 | | |  Good morning. Federal Reserve Chairman Jerome Powell helped markets sink lower last week, after he strongly hinted that the Fed would raise interest rates 50 basis points in May (Fed-speak for 0.5 percent). That's in contrast to the usual 0.25 percent moves higher seen between 2015 and 2019.
However, the markets are now starting to price in even higher moves as a result, with a full 35 percent of traders expecting a 75-point basis hike in June. If true, and if following a 50-point hike in May, interest rates could be 1.5 percent by Independence Day. Coming off of zero, it's an extreme move higher, even if rates are still far lower than, say, during the 1990s.
But with a higher cost of capital comes a slowdown in any business that has financing requirements, and such a speedy move could lead to a mild recession by the end of the year. While it's possible markets have one last rally higher from here, traders need to be increasingly cautious and avoid excessive leverage, especially giving rising financing costs.
Now here's the rest of the news: | | | | | |
| | |  | DOW 33,811.40 | -2.82% | | | | | S&P 4,271.81 | -2.77% | | | | | NASDAQ 12,839.29 | -2.55% | | | | | *As of market close | | | • | Stocks continued lower on Friday, on the prospect of higher interest rate increases. | | | • | Oil dropped 2.1 percent, closing at $101.60 per barrel. | | | • | Gold slid 0.7 percent, ending at $1,935 per ounce. | | | • | Cryptocurrencies continued lower, with Bitcoin at $39,539 at the stock market close. | | | | | | | |
| | | In Rough Markets, Consider This Overlooked Niche Financial Space | | | | When it comes to the financial sector of the market, most traders look at big banks, credit card companies, and even insurance firms. But there are other parts of the sector that could benefit traders who buy while stocks are out of favor.
One such area is in the asset management space. Companies that cater to providing funds and access to financial markets for individuals and other companies alike tend to trade relatively cheaply to the overall market.
» FULL STORY | | | | |
| | Insider Trading Report: CBL & Associates Properties (CBL) | | | | Jonathan Heller, a director at CBL & Associates Properties (CBL), recently bought 100,000 shares. The buy increased his position by nearly 1,200 percent. The buy came to a total cost of $3.225 million.
This marks the first insider buy since last November, when a different director picked up nearly $260,000 of shares. Otherwise, company insiders have generally been sellers of shares, albeit in smaller quantities.
» FULL STORY | | | | |
| | Unusual Options Activity: EQT Corporation (EQT) | | | | Oil and gas exploration company EQT Corporation (EQT) have been soaring in the past few months, but shares have started to weaken recently. One trader sees the potential for a rebound in the weeks ahead.
That's based on the June $49 calls. With 53 days until expiration, 11,878 contracts traded compared to a prior open interest of 567, for a 21-fold jump in volume on the trade. The buyer of the calls paid $1.95 to enter the trade.
» FULL STORY | | | | |
| | • | Services Soar as Production Sinks
While the overall economy appears to be stalling right now, it may be due to the fact that different parts are moving in different directions. Services are booming, particularly in the travel sector as restrictions ease. Yet ongoing supply chain issues are continuing to impact production. This trend complicates plans by the Fed to act strongly against inflation. | | | | • | 5-Year Treasury Yields Hit 3 Percent
Bond yields continued higher. Now, the 5-year Treasury topped 3 percent for the first time in years. However, the 10-year yield stayed around 2.9 percent, as the yield curve has continued to invert in recent weeks. The move occurred after Federal Reserve Chairman Jerome Powell hinted at a half-point interest rate hike next month. | | | | • | AB InBev Pulls Out of Russia
AB InBev (BUD), is the latest multi-national company to pull out of the Russian market. The company expects a $1.1 billion impairment charge, as the country was a key one for the world's biggest brewer. Other companies in the space have already announced plans to exit the country in prior weeks. | | | | • | Obama Warns on Social Media Impact
Former President Barack Obama has warned that social media companies have gained tremendous power in recent years, and that they are "well designed" to destroy democracies. That's especially true if the platforms are used to spread disinformation. | | | | • | Disney Loses Special Tax Status
The Florida legislature has passed a bill to revoke a 1967 law that gave The Walt Disney Company (DIS) the right to self-govern its 25,000+ acres of land in the Orlando area. Other theme parks have no such self-governance benefits in the state, where tourism is a top component of the economy. The bill has now been signed by the governor. | | |
| | | | TOP | | | KMB | 8.048% | | | | SIVB | 7.614% | | | | TWTR | 3.951% | | | | TTWO | 3.638% | | | | EA | 3.455% | | | | BOTTOM | | | HCA | 21.649% | | | | ISRG | 14.589% | | | | UHS | 13.943% | | | | DVA | 9.147% | | | | NUE | 8.309% | | | | |
| | |  | | Stagflation concerns resurface on the back of real-time signs of a tight labor market and waning business sentiment, coupled with another bounce in 10-year Treasury yields — and all peppered with a deluge of earnings releases. | | - Chris Hussey, Goldman Sachs managing director, on reasons why the combination of today's high inflation and the potential for a slowing economy could unleash stagflation in the months ahead. | |
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