Good morning contrarians!
Stock futures are pretty bright red as of 0615. Major indexes are pointing to losses north of 1%. Small caps and tech are seeing the worst of it, with the Russell down 1.8% and Nasdaq off about 1.5%. The few bright spots are in the old pre-pandemic favorites: Zoom Media (ZM), Teledoc (TDOC), and Peloton (PTON) are all up in the pre-market.
Bonds are being bought, with the yield on the 2-year back down to 0.61%. It was around 0.66% on Friday. Ten-year yield is down to 1.39% from around 1.45% on Friday.
Commodities are selling off, with WTI crude down more than 3% to trade around $68/barrel. Interestingly, copper is only off 0.6%. Natural gas is actually up 2%. Cryptos are down, with bitcoin off more than 2% to trade below $46,000.
Futures have actually rebounded a bit after news that Moderna’s booster helped in thwarting omicron. But it’s fair to say that the Santa rally has been sidelined, perhaps indefinitely.
The fact is that many countries are already locking down over this: The Netherlands entered a full lockdown yesterday. Germany, France, and others have imposed travel restrictions. Ireland has imposed an 8pm curfew for bars. Plenty of jokes available for that one. The U.K. is likely to do something soon. Dr. Anthony Fauci speaks on this topic this afternoon at 1500. President Biden speaks tomorrow about the U.S. as New York and D.C. report record daily caseloads. So it looks like omicron will dominate the headlines for at least a little while longer.
It’s not the only thing troubling markets. The White House’s ‘Build Back Better’ bill is now unlikely to become law thanks to opposition from Sen. Joe Manchin (D., W.Va.). That’s effectively a $2 trillion stimulus that the market was counting on. The real estate sector in China continues to unravel, with another developer, Kaisa Group, following Evergrande into restructuring.
And yet: M&A continues to happen, with Bank of Montreal acquiring Bank of the West from BNP Paribas in a $16 billion deal just announced overnight. With omicron, I can report some anecdotal evidence that maybe things aren’t so bad. But you have to listen to the podcast for that.
Today’s Data
The Conference Board’s Leading Indicators are out at 1000. This number has been rising consistently post-Covid, with last month’s reading increasing by 0.9%. Expectations are for it to rise by 0.8%, so roughly in line. The LEI tends to predict a recession when it dips below its six-month moving average. But even then it can be anywhere from two to 15 months before the onset of the recession. So kind of arbitrary. Still, worth keeping an eye on.
We have earnings today from Carnival Cruise Lines (CCL) before the market open at 0930. Nike (NKE) and Micron (MU) report after the close at 1600.
The Bottom Line
It’s looking like risk-off across the board. That may be a buying opportunity, if you believe the economy can weather this latest Covid surge just like it did the last ones.
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