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Good morning.
It’s been exactly a week since the Federal Reserve signaled to the markets it’s thinking about thinking about rate hikes on the distant horizon. After a sharp sell-off last Wednesday, stocks have recovered nicely in recent days. And, they’re up again this morning.
U.S. Futures, led by tech, are following Europe higher. The dollar is ticking lower. Commodities are gaining. Yields are pretty flat. In other words, the conditions are there for a risk-on day.
What to watch today: the Fed will release banks’ stress-tests results today. A strong showing is expected to lift that sector, analysts predict. More on that below.
Let’s see what else is moving the markets.
Markets update
Asia
- The major Asia indexes are mixed in afternoon trading with the Nikkei down 0.1%.
- Crypto miners are fleeing China as Beijing continues its crackdown on the energy-intensive practice. Crypto bulls are divided on what the exodus means.
Europe
- The European bourses are solidly higher with the Stoxx Europe 600 up 0.4% a half-hour into the trading day. Auto, tech and bank stocks lead the way higher.
- Stocks fell in Europe yesterday despite excellent PMI numbers that show the eurozone economy is booming.
- Maybe everyone was distracted by the footy. The big showdown between Germany and Hungary last night ended in a 2-2 draw, but the bad blood lingers as the city of Munich tried and failed to get Allianz Arena illuminated in rainbow colors to protest Hungary’s latest anti-LGBTQ law. Euro Cup corporate sponsors—from Gazprom to Coca-Cola—have been awfully quiet about the controversy.
U.S.
- U.S. Futures are ticking higher this morning. Tech stocks again outperformed yesterday with the Nasdaq closing in record territory.
- One of yesterday’s big winners was Occidental Petroleum. The stock has been on a tear this year with rising oil prices, and analysts are increasingly bullish on its growth story.
- On the opposite end yesterday were Fannie Mae and Freddie Mac. Fannie Mae shares fell more than 60% after the Biden Administration moved to oust the mortgage giants’ federal overseer following a damning Supreme Court ruling that all but dashes any effort to privatize the firms.
Elsewhere
- Gold is down, trading below $1,780/ounce.
- The dollar is off a touch.
- Crude is up with Brent trading above $75/barrel.
- The Bitcoin rally is petering out; BTC is trading around $33,000.
***
Buzzworthy
Big Tech…big rally
The markets are having a 2020 flashback. Big-cap tech names are on one heck of a run. The FANG+ Index, which includes stocks like Facebook, Apple and Microsoft, is up 7% in the past month, and according to MarketEar, up 13% from its May lows.
🚀🚀🚀
Bullish on dividends
Goldman Sachs this morning: “We forecast S&P 500 dividends will grow by 4.5% per year on average over the next decade, including 6% growth this year and again in 2022.” That’s well above market consensus.
💵💵💵
The Fed, and house prices (revisited)
🏡🏡🏡
In comedy and crypto…it’s all about timing
₿₿₿
***
Have a nice day, everyone. I’ll see you here tomorrow… Until then, there’s more news below.
Bernhard Warner
@BernhardWarner
[email protected]
As always, you can write to [email protected] or reply to this email with suggestions and feedback.
Today's read
Stress tests. It's a potentially big day for bank stocks. Later today, the Fed will reveal which banks pass its capital-requirements test, the next step to resumption of dividend payments and stock buy-backs. Watch this sector closely today.
Why is crypto crashing these days? Ethereum, Bitcoin, Dogecoin—they have a lot in common. Since Coinbase went public in mid-April, crypto assets have utterly collapsed in price. "If you’re new to investing in the crypto space or just interested now that prices have fallen substantially, there are a number of lessons we can take away from the current crash," writes Ben Carlson of Ritholtz Wealth Management. Here are four take-aways that might help you better understand the extreme volatility in these assets.
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Market candy
Quote of the day
The high end is up 25% over May of last year, and the overall increase is 15%... What's driving those incredible increases is an arbitrage opportunity.
That's Ed Pinto, director of the American Enterprise Institute's Housing Center, explaining what's behind America's red-hot housing market. Pinto believes house prices have yet to peak. Here's why.
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