Yesterday’s investors day could have been a huge positive that sent Tesla (TSLA) shares soaring today. Instead, because the company and its CEO Elon Musk once again over-promised and underdelivered, investors went away disappointed and today, March 2, the stock was down 5.85% at the close.
The debt crisis at China’s local governments will be top of the agenda when China’s leaders gather in Beijing for the annual parliament next week.m (The nation’s legislators and top leaders meet from this Sunday to approve key economic targets for 2023, including a new local bond quota, the budget, and also monetary policy.) A majority of regional governments — at least 17 out of 31 — are facing a serious funding squeeze, with outstanding borrowing exceeding 120% of income in 2022
My one-hundredth-and-twenty-third YouTube video “Netflix, Inflation, and Demand Destruction” went up today. Today I’m covering Netflix’s (NFLX) crash after releasing its subscriber numbers showing the loss of 200K subscribers for the quarter and predicting a loss of ten times that many for next quarter. I think we are starting to see signs of demand destruction due to ongoing inflation. That demand destruction will only get more severe as the Fed continues to raise rates.
I’m looking for more downgrades on projections for global economic growth as war in Ukraine gets hotter again with shift in fighting to eastern Ukraine. There’s certainly no indication that the war is about to wind down. We’ve already seen a set of lower forecasts for global economic growth. And we are likely to see another round of lower projections in the coming week or two.
My one-hundredth-and-twenty-first YouTube video “Another Global Financial Crisis?” went up today. In this week’s video, I’m looking at Sri Lanka’s announcement that it will default on its foreign debt as the canary in the coal mine for a new global financial crisis. A number of negative trends are lining up against emerging markets: the economic fallout of reduced tourism from the pandemic, rising costs for food and fuel, and the Russian invasion of Ukraine. We’ve seen political turmoil in developing markets surge recently, and I think this is an important area to watch with potential implications for a larger financial crisis. The ProShares Short MSCI Emerging Markets ETF (EUM), which inversely tracks emerging markets, is both a way to keep your eye on these developments as well as a possible hedge against the fallout.
Because of drought or near drought conditions, U.S. farmers have abandoned a large amount of winter wheat just at a time when the war in Ukraine has put pressure on U.S., Australian, and Argentine sources to replace grain exports from Ukraine and Russia.
China’s official purchasing managers’ index (PMI) fell to 49.5 in March, the government announced on Wednesday. In this index any reading below 50 signals that the sector is in contraction. This is the first time in five months that this index has shown China’s manufacturing sector to be in contraction.
The cause is obvious: In pursuit of its Zero Covid-19 policy China has locked down major technology and factory cities to combat a surge in infections. China’s manufacturing activity contracted in March as authorities locked down major technology and factory hubs, including Shenzhen (technology), and Changchun (automobiles) and Shanghai (finance), to curb a surge in Covid cases. The bad news in the bad news? The PMI survey period ended with March 25, three days before the lockdown in Shanghai.
Very timely research out of Bank of America yesterday warning that Bear Trap Rallies of 10% or more are very common during the run of a Bear market.And don’t mean that the Bear Market is over or nearing the end of its run. Yesterday’s 1.2% gain in the Standard & Poor’s 500 was the index’s ninth gain in 11 trading sessions. Today, March 30, however, the market was again in decline with the S&P 500 closing down 0.63%
Some financial trends make the transition from directional moves driven by events–the war in Ukraine or a speech by Federal Reserve chair Jerome Powell that opens there door to a 50-basis-point (instead of the “business as usual” 25 basis point move) increase in interest rates–to trends with their own momentum. These momentum trends then run until events arise to stop or reverse the trend Higher bond yields may have entered into that “momentum” phase last week. The yield on the 10-year Treasury ended Friday, March 25, at 2.47%, up 10 basis points on the day.
This counts as optimism about the global economy these days. Yesterday International Monetary Fund Managing Director Kristalina Georgieva on Tuesday advised the fund will cut its 4.4% global forecast for 2022 when it releases its fresh outlook next month. And the pessimists? They’re looking at a very empty glass.
Today, March 17, the stocks, and especially the technology stocks, that have been pummeled in 2022 continued their three-day bounce. For another day, at least, buy on the dip proved to be a very profitable adventure. Lithium recycling startup LiCycle (LICY), for example, gained 10.18% after climbed 6.74% on Wednesday, March 16. Electronic payments platform Block (SQ), formerly known as Prince (no, I mean formerly known as Square) rose 10.26% after picking up 12.57% on Wednesday, March 16. Cybersecurity newcomer SentinelOne (S) climbed 7.48% after a gain of 13.47% on March 16. Stocks like these (and many more) were just too cheap traders decided. But there were signs of, possibly (and we’ve been down this road before so let’s just say “possibly”), of a new caution. A sell on the bounce caution.
The U.S. central bank meets this week and is widely expected to raise its benchmark interest rate by 25 basis points to range of 0.25% to 0.50% from the current target range of 0%to 0.25%. That move would signal the start of a cycle The Russian invasion of Ukraine has pretty much taken the possibility of a 50 basis point interest rate increase off the table–too much economic risk at a time when everything is no uncertain–and that has left the consensus firmly anchored at 25 basis points. Which has taken almost all the drama out of the Wednesday, March 16, meeting of the Fed’s Open Market Committee. Almost.
