Wall Street Breakfast: What Moved Markets

- Stocks flip-flopped between gains and losses Friday to end a volatile week on Wall Street, as investors appeared content to consolidate positions after worries over China Evergrande and a slowing global economy prompted traders to pull $28.6 billion from U.S. equity funds over the first three days of the week, the most since February 2018. But stocks then staged a two-day rally after the Federal Reserve signaled no removal of its easy money policy, at least for now. Tech stocks trailed Friday after a crackdown on bitcoin by China overnight hurt sentiment in the sector, but financial stocks rose as the 10-year U.S. Treasury yield reached its highest since July. For the week, the Dow gained 0.6% and the S&P 500 added 0.5% while the tech-heavy Nasdaq finished flat.

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Top News Shutterstock Stocks flip-flopped between gains and losses Friday to end a volatile week on Wall Street, as investors appeared content to consolidate positions after worries over China Evergrande and a slowing global economy prompted traders to pull $28.6 billion from U.S. equity funds over the first three days of the week, the most since February 2018. But stocks then staged a two-day rally after the Federal Reserve signaled no removal of its easy money policy, at least for now. Tech stocks trailed Friday after a crackdown on bitcoin by China overnight hurt sentiment in the sector, but financial stocks rose as the 10-year U.S. Treasury yield reached its highest since July. For the week, the Dow gained 0.6% and the S&P 500 added 0.5% while the tech-heavy Nasdaq finished flat.       Stocks China property crisis The possibility of China property company Evergrande collapsing and overall worries about China's crackdown on indebted firms took a toll on Hong Kong shares. The Hang Seng Index (HSI) fell more than 3% on Monday with China and Japan closed for a holiday. The benchmark index hit an 11-month low, with the index tracking construction and property off more than 6%. Evergrande (OTCPK:EGRNF) (OTCPK:EGRNY) sunk more than 11% and has fallen more than 80% this year as it struggles to meet debt payments. The company has more than $300B in debt and defaulted on an interest payment on a bond later in the week.       Sponsored By Yieldstreet The Real Estate Market is Hot. Get Your Piece of the Action. Bidding well above asking price before even inspecting a home is becoming all too popular. Investing in real estate the old fashioned way is pricing out everyday people. Enter Yieldstreet. Yieldstreet is here to help put your savings to work, allowing you to invest in real estate debt and equity without needing to take out a new mortgage. Investment minimums start at $10k, allowing you to leverage the real estate market to generate passive returns. Less than 8.5% of opportunities reviewed this year have passed Yieldstreet's due diligence process to be offered in the Yieldstreet marketplace. Yieldstreet's investors have already allocated over $500M in their real estate asset class to date. Here's The Kicker: Yieldstreet offers target annual yields typically from 7% to 18%, allowing you to shift into leisure mode while your money is positioned to work overtime. Learn more about how Yieldstreet can start your passive income journey today. Energy Permian purchase ConocoPhillips (NYSE:COP) will become the second-largest oil and gas producer in the Lower 48 U.S. states following its $9.5B acquisition of Shell's assets in the Permian Basin, as the pecking order is reshuffled among top U.S. shale drillers. Adding an estimated 200K boe/day will put Conoco within striking distance of leader Exxon Mobil (NYSE:XOM), which is expected to produce about 1M boe/day from the Lower 48 this year. Conoco's deal will propel it past Chevron (NYSE:CVX), EQT Corp. (NYSE:EQT), Occidental Petroleum (NYSE:OXY) and EOG Resources (NYSE:EOG), according to consulting firm Rystad Energy.       Central Banking Fed evolution The Federal Reserve avoided a shock to equities in an already weak September, but will investors remain comfortable with the hawkish tilt? As expected from its decision yesterday, members pulled forward rate-hike expectations on the dot plot. And Fed chief Jay Powell telegraphed a tapering announcement at the next meeting in November. Tapering is expected to end around mid-2022 and liftoff could occur after that, although 2023 still seems the most likely timing for the start of rate hikes for now.

"What is clear is that inflation is likely to be the determining factor for liftoff and the pace of rate hikes," Deutsche Bank Chief U.S. Economist Matthew Luzzetti writes in a note. "If inflation is at or below the Fed's current forecast next year of 2.3% core PCE, liftoff is likely to come in 2023, consistent with our view. However, if inflation proves to be higher with inflation expectations continuing to rise, the first rate increase could well migrate into 2022." Scott Ruesterholz, portfolio manager at Insight Investment, is expecting a gradual liftoff and notes the Fed "is expecting inflation to run above 2% through 2024 even as they keep rates below their neutral 2.5% estimate." "That shows how committed they are to fostering as strong of a labor market recovery as possible." But was also the discussion and debate about asset purchases and how to communicate a taper within the FOMC and the markets a waste of energy?

     

Consumer

Nike and peers fall

NIKE (NYSE:NKE) shares fell hard despite the company's fifth consecutive earnings beat. Revenue for the quarter ended Aug 31, 2021, was slightly below expectations at $12.2B (+16% Y/Y), missing by $220M, and down $100M sequentially due to global supply chain issues and the Vietnam lockdown. The company reports that its owned physical retail stores have surpassed pre-pandemic levels, growing 24% Y/Y. Digital sales were up 25%, led by a 43% increase in North America. Gross margin expanded 170 bps from last year and 70 bps from the prior quarter to 46.5%, driven by NIKE Direct business margin expansion and fewer promotions, offset by higher freight costs. Investors reacted to softer guidance than anticipated from Nike and concerns over the impact of inventory all the way into spring from the supply chain disruption. Peers Adidas (OTCQX:ADDYY), Deckers Outdoor (NYSE:DECK) and JD Sports (OTCPK:JDSPY) also fell after the Nike numbers dropped.

     

U.S. Indices
Dow +0.6% to 34,798. S&P 500 +0.5% to 4,455. Nasdaq +0.% to 15,048. Russell 2000 +0.8% to 2,254. CBOE Volatility Index -14.7% to 17.75.

S&P 500 Sectors
Consumer Staples -0.3%. Utilities -1.2%. Financials +2.2%. Telecom -0.7%. Healthcare -0.4%. Industrials +0.8%. Information Technology +1.%. Materials +0.1%. Energy +4.7%. Consumer Discretionary +0.3%.

World Indices
London +1.3% to 7,051. France +1.% to 6,638. Germany +0.3% to 15,532. Japan -0.8% to 30,249. China 0.% to 3,613. Hong Kong -2.9% to 24,192. India +1.8% to 60,048.

Commodities and Bonds
Crude Oil WTI +2.8% to $73.98/bbl. Gold -0.1% to $1,750.4/oz. Natural Gas +1.4% to 5.174. Ten-Year Treasury Yield -0.6% to 132.09.

Forex and Cryptos
EUR/USD -0.05%. USD/JPY +0.71%. GBP/USD -0.49%. Bitcoin -11.8%. Litecoin -15.1%. Ethereum -15.2%. Ripple -11.9%.

Top Stock Gainers
Zivo Bioscience (NASDAQ:ZIVO) +95%. Marin Software Inc (NASDAQ:MRIN) +80%. Aerocentury Corp (NYSE:ACY) +66%. Medirom Healthcare Technologies Inc ADR (NASDAQ:MRM) +58%. Ensysce Biosciences Inc (NASDAQ:ENSC) +52%.

Top Stock Losers
Eargo Inc (NASDAQ:EAR) -68%. Innovage Holding Corp (NASDAQ:INNV) -49%. Nuvalent Inc Cl A (NASDAQ:NUVL) -37%. Beyondspring Inc (NASDAQ:BYSI) -33%. China Liberal Education Holdings Ltd (NASDAQ:CLEU) -32%.

Where will the markets be headed next week? Current trends and ideas? Add your thoughts to the comments section.

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