Live Markets: Savers pops, Kodiak, Fidelis drop as IPO market recovers

Savers Value Village

29/06/2023 18:35

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      DJI up ~0.7%, S&P 500 up ~0.3%, Nasdaq edges red
    

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      Financials lead S&P gainers; comm services down most
    

        * 
      Dollar up; gold, crude edge higher; bitcoin up >1.5%
    

        * 
      U.S. 10-Year Treasury yield jumps to ~3.85%
    

  
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    SAVERS POPS, KODIAK, FIDELIS DROP AS IPO MARKET RECOVERS
(1335 EDT/1735 GMT)   
    Thrift store operator Savers Value Village Inc  SVV.N  is
the clear winner on Thursday as the IPO market continues to show
signs of a resurgence.
    Shares of SVV opened about 38% above the $18 IPO price
valuing the Ares Management-backed  ARES.N  company at nearly $4
billion in debut.
    On the flip side, both Kodiak Gas Services  KGS.N  and
Fidelis Insurance Holdings  FIHL.N  are off to tepid starts with
shares of both firms dipping below their respective issue
prices.
    Still, deals are continuing to get done as risk appetite
improves for new issues. Earlier this month, Mediterranean
restaurant chain Cava Group  CAVA.N  popped in debut, while a
recent wave of stock sales could portend a U.S. IPO market
comeback in the second half of the year.
    Meanwhile, the Renaissance IPO ETF  IPO.P , which tracks a
basket of recent IPOs, is up 30% YTD vs a 14.4% rise in the S&P
500 index  .SPX .
    
    (Lance Tupper)
     *****
    
       
    EMERGING MARKET RATE CUTS ARE LOOMING (1301 EDT/1701 GMT)
    Interest rate cuts are on the way in emerging markets as
disinflation widens in the region, with Latin America leading
the way in easing rates and Chile the likely first country to
cut followed by Brazil.
    "LatAm is likely to lead the way in cutting rates, where a
much more proactive and aggressive monetary policy response at
the start of this inflation cycle makes central banks
well-positioned to begin cutting rates as the inflation backdrop
continues to improve," Goldman Sachs writes in a research note. 
    Chile is the clearest example of inflation moving lower,
Goldman notes. Inflation in Chile has now fallen from a peak of
14.1% year-over-year to 8.7% year-over-year. And its central
bank has kept policy rates at their highest level in over two
decades, at 11.25% since the fall of last year, which Goldman
says is now translating into an exceptionally restrictive policy
stance.
    More central banks are expected to follow the rate cut
moves, the bank writes, and the market has been pricing in a
historically fast EM cutting cycle. Relative to their history,
markets in Mexico, Chile, Colombia and Hungary are pricing a
rate-cutting cycle in the next 12 months this is historically
exceptionally aggressive, Goldman says.
    Those bets will be tested though because EM central banks
will want to be prudent and risk-averse, while central banks
from major developing economies are still hiking rates or remain
on hold.
    A prudent easing cycle should support the belly and the long
end of the EM curves, according to Goldman analysts led by
Kamakshya Trivedi.
     "If the EM rate-cutting cycle proceeds more gradually than
markets currently expect, we think the terminal rate pricing
still has room to move lower, during which we see scope for the
belly and the long end to perform well across most EM markets,
the bank says.
    
    (Gertrude Chavez-Dreyfuss)
     *****
      
  
        
  
        APPLE HITS RECORD, INCHES TOWARD $3 TRILLION MARKET CAP
(1235 EDT/1635 GMT)
  
        Apple  AAPL.O  is inching toward a $3 trillion market
capitalization on Thursday, now at $2.98 trillion as the iPhone
maker's stock climbs 0.3%, on track for its third straight
record high close.
  
        
  
        
  
        Apple's stock has gained over 5,800% since Steve Jobs
unveiled the iPhone in 2007.
  
        Apple briefly hit the $3 trillion mark on an intra-day
basis in January 2022, but it dipped back down by the close.
  
        The stock has surged 46% so far in 2023, part of a rally
among several of Wall Street's technology-related heavyweights,
fueled by bets that the Federal Reserve is nearing the end of
its campaign of interest rate hikes, and by optimism about the
potential for artificial intelligence.  
  
        Shares of Apple have climbed about 5% since June 5, when
it 
    launched
     a pricey augmented-reality headset, its riskiest bet since
the introduction of the iPhone more than a decade ago. That
compares to a 3% rise in the S&P 500  .SPX  over the same
period.
  
        
  
        (Noel Randewich)
  
         *****
  
    

    WHAT A YEAR SO FAR FOR THE NASDAQ! (1200 EDT/1600 GMT)  
    The Nasdaq's main indexes, the Composite  .IXIC  and the 100
 .NDX , have been shining bright so far in 2023.
    After a dismal 2022, which saw these two tech-heavy indexes
suffer their worst years since 2008, it's been a different story
so far in 2023.
    The IXIC is up 30% YTD, while the NDX is up 36.8% so far
this year.
    Provided the IXIC ends Friday up more than the 27.31% it
gained in the first half of 1991, it will be its best first six
months of a year since its 37.1% rise in 1983.
   And provided the NDX closes Friday up more than the 34.98% it
gained in the first half of 1998, it is on pace for its best
first-half start in its history.
    These indexes have been underpinned by strength in tech
 .SPLRCT , the S&P 500's best performing sector index so far
this year, which is posting a 39.7% gain. It is now just shy of
its record first six month percentage gain of 40.02% scored in
1995.
    Although up for the year, there's not much to write home
about in terms of a start to the year for the benchmark S&P 500
 .SPX , the DJI  .DJI , and the small-cap Russell 2000  .RUT . 
    With a 14.44% YTD gain, the SPX is just edging its 2021
first six month gain of 14.42%. This, puts it on track for its
biggest first-half gain since a 17.35% rise in 2019.
    With a 2.8% YTD rise, the DJI is only on pace for its best
start to a year since 2021's 12.7% advance.
    The RUT is up about 6.5% so far this year. It rose 17% in
the first half of 2021.
    Meanwhile, the SPX's worst performing sector so far in 2023,
energy  .SPNY , down 8.7%, is off to its worst first six month
start to a year since a 37% collapse in 2020.
    
    (Terence Gabriel)
     *****
    
    
    THURSDAY DATA ROLLS OUT RATE HIKE RED CARPET (1137 EDT/1537
GMT)
    Economic data gave the "all clear" for Powell & Co to foist
yet another interest rate hike on the markets next month.       
    The number of U.S. workers filing first-time applications
for unemployment checks  USJOB=ECI  dropped by 9.8% last week to
239,000, its lowest reading since May, landing well short of the
265,000 consensus, according to the Labor Department.
    Ordinarily, shorter lines at the unemployment office would
be a welcome sight. But in the good-is-bad reality of a Fed
tightening cycle, it suggests that the central bank's relentless
barrage of rate hikes has yet to make a meaningful dent in the
tight labor market, despite the recent swarm of announced
layoffs as reported by Challenger.
    Even so, the overall trend shows weekly claims are on the
rise. The 4-week moving average, which irons out weekly
volatility, inched up to 257,500. 
    "We expect that jobless claims will rise later in the year
as the economy weakens and falls into a recession," writes Nancy
Vanden Houten, lead U.S. economist at Oxford Economics (OE).
"Given our forecast for the recession to be mild, along with the
difficulties employers have faced hiring workers following the
pandemic, we expect job losses in this recession will be
relatively small compared to prior recessions."
    Ongoing claims  USJOBN=ECI , reported on a one-week lag,
edged down 1.1% to 1.742 million, or close to the pre-pandemic
"normal."
     
    
    The Commerce Department issued its third and final word on
first-quarter GDP  USGDPF=ECI , surprising analysts by hiking it
0.7 percentage points to an even 2%, at a quarterly annualized
rate, nearly double the 1.1% advance take issued in April.
    "(The) stronger-than-expected GDP data is further
confirmation that the economy is in stronger shape than many
expected, and is supportive of the Federal Reserve's higher for
longer policy when it comes to interest rates," says Carol
Schleif, chief investment officer at BMO Family Office. "The
Federal Reserve has indicated that we are getting closer to the
final innings of rate hikes, but that stance implies that a few
more rate hikes are possible if the economic data remains
strong."
    Diving beneath the headline, business investment in
equipment fell more than previously reported, imports were
revised lower while exports jumped 2.6 percentage points to
7.8%, but the inventories drag was a bit heavier than originally
stated, subtracting 2.1 percentage points from the total.
    
    
    Crucially, consumer spending - which accounts for about 70%
of the economy - was upwardly revised to 4.2% from 3.8%, and
contributed 2.8 percentage points to the upside, and driven by a
bigger than previously reported increase in services spending.
    "Stronger consumer spending and exports drove most of the
upward revision," says Oren Klachkin, lead U.S. economist at OE.
"The recession will be delayed as long as consumers continue to
spend."
     
    
    Finally, signed contracts for the sale of pre-owned homes
fell by 2.7% in May, a bigger drop than the 0.5% dip forecast by
economists.
    The National Association of Realtors' (NAR) Pending Home
Sales index  USNAR=ECI  is considered among the more
forward-looking housing market indicators, as signed contracts
tend to translate into real sales a month or two down the road.
    The sharper than expected decline likely reflects slim
pickings due to low inventories.
    "Despite sluggish pending contract signings, the housing
market is resilient with approximately three offers for each
listing," says Lawrence Yun, NAR's chief economist. "The lack of
housing inventory continues to prevent housing demand from being
fully realized."
    
    
    (Stephen Culp)
     *****
    
    
        WALL STREET SHARES A BIT DULL DESPITE UPBEAT U.S. DATA
(1010 EDT/1410 GMT)
  
    Shares on Wall Street are mixed early on Wednesday, despite
upbeat data suggesting the U.S. economy could end up just having
a mild recession or even avoid one.
    Initial claims for state unemployment benefits unexpectedly
dropped 26,000 to 239,000 for the week ended June 25. The
forecast was for 265,000 claims in the latest week. 
    A separate report on the third estimate for gross domestic
product showed that GDP grew at an annualized 2.0% rate in the
first quarter. That was revised up from the 1.3% pace reported
last month. Economists had expected first-quarter GDP growth
would be raised slightly to a 1.4% pace.
    "The final reading of first quarter GDP and personal
consumption reminded traders that the economy is far from
breaking and probably will need to be subject to much more Fed
tightening," wrote Edward Moya, senior market strategist, at
OANDA, in a research note after the data. 
    "It was a clean sweep of impressive U.S. data as U.S.
jobless claims declined the most since 2021 and a
holiday-shortened week." 
    At the same time, stocks are being lifted as bank shares
rose after major lenders cleared the Federal Reserve's annual
stress test, showing they have enough capital to weather a
recession if it happens.
    Shares of Bank of America  BAC.N , JPMorgan Chase  JPM.N ,
Goldman Sachs  GS.N  and Wells Fargo  WFC.N  are all higher in
early trading. 
    Here's a snapshot of what's going on across financial
markets:
    
    
    (Gertrude Chavez-Dreyfuss)
     *****
    
    
    DOW INDUSTRIALS: INVERSE HEAD & SHOULDERS AS CONTINUATION
PATTERN (0900 EDT/1300 GMT)
    Late last year, the Dow Jones Industrial Average  .DJI 
mounted an impressive thrust off its October 2022 trough. Since
then, however, a wide range has prevailed. This action is
potentially an inverse head & shoulders pattern acting as a
continuation pattern. If so, the DJI should ultimately resolve
its range to the upside:
    
    
     From its October 13, 2022 intraday low to its December 13,
2022 intraday high, the blue-chip average surged as much as 21%
in just 42 trading days (tds).
    From there, however, the DJI has chopped in a wide range,
while retracement levels of its January 2022-October 2022
decline have been acting as sticky support and resistance.
    Action from mid-December of last year to mid-June of this
year has the look of an inverse head & shoulders. Although such
a pattern is usually associated with bottoming action after a
long decline, its placement in this case appears to be as a
continuation pattern.
    The pattern is well defined and rather symmetrical. After
falling around 10% from its December 2022 high into its March
2023 low over 65 tds, the DJI rallied around 10% over 65 tds
into its mid-June high. Meanwhile, the shoulder depths at 32,573
and 32,586 are nearly identical.
    Since then, the Dow has dipped back to test the 61.8%
Fibonacci retracement of the January 2022-October 2022 decline
at 33,785, as well as the 50-day moving average (DMA), which
ended Wednesday at 33,610.
    If the pattern is to play out to the upside, traders are
looking for the DJI to resume its advance in short order. A
thrust above the 34,588.68 June 16 high will clear the neckline
of the pattern and suggest the potential for a sharp rally.
    Closing below 33,610, however, can suggest renewed downside
pressure. 
    Breaking the May 25 low, at 32,586, would suggest pattern
failure, while also putting the DJI back below the 50%
retracement of the January 2022-October 2022 decline, and the
200-DMA.     
       
    (Terence Gabriel)
     *****
 
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    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
DJI06292023B    https://tmsnrt.rs/46ptf5R
US morning snapshot    https://tmsnrt.rs/46vvAfq
Jobless claims    https://tmsnrt.rs/3NA67J8
GDP contributors    https://tmsnrt.rs/433YWP1
GDP consumer contribution    https://tmsnrt.rs/3JCNJhP
Pending home sales    https://tmsnrt.rs/3DbxkNL
Apple vs the S&P 500 since the iPhone's introduction    https://tmsnrt.rs/46wCb9p
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Terence Gabriel and Lance Tupper are a Reuters market
analysts. The views expressed are their own)