAY INDICATORS POINT TO RECOVERY
HOMECOMING (1051 EST/1551 GMT)
Data released on Wednesday provided upbeat news that the
U.S. economy express could pull into Normaltown ahead of
schedule.
A surge in hiring, continued (though abating) expansion in
the services sector, and a housing market returning to earth all
point to a welcome return to pre-COVID equanimity.
First, private U.S. employers added a whopping 807,000 jobs
last month, according to ADP. urn:newsml:reuters.com:*:nAQN09TQXF
The payrolls processor's National Employment index
USADP=ECI overshot the 400,000 consensus by a mile and came in
121% above the level analysts expect the Labor Department's more
comprehensive employment report to show on Friday.
If ADP is a prologue to that jobs report, it implies an
uptick in labor market participation and a sizeable step back
toward the 'full employment' goal set by the Federal Reserve as
a precondition for tightening its pandemic-era monetary policy.
Ian Shepherdson, chief economist at Pantheon Macroeconomics,
writes that the ADP print points to a "fading of some of the
forces holding back labor supply - enhanced/extended
unemployment benefits, and school/childcare closures - combined
with strong labor demand, triggered rising participation late
last year, facilitating a surge in payrolls."
"This could be interrupted in the January numbers by the
Omicron Covid wave," he warns.
Next, the services sector, while showing some loss of
momentum, notched its 17th-consecutive month of expanded
activity in December.
Global financial information firm IHS Markit's final reading
of its services PMI (purchasing managers index) USMPSF=ECI
came in at 57.6, marking a slight deceleration from November's
even 58 print.
A PMI reading over 50 indicates a monthly increase in
activity.
While customer-facing services suffered the brunt of initial
social distancing mandates to contain the pandemic, they have
since rebounded in response to booming demand, even as the
health crisis continues to drone on.
"Although the expansion in output softened slightly, the
flow of new orders picked up, with buoyant client demand rising
at the fastest pace for five months," says Sian Jones, senior
economist at IHS Markit.
Be that as it may, while supply chains are showing signs of
untangling, and the tight labor market appears to be loosening,
input prices and hot wage inflation remain headwinds.
"Subsequently, soaring wage bills and increased
transportation fees drove the rate of cost inflation up to a
fresh series high," Jones adds.
The Institute for Supply Management (ISM) is due to release
its services PMI number on Thursday, and it is expected to come
in at 66.9, a 2.2-point deceleration from November.
Finally, demand for home loans slipped by 5.6% to a near
two-year low in the closing days of 2021 as interest rates
resumed their uphill climb.
The Mortgage Bankers Association's (MBA) weekly report
showed the average 30-year fixed contract rate USMG=ECI adding
a mere 2 basis points to 3.33%, but this was enough to prompt a
10.2% drop in applications to purchase homes USMGPI=ECI and a
2.5% decline in refi demand USMGR=ECI .
While "the data point to a loss of momentum in purchase
applications and home sales," writes Nancy Vanden Houten, lead
economist at Oxford Economics, she also notes the data is often
volatile around the holidays.
Still, the housing market faces challenges in the coming
year.
"We expect existing home sales to lose some steam and then
trend sideways over the course of 2022 as the market navigates
headwinds in the form of limited supply and declining
affordability and tailwinds from resilient demand," Houten adds.
All told, mortgage demand is down more than 30% from a year
ago, when the pandemic-driven stampede for the suburbs hit its
zenith, sending housing inventories to record lows and launching
home prices to the moon.
Wall Street is serving a mixed platter of hot and cold in
morning trading.
The S&P 500 and the Nasdaq .IXIC are once again being
dragged into the red by tech .SPLRCT , while industrials
.SPLRCI and financials .SPSY help set the Dow .DJI on a
course for its third consecutive record closing high.
(Stephen Culp)
*****
U.S. STOCKS MIXED, BUT VALUE-TILT PERSISTS (0959 EST/1459
GMT)
Wall Street's main indexes are mixed early Wednesday ahead
of minutes from the Federal Reserve's December meeting, as a
rise in U.S. Treasury yields continues to hit technology-heavy
growth stocks. .N
The Dow Jones Industrial Average .DJI and S&P 500 .SPX
are near flat, while the Nasdaq Composite .IXIC is more
forthrightly red.
This, as the U.S. 10-Year Treasury yield US10YT=RR edges
up to the 1.66% area, and the tilt toward value persists. The
S&P 500 value .IVX /S&P 500 growth .IGX ratio is on track for
its biggest weekly rise since early May.
That said, the S&P 500 Banks index .SPXBK is now slightly
negative, and chips .SOX are well off their early lows. The
NYSE FANG+ index .NYFANG has ticked green.
Here is where markets stand about 30 minutes into the
trading day:
(Terence Gabriel)
*****
2022 NASDAQ COMPOSITE: YEAR OF THE ROADRUNNER OR THE COYOTE?
(0900 EST/1400 GMT)
The Nasdaq Composite .IXIC accomplished a rare feat last
year. That is, its entire 2021 trading range was above its upper
yearly Bollinger Band (BB):
Bollinger Bands (BB) are envelopes, or trading bands,
plotted at a level of standard deviation above and below a
simple moving average of price. Given that the bands are based
on standard deviation, they adjust to swings in volatility. The
bands can help answer the question of whether price is high or
low on a relative basis.
Using Refinitiv data, the IXIC has ended a year above its
upper yearly BB - or more than two standard deviations above its
20-year moving average - ten times, or about 43% of the time.
This includes a current nine-year streak from 2013 to 2021.
However, besides the building streak, what was especially
unique about last year is that the Composite's 12,397.05 low was
above its upper yearly BB, which ended the year at 12,274.516.
This is the first time the IXIC has managed this in 23 years of
data, which makes it just over 4% of the time.
When looking at the greater histories of the Dow .DJI (107
years of data), and S&P 500 .SPX (75 years of data), these
indexes' entire yearly ranges have only been above their upper
yearly BB once (0.9% of the time), and twice (2.7% of the time),
making it a rare event.
The Composite may yet accomplish this feat again in 2022,
but neither the Dow or SPX has ever managed do it two-straight
years.
It is just the start of 2022, and the market's exact path is
highly uncertain. However, given that the IXIC's upper yearly BB
currently resides at 14,173, or nearly 10% below Tuesday's
close, and that it will adjust for volatility, potential exists
for some especially wild action throughout this year, whether it
be a big upside run, a cliff dive, or both.
(Terence Gabriel)
*****
FOR WEDNESDAY'S LIVE MARKETS' POSTS PRIOR TO 0900 EST/1400
GMT - CLICK HERE: urn:newsml:reuters.com:*:nL8N2TL2HH
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IXIC01052021 https://tmsnrt.rs/3HtYPSG
earlytrade01052021 https://tmsnrt.rs/3pVKuII
ADP https://tmsnrt.rs/3G0eWqC
Markit PMI https://tmsnrt.rs/3tftMX1
MBA https://tmsnrt.rs/3FZL262
Auto sector versus STOXX https://tmsnrt.rs/3pSF15s
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(Terence Gabriel is a Reuters market analyst. The views
expressed are his own)