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This Global Week Ahead could be marking time for "a breather" on major U.S. large cap stock indices.
We have seen a “V-shaped” recovery for major share indices. Not so, the U.S. and global economy.
Last week’s tale of the tape frames the backdrop.
Out of the open of trading last Friday, all three major large-cap U.S. indexes went green. It felt very pre-set, particularly after such a broad selloff put on the board last Thursday.
Want another example of large-cap share machine trading, over a longer multi-month horizon?
The best performing stocks — from the March 23rd S&P 500 index low through Monday, June 8th — marked up the worst declines during the Thursday, June 11th sell-off.
And vice versa.
A related machine-trading item of note?
It was the clean 200-point descent seen last Thursday, from 3,200 to near 3,000 on the S&P 500. Again, last Friday, share markets approached that S&P 500 line at 3,000 and bounced.
How programmed was that?
Finally, the big, liquid mega-cap tech stocks were obvious market leaders on Friday.
When I looked at midday, the S&P 500 was trading up around +0.8%. I had MSFT up +1.85%, AAPL up +1.47%, FB up +1.98%, GOOGL up +0.94%, and AMZN up +1.13%.
Next are Reuters’ five world market themes, reordered for equity traders.
The writers led off with this crazy bankrupt (BK) stock-buying anomaly. I saw no reason to change that. This is a relevant narrative — inside the recent stock market surge.
(1) No-fee stock transactions seen inside stock markets
“Rise and rise again until lambs become lions,” runs an oft-quoted line from the 2010 film “Robin Hood.” The motto is being taken seriously by all those merry men and maidens chasing shares in little-known or even bankrupt firms, using a mobile trading app called Robinhood.
What’s drawing punters to stock markets? Record savings, stimulus cheques, low interest rates and possibly just lockdown boredom. Their trading has spawned some eye-catching trades, including a 1000% one-day leap in Chinese property firm FANGDD— possibly because its name raised associations with the mighty U.S. tech sector.
Frenzied traders also piled into bankrupt names Hertz and JC Penney, pushing shares 300-500% higher. Some Chinese fintech companies were pumped up for no apparent reason — possibly they were climbing the charts on Robintrack, a site tracking activity on the Robinhood app.
Seasoned traders are scratching their heads. Big punts on small Chinese firms won’t impact broader markets but retail cash coursing through mainstream shares will further widen the disconnect between equity prices and the global economy.
(2) Watch the VIX volatility index
The June 11 equity selloff brought the spotlight back onto the CBOE Volatility Index or VIX — Wall Street's "fear gauge.” It pared a weeks-long drift lower to rise above 40, its highest close since April 23, amid renewed fears for U.S. growth and the coronavirus trajectory.
A raft of U.S. data due in coming days might allay some concerns if they reveal an economy on the mend. April retail sales plunged a record 16.4% but hopefully that was the nadir. Industrial production and housing starts are the other anticipated data points.
The VIX could react, however, if infections rise further. Also, with U.S. presidential election campaigning getting underway, VIX futures are starting to capture political risks — there’s a visible bump in volatility expectations closer to the Nov. 3 vote.
(3) Don’t forget China and Japan
Data from the world’s second and third-largest economies will soon tell us how large a gap there is between hope and reality. China releases retail sales, industrial output and house price data, while Japan has trade figures and a central bank meeting.
The Bank of Japan won’t do much on June 15-16, given its yield curve is already set to a tune conducive for growth and its balance sheet continues to expand.
China should show a multi-track recovery — an industrial sector slowing less markedly, a timid consumer and a housing market feeding on cheap credit.
Authorities are switching towards more targeted lending, away from just easing broad cash conditions, but it’s too early to see that play out in data.
(4) The Bank of England (BoE) steps up late in the week
All central banks are battling coronavirus damage but the Bank of England also has Brexit to contend with. April’s 20% GDP slump leaves Britain’s economy the same size as in 2002; this year could bring the biggest contraction in 300 years.
The BOE is expected to give itself another 100 billion pounds in firepower at its June 18 meeting, adding to the expansion announced in March. Some reckon it could stretch to 200 billion pounds.
What about letting interest rates go negative? Unlikely — the BOE says it needs more time to weigh that.
Unfortunately, policy makers don’t know if coronavirus cases will surge again or whether the government can reach a trading arrangement with the EU by Dec. 31. If Britain is cast adrift without a trade deal, all bets are off on the economic outlook — and indeed on how much QE the BOE will eventually have to do.
(5) Ah yes, Brexit
The clock is ticking again for the European Union, which has two pressing matters to deal with.
First, Brexit. On June 15, Britain and the EU will attempt to revive stalled talks on post-Brexit ties. There’s been little progress on a free-trade agreement and little time left to extend the end-2020 deadline for a deal.
Then, on June 18-19, EU leaders will debate a recovery fund to repair COVID-19 damage. Most members support the European Commission proposal. But a quartet dubbed the “Frugal Four” — Netherlands, Austria, Denmark and Sweden — remain skeptical. For the proposal to succeed, it must get the nod from everyone. Any delay will be a major setback for the euro and southern European bonds.
Top Zacks Rank Stocks
(A) Tesla (TSLA - Free Report) : Yes, a glamour stock is on our #1 list. The shares trade at $935 each now, making this a $180B market cap stock. I see a Zacks Value score of F (well deserved), a Zacks Growth score of C (not as good as bulls say) and a Zacks Momentum score of F (ouch!).
(B) BHP Group (BHP - Free Report) : This is the big Australian mining stock. The shares trade at $50 and that makes for a $78B market cap stock. I see a Zacks Value score of A, a Zacks Growth score of B, and a Zacks Momentum score of A. So, Tesla is the play? You may want to think about that, relative to the short and long-term metrics of a stock like this.
(C) Blackrock (BLK - Free Report) : This is the big Wall Street conglomerate, with lots of equity ETFs. I see a stunning $527 share price, giving it a $78B market cap. The Zacks Value score is D, the Zacks Growth score is F, and the Zacks Momentum score is C. Not sure I see why this stock is roaring, other than the firm feeds on the equity markets.
Key Global Macro
The global week ahead has lots of central bank follow-up after last week’s Fed meeting.
Powell will get two chances to clarify his message. His two appearances combine with BoJ, BoE, BoC, and Bank of Brazil monetary policy announcements.
There is also rebounding macro readings and obsessive COVID-19 case count monitoring, as global reopening efforts gain stride.
On Monday, China might register some improvements in macro readings at the start of the week. The country updates industrial production and retail sales figures for May into the Asian market open to kick off the week’s potential fireworks.
We get the New York state Empire State manufacturing PMI. It will be interesting, given the COVID situation there. The prior reading was -9.2. Consensus looks for -20.0.
On Tuesday, Retail Sales in May will be reported before Chair Powell speaks. A headline gain of +8.5% m/m and a sales gain ex-autos of +3% or so is feasible.
Fed Chair Powell delivers the Fed’s already released semiannual monetary policy report to Congress in an online session with the Senate Committee on Banking, Housing and Urban Affairs on Tuesday (10am ET).
Powell’s opening statement and the early part of his grilling will be where the risk lies.
The Bank of Japan (BoJ) is expected to leave most, if not all, of its policy measures unchanged (-0.1 on its policy rate). But consensus is roughly evenly divided on whether the BoJ will enhance support for bank lending.
The ZEW indices come out in Europe. Consensus shows us -83 on current situation and 60 on economic sentiment.
Markets will also get their first peek at newly appointed Bank of Canada (BoC) Governor Tiff Macklem when he appears virtually.
Chile’s central bank makes its own rate decision. It is widely expected to leave its overnight rate target unchanged at 0.5%.
On Wednesday, Brazil’s central bank is widely expected to cut its Selic policy rate again. The policy rate has so far sunk to 3% from a peak of 14.25% in late 2016. The current easing cycle since last summer has amounted to -350 basis points (bps). Another 50-75 bps cut is likely alongside a dovish bias.
On Thursday, the Bank of England (BoE) is likely to further expand stimulus at the conclusion of its deliberations.
On Friday, Chair Powell will pop up again on Friday alongside Cleveland Fed President in a live video conference at 1pm ET.
The U.S. leading indicators for May should go up +2.4%.
In the widely followed and fresh University of Michigan consumer sentiment survey, there has been a full recovery in what consumers expect to happen to their finances one year ahead. Expectations for the health of their overall finances five years ahead are at an all-time high.
Russia’s central bank is expected to cut its key rate by between 50-100 bps.
Conclusion
To close matters up for this Global Week Ahead, why this surge in retail stock trading?
Jim Bianco runs his own respected macro investment firm these days.
He says it breaks down to four factors:
1. A move to zero brokerage commissions last fall. 2. An ability to buy fractional shares (less than 1 share). So, there are no more trading frictions. 3. Lockdown boredom. No sports gambling is to be done. 4. We have an aggressive money printing Fed. They created a "investors don't lose" stock market.
Good luck.
Happy trading to all!
Regards,
John Blank
Will you retire a millionaire?
One out of every six people retires a multimillionaire. Get smart tips you can do today to become one of them in a new Special Report, “7 Things You Can Do Now to Retire a Multimillionaire.” Click to get it free >>
See More Zacks Research for These Tickers
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A Big Recession! Buy BK Names? Global Week Ahead
This Global Week Ahead could be marking time for "a breather" on major U.S. large cap stock indices.
We have seen a “V-shaped” recovery for major share indices. Not so, the U.S. and global economy.
Last week’s tale of the tape frames the backdrop.
Out of the open of trading last Friday, all three major large-cap U.S. indexes went green. It felt very pre-set, particularly after such a broad selloff put on the board last Thursday.
Want another example of large-cap share machine trading, over a longer multi-month horizon?
The best performing stocks — from the March 23rd S&P 500 index low through Monday, June 8th — marked up the worst declines during the Thursday, June 11th sell-off.
And vice versa.
A related machine-trading item of note?
It was the clean 200-point descent seen last Thursday, from 3,200 to near 3,000 on the S&P 500. Again, last Friday, share markets approached that S&P 500 line at 3,000 and bounced.
How programmed was that?
Finally, the big, liquid mega-cap tech stocks were obvious market leaders on Friday.
When I looked at midday, the S&P 500 was trading up around +0.8%. I had MSFT up +1.85%, AAPL up +1.47%, FB up +1.98%, GOOGL up +0.94%, and AMZN up +1.13%.
Next are Reuters’ five world market themes, reordered for equity traders.
The writers led off with this crazy bankrupt (BK) stock-buying anomaly. I saw no reason to change that. This is a relevant narrative — inside the recent stock market surge.
(1) No-fee stock transactions seen inside stock markets
“Rise and rise again until lambs become lions,” runs an oft-quoted line from the 2010 film “Robin Hood.” The motto is being taken seriously by all those merry men and maidens chasing shares in little-known or even bankrupt firms, using a mobile trading app called Robinhood.
What’s drawing punters to stock markets? Record savings, stimulus cheques, low interest rates and possibly just lockdown boredom. Their trading has spawned some eye-catching trades, including a 1000% one-day leap in Chinese property firm FANGDD— possibly because its name raised associations with the mighty U.S. tech sector.
Frenzied traders also piled into bankrupt names Hertz and JC Penney, pushing shares 300-500% higher. Some Chinese fintech companies were pumped up for no apparent reason — possibly they were climbing the charts on Robintrack, a site tracking activity on the Robinhood app.
Seasoned traders are scratching their heads. Big punts on small Chinese firms won’t impact broader markets but retail cash coursing through mainstream shares will further widen the disconnect between equity prices and the global economy.
(2) Watch the VIX volatility index
The June 11 equity selloff brought the spotlight back onto the CBOE Volatility Index or VIX — Wall Street's "fear gauge.” It pared a weeks-long drift lower to rise above 40, its highest close since April 23, amid renewed fears for U.S. growth and the coronavirus trajectory.
A raft of U.S. data due in coming days might allay some concerns if they reveal an economy on the mend. April retail sales plunged a record 16.4% but hopefully that was the nadir. Industrial production and housing starts are the other anticipated data points.
The VIX could react, however, if infections rise further. Also, with U.S. presidential election campaigning getting underway, VIX futures are starting to capture political risks — there’s a visible bump in volatility expectations closer to the Nov. 3 vote.
(3) Don’t forget China and Japan
Data from the world’s second and third-largest economies will soon tell us how large a gap there is between hope and reality. China releases retail sales, industrial output and house price data, while Japan has trade figures and a central bank meeting.
The Bank of Japan won’t do much on June 15-16, given its yield curve is already set to a tune conducive for growth and its balance sheet continues to expand.
China should show a multi-track recovery — an industrial sector slowing less markedly, a timid consumer and a housing market feeding on cheap credit.
Authorities are switching towards more targeted lending, away from just easing broad cash conditions, but it’s too early to see that play out in data.
(4) The Bank of England (BoE) steps up late in the week
All central banks are battling coronavirus damage but the Bank of England also has Brexit to contend with. April’s 20% GDP slump leaves Britain’s economy the same size as in 2002; this year could bring the biggest contraction in 300 years.
The BOE is expected to give itself another 100 billion pounds in firepower at its June 18 meeting, adding to the expansion announced in March. Some reckon it could stretch to 200 billion pounds.
What about letting interest rates go negative? Unlikely — the BOE says it needs more time to weigh that.
Unfortunately, policy makers don’t know if coronavirus cases will surge again or whether the government can reach a trading arrangement with the EU by Dec. 31. If Britain is cast adrift without a trade deal, all bets are off on the economic outlook — and indeed on how much QE the BOE will eventually have to do.
(5) Ah yes, Brexit
The clock is ticking again for the European Union, which has two pressing matters to deal with.
First, Brexit. On June 15, Britain and the EU will attempt to revive stalled talks on post-Brexit ties. There’s been little progress on a free-trade agreement and little time left to extend the end-2020 deadline for a deal.
Then, on June 18-19, EU leaders will debate a recovery fund to repair COVID-19 damage. Most members support the European Commission proposal. But a quartet dubbed the “Frugal Four” — Netherlands, Austria, Denmark and Sweden — remain skeptical. For the proposal to succeed, it must get the nod from everyone. Any delay will be a major setback for the euro and southern European bonds.
Top Zacks Rank Stocks
(A) Tesla (TSLA - Free Report) : Yes, a glamour stock is on our #1 list. The shares trade at $935 each now, making this a $180B market cap stock. I see a Zacks Value score of F (well deserved), a Zacks Growth score of C (not as good as bulls say) and a Zacks Momentum score of F (ouch!).
(B) BHP Group (BHP - Free Report) : This is the big Australian mining stock. The shares trade at $50 and that makes for a $78B market cap stock. I see a Zacks Value score of A, a Zacks Growth score of B, and a Zacks Momentum score of A. So, Tesla is the play? You may want to think about that, relative to the short and long-term metrics of a stock like this.
(C) Blackrock (BLK - Free Report) : This is the big Wall Street conglomerate, with lots of equity ETFs. I see a stunning $527 share price, giving it a $78B market cap. The Zacks Value score is D, the Zacks Growth score is F, and the Zacks Momentum score is C. Not sure I see why this stock is roaring, other than the firm feeds on the equity markets.
Key Global Macro
The global week ahead has lots of central bank follow-up after last week’s Fed meeting.
Powell will get two chances to clarify his message. His two appearances combine with BoJ, BoE, BoC, and Bank of Brazil monetary policy announcements.
There is also rebounding macro readings and obsessive COVID-19 case count monitoring, as global reopening efforts gain stride.
On Monday, China might register some improvements in macro readings at the start of the week. The country updates industrial production and retail sales figures for May into the Asian market open to kick off the week’s potential fireworks.
We get the New York state Empire State manufacturing PMI. It will be interesting, given the COVID situation there. The prior reading was -9.2. Consensus looks for -20.0.
On Tuesday, Retail Sales in May will be reported before Chair Powell speaks. A headline gain of +8.5% m/m and a sales gain ex-autos of +3% or so is feasible.
Fed Chair Powell delivers the Fed’s already released semiannual monetary policy report to Congress in an online session with the Senate Committee on Banking, Housing and Urban Affairs on Tuesday (10am ET).
Powell’s opening statement and the early part of his grilling will be where the risk lies.
The Bank of Japan (BoJ) is expected to leave most, if not all, of its policy measures unchanged (-0.1 on its policy rate). But consensus is roughly evenly divided on whether the BoJ will enhance support for bank lending.
The ZEW indices come out in Europe. Consensus shows us -83 on current situation and 60 on economic sentiment.
Markets will also get their first peek at newly appointed Bank of Canada (BoC) Governor Tiff Macklem when he appears virtually.
Chile’s central bank makes its own rate decision. It is widely expected to leave its overnight rate target unchanged at 0.5%.
On Wednesday, Brazil’s central bank is widely expected to cut its Selic policy rate again. The policy rate has so far sunk to 3% from a peak of 14.25% in late 2016. The current easing cycle since last summer has amounted to -350 basis points (bps). Another 50-75 bps cut is likely alongside a dovish bias.
On Thursday, the Bank of England (BoE) is likely to further expand stimulus at the conclusion of its deliberations.
On Friday, Chair Powell will pop up again on Friday alongside Cleveland Fed President in a live video conference at 1pm ET.
The U.S. leading indicators for May should go up +2.4%.
In the widely followed and fresh University of Michigan consumer sentiment survey, there has been a full recovery in what consumers expect to happen to their finances one year ahead. Expectations for the health of their overall finances five years ahead are at an all-time high.
Russia’s central bank is expected to cut its key rate by between 50-100 bps.
Conclusion
To close matters up for this Global Week Ahead, why this surge in retail stock trading?
Jim Bianco runs his own respected macro investment firm these days.
He says it breaks down to four factors:
1. A move to zero brokerage commissions last fall.
2. An ability to buy fractional shares (less than 1 share). So, there are no more trading frictions.
3. Lockdown boredom. No sports gambling is to be done.
4. We have an aggressive money printing Fed. They created a "investors don't lose" stock market.
Good luck.
Happy trading to all!
Regards,
John Blank
Will you retire a millionaire?
One out of every six people retires a multimillionaire. Get smart tips you can do today to become one of them in a new Special Report, “7 Things You Can Do Now to Retire a Multimillionaire.”
Click to get it free >>