Thursday, August 17, 2023

😖China’s Credit Problems May Keep Markets Volatile

Good morning. China's real estate problems have been building for years, kicking off about two...
It's the monthly jobs numbers today and they're not going to be pretty and will be possibly the tip of the iceberg as we head into May.

Good morning. China's real estate problems have been building for years, kicking off about two years ago. Now, with a slow economy and a rising debt-to-GDP-ratio, ratings agency Fitch may downgrade the country's A+ credit rating. It also doesn't help that China has quickly shut down trading in troublesome bonds on its troubled property development companies.

Downgrade or not, China's slowdown could lead to slower global growth. It may not mean a recession, as China is more dependent on Western capital markets, and western nations have worked to diversify their manufacturing supply chains. But it could likely cause some turmoil in the markets, likely increasing some of the volatility in recent weeks.

Higher volatility gives traders more profitable opportunities, and a market decline can allow investors to buy beaten-down names at better valuations. Just don't get too bullish quite yet.

Now here's the rest of the news:

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MARKETS
DOW 34,765.74 -0.52%
S&P 4,404.33 -0.76%
NASDAQ 13,474.63 -1.15%
*As of market close
Markets continued lower on Wednesday, following the latest Fed meeting minutes.
Oil slid 2.2 percent, closing at $79.18 per barrel.
Gold dipped 0.7 percent, last going for $1,922 per ounce.
Cryptocurrencies traded lower, with bitcoin at $29,089 at the stock market close.

Today's TOP TIPS
Retail Sector Fears Have Been Overblown, For Now
The past few months have seen retail stocks underperform on concern that consumers have been slowing their spending. The latest retail sales data indicates that consumers are fine overall. If anything, they're just cutting back on spending unless they can get a big bargain.

Investors looking at the retail space should focus either on companies that can offer big, regular sales, or on big box stores that cater to consistent demand.

» FULL STORY

Insider Activity Report: Keycorp (KEY)
Devina Rankin, a director at Keycorp (KEY), recently bought 10,000 shares. The buy is an initial stake for the director. The total cost for the stake came to $114,900.

This marks the first insider buy since the company's institutional bank head bought 75,000 shares in May. He paid $733,500 to do so. Company insiders have mostly been buyers since March, following the drop in bank stocks. And they were largely sellers last year at higher prices.

» FULL STORY

Unusual Options Activity: Sea Limited (SE)
Singapore-based e-commerce and digital finance platform Sea Limited (SE) dropped nearly 30 percent on Tuesday. One trader expects shares to decline further in the next month.

That's based on the September $35 puts. With 28 days until expiration, 15,097 contracts traded compared to a prior open interest of 376, for a 40-fold rise in volume on the trade. The buyer of the puts paid $0.60 to make the bearish bet.

» FULL STORY

IN OTHER NEWS
Consumer Debts Rise as Payments Slow

While consumers are still holding strong on total cash balances, they are declining from their pandemic-era peak. Now, credit card debt has topped $1 trillion for the first time, and delinquent payments are on the rise. That indicates that some consumers may be getting into trouble, even as others have the ability to increase their debt load.
U.K. Inflation Drops to 6.8 Percent

Inflation in the United Kingdom dropped to 6.8 percent in July, a 17 month low. Overall, food and energy prices declined overall, which helped lead the drop. Food inflation remains high in the U.K., with a 14.9 percent increase for the year ending July.
Apple Starts iPhone Production in India

Tech giant Apple (AAPL) has started production of the iPhone 15 in India. The move is part of the company's plan to diversify manufacturing operations out of China, and improve supply chains. In fiscal 2022, Apple produced nearly 7 percent of all its iPhones in India, or about $7 billion.
Intel Calls Off Tower Semiconductor Merger

Chipmaker Intel (INTC) is calling off its plan to buy Tower Semiconductor (TSEM), in what would have been a $5.4 billion deal. Intel will pay a breakup fee of $353 million. The breakup is coming as a number of countries have cited regulatory concerns for the merger of the two companies, which would impact Intel's ability to close the deal in a timely manner.
Coinbase Gets Approval to Trade Crypto Futures

Cryptocurrency brokerage firm Coinbase (COIN) has received approval to trade futures on cryptocurrencies and offer that product to US customers. Unlike owning a crypto outright, futures contracts are similar to options in that they provide a low-cost way to profit from a big price move higher or lower in an asset.

S&P 500 MOVERS
TOP
PGR 8.733%
MKTX 5.349%
ALL 4.359%
TJX 4.168%
TGT 2.896%
BOTTOM
JKHY 7.151%
RHD 4.834%
MPWR 4.396%
SEDG 4.171%
SBAC 3.908%

Quote of the Day
When considering valuation, we believe the 'E' must substantiate the 'P' in the P/E ratio. As it stands, we are still not convinced corporate profits can sustain a move above the 4,800-range the S&P 500 achieved early last year, particularly given the current level of interest rates.
- John Lynch, chief investment officer of Comerica Wealth Management, on why the market can rally through the end of the year, but why it may not move too far past its prior all-time high.

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