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What’s Happening: Anti-Trump?
Over the past couple of days, we’ve seen the big Trump trades start to reverse themselves a bit, with bonds rallying, financials falling, biotech dropping, and gold stabilizing. Bonds are up again today ahead of Yellen’s testimony, and odds are she’ll be asked about Donald Trump’s proposed economic policies. But since the Fed strives to appear apolitical, I doubt she’ll give anything concrete. Already this week, many Fed officials have been asked about Trump and many have been evasive, though there’s a growing consensus that Trump’s spending plans could give the Fed room to raise rates. The CBOE’s FedWatch Tool shows that traders are pricing in a 91% chance of a December rate hike. Oil is rallying on Saudi optimism regarding an OPEC deal. Yesterday, Russia offered similar vibes. OPEC reached a preliminary agreement back in September at the meeting in Algiers, but didn’t provide any details. Maybe it’s for real this time, but I wouldn’t count on anything until there’s an official announcement. Throughout 2016, we’ve seen a lot of false rumors and conflicting headlines, so try not to get too caught up in the chatter. Wal-Mart (WMT) is getting spanked on a same-store-sales miss, though Best Buy (BBY) is popping hard on a beat. Overall, markets feel compressed, which is a familiar theme this year. We get some exciting news (election, Brexit, etc.) following by a long string of back-and-forth nothingness as traders wait for something to happen. The VIX is at 13 and change, but 20-day realized volatility on SPX is at 10.6. So unless we get big moves soon, the VIX could easily drop back under 12.
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Want to Start Earning Bigger, More Consistent Profits? Dave Green can show you how! We’re waking up to slightly shakier markets today. European carmakers are down after the US Department of Justice found evidence of criminal acts by Volkswagen AG relatded to its emissions cheating scandal. That’s helping push the Euro Stoxx 50 down -0.8%, while the DAX is of -0.6%. Euro bond markets are mixed. UK inflation was higher than expected in June, though perhaps Yesterday after the close, quarterly 13/F reports hit the tape, and the big news was that Warren Buffett’s Berkshire Hathaway upped its stake in Apple (AAPL) while reducing its position in Walmart (WMT) — seems like a big statement about Berkshire’s shift towards tech-friendliness. Retailers Home Depot (HD) and Dick’s Sporting Goods (DKS) are up on strong earnings earnings, while momo favorite Fabrinet (FN) is rising on what look like blockbuster numbers. Hot new issue Twilio (TWLO) is up premarket. I’ll discuss this more later — but I would not short this stock unless I was 100% confident that the market was set to drop sharply. Meawhile, Hain Celestial (HAIN) is getting smashed after it delayed results on accounting issues. Crude oil just broke through $46 and is hovering around there as traders continue to anticipate an OPEC output cut. We have inventory numbers coming today after the close (from the API) and tomorrow morning (EIA). On the deal front, Bloomberg is reporing that German industrial gas giant Linde is in talks to acquire Praxair (PX). SPX futures are down fractionally after showing very little movement overnight. And while the index fell for 5 straight hours into the close yesterday, there was still no volatility. Look at the chart below — that downdraft engulfed less than 4 points! We’re talking a -0.17% drop — that’s nothing. After 26 days without a 1% move in the SPX, this market could really use some excitement. We’ve got a nice chunk of economic data coming today, including CPI, Housing Starts, and Industrial Production, so maybe we’ll get the volatility bump for which we’ve been waiting. Good luck out there friends.
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