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Market News Posted by John Doherty April 16, 2023

Corn Farmers Start Planting and Crypto Funding Sinks

Remote Trading

Top things to watch this week

The Economic Calendar:

MONDAY: Empire State Manufacturing Index, Housing Market Index, 3-Month Bill Auction, 6-Month Bill Auction, Thomas Barkin Speaks, Treasury International Capital

TUESDAY: Housing Starts and Permits, 52-Week Bill Auction

WEDNESDAY: MBA Mortgage Applications, EIA Petroleum Status Report, 4-Month Bill Auction, 20-Yr Bond Auction, Beige Book, John Williams Speaks

THURSDAY: Jobless Claims, Philadelphia Fed Manufacturing Index, Existing Home Sales, Leading Indicators, EIA Natural Gas Report, 4-Week Bill Auction, 8-Week Bill Auction, Loretta Mester Speaks, 5-Yr TIPS Auction, Fed Balance Sheet, Raphael Bostic Speaks

FRIDAY: PMI Composite Flash, Baker Hughes Rig Count

Futures Expiration and Rolls This Week:

THURSDAY: Last trading day for May (K) Crude Oil futures

Key Events:

  • Earnings season heats up with a focus on regional bank earnings reports.
  • Notable reports from Netflix, Lockheed Martin, Johnson & Johnson, and Tesla.
  • Key economic reports focus on housing and building this week.
  • ECB’s President Lagarde speaks on Monday.
  • Fed governor speakers include Bowman, Goolsbee, Mester, and Williams.
  • The Fed governor blackout period begins on Saturday.
  • U.K. CPI (inflation) report on Wednesday.

Stock Index Futures

Stock indexes were flat on the week. The S&P 500 gained 0.80% for the week, and the Nasdaq index climbed 0.16%.

Will another buy stock index futures high Commodity Trading Advisor (CTA) pain trade play out?

CTAs have gone from short $35 billion in late March to currently holding around $100 billion long. According to Goldman Sachs, CTAs need to buy about $25bn in a flat market, but it becomes interesting if the market sells off big, CTAs need to sell their longs, and if the market were to go low enough, initiate sell orders.

A few key short-term levels for the S&P 500:

Upside: 4208,4220,4230,4265
Downside: 4130,4095,4083,4060

Interest Rate Futures

According to last week’s minutes of the March meeting, several FOMC members considered forgoing any rate hike because of the worst banking turmoil since the 2008 crisis. Still, they ultimately decided to press ahead due to persistently high inflation.

Analysts see credit tightening one month after the regional bank turmoil, which will act similarly to Fed hikes.

Goldman Sachs analysts now see the benchmark 10yr Treasury yield ending the year at 3.9%, about 30bp below their previous projection. They project 2yr yields will end the year at 4.4%, while only 40bp above current levels.

U.S. Treasury yields compared to the last newsletter:
30-Year yield  3.73% vs. 3.62%
10-Year yield  3.51% vs. 3.41%
5-Year yield  3.60% vs. 3.51%
2-Year yield  4.10% vs. 3.99%
2-10 Yield spread  -0.58 vs. -0.58%

FOMC statement 04-17-2023

Corn Futures

Farmers in the Midwest had their first taste of summer temperatures, and many were able to plant.

Temperatures in the Midwest will drop significantly this week and will be coupled with rains. This will temporarily halt farmers’ good start on plantings. Weather is expected to return to normal in about a week, and planting can return to schedule.

Corn prices are expected to fall from a near-record peak season-average farm price of $6.80 per bushel in 2022/23 to $5.70 per bushel in the 2023-24 season.

US Corn Supply 04-17-2023Source: Iowa State University Ag Decision Maker

Q1 Earnings

Big banks reported last Friday and had a solid quarter. The megabanks JPM, C, WFC, and PNC kicked off earnings season for banks, and all four reported earnings beats.

We are looking forward to earnings on regional banks this week, and analysts expect the focus to be on funding, deposit flows, and the lending environment. (STT, MTB, PNFP, BK, WAL, UCBI, SYF, USB, ZION, FITB, KEY, SNV, and HBAN).

We also get reports from Tesla (TSLA) and Netflix (NFLX) in the consumer sector.

Earnings Whispers 04-17-2023


Venture funding for crypto startups has cratered following the collapse of crypto exchange FTX, plummeting 80% to $2.4 billion in the first quarter compared to the same period last year, according to data firm PitchBook.

Despite the woes in VC funding, Bitcoin refuses to retrace its recent gains and has increased 83% in 2023.

Asset Class Performance Summary

This performance chart tracks the daily, weekly, monthly, and yearly changes of various asset classes, including some of the most popular and liquid markets available to traders.

Asset Class Performance Sheet 04-17-2023

Thought of the Week

Stanley Druckenmiller, one of our favorite hedge fund managers, has generated some of the best investment returns over the past four decades.

In discussing how he learned to invest during the bear market in the 1970s, Druckenmiller made the following comments:

“Never, ever invest in the present. It doesn’t matter what a company’s earning, what they have earned… You have to visualize the situation 18 months from now, and whatever that is, that’s where the price will be, not where it is today. And too many people tend to look at the present, oh this is a great company, they’ve done this, or this central bank is doing all the right things. But you have to look to the future. If you invest in the present, you’ll get run over.”

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