MARKETS TODAY Nov 21 (Vica Partners) – The S&P 500 down -0.20% as of 1:40 p.m. Eastern. The Dow Jones Industrial Average up 33 points, or +0.10%, to 33,778. The tech based Nasdaq down -0.75%.
Markets slowly gain in Mondays trading session with the 3 key stock market indexes mixed, the 10-year Treasury yield up at 3.834%, +0.016%, the 2 year Treasury yield up at 4.55%, +0.038% and the U.S. Dollar Index (DXY) up at $107.88, +0.89%. Oil prices flat with Brent crude $87.43, -0.22%, and US West Texas Intermediate down at $79.86, -0.27%. Crypto measure Bitcoin at $15,967, down -1.75%.
BIG PICTURE MONDAY
Traders are closely watching what Fed speakers say about the outlook for interest rates. Crude futures took losses after Saudi Arabia denied a report that it is discussing an oil-production increase for the OPEC+ meeting next month. The dollar gained as investors sought haven assets. Treasury yields remain flat.
Federal Reserve Bank is ready to “move away” from larger rate increases
Markets expect the Fed to raise its benchmark interest rate another 0.5 percentage point in December, rather than the three-quarters of a percent. The current 2022 short-term target rate of between 3.75% and 4.00% was set in November. Cleveland Fed President Loretta Mester and St. Louis Fed President James Bullard speak Tuesday.
The most important day for markets this week will be Wednesday
Markets will get updated durable goods orders, job claims, manufacturing PMI and home sales numbers. However look for some increased volatility and lower volumes as traders take time off as the markets are closed Thursday for Thanksgiving, and will have a shortened trading day on Friday.
Continue to watch S&P 4,000 level benchmark
The S&P 500 is on its 200-day moving average. The line has been a resistance level for the index, most notably in April and August and can indicate a breakout. Since the late September lows the index is up +10% today.
The US yield curve is now the most inverted it has been since 1982
Meaning short term interest rates are moving up, closer to (or higher than) long term rates. This unusual occurrence and has historically been a very reliable indicator of an upcoming economic recession. Since World War II every yield curve inversion has been followed by a recession in the following 6-18 months.
Vica Momentum Stock Report
Sociedad Quimica y Minera NYSE (SQM) (Grade A-) 20 Day Average +8.08%, 100 Day Average +18.76%, 200 Day Average +86.22%, YTD +96.71%.
Sociedad Quimica Minera Chile SA produces fertilizer and iodine and manufactures industrial chemicals and iodine derivative products. The Company sells its products in over 60 countries throughout the world.
IMPORTANT TO READ; Low interest rates will return!
The Federal Reserve gave guidance that back in August of 2022 that they would raise rates to 4% and have. Rate adjustments will drive down inflation and slow the pace of the economy. Company earnings will remain mixed with stronger support for Communication services, Consumer staples, Energy, Financials and Health care. As these sectors tend to perform well during recessions
Following 2022 we expect the Central Bank to begin to cut interest rates in late Q2 of 2023 to avoid an extended recession. As the cure for inflation is not just raising rates. Vica analysts see a significant policy change coming by late spring of 2023 with Powell reversing direction… just look at 12 month declining lower commodity pricing and new reports on rising retail inventories.
Yearly commodity prices will rise “as there are still production shortages” which include: iron, copper and crude oil. Upside will continue!
Solid strategy for these type of market days ….
We suggest investing in companies that have solid balance sheets and offer dividends.
Look to Communication services, Consumer staples, Energy, Financials and Health care as these sectors tend to perform well during recessions
Best to continue to cost average buy value stocks and resist most all tech and growth stocks where companies have negative margins. Our Teams forecast a negative 6-8% valuation correction for speculative stocks. DON’T try to time market lows!
*** Watch for our emerging 30/ 60/ 90 day Sector and leading company watchlist’s
*** Look to Index ETF’s like SPY to outperform stocks and most managed funds
*** Energy is the Top Performing Sector in S&P 500 Year to Date and is already regaining strength
*** Banks will profit from higher interest rates on new loans and other products which will offset defaults
