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C$67.53 -1.7  -2.5%

Last Trade - 18/09/20

Basic Materials
Large Cap
Market Cap £17.78bn
Enterprise Value £18.18bn
Revenue £735.2m
Position in Universe 24th / 2689

LIVE MARKETS U.S.-Silver stocks: Starting to outshine their golden siblings

Mon 6th July, 2020 7:15pm
* Major indexes advance; Nasdaq out front * Cons disc leads S&P sector gains, utilities weakest group * Dollar dips; crude, gold up; US 10-yr yield ~0.70% July 6 (Reuters) - Welcome to the home for real-time coverage of U.S. equity markets brought to you by Reuters stocks reporters and anchored today by Sinéad Carew. Reach Sinéad on Messenger to share your thoughts on market moves: sinead.carew.thomsonreuters.com@reuters.net SILVER STOCKS: STARTING TO OUTSHINE THEIR GOLDEN SIBLINGS (1355 EDT/1755 GMT) Precious metal mining shares have been big winners in 2020. That said, it's been gold and gold miners leading the way, while silver and silver stocks have struggled to keep pace. However, charts suggest silver and silver stocks may be at an important juncture. Indeed, spot gold XAU= has advanced about 18% in 2020 vs. spot silver XAG= which has only risen around 2%. This with the Philadelphia SE Gold/Silver Index .XAU , an index of precious metals mining shares, up more than 20% this year while the S&P 500 .SPX is down about 2%. The VanEck Vectors Gold Mining ETF GDX.P has risen about 25% this year, while the Global X Silver Miners ETF SIL.P has lagged, with a gain of just over 10%. Of note, around the time the equity market was bottoming in March, the silver/gold ratio hit an all-time low, suggesting silver was extremely undervalued relative to gold: Since then, the SIL has outperformed the GDX. The SIL is up 98% off its March closing low, while the GDX has gained about 93%. Meanwhile, although spot gold hit its highest levels since 2012 last week, spot silver has badly lagged with its upside capped by a 9-year, log-scale, resistance line. SIL upside is also hindered by its own 9-year resistance line, now at about $36.75: In the event spot silver can successfully clear its resistance line, now at about $18.25, momentum may accelerate, allowing silver to rally faster than gold and the silver/gold ratio to see a greater rise toward its 9-year resistance line. Given the strong positive rolling 50-day correlation between XAG and SIL, (now >0.83), SIL will have potential for its own powerful upside breakout, as will the SIL/GDX ratio. (Terence Gabriel) ***** COVID CASES ARE SOARING SO WHY ARE STOCKS? (1321 EDT/1721 GMT) The number of U.S. coronavirus deaths exceeded 130,000 on Monday, following a surge of new cases with cases rising in 39 states and 16 posting new record daily infection counts this month, according to a Reuters analysis. In total, cases in the U.S. are approaching 3 million - the highest tally in the world and double Brazil's, the second most-affected country. urn:newsml:reuters.com:*:nL1N2ED0QA But Wall Street's three major averages are climbing with the Nasdaq .IXIC up more than 2% on Monday. While investors always cite uncertainties around the virus which has slammed the global economy, Mark Haefele, chief investment officer for global wealth management at UBS explains why stocks are looking anything but uncertain. Simply put, he says investors are focusing on the positives and he points to three. The first is signs healthcare systems are coping better with Covid-19, reducing the need for restrictions. Haefele points to a slower increase in death rates than infections and growing optimism around vaccine development. The second is of course, central bank stimulus around the world and the fact U.S. lawmakers look increasingly convinced of the need for further economic support. The third is economic data, said Haefele citing an increase in German industrial orders and U.S. payrolls data for May. But he did advise investors to brace for continued volatility as news on the pandemic was moving fast. (Sinéad Carew) ***** FASTEN THAT SEAT BELT FOR Q2 EARNINGS (1223 EDT/1623 GMT) Before the U.S. second-quarter reporting season kicks off, CFRA is out with research looking at what investors should expect from sectors - nothing pretty, but some less ugly. Chief Investment Strategist Sam Stovall points to declines in the EPS of all 11 of the S&P 500's .SPX major industry sectors. Consumer discretionary .SPLRCD and energy .SPNY will see triple-digit declines while defensives and technology declines are expected to be shallower. Of 124 sub-industries in the S&P 500, only 10% will show Q2 EPS gains, led by gold, interactive home entertainment, and managed health care as consumers flocked to stay at home services during coronavirus lockdowns, Stovall says. And 22 groups likely saw triple-digit declines, with airlines, automobile manufacturers, and casinos & gaming leading the losers as they depend on consumers leaving home. In communications services, Stovall points to advertising revenue declines on live sport cancellations and the shutdown of Hollywood. Also cinemas and theme parks have been closed. Though he sees home broadband demand as a bright spot. In consumer discretionary, Stovall cites autos, retail and apparel as weak links, while he sees positive signs in homebuilding as apartment dwellers eyed single family homes. While consumer staples companies saw "an unprecedented surge in demand," earnings will still fall 15% as costs rise due to interruptions in supply chains and other issues. In energy, weak commodity prices are the culprit for a $3.15/shr operating loss compared with Q1's $3.06/shr profit. In financials, a key issue will be loan-loss provisions and higher credit card risk. In healthcare, Stovall points to a 19% year-over-year decline with companies in healthcare equipment, providers and services hit particularly hard due to a decline in surgery procedures. Somewhat insulated, technology will still see an EPS decline of 10.9%, and Stovall sounded cautious about the consumer technology product outlook for the second half. In real estate, Covid-19 may be the final nail in the coffin for many enclosed malls, despite the economy's reopening. Even utilities earnings may be flat as commercial customers lower consumption. (Sinéad Carew) ***** ARE CYCLICALS THE NEXT "IT" SPACE? (1030 EDT/1430 GMT) With some cyclical sectors underperforming in the market's recent recovery, Jefferies is suggesting that such sectors could be in line to "flip from frumpy to fashionable." The research, published on July 5, pits industrials, materials and financials as the "best ways to play on an improving economic backdrop." Typically these sectors outperform once the ISM is greater than 50, according to the report. And with inventory levels already low and being drawn down further heading into the Covid crisis, ISM was already set to improve. Thus, it described the June 52.6 reading as what is historically a tipping point for the pro-cyclicals. Jefferies economists see July bringing another solid ISM read, though they say that August and beyond may depend on Covid outbreaks and how they're handled. But aside from that uncertainty they sound hopeful particularly in relation to earnings revisions. "Estimate revisions hit these groups harder than most, and the trend is only beginning to reverse," according to the research. And Jefferies wrote, "the foundation of the next expansion is real." The S&P financial sector .SPSY has risen ~35% since its March 23 low while the S&P industrial sector .SPLRCI has risen ~23%. The S&P 500 .SPX is up 45% over the same time frame. Of note, S&P materials .SPLRCM sector has risen ~53% during this period. Stocks were boosted on Monday after data showed U.S. services industry activity rebounded sharply in June, almost returning to its pre-COVID-19 pandemic levels, but a resurgence in coronavirus cases that has forced some restaurants and bars to close again threatens the emerging recovery. urn:newsml:reuters.com:*:nN9N2BW01G (Sinéad Carew) ***** DOW INDUSTRIALS: COILED UP, READY TO STRIKE? (0915 EDT/1315 GMT) For about the past month, the Dow Jones Industrial Average .DJI has been pretty much trapped in a contracting range defined by converging intermediate and longer-term moving averages. However, with CBT e-mini Dow futures 1YMcv1 up around 400 points ahead of the open, the blue-chip average can attempt an upward breakout of this range. (Click on chart below) Indeed, in the wake of the formation of an island reversal pattern on June 11 urn:newsml:reuters.com:*:nL1N2DP14C, the Dow has been coiling, or trading essentially sideways, amid subdued volatility. urn:newsml:reuters.com:*:nL1N2E30J3 Over this period, the blue-chip average has not closed outside a range defined by its rising 50-day moving average (DMA) and its descending 200-DMA. With these two closely watched moving averages pinching together, their spread is now the tightest it's been in more than 3 months. Thus, the index appears ripe for a breakout, which can lead to the next near-term trend. urn:newsml:reuters.com:*:nL1N2E70LU On a close above the 200-DMA (now at about 26,255), the Dow can then attempt to fill its June 11 gap (up to 29,938.05). In that event, the index's next hurdle would then be its June 8 high (27,580.21). urn:newsml:reuters.com:*:nL1N2E80SF Conversely, breaking below the 50-DMA (now at about 25,100) can threaten a downside range resolution. Violating support at the April 29 high (24,764.77) can inflict further damage, and suggest the trend is turning down in earnest. (Terence Gabriel) ***** WALL STREET FUTURES RISE(0900 EDT/1300 GMT) Wall Street futures are rallying on Monday following gains in China as investors bet on improvements in that economy and basked in recent strength in U.S. data even as surging coronavirus cases in many states has been impeding business re-openings. .N urn:newsml:reuters.com:*:nL8N2ED2IR Lurking beneath the optimism were the latest signs of tension between the world's two biggest economies after the U.S. Navy said two of its aircraft carriers conducted exercises in the disputed South China Sea on Saturday, as China carried out military drills that have been criticized by the Pentagon and neighboring states. urn:newsml:reuters.com:*:nL3N2EB00E U.S. markets were set to reopen after closing on Friday to observe the Independence Day July 4th holiday. Here is a premarket snapshot: (Sinéad Carew) ***** <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Wall Street futures gain https://tmsnrt.rs/2VOcrTa Dow07062020TG https://tmsnrt.rs/31Ly1vz XAGXAU07062020B https://tmsnrt.rs/3f8ax7Q SILGDX07062020B https://tmsnrt.rs/3e219RO ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Terence Gabriel is a Reuters market analyst. The views expressed are his own)
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