Live Markets: Transports go in reverse

Eagle Bulk Shipping

08/06/2022 17:30

* Major U.S. indexes now modestly red; NYFANG up >1.5%, DJT
weak
    * Materials weakest S&P 500 sector; energy leads gainers
    * Dollar edges lower; gold, crude gain; bitcoin down
    * U.S. 10-Year Treasury yield edges up to ~3.01%

    June 8 - Welcome to the home for real-time coverage of
markets brought to you by Reuters reporters. You can share your
thoughts with us at markets.research@thomsonreuters.com
    
    
    TRANSPORTS GO IN REVERSE (1230 EDT/1630 GMT)
    Like the broader market, the Dow Jones Transportation
Average  .DJT  had been staging a comeback in recent weeks. The
index, which includes rail, airline, shipping and other
transport companies, had climbed more than 8% as of Tuesday's
close from its May 19 closing low for 2022.
    That changed Wednesday, with the DJT dropping more than 2%
and significantly underperforming the other main indexes on the
day. All but one of the DJT's 20 components were in negative
territory as of late-morning trade, led by a near-10% drop for
ocean transport and logistics company Matson  MATX.N  and a 7%
fall for car-rental company Avis Budget  CAR.O .
    After its rebound, the index “was due for some sort of a
pullback," said Chuck Carlson, chief executive officer at
Horizon Investment Services, who follows the index closely. "At
some point we expect a re-test of those lows.” 
    Another potential factor behind the transport stocks'
declines, Carlson added, was surging oil prices, with U.S. crude
topping $120 a barrel and hitting a three-month high on
Wednesday.
    "Energy prices just keep going up,” Carlson said.
    Jack Atkins, a transportation research analyst at Stephens,
said investors may be coming to grips with transport rates
coming down after being elevated in recent years as the economy
grappled with coronavirus-related supply chain issues.
    "We continue to see signs that global and U.S. supply chains
are returning to balance following nearly two years of under
capacity and strong rates," Atkins said. "We are seeing it
across nearly every mode of transportation we track."
     Beyond the DJT, shares of shipping companies are getting
hit broadly. Shares of Eagle Bulk Shipping  EGLE.O  and Star
Bulk Carriers  SBLK.O  are both off about 9%. 

    (Lewis Krauskopf)
    *****
    
    CHIP STOCKS TUMBLE AFTER CITI SOUNDS ALARM ON INTEL (1205
EDT/1605 GMT)
    The Philadelphia Semiconductor Index is tumbling on
Wednesday, and worries about Intel  INTC.O  are to blame.
    Intel is sinking over 4% after Citi cut its estimates on the
U.S. chipmaker for the second time in a week, spurred by what
analyst Christopher Danely said were negative comments made by
company executives at an investor conference.
    The Philadelphia chip index  .SOX  is down 1.5%, even as the
Nasdaq  .IXIC  is climbing 0.2%. Intel and rival Advanced Micro
Devices  AMD.O , which is down 3%, are the largest drags on the
index. They are followed by computer memory chip Micron
Technology  MU.O , which is off almost 2%.
    "Although we lowered Intel estimates Monday, we are lowering
them again as we now expect Intel to negatively pre-announce or
miss 2Q22 guidance," Danely wrote in his research note.
    Pointing to worries about PC sales, Danely cut his 2022
revenue estimate to $71.9 billion from $74.4 billion. That
compares to 2021 sales of $74.7 billion. He also slashed his
adjusted EPS estimate to $2.33 from $2.63. That is well below
the street estimate of $3.50. Danely's estimates rank two out of
five stars over the past 24 months, according to Refinitiv.
    Increased worries about weak PC demand will now be a hot
topic at AMD's investor day on Thursday. 
    Bernstein analyst Stacy Rasgon, who has an "outperform"
rating on AMD, is optimistic, saying in a preview on Wednesday
that AMD's datacenter push is paying off with higher margins and
increased competitiveness against Intel. 
    AMD's stock market value briefly matched Intel's earlier
this year, even after its $3.2 billion net profit in 2021
amounted to just 16% of Intel's.
        
    
    "As semiconductor investors grow increasingly convinced that
the good times in semiconductors are getting ever closer to the
end, AMD stands out as a potential beacon," Rasgon writes.
    The chip index is now down 23% in 2022, about the same as
the Nasdaq, but far worse than the S&P 500's  .SPX  13% loss.
    
    (Noel Randewich)
    *****
    
    WARM-UP ACTS: WHOLESALE INVENTORIES, MORTGAGES, CONSUMER
CREDIT (1110 EDT/1510 GMT)
    Several economic supporting players took the stage late
Tuesday and early Wednesday as warm-up acts to Friday's much
anticipated CPI report, which market participants hope will
confirm that inflation peaked in March.    
    The value of goods stored in U.S. wholesale warehouses
 USWINV=ECI  grew by a solid 2.2% in April, a stronger showing
than the 2.1% increase analysts expected and standing on the
shoulders of March's 2.0% jump.  urn:newsml:reuters.com:*:nL1N2XU1YN
    The reading notches the 20th consecutive month of growth.
    The Commerce Department's report suggested the hobbled
global supply chain - which, combined with booming demand is
responsible for decades-high inflation - is slowly becoming
untangled. 
    And while some of the increase can be attributable to
inflation itself, the report bodes well for second-quarter GDP
returning to positive territory.
    While private inventories have contributed to the GDP plus
column for three straight quarters, their contribution in the
first three months of 2022, which saw the first economic
contraction since the onset of the pandemic, was a paltry 0.1
percentage point:
    
    
    Separately, mortgage rates resumed their uphill climb last
week, dampening home loan demand.
    The Mortgage Bankers Association's (MBA) report showed the
average 30-year fixed contract rate  USMG=ECI  added 7 basis
points to 5.40%, driving purchase  USMGPI=ECI  and refi
applications  USMGR=ECI  down by 7.1% and 5.6%, respectively.
    Mortgage rates have followed benchmark Treasury yields in
their upward trajectory, swelling by more than 2 percentage
points since the beginning of the year.
    Combined with sky-rocketing home prices, the cost of making
monthly payments has ballooned, pushing the prospect of
ownership beyond the grasp of many potential homebuyers,
particularly at the lower end of the market.
    "Weakness in both purchase and refinance applications pushed
the market index down to its lowest level in 22 years," says
Joel Kan, associate vice president of economic and industry
forecasting at MBA. "The purchase market has suffered from
persistently low housing inventory and the jump in mortgage
rates over the past months."
    "These worsening affordability challenges have been
particularly hard on prospective first-time buyers."
    Overall, mortgage demand is down 55.3% from the same week a
year ago.
    
    
    Finally, in yesterday's news, the sum total of outstanding
consumer credit debt  USCRED=ECI  grew by $38.1 billion in
April, according to data released late Tuesday by the Federal
Reserve.
    The number came in above consensus but marked a 19.6%
slowdown from the prior month's increase.
    
    
    Non-revolving credit, which includes big-ticket items such
as home/car loans and tuition, edged up by 0.6%. 
    But revolving credit, which includes credit card debt, rose
by 1.6% to a grand total of $1.1 trillion, marking a return to
its pre-pandemic level.
    When the health crisis struck, not only did shutdowns
restrict spending, it also convinced many Americans to pay down
their plastic, sending revolving credit down by nearly 12%.
    While restrictions have been lifted and demand has
recovered, supply chains remain choked, leading to the
not-quite-transitory inflation that Powell & Co have vowed to
battle via interest rate hikes.
    So the return pre-COVID credit card debt, along with gloomy
consumer expectations and a dropping saving rate, together
suggest consumers are busting their piggy banks and breaking out
their plastic in order to buy essentials such as food and
gasoline, the costs of which have well outpaced wage growth.
    
    
    Wall Street is mixed in late morning trading, with the
Nasdaq  .IXIC  just above flat, while the S&P 500  .SPX  and the
Dow  .DJI  are in negative territory.
    Industrials  .SPLRCI  and transports  .DJT  are having worse
days than most.
    
    (Stephen Culp)
    *****
    
    S&P 500 RIPE FOR MORE SPIRITED ACTION (1003 EDT/1403 GMT)
    Wall Street's main indexes are mixed early on Wednesday,
while higher oil prices stoked worries of a further rise in
global inflation.  .N 
    A majority of major S&P 500  .SPX  sectors are lower, with
industrials  .SPLRCI , staples  .SPLRCS  and real estate
 .SPLRCR  among the biggest losers. Transports  .DJT  are also
especially weak.
    That said, the Nasdaq  .IXIC  is green, communication
services  .SPLRCL  is leading S&P sector gainers, and the NYSE
FANG+TM index  .NYFANG  is advancing more than 2% after hitting
its highest level in more than a month.
    With this, growth  .IGX  is on track to outperform value
 .IVX  for a third-straight week.
    Meanwhile, for more than a week, the S&P 500 has been
churning in a tight range. With this, the benchmark index is
roughly flat with its May 27 close, and a historical volatility
measure on an hourly basis hit a multi-month low on Tuesday.
Thus, the SPX appears ripe for much more spirited action, one
way or the other.
    This ahead of Friday's key CPI release.   
    Here is an early trade snap shot:
    
    
    (Terence Gabriel)
    *****
    
    CRUDE OIL FUTURES: ABOUT TO BURN HOTTER, OR BURN OUT? (0900
EDT/1300 GMT)
    Oil prices gained about 1% on Tuesday, with U.S. crude
settling at a 13-week high on supply concerns, including no
nuclear deal with Iran, and prospects for demand growth in
China, which is relaxing lockdowns to control the
pandemic. urn:newsml:reuters.com:*:nL1N2XU024
    And amid the war in Ukraine, NYMEX crude oil futures  CLc1 
are adding to gains on Wednesday, trading at just over $120.
 urn:newsml:reuters.com:*:nL1N2XU1RZ
    With this, the futures are flirting with important chart
resistance. Thus, oil may be on the verge of a major upside
breakout or, once again, have potential for a surprise downside
reversal  urn:newsml:reuters.com:*:nL2N2VA0XE:
  
  
    At current levels, the futures are trading at 1.98 times
their 200-week moving average. Of note, oil put in a major top
in 1990, and again in 2008, when the 200-week disparity hit the
2.07/2.08 area on a weekly closing basis.
    More recently, in early-March, just shortly after Russia
invaded Ukraine, crude spiked to a high of $130.50, while its
200-week disparity hit more than 2.2 intra-week, before
reversing to end the week at 1.98. By mid-April, crude hit a low
of $92.93.
    At 1.98, the measure is now challenging its March peak. If
it were to spike to the 2.07/2.08 area this week, it would
equate to prices around $126/$127, which would still be shy of
the March $130.50 intra-week high.
    Despite crude being on track for its highest weekly close
since 2008, momentum is lagging. At just over 71.00, the RSI is
well shy of its early-March close of 87.5. Thus, a sudden
down-tick can solidify a bearish divergence.
    Oil could still gyrate at high levels. However, in 1990 and
2008, once the disparity reached the 2.07/2.08 area, it only
took one to two more weeks, before crude was reversing violently
to the downside.
    Meanwhile, crude futures are now up 60% year-to-date (YTD),
which has them on pace for their biggest yearly gain since 2009.
The S&P energy sector  .SPNY  is up 65% YTD, putting it on track
for its biggest yearly advance ever.
    
    (Terence Gabriel)
    *****

    FOR WEDNESDAY'S LIVE MARKETS' POSTS PRIOR TO 0900 EDT/1300
GMT - CLICK HERE:  urn:newsml:reuters.com:*:nL8N2XV31A
    
      
    
    
    


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CrudeFuts06082022    https://tmsnrt.rs/3aHHCtL
earlytrade06082022    https://tmsnrt.rs/3xvZxwr
Wholesale inventories    https://tmsnrt.rs/39hSmyz
MBA    https://tmsnrt.rs/3mrxMia
Consumer credit    https://tmsnrt.rs/3QbYKbe
Consumer credit    https://tmsnrt.rs/3xaGLJI
AMD's stock market value matches Intel's    https://tmsnrt.rs/393wRSf
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Terence Gabriel is a Reuters market analyst. The views
expressed are his own)