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Monday Market Movement – The Weak Ahead

Publishing, Historic Newspaper Headlines, 1st October 1938, The front...  News Photo - Getty ImagesAt least the war is off the front page.  

That's right, just 6 weeks into it and already the Wall Street Jornal has decided the war only merits one article in the main section.  In the NY Times, it's still the whole top of the page and part of the bottom but Mr. Murdoch has decided he wants us to move on and stop bothering his pal Putin (and, as far as Trump goes – was he even ever in trouble?).  I listed my grievances against the press last Tuesday so I'll save the rest for Festivus (Dec 23rd) 

The war we need to be fighting this month is the war against Inflation and tomorrow we get our CPI Report, which we believe will be much higher than expected by leading Economorons because EVERY SINGLE COMPONENT of the CPI Report was higher in March than it was in February (7.9%).  

We are living through the worst inflation since 1981 and let's keep in mind that the minumum wage in 1968 was $1.60/hr, $2 in 1974 (up 25%), $2.10 in 1975 (up 5%), $2.30 in 1976 (up 10%), $2.65 in 1978 (up 15%), $2.90 in 1979 (up 9.5%), $3.10 in 1980 (up 6.8%) and $3.35 in 1981 (up 8%) – that's a total of 109% in 13 years.

13 years ago, in 2009, the minumum wage was $7.25/hr and, during infaltion that's as bad as it was in the 80s, 13 years later it's $9.20/hr (up 27%) as all this talk of phasing in $15/hr is mostly talk so far.  We talked last Friday about how Consumers are pushing their credit lines to levels never seen before – which is financial suicide in a rising-rate environment but that's what happens when the Government LIES to you and says the inflation is "transitory" – it encourages people to keep spending – as if this is a passing thing that will go away on its own.

We are phasing in a higher minimum wage over time but no one is "phasing in" inflation – it is biting hard and fast on the consumers and spending habits don't bend – they break – and they are very hard to fix once they get broken – those of us with Grandparents who went through the Great Depression know that.  

WAGES may go up but REAL WAGES are going down – at a rate not seens since the last great market collapse.  Since the US economy is still 60% consumer spending – perhaps this should be a statistic we are concerned about…  The Top 5% of the workers in this country make an average of $446,00 per year and the top 20% make $253,000 per year – they'll be fine.  The next 20% make $109,000 and they'll muddle through but the Bottom 60% make $68,000, $39,500 and $14,500 – for an average of $40,666 for 72M households.  

Household income by quintile : r/NoLubricant

Six Clever Cartoons on Income InequalityNo one in the Bottom 80% is keeping up with inflation and you simply can't have a robust economy when 80% of the people are in a recession.  Sure, first class will still be full, the best restaurants will still be booked solid – all the good hotels will be filled, shows will be sold out, Disney will be at full capacity but all this economic joy is coming off the backs of the little people – who are getting a smaller and smaller share of the ever-more expensive pie.

In order to perpetuate the myth that you don't need to increase taxes to offset spending, the Government is going $3.5Tn further into debt this year and guess what?  We have a system that distrubutes the burdent of that deficit Democratically – no matter how much money you have – your debt is the same slice as the next person.  

Funny how we believe in distributing debt but not income, right?  Who makes more use of our electtic grid, you or Elon Musk?  We've invested Trillions building it for everyone and he's figured out how to make hundreds of Billions both supplying it and drawing from it but YOU will pay the bill to upgrade it for him.  The roads Jeff Bezos uses to deliver your goods – same thing.  The Government built the Internet using your tax Dollars and Bill Gates, Larry Page, Sergey Brin, Larry Ellison and Steve Balmer have all have made $100Bn off it – but you're footing the bill.

rent vs buy - Realtor.com Economic Research"That's Capitalism", they will say.  There are winners and losers but, more and more lately, there are just a few winners and SO MANY LOSERS.  We used to have a "Middle Class" but now only the Top 20% of the people in this country can afford homes.  That's still 60M people though and, recently, they've been kind enough to buy multiple homes and rent them out to the 240M people who can't afford to buy them.  And, of course, they have raised the rents dramatically because you wouldn't want to deny them the right to make a profit – that would be UnAmerican!  

Housing, after all, is not a right.  Food is not a right.  Medical Care – not a right.  Education – some is a right – enough to get you to that minimum wage.  So, logically, if you don't have a right to Housing or Food or Medical Care, then the system educates you just enough to have a low-wage job, which you must continue at until you die because there is no one to take care of you if you stop working.  That about sums it up, right?  

You don't need whips and chains when the whole country is designed to keep you trapped in underpaid jobs, do you?  We don't have any more runaways because there's simply nowhere for them to go – we're all trapped here – especially those who were foolish enough to go into debt to get to that first job – a burden most people end up trapped in for the rest of their lives.  

We'll see how bad Inflation is in tomorrow's CPI Report but the Fed doesn't meet again until May – so there's not much to be done about it either way.  We have PPI on Wednesday and China's PPI just hit 8.3% this morning – very nasty.  Retail Sales will be interesting on Thursday.  The French election is a big deal this week as Le Pen is another far-right neo-Fascist who would make Putin very happy and weaken NATO considerably – probably why he's behaving himself this week.

Earnings Season is back in gear this week so we're very excited to hear some Q1 results and, more importantly, guidance – paying special attention to how companies will forecast interest rate increases on their debts going forward.  

Image

At least it should be an interesting week.

 


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  1. Good Morning.


  2. Good morning!

    (Good) Friday is a holiday, so it's a short week.  

    Off to a poor start out the gate.

       

         
     


  3. Phil/Wbd good morning, any thoughts of selling 2024 25 strike strad  or strang for about 13 or should wait for options to settle down? TIA 



  4. EU to consider Ukraine membership in weeks; Russia warns of ‘direct military confrontation’ with US: Live updates


  5. Phil// What is your take on T after the dividend cut and the spinoff?  Stock has been trending lower and lower and lower.  Thanks.


  6. Are brokers required to adjust the cost basis for T post spinoff?  I'm with IB and showing a big loss since it's reflecting old cost basis. Heck, I'd sell to get the capital loss but have to wait 30 days for wash rule. 


  7. My mom got Covid this weekend – it's not over yet.

    WBDWV/Stuart, Rookie - Is that even trading yet?  We got a nice pop in T now that the split is done and I'm just waiting to see how things shake out in the earnings.

    Lower/Rookie – Well all the better chances to take the entry.  

    Brokers/Jeddah – There's no way to know what the brokers will do until they do it.   T shareholders still have their T stock, of course, and also own 71% of the new company so you get 0.24 shares of WBDWV for each share of T.  WBDWV is trading at $24.47 so those extra shares are worth $6 per T share and T is down to $19.37 so a combined $25.50ish is the post-split value for the stockholders.  On the options side, we're probably just stuck in the old-class options and the 2024 $20s are $5.80/6.20 so not too wide of a spread and it's likely we'll unwind but let's see how earnings look on 4/21 first.


  8. Bonds are rapidly deteriorating:

       

    Looks like we can play /YM to catch up if /NQ 14,000 fails.  /RTY already failed 2,000 again.

       





  9. SP500 -1.12%Apr. 11, 2022 11:20 AM ET12 Comments

    Stocks are falling further Monday as the prospect of positive real rates biting into high-valuation stocks weights on growth sectors

    The Nasdaq (COMP.IND-1.8% is falling more than the S&P 500 (SP500-1.1% and Dow Jones (DJI-0.5%.

    Nine of 11 S&P sectors are lower. Info Tech is the weakest, with chips struggling. All the megacaps are in the red. Industrials is performing the best.

    The real 10-year yield, which takes inflation into account, is at -0.13%. It was at -1.1% in mid-March.

    "Profit growth is slowing and rising real yields are telling you that liquidity is tightening and that is not a great envrionment for stocks," Bernstein Advisors' Dan Suzuki said on Bloomberg. "What's most at risk are the most expensive stocks, when interest rates go up they are the most vulnerable."

    Morgan Stanley's Mike Wilson said that stock market internals indicate that investors should stick with defensive sectors.

    Among active stocks, Twitter is off lows after Elon Musk declined to take a seat on the board. Twitter CEO Parag Agrawal said the move was for the best, but that there would be "distractions ahead."

    Wedbush says that could lead to a 'Game of Thrones' battle.

    Nvidia is the weakest stocks in the S&P after a downgrade from Baird on order cancellations.

    MSFT -3.60%Apr. 11, 2022 11:18 AM ET11 Comments

    Microsoft (NASDAQ:MSFT) shares tumbled on Monday after investment bank UBS said the tech giant could start to see a "gentle deceleration" in Office 365-related growth.

    Analyst Karl Keirstead, who rates Microsoft buy with a $360 price target, noted that Office 365 is the company's second-largest product, behind Azure and likely generated $35.1 billion in fiscal 2022 revenue, growing at between 19% and 21% quarter-over-quarter for the last six quarters.

    But given that it likely has "high penetration" and benefits from the pandemic and work-from-home boom are starting to fade, Office 365 growth could start to slow.

    Microsoft (MSFT) shares fell nearly 3.5% to $286.17 in early trading on Monday. Shares have declined nearly 9% over the past week.

    Keirstead added that Microsoft remains the dominant franchise in the employee productivity software market, with the race between it Google (GOOG) (GOOGL) "effectively over" and is now trying to displace Microsoft Azure by making Google Cloud more competitive.

    "However, we now believe that it is prudent to begin modeling a gentle deceleration in commercial Office 365 seat growth given the combo of the pandemic/work-from-home boost fading and Office 365 penetration into the broader Office installed base now reaching 80%, offset by strong E5 traction and the price increase," Keirstead wrote in a note to clients.

    As such, he lowered the estimates for Office 365 revenue growth to 17.4% from 19.1% for Microsoft's (MSFT) fiscal 2023.

    Keirstead also lowered estimates for Windows, due to a potential risk for slowing PC growth and in Server Product and LinkedIn due to tough comparisons.

    Last week, Boeing (BA) tapped Microsoft (MSFT), as well as Amazon (AMZN) and Google (GOOG) (GOOGLfor a cloud computing deal that some believe may be worth more than $1 billion.

    T -18.56%Apr. 11, 2022 11:10 AM ET16 Comments

    WBD logo

    AT&T (NYSE:T) and Warner Bros. Discovery (NASDAQ:WBD) each traded higher early this morning in their new post-spin-off lives, with investors of each reacting positively to the new arrangement, against a broadly lower market in technology and media. But after an initial bump, selling pressure is showing up for WBD.

    On a post-spin valuation basis, AT&T (T) is up 6.8% today, hitting $19.47; it's retesting resistance at its 200-day moving average. Warner Bros. Discovery (WBD) – of which AT&T shareholders own 71% - rose as high as 8%, but in recent minutes has fallen 1.8% to $24.04. AT&T and Discovery completed their $43 billion transaction late Friday.

    Analysts looking at the new Warner Bros. Discovery have coalesced around a $40 price target, implying a hefty 66% upside. Deutsche Bank has made the new stock its top pick in Media, saying it's one of the best positioned companies in global streaming.

    "From a content perspective, we view WBD as No. 1 in scripted general entertainment content given the Warner Brothers + HBO libraries and current production slates; and No. 1 in unscripted given legacy Discovery's content across its lifestyle brand portfolio," analyst Bryan Kraft says.

    He's also got praise for recently turbulent news network CNN (a "valuable and differentiating asset for WBD's global streaming business") as well as a boost from sports rights in the key markets of the U.S. and Latin America.

    He's expecting WBD can roughly double today's global streaming subscriber base to 194 million by the end of 2026 (with potential upside to the forecast considering Netflix is already at 222 million), and drawing $24 billion in revenue across its various service tiers (subscription video, ad-supported video and free ad-supported TV).

    Evercore has boosted its former In-line rating on Discovery to an Outperform on WBD – the "first direct-to-consumer free cash flow machine."

    Shares in the new No. 2 media company (behind Disney) are undervalued given a 14% 2023 levered free cash flow yield, and a path to grow free cash flow per share at double digits beyond 2023, analyst Vijay Jayant says. The combination of HBO Max and Discovery+ into a single service will be "highly synergistic," Jayant says; HBO Max will bring "expensive, flashy" originals needed to acquire customers, will Discovery's giant library will offer retention of those customers.

    Streaming revenues should grow at a 21% compound annual rate from 2021-2026, in line with expectations for Disney, Jayant says, while a consolidated product in Q1 2023 will launch a reacceleration.

    Long-term fundamental investors should take advantage of a "technical aberration" given the Reverse Morris Trust structure of the deal has created a massive supply of stock, Jayant thinks.

    Atlantic Equities also boosted WBD to Overweight with a $40 target. MoffettNathanson, for its part, has departed from the bullishness, starting the company at Neutral with a $27 price target.

    As for AT&T, overall an average price target of $21.90 implies 13% upside from here. BofA adjusted its price target to $25 while reiterating a Buy, suggesting that some complexity concerns have resolved and the new dividend is baked in to expectations.

    That's been one subject of heavy concern for AT&T investors: where the new dividend yield would fall. With an expected annual payout of $1.11, it's currently sitting at 5.7% on a forward yield basis (thanks to today's post-spin gain). AT&T will trade ex-dividend this Wednesday, April 13.

    AT&T now looks an awful lot like Verizon, J.P. Morgan's Philip Cusick says – with a similar dividend yield but still a lower EBITDA multiple. Dividend yield even at the firm's $22 price target would be 5.0% vs. Verizon's 4.8% – and the enterprise value-to-EBITDA multiple there would be 6.6x, vs. Verizon's 7.4x today.

    Deutsche Bank's Kraft also updated his price target on AT&T, cutting to $24 from $30 – essentially an unchanged valuation for "stand-alone" AT&T. He's positive on AT&T following the transaction as well as commentary from AT&T's recent analyst day and a view that the wireless market saw "healthy volumes" industrywide in Q1.

    Apr. 11, 2022 11:00 AM ET

    • Russia said it will take legal action if it's forced into default on its debt, the country's finance minister said in an interview with Russian newspaper Iszestia.
    • The comment comes after S&P Global Ratings cut Russia's foreign currency ratings to "selective default" from CC/C after the country paid coupon and principal payments on its U.S. dollar-denominated Eurobonds in rubles when those payments were due on April 4, 2022.
    • S&P then withdrew its ratings on Russia "in consideration of the EU's decision on March 15 to ban the provision of credit ratings to legal persons, entities, or bodies established in Russia," the credit-rating company said. It will withdraw all outstanding ratings on relevant issuers before April 15, S&P said.
    • Anton Siluanov, Russia's foreign minister, said: "Of course, we will sue, because we have taken all the necessary steps to ensure that investors receive their payments," according to Izvestia.
    • He also told the newspaper that Russia doesn't plan to sell any more bonds this year because the "borrowing cost would be cosmic."
    • At one point last week, the cost of insuring Russia's government debt jumped to indicate a 99% chance of default within a year, Bloomberg reported.
    • Previously (April 5) , Russia's probability of default jumped to 87.7%

    Apr. 11, 2022 10:53 AM ET41 Comments

    Here are the latest headlines in the Russia-Ukraine crisis:

    Ukraine economy to shrink 45%

    The World Bank says Ukraine's economy will shrink by 45.1% this year because of Russia's invasion, which has shut down half of the country's businesses, choked off imports and exports, and damaged a vast amount of critical infrastructure.

    Russian threat pushes natgas higher

    A representative in the Russian parliament proposed Moscow suspend gas supply to the EU, saying, "The EU is continuing its disrespectful and humiliating policy towards Russia. In response to their unfriendly actions, I think we should respond with tough sanctions – temporarily halt energy supplies until the European counterparts realize that an aggressive policy towards Russia is harmful."

    Zelenskyy asks South Korea for arms

    President Volodymyr Zelenskyy made the request in a video address to South Korean lawmakers that came hours after Seoul’s Defense Ministry confirmed it had rejected a Ukrainian request for anti-aircraft weapons during a call between the countries’ defense ministers last week. The ministry cited the South Korean government’s principle of limiting its military help to Ukraine to non-lethal supplies.

    Russia halt bond sales

    "We do not plan to go to the local market or foreign markets this year," Russian Finance Minister Anton Siluanov told Izvestia. "It makes no sense because the borrowing cost would be cosmic." A fresh forecast from the World Bank also expects the Russian economy to contract by 11.2% this year, while Ukraine's GDP will shrink by a staggering 45.1%.

    NATO expansion

    Russia has made a "massive strategic blunder" as Finland and Sweden look poised to join NATO as early as the summer, senior American officials told The Times. That would stretch the western alliance from 30 to 32 members. Meanwhile, Austrian Chancellor Karl Nehammer is scheduled to travel to Moscow on Monday, becoming the latest world leader to meet with Vladimir Putin.


  10. MRNA -1.49%Apr. 11, 2022 10:59 AM ET

    • Moderna (NASDAQ:MRNAsaid the first participant has been dosed in the Phase 1/2 study of its seasonal influenza vaccine candidates, mRNA-1020 and mRNA-1030.
    • The Company intends to enroll about 560 participants in the study.
    • The company's vaccines, mRNA-1020 and mRNA-1030, target two major influenza surface glycoproteins called hemagglutinin and neuraminidase antigens.
    • The vaccines target the strains recommended by WHO for the prevention of influenza, including seasonal influenza A/H1N1, A/H3N2 and influenza B/Yamagata and B/Victoria, the company said.
    • "We expect that our platform's flexibility in targeting multiple strains coupled with our ability to manufacture quickly will facilitate production of a vaccine that matches the predominant circulating influenza strain," said Moderna's CEO, Stéphane Bancel.
    • The company is using its mRNA platform to develop seasonal influenza vaccines.

    BNTX -0.82%Apr. 11, 2022 10:38 AM ET3 Comments

    Announcing early clinical results from an ongoing Phase 1/2 trial, BioNTech (NASDAQ:BNTX) said on Monday that its CAR-T cell therapy candidate, BNT211 showed a strong antitumor effect when combined with CARVac, a CAR-T cell amplifying vaccine based on mRNA technology.

    BNT211 is an autologous CAR-T cell therapy targeted at the oncofetal antigen Claudin-6 (CLDN6), and CARVac is designed to encode CLDN6.

    The trial, being conducted in Germany and the Netherlands, evaluates BNT211 alone or in combination with CARVac in patients with advanced solid tumors.

    After 10 – 17 days, all 16 patients who received the infusion indicated strong CAR-T cell expansion, BioNTech (BNTX) said, adding that their adverse events and dose-limiting toxicities were manageable. However, findings point to a short-lived incidence of neurotoxicity Grade 1 and cytokine release syndromes of Grade 1 and 2.

    Notably, after 6 weeks, 6 of 14 evaluable patients were found to have a partial response and five subjects had stable disease. In addition, there was a complete response 18 weeks after the infusion.

    Given the partial responses found in four of five patients in the CARVac combination group, “the antitumor activity tended to be higher at the higher CAR-T dose and when combined with the vaccine,” the company added.

    CAR-T cell therapies are mostly used to treat blood cancers. “Our preliminary data indicate that the successes of CAR-T in hematological cancers may indeed be transferred to solid tumors,” BioNTech (BNTX) Chief Medical Officer Özlem Türeci remarked.

    The next data update from the study is expected later this year.

    Read about another biotech whose valuation surged in response to antitumor effect of its mRNA molecules.

    NG1:COM +3.89%Apr. 11, 2022 10:14 AM ET4 Comments

    Natural gas futures (NG1:COM) traded higher by ~5% early Monday, as a cold weather forecast in the US and threats from Russian politicians supported prices.

    In the US, a surprise draw in underground storage levels last week, paired with a cold forecast issued by the NOAA Sunday, has supported prices.

    Meanwhile, over the weekend, a representative in Russian parliament proposed Moscow suspend gas supply to the EU, saying, "The EU is continuing its disrespectful and humiliating policy towards Russia. In response to their unfriendly actions, I think we should respond with tough sanctions – temporarily halt energy supplies until the European counterparts realize that an aggressive policy towards Russia is harmful."

    The comments come from a relatively low-level politician; nevertheless, they could capture the market's attention, given the significant price implications of a natural gas export ban (LNG) (TELL). Regardless, lower inventories, higher demand, and geopolitical risk are fueling the record run in natural gas prices (EQT) (BOIL) (CHK).

    AAPL -1.94%Apr. 11, 2022 9:29 AM ET5 Comments

    • Apple (NASDAQ:AAPL) is reportedly on the brink of being slapped with another antitrust by the European Union over the company's streaming payment practices.
    • The EU is considering charging Apple (AAPL) again with regards to how it requires developers to use Apple's (AAPL) own payment system, and prevents those developers from allowing users access to other payment options. According to a report from Reuters, the EU is responding to complaint from streaming music giant Spotify (SPOT), which claims that Apple's (AAPL) practices violate competition regulations in Europe.
    • New EU rules on competition called the Digital Markets Act [DMA] went into effect last month and view Apple's (AAPL) payment practices as illegal. Apple (AAPL) and other U.S. tech companies have been given a few years before the new edicts will be enforced.
    • Last Friday, Apple (AAPL) took another step with its ongoing streaming entertainment offerings with the premiere of "Friday Night Baseball". Apple (AAPL) reportedly pays $85 million for the right to air two Major League Baseball games a week on its Apple TV+ streaming service.

    GOLD -0.33%Apr. 11, 2022 8:33 AM ET

    Barrick Gold (NYSE:GOLD) said Friday after the market close that the government of the Dominican Republic completed its strategic review of the location of the new tailings storage facility for the Pueblo Viejo mine, paving the way for the company to move ahead with its $1.4B gold expansion project.

    The new tailings storage facility forms part of the expansion project that is designed to extend the Tier One mine's life beyond 2040 and support annual production of more than 800K oz.

    Barrick and the government have separately studied sites for the TSF location, with the assessments independently identifying four alternative sites; two of the sites will be forwarded for further investigation.

    The final location and construction of the facility will be subject to the completion of an environmental and social impact assessment.

    Pueblo Viejo is owned in a 60-40 joint venture with Newmont (NEM).

    As the world seemingly moves into a new era of war and inflation, "these are nevertheless powerful drivers for gold and copper prices, thereby raising the prospects to see a high free cash flow yield of near 9%," Daniel Thurecht writes in a bullish analysis posted on Seeking Alpha.


  11. Comment content omitted because it is too long.


  12. Well the retracement from the highs chart is now completely F'd:

    • Dow  36,000 to 34,200 has bounce lines of 34,560 (weak) and 34,920 (strong) 
    • S&P 4,700 to 4,465 has bounce lines of 4,512 (weak) and 4,559 (strong) 
    • Nasdaq 16,500 to 15,675 has bounce lines of 15,840 (weak) and 16,005 (strong) 
    • Russell 2,400 to 2,080 has bounce lines of 2,144 (weak) and 2,208 (strong)

    And the Nas blew both bounce lines on the 20% retrace so without taking back 14,100 – look for the other indexes to dive back into this territory:

    • Dow 36,000 to 28,800 would be a 7,200-point drop with 1,440 bounces to 30,240 (weak) and 31,680 (strong).   
    • S&P 4,800 is 20% above 4,000 and that makes it an 800-point drop with 160-point bounces so 4,160 (weak) and 4,320 (strong).
    • Nasdaq is using 13,500 as the base.  14,100 is the weak bounce and 14,700 is strong.  
    • Russell 1,600, would be about an 800-point drop with 160-point bounces to 1,780 (weak) and 1,960 (strong).

    Russell 1,960 would be our next dire sign.


  13. NVDA -5.54%Apr. 11, 2022 7:52 AM ET49 Comments

    Nvidia (NASDAQ:NVDA) shares fell in premarket trading on Monday after investment firm Baird downgraded the stock and cut its price target, citing worries over order cancellations.

    Analyst Tristan Gerra lowered the rating to neutral from outperform and slashed the price target to $225 from $360, noting that he believes order cancellations recently started for consumer GPUs, due to "excess inventories."

    In addition, a slowdown in PC demand and the Russia embargo sanctions are likely to hurt the company more than the market currently believes.

    Nvidia (NVDA) shares fell nearly 3% to $224.41 in premarket trading on Monday.

    Competitor Advanced Micro Devices (AMD) fell in sympathy, with shares losing 1.5% to $99.46 in premarket trading.

    Gerra added that the upcoming fork for cryptocurrency Ethereum could "compound the demand weakness."

    The analyst noted, however, that data center trends are still "very strong," but it's likely that a peak in year-over-year revenue comes in the first half of 2022 and gaming-related revenue is likely to be weak for the rest of the year.

    On April 5, investment firm Truist slashed price targets across the board in the semiconductor space, including Nvidia (NVDA) and AMD (AMD), telling investors it has found "hard evidence of order cuts."

    IWB -1.05%Apr. 11, 2022 7:48 AM ET8 Comments

    Goldman Sachs equity strategists stressed the importance of pricing power for companies given a four-decade high in inflation and rising commodities prices.

    "Pricing power will become increasingly important in the face of continued inflation and cost pressures," David Kostin, chief U.S. equity strategist, and team wrote in a note. "In order to assess the sustainability of margins, we will monitor the ability of firms to pass increased costs through to consumers."

    Goldman screened the Russell 1000 (NYSEARCA:IWB) for companies in each sector with the best and worst pricing power.

    These stocks have high and stable gross margins:

    Communication Services (XLC)

    1. Alphabet (GOOGL) (GOOG), average 5-year gross margin level 57%
    2. Cable One (CABO), 48%

    Consumer Discretionary (XLY)

    1. Tapestry (TPR), 69%
    2. PVH (PVH), 55%
    3. Lululemon (LULU), 54%
    4. O'Reilly Automotive (ORLY), 53%
    5. Travel + Leisure (TNL), 49%
    6. Skechers (SKX), 48%
    7. Nike (NKE), 44%
    8. Advance Auto Parts (AAP), 44%
    9. Harley-Davidson (HOG), 41%
    10. Burlington Stores (BURL), 39%
    11. LKQ (LKQ), 37%

    Consumer Staples (XLP)

    1. Philip Morris International (PM), 65%
    2. Coca-Cola (KO), 61%

    Energy (XLE)

    1. Baker Hughes (BKR), 18%
    2. Schlumberger (SLB), 13%
    3. Halliburton (HAL), 11%

    Healthcare (XLV)

    1. Edwards Lifesciences (EW), 75%
    2. Align Technology (ALGN), 74%
    3. J&J (JNJ), 67%
    4. Zoetis (ZTS), 66%
    5. Cooper Companies (COO), 62%
    6. Waters (WAT), 58%
    7. Mettler-Toledo (MTD), 56%

    Industrials (XLI)

    1. CoStar (CSGP), 76%
    2. Nordson (NDSN), 55%
    3. TransUnion (TRU), 53%
    4. Graco (GGG), 53%
    5. Verisk Analytics (VRSK), 52%
    6. Snap-on (SNA), 51%
    7. S&P Global (SPGI), 69%
    8. Rollins (ROL), 47%
    9. Cintas (CTAS), 46%
    10. nVent Electric (NVT), 39%
    11. Dover (DOV), 37%
    12. Curtiss-Wright (CW), 36%
    13. Fortune Brands (FBHS), 35%
    14. Donaldson (DCI), 34%
    15. ITT (ITT), 32%
    16. Trane Technologies (TT), 31%

    Info Tech (XLK)

    1. Dolby (DLB), 88%
    2. Cadence Design (CDNS), 87%
    3. Adobe (ADBE), 85%
    4. Synopsys (SNPS), 76%
    5. Oracle (ORCL), 76%
    6. Fortinet (FTNT), 76%
    7. Workday (WDAY), 71%
    8. Paychex (PAYX), 69%
    9. Cisco Systems (CSCO), 63%
    10. Monolithic Power (MPWR), 55%

    Materials (XLB)

    1. Corteva (CTVA), 36%

    These stocks have low and variable gross margins:

    Communication Services (XLC)

    1. Live Nation (LYV), average 5-year gross margin level 17%
    2. Madison Square Garden (MSGS), 32%
    3. Disney (DIS), 33%

    Consumer Discretionary (XLY)

    1. Wynn Resorts (WYNN), 20%
    2. Bright Horizons (BFAM), 21%
    3. Six Flags (SIX), 31%
    4. Las Vegas Sands (LVS), 31%
    5. Marriott Vacations (VAC), 34%
    6. Domino's (DPZ), 36%

    Consumer Staples (XLP)

    1. Hormel (HRL), 20%
    2. Walgreens (WBA), 23%
    3. Ingredion (INGR), 25%

    Healthcare (XLV)

    1. Sarepta Therapeutics (SRPT), NM
    2. Alnylam Pharmaceuticals (ALNY), NM
    3. Neurocrine Biosciences (NBIX), NM
    4. Nektar Therapeutics (NKTR), NM
    5. ICU Medical (ICUI), 40%
    6. Viatris (VTRS), 41%
    7. Premier (PINC), 55%

    Industrials (XLI)

    1. J.B. Hunt (JBHT), 11%
    2. Lockheed Martin (LMT), 13%
    3. General Dynamics (GD), 18%
    4. Sunrun (RUN), 19%
    5. Kirby (KEX), 19%
    6. Huntington Ingalls (HII), 19%
    7. Raytheon Technologies (RTX), 23%
    8. GE (GE), 24%
    9. Hexcel (HXL), 24%

    Info Tech (XLK)

    1. Avnet (AVT), 13%
    2. DXC Technology (DXC), 15%
    3. Euronet Worldwide (EEFT), 20%
    4. Wolfspeed (WOLF), 29%
    5. Block (SQ), 34%
    6. Ceridian (CDAY), 41%
    7. Fleetcor (FLT), 46%
    8. Switch (SWCH), 45%
    9. CDK Global (CDK), 49%
    10. Wex (WEX), 50%
    11. Marvell Tech (MRVL), 55%
    12. Guidewire (GWRE), 55%

    Materials (XLB)

    1. CF Industries (CF), 20%

    See what else Goldman Sachs wants to hear on earnings calls.


  14. Phil what's the trade on tomorrows overheating CPI


  15. TBT +3.00%Apr. 11, 2022 7:13 AM ET4 Comments

    Ahead of bank earnings and inflation data later in the week, investors are keeping their eyes on the 10-year Treasury yield, which continues to spike to multi-year highs. Early Monday, the rate climbed 5 basis points to 2.76%, notching a level last seen in 2019. The momentum gathered pace last week after Fed Vice Chair Lael Brainard said the central bank's balance sheet would be reduced "at a rapid pace" as soon as May, only to be followed up by similar sentiment during the release of FOMC minutes.

    Commentary: "Fed tightening is the single biggest theme in global markets right now," said Nomura rates strategist Andrew Ticehurst. "Yields are making fresh highs, so we are likely seeing stops and technical trading contributing to this move."

    The tightening cycle in the U.S. is also making way for some interesting shifts as policy diverges across the globe. The yield on China's 10-year government bond fell to 2.75% on Monday, marking the first time it has been below the rate of its U.S counterpart in 12 years. The fading premium comes as Beijing sticks to an accommodative monetary stance as prolonged COVID-19 lockdowns – like the one in Shanghai - weigh on its economy.

    Ominous signs? While 5-year and 30-year U.S. Treasury yields remain inverted, the 2s10s curve has steepened since the beginning of April after briefly inverting for the first time since 2019. That was followed by the COVID downturn of 2020, though the last persistent inversion of the Treasury curve occurred in 2006-2007.

    JBLU +1.26%Apr. 11, 2022 5:54 AM ET18 Comments

    Been on a flight recently? There have likely been delays, and that's if you even get on a plane (cancellations have been through the roof). The developments have prompted "camping out at the airport" to trend across the country, while hours-long waits for customer service have left many passengers with a sour taste of the whole traveling experience. Severe storms have not made things any better, while COVID-19 still looms large as many employees call out sick.

    Case in point: JetBlue (NASDAQ:JBLU) scrapped more than 300 flights over the weekend, with nearly a fifth of all its flights canceled on Saturday. That's on top of hiring 2,500 workers this year and perks to keep staff on the job. It's now offering a $1,000 bonus to flight attendants who don't call out of work through May 31, as well as an extra $100 per trip for attendants who pick up open flights on days off.

    "We've already reduced May capacity 8-10% and you can expect to see a similar size capacity pull for the remainder of the summer," JetBlue COO Joanna Geraghty declared. "Despite these challenges and, based on your feedback that the schedule is wound too tight, we know the best plan is to reduce capacity now. I think everyone recognizes that the industry still remains very much in recovery mode, so we believe this proactive step is the right decision."

    Go deeper: It's not the only carrier facing heat. Last week, Alaska Airlines (NYSE:ALK) said it would trim its flight schedule through the end of June to catch up on pilot training. "We've recently let down some of our valued guests by canceling an unusual number of flights. The primary cause of cancellations is the shortage of pilots available to fly versus what was planned when we built our April schedule in January."

    Related: American Airlines (AAL), Delta Air Lines (DAL), Southwest Airlines (LUV), United Airlines (UAL), Hawaiian Holdings (HA), Spirit Airlines (SAVE), Mesa Airlines (MESA), SkyWest (SKYW) and Frontier Group (ULCC).

    SPY -1.29%Apr. 10, 2022 12:55 PM ET18 Comments

    Earnings risks are to the downside for the rest of the year and management commentary will be particularly important this earnings season given current uncertainty, Goldman Sachs says.

    Excluding the outlier sectors of Energy (XLE) outperformance and Financials (XLF) underperformance, Goldman predicts a modest 6% rise in Q1 S&P 500 (SP500) (NYSEARCA:SPY) earnings.

    "Full-year EPS estimates have actually been revised 2% higher since the start of the year and earnings growth is forecast to accelerate in coming quarters," strategist David Kostin and team wrote in a note. "Analysts appear reluctant to adequately trim forecasts despite the high degree of uncertainty surrounding the economic outlook."

    "Although our 2022 topdown EPS estimate is 3% below bottom-up consensus ($221 vs. $227), we believe results from 1Q earnings season are unlikely to generate enough clarity for analyst estimates to fully converge to our forecast."

    "We encourage managements on their conference calls to address three key sources of investor uncertainty that will affect earnings during the rest of 2022," Kostin said.

    They are:'

    1. Outlook for economic growth and consumer demand. "The possibility of a recession has been a common theme in recent client discussions, and the yield curve is implying a one in three probability of a recession in 2023. However, our economists believe a recession is far from inevitable due partly to healthy household and corporate balance sheets … We will monitor management commentary for broader signs of declining consumer demand."
    2. Inflation and profit margins. "Pricing power will become increasingly important in the face of continued inflation and cost pressures. In order to assess the sustainability of margins, we will monitor the ability of firms to pass increased costs through to consumers."
    3. Business exposure to geopolitical risks and investment plans to improve resiliency. "Pandemic lockdowns and the Russian invasion of Ukraine have reinforced the need for firms to evaluate their global exposures. Some firms have taken actions to strengthen their supply chain resilience … Furthermore, firms that have recently halted business in Russia will likely need to take impairment charges to account for asset write downs."

    Banks kick off earnings season this week. See what analysts expect.

    PFE -1.84%Apr. 10, 2022 9:39 AM ET186 Comments

    The demand for COVID-19 vaccines has dropped by more than half from January to March this year amid reluctance for repeated vaccinations in richer nations and vaccine hesitancy in poorer nations, the data analytics firm Airfinity points out.

    As the Covid wave fueled by the Omicron variant subsided, 104 million vaccines were being rolled out weekly by mid-March, indicating a sharp decline from 212 million in the first week of January, The Financial Times reported Sunday, citing data from Airfinity.

    That has prompted the firm to cut its 2022 forecast for worldwide sales of non-Chinese Covid-19 vaccines to 6 billion doses, down from its earlier estimate of 9 billion doses. The revenue forecast has been slashed to $64.1 billion, indicating a decline of more than 20% from the previous projection of $80.9 billion made three months ago. Airfinity projects 2 billion – 4 billion doses of vaccine sales for 2023.

    “The vaccine market has moved from high demand and constrained supply, to lower demand with more choice and reluctance from populations to take repeated shots,” remarked Matt Linley, Airfinity’s director of analytics.

    “With Omicron variants causing less severe disease, people don’t have the appetite for more doses. Data from third and fourth dose programs in Israel and Chile shows uptake diminished by 25 percent for the booster and 50 percent for the fourth shot.”

    According to Airfinity forecasts, Pfizer (NYSE:PFE)/BioNTech (NASDAQ:BNTX) and Moderna (NASDAQ:MRNA) are expected to dominate the global vaccine market this year with a combined market share of 88%. The mRNA-based vaccine makers are projected to generate $36.4 billion and $18.7 billion in sales, down by 15% and 27% from previous estimates, respectively.

    Meanwhile, Oxford/AstraZeneca (AZN) and Johnson & Johnson (JNJ), which used a traditional method to develop their COVID-19 shots, are estimated to generate $3 billion and $2.87 billion in sales, respectively. The sales forecast for the protein-based Novavax (NASDAQ:NVAX) vaccine stands at $2.74 billion, down ~41% from the previous estimate of $4.61 billion.

    Last year, Pfizer (PFE)/BioNTech (BNTX), Moderna (MRNA), AstraZeneca (AZN), J&J (JNJ), and Novavax (NVAX) raked in $61 billion in vaccine sales in total.

    According to Airfinity, many vaccine makers have slowed down their production as inventory levels have increased to an estimated 2.3bn vaccine doses. The firm thinks that 241 million Covid-19 vaccine doses procured by G7 countries and the EU remained unused and expired by mid-March.

    Jefferies analyst Roger Song sees signs of an end to the Covid-19 “money train” for vaccine makers, which look for diversifications to sustain the growth. Song projects the current vaccine market to change to an annual booster market worth about $5 billion – $10 billion in a few years.

    “This year Covid-19 is still providing a money train or cash cow but the companies have made it clear they are diversifying and developing new product pipelines, including pan-respiratory vaccines, which combine flu, coronavirus and RSV (respiratory syncytial virus)”.

    The latest estimates of a potential slowdown in vaccine sales come amid the uptake of Covid-19 pills, which entered the markets in 2021-end. However, last month, Airfinity predicted that many in the world would not be able to access the Pfizer (PFE) Covid-19 pill due to regulatory and production issues.


  16. CPI/Pman – What's happening now is what we expected – a sell-off on worsening inflation data (which forces the Fed to be more aggressive).


  17. Things seem to have settled down – drifting into tomorrow, I suppose. 

    STP chugging along:

    Security Value:  $391,148
    Cash on Hand:  $160,421
    Total Value:  $551,568
    Portfolio Ret.:  175.8%

    LTP holding up pretty well:

    Security Value:  $585,406
    Cash on Hand:  $1,777,503
    Total Value:  $2,362,909
    Portfolio Ret.:  372.6%

    Was $2,900,025 on Thursday last week when we checked and we did that roll thing with SQQQ and before that we had done the TSLA short, which is working well and now above is $2,914,477 on a 1% down day so we seem pretty stable – no pressure to change…

    Oh, and that's with T being zero'd out so better than that.

    TSLA Long Put 2023 20-JAN 1,000.00 PUT [TSLA @ $988.17 $-37.32] 5 4/6/2022 (284) $90,000 $180.00 $20.15 $180.00     $200.15 $11.15 $10,075 11.2% $100,075
    TSLA Short Put 2023 20-JAN 900.00 PUT [TSLA @ $988.17 $-37.32] -5 4/6/2022 (284) $-67,500 $135.00 $12.18     $147.18 $9.18 $-6,088 -9.0% $-73,588
    TSLA Short Call 2022 15-JUL 1,200.00 CALL [TSLA @ $988.17 $-37.32] -2 4/6/2022 (95) $-16,000 $80.00 $-34.80     $45.20 $-14.95 $6,960 43.5% $-9,040

    From:  Weakening Wednesday – Indexes Dip as Mortgage Rates Top 5%

    Good timing!


  18. Hi Phil – thoughts on PSX? Why does it trade at a lower multiple than VLO? It has also not broken out to highs unlike VLO. Would it be a good trade?





  19. Why American Teens Are So Sad



  20. Yikes, another terrible finish.  

    PSX/Rn – It's like other miners compared to GOLD – I only like to play the best one in a sector.  PSX is fine, there have been times we've played them but, over the years, I trust VLO to navigate difficult markets better than PSX.  They also have special fee agreements with PSXP that may favor PSXP more than they should and could be harmful as prices change – sort of incestuous.  There's certainly nothing terribly wrong with them at 11x earnings but, at 12.5x, there's certainly nothing wrong with VLO either.