S&P 500 (SPY) Rebounds After Testing New Lows

Key Insights

  • S&P 500 found support below the 3600 level and moved towards the resistance at 3640.
  • The rebound is broad as traders buy stocks from various industries near yearly lows. 
  • A move above 3640 will push S&P 500 towards the resistance at 3675.

S&P 500 Gains Ground As Treasury Yields Pull Back

S&P 500 gained upside momentum after testing new lows near 3570 as traders rushed to buy stocks after the strong pullback.

The yield of 10-year Treasuries failed to settle above the 4.00% level and pulled back below 3.90%, providing additional support to stocks.

While the rebound is broad, it is important to note that semiconductor stocks remain under pressure. Qualcomm, Qorvo, ON Semiconductor and other stocks in this market segment are moving lower as traders react to the recent export controls imposed on China.

Meta and NVIDIA tested new lows today but managed to move away from yearly lows amid a broad rebound in the stock market.

From a big picture point of view, today’s rebound looks technical. S&P 500 moved from the 3800 level to 3575 in just four trading sessions, so it’s not surprising to see that some traders were ready to buy stocks at a material discount to recent levels.

The market will soon get tested by the earnings season. Big banks, including JP Morgan Chase, Wells Fargo, Citigroup, and Morgan Stanley, will present their results at the end of this week, and their reports will have a significant impact on market mood. Trading may stay choppy ahead of these important reports.

S&P 500 Tests Resistance At 3640

S&P 500

S&P 500 managed to settle back above 3615 and is trying to settle above the next resistance level at 3640. In case this attempt is successful, it will head towards the resistance at 3675. A move above the resistance at 3675 will push S&P 500 towards the 3700 level.

On the support side, the nearest support level for S&P 500 is located at 3615. If S&P 500 declines below this level, it will move towards the next support level at 3585. A successful test of the support at 3585 will push S&P 500 towards the next support level at 3560.

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

S&P 500 (SPY) Tries To Gain More Ground Despite Powell’s Comments

Key Insights

  • Hawkish commentary from Fed Chair Powell put some pressure on leading tech stocks. 
  • Healthcare and financial stocks enjoy strong support today. 
  • S&P 500 needs to settle above 4015 to continue its rebound.

S&P 500 Tries To Continue Its Rebound

S&P 500 is swinging between gains and losses today as leading tech stocks have once again found themselves under pressure. Apple, Alphabet, Amazon are down by about 1%.

Today, traders focused on the hawkish comments from Fed Chair Jerome Powell, who highlighted the importance of Fed’s fight against inflation. Treasury yields moved higher, which was bearish for growth stocks and put some pressure on S&P 500.

At the same time, it should be noted that demand for stocks is visible in the healthcare and financial segments. For example, big banks like JP Morgan, Citigroup, Morgan Stanley are up by about 2% today.

S&P 500

S&P 500 failed to settle above the 4000 level and pulled back. Currently, S&P 500 has settled between the support at 3950 and the resistance at 3980. In case S&P 500 declines below the 3950 level, it will gain additional downside momentum and move towards the next support level at 3915.

On the upside, S&P 500 must settle above 4015 to have a chance to gain sustainable upside momentum. A move above 4015 will open the way to the test of the next resistance level at the 20 EMA at 4035.

Snap Rallies As Memo Highlights Growth Ambitions

Snap is up by more than 7% today as traders react to the internal memo that was sent by the company’s CEO Evan Spiegel. According to the memo, the company plans to grow the user base to 450 million by the end of the next year.

Gamestop has also enjoyed some support today and made an attempt to settle above the $26 level after the company revealed its new partership with the crypto exchange FTX. Gamestop stock has been under serious pressure in recent weeks, and it remains to be seen whether the new crypto partnership will boost interest in the meme stock.

From a big picture point of view, the market needs additional catalysts to continue its rebound. Most likely, trading will remain highly volatile ahead of the Fed decision, which will be released on September 21. While traders look ready to buy stocks after the major pullback, the hawkish Fed may limit their appetite for risk.

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

Bitcoin Lightning Network-Based Strike Can Rival Visa – MS

Key Points

  • Morgan Stanley is bullish on the possibilities for wider use of the bitcoin Lightning Network as a consumer payment solution.
  • They think that Lightning Network-based payment platform Strike can rival or even surpass digital payments giant Visa.
  • Strike recently announced partnerships with Shopify and NCR, the world’s largest point-of-sale payment solution provider.

On Thursday, Morgan Stanley released a new report on the potential for bitcoin’s Layer 2 instant payment solution the Lightning Network to power a “long-term transition towards payments and settlements using digital and cryptocurrencies instead of fiat currencies like the US dollar”.

Morgan Stanley’s bullish report on the possibilities for wider use of the Lightning Network comes after Strike, a US-based digital payments platform built on top of bitcoin’s Lightning Network, announced a new integration partnership with e-commerce giant Shopify earlier this month.

US Shopify merchants will now be able to receive payments in US dollar from their global customers who paid in bitcoin. Strike also recently announced partnerships with NCR, the world’s largest point-of-sale (PoS) payments service provider.

Morgan Stanley Thinks Lightning Network Can Compete With Visa

In its latest report, Morgan Stanley laid out why it thinks Lightning Network-based digital payment platform Strike can rival or even surpass digital payments giant Visa.

“In essence, Strike is directly competing with Visa Direct, which offers real-time settlement”, Morgan Stanley notes, before adding that “the main difference for merchants will be charged a much lower transaction fee.”

The bank adds that “the benefit for the consumer is that they can, if they want, host their bitcoin on a private, secure network, allowing an element of privacy associated with their transaction”.

Regarding Strike’s partnership with NCR, Morgan Stanley notes the significance of the announcement. “One in six PoS devices globally use software provided by NCR, so this announcement is significant even if only a small proportion of retail shops choose to add the crypto functionality,” the bank states.

Drawbacks Of Using Bitcoin Payments

The Morgan Stanley report highlights some of the various drawbacks of using a bitcoin-based payment solution, including the cryptocurrency’s underlying volatility on a day-to-day basis, which makes the prediction of future purchasing power difficult.

Meanwhile, Morgan Stanley warns that current taxation laws also present a barrier to wider-scale adoption of bitcoin as a widely used medium of exchange, given that consumers must pay capital gains taxes on the cryptocurrencies they sell.

But the bank notes a new bill that is being proposed in the US Congress called the Virtual Currency Tax Fairness Act. The bill, if adopted, would exempt personal bitcoin transactions from tax so long as gains are below $200.

However, Morgan Stanley warns that this bill may face opposition, especially by anti-crypto contingents within Congress, given that it helps to position bitcoin (and other cryptocurrencies) as legitimate contenders to the US dollar.

Alex Gladstein, who summarised the Morgan Stanley report on Twitter, said that the report “suggests we are at the beginning of an era where more and more consumers may over time choose to pay for goods using Bitcoin and cryptocurrency”.

Bank Stocks Will Keep Underperforming. It’s The Business Cycle.

Summary

Bank stocks are sensitive to interest rates.

Interest rates are sensitive to the strength of the business cycle.

The attractiveness of bank stocks depends on the trend of the business cycle. Not interest rates.

My article of January 2021 concluded:

“…… rising yields at the beginning of a business cycle is good news for bank stocks. Yields rising to levels damaging the economy and causing the business cycle to decline is bad news for the banking sector.”

To recognize what is happening now it is useful to review how the banking sector responds to changes in the business cycle.

Chart, pie chart Description automatically generated

Source: The Peter Dag Portfolio Strategy and Management

Business Cycle and Its Phases

The business cycle goes through four distinctive phases. The trends pointing to the end of Phase 4 are:

  • Commodity and inflation are declining.
  • Sales growth is lower than the pace of inventory accumulation.
  • Income after inflation starts rising.
  • Consumer confidence rebounds as consumers respond favorably to the decline of inflation, interest rates, and to the rise of real income.

These favorable developments create the conditions for the business cycle to move into Phase 1. Sales increase because of consumers’ improved financial conditions. Business is forced to boost production to build up inventories to respond to the rising demand. Business will have to hire new people, buy raw materials, and increase borrowing to improve and possibly expand capacity.

These activities place a floor on commodities and interest rates. As the positive feedback continues, improved sales feed into rising inventories, rising employment, and increased borrowing.

This expansion benefits the banking sector, of course, because it provides the liquidity needed to fuel the positive loop thus creating even more growth. This is the time when bank stocks outperform the market.

There is a point, however, when the high level of production places upward pressure on commodities, interest rates, and inflation. The business cycle enters Phase 2, reflecting an even stronger economy.

But rising commodities, interest rates, and inflation eventually have a negative impact on the finances of consumers as it is happening now. Consumer confidence peaks and then declines. Demand for goods slows down.

Business recognizes inventories are now rising too rapidly due to the slower demand and are having a negative impact on earnings. Production is curtailed. Purchases of raw materials are reduced. Hiring is cut. Improvements and expansions of capacity are delayed resulting in lower borrowing, an unwelcome development for banks.

What Phase Are We in Now?

Chart, line chart, histogram Description automatically generated

Source: StockCharts.com, The Peter Dag Portfolio Strategy and Management

The above chart shows the business cycle indicator updated in real time from market data and reviewed in each issue of The Peter Dag Portfolio Strategy and Management. It shows the previous two cycles (2011-2014 and 2014-2020) and the current one started in 2020.

This indicator and data about growth in heavy truck sales, in income after inflation, in retail sales after inflation, and the action of the defensive market sectors (see below) confirm the business cycle is now declining, reflecting slower economic growth. The business cycle is now in Phase 3.

The slowdown process will continue until the causes that produced it are brought under control and consumers recognizes their finances are improving. This new environment will be characterized by the decline in inflation and interest rates. This process will take place in Phase 4, the most painful phase for consumers and the financial markets.

During Phase 3 and Phase 4 the sectors outperforming the markets are utilities (XLU), healthcare (XLV), staples (XLP), REITs, and long duration Treasury bonds.

The performance of the various sectors keeps repeating as the business cycle swings from periods of stronger to weaker growth.

Source: StockCharts.com, The Peter Dag Portfolio Strategy and Management

The sectors outperforming the market over the last two hundred days (except for energy) have been the four sectors mentioned above. Their performance confirms the business cycle is declining, reflecting a weakening economy.

The financial sector, and banks in particular, is a cyclical sector outperforming the market during periods of strengthening business cycle.

Chart, line chart, histogram Description automatically generated

Source: StockCharts.com, The Peter Dag Portfolio Strategy and Management

The above chart shows the ratio of Invesco KBWB bank ETF and the S&P 500 ETF (ratio KBWB/SPY). The ratio rises when bank stocks outperform the market. The ratio declines when bank stocks underperform the market.

The lower panel of the above chart shows the business cycle indicator computed in real-time as reviewed in each issue of The Peter Dag Portfolio Strategy and Management.

The chart shows bank stocks outperform the market (the ratio rises) when the business cycle rises, reflecting a strengthening economy. The ratio declines, reflecting the underperformance of the bank stocks, when the business cycle indicator declines in response to a weakening economy. Chart, histogram Description automatically generated

Source: StockCharts.com, The Peter Dag Portfolio Strategy and Management

The above chart shows regional banks stocks (ETF: KRE) respond like the major center banks stocks to the changes of the business cycle. They outperform the market when the business cycle indicator rises and underperform the market when the business cycle indicator declines. Chart, histogram Description automatically generated

Source: StockCharts.com, The Peter Dag Portfolio Strategy and Management

Even large and well managed banks like JP Morgan (JPM) are not immune to the changes in the business cycle as shown in the above chart. The stock of JP Morgan outperforms the market when the business cycle rises and underperforms the market when the business cycle declines.

Key Takeaways

  1. Bank stocks respond to changes of the business cycle and not of interest rates.
  2. Bank stocks outperform the market when the business cycle rises, reflecting a strengthening economy (Phase 1 and Phase 2 of the business cycle).
  3. There is a point when rising interest rates and inflation cause the business cycle to decline. This is the time when bank stocks start underperforming (Phase 3 and Phase 4 of the business cycle).

NVIDIA Is Down By 5%, Here Is Why

Key Insights

  • Baird downgraded NVIDIA due to slowing demand and order cancellations. 
  • This is not the first downgrade in the industry, and the recent evidence suggests that demand weaker than previously expected. 
  • NVIDIA remains a richly valued stock, which may present a problem if Treasury yields keep moving higher. 

NVIDIA Stock Falls After Analyst Downgrade

Shares of NVIDIA gained strong downside momentum after Baird downgraded the stock due to concerns about order cancellations. The investment firm stated that demand in the PC segment was slowing down, while sanctions on Russia would also hurt the demand for NVIDIA products.

This is not the first time that slowing PC demand is mentioned ahead of the earnings season. At the end of March, HP and Dell were downgraded by Morgan Stanley as analysts believed that hardware budgets would be cut.

At this point, it looks that the recent downgrades highlight the emerging trend, so traders should keep a close eye on the stocks in this market segment ahead of the earnings season.

What’s Next For NVIDIA Stock?

Analysts expect that NVIDIA will report earnings of $5.66 per share in the current year and earnings of $6.79 per share in the next year, so the stock is trading at 32 forward P/E.

While these valuation levels may look cheap for NVIDIA, it should be noted that concerns about the slowdown of the company’s growth may put material pressure on the stock.

In addition, Treasury yields keep moving higher, which is bearish for richly valued tech stocks like NVIDIA. The yield of 10-year Treasuries has already managed to get above the 2.75% level and keeps moving towards the psychologically important 3.00% level.

It remains to be seen whether traders will be ready to pay more than 30 forward P/E for a company whose growth may be slowing down due to the emerging weakness in the semiconductor industry.

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

Stock Markets: Top 3 Things You Need To Know This Week

Keep in mind, this week is the official start of the US corporate earnings season and at the same time, there is going to be a lot of economic and inflation data being released as well as the latest headlines regarding Russia’s war in Ukraine.

It is also a short trading week with stock, bond, and commodity markets closed on Friday for Good Friday, which could bring some added volatility as we get closer to the long weekend.

SP500 Earnings

Most Wall Street traders recognize that the S&P 500 rally off the March 2020 lows was built on extremely strong US corporate earnings power. Several traders and investors are quick to remind us that prior to the Covid outbreak S&P 500 company earnings were averaging around $40/share per quarter. Fast forward to our last earnings report that showed 2021 Q4 earnings and we see an average of $55/share. In other words, there was a +38% jump in earnings from before the pandemic to our last quarterly estimates, which puts us fairly in line with the current price level of the S&P 500. The question is can US corporate earnings continue to show growth?

I worry because interest rates are starting to aggressively creep higher, wage inflation is real, energy inflation is real, the cost of doing business is obviously higher and supply chain dislocations are still creating supply-side imbalances.

China in the Spotlight

Remember, China’s lockdown in Shanghai continues. The lockdown began on March 28 in half the city but has since expanded to its entire population of around 26 million. A trucker shortage and closures of warehouses in Shanghai are also affecting nearby provinces of Zhejiang and Jiangsu, according to a recent note from Citigroup analysts.

The two provinces are major manufacturing hubs that produce about one-third of China’s total exports. Shipping experts warn the fallout will start to be felt in the months ahead as severe dislocations once again drive up shipping costs and exacerbate shortages of raw materials and other essential supplies. There are also lingering concerns about energy prices as Europe continues to debate the possibility of banning Russian oil and gas supplies. Such a move could bring another dramatic rise in prices as available global supplies get spread even more thin.

Data to Watch

The Atlanta Fed is now forecasting just +1.1% Q1 US GDP growth, whereas, three of their last four Quarterly readings were all above +6.1%. At the same time, there are a lot more investors and economists also starting to walk back their global economic growth estimates. Several sources are thinking Ukraine’s economic output will likely contract by -40% to -50%.

More economists are also forecasting a double-digit reduction in Russia’s GDP, as well as much larger reductions in countries like Belarus and Moldova. Growth estimates in the Central Europe region i.e. Bulgaria, Croatia, Hungary, Poland, and Romania are also starting to be reduced.

There was also more talk over the weekend that Russia could eventually start to default on some of its “external debt” for the first time since 1917.

As for this week, all eyes will be on Consumer Price Index, scheduled for release Tuesday morning, and the Producer Price Index scheduled for release Wednesday morning. Both will work to add a bit more color to our current inflation debate.

Also on Wednesday, we get the first batch of Q1 earnings from a few big names like JPMorgan, Black Rock, Bed, Bath & Beyond, and Delta. Then on Thursday the trade will be digesting the latest Retail Sales data and another round of earnings from names like Citigroup, Wells Fargo, Goldman Sachs, Morgan Stanely, and United Health Group.

Keep in mind, several of the largest US banks might be reporting their biggest slowdown in investment banking revenue in years, as more and more “deals” have been getting put on the back-burner. Who knows how long this slowdown will last?

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

Why HP Stock Is Down By 6% Today

Key Insights

  • Morgan Stanley cuts its outlook for PC sales and downgrades HP and Dell. 
  • The demand boost from the pandemic may be over, and PC sales could get back to the previous downside trend. 
  • HP stock may need additional upside catalysts to get back to recent highs near the $40 level. 

HP Stock Is Under Pressure After Analyst Downgrade

Shares of HP gained downside momentum after Morgan Stanley downgraded the stock due to expectations of weak PC sales. Dell was downgraded as well.

Morgan Stanley believes that hardware budgets could be cut, which would hurt HP sales. In addition, demand could slow down as the world gets back to normal after two years of pandemic, which boosted PC demand.

The market reacted nervously to the analyst downsgrade, and HP stock moved from the $40 level to the $36 level.  Yesterday, HP stock made an attempt to settle above yearly highs, but the downgrade has clearly hurt the positive momentum.

What’s Next For HP Stock?

Analysts expect that HP will report earnings of $4.28 per share in the current year and $4.43 per share in the next year, so the stock is trading at just 8 forward P/E, which looks cheap for the current market environment.

However, Dell is even cheaper at 7 forward P/E, so the market does not have too much appetite for computer hardware stocks.

In this environment, worries about slowing demand may ultimately put more pressure on HP stock. Companies and individuals that have upgraded their hardware in 2020 – 2021 may not rush to renew it, and PC sales may get back to the previous downside trend.

This is a material risk for HP stock, which may need additional positive catalysts to get back to recent highs. At the same time, the current valuation levels may provide some support to the stock in the upcoming trading sessions.

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

Can Morgan Stanley Be the Largest Bitcoin Owning Institution in 2022?

Key Insights

– Analysts’ speculations suggest that Morgan Stanley may be planning to increase exposure to Bitcoin and the cryptocurrency market.
– Morgan Stanley could potentially become the largest Bitcoin-owning institution in 2022.
– However, the American multinational investment bank’s stance on BTC and BTC mining counters the claims of stacking more Bitcoin.

Despite concerns around BTC’s energy consumption, American multinational investment bank Morgan Stanley could be inching closer to becoming the largest Bitcoin-owning institution, as per speculations.

MacroScope’s Twitter account claims that as per data, Morgan Stanley could potentially become the largest Bitcoin-owning institution in the industry by the end of this year.

Institutional Interest in Bitcoin Grows

The year 2021 was a stellar time for BTC as institutional money poured in with firms like Microstrategy, Tesla, Galaxy Digital Holdings, and others stacking SATS. In addition, over the last year, several major firms, like Square and Coinbase, have collectively purchased hundreds of millions of dollars worth of cryptocurrency.

On February 28, analyst MacroScope highlighted that in 2021, Morgan Stanley purchased millions of shares in the Grayscale BTC (GBTC) fund. Notably, GBTC was one of the first instruments that gave exposure to the digital assets market for institutional players like Morgan Stanley.

The analyst further suggested significant increases in Morgan Stanley’s ownership in many of its institutional funds. According to balance sheets, the gains are primarily double-digit, with up to a 26% increase on the high end.

Data from December 31, 2021, highlights that the investment bank’s growth portfolio had 4.29 million shares, an 18% increase. Since then, Morgan Stanley has added more GBTC shares to its balance sheet, increasing its exposure.

Morgan Stanley is already one of the largest institutional Bitcoin investors, and they are most likely to increase their exposure. For now, however, there was no clear indication from the firm about adding more BTC to their wallet.

A Perplexing Stance

While according to speculations, Morgan Stanley was preparing to add more BTC to their account. A recent report stressed how ‘Bitcoin cannot escape energy requirements.’

The American banking giant further said that mining for cryptocurrencies could be highly energy-intensive.

Furthermore, the firm noted that ‘Bitcoin mining alone requires the same amount of electricity as the Netherlands’ annual total power generation, or 0.5% of total global electricity consumption.’ Seemingly, the bank’s stance around cryptocurrencies appears skewed.

That said, institutional interest in BTC has kept on rising. Large firms’ first significant steps towards BTC adoption happened when cloud software company MicroStrategy bought $425 million worth of Bitcoin in August and September 2020. Soon after, other firms followed suit, including payments processor Square and EV manufacturer Tesla.

Blockchain.com Adds a Former Walmart Director to its Board

The cryptocurrency and blockchain industry has seen an influx of experts from traditional financial institutions over the past few years, and the trend could continue.

Horton Joins the Blockchain.com Team

Cryptocurrency startup Blockchain.com has announced the addition of Tom Horton to its board. Horton is an independent director from Walmart and has become the latest executive from a traditional company to join a crypto startup.

The Walmart director now joins a host of other executives on Blockchain.com’s board. The company recently added Marcie Vu, former head of consumer Internet banking at Morgan Stanley, to its board.

Other financial backers of the company include Google Ventures, Sir Richard Branson, and Lightspeed Commerce Inc.

Blockchain.com is one of the leading cryptocurrency companies planning to conduct an initial public offering (IPO) in the near to medium term. However, there is no set date regarding the company’s planned public listing.

Horton’s addition to the Blockchain.com board highlights a growing trend in the cryptocurrency and blockchain industry. The past few years have seen numerous mainstream financial institutions and businesses enter the blockchain space.

Visa, one of the leading payment facilitators in the world, launched a cryptocurrency advisory forum towards the end of last year. BlackRock is another traditional financial institution that is currently involved in the crypto space.

MasterCard, PayPal, MoneyGram, Morgan Stanley, Goldman Sachs, and several other traditional financial institutions are currently involved in various crypto-related activities.

The Crypto Market is Slowly Recovering

The cryptocurrency market suffered huge losses over the weekend, but it is now slowly recovering. The total cryptocurrency market cap has climbed above $1.6 trillion again after dropping towards $1.5 trillion yesterday.

Bitcoin declined towards the $33k level but has added more than 8% to its value in the last 24 hours and is now trading at $36,402 per coin. Ether is currently targeting the $2,500 psychological level after rallying by more than 7% in the past 24 hours.

Morgan Stanley Shares Jump Over 4% as Q4 Profit Tops Estimates

Shares of Morgan Stanley rose as much as 4.5% on Wednesday after the Midtown Manhattan, New York City-based investment bank reported better-than-expected profits in the fourth quarter, largely driven by an increase in asset management fees.

The Firm’s full-year results reflect both record net revenues of $59.8 billion up 23% year over year and net income of $15.0 billion up 37%. The Firm delivered a full-year ROTCE of 19.8%, the bank said in the press release.

The leading global financial services firm reported quarterly adjusted earnings of $2.01​​ per share, beating the Wall Street consensus estimates of $1.83 per share. The company’s revenue jumped more than 6% to $14.52 billion from a year ago. That missed the market expectations of $14.59 billion.

“The reopening of the economy from COVID-19 has recently led to strong investment banking revenue at Morgan Stanley, while persistent uncertainties over the pace of economic growth and inflation (among other factors) have kept trading revenue high,” noted Michael Wong, Sector Director at Morningstar.

Morgan Stanley also acquired discount brokerage E-Trade and asset manager Eaton Vance that boosted revenue in 2021. While Morgan Stanley will harvest synergies from recent acquisitions and is exposed to positive tailwinds, such as eventually higher interest rates, net revenue will likely reset lower over the next two years.”

Morgan Stanley stock rose over 4% on Wednesday. The stock slumped over 2% so far this year after surging more than 40% in 2021.

Morgan Stanley Stock Price Forecast

Ten analysts who offered stock ratings for Morgan Stanley in the last three months forecast the average price in 12 months of $118.50 with a high forecast of $140.00 and a low forecast of $104.00.

The average price target represents a 23.21% change from the last price of $96.18. From those ten analysts, six rated “Buy”, four rated “Hold” while none rated “Sell”, according to Tipranks.

Citigroup increased the price target to $125 from $115. BofA Global Research raised the price objective to $125 from $115. Piper Sandler lifted the target price to $112 from $110. JPMorgan upped the target price to $108 from $103.

Technical analysis also suggests it is good to buy as 100-day Moving Average and 100-200-day MACD Oscillator signals a strong buying opportunity.

Analyst Comments

“4Q21 adj EPS equalled $2.08 vs Cons of $1.91. Revenues of $14.5B came in modestly ahead of Cons by +$280M with modest beats in S&T and IM, while IB and WM were generally in line. The comp ratio of 37.8% was modestly better than Cons of 40.8% (ISG Comp ratio down ~950bps q/q). Morgan Stanley (MS) increased its long term ROTCE target to 20%+ (up from 17%+), which compares with 20% in 2021,” noted Daniel T. Fannon, equity analyst at Jefferies.

Check out FX Empire’s earnings calendar

Interest Rate Hikes to Weaken the Crypto Market, Says Morgan Stanley

The cryptocurrency market has experienced selling pressure in recent months, with the total market cap dropping below the $2 trillion mark again.

Central Bank Tightening is Putting Pressure on the Crypto Market

Analysts at Morgan Stanley believe that the upcoming policies by central banks around the world will put pressure on the cryptocurrency market in the coming months.

According to the analysts in a recent research note, the crypto market has benefited from low-interest rates, expansion of central bank balance sheets, and government stimulus in the last two years.

However, the researchers led by Sheena Shah said leveraged crypto markets are now weakening as the United States Federal Reserve and other central banks around the world slow their balance sheet expansion.

The apex banks are also preparing interest rate hikes in the coming months. The US Fed is expected to introduce four rate hikes before the end of the year.

Morgan Stanley analysts believe that these policies will affect the cryptocurrency market over the next few months. The analysts added that retail investor sentiment on social media is turning less bullish.

The ongoing bearish trend in the market has also contributed to the current social media reaction.

The cryptocurrency market has underperformed in recent weeks. Bitcoin has lost more than 30% of its value in the past two months. At press time, BTC is trading above the $42k level, down from the all-time high of $69k it achieved in November.

Morgan Stanley Holds GBTC

Despite its recent analysis of Bitcoin, Morgan Stanley holds Bitcoin indirectly via the Grayscale Bitcoin Trust (GBTC). In an SEC filing in July, the bank revealed that it had acquired 28,000 shares of the GBTC.

The investment came at a time when Bitcoin was struggling around the $30k level. As of November 24, Morgan Stanley held 6,626,381 shares of GBTC (worth $303 million at the time).

In The Spotlight – Big Wall Street Banks as the Main Power in S&P 500

Banks’ earnings

Big Wall Street banks are in the spotlight right out of the gate with Goldman Sachs set to release results before markets open. They will be followed by Bank of America, Morgan Stanley, and U.S. Bancorp tomorrow (Wednesday). Bank results got off to a mixed start on Friday. JPMorgan Chase, Citigroup, and Wells Fargo all topped profit estimates for Q4 but JPMorgan and Citi delivered disappointments in other areas.

In particular, investors are nervous about higher expenses that cut into Q4 profits for both JPMorgan and Citi and which both banks forecast would continue to weigh on results in 2022. JPMorgan and Citi also saw -11% decreases in trading revenue, with fixed income trading down by double digits for both.

There are also signs of slowing loan growth that some analysts worry is an early sign of slowing consumer demand for big-ticket items as inflation continues to climb. While banks will eventually benefit from higher U.S. interest rates that are anticipated in the year ahead, a big pullback in consumer lending is a threat to some of the more lofty Wall Street expectations had for the sector in 2022.

Global economy

Globally, not a lot changed over the extended weekend. China might have provided a bit of a surprise with additional monetary easing into a struggling GDP and sagging real estate prices. It’s worth noting, Omicron has now been detected in Beijing for the first time, just three weeks before the city is due to host the Winter Olympics. Now the Chinese are shutting down and suspending the sale of Olympic tickets to the public.

Tensions remain heated between Hong Kong activists and Chinese government officials. North Korea launched its fourth missile test this month. After North Korea’s missile test last week, the US announced sanctions on eight North Korean and Russian individuals and entities for supporting North Korea’s ballistic missile programs.

Tensions between the U.S. and Russia seem to be headed in the wrong direction with Russia over the weekend moving troops and equipment into Belarus for joint military exercises.

The so-called “Allied Resolve” drills are set to take place near borders with NATO members Poland and Lithuania, as well as Ukraine where Russia has maintained its alarming military presence.

Most U.S. military experts don’t really think Russia has any real intentions of invading Ukraine or any other EU country. However, Western countries also have increased their military presence along borders and other strategic locations which increases the chances that a broader conflict could “accidentally” be sparked.

Europe’s gas supplies are also at risk as Russia continues to dangle the threat of cutting them off. Most of the tension stems from Russia’s demand that former Soviet countries be barred from entering NATO, something the U.S. and other NATO allies have refused.

In the USA, we are heading deeper into earnings season and investors are going to be paying close attention to costs and expenses. As I mentioned, late last week, JPMorgan warned that higher expenses and higher spending on hiring in 2022 could create some headwinds.

Looking ahead, it will be interesting to see how many executive teams start providing guidance and warnings that corporate expenses are rising faster than anticipated and what if any damage will be due to profit margins?

Remember, some companies have said they are passing the additional rising costs on to the consumer while other companies are eating a majority of the higher expenses in an attempt to gain more market share.

How the stock market decides to differentiate the strategy and style could greatly impact money flow and valuations. Goldman Sachs, J.B. Hunt, Charles Schwab, Citrix, Concentrix, and Interactive Brokers report earnings today.

Data to watch

Tomorrow we have Alcoa, Bank of America, Kinder Morgan, Morgan Stanley, Procter & Gamble, and United Airlines.

Thursday we have American Airlines, Baker Hughes, Netflix, and Union Pacific.

Then next week we have big names like Apple, Boeing, Caterpillar, McDonalds, Microsoft and Verizon reporting earnings.

Let’s also not forget next week we have the first Fed FOMC meeting of the new year.

With the U.S. Federal Reserve getting ever closer to implementing its first rate hikes, which most anticipate will begin in March, investors are growing less enchanted with some of the high-growth and momentum stocks that saw outsized share price gains last year.

This trend is most evident in the tech-heavy Nasdaq where nearly half of the index’s stocks have fallen by -50% from their recent peaks. The Nasdaq itself is only down by about -7% from its most recent record high. The selloff has been very much concentrated in highly-leveraged companies that have yet to deliver a profit, as the prospect of higher rates reduce future profit potential. Earnings results from these high-fliers will likely be harshly scrutinized as Wall Street tries to separate the “wheat from the chaff,” so to speak.

On the economic data front, Empire State Manufacturing and the NAHB Housing Market are today’s highlights.

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

Wall Street Week Ahead Earnings: Goldman Sachs, Procter & Gamble, United Airlines, and Netflix in focus

The following is a list of earnings slated for release January 17-21, along with a few previews. A number of big companies will report earnings in the week ahead, including Goldman Sachs and Bank of America, Procter & Gamble, Netflix, and a number of transportation companies. Investors will carefully monitor the latest news on the rapidly spreading Omicron coronavirus variant to see how it affects earnings in 2022.

Earnings Calendar For The Week Of January 17

Monday (January 17)

No major earnings are scheduled for release. The stock market in the U.S. will be closed in observance of Martin Luther King, Jr. Day.

Tuesday (January 18)

IN THE SPOTLIGHT: GOLDMAN SACHS

The New York-based leading global investment bank Goldman Sachs is expected to report its fourth-quarter earnings of $11.89 per share, which represents a year-over-year decline of about 2% from $12.08 per share seen in the same period a year ago.

The world’s leading investment manager would see a decline in revenue of nearly 1% to $11.65 billion from a year ago. It is worth noting that in the last two years, Goldman Sachs has surpassed market consensus expectations for profit and revenue most of the time.

“We expect Goldman Sachs to report mixed results, with revenues outperforming the consensus estimates and earnings missing the expected figure. The investment bank reported better than expected results in the last quarter, with the top-line increasing 26% y-o-y. This was driven by significant growth in the investment banking business, followed by higher global markets and consumer & wealth management revenues,” noted analysts at TREFIS.

“While investment banking grew on the back of growth in mergers &acquisitions (M&A) and equity underwriting deal volumes, global markets benefited from higher equity trading revenues. Similarly, the consumer & wealth management segment gained from an increase in outstanding loan balances. That said, the top-line was partially offset by negative growth in the asset management division, primarily due to lower equity investment revenues. We expect the same trend to continue in the fourth quarter. We estimate Goldman Sachs’ valuation to be around $447 per share which is 14% above the current market price.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 18

TICKER COMPANY EPS FORECAST
BAC Bank of America $0.78
SCHW Charles Schwab $0.83
CNXC Concentrix $2.54
HWC Hancock Whitney $1.33
IBKR Interactive Brokers $0.74
JBHT J.B. Hunt Transport Services $2.0
MBWM Mercantile Bank $0.85
ONB Old National Bancorp $0.38
PNFP Pinnacle Financial Partners $1.56
PNC PNC Financial Services $3.62
PRGS Progress Software $0.62
SBNY Signature Bank $3.92
TFC Truist Financial $1.27
UCBI United Community Banks $0.63

 

Wednesday (January 19)

IN THE SPOTLIGHT: PROCTER & GAMBLE, UNITED AIRLINES

PROCTER & GAMBLE: The world’s largest maker of consumer-packaged goods, is expected to report its fiscal second-quarter earnings of $1.66 per share, which represents year-on-year growth of just over 1% from $1.64 per share seen in the same period a year ago.

The Cincinnati, Ohio-based consumer goods corporation would post revenue growth of over 3% to $20.4 billion from a year ago. It is worth noting that the company has consistently beaten consensus earnings estimates in the last two years, at least.

“We believe strategy changes can sustain Procter & Gamble (PG) LT topline growth in the 4% range. In the US, a strong breadth of performance and share gains give us confidence that market share momentum is sustainable and supports LT topline growth above HPC peers. While near-term pressures from commodity/freight inflation will impact margins, we believe PG has stronger pricing power than peers, particularly with share gains,” noted Dara Mohsenian, equity analyst at Morgan Stanley.

PG trades at ~22.5x CY22e EPS, an HSD% discount to HPC peers CLX, CL and CHD, and looks compelling given our call for higher LT PG growth.”

UNITED AIRLINES: The major U.S. airline company is expected to report a loss for the eight-consecutive time of $-2.12 in the holiday quarter as the aviation service provider continues to be negatively impacted by the ongoing COVID-19 pandemic and travel restrictions.

However, that would represent a year-over-year improvement of about 70% from -$7.0 per share seen in the same period a year ago. The Chicago, Illinois-based airlines would post revenue growth of over 130% to $7.94 billion.

“Despite some headwinds around staffing issues, we expect United Airlines (UAL) to guide to a continued sequential improvement with capacity guided to be down in the 17-18% range in Q1, which incorporates domestic capacity down in the 1% range, while international capacity remains down 27%,” noted Sheila Kahyaoglu, equity analyst at Jefferies.

“Remaining in a Net Loss Position into Q1. We expect a continued sequential decline in CASM-ex to 11.63¢, which reflect a 9% increase vs. 2019 levels, which compares to the 13% increase we expect in Q4. Nonetheless, UAL will remain in a net loss position in Q1, before turning positive in Q2.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 19

TICKER COMPANY EPS FORECAST
AA Alcoa $2.5
ASML ASML Holding $4.3
CFG Citizens Financial Group $1.16
CMA Comerica $1.6
DFS Discover Financial Services $3.48
FAST Fastenal $0.36
FUL H.B. Fuller $1.06
KMI Kinder Morgan $0.27
MS Morgan Stanley $1.83
PACW PacWest Bancorp $1.06
PG Procter & Gamble $1.66
STT State Street $1.93
USB U.S. Bancorp $1.13
UAL United Airlines $-2.12
WTFC Wintrust Financial $1.56

 

Thursday (January 20)

IN THE SPOTLIGHT: NETFLIX

The California-based global internet entertainment service company NetFlix is expected to report its fourth-quarter earnings of $0.82 per share, which represents a year-over-year decline of over 30% from $1.19 per share seen in the same period a year ago.

However, the streaming video pioneer would post revenue growth of over 16% to $7.71 billion. It is worth noting that the company has beaten earnings per share (EPS) estimates just thrice in the last two years.

“We believe share performance is highly dependent on increasing global membership scale. Proven success in the US and initial international markets provides a roadmap to success in emerging markets, and scale should allow Netflix (NFLX) to leverage content investments and drive margins,” noted Benjamin Swinburne, equity analyst at Morgan Stanley.

“Higher global broadband penetration should increase the Netflix (NFLX) addressable market, driving member growth and providing further opportunity given NFLX’s global presence. Longer-term, we see the ability to drive ARPU growth, particularly given increased original programming traction.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 20

TICKER COMPANY EPS FORECAST
AAL American Airlines $-1.72
CSX CSX $0.42
FITB Fifth Third $0.91
ISRG Intuitive Surgical $1.01
KEY KeyCorp $0.56
MTB M&T Bank $3.24
NTRS Northern Trust $1.82
OZK Bank OZK $0.98
PPBI Pacific Premier Bancorp $0.85
PPG PPG Industries $1.2
RF Regions Financial $0.49
SASR Sandy Spring Bancorp $1.1
SIVB SVB Financial $6.29
TRV Travelers $3.77
UNP Union Pacific $2.66
WBS Webster Financial $1.11

 

Friday (January 21)

TICKER COMPANY EPS FORECAST
ALLY Ally Financial $2.0
FHB First Hawaiian $0.47
HBAN Huntington Bancshares $0.37
INFO IHS Markit $0.71
SLB Schlumberger $0.39

 

SPXU: Harnessing Volatility in The S&P 500, to Short the Market With a Three Times Inverse ETF

Fed Chairman’s Powell reassuring statement on Tuesday and inflation figures for 2021 being in line with estimates on Wednesday seem to have appeased bearish sentiments resulting in the S&P 500 rising.

However, there are many different elements that are likely to impact stocks, such as the continuation of the economic recovery, corporate earnings, inflation, supply chain concerns as well as the likelihood of the Omicron variant stressing hospital services. These should result in continued volatility episodes as seen in the S&P 500 ETF Trust ETF (SPY) which tracks the S&P 500 index.

https://static.seekingalpha.com/uploads/2022/1/12/49663886-16420000045920553.png

Source: fxempire.com

In such conditions, people are normally risk-averse, or avoid trading and prefer to wait for some relative calm before looking at stocks. This is the case for most of us, but, there is another option which is to trade the volatility using a tool like the ProShares UltraPro Short S&P500 (SPXU) which inversely tracks S&P 500 at -3 times its daily performance.

This calls for enticing gains as a 5% fall in the SPY can “theoretically” bring you 15% gains, but my own experience has taught me that just putting money in the SPXU at the first sign of a market downturn is unproductive. Instead, I use the chart below which shows the performance of the ProShares ETF from January 2020 to date. It includes the spring 2020 crash subsequent to the World Health Organization declaring Covid to be a pandemic.

Investors will notice that I have calculated the amplitude obtained by subtracting SPXU’s daily low from the daily high. Then I converted the resulting value as a percentage that more vividly represents the volatility induced in the ProShares ETF’s through its daily variations.

Here, the March (spring) 2020 crash resulted in gains of over 30% but this was achieved over a period of many weeks. The second noteworthy point is the above-10% differences which, after occurring four times from June 2020 to February 2021, ceased till November last year.

https://static.seekingalpha.com/uploads/2022/1/12/49663886-16420000046728988.png

Source: Chart built by author with data from finance.yahoo.com

Then, came the December 1 market downturn, induced mostly by tech stock aversion, as investors increasingly rotated into value names. To be realistic, this high-volatility episode may prove to be a lone occurrence, but forthcoming events should constitute catalysts for further fluctuations.

First, the earnings season is to be kicked off by banks on Friday this week, and with investors having already placed a lot of expectations on the financial sector as the main beneficiary of the economic recovery and this, thanks to rising interest rates allowing an increase in net interest margins on loans.

This expectation may suffer if megabanks like JPMorgan Chase (JPM) Citigroup (C) and Wells Fargo (WFC) fail to provide any upside surprises in their fourth-quarter earnings reports. Others like the Bank of America (BAC) and Morgan and Stanley (MS) will follow suit. Then, it will be the turn of the big techs with Microsoft (MSFT) on Jan 25 and Apple (APPL) on Jan 29, with analysts being keen to observe for any effects caused by the semiconductor supply crunch.

Second, there is the VIX (Volatility indicator) also referred to as the “index of fear” whose methodology is based on the stocks forming part of the S&P 500. Higher is the VIX, more are volatility risks, and from its high of 35, the indicator is currently at around 18. Given that this figure is far from the VIX’s above- 85 spike during the spring 2020 market crash, a major downside does not seem imminent, but a near-20 value signifies that volatility is persisting.

This signifies that we are in an environment conducive for gains through the SPXU.

Pursing on a cautionary note, I deliberately used the word theoretically above when mentioning possible gains with the SPXU. In this case, a 5% loss in the SPY will not convert into a 15% gain in the SPXU as some percentage points will be lost due to the compounding effect which is a specific feature of highly leveraged ETFs. The net gain will ultimately depend on the degree of fluctuations (volatility) during the trading period. This discrepancy is evident in the one-week performance chart below where a -1.39% loss of the SPY has not translated into a 4.17% (1.39 x 3) gain in the SPXU, but only a 4.15% gain.

https://static.seekingalpha.com/uploads/2022/1/12/49663886-164200000530492.png

Source: Trading View

Considering the long term, due to the leverage, the ProShares fund has delivered a 55% loss and thus, a buy-and-hold strategy is to be avoided, and it is preferable to use this market shorting tool for the least amount of time possible, preferably one day as per the prospectus. This said I have held it for up to five days after gaining some experience selling it at a loss due to the unpredictability of the market. Looking at portfolio protection, some investors also use the SPXU as a hedging tool to gain from a falling S&P 500. Thus, by hedging, these investors hold on to their stocks instead of passively selling them and taking profit in the expectation of an elusive market crash.

Finally, my advice is to wait for the VIX to go above 20 before placing your bet, and this should happen this week or the next. Also, patience, rigorous monitoring and being prepared to exit with a loss are key ingredients for shorting the market.

Disclosure: I/We are long Apple. This is an investment thesis and is intended for informational purposes. Investors are kindly requested to do additional research before investing.

PwC Hong Kong Goes Metaverse

Metaverse was back in the news, with PwC Hong Kong announcing its move into the metaverse. PwC Hong Kong is a subsidiary of Pricewaterhouse Coopers, which has a network of firms in 156 countries, delivering assurance advisory, and tax services. Industries that PwC Hong Kong supports include but are not limited to asset and wealth management, automotive, banking and capital markets, consumer markets, and financial services.

PwC Hong Kong and Sandbox

On Thursday, PwC Hong Kong announced that it had purchased LAND in The Sandbox. The LAND purchase is to allow the construction of a Web 3.0 advisory hub. PwC plans to use the hub to build a new generation of professional services that includes accounting and taxation.

Earlier this year, PwC had raised concerns that venture capital and similar well-funded organizations are hindering opportunities for smaller firms to invest and benefit from the growth of crypto start-ups. PwC is not alone, with a number of other prominent names also seeing VCs as a threat to Web 3.0 development.

PwC Hong Kong is not the only mainstream firm exploring the metaverse. Earlier this month, Bank of America gave its view on the metaverse. According to the BoA, the metaverse presents a massive opportunity for crypto as “we start using cryptocurrencies as currencies”. Another U.S banking giant, Morgan Stanley, also reportedly noted that the metaverse could fundamentally transform human behavior. In particular, metaverse could alter the way people socialize, watch performances, engage with brands, learn, and trade/speculate on digital assts.

Bank of America reportedly announced that the metaverse economy could grow to $800bn by 2024.

PwC Hong Kong did not state the purchase amount. Earlier in the month, however, Tokens.com had announced a $2.4m LAND purchase.

SAND Price Action

On Thursday, SAND rallied by 23.7% to end the day at $6.32. In late November, SAND had struck an ATH $8.49 before easing back. In spite of the pullback, positive metaverse news has supported an eyewatering 17,600% SAND return year-to-date. When considering Bank of America’s estimates for metaverse economic growth, there’s more to come.

SANDBUSD 241221

Morgan Stanley Raises Nordson’s Target Price to $270, Says 4Q Earnings Miss A Bump in the Road

Morgan Stanley raised their base stock price forecast on Nordson to $270 from $230, reiterating an “Equal-weight” rating on the Westlake, Ohio-based medical device manufacturer and said fourth-quarter earnings miss was a bump in the road, but the 2022 outlook seems in-line.

Last week, the maker of adhesives and industrial coatings reported quarterly earnings of $1.88 per share, missing the Wall Street consensus of $2.10 per share, also down from $1.59 per share seen in the same period a year earlier. In addition, the company said its revenues rose slightly to $599.25 million during the quarter ended October 2021 from $558.53 million. That was also below the market expectations of $581.8 million.

Nordson (NDSN) reported 4Q results that were slightly below expectations. Commentary on the end-market trajectory is relatively constructive, though management pointed to the potential for growth rate deceleration in 2H22, but we think this is fairly understandable vs. current comps. Raising our price target to $270,” noted Connor Lynagh, equity analyst at Morgan Stanley.

“We are updating our estimates to account for 4Q actuals and FY22 guidance. The resulting changes are limited, as guidance was in line with our prior expectations – FY22 revenue and EBITDA are essentially unchanged. Notably, we have raised ATS revenue growth by ~200bps, although EBIT margins are unchanged at ~26%, or ~$335MM. However, commentary on the call seemed to confirm that NDSN’s medical and electronic end markets (~50% of revenue) are earlier in the cycle than we had previously assumed. Therefore, we are raising our target valuation assumption for NDSN by ~15%, to ~20.0x EV/EBITDA on 2022E EBITDA vs. our prior target multiple of 17.0x, which is more consistent with other IET companies in our coverage and more commensurate with the stock’s recent trading range.”

Morgan Stanley gave the stock price forecast of $325 under the bull scenario and $180 under the worst-case scenario. Other equity analysts also updated their stock price outlook. Jefferies raised the target price to $290 from $275. D.A. Davidson lifted the target price to $300 from $275. Berenberg upped the target price to $330 from $297.

Seven analysts who offered stock ratings for Nordson in the last three months forecast the average price in 12 months at $293.83 with a high forecast of $330.00 and a low forecast of $270.00. The average price target represents an 18.52% change from the last price of $247.92.

Of those seven equity analysts, five rated “Buy”, two rated “Hold” while none rated “Sell”, according to Tipranks. On Friday, Nordson shares closed 0.17% lower at $248.43. However, the stock surged over 23% so far this year.

“Mixed cyclical momentum: Nordson (NDSN) had one of the most resilient earnings performances of peers in 2020, largely on the back of its medical and consumer-oriented businesses. Thus, growth from here is less substantial vs. some more-cyclical peers,” Morgan Stanley’s Lynagh added.

“Solid longer-term secular trends in ATS: NDSN highlights the potential for 2x GDP growth in its Advanced Technology Systems segment, which seems likely to see mid-high single-digit growth on a durable basis, in our view. Fairly valued in light of major factors: We don’t see major scope for upward revisions beyond recent updates, though we think NDSN’s valuation vs. peers is defensible due to its longer-term growth opportunity, driving a balanced risk-reward.”

Technical analysis suggests it is good to buy now as 100-day Moving Average and 100-200-day MACD Oscillator signals a buying opportunity.

Check out FX Empire’s earnings calendar

US SEC and CFTC Fines JPMorgan $200 Million for Letting Evade Regulators’ Reach

JPMorgan Chase is one of the leading financial institutions in the world, and it is now in trouble with the regulators.

JPMorgan Charged $200 Million by the SEC and CFTC

Leading financial institution JPMorgan Chase is set to cough out $200 million in fines to two United States regulators. The bank was accused of letting its employees use WhatsApp and other platforms to evade federal record-keeping laws.

According to the United States Securities and Exchange Commission earlier today, JPMorgan had agreed to pay $125 million after admitting to “widespread” record-keeping failures over the past few years. Furthermore, the Commodity Futures Trading Commission said it had fined the bank $75 million for allowing unapproved communications since at least 2015.

The SEC officials said JPMorgan’s failure to preserve the offline conversations is a violation of federal securities law as it left the regulatory agency unaware of what was happening between the bank and its clients.

According to federal laws, financial institutions are required to keep an electronic record of the conversations between the clients and the financial institutions to ensure that the firms are not breaking the law.

The SEC said employees were guilty of using WhatsApp and other private communication methods to get in touch with the clients.

The SEC is Looking at Other Major Financial Institutions

The investigation into JPMorgan is still ongoing, but the regulatory agency said it is also looking into other major financial institutions. The regulatory agency is looking into the activities of major banks, including Morgan Stanley, Deutsche Bank and a few others.

The shares of JPMorgan have dipped by more than 2% since the SEC and CFTC made their announcements. At press time, JPM is trading at $156 per coin, down by 2.16% since the market opened earlier today.

JPM has underperformed in recent months, losing more than 5% of its value over the past four weeks. However, year-to-date, JPM has performed excellently, adding 26% to its value during that period.

Morgan Stanley Predicts Apple’s Stock Price Will Hit $200 Soon

Apple is the world’s most valuable company, with a market cap of over $2 trillion. However, it is expected to grow even bigger over the coming months and years as its products continue to appeal to consumers.

AAPL to Rally Towards the $200 Mark

Morgan Stanley analyst Katy Hubert has raised Apple’s price target to $200. The analyst previously priced the stock at $164, but it has performed excellently in recent months and surpassed that target.

According to Hubert, AAPL is currently a buy as the company enters new terrains such as the augmented reality and autonomous vehicle sectors. She also increased her December quarter iPhone shipment forecast by 4% to 83 million year-over-year. According to the analyst, Apple hasn’t been affected by the same supply chain challenges it faced in the third quarter of the year.

Hubert told investors that “Today, we know that Apple is working on products to address two significantly large markets – AR/VR and Autonomous Vehicles – and as we get closer to these products becoming a reality, we believe valuation would need to reflect the optionality of these future opportunities.”

AAPL Reaches a New All-Time High

AAPL is up by more than 2.5% since the US market opened a few hours ago. As a result, AAPL reached a new all-time high of $171.58 per share, with a market cap of just under $2.8 trillion. Year-to-date, Apple’s stock price has surged by more than 28%.

This latest development comes a few days after reports surfaced that Apple warned its suppliers that the demand for new iPhones is low heading into the holidays. As such, Apple is expecting to take a hit in its revenue for the third quarter of the year.

Apple said it expects to lose more than $6 billion in the current quarter due to the ongoing supply chain issues facing the global economy. However, Hubert’s note indicates that Apple might not face the supply chain issue it had expected.

Wall St Ends Up Sharply as Earnings, Economic Data Lift Optimism

The technology sector gave the S&P 500 its biggest boost, with shares of Microsoft Corp and Apple Inc rising.

Shares of Citigroup, Bank of America Corp and Morgan Stanley rose after they topped quarterly earnings estimates. The rebounding economy allowed them to release more cash they had set aside for pandemic losses, while sizzling deals, equity financing and trading added to profits. The S&P bank index jumped.

UnitedHealth Group Inc also climbed after the health insurer reported results and raised its full-year adjusted profit forecast on strength from its Optum unit that manages drug benefits.

Adding to optimism, data showed the number of Americans filing new claims for unemployment benefits last week fell close to a 19-month low, and a separate report showed producer prices eased in September.

“Some of the things that worried the market in September, and even last week, as far as the inflation aspect and higher interest rates and the Delta variant, maybe have lessened,” said Alan Lancz, president, Alan B. Lancz & Associates Inc., an investment advisory firm, based in Toledo, Ohio.

“Not that it’s all over, but on a temporary scale at least, you can make a case for it trending in the right direction.”

According to preliminary data, the S&P 500 gained 74.35 points, or 1.70%, to end at 4,438.15 points, while the Nasdaq Composite gained 248.97 points, or 1.71%, to 14,824.90. The Dow Jones Industrial Average rose 532.21 points, or 1.55%, to 34,910.02.

Gains were broad-based, with all S&P 500 sectors higher.

Shares of Moderna Inc were sharply higher after a panel of expert advisers to the U.S. Food and Drug Administration voted to recommend booster shots of its COVID-19 vaccine for Americans aged 65 and older and those at high risk of severe illness.

Also in earnings, Walgreens Boots Alliance Inc jumped after the drugstore chain reported fourth-quarter revenue and adjusted profit above estimates and forecast growth of 11% to 13% in the long term.

U.S. companies are expected to report strong quarterly profit growth for the third quarter, but investors have been keen to hear what they say about rising costs, labor shortages and supply problems.

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

(Additional reporting by Devik Jain in Bengaluru and Federica Urso in Gdansk; Editing by Arun Koyyur and David Gregorio)

Marketmind: No Escaping the Inflation Beast

A look at the day ahead from Dhara Ranasinghe.

Data on Thursday showed China’s factory gate prices grew at their fastest pace on record in September, a day after figures showed another solid increase in U.S. consumer prices.

The take away from markets is that transitory or not, central banks are likely to respond to higher inflation sooner rather than later.

And with minutes from last month’s Federal Reserve meeting showing policymakers’ growing concern about inflation, investors have again brought forward rate-hike expectations.

Fed Funds futures have pulled forward expectations for the first hike from late in 2022 to almost fully price a 25 basis point hike by September.

In addition, money market pricing suggests the Bank of England could move before year-end, the cautious European Central Bank could tighten next year and the overtly dovish Reserve Bank of Australia could raise rates by end-2023 — a trajectory that doesn’t gel with the central bank’s guidance.

Singapore’s central bank on Thursday unexpectedly tightened monetary policy, citing forecasts for higher inflation.

Markets, having priced in higher inflation and a tighter monetary policy outlook, appear to be in a calmer mood in early Europe. Asian shares rallied overnight, European and U.S. stock futures are higher too. U.S. Treasury yields, while a touch higher, are holding below recent multi-month highs.

Still, China property shares fell as investors fretted about a debt crisis in the sector.

The Turkish lira, at record lows versus the dollar, is also in the spotlight after Turkey’s President Tayyip Erdogan dismissed three central bank officials.

Key developments that should provide more direction to markets on Thursday:

– BOJ policymaker rules out stimulus withdrawal even after economy recovers

– Taiwan’s TSMC posts 13.8% rise in Q3 profit on global chip demand surge

– Japan dissolves parliament, setting stage for general election

– Data: Spain harmonized inflation rate(Sept), Canada manufacturing sales (Aug)

– United States: Initial Jobless Claims (Oct), Jobless Claims 4-week Average, PPI (Sept), NY Fed Treasury Purchases 22.5 to 30 years, 4-week and 8-week T-Bill Auction

– Central Banks: Fed’s Bowman, Bostic, Barkin, Bullard, Daly and Harker, ECB’s Elderson, and BoE’s Tenreyro and Mann speak

– Earnings: UnitedHealth, Bank of America, Wells Fargo, Morgan Stanley, Citigroup, US Bancorp, Walgreens Boots Alliance, Fast Retailing, Domino’s Pizza.

(Reporting by Dhara Ranasinghe; Editing by Rachel Armstrong)