Live Markets: History sees no need for a flip-flop freakout

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22/06/2021 17:44

* U.S. stocks up slightly 
    * Consumer disc leads S&P sector gainers; real estate
declines
    * Bitcoin regains ground, last up 1.8% after dip below $30k
    * Dollar edges up; gold, crude slip
    * U.S. 10-Year Treasury yield ~1.48% 

    June 22 - 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
    
    HISTORY SEES NO NEED FOR A FLIP-FLOP FREAKOUT (1214 EDT/1614
GMT)
    The S&P 500 has been having some fits and starts recently
with four days of declines last week, which involved an intraday
record-high on Tuesday and a 1.3% drop on Friday, followed this
week by Monday's 1.4% gain and a more modest 0.3% gain so far in
Tuesday's session. 
    While some investors may be worried that "volatility and
indecision so close to a record high is a sign of instability,
Bespoke Investment Group is out with a research note using 
historical data to ease any frazzled nerves.
    Since World War II there are 21 times the S&P 500 fell more
than 1% after closing within 1% of a record high and immediately
bounced back 1% the following day. 
    But in the six and 12 months after these 'flip flops,'
average and median returns over the following were actually
modestly better than average, according to Bespoke. 
    The average gain after a flip flop in this timeframe was
4.7% for the six months following and 10.24% for the 12 months
following compared with the average gain of 4.33% for all six
month periods since 1945 and 8.79% for all 12-month periods
since 1945, according to Bespoke data. 
    "While the performance figures are only marginally better
than average and don't provide a compelling argument for further
outperformance, they also don't support any idea that this type
of volatility within such close levels of an all-time high is
any sort of ominous signal," Bespoke wrote. 
    
    (Sinéad Carew)
     *****
    
    THE HOUSE BEGAN TO PITCH: EXISTING HOME SALES EXTEND THEIR
DECLINE (1105 EDT/1505 GMT)
     Remember that movie where a calamity sent a house spinning
into the sky? You'll recall it came back down and a certain
witch had a bad day.    
    Existing home sales have come back to earth.
    Sales of previously-owned U.S. homes  USEHS=ECI  eased by
0.9% in May to 5.8 million units at a seasonally adjusted
annualized rate (SAAR), according to the National Association of
Realtors (NAR).
    While the number extended April's 2.7% drop, it came in
above the 5.72 million units SAAR expected by economists.
    Until recently, the housing market has been the undisputed
star of the COVID recovery, as social distancing restrictions
and the new, work-from-home normal sent homebuyers stampeding
for the suburbs in search of elbow room and home office space.
    That demand surge sent housing inventories to all-time lows,
which in turn, launched home prices to the moon and well beyond
the grasp of many potential buyers, particularly at the lower
end of the market.
    With this latest data, existing home sales are right about
at February 2020 levels.
    "Lack of inventory continues to be the overwhelming factor
holding back home sales, but falling affordability is simply
squeezing some first-time buyers out of the market," writes
Lawrence Yun, chief economist at NAR.
    "The market's outlook, however, is encouraging," Yun adds.
"Supply is expected to improve, which will give buyers more
options and help tamp down record-high asking prices for
existing homes."
    Indeed supply has improved. 
    The scarcity of single-family homes on the market has begun
to recover. It would now take 2.5 months to sell all available
homes on the market, up from 1.8 months at the beginning of the
year:
    Housing stocks have largely outshone the broader market
throughout the health crisis.
    The 12-month performances of the Philadelphia SE Housing
index  .HGX  and the S&P 1500 Homebuilding index  .SPCOMHOME 
have handily outperformed the S&P 500  .SPX .
    As seen in the chart below, that outperformance started
losing momentum about six weeks ago, but appears to have found a
second wind in recent sessions:
    Wall Street was once again range-bound and languid.
    By mid-morning, the three major U.S. stock indexes were
barely higher, but hadn't strayed far from the starting line. 
    But smallcaps  .RUT , like the witch, have had better days.
    
    (Stephen Culp)
    *****
    
    WALL STREET FLATTISH, BRACING FOR POWELL (1015 EDT/1415 GMT)
    The three major U.S. stock indexes are mixed, and near flat,
in early trading Tuesday, as investors brace for comments from
Federal Reserve Chair Jerome Powell.
    Powell is to testify Tuesday before the U.S. House of
Representatives Select Subcommittee on the Coronavirus Crisis.
    In his prepared remarks for Tuesday released late Monday,
Powell said the U.S. economy continues to show "sustained
improvement" from the impact of the coronavirus pandemic and
ongoing job market gains, but inflation has "increased notably
in recent months."  urn:newsml:reuters.com:*:nN9N2M1016
    Financials  .SPSY , down 0.4%, are leading declines among
S&P 500 sectors.
    Meanwhile, so-called meme stocks are leading the charge in
U.S. trading volumes, with ContextLogic  WISH.O , down 3.0%, the
most heavily traded stock with more than 92 million shares
changing hands so far. Next comes Torchlight Energy  TRCH.O ,
down 5.3% with 69.5 million shares traded so far and Clover
Health  CLOV.O  following with 57 million shares and a 19.2%
advance. In fourth place is Alfi Inc  ALF.O , up 47.8%, with
47.4 million shares exchanged, and AMC Entertainment  AMC.N  is
fifth, with volume of 47 million shares.
    Here is the morning U.S. market snapshot:    
    (Caroline Valetkevitch, Sinéad Carew)
    *****
    
    PEERING BELOW THE SURFACE (1004 EDT/1404 GMT)
    As investors digested last week's market selloff following
the Federal Reserve's meeting, one dynamic that stood out were
signs that the average stock struggled more than the overall
benchmark index.
    While the S&P 500  .SPX  fell 1.9% last week, the
equal-weight version of the index  .SPXEW  dropped 3.7%. That
was the biggest weekly percentage drop for the equal-weight S&P
500 since late January.
    "As much as the market pulled back a little bit at the
headline level last week, below the surface the pullback was
much sharper," said Keith Lerner, chief market strategist at 
Truist Advisory Services in Atlanta.
    Lerner points out that the relative strength in the
heavyweight technology sector  .SPLRCT , which edged up 0.1%
last week for its fifth straight week of gains, helped keep the
benchmark S&P 500 from logging more severe declines. 
    The strength of the equal-weight gauge this year has been an
encouraging sign for those investors seeking a broader rally, as
it suggests more stocks on average are doing well, rather than
only those with the biggest market caps.
    Indeed, after bouncing back on Monday, the S&P 500 equal
weight index was up 16.9% so far in 2021 through yesterday's
close, versus a 12.5% rise for the overall S&P 500. If that
holds, it would be the first time since 2016 that the
equal-weight version outperformed for a calendar year.
    
    (Lewis Krauskopf)
    *****

    FANG INDEX: STILL INSIDE THE LINES (0900 EDT/1300 GMT)
    Since peaking in February at 7,370.72, and then declining
into an early March low at 6,095,23, the NYSE FANG+TM Index
 .NYFANG  has been serving up swings contained by numerous lines
on the charts  urn:newsml:reuters.com:*:nL2N2NB0X0  urn:newsml:reuters.com:*:nL1N2MN157  urn:newsml:reuters.com:*:nL1N2M7273:
    

    After establishing the early March trough, an initial upward
reaction essentially stalled at the 50% retracement of the
February-March slide.
    In the wake of a marginal new intraday low in late March at
6,086.32, NYFANG quickly rallied, and with its 7,107.70 April 14
high, ultimately retraced 79.4% of the mid-February to
early-March slide on an intraday basis. However, the index
failed to close above the 76.4%/78.6% Fibonacci retracement zone
of that decline in the 7,069.70/7,097.77 area.
    A resumption of weakness led to a test of the March troughs
with the 6,106.50 mid-May low.
    The index has since bounced again, hitting an intraday high
of 6,897.64 on Friday. However, the index has so far failed to
end back above the 61.8% retracement of the February-March slide
at 6,883.48, or the 76.4%/78.6% retracement zone of the
April-May down-leg in the 6,871.42/6,893.44 area.
    The index slid during Monday's session, before recovering,
and posting a small rise. Now in premarket trade on Tuesday, 7
of the 10 NYFANG members are quoted down, suggesting the index
may be poised to trade lower early in the regular session.
    With yields snapping back, potentially putting the recent
growth stock relative resurgence at risk  urn:newsml:reuters.com:*:nL2N2O30ZI, NYFANG
may be facing a sudden headwind. A close back below its 50-day
moving average, which ended Monday at around 6,677, may see
downside pressure intensify again.
    However, if NYFANG is forming a bullish triangle since its
February peak, the 2021 lows should contain weakness.
 
    (Terence Gabriel)
    *****
    
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    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
NYFANG06222021    https://tmsnrt.rs/2SS8RJu
S&P 500 vs equal-weight counterpart in 2021    https://tmsnrt.rs/3xHbexM
Early U.S. market snapshot    https://tmsnrt.rs/2UsPSpx
Existing home sales    https://tmsnrt.rs/2UrW4y1
Housing stocks    https://tmsnrt.rs/3iZvO8f
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Terence Gabriel is a Reuters market analyst. The views
expressed are his own)