Live Markets: Stocks down, but what's actually cheap?

Ryder System

17/10/2022 17:15

* 
      Main U.S. equity indexes advance: Nasdaq out front, up
~3.2%
    

        * 
      All S&P 500 sectors green: consumer discretionary up most 
    

        * 
      Euro STOXX 600 index ends up ~1.8%
    

        * 
      Dollar dips; gold, crude, bitcoin gain
    

        * 
      U.S. 10-Year Treasury yield falls to ~3.96%
    

  
       Oct 17 - Welcome to the home for real-time coverage of
markets brought to you by Reuters reporters. You can share your
thoughts with us at 
    STOCKS DOWN, BUT WHAT'S ACTUALLY CHEAP? (1215 EDT/1615 GMT)
    With the S&P 500  .SPX  ending Friday's session down almost
25% year-to-date, its understandable investors are seeking
bargains. But Goldman Sachs' U.S. equity strategist David Kostin
says U.S. stocks are still expensive vs history.
    While the benchmark's forward price/earnings multiple has
fallen to 15.8x from 21x, he says it's still in the 66th
percentile going back to 1980. And with the index above
Goldman's year-end target of 3,600 and above its hard-landing
scenario target, 3,150, "the risk/reward for owning the broad US
equity index is unattractive."
    Still, with wide valuation differences under the hood, the
strategist sees four areas of interest. 
    The first is short-duration value stocks that are less
sensitive to interest rate changes. If rates stay high, Kostin
sees long-duration, rate sensitive, stocks continuing to face
stronger valuation and performance headwinds than short duration
peers. Kostin lists a bunch of stocks from each industry in the
short-duration basket. These have the lowest valuations of their
group: Macy's  M.N , Albertsons  ACI.N , Ovintiv  OVV.N ,
QuidelOrtho  QDEL.O , Ryder System  R.N , Hewlett Packard
Enterprise  HPE.N  , Cleveland-Cliffs  CLF.N , Frontier
Communications  FYBR.O  and NRG Energy  NRG.N .
    Secondly, while growth is expensive, Kostin sees
opportunities. While higher rates and recession risks pose
near-term headwinds, he sees low valuations of some profitable
ultra-growth stocks representing opportunities for stock pickers
with "sufficiently long investment horizons."
    His third category is cyclicals' "substantial valuation
dispersion." Even with the elevated risk of an economic
downturn, investor fears have weighed so much that multiples of
certain cyclical stocks to make them favorable.
    Fourth in the list are small caps, which trade at a more
attractive valuation than large caps as investors are concerned
about earnings, which may face more downside in a recession than
large-cap peers. But still, benchmarking the S&P 500 and the S&P
600 against 2019 earnings, he notes that the S&P 600 trades at a
7% valuation discount to the S&P 500, ranking it in the 29th
percentile of the past 30 years.
    S&P valuations vs history as per Goldman: 
    (Sinéad Carew)
    *****        
    AUTUMN IN NEW YORK: EMPIRE STATE DIPS DEEPER INTO
CONTRACTION (1139 EDT/1539 GMT)
    Investors are having a grand time on Monday, with U.S.
stocks enjoying a broad-based rally based in part on upbeat
earnings results.
    It almost feels a shame that the day's lone indicator is
raining on the parade.          
    Factory activity in New York State has contracted more
sharply than expected this month.
    The NY Federal Reserve's Business Conditions index
 USEMPM=ECI  - more popularly known as the Empire State -
delivered an October reading of -9.1, more than double the size
of the -4.0 forecast by economists.
    An Empire State reading below zero signifies monthly
contraction.
    The drop was largely attributable to deteriorating
expectations, which plunged 10 points into negative territory.
    While the report showed 23% of the survey's respondents
improved business current conditions, 32% said current
conditions have deteriorated.
    The "input prices" component was among the more discouraging
aspects of the report, rising 6.9 points to 55, in yet another
sign that inflation has yet to show much reaction to Powell &
Co's barrage of interest rate hikes, and provides very little
reason to expect a dovish pivot in the foreseeable future.
    "Manufacturing activity will continue to decelerate in
coming months, and a significant slowdown is expected heading
into 2023," writes Gurleen Chadha, U.S. economist at Oxford
Economics. "We expect weakening demand conditions domestically
and abroad, high inflation, and rising interest rates will
heavily weigh on growth in H1 2023."
        "The weakness in manufacturing won't prevent the Fed
from raising rates, however, as inflation remains stubbornly
high," Chadha adds.
  
    The Philadelphia Federal Reserve's Philly Fed index, due
Thursday, is expected to have languished in negative territory,
and tomorrow the U.S. Federal Reserve is due to release its
industrial output and capacity utilization data, both of which
should provide a more detailed picture of the health of the
manufacturing sector, which represents about 11% to the U.S.
economy.
    U.S. stock indexes are bright green, with every major sector
of the S&P 500 in positive territory.
    Market moving mega-caps are providing the most upside
muscle.
    (Stephen Culp)
    *****
    U.S. STOCKS ROAR OUT OF THE STARTING GATE (1000 EDT/1400
GMT)
    Wall Street's main indexes are sharply higher early on
Monday, following better-than-expected results from Bank of
America  BAC.N   urn:newsml:reuters.com:*:nL4N31I2HP that were underpinned by the
Federal Reserve's rapid rate hikes.  .N 
    That said, in terms of indexes and sectors, consumer
discretionary  .SPLRCD  is the biggest riser. FANGs  .NYFANG ,
and tech  .SPLRCT  are also among the biggest gainers so far.
Banks  .SPXBK , and chips  .SOX  are also strong.
    With the early strength, growth  .IGX  is on track for its
best day vs value  .IVX  since August 10.
    Also aiding positive sentiment was new British finance
minister Jeremy Hunt's move to reverse nearly all of Prime
Minister Liz Truss's mini-budget that had sparked a market
turmoil, and rein in a vast energy subsidy plan.  urn:newsml:reuters.com:*:nL1N31I0AB 
    Here is where markets stood about 30 minutes into the
trading day:
    (Terence Gabriel)
    *****
    S&P 500 LEVELS MORE LIKE PISTOLS AT DAWN (0900 EDT/1300 GMT)
    Traders remain focused on dueling chart levels, especially
after the S&P 500 index  .SPX  survived a test of some
significant support last week, but was then repulsed by a stiff
resistance barrier  urn:newsml:reuters.com:*:nL1N31B0MK:
    On Thursday of last week, the SPX plunged to a low of
3,491.58, putting it down more than 4% for the week. With this,
the benchmark index tested a support zone defined by the 50%
retracement of the March 2020-January 2022 advance, at 3,505.24,
and a Fibonacci-based longer-term moving average, the 233-week
moving average (WMA), which was around 3,480.
    After flirting with this zone for only 15 minutes or so
early on Thursday, a powerful reversal ensued which carried into
the first 15 minutes or so of Friday's session.
    That said, the SPX stalled just shy of a weekly Gann Line,
which presented a stiff hurdle around 3,717. The SPX was only
able to rally as high as 3,712 early on Friday before turning
tail again. It ended down 1.6% for the week.
    However, with CME e-mini S&P 500 futures  EScv1  quoted up
around 50 points, or more than 1.4%, in premarket Monday, the
SPX looks poised to take aim at the upside again.
    Still, in order to gain confidence in a more significant
recovery, traders will want to see the SPX reclaim, and hold,
the weekly Gann Line resistance, which will ascend to around
3,721 this week.
    In the event the 50% retracement at 3,505 and the 233-WMA -
which will ascend to 3,485 this week - were to give way on a
closing basis, a much deeper decline may develop. 
    Traders would then focus on another weekly Gann Line, which
will be support at around 3,341 this week. The 61.8% Fibonacci
retracement of the March 2020-January 2022 advance is at
3,195.28.
    Meanwhile, the Nasdaq  .IXIC  is attempting to hold its
61.8% Fibonacci retracement of its March 2020-November 2021
advance at 10,291 - click here:  urn:newsml:reuters.com:*:nL1N3140PM
    (Terence Gabriel)
    *****
    FOR MONDAY'S LIVE MARKETS' POSTS PRIOR TO 0900 EDT/1300 GMT
- CLICK HERE:  urn:newsml:reuters.com:*:nL8N31I34K 
    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
SPX10172022    https://tmsnrt.rs/3s7ut2t
earlytrade10172022    https://tmsnrt.rs/3VztuWE
Empire State    https://tmsnrt.rs/3gdJ1et
Stocks have fallen but are still expensive    https://tmsnrt.rs/3Vw1gfg
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Terence Gabriel is a Reuters market analyst. The views
expressed are his own)