Sethi Associates

  Daily Summary – March 31, 2021 - Into April We Go I ended yesterday's summary insinuating we'd see downside today due to what I thought would be some lingering quarter-end rebalancing, and while we did seem to get some of the latter (rebalance) it wasn't out of equities and into bonds as I thought might happen after one of the worst quarters for bonds ever,  but rather between equity sectors as some of the first quarter's laggards (tech, discr, utes, comms, and health care) finished green while the stronger sectors (basically the rest) finished red led to the downside by the two biggest winners, energy and financials.  We also saw it within sectors as for example high flying GME and AMC (up 908 and 283% respectively) finished red, while AAPL and AMZN which both finished down for the quarter finished green. The same was true of indices with NDX and Naz (which finished the quarter with very moderate gains) finishing the day up around 1.5% (which was over half of the ove

 EIA - Summary of Weekly Petroleum Data for the week ending March 26, 2021  US DoE Crude Oil Inventories (W/W) 26-Mar: -876K (est -1500K; prev 1912K) - Distillate: 2542K (est 500K; prev 3806K) - Cushing: 782K (prev -1935K) - Gasoline: -876K (est 700K; prev 204K) - Refinery Utilization: 2.30% (est 1.70%; prev 5.50%) Small crude draw this week after several weeks of large builds due to the impacts of the winter storms which reverberated well into March. That was offset by another significant build in distillates (despite big increase in demand - as we'll see below products exports fell markedly). Overall, we saw a net draw of 1.347mb across the petroleum complex bringing total stocks to 1,928.098mb excl SPR (1,928.1 including). Crude - Production edged up 100kbd to 11.1mbd (but still down 1.9mbd y/y). Net imports fell a bit as 583kbd rise in imports more than offset by a big 693kbd increase in exports. Adjustment back in "big" territory at +745kbd showing that keeping t

US Pending Home Sales (M/M) Feb: -10.6% (est -3.0%; prev R -2.4%) Pending Home Sales NSA (Y/Y) Feb: -2.7% (est 6.5%; prev R 8.8%) Pending home sales (which are contract signings not actual transactions) plunged in February down in all regions bringing it to pre-pandemic levels (and down 0.5% y/y).  Weather and inventory were IMO the predominant issues so I expect a bounce back in March due to the former being much better, but inventory will remain a challenge.  It should be noted also that the West saw a big fall (although less than the other regions) where weather was not much of an issue.  There it is more of an inventory and affordability (and perhaps desirability) story it would seem.  Here is some commentary from the report. "The demand for a home purchase is widespread, multiple offers are prevalent, and days-on-market are swift but contracts are not clicking due to record-low inventory," said Lawrence Yun, NAR's chief economist. "Only the upper-end market is e

  US ADP Employment Change Apr: 742K (est 850K; prevR 565K; prev 517K) What would normally be an outstanding ADP employment report with an increase of 742k jobs shows you how high expectations have become as that was a miss of exp's for 850k.  But as we've seen this understating the "real" employment numbers of late, it bodes well for a big number on Friday. With the singular exception IT (for a second consecutive month) every size and sector showed solid if not robust growth led this month by large sized businesses (last month was medium) and services jobs (same as last few months) with the latter making up most of the huge increase up 636k (full table below).  Goods producing jobs up a still solid 106k. A big report, but as I said last month, I think we will likely see bigger on Friday (and that's what expectations are with a 1M print as the median forecast).  From the report (typo corrected, they must have forgotten to spell check ;-)): "The labor market c

      As we approach the open... 3/31/21 As we bring an eventful first quarter to a close, US equity futures trade with an upside bias at the highs of the overnight session.  Growth getting the best of the bid this morning as the 10-year yield trades little changed with NDX indicated up three-quarters of a percent, RUT a third, and SPX little under two tenths.   Equity notes include Apple (AAPL 121.81, +1.91): +1.6% after the stock was upgraded to Buy from Neutral at UBS. Walgreens Boots Alliance (WBA 54.28, +1.30): +2.5% after beating EPS estimates on below-consensus revenue. WBA also raised its fiscal 2021 guidance. Pfizer (PFE 36.35, +0.24): +0.7% top-line results for its COVID-19 vaccine trial demonstrated 100% efficacy and robust antibody responses in kids aged 12-15. lululemon athletica (LULU 312.20, -4.89): -1.5% after guiding FY21 EPS below consensus, although it beat top and bottom-line estimates, issued upbeat guidance for its April quarter, and issued upbeat FY21 revenue gui

 Daily Summary – March 30, 2021 - Into Month End We Go I ended yesterday's summary with  "Given today's action, I'm inclined to look for more downside tomorrow, especially given the buying volume.  I still think we rally within the first few trading days of April, but I don't think we're ready to quite yet." That was true of the SPX and and Naz which were weighed down by weakness in large caps, but small caps found their footing today following the largest beat in consumer confidence since 2000 (which was the highest reading in a year although only about halfway back to pre-pandemic highs) and a bounceback in financials with the RUT powering up 1.72% to easily outpace the larger cap indices. SPX finished down a third of a percent while NDX weighed down by increasing 10-year yields fell little more than half a percent. Naz finished down around a tenth.  The style box the opposite of yesterday's with green towards the bottom although still a bit of a val

     3/30/21 After a week or so of respite, with a family fund blow-up helping to keep traders otherwise occupied, attention has circled back to interest rates with the 10-year yield moving this morning to a new recovery high up at one point five more basis points to 1.77%.  This (along with the weak buying interest highlighted in last night's summary) has predictably pressured growth stocks with the NDX indicated down seven tenths. SPX also indicated down three tenths while RUT is "least bad" at down one tenth.  These are well off the best levels of the overnight session.  Banks are up on the steepening yield curve (2/10 now widest since 2015) and some overdone selling in yesterday's session, but overall the negative correlation between yields and stocks remains. The fears over runaway bond yields is evident in the latest BoA survey where for the first time since the pandemic began Covid was not the top worry.  Now it's inflation.   As we're about to lap a hu

Daily Summary – March 29, 2021 - Another Risk Off Day I ended Friday's summary with  "So, overall, I'm encouraged by the broad based rally today, but I still see headwinds in technicals, breadth, and sentiment. So my inclination is to look for weakness early in the week that we rally from...." What I didn't take into account is the breadth of the losses related to the Archegos family fund blowup which caused a bit of a risk off mood as did the director of the CDCs warning of "impending doom".  Nevertheless, bonds did not benefit with the 10-year yield pushing back up above the 1.7% level  towards its recovery highs which dinged growth stocks a bit. Value stocks on the other hand were hurt by financials due to potential after-shocks from the Archegos issue (as well as what seems to be still profit taking in 1Q winners as most of those sectors were weak).  The result was a very mild down day for the big cap dominated SPX and NDX, a little bigger losses in