Wall Street Ends Sharply Lower in Broad Sell-Off

The Nasdaq fell to its lowest level in about a month, and Microsoft Corp, Alphabet Inc, Amazon.com Inc, Apple Inc, Facebook Inc and Tesla Inc were among the biggest drags on the index as well as the S&P 500.

All 11 major S&P 500 sectors were lower, with economically sensitive groups like energy down the most.

Investors also were nervous ahead of the Federal Reserve’s policy meeting this week.

The banking sub-index dropped sharply while U.S. Treasury prices rose as worries about the possible default of Evergrande appeared to affect the broader market.

“You kind of knew that when there was something that caught markets off guard, that it was going to lead to probably a bigger sell-off and you didn’t know what the reason would be,” said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute.

“I guess it’s the China news but… it’s not altogether surprising given how bullish people were.”

Wednesday will bring the results of the Fed’s policy meeting, where the central bank is expected to lay the groundwork for a tapering, although the consensus is for an actual announcement to be delayed until the November or December meetings.

Unofficially, the Dow Jones Industrial Average fell 620.22 points, or 1.79%, to 33,964.66, the S&P 500 lost 75.28 points, or 1.70%, to 4,357.71 and the Nasdaq Composite dropped 325.95 points, or 2.17%, to 14,718.02.

The S&P 500 is down sharply from its intra-day record high hit on Sept. 2 and is on track to snap a seven-month winning streak.

Strategists at Morgan Stanley said they expected a 10% correction in the S&P 500 as the Fed starts to unwind its monetary support, adding that signs of stalling economic growth could deepen it to 20%.

The CBOE volatility index, known as Wall Street’s fear gauge, rose.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Caroline Valetkevitch in New York; additional reporting by Devik Jain and Sagarika Jaisinghani in Bengaluru and by Noel Randewich in San Francisco; Editing by Sriraj Kalluvila and Lisa Shumaker)

S&P Ends Modestly Lower as Rising Treasury Yields Offset Robust Retail Data

The three major indexes spent much of the day in negative territory as rising U.S. Treasury yields pressured market-leading tech stocks, and the rising dollar weighed on exporters.

Amazon.com Inc, buoyed by solid online sales in the Commerce Department’s report, helped push the Nasdaq into positive territory.

“Looking at today, clearly we had positive news from retail sales and it looks as if the massive slowdown in the economy is not materializing as a lot of people expected,” said Ryan Detrick, senior market strategist at LPL Financial in Charlotte, North Carolina.

“It’s a nice reminder that the economy is still taking two steps forward for each step back even amid the COVID concerns,” Detrick added.

Economically sensitive transports and microchips were among the outperformers.

Data released before the opening bell showed an unexpected bump in retail sales as shoppers weathered Hurricane Ida and the COVID Delta variant, evidence of resilience in the consumer, who contributes about 70% to U.S. economic growth.

“Once again, it shows the U.S. consumer continues to spend and continues to help this economy grow,” Detrick said.

The Dow Jones Industrial Average fell 63.07 points, or 0.18%, to 34,751.32; the S&P 500 lost 6.95 points, or 0.16%, at 4,473.75; and the Nasdaq Composite added 20.40 points, or 0.13%, at 15,181.92.

Eight of the 11 major sectors in the S&P 500 ended lower, with materials suffering the largest percentage drop.

The consumer discretionary spending sector posted the biggest gain, with Amazon.com doing the heavy lifting.

Apparel company Gap Inc gained 1.6%. Online marketplace Etsy Inc and luxury accessory company Tapestry Inc rose 3.1% and 1.9%, respectively.

Ford Motor Co rose 1.4% after it announced plans to boost production of its F-150 electric pickup model.

Declining issues outnumbered advancing ones on the NYSE by a 1.27-to-1 ratio; on Nasdaq, a 1.06-to-1 ratio favored advancers.

The S&P 500 posted nine new 52-week highs and one new low; the Nasdaq Composite recorded 82 new highs and 94 new lows.

Volume on U.S. exchanges was 9.37 billion shares, compared with the 9.44 billion average over the last 20 trading days.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Stephen Culp; Additional reporting by Ambar Warrick in Bengaluru; Editing by Richard Chang)

UK Shares Dip as British Inflation Data Reignites Taper Fears

The blue-chip index slipped 0.1%, with food delivery company Just Eat Takeaway.com dropping 3.5% to the bottom of the index following a media report that Amazon and rival Deliveroo will offer free delivery to prime subscribers in the UK.

Deliveroo shares were up 0.9%.

Losses in the index, however, were limited by decent gains by heavyweight oil majors BP, Royal Dutch Shell and life insurers.

The domestically focused mid-cap FTSE 250 index declined 0.3%.

Consumer prices last month rose by 3.2% in annual terms, its biggest monthly jump in at least 24 years, largely due to a one-off boost reflecting the “Eat Out to Help Out” scheme that pushed down restaurant meal prices last year.

The data came on the heels of a strong jobs report, with the focus now shifting to BoE’s policy meeting due next week as policymakers remain split on whether basic conditions for a rate hike are met by the economy.

“The key question for investors is how this impacts the timing of the first rate hike. The bank will be reluctant to move until it is also confident that the economy has successfully negotiated the end of the furlough scheme,” said Hugh Gimber, global market strategist at J.P. Morgan Asset Management.

“With inflation running hot and wages on the rise, the bank looks quite likely to be one of the first major central banks to hike rates next year.”

A Reuters poll forecasts the BoE will raise borrowing costs by end-2022, earlier than previously thought, and there is a chance it comes even sooner.

Among other stocks, Darktrace jumped 10.3% after the cybersecurity company increased its revenue growth forecast for its 2022 financial year.

Tullow Oil added 5.6% after the Africa-focused oil and gas company swung to a profit in the first half.

(Reporting by Devik Jain in Bengaluru; Editing by Uttaresh.V and Sherry Jacob-Phillips)

S&P 500 Ends Down After Jobless Claims Hit 18-Month Low

The Labor Department said initial claims for state unemployment benefits dropped 35,000 to a seasonally adjusted 310,000 for the week ended Sept. 4, the lowest level since mid-March 2020. That suggested that job growth could be hindered by labor shortages rather than cooling demand for workers.

Microsoft, Apple and Amazon each declined, all three among the stocks weighing most on the S&P 500 and Nasdaq.

The S&P 500 real estate and healthcare indexes were among the poorest performers of 11 sectors, while financials and materials made modest gains.

JPMorgan, Wells Fargo, Citi Group and Morgan Stanley each rose, tracking a slight rise in benchmark bond yields following the claims data.

“The problem with the market these days is it’s rotating more than it’s moving. Today, because of the jobs claims report, everyone is buying cyclical stocks,” said Jay Hatfield, chief executive of Infrastructure Capital Management in New York. “We see it as a rangebound market, between 4,400 and 4,600 (on the S&P 500).”

Investors have become more worried in recent sessions after a recent monthly jobs report showed a slowdown in U.S. hiring, suggesting the economic recovery may be losing steam faster than expected. Also dragging on sentiment has been uncertainty about when the U.S. Federal Reserve’s will scale back massive measures enacted last year to shield the economy from the coronavirus pandemic.

Unofficially, the Dow Jones Industrial Average fell 147.25 points, or 0.42%, to 34,883.82, the S&P 500 lost 20.44 points, or 0.45%, to 4,493.63 and the Nasdaq Composite dropped 38.17 points, or 0.25%, to 15,248.46.

Lululemon Athletica soared after providing a strong annual forecast, as demand for its yoga pants remains strong despite the easing of coronavirus restrictions.

Reports that Beijing slowed down approval for all new online video games sent shares of U.S.-listed gaming stocks Activision Blizzard Inc, Electronic Art Inc, and Take-Two Interactive Software Inc down more than 1%.

Digital Realty slid after the data center REIT announced a public offering of 6.25 million shares.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Noel Randewich; Additional reporting by Shashank Nayar in Bengaluru; Editing by Anil D’Silva, Arun Koyyur and Aurora Ellis)

Kroger Overbought and Overpriced

The Kroger Co. (KR) reports fiscal Q1 2022 earnings in Friday’s pre-market, with analysts looking for a profit of $0.64 per-share on $30.7 billion in revenue. If met, earnings-per-share (EPS) will mark a 12% reduction in profit compared to the same quarter last year, when Americans overstocked their shelves with food and supplies due to the pandemic. The stock jumped more than 4% in June after beating Q4 2021 top and bottom-line estimates and is now trading near an all-time high.

Outperforming Larger Rivals in 2021

The grocery giant is outperforming Walmart Inc. (WMT) and Amazon.com Inc. (AMZN) by wide margins in 2021, despite the rapid growth of their supermarket services. The chain, which operates more than 3,000 locations under the Fry’s, King Sooper’s, City Market, and Ralph’s labels, has benefited from soaring foot traffic as unvaccinated folks visit their pharmacies. In addition, it has maintained profit margins despite food commodity inflation, strategically raising prices.

Many big investors own Kroger stock, including Warren Buffett, who raised his stake from 51.06 to 61.79 million shares during the quarter. Even so, earnings growth has decelerated since 2020, highlighted by a digital sales slowdown to an unimpressive 16% in the last quarter. Additional slowing could easily trigger a reversal and pullback, compounded by 24% upside since the last earnings report.

Wall Street and Technical Outlook

Wall Street is taking a cautious view, posting a consensus ‘Hold’ rating based upon 5 ‘Buy’, 1 ‘Overweight’, 15 ‘Hold’, and 3 ‘Underweight’ recommendations. In addition, four analysts recommend that shareholders close positions and move to the sidelines. Price targets currently range from a low of $28 to a Street-high $48 while the stock is set to open Tuesday’s session less than $2 below the high target. Given slowing growth, this lofty placement favors new short sales, if the seller is willing to pay the current $0.21 per-share dividend.

Kroger spiked into the low 40s in a vertical impulse in January 2020 and gave up those gains during the pandemic decline. A slow but persistent recovery wave reached the prior high in August 2021, yielding an immediate breakout that posted an all-time high at 47.99 last week. The stock is consolidating near that level as the new trading week begins, with headwinds favoring a sell-the-news reaction after Friday’s report.

For a look at all this week’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

Nasdaq Ekes Out Record Finish as Wall St Ends Higher

The energy sector rose, reversing most of the losses suffered during the first three days of the week. Thursday’s performance was fueled by U.S. crude prices jumping 2% on a sharp decline in U.S. inventories and a weaker dollar.

Cabot Oil & Gas Corp and Occidental Petroleum Corp were among the largest risers, with oil majors Exxon Mobil and Chevron Corp also posting solid gains.

The technology index slipped into negative territory, as some of the industry’s largest companies saw their recent upward momentum stall.

Amazon.com Inc, Microsoft Corp, Facebook Inc and Google-owner Alphabet Inc were all under water. A notable exception was Netflix Inc, which hit an all-time high intraday.

U.S. stocks have regularly hit record highs over the past few weeks as a solid corporate earnings season and hopes of continued central bank support underpinned confidence as data showed the country’s post-pandemic economic growth was beginning to slow.

Data on Thursday showed the number of Americans filing new claims for jobless benefits fell last week, although the focus will be on the Labor Department’s monthly jobs report on Friday to set the stage for the Fed’s policy meeting later this month.

The report is likely to show job growth slowed to 750,000 in August from 943,000 the previous month.

“You have to see very wide beats or misses in this data to really change people’s minds,” said Greg Boutle, U.S. head of equity and derivative strategy at BNP Paribas.

“Investors are either in this renormalization camp that thinks inflation will not happen, or they believe there will be some persistence to inflation. Really, it will be a collection of beats or misses that will move the needle for investors and the Fed, rather than a single data point.”

Unofficially, the S&P 500 gained 12.92 points, or 0.29%, to end at 4,537.01 points, while the Dow Jones Industrial Average  gained 129.38 points, or 0.37%, to 35,441.91. The Nasdaq Composite  rose 21.15 points, or 0.14%, to 15,330.53.

Despite deadly flash floods in New York City, trading on Wall Street was operating normally.

Wells Fargo rose after three straight sessions of losses. The lender had been weighed by a report it could face further regulatory sanctions over the pace of compensating victims of a years-long sales practice scandal.

Contracting services company Quanta Services Inc jumped to a record high after saying it would buy privately held Blattner Holding Company in a deal valued at about $2.7 billion.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Shashank Nayar in Bengaluru and David French in New York; Editing by Aditya Soni and Lisa Shumaker)

Walmart Eyes Bigger Piece of Grocery Delivery Pie

When a company such as Walmart or e-commerce giant Amazon.com enters a market, you know that the sector will never be the same. Seeing both companies compete for market share in the same segment is becoming increasingly common.

Most recently, big-box retailer Walmart is poised to disrupt the food-delivery business further, as it continues to take aim at market leader Amazon.com. According to a report in The Wall Street Journal, Walmart plans to start offering grocery delivery services in New York in addition to the cities it is already serving. Amazon owns Whole Foods, where Jeff Bezos’ company initiated grocery e-commerce.

Walmart is working with Instacart for the venture and will target a trio of NY boroughs to begin, including Brooklyn, Queens and the Bronx. One borough that is noticeably missing is Manhattan. For its part, Instagram uses the gig economy to match delivery workers with customers on its platform, similar to how Uber and Lyft use it for ride-share purposes.

Walmart shares were up fractionally today and are close to flat for the year. Walmart is also a dividend-paying stock.

Market Landscape

Walmart’s grocery push will give it a stake in the New York City market, where it does not currently have a retail presence. Through its existing partnership with Instacart, the retailer has already expanded into grocery delivery in a couple of other states including California and Oklahoma.

Similar to how Big Tech is disrupting financial services, big-box retailers are increasingly taking market share in the delivery business, both competing and cooperating with market leaders such as DoorDash in the interim. Walmart also boasts its own delivery business dubbed Walmart GoLocal that it contracts out to other retailers.

Table Stakes

In addition to grocery delivery, Walmart and Amazon are similarly jockeying for position in the buy now pay later (BNPL) space. Most recently, Amazon has teamed up with BNPL provider Affirm in the U.S. for a deal in which customers will be able to pay for certain purchases in installments over time for no interest. In addition to Amazon, Affirm also counts Walmart among its partners.

While there is room for both companies, the table stakes continue to rise in these increasingly popular market niches.

Wall Street Boom or Bubble? Don’t Blame It All on the Fed: Jamie McGeever

It is undeniable that trillions of dollars of asset purchases and years of official interest rates of zero and 10-year bond yields barely above 1% have boosted stock prices.

But the significance of Fed actions are overstated.

The tech-heavy composition of Wall Street, which benefits more from low interest rates and plain old stronger economic growth, are adding fuel to the U.S. stock surge. And the Fed’s large balance sheet expansion is nowhere near the European Central Bank or Bank of Japan’s.

Look no further than Wall Street: The S&P 500 has more than doubled from its COVID low of March last year, chalking up 51 record highs this year.

According to Ryan Detrick, chief market strategist at LPL Financial in Charlotte, North Carolina, only 1964 and 1995 had more than 50 new highs by the end of August. He reckons the S&P 500 could make 78 new highs this year, eclipsing the all-time record of 77 set in 1995.

On a 12-month forward earnings valuation basis, the S&P 500 earlier this year was its most expensive since 1999, just before the tech bubble burst. This price/earnings ratio has since drifted lower. But it is still above 20, which is unfamiliar territory for most of the last two decades.

Official interest rates and ultra-low benchmark bond yields make investing in profitable, cash-generating companies an attractive proposition. To some investors desperate for return, riskier stocks are a no-brainer.

Many argue there is a natural consequence of the Fed doubling the size of its balance sheet to $8.3 trillion since the pandemic outbreak.

As a share of GDP, that is now around 40%.

With stocks and other financial assets mostly in the hands of society’s better off, critics say U.S. monetary policy is widening the gap between rich and poor and directly exacerbating wealth inequality.

The world’s second and third largest central banks, meanwhile, have also ramped up their pandemic-fighting asset purchases. Their balance sheets, as a share of GDP, are far bigger than the Fed’s. Yet stock markets and valuations in the euro zone and Japan are nowhere near as high.

“The commonly held narrative centers on the Fed, and if everyone believes that, then it is self-reinforcing,” said Meb Faber, co-founder and chief investment officer at Cambria Investments in El Segundo, California.

“But there is a limit as to how far you can extrapolate that.”

The ECB has grown its balance sheet to $9.5 trillion since the outbreak of the pandemic. The ECB’s balance sheet is now worth more than 60% of euro zone GDP.

Similarly, the Bank of Japan has grown its balance sheet by $1.4 trillion since March 2020 to $6.6 trillion, around 120% of GDP.

Yet the euro Stoxx 50 is up ‘only’ around 65% from the COVID low, and is still 23% below its record high from March 2000. Euro stocks’ 12-month forward price/earnings ratio is around 16.

Japan’s Topix is up 55% from the COVID low and has a forward multiple of around 13.

Both figures, again, are significantly below their U.S. equivalents, suggesting factors other than central bank largesse are behind Wall Street’s surge.

For one, the U.S. equity market is far more tech- and digital-heavy than its global peers.

A world of zero interest rates benefits tech companies disproportionately because a low discount rate inflates future cash flows for companies where cutting edge innovation is likely to fuel faster growth. By any measure, the big five tech ‘FAANG’ stocks – Facebook, Amazon, Apple, Netflix and Google – dominate Wall Street. They have risen more than three times the broader S&P 500 in the last five years and their $7 trillion market cap is 21% of the whole index.

Another is good old-fashioned economic growth.

Some of the more bullish U.S. forecasts have been trimmed recently, but the International Monetary Fund expects 7.0% GDP growth in the United States this year, 4.6% in the euro zone, and just 2.8% in Japan.

On top of that, Corporate America is motoring along nicely.

LPL Financial’s Detrick notes that some 85% of S&P 500 companies posted second quarter earnings beats. And 2021 consensus earnings per share estimates are for a 43% jump from last year.

“The Fed backstop helps explain why people are willing to pay higher multiples. But higher earnings are higher earnings, and that justifies a lot. Investors still see better opportunity in the U.S., and are willing to pay that premium,” he said.

For a look at all of today’s economic events, check out our economic calendar.

(By Jamie McGeever; Editing by Edward Tobin)

Home Depot Could Sell Off to 300

Dow component Home Depot Inc. (HD) is trading lower by more than 3% in Tuesday’s pre-market after beating Q2 2021 top and bottom line estimates by slim margins. The home improvement giant posted a profit of $4.53 per-share during the quarter, $0.10 better than expectations, while revenue rose a modest 8.1% year-over-year to $41.12 billion, less than $400 million above consensus. US sales rose just 3.4%, highlighting tough ‘comps’ after last year’s COVID-driven windfall.

Post-Pandemic Hangover

The company generated historic revenue in 2020, underpinned in the first half by pandemic lockdowns that freed up time for at-home activities, and in the second half by the migration of the Zoom crowd to new parts of the country.  Mean reversion has now resumed control of quarterly performance, easing toward historic norms that underpinned years of higher prices. However, the stock has already gained 22% so far in 2021, raising doubts about second half performance.

Other big players in the retail space are dealing with similar headwinds, as evidenced by an identical sell-the-news reaction after Walmart Inc. (WMT) also beats estimates on Tuesday.  Amazon.com Inc. (AMZN) remains the poster child for this 2021 performance hangover, posting a 0% return since July 2020 after soaring 81% earlier that year. All in all, this malaise perfectly illustrates the old market adage that “the bigger the move, the broader the base”.

Wall Street and Technical Outlook

Wall Street consensus is locked into an ‘Overweight’ rating based upon 19 ‘Buy’, 4 ‘Overweight’, 20 ‘Hold’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $300 to a Street-high $391 while the stock is set to open Tuesday’s session about $27 below the median $350 target. A descent to the low target is possible with this configuration, which makes sense because support at June’s rangebound low is situated just below that level.

Home Depot broke out above 2018 resistance just above 200 in September 2019 and topped out at 247.36 in February 2020, ahead of a pandemic decline that dropped the stock to a three-year low. The subsequent uptick mounted first quarter resistance in June, yielding a two-legged advance that posted an all-time high at 345.69 in May 2021. A persistent pullback found support at 303.83 in June while the bounce into August has reversed at the .786 Fibonacci selloff retracement level. In turn, this also raises odds for a quick trip to 300.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

How Options Are Fueling The Markets

First, let’s look at the covid crisis and how it played a role. As a result of the shutdowns, the FED took a really aggressive stance with its quantitative easing measures.  Lots of money printing to pay for massive stimulus payouts.  The worse news we hear historically is that the markets will react sharply to the downside.

In this market, they did the opposite because many in the market viewed the bad news as a sign the FED will keep its foot on the gas with their aggressive quantitative easing.  The markets love this as they see it as huge economic growth with less risk, even when things were shut down.  Many people were at home and had nothing to do but spend their stimulus money.  The markets loved this.  That is why we saw massive growth in AMZN, FB, GOOGL, and MSFT.  Other stocks favored from staying at home were ZM, NFLX, and TTD.

Now how do options fuel the markets?  Well, when an underlying stock has options there is a secondary derivative market that has its own supply and demand outside of the stock.  This can cause market makers to balance those demands.  How do they do this?

They do this by taking the difference of the total contracts bought and sold and adjust accordingly.  So for example let’s look at SPX.  In the below picture you can see Put volume is roughly half the call volume.  In this case, the market maker would engage in an activity called delta hedging where they would buy shares of stock to offset the difference between the Put and Call contract volume.  Since the market maker is only interested in the arbitrage between the bid and ask of these contracts, they want to stay delta neutral or, in other words, not be affected by stock price movement.

When they buy to offset, this can drive the price of an underlying stock up.  This is one reason why so many traders watch unusual options activity.

Every day on  Options Trading Signals we do defined risk trades that protect us from black swan events 24/7.  Many may think that is what stop losses are for.  Well, remember the markets are only open about 1/3 of the hours in a day.  Therefore, a stop loss only protects you for 1/3 of each day.  Stocks can gap up or down.  With options, you are always protected because we do defined risk in a spread.  We cover with multiple legs which are always on once you own.

Enjoy your day!

For a look at all of today’s economic events, check out our economic calendar.

Chris Vermeulen
Founder & Chief Market Strategist


Amazon Launches Its $1.5 Billion Air Hub In Kentucky

Amazon is working towards ensuring faster delivery and the launch of its latest air hub in Kentucky signals the company’s intentions.

Amazon Opens Its Latest Air Hub

E-commerce giant Amazon announced earlier today that it had launched its latest air hub in Northern Kentucky. The $1.5 billion air hub is designed to help the e-commerce giant deliver products to its customers faster.

In an announcement earlier today, Amazon said the launch of the air hub is a major milestone for Amazon Air, the company’s fast-growing air cargo arm. The Amazon Air routes are flown by several contracted carriers and have experienced massive growth since it was launched five years ago.

While Amazon Air currently operates in over 40 airports across the United States, the terminal at Cincinnati/Northern Kentucky International Airport is expected to serve as the central nerve of the company’s nationwide cargo network. The terminal will enable Amazon to boost its 1-day and same-day delivery in various parts of the United States.

The launch of the Kentucky hub is a huge achievement for Amazon as the company has been working on the project for the past four years. Bezos believes that the hub would allow Amazon to get packages to customers faster, and that is a big deal for the company.

AMZN Consolidating Following A Period Of Growth

Amazon’s stock experienced an excellent start to the year, rising by over 20% to reach a yearly high of $3,727 in July. However, AMZN has been in a consolidation stage for the past few weeks, with the stock price down by over 10% in less than two months.

AMZN stock chart. Source: FXEMPIRE

At the time of this writing, AMZN is trading at $3,292.22 per share, down by 0.86% today. The stock price has declined despite the positive news of the launch of the Kentucky air hub. However, Amazon remains one of the leading companies globally, and analysts still see it performing well before the end of the year.

eBay Nearing Support Ahead of Earnings

eBay Inc. (EBAY) reports Q2 2021 earnings after Wednesday’s closing bell, with analysts looking for a profit of $0.95 per-share on $3.0 billion in revenue. If met, earnings-per-share (EPS) will mark a 12% decline compared to the same quarter last year. The stock sold off more than 10% in April, despite meeting Q1 estimates with a 26.4% year-over-year revenue increase, and rallied into July’s all-time high in the mid-70s.

Riding the Non-Fungible Token (NFT) Wave

The e-commerce provider has outperformed larger rivals so far in 2021, posting a 30% return compared 2.7% for Amazon.com Inc. (AMZN) and less than 1% for Dow component Walmart Inc. (WMT). The explosive growth of non-fungible tokens (NFT) has underpinned revenue and investor sentiment since sales were introduced in May. It’s a perfect place for this initiative, with digital trading cards, music, entertainment, and art backed up by blockchain technology.

eBay discussed this emerging growth channel at the time of the release, noting that “NFTs offer greater access to a broader audience of collectors and creators. In the same way digital publishing brought more exposure for writers, digital collectibles bring greater opportunity for artists and creators. We plan to double down on this idea – combining eBay’s global reach with the principle that anyone can find almost anything on our platform”.

Wall Street and Technical Outlook

Wall Street consensus remains unenthusiastic, with an ‘Overweight’ rating based upon 7 ‘Buy’, 2 ‘Overweight’, 10 ‘Hold’, and one ‘Underweight’ recommendation. No analysts are recommending that shareholders close positions. Price targets range from a low of $59.20 to a Street-high $81.00 while the stock closed Friday’s session on top of the median $66.00 target. This suggests the company will need to raise Q3 guidance to trade at higher prices.

eBay completed a round trip into the 2018 high at 46.99 in June 2020 and broke out, entering an uptrend that stalled just above 60. The stock cleared that barrier in June 2021, lifted into July’s all-time high at 74.13, and turned south into August. It’s currently trading below the 50-day moving average for the first time since May and testing support in the mid-60s. So far at least, this looks like garden variety profit-taking, suggesting even higher prices in coming months.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Amazon Interfered with Union Elections, Says U.S. Labor Board

(Corrects to remove reference to police, threats to employees)

The board on Monday recommended a rerun of the landmark Amazon union election in Alabama where employees had voted against making their warehouse the online retailer’s first union in the United States.

(Reporting by Nivedita Balu in Bengaluru; Editing by Arun Koyyur)

Square Trading Sharply Lower After Acquisition News

Square Inc. (SQ) is trading lower by nearly 5% in Monday’s pre-market after missing Q2 2021 revenue estimates and announcing the acquisition of Australian fintech provider Afterpay Ltd. for $29 billion. The San Francisco-based payment processor earned $0.66 per-share during the quarter, $0.35 better than expectations, while revenue rose 143.3% year-over-year to $4.68 billion, nearly $400 million lower than consensus.

Revenue Shortfall Sours Bullish Sentiment

The company hopes the Allpay acquisition will accelerate “strategic priorities for its Seller and Cash App ecosystems”. The all-stock deal is expected to close in the first quarter of calendar year 2022, indicating that a secondary offering will be needed to cover the purchase. Square predicts the transaction will be “accretive to gross profit growth with a modest decrease in Adjusted EBITDA markets expected in the first year after completion of the transaction”.

The sell-the-news reaction reveals shareholder anxiety about Square’s long-term growth trajectory. The acquisition will dilute current shares, requiring an equal uptick in income that isn’t guaranteed, given complex integration issues. Even so, the revenue shortfall is a bigger deal because, as PayPal, Inc. (PYPL) and Amazon.com Inc. (AMZN) underscored last week, 2020 COVID beneficiaries are having a harder time maintaining growth as quarterly metrics revert to historical norms.

Wall Street and Technical Outlook

Wall Street consensus stands at an ‘Overweight’ rating after 2020’s phenomenal 347% return, consisting of 24 ‘Buy’, 1 ‘Overweight’, 15 ‘Hold’, and 1 ‘Underweight’ recommendation. In addition, one analyst recommends that shareholders close positions and move to the sidelines. Price targets currently range from a low of $175 to a Street-high $380 while the stock is set to open Monday’s session more than $40 below the median $281 target. This humble placement suggests that Main Street is worried about post-COVID growth.

Square broke out above the 2018 high at 101.15 in June 2020 and took off in a powerful trend advance that posted an all-time high at 283.19 in February 2021. A rapid decline to 191 set the lower boundary of a trading range that has remained intact for the last five months. Price action has improved since a successful support test in May but the stock is now stuck near the dead center of the sideways pattern, likely months away from a sustained breakout or breakdown.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

A Post-Covid Hangover – Should You Worry About Your Portfolio?

Amazon executives noted shifting consumer habits as the pandemic eases and people become more mobile. Amazon forecasted the next quarter’s sales at between $106 billion and $112 billion, compared to Wall Street expectations for right around $119 billion.

Amazon’s projections would still represent growth of +10% to +16%. Keep in mind, bears are also pointing to ongoing fears of supply chain hiccups, higher-trending inflation, and new coronavirus outbreaks. Earnings come at a busy pace again today with results from Caterpillar, Cerner, Chevron, CNH Industrial, Colgate Palmolive, Enbridge, Exxon Mobil, Johnson Control, and Procter & Gamble.

The worry on Wall Street is that this new normal rate of growth will be slower than many analysts and trading firms are forecasting coupled with higher inflation and or supply chain dislocations corporate profits could fall under some pressure or in this case be less than Wall Street is forecasting for the next few quarters. Bulls expect more consumer spending will shift from goods and pandemic-related services (delivery, video games, cloud/collaboration software) but are still betting on pent-up demand for things people missed out on during lockdowns, as well as goods and services that are currently in short supply.

Data to watch

Updated inflation data is also on tap with the ISM Manufacturing Index on Monday and the Services Index on Wednesday.

There will be plenty more earnings next week too, including Simon Properties and Zoom on Monday; Activision Blizzard, Alibaba, Amgen, Clorox, ConocoPhillips, Eli Lilly, Fidelity, Match Group, Monster Beverage, Occidental Petroleum, and Phillips 66 on Tuesday; Allstate, CVS, Etsy, General Motors, Kraft Heinz, Marathon Petroleum, MetLife, MGM Resorts, Rocket Companies, Roku, Trane, and Uber on Wednesday; Adidas, AMC, Carvana, Cigna, Cloudflare, Corteva, Duke Energy, Kellogg, Moderna, Nintendo, Novo Nordisk, Siemens, Square, Wayfair, Zillow, and Zoetis on Thursday; and Dish Network, Dominion Energy, and DraftKings on Friday.

Insider Accumulation

ES ##-## (Daily) 2021_08_01 (19_25_02)

I have mixed feelings about SP500. There are a few signs of weakness. However, it might be the result of low summer activity. Advance-Decline Line is clearly bearish. Insider Accumulation is also not that strong. Moreover, the Volatility Index is very low and potentially it could bring a pullback. In any case, SP500 futures failed to close the week above Gann resistance. And that is also a negative sign.

The Federal Reserve policy is still supportive. But keep in mind, that SP500 has rallied around 100% since the pandemic bottom without any pullback. And the retest of key support zones near 4200 and 4000 is realistic.

On the other hand, the continuation of the rally is also possible but only if price sustains above 4400. If that happens, bulls will target 4500 and 4600 in extension.

August Poised for Upbeat Start With Stock Index Futures in the Green

Stocks were weighed down on Friday after Amazon shares took a tumble. All three major stock market indices finished the session in the red. And while the S&P 500 was down for the day, it clocked a gain for the month of July as a whole. Also on Friday, the Dow Jones Industrial Average fell almost 150 points, while the tech-heavy Nasdaq was down more than 100 points.

That Was Then, This Is Now

Stock index futures are trading in the green across the board on Sunday evening. At this rate, investors are poised to leave Friday’s declines and inflation fears behind and begin the month of August on a positive note.

Stocks to Watch

Amazon’s stock plummeted 7.5% on Friday after the e-commerce giant fell short on the top line, a disappointment that hasn’t happened in three years. As the economy has reopened, consumers have turned their attention to other things beyond online shopping.

As a result, Amazon’s Q3 revenue is expected to similarly fall below Wall Street estimates, though it will likely remain above the USD 100 billion threshold. Amazon is not alone amid a trend among big tech companies where revenue is retreating from pandemic-related highs.

Square reported its Q2 earnings sooner than expected. In the report, Square revealed that it is scooping up Afterpay, an Australia-based buy now, pay later (BNPL) startup, in a blockbuster USD 29 billion deal using all stock. Square CEO Jack Dorsey said that his company and Afterpay have a “shared purpose.” Square will integrate AfterPay into its Cash App and Seller divisions, giving more merchants the opportunity to offer BNPL.

In Q2, Square’s revenue soared more than 143% to USD 4.68 billion. Bitcoin revenue came in at USD 2.72 billion via the Cash App. Square’s earnings call will take place on Monday.  The call was originally planned for Aug. 5 but that one has been cancelled.

Look Ahead

The ISM Manufacturing index for the month of July will be released on Monday. Wells Fargo economists predict that the ISM index fell slightly due to the one-two punch of hiring challenges and supply-chain constraints that have taken a toll on the manufacturing sector.

Construction spending data for June will also come out on Monday. Wells Fargo economists are expecting an increase of 0.6% in “construction outlays.”

On the earnings front, Uber Technology reports its Q2 results on Wednesday. DraftKings will report its quarterly results on Friday.

Amazon Fails Breakout After Revenue Warning

Amazon.com Inc. (AMZN) became the latest casualty of a tough earnings season on Friday, dropping more than 7.5% after missing Q2 2021 revenue expectations and issuing weak Q3 guidance. The e-commerce juggernaut earned $15.12 per-share, beating estimates by $2.88, while revenue grew 27.2% year-over-year to $113.08 billion, about $2 billion below consensus. Cloud services knocked it out of the park as usual, growing 37% year-over-year, while Prime purchases grew at the slowest pace in four quarters.

Another Post-COVID Hangover

The company detailed limp second quarter Prime growth, which prompted the third quarter warning, noting that folks emerging from the winter’s pandemic wave were spending more time traveling and engaging in other physical activities. Tough 2020 comparisons also drove the aggressive sell-the-news reaction because Amazon and other COVID beneficiaries booked historic market share gains at that time, depleting the pool of potential 2021 customers.

‘Peak growth’ has become a hot topic on Wall Street, with U.S. GDP easing after a torrid first half while inflation expectations settle back to earth. As a result, nervous shareholders have been selling strong second quarter earnings reports at the majority of last year’s big winners, understanding that year-over-year comparisons will be tougher going forward, at the same time that profit and revenue trajectories revert to historical norms.

Wall Street and Technical Outlook

Wall Street hasn’t reacted to the quarterly metrics but downgrades are possible in coming sessions. Consensus now stands at a ‘Buy’ rating based upon 41 ‘Buy’, 7 ‘Overweight’, and just 2 ‘Sell’ recommendations. Price targets currently range from a low of $3,775 to a Street-high $5,000 while the stock closed Friday’s session more than $400 below the low target. This huge disconnect reveals misguided analyst cheerleading, given the mixed third quarter outlook.

Amazon broke out above the 2018 high near 2,050 in April 2020, entering an historic uptrend that topped out at 3,552 in September. A rapid pullback to 2,871 marked the low end of a trading range that stayed intact until a July 2021 breakout posted an all-time high at 3,773.08. It’s been all downhill since that time, with Friday’s selloff completing a failed breakout that exposes another sub-3,000 decline. More importantly, the stock’s return in the last 12 months is now approaching zero, forcing many shareholders to consider a timely exit.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Why Amazon Stock Is Down By 7% Today

Amazon Stock Dives On Weak Q3 2021 Guidance

Shares of Amazon found themselves under significant pressure after the company released its second-quarter earnings report.

Amazon reported revenue of $113.1 billion, which was lower than analyst estimates. The company’s GAAP earnings of $15.12 per share exceeded analyst expectations but were not sufficient enough to provide support to Amazon shares.

In Q3 2021, Amazon expects to report revenue of $106 billion – $112 billion, which means that Amazon’s revenue will decrease compared to the second quarter. The company’s operating income is projected to be between $2.5 billion and $6 billion compared to $6.2 billion in Q3 2020.

The market was clearly shocked by the company’s quidance for the next quarter, and the stock opened with a big gap down. The stock has made an attempt to gain ground as some speculative traders decided to buy the dip, but it failed to develop upside momentum.

What’s Next For Amazon Stock?

Investors and traders got used to strong reports from Amazon so the soft Q3 2021 guidance dealt a major blow to the stock. Analysts expect that the company will report earnings of $55.86 per share in 2021 and $72.38 per share in 2022, so the stock is trading at roughly 46 forward P/E.

Amazon has always enjoyed rich multiples as investors believed in its growth story, and it remains to be seen whether one report will change the market’s view.

It should be noted that the report highlights potential problems for all leading tech companies as they may face slower growth in case the world succeeds in its battle against the coronavirus pandemic and gets back to normal life.

It’s too early to say that Amazon’s growth story is under question, and the stock will surely attract opportunistic buyers. However, it remains to be seen whether support from such buyers will be sufficient enough to push Amazon shares back to recent highs in the upcoming trading sessions.

For a look at all of today’s economic events, check out our economic calendar.

Stocks Retreat As Amazon Drags Down Tech Shares

Stocks Are Under Pressure Ahead Of The Weekend

S&P 500 futures are moving lower in premarket trading as Amazon‘s disappointing quarterly results put pressure on tech stocks.

Amazon released its second-quarter report yesterday, after the market close. The company reported revenue of $113.1 billion and GAAP earnings of $15.12 per share, missing analyst estimates on revenue and beating them on earnings.

The market focused on the disappointing revenue performance and weak third-quarter guidance as Amazon forecasted revenue of $106 billion – $112 billion in Q3 2021.

Currently, the stock is down by about 7% in premarket trading, and Nasdaq futures are down by roughly 1%. It remains to be seen whether traders will rush to buy the dip in Amazon shares and other tech stocks ahead of the weekend or choose to take some profits off the table near record highs for S&P 500 and Nasdaq.

Personal Income Increased By 0.1% In June

U.S. has just released Personal Income and Personal Spending reports for June. The reports indicated that Personal Income increased by 0.1% month-over-month in June compared to analyst consensus whcih called for a decline of 0.3%. Personal Spending grew by 1% compared to analyst consensus of 0.7%.

Today, traders will also have a chance to take a look at the final reading of Consumer Confidence report for July. Analysts expected that Consumer Confidence declined from 85.5 in June to 80.8 in July.

WTI Oil Settles Above The $73 Level As Traders Shrug Off Virus Worries

WTI oil managed to get above the $73 level and continues to move higher as traders bet that demand for oil will continue to increase despite the recent surge in the number of new COVID-19 cases which was caused by the Delta variant of coronavirus.

Recent data indicates that crude inventories are moving lower, which is bullish for oil. Today, oil-related stocks will have a good chance to continue their rebound after strong results from Exxon Mobil and Chevron.

For a look at all of today’s economic events, check out our economic calendar.

Today’s Market Wrap Up and a Glimpse Into Friday

Stocks finished the day in the green after investors were able to brush off signs that the economic recovery may have hit a snag. The Dow Jones Industrial Average tacked on more than 150 points, while the S&P 500 and tech-heavy Nasdaq also inched higher. The market indices showed resilience even as the delta variant threatens to throw a wrench into economic expansion for the rest of the year.

Second-quarter GDP expanded at an annual rate of 6.5%, which catapults the economy beyond pre-COVID levels but falls short of estimates. Meanwhile, the forecast for the rest of the year could be threatened by the uncertainty from the delta variant. Companies have responded by delaying the return to the office or in some cases reinstating mask policies for consumers. It’s déjà vu all over again.

Investors were able to focus on the glass half full. For example, consumer spending and corporate earnings have been bright spots of late. Meanwhile, supply chain issues seem to be a stumbling block.

Stocks to Watch

Amazon reported its Q2 results, and the stock sank 5% in after-hours trading. While the e-commerce giant reported revenue of slightly more than USD 113 billion, Wall Street analysts were looking for USD 115 billion. Amazon’s revenue outlook for Q3 also falls below consensus estimates, and the stock is being punished. The latest quarterly performance unfolded just before Jeff Bezos was replaced as CEO by Andy Jassy earlier this month.

Pinterest is also under pressure in extended-hours trading, falling 14%. The company fell short on its number of monthly active users, which came in at 454 million compared to estimates of 482 million. This indicator could also come back to bite Pinterest in Q3, for which management failed to provide any forecast and blamed the pandemic.

Robinhood’s IPO was a flop after the stock fell more than 8% on its first day of trading on the Nasdaq. The trading app’s shares opened at USD 38 and finished the day at just under USD 35. Robinhood sought to appeal to retail investors but was in for a rude awakening. The broker finished the day with a market cap of USD 29 billion.

Look Ahead

On the economic front, Personal Income & Spending for the month of June comes out on Friday. Wells Fargo economists predict that income fell 0.2% while spending increased 2% vs. May levels. The weaning away of the stimulus is pressuring incomes.