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Monday Market Meltdown – The China Syndrome

Well, you can't say I didn't tell you so.

This is what we were afraid of.  In a thinly-traded market, there are not enough buyers to put a floor under a sell-off and the market can drop very rapidly when there is any kind of panic selling.  There were so many things that could have set this off but, this morning, it's one of the earliest ones we had bet on – China Evergrande, their largest property developer that we have warned about on many occasions, is rumored to be failing – and the State is letting it happen!

Market participants increasingly believe that Beijing will let Evergrande fail and inflict losses on its shareholders and bondholders. The company’s debt burden is the biggest for any publicly traded real estate management or development company in the world.

“Everyone is looking at Evergrande and saying ‘has the time come for a major default in that area, and then the potential for contagion into the broader property sector?’” said Edward Park, chief investment officer at Brooks Macdonald. “It’s an imminent risk now rather than being a theoretical risk as it has been for the past few years.”

Other factors weighing on markets Monday included a natural-gas shortage in Europe that has prompted the U.K. government to hold emergency talks with energy suppliers, Mr. Park said. The Federal Reserve will likely use its policy decision Wednesday to pave the way to pare back some of the stimulus it lavished on markets last year, he added.

You know I hate to be Chicken Little but Evergrande is one of those many things the market has been ignoring and, as you can see from all the links at PSW, it's something we've been concerned with for quite a while – the market just chose to ignore it – until now.  Of course, any excuse for a pullback works in an overbought market and that's why we went to CASH!!! in our Member Portfolios – last month.

In fact, we've had the China Ultra-Short ETF (FXP) as one of the hedges in our Short-Term Portfolio, with 40 of the $30/50 bull call spreads giving us an $80,000 potential and we bought them for just net $7,000 at the time, as it was out of the money.  Now we're $10 in the money at $40,000 with another $40,000 to gain if China melts down yet the net of the spread is still only $20,700 – aren't options weird?  

FXP Long Call 2021 17-DEC 30.00 CALL [FXP @ $37.11 $0.00] 40 6/18/2021 (88) $12,000 $3.00 $5.15 $3.62     $8.15 $0.00 $20,600 171.7% $32,600
FXP Short Call 2021 17-DEC 40.00 CALL [FXP @ $37.11 $0.00] -40 6/18/2021 (88) $-5,000 $1.25 $1.73     $2.98 $0.00 $-6,900 -138.0% $-11,900

Anyway, we'll see if the selling lasts but we're very well-hedged and, frankly, we WANT to see a sell-off so we can re-deploy our cash doing some bargain-hunting.  The Fed has a Rate Announcement on Wednesday and we have 4 Fed speakers on Friday – which means they are worried about our reaction to Wednesday's decision.  

Other than that, it's a pretty lame data week with a little Housing Data ahead of the Fed and Thursday is busy with the Chicage on Kansas City Fed Indexs along with PMI and Leading Economic Indicators but not much else going on the whole week:

I predicted S&P 4,200 would be tested this week and it's 4,340 this morning so we're now as close to 4,200 as we are to last week's Strong Bounce line at 4,480 – exactly in the middle, in fact.  Very interesting…

 


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  1. Good Morning.


  2. Comment content omitted because it is too long.


  3. Phil didn't get your comment-too long


  4. Good morning and wheeee!  

    Nice little sell-off and we'll see if it lasts.  

       

       

    As a rule of thumb, you have to burn the dip buyers 3 times before they learn a lesson.

    Missed the dip in /CL by being too cautious over the weekend:

        

  5. Thanks Pirate!  


  6. At least Gold bounced back but not /SI so far.

     

    Dollar still going up:

    Though not much in the grand scheme of things:

    /KC testing $200!



  7. Are left-handed people smarter?




  8. there is a lot of GILD call activity today.

    18,000 June $75 calls- cant tell if bought or sold

    1000+ June $72.50 / $82.50 call spread , looks bought

    1500 Jan23 $72.50 calls , looks bought  but at $7.30 it looks good to me for a buy write 


  9. 15,000 holding up on /NQ – so far…




  10. Phil do we want to own any silver? or just stick with Barrick

    PAAS  , you can sell some 2024 $18 or 20 puts for a nice entry 







  11. STP up $31,000, LTP down $25,000 – all is well.

    GILD/Stock – Still reasonably priced at 17.5 x earnings and that's prior earnings – this year they are on-track for $9Bn against $89.5Bn market cap.    We have GILD in the LTP but only 10 of the 2023 $50/65 bull call spreads with 5 short $50 puts which, of course, is all in the money now.  

    As a new trade for GILD, I'd go for:

    • Sell 10 GILD 2024 $60 puts for $7 ($7,000) 
    • Buy 15 GILD 2024 $60 calls for $16 ($24,000) 
    • Sell 15 GILD 2024 $75 calls for $8.50 ($12,750)
    • Sell 5 GILD Jan $72.50 calls for $3.65 ($1,825)

    That's net $2,425 on the $22,500 spread, so there's $20,075 (827%) upside potential but we only used 123 out of 851 days to raise $1,825 so we'll get the basis down below $0 as time goes on.  GILD is not likely to pop 10% ($77.50) but, if it did, you'd owe back $2,500 so not a very risky short call strategy and, of course, at $77.50, you'd be on the way to a $20,075 gain anyway.  

    Silver/Stock – Well we have WPM in the LTP, still good for a new entry as it's a $30,000 spread at net $5,500 so "only" $24,500 (445%) left to gain if all goes well – even if you missed out on our net $500 initial entry.  Silver streaming is only 1/3 of their revenues with Gold being pretty much all the rest (Palladium is the end of it).  

    WPM Long Call 2023 20-JAN 35.00 CALL [WPM @ $41.02 $-0.21] 20 2/8/2021 (487) $23,500 $11.75 $-2.20 $11.75     $9.55 $0.01 $-4,400 -18.7% $19,100
    WPM Short Call 2023 20-JAN 50.00 CALL [WPM @ $41.02 $-0.21] -20 2/8/2021 (487) $-13,500 $6.75 $-3.05     $3.70 $0.06 $6,100 45.2% $-7,400
    WPM Short Put 2023 20-JAN 40.00 PUT [WPM @ $41.02 $-0.21] -10 2/9/2021 (487) $-9,500 $9.50 $-3.30     $6.20 $0.15 $3,300 34.7% $-6,20

    PAAS is a good miner and didn't lose money last year, so I like them but $5Bn at $24.26 vs not even $200M in earnings in their best year (projected to go to $400M+ next year) means you have to really buy into the expansion story.  Last Q, they revised production guidance lower by 12% for gold and 17% for Silver.  Yes, the put sale is reasonable if you are a believer but how can I put metals money into PAAS when GOLD is at $18.50, which is $32.5Bn and they made $2.3Bn last year so 14x against a terrible year and likely to get much better.  

    Barrick Gold debt

    That's a nice chart if you are a long-term investor!   Also this:

    One important aspect of Barrick's financial outlook is its gold reserves. The latest, as of the end of last year is that it is sitting on 68 million ounces that are considered to be economically viable to produce, given an assumed price of gold of $1,200/ounce. At current gold prices, reserves would probably increase. It should be worth noting that the value of the 68 million ounces of gold at current prices is $122 billion. Its current market cap is $34.5 billion. It should be noted that as per Barrick's less conservative estimate given an assumed price for gold of $1,500 its reserves more than double to 160 million ounces. There are also 13 billion pounds in copper reserves. Taking the less conservative reserve estimate as well as the copper reserve value, Barrick is currently trading at 10 times less than its reserve values. 

    Barrick AISC production costs

    global debt/GDP

    A sustained stagflationary environment is also likely to create a great deal of mistrust in holding large piles of central bank reserves denominated in currencies that are seeing a massive amount on supply expansion. There are many central banks around the world that have been increasing their gold holdings substantially for many years now. Russia & China are well-known gold bugs. More recently Hungary & Poland have been going down the same path as well. Hungary increased its gold reserves from just 3.1 tons a few years ago, to 94.5 tons currently. Poland went from just over 100 tons a few years ago to almost 229 tons currently. Many other countries around the world are increasing their gold reserves and I expect that the trend will continue as the world's main reserve currencies are seeing massive growth in supplies.

     

    Central banks around the world seem to be doing what many investors are also doing, namely making sure to have some gold reserves in case that something goes horribly wrong with the fiat currency system, at the national level, or perhaps internationally, in the event that one or more of the main fiat reserve currencies will falter. There is also the increasingly credible threat of inflation taking off globally, with few tools available to stop it, given the debt trap dilemma. There are many reasons to expect gold prices to rally throughout this decade.

    As a new play on GOLD, I'd go with:  

    • Sell 10 GOLD 2024 $20 puts for $5.20 ($5,200)
    • Buy 20 GOLD 2024 $17 calls for $4.40 ($8,800) 
    • Sell 10 GOLD 2024 $25 calls for $2.20 ($2,200) 

    That's net $1,400 on the $5,000 spread that's 1/2 uncovered so we have the flexibility to let it make gains or sell short calls over 851 days to make up that $1,400 – that's why I get so excited when the new options come out – so much time to make money, so much flexibility!  


  12. How are we looking for the rest of today and the coming week? We are already well positioned for the drop, but any plays that lean short that are still good for an entry?


  13. FYI all, on the GILD trade above, the 2024 $60 puts filled at $8.00


  14. FYI, the entire GILD play filled at $700


  15. Shorts/Pman – Been burned so many times shorting that it's hard to pick them.  

    CMG we just added more shorts last week – I think they are ridiculous up here. 

    NFLX also silly at $575.

    TSLA $750 ridiculous

    GILD/Stock, Hwtdr – Good job with patient fills!

    Wow, 14,884 was the /NQ low (so far), now they have to get back to 15,000 to not look terrible.

    • Quick bounces from selloffs have been the rule for many months, but that's not the case today (yet), with the major averages now down more than 2% about three hours before the close. The Nasdaq (COMP.IND) is hardest-hit, off 2.7%, while the Dow (DJI) and S&P 500 (SP500) are lower by 2.2%.
    • Money is rolling into fixed-income, with the 10-year Treasury yield down 5.5 basis points to 1.316%.
    • All S&P 500 sectors are in the red, but there's relative strength in the rate-sensitive utilities (NYSEARCA:XLU) and REITs (NYSEARCA:IYR).
    • Checking some other assets, crude oil is down 2%, bitcoin down 7%, and gold is seeing a modest bid, up 0.6%.
    • Also doing well, the VIX is on its way to its 4th-largest-ever gain.
    • U.S. tech titans such as Apple (NASDAQ:AAPL), Nvidia (NASDAQ:NVDA) and Applied Materials (NASDAQ:AMAT) joined in a broad slate of tech-sector losses resulting from concerns about the possibility that Chinese property giant Evergrande (OTCPK:EGRNF) could collapse and wreak have on China's economy.
    • Evergrande (OTCPK:EGRNF) is facing a massive debt of $300 billion, and has warned it could go into default. Such a move is seen as potentially damaging to the Chinese economy, and could spill into international market. Many leading Chinese e-commerce and other tech companies found their U.S.-traded shared battered during Monday's trading session.
    • It may have been guilt by association, but nearly every major U.S. tech company builds products in China and across Asia. And as such, the Evergrande situation spread negative sentiment throughout the tech sector.
    • Apple (AAPL), which during its most-recent quarter brought in $14.8 billion in sales from China alone, saw its shares give up 2.6% as trading progressed Monday. Apple wasn't alone, as Nvidia (NVDAfell almost 5%, Applied Materials (AMATgave up 4.3%, KLA (NASDAQ:KLAC) fell 4.6%, Intel (NASDAQ:INTC) shares declined by 3.6% and Advanced Micro Devices (NASDAQ:AMD) was down by 3%, as the sector showed few signs of turning around.
    • Still, Wedbush analyst Dan Ives, who covers Apple and other big-name tech companies, said that Monday's selloff, "is an opportunity as we believe this near-term pullback will be short lived." Ives also reiterated his belief that the tech-heavy Nasdaq Composite Index (COMP.IND) will reach the 16,000-point mark by the end of the year.
    • While market sentiment was roundly negative on Monday, Allianz Chairman Mohamed El-Erian said that he didn't believe markets were at a "Lehman moment" with regards to the situation with Evergrande.

    • Cathay Pacific (OTCPK:CPCAY -1.2%lowers its Q4 passenger capacity guidance to 13% of pre-pandemic levels down from previous hopes of 30%, blaming continuing operational and passenger travel restrictions. The airline expects cash burn at a rate of under HK$1B ($130M) per month.
    • Passenger numbers did increase from the previous month due to student traffic from China to the US, but were still 95.3% below pre-pandemic levels.
    • Hong Kong has been one of the hardest hit cities in the flight industry, requiring inbound passengers from "high-risk" areas including the US and Britain to be vaccinated and quarantine for three weeks.
    • Regarding cargo, the airline predicts a "strong peak season" due to the need for inventory replenishment and global ocean freight congestion. Air cargo made up ~80% of the airline's revenue in the first half of 2021.
    • In the US, airline stocks saw a boost on reports that President Biden will loosen some travel restrictions.
    • Self-driving technology company Aurora tweets a picture of a Toyota (NYSE:TM) Sienna powered by the Aurora Drive as it moves forward with its goal to help develop a self-driving car for autonomous ride-hailing with Uber (UBER -0.5%)
    • "In collaboration with Toyota’s world-class engineering team, we’ve defined the requirements that enable the Toyota S-AM, a Hybrid Electric platform, to be safely operated by the Aurora Driver. Now, we’re integrating our Driver with Toyota’s first S-AM vehicles, fresh off of their production line."
    • Aurora has a SPAC deal planned with Reinvent Technology Partners Y (RTPY -0.3%). Upon closing of the proposed transaction, the combined company will be named Aurora Innovation and be publicly traded, with its common stock expected to be listed on Nasdaq with the ticker symbol AUR.

    • Albertsons Companies (ACI +0.8%) will be the first grocery chain to pilot DoorDash’s (DASH -1.1%) DoubleDash add-on delivery service. DoubleDash allows customers to add items from nearby stores to their initial delivery without an additional delivery fee or order minimum.
    • The feature is currently available at 7-Eleven, Walgreens, Wawa, QuickChek, The Ice Cream Shop and DashMart, a DoorDash-exclusive store, but the expansion of a partnership that has existed since June with Albertsons will mark the first time DoubleDash is used at a large-scale grocer.
    • Grocery retailers will also be able to use DoorDash's newest offering: Alcohol delivery for over 100M customers in the United States, Canada, and Australia.
    • ProShares is preparing to launch the ProShare On-Demand ETF, which plans to invest in companies that provide access to on-demand platforms and services to consumers.
    • According to the U.S. Securities and Exchange Commission filing, the ETF is a passively managed fund that tracks the FactSet On-Demand Index.
    • The index is built of stocks that provide on-demand platforms to lifestyle needs, including digital media, eGaming, fitness, food delivery, ridesharing or virtual-reality experiences.
    • The On-Demand ETF intends to trade on the New York Stock Exchange under the ticker symbol "OND" and come to market with a 0.58% expense ratio.
    • Presumably, three names the ETF can possibly hold are Netflix (NASDAQ:NFLX), Uber Technologies (NYSE:UBER) and DoorDash (NYSE:DASH).
    • Monday price action: NFLX -2.38%, UBER -0.94%, and DASH -0.77%.
    • Netflix once again swept the top 10 overall in Nielsen's most recent weekly streaming ratings, due in part to the original series "Outer Banks."
    • Disney (DIS -2.9%) continued scoring at the 2021 box office, as Shang-Chi and the Legend of the Ten Rings spent a third weekend topping receipts and Free Guy followed it up with just a small drop-off from last week.
    • Shang-Chi drew $21.7 million to bring its cumulative domestic total to $176.9 million, making it the second-best performer for 2021, behind only fellow Marvel film Black Widow ($183.4 million) – and on pace to pass it and become 2021's first $200 million film at home.
    • Shang-Chi has grossed $320.6 million worldwide.
    • And in its sixth weekend, Free Guy fell off just 7% from last week to gross $5.2 million, good enough for second place ahead of a disappointing opening from Cry Macho. The Warner Bros./Clint Eastwood (T -1.5%) film opened with $4.5 million; unlike Shang-Chi, it debuted simultaneously online, appearing on HBO Max.
    • That's just a $1,138 per-screen average and it trailed not only expectations (Cry Macho was seen as hitting mid- to high single digits in millions) but also Eastwood's last opening – 2018's The Mule opened to $17.5 million and eventually crested $103 million domestically.
    • Free Guy has now piled up $108.6 million domestically and $298.3 million worldwide. Rounding out the top five behind it: Candyman (CMCSA -1.7%), with $3.5 million bringing its cumulative total to $53.2 million; and Malignant (T -1.5%), with $2.7 million in its second weekend, for a cumulative total of $9.8 million.
    • Theater stocks, like the studio stocks, are all down today amid a sharply lower market: (AMC -7.9%); Cineworld (OTCPK:CNNWF -2.8%); Cinemark (CNK -2.6%); (IMAX -2.9%); Marcus (MCS -2.9%); Reading International (RDI -0.9%); Cineplex (OTCPK:CPXGF -2.7%); National CineMedia (NCMI -0.9%).

    • The benchmark exchange traded fund SPDR S&P 500 Trust ETF (NYSEARCA:SPY) is on pace for its worst monthly performance in a year as the fund is down 3.99% for the month.
    • SPY has not dipped this low since September 2020, where the ETF dropped 4.37%.
    • If the fund were to surpass its September 2020 lows, SPY would be on track to have its worst monthly performance since March 2020, where the ETF plummeted 13.57% in the height of the COVID-19 pandemic selloff.
    • SPY, whose $374B in assets under management make it the world’s largest ETF, is under fire as investors remain uncertain amid increased volatility levels across the market. Here's what our interactive chart for SPY shows:

    • Thomas Lee, managing partner and the head of research at Fundstrat Global Advisors, argued Monday that the U.S. stock market's recent slide provides "a really good buying opportunity."
    • Speaking to CNBC, Lee said that Monday's steep decline didn't necessarily represent a bottom for the market — but overall, he suggested that the pull-back represented a good time to add to equity positions.
    • "I would look at sell-offs like this, which is sort of broad-based selling, as a time to add incrementally," he said.
    • Stocks dropped on Monday, while the VIX volatility index spiked amid worries that a debt crisis at Chinese property Evergrande could spread to financial markets in general.
    • However, Lee took an optimistic view of the Evergrande risk, contending that overall economic conditions remain favorable for U.S. stocks.
    • "Is the recovery one year into over? Is the pent-up demand exhausted because of some property worries in Asia? I would say 'no,'" he said.
    • The outspoken near-term bull asserted that signs of worry in the market present a buy signal, as they suggest that money remains on the sidelines to fuel a future rally.
    • "We're at a moment where everyone's only seeing darkness and downside and usually that when you want to be adding risk," he said.
    • For more on Monday's decline, look at the way the Evergrande fears have spiraled out to the broader Chinese market.

    • Cryptocurrency exchange Coinbase Global (COIN -5.5%drops to its lowest level since early-August as the company said it will not go forward with the Lend program shortly after the Securities Exchange Commission threatened to sue with a Wells notice, the company said on its website.
    • Under the program, customers would earn interest on USDC – guaranteed by Coinbase – well above what traditional depository institutions offer for a savings account.
    • Coinbase (NASDAQ:COIN) said it will also discontinue the waitlist for the USD Coin annual percentage yield program, which already had hundreds of thousands of signups before it got dropped.
    • The SEC told the exchange that if it launches Lend, they will sue because the feature is considered a security, but "they refuse to tell us why they think it's a security," Coinbase CEO Brian Armstrong said in a tweet.
    • The downside move in COIN may also be enhanced by Bitcoin's (BTC-USD -7.8%) plunge as global markets suffer a 'risk-off' day.
    • Separately, as digital asset adoption continues to accelerate, the company said it's opening Prime, a crypto brokerage, to all institutional investors, CoinDesk reports. Tesla CEO Elon Musk, PNC Bank, SpaceX, and Tesla (NASDAQ:TSLA) are among some of Prime's clients, CoinDesk notes, citing a shareholder letter from last month.
    • Previously, (Sep. 8) Coinbase stock price falls 3% after SEC says it may sue on Lend program.
    • Saudi Basic Industries Corp. has started commissioning activities and preparing for an initial startup for its petrochemical joint venture with Exxon Mobil (XOM -2.9%) near Corpus Christi, Texas, ahead of an expected startup in Q4, S&P Global Platts reports.
    • The new complex features the world's second largest ethane-fed cracker at 1.8M metric tons/year and the world's largest mono-ethylene glycol unit at 1.1M mt/year.
    • SABIC, which is 70% owned by Saudi Aramco (ARMCO), says the project supports its global growth strategy, diversifying its feedstock sources and strengthening its petrochemical manufacturing presence in North America for a wide range of products.
    • The SABIC-Exxon project is part of 9.77M mt/year of new U.S. polyethylene capacity under construction or planned to start up in 2021 and beyond, compared to 23.4M mt/year of U.S. polyethylene capacity in 2019, according to Platts.
    • Exxon's profitability has "turned a corner," and "a decent long-term return can be expected now under the current valuation in the mid to upper single-digit range," Envision Research writes in a bullish analysis posted recently on Seeking Alpha.
    • Energy (XLE -4.2%) is today's worst S&P sector performer in a day of broad and sharp losses, as risk aversion hurts stocks and lifts the U.S. dollar, although crude oil has trimmed earlier losses on signs that some U.S. Gulf of Mexico production will stay offline for months because of storm damage.
    • Commodities including copper and iron ore also trade sharply lower (III), in part due to worries over the potential collapse of Chinese real estate giant Evergrande Group.
    • WTI October crude (CL1:COM) -1.3% to $71.01/bbl, while November Brent (CO1:COM) -1% to $74.54/bbl, after both jumped more than 3% last week to seven-week highs.
    • ETFs: XLEUSOXOPVDEOIH
    • Among today's biggest losers: APA -5.6%OXY -5.1%HES -5.1%DVN -4.9%MRO -4.1%FANG -4%HAL -3.8%SLB -3.7%.
    • "Far East stock markets and the strong dollar are affecting oil," Tamas Varga of oil broker PVM tells Reuters, but "unless all hell breaks loose, the positive sentiment ought to prevail."
    • Crude oil losses eased after Royal Dutch Shell said it expects its West Delta-143 crude transfer station in the Gulf of Mexico will stay offline for repairs until the end of 2021 due to damage from Hurricane Ida.

    • Chinese tech companies such as Alibaba Group (NYSE:BABA), Baidu (NASDAQ:BIDU) and JD.com (NASDAQ:JD) went into the red early Monday as the sector got caught in a wave of broad declines spurred on by fears over a possible default by China-based property giant Evergrande (OTCPK:EGRNF).
    • Over the weekend, concerns about Evergrande, and its $300 billion in debt, began to grow, and hit U.S. markets in force Monday morning. Should Evergrande collapse, it's possible that other Chinese property developers could fall in its wake and lead to upheaval across China and its economy.
    • Investors wasted little time showing their feeling Monday, as Alibaba (BABA) fell almost 6%, JD.com (JD) and Baidu (BIDU) each gave up more than 5%, Weibo (NASDAQ:WB) fell almost 4%, Tencent Holdings (OTCPK:TCEHY) gave up 3%, and the KraneShares CSI China Internet ETF (NYSEARCA:KWEB) pulled back by 5.2% as trading progress.
    • Chinese ride-sharing leader DiDi Global (NYSE:DIDI) fell 7.5%. A report from Reuters said DiDi co-founder and chairman Jean Liu is going to leave the company, and has told other company leaders to start looking for new jobs. The report suggests that Beijing may be moving to take control of DiDi and appoint new company management.
    • The co-founder and president of embattled Chinese ride-hailing firm DiDi Global (NYSE:DIDI) has reportedly told associates she plans to soon step down, as she expects the Chinese government to take control of the company and appoint new management.
    • Reuters cited unnamed sources as saying company president and co-founder Jean Liu has told close associates that she’ll be leaving and has encouraged some top DIDI executives to start looking for new jobs as well.
    • The news agency quoted the sources as saying some unnamed executives had begun approaching other people in the industry for jobs. Reuters added that Liu, a former Goldman Sachs banker, has told people she expects the Beijing government to take control of the company “eventually.”
    • However, the news agency said that Liu didn’t respond to a request for comment, while DIDI told it that “Reuters' rumors about management changes are untrue and unsubstantiated."
    • Nonethless, DIDI stock fell on the news. U.S.-listed Chinese stocks had already been struggling Monday on problems for Chinese property giant Evergrande and Hong Kong’s Hang Seng index, with DIDI down some 2.7% at $8.08 even before the Reuters story hit the tape.

    • However, news of Liu’s apparent impending departure sent DIDI to $7.93 shortly before 10:45 a.m. ET, off 4.4%.

    • DIDI, which has been called the “Uber of China,” staged a seemingly successful U.S. IPO earlier this year, but then sank after Chinese regulators began cracking down on the company.

    • Some observers believe the firm’s woes stem from Beijing’s desire to see hot Chinese tech companies list in Shenzhen or Hong Kong instead of New York given today’s frosty U.S.-Chinese relations.

    • BorgWarner (BWA -4.7%) and Lear Corporation (LEA -5.0%) are lower after weaker-than-anticipated Europe sales trends dent sentiment and Jefferies downgrades both stocks to Hold from Buy.
    • Jefferies lifted Visteon Corporation (VC -2.6%) to a Buy rating, but shares are also lower due to the Europe auto sales update.
    • The general tone from Jefferies is that disruption in the auto supply chain will impact near-term results for a while even if the shortages are now on the other side of the peak.
    • Other notable decliners in the sector on the day include VOXX International (VOXX -9.0%), American Axle & Manufacturing (AXL -8.0%), Meritor (MTOR -6.4%) and Magna International (MGA -3.6%).
    • D.R. Horton (DHI -3.2%updated its guidance for homes closed, consolidated revenues and home sales gross margin for Q4.
    • Homes closed for the quarter seen ranging between 21.3K to 21.7K homes compared to earlier range of 23K to 24.5K led by continuing significant disruptions in the supply chain, including shortages and delivery delays in certain building materials along with tightness in the labor market.
    • FY21 homes closed seen increasing 24% to 25% Y/Y to a range of 81.3K to 81.7K homes compared to a range of 83K to 84.5K homes.
    • Due to the lower expected closings volume, partially offset by an expected increase in the average sales price of homes closed during the quarter, the company now expects its Q4 consolidated revenues to be in a range of $7.7B to $7.9B compared to the prior range of $7.9B to $8.4B.
    • FY21 consolidated revenues seen rising 35% to 36% Y/Y to $27.4B to $27.6B compared to earlier range of $27.6B to $28.1B.
    • Gross margin is seen ranging between 26.5% to 26.8%, an improvement from the previous range of 26% to 26.3%.
    • The company has maintained a strong pace of home starts in the current quarter and still expects to grow its homes closed at a double-digit percentage pace in FY22 as compared to FY21.
    • Shares trade 2.2% down premarket.
    • Freeport McMoRan (NYSE:FCX) -7% pre-market, plunging alongside copper prices as contagion fears from a potential debt default at Chinese property developer Evergrande Group sparks a selloff across financial markets with investors flocking to the safe-haven dollar.
    • Metals also are hurt by China's pledge to limit steel production as it looks to cut carbon emissions.
    • London Metal Exchange copper (HG1:COM) recently traded -2.5% to $9,079/metric ton after slipping as low as $9,052.50/ton, the lowest since August 20.
    • Also: SCCO -5.7%TECK -5.8%HBM -3.8%.
    • ETFs: COPXCPERJJCTFJJC
    • Regulators warn that Evergrande's $305B of liabilities could trigger broader risks to China's financial system if not stabilized, but Giles Coghlan, analyst at broker HYCM, tells Reuters that he does not anticipate another Lehman-style crisis because of the high level of down payments required in China for property.
    • Also, nickel -2.1% to $18,945/ton and aluminum -0.5% at $2,869/ton.
    • Credit Suisse recently cut Freeport McMoRan shares to Underperform, believing copper prices "will revert to more historical levels in 2022."
    • Rio Tinto (NYSE:RIO) -6.6%, BHP (NYSE:BHP) -5.4% and Vale (NYSE:VALE) -4.9% pre-market as iron ore futures in Singapore tumble well below $100/ton following further steel industry curbs in China.
    • Australia's top three iron ore miners – Rio, BHP and Fortescue (OTCQX:FSUMF) - have lost a combined US$109B in market value in less than two months, as iron has been slashed from more than $230/ton in May.
    • Other relevant tickers include OTCPK:GLCNFOTCPK:GLNCYOTCQX:AAUKFOTCQX:NGLOY
    • Steel producers (NYSEARCA:SLX) also are suffering heavy losses: MT -8.3%CLF -7.1%X -5.3%TX -5.1%NUE -4.7%TS -2.7%.
    • Iron ore futures (SCO:COM) in Singapore are down for a ninth straight day and heading for their longest run of losses since 2015, sliding as much as 11% before trading 5% lower at $96.60/metric ton; markets in China are closed for a holiday.
    • In the government's latest moves, mills in Jiangsu province have been ordered to cut production as part of broader curbs on industrial activity aimed at lowering power usage.
    • China is cutting production to reduce pollution as it pushes forward with its plan to become carbon neutral by 2060, as well as to improve air quality for the Winter Olympics next year.
    • Broker downgrades also are weighing shares, with BHP cut at Berenberg and Anglo American lowered at Barclays; UBS recently slapped Rio and Fortescue with Sell ratings.
    • Jefferies warns on more troubles for the Macau sector in the near term as COVID restrictions remain ahead of a key holiday period.
    • Analyst David Katz and team believe the upcoming Golden Week holidays is likely to disappoint similar to the Chinese New Year due to the potential for new travel restrictions given 28 new local confirmed cases on September 19 in Fujian province. The firm notes this means 365 local confirmed cases in Fujian since the first case was confirmed on September 10.
    • On the regulatory front, the sector could also see some share price volatility with public consultations sessions set for gaming operators and gaming promoters in Macau over gaming law changes.
    • Macau casino stocks: Wynn Macau (OTCPK:WYNMFOTCPK:WYNMY), Wynn Resorts (NASDAQ:WYNN), Sands China (OTCPK:SCHYYOTCPK:SCHYF), Las Vegas Sands (NYSE:LVS), MGM China (OTCPK:MCHVFOTCPK:MCHVY). MGM Resorts (NYSE:MGM), Galaxy Entertainment (OTCPK:GXYEF), SJM Holdings (OTCPK:SJMHFOTCPK:SJMHY), Melco Resorts & Entertainment (NASDAQ:MLCO), Studio City International (NYSE:MSC).
    • Related ETF: BJK.
    • Hong Kong-traded stocks in general are having a rough session on concerns over the Evergrande developments.
    • The price of coal (XAL1:COM) near an all-time high shows how circumstances in one region of the world can impact the global commodities market, Morgan Stanley says.
    • Liquefied natural gas, electricity and aluminum prices (LMAHDS03:COM) are also soaring, even though the global economy has yet to fully recover from the pandemic.
    • Energy (NYSEARCA:XLE) is the weakest sector premarket as S&P (SPX) (NYSEARCA:SPY), Nasdaq 100 (NDX:IND) (NASDAQ:QQQ) and Dow (INDU) (NYSEARCA:DIA) futures tumble.
    • And the story starts in China, according to Martijn Rats, Morgan Stanley equity analyst and commodities strategist.
    • "The combination of a post-COVID-19 recovery and unusually hot weather has increased consumption of electricity sharply this year," Rats says in a note. "Most of China’s electricity is produced from coal, but domestic coal production is increasingly struggling to keep up – the result of regulatory reforms, under-investment and more stringent HSE inspections."
    • "Another important source of electricity generation in China is hydropower, but because of droughts in key parts of the country, hydropower has failed to grow this year too," he says.
    • "Over the summer, this led to power crunches that forced regional governments to curtail consumption – street lights were even switched off at night in a number of regions," Rats adds. "Another victim of these measures was aluminium smelting, which is a particularly electricity intensive process. Normally, China supplies ~60% of the world’s aluminium. With its production curtailed and global demand continuing to grow, aluminium prices soared."
    • Morgan Stanley draws three conclusions:
    1. "First, this sequence of events shows how inter-connected commodity markets are. One region impacts another and multiple commodities are eventually linked. A drought in China can drive up the price of electricity prices in Spain but also the cost of soft drink cans in the US."
    2. "Second, this year has shown how difficult it can be to anticipate such moves. Even a few months ago, the common view was that practically all these commodities were abundant, and would become more so over time."
    3. "Finally, it shows how little margin of safety there is in the world’s energy system, and this has important implications for the future."


  16. Phil,

    Interested in your thoughts on the possible effects of AMZN selling its holdings in AAWW and buying shares in ATSG. AAWW is far and away a better operation but also at >2x the price. Also, would the fact that AMZN bought cargo planes to add to its AMZN AIR fleet suggest that AMZN is planning to become self-sufficient in air cargo and/or enter the space as a competitor?

    Thanks


    • Bank of America reports that airlines bookings took a slight step back with sales tracking at -66.4% vs 2019 for the week ending September 12 vs. -63.9% for the week prior. The latest TSA numbers also show slowing momentum.
    • "After seeing strong TSA throughput numbers around the Labor day weekend (back above 80% of 2019 levels for six days), this week the TSA throughput trailing 7-day average took a sizable step back to -28.3% vs 2019. This is the lowest the TSA numbers have been since early June as corporate demand remains weak during the early part of September."
    • Looking further ahead, website visit trends are strong for American Airlines (NASDAQ:AAL), Southwest Airlines (NYSE:LUV) and Hawaiian Airlines (NASDAQ:HA), with all three currently tracking above 2019 levels as consumers weigh leisure travel options.
    • Sector watch: Delta Air Lines (NYSE:DAL), United Airlines (NASDAQ:UAL), JetBlue (NASDAQ:JBLU), Alaska Air Group (NYSE:ALK), Allegiant Travel (NASDAQ:ALGT), Spirit Airlines (NYSE:SAVE), Mesa Airlines (NASDAQ:MESA), SkyWest (NASDAQ:SKYW), Sun Country Airlines (NASDAQ:SNCY), Frontier Group (NASDAQ:ULCC).
    • The possibility of China property company Evergrande collapsing and overall worries about China's crackdown on indebted firms is taking its toll on Hong Kong shares.
    • The Hang Seng Index (HSI) is down more than 3% with China and Japan closed for a holiday.
    • The benchmark index hit an 11-month low earlier, with the index tracking construction and property off more than 6%.
    • Evergrande (OTCPK:EGRNF) (OTCPK:EGRNY) is down more than 11% today and has fallen more than 80% this year as it struggles to meet debt payments.
    • The company has more than $300B debt and has warned about default. It has an $83.5M interest payment due on Thursday for a March 2022 bond, according to Reuters.
    • Domino effect: A collapse of Evergrande would have a domino effect on other China and Hong Kong property developers and a systemic effect on the rest of the economy, according to Jenny Zeng, co-head of Asia fixed income at AllianceBernstein.
    • “In the offshore dollar market, there is a considerable large portion of developers (who) are implied to be highly distressed,” Zeng said on CNBC. Developers “can’t survive much longer” if the refinancing channel continues to be shut.
    • But she played down the possibility of Evergrande being akin to the collapse of Lehman Bros., noting the fragmentation of the China property market.
    • “Despite Evergrande’s size, we all know it is the largest developer in China, probably the largest in the world, (the company) still accounts for only 4% and now it’s even less of the total annual sales market,” Zeng says. “The debt, particularly the onshore debt, is well collateralized.”
    • Regulatory crackdown: Along with Evergrande, pressure is on the Hong Kong market as China's leaders look to rein in what it calls monopoly behavior, much like it has taken aim at the tech sector.
    • But also like the moves against big tech companies, the exact actions the government will take are unclear.
    • It is part of President Xi Jinping's "common prosperity" plan to address inequality.
    • “People may be worried about whether they have to take up extra responsibility to build more subsidized housing,” Philip Tse, head of Hong Kong and China property research at BOCOM International, says, according to Bloomberg. “Foreign investors will be concerned if administrative matters in China will lead to a price cap, more stringent purchasing limits, or some tax-payment proof is required in order to pay for buying a flat.”
    • “The price action across several asset classes in Asia today is horrendous due to rising fears over Evergrande and a few other issues, but it could be an overreaction due to all of the market closures in the region,” Brian Quartarolo, portfolio manager at Pilgrim Partners Asia, says.
    • Jens Nordvig, economist with Exante Data, recently listed more companies with high weightings in the China high yield index, which is 66% real estate, including Kaisa Group (OTCPK:KKPFF), Sunac (OTC:SCCCF) and Fortune Star.
    • Evergrande said last week it plans to suspend onshore corporate bond trading.
    • London -1.45%. Shares edged lower dragged down by miners and financial stocks.
    • Germany -2.11%. August PPI +1.5% M/M vs +0.8% expected, prior +1.9%.
    • Annually, PPI rose 12.0% Y/Y vs estimate of +9.2%, prior +10.4%.
    • France -2.29%.
    • The pan-European STOXX 600 index was down 1.8%, with energy and mining stocks leading declines on a slide in commodities prices.
    • European shares fell as investors feared that major central banks would hint on tapering stimulus programs at various meetings this week.
    • In bond market, the yield on 10-year Treasuries declined one basis point to 1.35%.
    • Germany’s 10-year yield down one basis point to -0.29%.
    • Britain’s 10-year yield fell two basis points to 0.83%.
    • Japan closed for holiday.
    • China closed for holiday.
    • Hong Kong -3.87%. Shares edged lower dragged down by the property sector.
    • Australia -2.03%.
    • The Federal Reserve meets on Tuesday and Wednesday this week to discuss monetary policy. The central bank has already said they're not planning to start reducing asset purchases yet — the much-discussed taper. In addition, Fed Chair Jerome Powell has explicitly said the Fed won't raise rates until well after tapering of its asset purchases starts.
    • Still, investors will be looking for hints of when the central bank will ease off the gas that it's been providing since the start of the pandemic. Economists surveyed by Bloomberg expect the Fed to make a formal announcement on reducing its purchases of Treasurys and mortgage-backed securities at the end of the November meeting.
    • Two thirds of the 52 economists surveyed expect a November announcement, with more than half expecting the Fed to start the taper in December. As a reminder, the Fed is currently purchasing $80B of Treasurys and $40B of MBS per month.
    • At least five of the 12 Fed district bank presidents expect tapering to start this year, in comments they've publicly made starting in late August. Earlier this month, Atlanta Fed President Raphael Bostic said he expects the Fed to reduce its pace of asset purchases this year, but not this month.
    • At his virtual Jackson Hole speech, Powell said the move could occur this year. But that was his description of the sentiment at the FOMC's July meeting. Since then, the COVID-19 Delta variant has spread, weighing on the economic outlook.
    • As such, much attention will be on the Fed policymakers' expectations for the economy, which will include the closely watched "dot-plot" of when they expect rates to rise.
    • With the last dot-plot, at the June 16 meeting, most of the officials expected the federal funds rate to rise sometime in 2023. Only seven expected a rate increase would be needed in 2022.
    • A Bloomberg survey of 52 economists predicts the Fed will hold rates near zero through 2022 then provide two quarter-point rate hikes in 2023. (The Fed's target range for the federal funds rate currently stands at 0.0-0.25%.)
    • Tim Duy, chief U.S. economist at SGH Macro Advisors, though, expects that forecasts for higher and more persistent inflation in 2022 will cause three more dots to shift to a rate hike into 2022. That would bring it to 10 out of 18 Fed officials expecting to raise rates next year.
    • Furthermore, he expects the median policymaker to mark in another two hikes in each of 2023 and 2024 to bring the rate forecast to 1.375% in 2024.
    • The reason for the shift: "I think the most important element of the SEP revisions will be a forecast of higher and more persistent inflation in 2022; my instinct is another 20bp to get to 2.3% on core-PCE with a risk to the upside," Duy writes in a note. While he expects the Fed to be comforted by the lower-than-expected CPI print, he believes the supply constraints will persist in applying upward pressure on inflation.
    • Rick Rieder, chief investment officer of global fixed income at BlackRock, said earlier this month that "the time has come" for the Fed to start reducing its asset purchases.
    • Mohamed El-Erian, former Pimco CEO and now chief economic adviser at Allianz, agrees. He sees inflationary pressures caused by supply chain disruptions providing urgency for the Fed to act in slowing the pace of asset purchases, arguing that the "window to taper is closing."
    • Since the onset of the COVID-19 pandemic in 2020, the long-running debate between hawks and doves over the "transitory" nature of headline inflation is getting even more heated as the last two CPI Y/Y prints came in below the June peak of 5.3%, albeit still well-above the Federal Reserve's 2% average inflation target.
    • On that alone, the Fed might be inclined to think about hiking interest rates to rein in inflation if they thought that inflation will continue. But the central bank's second mandate of maximum employment also hasn't been met as there is still a record 10.9M job openings in July, compared with just 6.7M openings in July 2020. 
    • The Fed partly blames the overshooting inflation prints on base effects from the previous year's deflationary shock, however, those base effects already ended two months ago, Chief Economist at Tressis SV Daniel Lacalle recently told Keith McCullough on Hedgeye TV. But supply chain bottlenecks are also constantly attributed to rising inflation, especially when combined with the spread of Covid-19 variants; the Fed's Federal Open Market Committee's July 27-28 meeting signals supply constraints and labor shortages are likely to continue through the rest of this year.
    • Inflation peak may already be behind us, albeit still high.
    • U.S. import prices fell 0.3% in August for the first time in 10 months, missing the +0.3% consensus, but still up 9% Y/Y, while the CPI rose, though at a slower M/M rate of 0.3% vs. 0.5% in July. On a Y/Y basis, headline CPI rose 5.3% in August, a tick down from the 5.4% level in July
    • Despite the "slowdown" in price inflation, "supply issues are still maintaining upward price pressures," Oxford Economics Chief Economist Gregory Daco wrote in a tweet. "Computers, peripherals, & semiconductors, and oil drilling, mining, and construction machinery prices all rose m/m."
    • In the 2008 financial crisis, import prices peaked in July at 21.4% Y/Y growth, the same month where CPI inflation also peaked at 5.5%. The import price index and CPI index also both bottomed in July 2009.
    • In 2021, import prices have peaked 11.6% Y/Y growth in May, but CPI appears to lag by a month, peaking at 5.32% in June. This could imply that headline inflation will continue to gain downside momentum. But certainly, it's no guaranty.
    • Who is leading in the inflation debate?
    • As a result of the lower-than-expected CPI print in August, the 10-year U.S. Treasury yield slid below 130bps. But a day after CPI released, the 10-year climbed back over 1.3% following a substantially better-than-expected print on the Sept. Empire Manufacturing Survey diffusion index of 34.3 vs. 17.9 estimate and 18.3 in the prior month – the second highest reading since July. Business activity grew at a "swift" pace in New York State. New orders, shipments, and unfilled orders all increased substantially, and delivery times reached a record high, according to the report.
    • Similarly, the Philadelphia Fed's business outlook index almost doubled in September – another regional surprise – activity and shipments improved, but new orders and employment eased somewhat, according to the Sept. 2021 Manufacturing Business Outlook Survey.
    • In addition, retail sales also caught economists by surprise, rising 0.7% in August vs. a -0.8% consensus and -1.8% prior, implying a more resilient consumer sector especially since August was the last month before enhanced weekly unemployment checks expired in early-Sept.
    • Given the recent upside surprises in economic data, it's no wonder why the bond market gave up most of this week's gains; however, the 10-year yield still remains well-below the 1.76% peak at end-August, now stands at 1.37%.
    • Clearly, there are still inflationary pressures underlying the real economy; the question remains how "sticky" this inflation really is. Indeed, momentum of inflation has eased in the past couple months, but prices are still historically high. Keep in mind the producer price index rose 8.3% Y/Y in August – the largest increase since the annual data calculation began in 2010, which would put more pressure on businesses to pass on even higher prices to consumers, or their profit margins will narrow.
    • Recently SA's Alpha Trader podcast dove into Tuesday's softer-than-expected inflation report.
    • Previously, (Sept. 4) Transitory inflation appears less likely as rents are set to surge – Dallas Fed.

    • President Biden will hold a virtual vaccine summit on Sept. 22 on the sidelines of next week's UN General Assembly meeting.
    • The White House said the purpose of the meeting is to build on previous efforts to collectively defeat COVID-19.
    • According to a White House document, the summit will have four themes: vaccinate the world; save lives now; build back better; and calling the world to account.
    • The first goal is to provide more equitable access to vaccines, while the second is to provide more oxygen, personal protective equipment, and medications to other countries.
    • The third goal is to a create a sustainable health security financing mechanism and the final is for countries to support each other in meeting commitments.
    • Last week, it was reported that the federal government will purchase hundreds of millions of additional Pfizer (NYSE:PFE)/BioNTech (NASDAQ:BNTX) COVID-19 vaccine doses to donate.
    • Other vaccine makers: Johnson & Johnson (NYSE:JNJ) and AstraZeneca (NASDAQ:AZN)
    • Three investigators with the National Transportation Safety Board are traveling next week to Coral Gables, Florida to investigate a fatal accident in which a Tesla (NASDAQ:TSLA) Model 3 left the roadway and collided with a tree.
    • NTSB officials say the investigation will focus on the operation of the vehicle and the post-crash fire that consumed the car. It is unclear whether the car's partially automated driving system was activated at the time of the crash.
    • Extra scrutiny is nothing new for the electric vehicle maker. In the past five years, the National Highway Traffic Safety Administration has sent investigators to a total of 25 crashes involving Tesla vehicles with partially automated driver-assist systems.
    • "We always look especially closely at newer technology,” confirms NTSB spokesman Peter Knudson.
    • TSLA closed yesterday up 0.33% to $759.49 after Wedbush Securities issued a positive forecast on deliveries for next year.

    Tesla's Autopilot faces US investigation after crashes with emergency  vehicles | Tesla | The Guardian

    Tesla crashes into Los Gatos medical center

    A Tesla Model 3 Hits An Electric Bike Then Crashes In China

    Tesla Model 3 Driver Slams Into A Brick Wall | CarBuzz

    Tesla Model Y crash in Detroit likely caused by reckless driving, not  Autopilot: police

    Hedgeye on Twitter: "Cartoon of the Day: Teslemmings @elonmusk $TSLA #Tesla  https://t.co/Z5OCvy40ow… "


    • Stocks are seeing volatile moves as investors pile out of risk and put cash to work in bonds.
    • The S&P VIX Index (VIX) +25%, often referred to as the fear gauge, is surging with the major averages tumbling on concerns about high commodity prices and contagion from China's Evergrande.
    • The gain of more than five points on the VIX would be the fourth-largest rise on record, according to Bespoke Investment Group.
    • It was last this high during a spike in May.
    • The S&P 500 (SP500) (NYSEARCA:SPY) is now about 75 points below its 50-day moving average and only about 30 points above its 100-day moving average.
    • "Prior pullbacks in February, March, and June also included brief periods of the index closing below the 50-day MA," Craig W. Johnson, technical strategist at Piper Sandler, writes today. "This week will be a key test for the buy the dip crowd as a failure to defend this area of support would suggest the broader market is at risk for a deeper pullback."
    • "Further downside support sets up 4,422 (July highs), the 4,400-point milestone, and at 4,385 (mid-July highs)," Johnson says. "Momentum indicators have turned bearish amid the selling pressure. MACD remains in a sell position, while RSI has faded below the midline."
    • "Breadth on the index also deteriorated last week. Only 43% of SPX stocks remain above their 50-day MAs, while the ratio of new 4-week lows to highs on Friday reached nearly 5:1. We recommend waiting for support to be established before stepping up to buy the current pullback."
    • Currently, the benchmark index is nearly 4% down from its recent high. Many strategists have said that a 5% pullback would be a healthy shakeout.
    • Since 1980, "the only two years that did not see at least a 5% pullback were 1995 and 2017," Truist Advisory Services writes. "Thus, it would be normal to see a pullback before year end. However, periodic setbacks are the admission price to the stock market, and our view is investors are generally served to focus on the primary market trend, which our work suggests is higher over the next 12 months."
    • As stocks struggle, bond prices are gaining. The 10-year Treasury yield (NYSEARCA:TBT) (NASDAQ:TLT) is down 5 basis points to 1.32%.
    • Goldman Sachs is calling for the 10-year to finish the year at 1.6% and end 2022 at 1.8%.
    • "Our rates strategists believe that decelerating growth makes sharp rises in bond yields of the kind seen in 1Q 2021 unlikely," Goldman strategists led by David Kostin write. "However they expect continued improvement in the labor market and reduced economic growth concerns will allow yields to reset modestly higher."
    • Along with U.S. stocks, Evergrande is also taking its toll on the crypto space.

    • Volatility-based exchange traded funds feel tremors on Monday as the S&P VIX Index (VIX) spiked to its highest point in four months dating back to May 13.
    • The VIX has jumped above the 25 handle to 25.92 as the market tumbles to the downside out of the gate to start the trading week.
    • Below is a breakdown of four ETFs and ETNs that track volatility levels in both the short- and medium-term through the use of the futures market.
    • iPath Series B S&P 500 VIX Short-Term Futures ETN (BATS:VXX)+11.12% on Monday’s session. However, VXX is -60.08% YTD. The fund additionally has an expense ratio of 0.89% and $909.39M AUM.
    • ProShares VIX Short-Term Futures ETF (BATS:VIXY)+10.94% on Monday’s session, although it's -60.08% from a YTD stance. VIXY has a 0.87% expense ratio and $891.89M AUM.
    • ProShares VIX Mid-Term Futures ETF (BATS:VIXM)+4.81% on Monday’s session. From a YTD viewpoint, the fund is -13.68%. VIXM has an expense ratio of 0.87% and $111.27M AUM.
    • iPath Series B S&P 500 VIX Mid-Term Futures ETN (BATS:VXZ)+4.25% on Monday’s session. On a YTD performance stance, the ETF is -13.55%. VXZ comes with a 0.89% expense ratio and has $42.43M AUM.
    • Investors have found themselves on edge today as the stock market is getting hit hard following weakness in Europe and Hong Kong on further concerns about the health of property developer Evergrande.
    • Below is a year-to-date chart of the S&P VIX Index. Investors will see the recent surge as markets find themselves on shaky ground.
    • Gambling stocks are having a rough session even as industry reports show strengthening trends for both sports betting volume and iGaming activity.
    • Decliners amid a broad risk-off stock market day include Esports Technologies (EBET -13.4%), GAN Limited (GAN -6.7%), Esports Entertainment Group (GMBL -4.5%), SharpLink Gaming (SBET -6.7%), Elys Game Technology (ELYS -4.7%), PlayAGS (AGS -2.8%), DraftKings (DKNG -3.3%), Accel Entertainment (ACEL -2.2%), Full House Resorts (FLL -4.6%), Golden Entertainment (GDEN -0.4%), Penn National Gaming (PENN -0.0%), Red Rock Resorts (RRR +0.1%) and Golden Nugget Online Gaming (GNOG -2.9%).
    • Meanwhile, there is still a lot of anxiety over the near term for the Macau sector with the Golden Week recovery looking unlikely. Wynn Resorts (WYNN +0.7%) is faring better than Las Vegas Sands (LVS -0.3%) and Melco Resorts & Entertainment (MLCO -1.1%) on the day.
    • Looking for a potential M&A target in the casino and sports betting sector? Roundhill Investment's Will Hershey thinks Rush Street Interactive (RSI -0.7%) makes sense as an acquisition target for Fanatics (FANA) if it decides to buy an existing operator to launch sports betting. Other potential Fanatics targets are 888 Holdings (OTCPK:EIHDF -2.4%) and PointsBet (OTCQX:PBTHF -5.5%).

    BYD holding up, LVS seems to have bottomed:


  17. A bit of a bounce into the close but a down 2% day on the whole.

       

    • Consumer stocks are tumbling along with the rest of the market on broad concerns over what the China property market debacle signals for riskier assets and increased apprehension on the U.S. debt ceiling negotiations between Democrats and Republicans in D.C. The topper could be the FOMC meeting in a few days during which a sharp focus will be on tapering wording.
    • The biggest decliners in the consumer sector of the S&P 500 component stocks are Tapestry (TPR -6.2%), Ford (F -5.4%), Etsy (ETSY -4.5%), Tesla (TSLA -4.2%), PVH (PVH -3.8%), Newell Brands (NWL -3.5%) and Bath & Bord Works (BBWI -3.4%). Of the Dow 30 components, it is a clean sweep of losses for Nike (NKE -1.9%), McDonald's (MCD -1.6%) and Home Depot (HD -1.6%).
    • Analysts are pointing out that the nervous trading has been building with the Dow down three straights weeks in a row, which has not happened since September of 2020. Still, there are plenty of calls to buy the dip. On CNBC earlier, Fundstrat Global Advisors’ Tom Lee took the other side of the trade, calling today's sell-off a really good buying opportunity due to the structural tailwinds in place. Read more details on the broad market action.
    • Air Products (NYSE:APD) says it will raise product pricing, monthly service charges and surcharges for merchant customers in North America, effective October 1 or as contracts permit, in response to increases in sourcing, production and delivery costs.
    • Price increases will include up to 20% for liquid nitrogen and liquid oxygen, up to 15% for liquid carbon dioxide and up to 15% for monthly service charges.
    • Helium, hydrogen and argon prices also will be increased based on supply/demand and cost situations.
    • FedEx (NYSE:FDX) plans to boost shipping rates across the FedEx Express, FedEx Ground and FedEx Freight business lines. The new rates will be effective on January 3, 2022.
    • FedEx Express shipping rates will increase by an average of 5.9% for U.S. domestic, U.S. export and U.S. import services.
    • FedEx Ground and FedEx Home Delivery shipping rates will increase by an average of 5.9%. FedEx Ground Economy shipping rates will also increase.
    • FedEx Freight shipping rates will increase by an average of 5.9% for customers who use FXF PZONE and FXF EZONE, and by 7.9% for customers who use FXF 1000 and 501.
    • The company says the rate changes reflect "incremental costs" associated with the challenging operating environment, while enabling FedEx to continue investing in service enhancement, fleet maintenance, technology innovations and other areas.
    • FedEx is due to report earnings tomorrow.
    • DoorDash (NYSE:DASH) CEO Tony Xu said Monday that the extension of his firm's alcohol-delivery business is part of a wider effort to expand into more logistically complicated offerings.
    • Speaking to CNBC, Xu noted that many of the features that have allowed for alcohol delivery, such as the ability to check IDs, can help with other regulation-sensitive businesses like pharmaceuticals.
    • Earlier on Monday, DoorDash (DASH) revealed that it has expanded its alcohol delivery to 20 states plus the District of Columbia. Outside the U.S., the service is also available in Canada and Australia.
    • The DoorDash CEO reported that the company has been testing the alcohol-delivery process internally to make sure that features like ID-check can work consistently.
    • "We're making sure that we can get the quality right. Getting everything from logistics to safety to security, privacy such that everything … can happen exactly the right way, every single time," he said.
    • Xu added that the pandemic accelerated the expansion of DASH's alcohol business, as the COVID-related shutdowns convinced many authorities to loosen their restrictions on booze delivery.
    • Turning to labor issues, Xu called the recent overturn of California's Prop 22, which gave gig-economy workers the status of independent contractors in that state, a "surprise" that "made no sense from a legal perspective."
    • "It really overreaches to what the laws permit in the state of California," he said.
    • DASH slipped in Monday's intraday trading, sitting at $219.40 at around 3:15 p.m. ET.
    • The stock is just below its 52-week closing high of $222.91 set on Friday, although it did reach an intraday peak of $256.09 at one point Monday:

    • Solar names are among many sectors feeling the heat from growing contagion fears of a potential debt default at Chinese property developer Evergrande Group, with the Invesco Solar ETF (TAN -5.8%) falling as much as 6.5%, the most since early May.
    • Some of the day's biggest decliners include JKS -10.2%DQ -9.1%SUNW -8.9%MAXN -8.9%FSLR -8.4%CSIQ -7.2%SPWR -7.1%NOVA -6.4%ENPH -6.1%RUN -5.6%SEDG -5.4%ARRY -5.2%.
    • A recent report from the Solar Energy Industries Association and Wood Mackenzie said supply chain bottlenecks and rising raw materials costs caused U.S. solar prices to rise Q/Q and Y/Y during Q2 across every U.S. market segment.
    • General Motors (GM -5.4%) says production has started back up again on the battery modules used in recalled Chevrolet Bolt electric vehicles. The automaker says customers could start getting replacement parts by the middle part of October.
    • As part of its effort to restore confidence in the Bolt EV, the automaker is introducing new advanced diagnostics software designed to detect specific abnormalities that might indicate a damaged battery by monitoring the battery performance and alerting customers of any anomalies.  GM thinks the  added diagnostic software will allow customers to return to a 100% state of charge once all diagnostic processes are complete.
    • More than 140K Bolts are covered by the battery recall, which is expected to cost about $1.8B. GM plans to continue to negotiate with LG Chem over who will pay for the recall.
    • Read a roundup of electric vehicle news from today.
    • With Apple's (NASDAQ:AAPL) iPhone 13 available for pre-ordering, and officially set to go on sale on September 24, speculation is turning toward just how well the newest version of the iPhone is doing out of the gate.
    • And according to Bank of America analyst Wamsi Mohan, the iPhone 13 is seeing better demand compared to that of the iPhone 12 during its initial release period a year ago.
    • In a research note Monday, Mohan said that a combination of tracking iPhone shipping dates on the company's website, along with the sites of various mobile-network carriers, the ship dates of the iPhone 13 Mini, Pro and Pro Max models are showing longer lead times when measured against those of the iPhone 12 last year. "The availability at U.S. Apple stores seems good, where many models are available for pick up on the first available date," Mohan said. "However, delivery dates seem faster from carrier websites."
    • Mohan said that in China, media reports suggest that Apple (AAPL) has priced all models of the iPhone 13 at lower levels than those of the iPhone 12 during its pre-order phase a year ago. Mohan also said that even though shipping dates could be affected by component shortages, he still believes Apple will sell 210 million iPhones for its 2022 fiscal year.
    • Late week, an assessment by the South China Morning Post of Chinese e-commerce sites such as JD.com (NASDAQ:JD) said that iPhone 13 pre-orders were coming in ahead of last year's initial orders of the iPhone 12.
    • And although the iPhone 13 was still days away from being available for sale at retail outlets, on Monday, influential Apple analyst Ming-Chi Kuo wasted little time in making predictions about what the iPhone 14 might look like next year.
    • As China goes, so goes Caterpillar (CAT -5.3%), today's biggest loser on the Dow Jones index and slumping to its lowest levels since early February, with prices of iron ore and metals accelerating their recent decline as China steps up restrictions on industrial activity in some provinces.
    • Caterpillar shares have shed 7% over the past three trading sessions, down 22.5% from their 52-week closing high of $244.79 on May 17.
    • Aside from Caterpillar, the biggest decliners on the top industrial sector ETF include Cummins (CMI -4%), Deere (DE -3.7%), Emerson (EMR -2.9%), Generac (GNRC -4.9%), Johnson Controls (JCI -3.6%) and United Rentals (URI -4.8%).
    • Caterpillar generates ~25% of its sales in the Asian-Pacific region; it does not report China-only sales, but it is a safe bet that the country comprises a large part of the 25%.
    • A credit crisis in China "certainly would take the wind out of industrial sector sales, but if the trouble is contained, it could be an opportunity for investors," writes Al Root at Barron's.
    • Seeking Alpha contributor Joshua Hall thinks the potential U.S. infrastructure bill is overly priced into Caterpillar shares, while Josh Arnold believes Caterpillar stock is "set to fly" as fundamentals and valuation improve.