Good morning contrarians!
Yesterday was yet another day of heavy selling on Wall Street. Stocks plummeted for the third session in a row to their lowest level of the year so far. Tech once again saw the worst of it as the Nasdaq dropped 4.5% on the day. The S&P 500 fell by 3% to dip below the 4,000 level for the first time in more than a year. The S&P is now 17% off of its all-time high. Another day like yesterday and it, too will be in a bear market.
State of Play
As of 0245 this morning, stocks are looking to rebound, with the Nasdaq up 1.7% and other indexes up a little less.
Bonds are flat after rebounding from multi-year lows yesterday. The 10-year is trading around 3.06% whilst the 2-year is at 2.63%.
Commodities aren’t doing all that much. WTI crude oil is down about 1% to trade around $102/barrel. Copper is rebounding a bit, up 0.6%. Cryptos are rebounding after bitcoin briefly dipped below 30,000 yesterday. BTC now changing hands around $32,500.
Fed Speakers
There are no major economic data releases today (that comes tomorrow, with the CPI) bu there are Fed speakers: New York Fed President John Williams is up first at 0740, followed by Richmond Fed President Tom Barkin (0915), Fed Governor Christopher Waller and Minneapolis Fed President Neel Kashkari (1300), Cleveland Fed President Loretta Mester (1500) and Atlanta Fed President Raphael Bostic (1900).
Earnings
Peloton (PTON) and Fox (FOXA) are due to report before the open at 0930. Other highlights today include Aramark (ARMK), Electronic Arts (EA), Occidental Petroleum (OXY), H&R Block (HRB), Hyatt Hotels (H), Nintendo (NTDOY), Roblox (RBLX), and Coinbase (COIN).
The Bottom Line©
Things are quite ugly indeed and it’s hard to see what could end all this bloodletting. Maybe tomorrow with the CPI? Otherwise hard to see where a catalyst could emerge.
There are some signs of life, primarily in consumer staples. Look at names like Newell (NWL), Clorox (CLX), Colgate (CL), Walmart (WMT), and Home Depot (HD): All were up over 1% yesterday. That tells us there is still some appetite for stocks. It just needs to be the right stock. Cashflows are king. Tech is dreck. That appears to be the new narrative that is emerging here.
Contrarian opportunities abound, but remember that sometimes the contrarian idea is not the smart one; it’s just contrarian. Don’t catch a falling knife. Don’t fight the tape. Sometimes things just need to bleed for awhile. Blood is certainly starting to gush now. Let’s see how much longer.
Blood-Letting: Daily Contrarian, May 10