*
DJI, S&P 500 gain, Nasdaq slips
*
Energy leads S&P 500 sector gainers; tech weakest group
*
Dollar dips; gold rises, crude up ~2%; bitcoin up ~3.5%
*
U.S. 10-Year Treasury yield rises to ~3.44%
Welcome to the home for real-time coverage of markets brought to
you by Reuters reporters. You can share your thoughts with us at
SEMIS VULNERABLE AFTER RECENT STRONG GAINS -BTIG (1410 EDT/1810 GMT) After a strong start to the year, semiconductor stocks could be in for a period of underperformance, according to Jonathan Krinksy, chief market technician at BTIG. The Philadelphia SE Semiconductor index was up about 28% in the first quarter, and the S&P 500 technology index gained about 21% for the quarter. Both outperformed the broad S&P 500 , which rose about 7% in the period. "In both absolute and relative terms, semis look vulnerable..." Krinsky wrote in his note this week. "The room for error looks small." For the second quarter so far, the semi index is down 3.3% and the S&P 500 tech index is down about 2% while the S&P 500 is up 0.3%. Among factors influencing his view, is that semis outperformed the Nasdaq 100 by ~25% from last October through mid-March. That leaves the SOX/NDX ratio at key resistance going back nearly 20 years. "Our sense is that semis underperform from here," Krinsky wrote. Also, he believes that "downside volatility" in the Nasdaq "is likely to reassert itself over the coming weeks."
(Caroline Valetkevitch)
*****
STORE CLOSURES TO ACCELERATE, RING UP RIVALS' PROFITS (1254 EDT/1654 GMT) U.S. store closures will likely accelerate sharply moving forward, according to UBS analysts including Michael Lasser, who blame a mix of slowing consumer spending, reduced credit availability and an expansion of online purchases for the trend. The analysts estimate 50,000 plus store close out of the 940,000 U.S. stores currently operating, excluding gas and food service in the next five years. This implies ~5% fewer stores by the end of 2027. But UBS sees this benefiting large, well-capitalized retailers like Home Depot , Lowe's , Walmart , Target and Costco "who stand to capture a disproportionate amount of market share" as well as specialist retailers such as Floor & Decor , Academy Sports and Outdoors and National Vision . The reasoning is that $5.7 million average sales per closed store would translate to $285 billion of sales "up for grabs." If 26% goes online - as per UBS' prediction for 2027 e-commerce penetration versus 20% currently - this potentially leaves $210 billion, or $1,600 annual spend per household, for retailers like Walmart, Home Depot and Costco Wholesale. So who loses out?
UBS says smaller chains and mom & pops are "most at risk of closures" because they typically have less access to the capital needed for robust offerings. As of 2020, it says, firms with less than 20 employees ran 57% of retail stores while 68% of stores are operated by chains with less than 500 employees. These chains closed 40,000 stores in the past 10 years, while bigger chains with more than 500 employees added 17,000 stores. UBS sees clothing, accessories, consumer electronics and home furnishing retailers seeing the most shutdowns, at 27,000 cumulatively.
UBS sees every 100 basis point increase in online penetration closing about 8,000 stores.
But if online does better than its base case, gobbling up 28-29% of sales and with retail sales growing 2.5%, this means 130,000 stores may be shuttered. Or if retail sales grow at a faster 5% clip and online reaches just 24-25% penetration, this could mean an increase in the number of stores by 10,000.
(Sinéad Carew)
*****
ASSESSING THE MARKET LANDSCAPE LEADS TO THESE 10 CONCLUSIONS -CROSSMARK GLOBAL (1215 EDT/1615 GMT) In his latest "Deliberations," Bob Doll, chief investment officer at Crossmark Global Investments, comes to 10 conclusions about what to expect over the next year. Crossmark continues to recommend underweighting risky assets versus government bonds, as they expect that the U.S. economy is destined to enter into recession over the coming year. In any event, after assessing the market landscape, Doll comes to the following conclusions: 1) Moving through 2023, expect the U.S. economy to slow sequentially each quarter 2) A mild recession will commence at year end 3) The Fed will raise rates one more time then leave rates flat throughout the rest of 2023 4) Inflation will continue to subside, but not hit levels anywhere near the Fed's targets 5) Earnings estimates will continue to fall for this year and next
6) Bonds will remain in a trading range, with credit spreads just seeing some widening 7) Stocks will break below their October lows when recession and reduced earnings expectations finally sink in 8) Non-U.S. markets will outperform U.S. markets again this year 9) Both bulls and bears will be frustrated for the balance of the year 10) The domestic and global political arena will be somewhat chaotic
(Terence Gabriel)
*****
MORE LOSERS THAN WINNERS IN Q1 WITH EARNINGS RECESSION LIKELY (1040 EDT/1440 GMT) The upcoming quarterly reporting season is likely to mark the start of another U.S. profit recession, with earnings for S&P 500 companies expected to have declined for the second quarter in a row, according to an analysis from Refinitiv. First-quarter blended earnings for S&P 500 companies are forecast at $419.1 billion, down 5.2% year over year, while revenue is expected to have risen 1.6%, according to the latest data from Refinitiv. Similar to the last earnings recession, which started in 2020, this earnings recession may also last three quarters, if analyst expectations prove to be correct, according to Refinitiv. Only four sectors are expected to have had earnings growth in the first quarter, per Refinitiv data, with the largest share belonging to consumer discretionary, followed by industrials and energy. Refinitiv noted that energy is no longer the belle of the ball when it comes to earnings growth, like it had been in recent quarters. The sector's top-notch performance in 2022 will make year-over-year comparisons more difficult for it now, according to Refinitiv. Health care, information technology, and materials are likely to have dealt the biggest blow to earnings growth in the first quarter. Analysts have set the bar low going into earnings season by lowering first-quarter estimates, according to Refinitiv. Wells Fargo strategists have also warned of an earnings recession in the near-term, flagging a likely hit to revenue from an economic slowdown.
The earnings season unofficially kicks off this week, with results due Friday from JPMorgan Chase & Co and other big U.S. banks.
(Vansh Agarwal)
****
NFIB: THE GRUMPYTOWN GAZETTE (1035 EDT/1435 GMT) The mood among small business owners dimmed in March as the potential for a regional bank crisis offset easing labor market conditions and ongoing consumer resilience. The National Federation of Independent Business' (NFIB) Optimism index shed 0.8 point to 90.1 last month, marking the series' 15th consecutive month below the long-term average of 98, according to the NFIB website. "Small business owners are cynical about future economic conditions," says Bill Dunkelberg, NFIB's chief economist. "Hiring plans fell to their lowest level since May 2020, but strong consumer spending has kept Main Street alive and supported strong labor demand."
Digging deeper into the report, the percentage of survey
participants reporting hard-to-fill jobs eased 4 percentage
points to 43%, and near-term hiring intentions eased to a net
15%, supporting the notion that a gradual loosening in labor
market conditions could be under way.
Those citing inflation as their biggest problem slid 4
points, to 24%.
Still, a net negative 47% of respondents expect business to
improve over the next month and a net negative 6% reported
higher sales over the last three months.
An optimist might point to all that as evidence that the
Fed's restrictive policy rates are doing the job - dampening
demand and cooling inflation.
The survey was conducted right around the time the notion of
a regional bank liquidity crisis raised its ugly head amid the
failure of SVB and Signature banks.
"Small businesses are captives of their banks, and the
overnight change in the way markets view regional banks means
they have been catapulted into survival and liquidity mode,"
writes Kieran Clancy, senior U.S. economist at Pantheon
Macroeconomics. "Lending growth was slowing long before SVB
failed, but the declines in the March NFIB measures of current
and expected credit availability means we have to expect much
weaker lending numbers over the next few months."
The effects of tightening credit conditions - a combined
result of Fed rate hikes and the regional bank scare - have yet
to show up in the report.
"The March NFIB survey suggests the fallout from regional
bank failures has not yet led to a large tightening in financing
conditions for small firms," said Michael Pearce, lead U.S.
economist at Oxford Economics. "But the continued easing in
capex intentions and hiring plans is consistent with a continued
slowdown in economic growth."
It should be noted that the NFIB is a politically active
membership organization whose PAC spending skews heavily
conservative, according to the Center for Responsive
Politics/opensecrets.org.
Wall Street stocks were idling at the stoplight as investors
rev their engines ahead of tomorrow's CPI report.
Declining tech shares pulled the Nasdaq lower,
while industrials helped keep the Dow above water,
albeit barely.
(Stephen Culp)
*****
U.S. INDEXES NEAR FLAT EARLY, BUT TECH FALLS (0950 EDT/1350 GMT) Major U.S. stock indexes are mixed in early trading Tuesday, with the technology sector weighing the most on the S&P 500 . Investors are bracing for Wednesday's U.S. consumer price data, which could give them a better idea of the inflation picture and possibly how much longer the Federal Reserve may need to keep raising interest rates to cool inflation. Key earnings reports are also on tap this week, with results from some of biggest U.S. banks due. The results unofficially kick off S&P 500 companies' first-quarter earnings, which in aggregate are expected to have declined in the first quarter year-over-year. Here is the early market snapshot:
(Caroline Valetkevitch)
*****
DOW INDUSTRIALS: RUMBLE, BUMBLE OR STUMBLE? (0900 EDT/1300 GMT) Over the past four trading days, the Dow Jones Industrial Average has been consolidating in an especially tight range. On the plus side, this action may well be a bullish pennant implying the impending continuation of the DJI's late-March-early April advance:
Meanwhile, with this, a measure of volatility, on an hourly basis, just hit a one-year low, suggesting the DJI is especially ripe for a dynamic breakout of its shorter-term range. By mid-day on Monday, the DJI's hourly Bollinger Band width had compressed to its tightest reading since mid-April 2022. Compressed band width does not in itself predict direction, but it can signal a market primed for much more spirited action, or indeed, its next trend. On a thrust above the April 4 high at 33,642.72, the DJI can quickly move to challenge the resistance line from its January 2022 record high, which is around 34,020 on Tuesday. Since establishing this line with its mid-December high at 34,712.28, the DJI put in three distinct highs in January to February of this year. These highs were all packed in a tight range, all lower, and all capped by the resistance line. These highs were at 34,342.32, 34,334.70 and 34,331.47. Thus, traders will be keenly focused on the DJI's action in the event it thrusts higher to once again challenge the resistance line. On the downside, breaking the 50-day moving average (DMA), which ended Monday around 31,115, may see pressure quickly intensify. The 23.6% Fibonacci retracement of the March 2020-January 2022 advance is at 32,530, and the 200-DMA ended Monday around 32,470. The mid-March trough was at 31,429.82. In any event, with a highly anticipated CPI release on Wednesday, traders may not have long to wait before the blue-chip average sees some real fireworks.
(Terence Gabriel)
*****
FOR TUESDAY'S LIVE MARKETS POSTS PRIOR TO 0900 EDT/1300 GMT - CLICK HERE <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ DJI04112023 Early US market snapshot NFIB ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Terence Gabriel is a Reuters market analyst. The views expressed are his own)
