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The Zacks Analyst Blog Highlights: Shopify, Deere & Co and LyondellBasell Industries
Read MoreHide Full Article
For Immediate Release
Chicago, IL – March 2, 2021 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Shopify Inc. (SHOP - Free Report) , Deere & Company (DE - Free Report) and LyondellBasell Industries N.V. (LYB - Free Report) .
Here are highlights from Monday’s Analyst Blog:
Logic Machines Input Bond & Divvy Yields: Global Week Ahead
Across the Global Week Ahead, stock traders will go into a hyper-focus.
Traders will tune in on a relationship between:
· - Risk-free U.S. Treasury long-term bond rates, and
· - More-risky S&P 500 annual dividend yields.
It is time for a brief asset allocation primer.
What can happen when the S&P 500's annual dividend yield (1.57% now) gets nearer to a cross with the 10-yr U.S. Treasury bond effective annual coupon rate (1.42% at the close on Friday, but 1.52% last Thursday)?
Asset allocation logic machines can suddenly kick into a more active gear.
Many are coded to sell stocks, from this Rubicon onwards, to reduce risk exposure.
What effect will such mechanical tactics have upon the S&P 500's valuation? That is a matter of guessing.
How much institutional money is positioned in this mechanical way? It is not a small allocation.
Then comes the high-beta stock punishment. That is a related machine logic sort.
Watch the really overvalued 'momo' growth stocks get pummeled.
After the recent volatility, broken technical chart patterns abound, across the large- and small-cap stock spectrum.
Here is how Scotiabank's globally-savvy FX economists in Canada summed up the current bond and stock market circumstance:
"Following a week of abrupt market movements concentrated upon bonds, the pressing question facing monetary policymakers is whether to respond and how much further license this may give bond markets to push financing costs higher."
Equally important is what investors should make of it all in the context of potential policy shifts. Markets will receive further information to inform their views over the coming week.
A first point involves what to make of stock market volatility. With the S&P 500 -2.5% below the mid-February peak, it's pretty clear that it's a tad premature to ring the alarm bells. It would be rather unusual to see a sustained equity sell-off into reflation and strong growth which is more typically a bad bond market environment.
Further, recall that during the 2013–14 Fed policy exit episode, there were no fewer than seven periods during which the S&P fell by between -4 to -7% only to recoup the hit and move onto greater highs each time. The almost -6% drop in the month following former Fed Chair Bernanke's taper remark in May 2013 was among them.
We are going to get this kind of volatility in spades on the long and grinding ultimate way out of record stimulus that will take 'some time' as they say.
The core issue of whether stocks are cheap, fair value, or dear, nevertheless continues to hang over markets.
A price-to-forward-earnings ratio at 19.4 heading into the first full year of vaccines (2022) is not a cheap market but also doesn't scream over-valuation."
Next are Reuters' five world market themes, reordered for equity traders.
(1) Last Week's Surge in Bond Yields is This Week's Central Banker Topic
What happened to keeping borrowing costs in check?
All of a sudden, central banks are grappling with rising bond yields that could threaten recovery prospects.
February ended with some of the biggest bond moves in years, even after soothing noises from Federal Reserve Chair Jerome Powell, European Central Bank boss Christine Lagarde and Reserve Bank of New Zealand Governor Adrian Orr.
Australian and New Zealand 10-year yields have soared 70 basis points each -- Australia's biggest monthly yield jump since 2009. U.S. 10-year yields are set for the biggest monthly rise since late-2016.
Focus now turns to what central banks say or do next: the Reserve Bank of Australia meets Tuesday and officials from the Fed, ECB and the Bank of England officials are due to speak.
The RBA tried to defend its 0.1% target on three-year yields. If Tuesday's Eurozone data shows inflation ticking higher, pressure will grow on the ECB, too.
(2) On Friday, Traders Get to See the February Nonfarm Payroll Report
As U.S. lawmakers weigh up President Joe Biden's $1.9 trillion spending bill, February's jobs report on March 5th will show us how the labor market is faring.
Latest weekly data showed new unemployment benefit claims at a three-month low, suggesting the decline in COVID-19 infections is lending the labor market some traction. Retail sales also rebounded in January.
February non-farm payrolls are expected to rise by 148,000, economists estimate, after January's 49,000 increase. But winter storms that swept across the South in February may complicate the issue.
(3) OPEC+ Producers Meet on Thursday, March 4th
With oil prices at 13-month highs, the OPEC+ producers' meeting on March 4 is expected to discuss a modest easing of supply curbs from April.
The Organization of the Petroleum Exporting Countries and allies, known as OPEC+, cut output by 9.7 million barrels per day last year as the pandemic ravaged demand. As of February, it is still withholding 7.125 million bpd, about 7% of world demand.
OPEC+ sources reckon a 500,000 barrel per day (bpd) output increase looks possible without causing an inventory build-up, as economies recover.
Russia is keen to raise supply. Saudi Arabia's voluntary 1 million bpd cut also expires in March, and that supply may return from April.
Some OPEC+ voices argue against an output increase, citing possible setbacks in the pandemic battle. The ministers will consider the latest market data before making their decision.
(4) Will the U.K. Budget Follow the U.S. into a Major Spending Expansion?
British finance minister Rishi Sunak will pledge more budget spending on Wednesday but it may be the last bit of pandemic-related support he offers.
Sunak has racked up more than 280 billion pounds ($397 billion) in spending and tax cuts to revive the economy. He's pushed sovereign borrowing to a peacetime record -- the 2.1 trillion-pound debt equals 98% of gross domestic product.
So, he'll be thinking of ways to plug rather than enlarge budget holes. Expectations are for the corporation tax rate to be upped from the current 19%.
Some analysts expect tax increase announcements in autumn. Morgan Stanley predicts fiscal tightening to the tune of 2% of GDP to come into force from next year.
Businesses want Sunak to keep lifelines open; some economists urge him to emulate U.S. stimulus plans. Sunak will be hoping a post-economic recovery materializes, bringing tax revenues rolling in.
(5) Will the Reserve Bank of Australia (RBA) Speak About the Bond Rout?
The bond rout poses a test for the RBA's yield-curve control policy when it meets Tuesday.
The RBA offered to buy A$3 billion ($2.36 billion) of three-year bonds at an unscheduled operation on Friday. But a firmer message is needed. Australia's 3-to-10-year yield curve is the steepest it has been in at least three decades. The Aussie dollar topped $0.80 for the first time in three years.
Futures are pricing a rate hike for 2021, despite the RBA stressing it won't move until at least 2024.
Rising commodity prices offer a reason to be bullish on Australia's economy, but the RBA might need to rein in some of this optimism.
Top Zacks #1 Rank (STRONG BUY) Stocks
(1) Shopify: This is a $1280 a share stock with a $151B market cap now. That garners a Zacks Value score of F, over-pricing a Zacks Growth score of A. The Zacks Momentum score of A is the rest of the story here.
Does this 'momo' stock trader's favorite get hit with a rise in bond yields?
(2) Deere & Co.: This is a $350 stock with a $109B market cap. I see a Zacks Value score of D, a Zacks Growth score of B and a Zacks Momentum score of A.
Agricultural commodities prices are strong now. That price strength appears to reach Deere's fundamentals.
(3) LyondellBasell Industries: This is a $103 stock with a $34.8B market cap. I see a Zacks Value score of A, a Zacks Growth score of C, and a Zacks Momentum score of A.
I wanted to add a Zacks Value score of A stock to the list this week. Note the difference in industry group. This is a Diversified Chemical company.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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The Zacks Analyst Blog Highlights: Shopify, Deere & Co and LyondellBasell Industries
For Immediate Release
Chicago, IL – March 2, 2021 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Shopify Inc. (SHOP - Free Report) , Deere & Company (DE - Free Report) and LyondellBasell Industries N.V. (LYB - Free Report) .
Here are highlights from Monday’s Analyst Blog:
Logic Machines Input Bond & Divvy Yields: Global Week Ahead
Across the Global Week Ahead, stock traders will go into a hyper-focus.
Traders will tune in on a relationship between:
· - Risk-free U.S. Treasury long-term bond rates, and
· - More-risky S&P 500 annual dividend yields.
It is time for a brief asset allocation primer.
What can happen when the S&P 500's annual dividend yield (1.57% now) gets nearer to a cross with the 10-yr U.S. Treasury bond effective annual coupon rate (1.42% at the close on Friday, but 1.52% last Thursday)?
Asset allocation logic machines can suddenly kick into a more active gear.
Many are coded to sell stocks, from this Rubicon onwards, to reduce risk exposure.
What effect will such mechanical tactics have upon the S&P 500's valuation? That is a matter of guessing.
How much institutional money is positioned in this mechanical way? It is not a small allocation.
Then comes the high-beta stock punishment. That is a related machine logic sort.
Watch the really overvalued 'momo' growth stocks get pummeled.
After the recent volatility, broken technical chart patterns abound, across the large- and small-cap stock spectrum.
Here is how Scotiabank's globally-savvy FX economists in Canada summed up the current bond and stock market circumstance:
"Following a week of abrupt market movements concentrated upon bonds, the pressing question facing monetary policymakers is whether to respond and how much further license this may give bond markets to push financing costs higher."
Equally important is what investors should make of it all in the context of potential policy shifts. Markets will receive further information to inform their views over the coming week.
A first point involves what to make of stock market volatility. With the S&P 500 -2.5% below the mid-February peak, it's pretty clear that it's a tad premature to ring the alarm bells. It would be rather unusual to see a sustained equity sell-off into reflation and strong growth which is more typically a bad bond market environment.
Further, recall that during the 2013–14 Fed policy exit episode, there were no fewer than seven periods during which the S&P fell by between -4 to -7% only to recoup the hit and move onto greater highs each time. The almost -6% drop in the month following former Fed Chair Bernanke's taper remark in May 2013 was among them.
We are going to get this kind of volatility in spades on the long and grinding ultimate way out of record stimulus that will take 'some time' as they say.
The core issue of whether stocks are cheap, fair value, or dear, nevertheless continues to hang over markets.
A price-to-forward-earnings ratio at 19.4 heading into the first full year of vaccines (2022) is not a cheap market but also doesn't scream over-valuation."
Next are Reuters' five world market themes, reordered for equity traders.
(1) Last Week's Surge in Bond Yields is This Week's Central Banker Topic
What happened to keeping borrowing costs in check?
All of a sudden, central banks are grappling with rising bond yields that could threaten recovery prospects.
February ended with some of the biggest bond moves in years, even after soothing noises from Federal Reserve Chair Jerome Powell, European Central Bank boss Christine Lagarde and Reserve Bank of New Zealand Governor Adrian Orr.
Australian and New Zealand 10-year yields have soared 70 basis points each -- Australia's biggest monthly yield jump since 2009. U.S. 10-year yields are set for the biggest monthly rise since late-2016.
Focus now turns to what central banks say or do next: the Reserve Bank of Australia meets Tuesday and officials from the Fed, ECB and the Bank of England officials are due to speak.
The RBA tried to defend its 0.1% target on three-year yields. If Tuesday's Eurozone data shows inflation ticking higher, pressure will grow on the ECB, too.
(2) On Friday, Traders Get to See the February Nonfarm Payroll Report
As U.S. lawmakers weigh up President Joe Biden's $1.9 trillion spending bill, February's jobs report on March 5th will show us how the labor market is faring.
Latest weekly data showed new unemployment benefit claims at a three-month low, suggesting the decline in COVID-19 infections is lending the labor market some traction. Retail sales also rebounded in January.
February non-farm payrolls are expected to rise by 148,000, economists estimate, after January's 49,000 increase. But winter storms that swept across the South in February may complicate the issue.
(3) OPEC+ Producers Meet on Thursday, March 4th
With oil prices at 13-month highs, the OPEC+ producers' meeting on March 4 is expected to discuss a modest easing of supply curbs from April.
The Organization of the Petroleum Exporting Countries and allies, known as OPEC+, cut output by 9.7 million barrels per day last year as the pandemic ravaged demand. As of February, it is still withholding 7.125 million bpd, about 7% of world demand.
OPEC+ sources reckon a 500,000 barrel per day (bpd) output increase looks possible without causing an inventory build-up, as economies recover.
Russia is keen to raise supply. Saudi Arabia's voluntary 1 million bpd cut also expires in March, and that supply may return from April.
Some OPEC+ voices argue against an output increase, citing possible setbacks in the pandemic battle. The ministers will consider the latest market data before making their decision.
(4) Will the U.K. Budget Follow the U.S. into a Major Spending Expansion?
British finance minister Rishi Sunak will pledge more budget spending on Wednesday but it may be the last bit of pandemic-related support he offers.
Sunak has racked up more than 280 billion pounds ($397 billion) in spending and tax cuts to revive the economy. He's pushed sovereign borrowing to a peacetime record -- the 2.1 trillion-pound debt equals 98% of gross domestic product.
So, he'll be thinking of ways to plug rather than enlarge budget holes. Expectations are for the corporation tax rate to be upped from the current 19%.
Some analysts expect tax increase announcements in autumn. Morgan Stanley predicts fiscal tightening to the tune of 2% of GDP to come into force from next year.
Businesses want Sunak to keep lifelines open; some economists urge him to emulate U.S. stimulus plans. Sunak will be hoping a post-economic recovery materializes, bringing tax revenues rolling in.
(5) Will the Reserve Bank of Australia (RBA) Speak About the Bond Rout?
The bond rout poses a test for the RBA's yield-curve control policy when it meets Tuesday.
The RBA offered to buy A$3 billion ($2.36 billion) of three-year bonds at an unscheduled operation on Friday. But a firmer message is needed. Australia's 3-to-10-year yield curve is the steepest it has been in at least three decades. The Aussie dollar topped $0.80 for the first time in three years.
Futures are pricing a rate hike for 2021, despite the RBA stressing it won't move until at least 2024.
Rising commodity prices offer a reason to be bullish on Australia's economy, but the RBA might need to rein in some of this optimism.
Top Zacks #1 Rank (STRONG BUY) Stocks
(1) Shopify: This is a $1280 a share stock with a $151B market cap now. That garners a Zacks Value score of F, over-pricing a Zacks Growth score of A. The Zacks Momentum score of A is the rest of the story here.
Does this 'momo' stock trader's favorite get hit with a rise in bond yields?
(2) Deere & Co.: This is a $350 stock with a $109B market cap. I see a Zacks Value score of D, a Zacks Growth score of B and a Zacks Momentum score of A.
Agricultural commodities prices are strong now. That price strength appears to reach Deere's fundamentals.
(3) LyondellBasell Industries: This is a $103 stock with a $34.8B market cap. I see a Zacks Value score of A, a Zacks Growth score of C, and a Zacks Momentum score of A.
I wanted to add a Zacks Value score of A stock to the list this week. Note the difference in industry group. This is a Diversified Chemical company.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.