Laggard Energy Could Be 2021s Big Winner
Energy shares were once over 10% of the market cap of the
S&P 500, but with last year’s pandemic nearly killing travel and industry,
that fell under 3% in 2020. Some fund managers even gave up completely on the
sector based on the fact that not only was it a dog in 2020, but energy has
underperformed the broader market over the past decade.
After all, why add 5% on energy to your portfolio when you
can add 5% more Apple or Tesla?
The thing is, common wisdom in the stock market dictates
that the most beaten down sectors are those with the most to gain. And some
analysts are beginning to think that 2021 will be the year that energy recovers
from its decade long doldrums.
Already energy names are up 18% in 2021, with just two weeks
of the year in the bag. Those gains come despite a struggle in the S&P 500
that has the benchmark index up less than 1% since the start of the year.
Strangely enough, it could be the same fear of missing out
that sends the energy sector higher in 2021 as changing fundamentals and
sentiment drive all the fund managers who’ve dumped energy over the past decade
back into the rising trade.
While demand remains weak now, the future dynamics look very
positive. Demand should recover strongly later in the year, and the Biden
presidency is likely to limit the growth of future supply.
Perhaps most tellingly is that names like Exxon Mobil are
now getting upgrades from analysts, which could be the beginning of a shift in
U.S. Daily Market Review
Wall Street’s main indexes partly declined today as President Joe Biden’s $1.9 trillion stimulus plan sparked fears of a rises in taxes.The Dow Jones Industrial Average slipped 64.7 points, or 0.21%, at the open to 30926.77. The S&P-500 dropped 6.8 points, or 0.18%, at the open to 3788.73, while the Nasdaq Composite dropped 12.7 points, or 0.10%, to 13099.895.U.S. retail sales fell further in December as renewed measures to slow the spread of COVID-19 undercut spending at restaurants and reduced traffic to shopping malls.Retail sales dropped 0.7% last month, the Commerce Department said on Friday. U.S. business inventories surged in November, supporting expectations that inventory investment.Business inventories added 0.5% in November after increasing 0.8% in October, according to the Commerce Department said on Friday. U.S. consumer sentiment tumbled early January as Americans reacted to the assault on the Capitol building.The University of Michigan’s consumer sentiment index dropped to 79.2 early this month from a final reading of 80.7 in December. The producer price index for final demand increased 0.3% last month after securing 0.1% in November, as reported by the Labor Department.
European Daily Market Review
European markets are into a mixed pattern.The CAC-40 added 0.33%, while the FTSE 100 is leading the DAX dropped 0.57% and 0.48% respectively.The pan-European STOXX-600 slipped 0.5% by 0804 GMT.Carrefour shares dropped more than 5% to the bottom of the Stoxx 600 in early trade.German business software group SAP soared 1.6% after it released preliminary annual results higher than forecasts.German Chancellor Angela Merkel demands “fast action” after the country marked record number of deaths from the coronavirus.Italy has been plunged into political turmoil once again as former Prime Minister Matteo Renzi decided to pull his support for the current coalition government on Wednesday. Italian Prime Minister Giuseppe Conte refused to leave his office yesterday, after a junior coalition party led by former premier Matteo Renzi.
The USD On A Rise
The USD rallied after President-elect Joe Biden outlined his plans for additional stimulus package. The Federal Reserve Chairman Jerome Powell refused to join any discussion about reducing monetary stimulus. Presently, the USD versus the Euro trades at 0.82580000 EUR, which is an incline of 0.00400000 or 0.49% from the previous close of 0.82180000.The daily trading range is from 0.82060000 to 0.82580000, while the trading volume is 53.092K.Biden outlined his plan of $1.9 trillion spending plan overnight, including additional direct payments to households.However, advances are limited after Fed Chair Jerome Powell adopted a very dovish tone.Last Friday’s jobs report implied in the U.S. dropped 140,000 payroll positions in December, while the December CPI annual figure advanced 1.4%.
Gold Prices Surged
Gold prices partly rallied this morning during the Asian hours, with U.S. President-elect Joe Biden’s unveiling of a massive $1.9 trillion COVID-19 relief plan.Now, the precious metal trades at $1851.81, which is another rise of $6.31 or 0.34% from the previous close of 1845.50.The daily trading range is from $1845.26 to 1855.56, while the trading volume is 122.323K.Biden presented his plan called “American Rescue Plan” on Thursday, which includes a wave of new spending, additional direct payments to households, an further jobless benefits bill.The coming numbers from yesterday indicated in that the number of initial jobless claims filed in the U.S. jumped to 965,000, coming more than 795,000 claims in estimates. Fed’s Chair Powell announced that the Fed will raise interest rates “no time soon”, unless there are troubling signs of inflation. Now, the market focus is on the U.S. Senate, which will meet next week to being incumbent President Donald Trump’s second impeachment trial. Trump is challenged by charges of inciting his supporters’ riot in Capital Hill.
Asian Daily Market Review
Asian markets are mixed Friday morning following a weak
overnight session on Wall Street. There are some pockets of strength however as
investors across the region look ahead to the beginning of earnings season when
major U.S. banks begin reporting Friday on Wall Street. There is also rising
optimism for President-elect Joe Biden’s proposed stimulus plan, which will
deliver additional direct payments to U.S. citizens.
In Japan the Nikkei is trading slightly lower by 0.2% as
equities come under slight pressure due to Yen strength. Shares of Softbank are
up 0.6%, while Sony is falling 1.4%. Among the major exporters Toyota is losing
1.6%, Panasonic is 1% lower, but Canon is surging 7% higher.
In Australia the S&P/ASX 200 is one of the rising
markets as it trades 0.2% higher. Shares of the big four banks are mostly
higher and helping gains. Shares of ANZ are trading 0.6% higher, NAB is up 1.7%,
Westpac is 2.1% higher, but Commonwealth Bank is falling 0.8%.
In mainland China markets are trading mixed after reporting
a record trade surplus for December due to sales of pandemic linked goods. The
Shanghai Composite is trading up by 0.2%, while the smaller cap Shenzhen
Composite trades 0.4% lower. Meanwhile in Hong Kong the Hang Seng is gaining 0.3%.
South Korea’s Kospi is leading losses for the region as it
falls 1.5%, and Taiwan’s Taiex is trading 0.8% higher.
In Southeast Asia markets are edging higher as the Straits
Times in Singapore adds 0.3%, Indonesia’s Jakarta Composite inches up by 0.1%,
and the KLCI in Malaysia is slightly higher by less than 0.1%.
Wall Street Could See Better Than Usual Earnings Season
Wall Street has an interesting dilemma as we head into the
latest earnings season. And that is how to report something as better than
expected when there were no expectations to begin with.
Early indications are that actual earnings this quarter are
going to beat expectations by a wide margin. In fact, earnings could be so good
that EPS growth will swing back to positive growth for the first time since the
COVID-19 pandemic hit.
And yet it’s not sure if that will necessarily help markets
that are already trading at record levels. In the previous quarter fully 85% of
the S&P 500 companies beat earnings expectations, but the result was an
average loss of 0.2% following the earnings reports.
As a positive harbinger of the coming earnings season, those
companies that have already reported their fourth quarter results have beaten
expectations by an average of 13%. In addition, the EPS expectations have been
rising throughout the quarter, which is not historically the norm for analysts.
In fact, over the past five years the historical norm has
been for EPS estimates to fall by 4.5% through the quarter. Even so, many on
Wall Street feel that expectations for fourth quarter earnings are too low, and
that will lead to huge beats in some cases, but beats on average across the
That’s good news because it could end the earnings recession
by delivering the first quarter of positive earnings growth since the fourth
quarter of 2019.
There are concerns however that the recent surge in COVID-19
cases and additional lockdown measures will short-circuit the earnings recovery.
U.S. Daily Market Review
U.S. stocks retreated from the peaks for the day and Treasury yields rallied amid predictions President-elect Joe Biden plans Covid-19 relief of as much as $2 trillion.By 2:12 p.m. ET (1912 GMT), the Dow Jones Industrial Average added 77.52 points, or 0.25%, to 31,137.99.The S&P-500 inclined 4.95 points, or 0.13%, to 3,814.79 and the Nasdaq Composite gained 37.77 points, or 0.29%, to 13,166.72.The energy, real estate and industrial sectors led the benchmark S&P 500 higher for a third session. Biden is likely to report his economic support plans later in the day. Federal Reserve Chairman Jerome Powell stated that policy makers won’t raise interest rates.Unemployment for the lowest-paid workers in the U.S. advanced above 20%, according to figures from the Federal Reserve.Shares of Petco Health and Wellness Co Inc rallied in their market debut on Thursday, giving the U.S. pet retailer a market capitalization of $5.69 billion. The USD fell today in choppy trading, after Federal Reserve Chair Jerome Powell indicated in a dovish tone.
European Daily Market Review
European markets advanced today with shares in Germany leading the region. The DAX gained 0.45% while London's FTSE-100 rallied 0.36% and France's CAC-40 surged 0.21%.The pan-European STOXX-600 index jumped 0.3% by 0812 GMT.The stock price of Carrefour tumbled 6.0% after the French government brought in issues its takeover by Canadian convenience-store operator Alimentation Couche-Tard.Homebuilder Taylor Wimpey declined 1.6% even after reporting its 2020 operating profit would meet market forecasts.The German economy retreated a smaller-than-predicted 5.0% in 2020 as a strong state response helped limit the havoc caused by the COVID-19 pandemic in Europe’s largest economy.The loss in GDP was smaller than a Reuters forecast of -5.1% and less severe than the record retreat of -5.7%.
Crude Oil Prices Dropped
Oil prices slipped this morning during the Asian trading hours, with investors weighing the ever-higher number of COVID-19 cases and the impact for fuel demand versus a fifth consecutive week of retreat in U.S. crude oil supply.Now, oil trades at $53.110, which is a small incline of $0.268 or 0.51% from the previous close of 52.842.The daily trading range is from $52.699 to 53.262, while the trading volume is 11.75K.U.S. crude oil supply data from the U.S. Energy Information Administration (EIA) announced that a draw of 3.247 million barrels for the week to Jan. 8. Tuesday’s data from the American Petroleum Institute showed a draw of 5.821 million barrels.The EIA data also implied in a surge in gasoline and distillate inventories as refiners increased output to the highest level since August 2020.China announced that the number of new cases in the province of Heilongjiang are on massive rally of over 300%, which is the largest daily advance in more than ten months. In Europe, in many countries the lockdown was extended to curb the B177 strain of the virus.However, additional stimulus packages could be unveiled by U.S. President-elect Joe Biden later in the day helped cap losses.Furthermore, Saudi Arabia, the world’s top oil producer is planning supply reductions of February-loading crude for some Asian buyers by up to a quarter.
Asian Daily Market Review
Asian markets are mostly higher Thursday morning after Wall
Street recovered from uncertainty overnight, with most major indices finishing
in positive territory despite President Trump being impeached by the House of
Representatives for the second time.
In Japan the Nikkei is trading 1.1% higher to lead gains in
the region as investors are hoping for additional stimulus measures in the U.S.
once president-elect Biden takes office next week. Shares of Softbank are
surging 4.8% higher while Sony is up a far more modest 0.3%. Among the major
exporters Toyota is 0.5% lower, Panasonic is down 0.9%, and Canon is rising
Meanwhile in Australia the S&P/ASX 200 is up by 0.4%,
with the big four banks helping lift the broader market. Shares of ANZ are 1.5%
higher, NAB has a 1.1% gain, Commonwealth Bank is flat with a slight loss of
less than 0.1%, and Westpac is surging 2.3% higher. Major miners are holding
the index back however as BHP is down 0.5% and Rio Tinto is losing 1.1%.
In mainland China markets are sharply lower in early trade
ahead of the release of trade data, with the Shanghai Composite falling 0.5%
and the smaller cap Shenzhen Composite losing 1.5%. Meanwhile in Hong Kong the
Hang Seng is bucking the falling trend on the mainland with a 0.3% gain.
South Korea’s Kospi is trading flat today, while the Taiex
in Taiwan is falling 0.6% as Taiwan Semiconductor falls 2.2% ahead of its
Southeast Asian markets are higher with Singapore’s Straits
Times rising 0.6%, the KLCI in Malaysia up 0.4%, and Indonesia’s Jakarta
Composite up by 0.3%.
Intel Shares Up 7% On Ousting Of CEO
Shares of chipmaker Intel rose 7% on Wednesday after the
company announced it will be replacing current CEO Bob Swan with VMware Inc.
Chief Executive Pat Gelsinger. VMWare saw its shares plunge 6.8% on the news,
and Dell Technologies, which owns a sizeable chunk of VMWare, also saw its
shares sink 7.2%.
Swan has been the CEO at Intel for just 2 years, although he
also held the position on a interim basis for seven months prior to that. To
his credit he did oversea a challenging period in Intel’s history as the
company fell behind in its process technology, leading to a dramatic drop in
market share. Last July Intel admitted its next generation of processors would
be late, and in a departure from typical practices it said it could work with
third-party manufacturers on the chips.
There were concerns when Swan took over as CEO that his
background as the CFO of Intel would mean his technological know-how would pose
a problem. However shares rose more than 40% over the following three months.
Analysts warned that even with Swan being replaced it could
take years to turn things around at Intel. Any changes made now will take
several years to bear fruit and it’s pretty much guaranteed at this point that
Intel will continue losing market share to rivals like AMD in the coming few
years. Shares of AMD fell 3.8% on Wednesday.
Intel shares have significantly underperformed under Swan,
gaining just 21% since he took over as CEO in January 2019 versus a gain of 135%
for the Philadelphia Semiconductor Index over the same period.
U.S. Daily Market Review
Wall Street’s three major indexes managed to rally after Wednesday’s choppy morning session as investors seem to be relatively quiet during today’s session.The Dow Jones Industrial Average added 72.19 points, or 0.23%, to 31,140.86.The S&P-500 secured 18.68 points, or 0.49%, to 3,819.85 and the Nasdaq Composite inclined 93.67 points, or 0.71%, to 13,166.11.Unemployment sunk to its floor-paid workers in the U.S. is above 20%, a data coming that Federal Reserve Governor Lael Brainard.The data implied in how uneven the regaining path has seen since efforts to control the Covid-19 pandemic resulted in the biggest quarterly GDP retreat since the Great Depression.The U.S. government marked December budget deficit of $144 billion - a monthly record.
European Daily Market Review
European markets lost some territory today with shares in Germany losing the most. The DAX slipped 0.23% while France's CAC-40 dropped 0.20% and London's FTSE-100 declined 0.11%.The pan-European Stoxx-600 moves around the flatline by late morning, with telecoms stocks climbing 1.3% to lead the rising path.Euro zone industrial production surged more than the predictions November, according to the numbers.The European Union’s statistics office, Eurostat, reported that the industrial output in the 19 countries sharing the euro advanced 2.5% in November against October for a 0.6% year-on-year retreat.The Spanish Telefonica shares rallied almost 10% after the Spanish telecom leader stated announced a $9.4 billion sale of phone masts to American Towers.
Gold Prices Advanced
Gold prices rallied this morning during the Asian hours, with both the USD and U.S. Treasury yields hitting the pause button in their recent rallies.Presently, the precious metal trades at $1857.52, which is a rise of $3.43 or 0.18% from the previous close of 1854.09.The daily trading range is from $1853.54 to 1863.01, while the trading volume is 110.035K.Moreover, The U.S. economy mark a solid recovery in the second half of this year as vaccinations become widely available.Still however, COVID-19 is putting in a negative pressure on the economy and monetary policy will remain accommodative, according to the Boston Federal Reserve Bank President Eric Rosengren said on Tuesday. On the data front, the U.S. will release December’s core Consumer Price Index later in the day. Data on December’s Producer Price Index (PPI). The number of global cases surpassed the mark of 91.57 million as of Jan. 13, with some Asian and European countries introducing tighter restrictions to cease the spread of the virus.