|Bid||254.20 x 1000|
|Ask||0.00 x 800|
|Day's Range||251.34 - 254.96|
|52 Week Range||233.20 - 269.28|
|PE Ratio (TTM)||N/A|
|Beta (3Y Monthly)||1.02|
|Expense Ratio (net)||0.15%|
Disappointing earnings from NVIDIA Corporation ( NVDA) and Nordstrom, Inc. ( JWN) reinforced concerns over slowing growth in 2019 – particularly in the technology sector. Looking at technical indicators, the RSI appears slightly oversold at 44.45, and the MACD uptrend remains in place.
On November 8–15, US equity indexes had the following correlations with US crude oil January futures: the Dow Jones Industrial Average (DIA): -5.2% the S&P 500 (SPY): -9.6% the S&P Mid-Cap 400 (IVOO): -10.3%
On November 14, US crude oil December futures rose 1% and closed at $56.25 per barrel. News of OPEC’s rescue plan might have helped US crude oil prices end the three-day losing streak.
Earlier this year, President Trump imposed a 10% tariff on aluminum imports and a 25% tariff on steel imports. The tariffs were imposed under the little-used Section 232 of the Trade Expansion Act of 1962. The Department of Commerce’s investigation found that steel and aluminum imports are a threat to US national security.
Bank of America Merrill Lynch seems unusually bullish these days despite a series of major market sell-offs and mounting uncertainty about economic growth and corporate earnings. The firm's forecast calls for stocks to rally through the end of the year, although the gains may be accompanied by increased volatility.
In the BAML (Bank of America Merrill Lynch) November 2018 survey, trade war concerns were again named as the top concern among global fund managers. About 35% of fund managers surveyed cited it as their top tail risk, which is the same as last month and lower than 43% in September. The trade risk is still fresh, and the recent trade escalations between the United States and China (FXI) have kept fund managers concerned about ongoing trade tensions.
BAML (Bank of America Merrill Lynch) conducted a survey that polled 225 global investors with $641 billion in total assets under management between November 2 and November 8.
The Fed has raised rates three times in 2018. The Fed appears to be on track to raise rates for the fourth time next month. On multiple occasions, President Trump has spoken against the Fed’s tightening.
As of November 12, US crude oil prices have fallen 27.1% from the multiyear closing high of $76.41 per barrel on October 3. Oversupply concerns have led the decline in oil prices. Based on a Reuters report, OPEC members and non-OPEC oil producers might develop a plan to reduce their oil output by up to 1.4 MMbpd (million barrels per day) in 2019. In the oil market report on November 14, the International Energy Agency expects global oil demand growth to rise by 1.3 MMbpd and 1.4 MMbpd in 2018 and 2019, respectively. A production cut of that magnitude might limit oil’s fall.
In the week ending on November 2, US crude oil inventories were 3% above their five-year average—one percentage point more than the previous week. Oil prices and the inventories spread usually move inversely, as you can see in the following chart. If the inventories spread expands more into the positive territory, it might drag down oil prices in the coming weeks. The inventories spread is the difference between inventories and their five-year average.
On November 12, US crude oil December futures fell 0.4% and settled at $59.93 per barrel—the lowest closing level for active US crude oil futures since February 13. The Energy Select Sector SPDR ETF (XLE) fell 2.1% on November 12. The S&P 500 (SPY) and the Dow Jones Industrial Average (DIA) fell 2% and 2.3%, respectively. The fall in the broader market might have dragged energy stocks.
On November 2–9, US equity indexes ended in the green. Last week, the Dow Jones Industrial Average (DIA), the S&P 500 (SPY), and the S&P Mid-Cap 400 (IVOO) rose 2.8%, 2.1%, and 1.1%, respectively. Energy stocks form ~5.2%, 5.9%, and 5.1%, respectively, of these equity indexes.
Since the start of this year, there has been a severe fall in the prices of almost all commodities (COMT) like copper, nickel, lead, cobalt, and gold (GLD). Factors such as the stronger US dollar (UUP), higher interest rates, weakness in emerging markets, and increasing trade tensions have been the major reasons for the slump in commodities. The trade war has started taking its toll on China (FXI), which is a negative for commodities, as China is the mainstay for many commodity producers.
On November 2–9, US crude oil December futures fell 4.7% and closed at $60.19 per barrel on November 9—the lowest closing level for active US crude oil futures since March 3. US crude oil December futures fell due to rising oversupply concerns. Last week, US crude oil prices recorded the fifth consecutive weekly decline—the second-longest streak of weekly declines in 2018.
On November 8, US crude oil’s implied volatility was 30.8%—12.8% above its 15-day average. The inverse relationship between oil prices and oil’s implied volatility is illustrated in the following graph. Since reaching a 12-year low in February 2016, US crude oil active futures have risen 131.5%. Crude oil’s implied volatility has fallen ~59% since February 11, 2016.
Major U.S. indexes ticked higher on expected news from the polls and the Fed. Here are some levels to watch out for in the week ahead.
In addition to a shift in the House majority and the passage of a number of new ballot measures this week, investors got one more major curveball from Washington when President Donald Trump ordered U.S. Attorney General Jeff Sessions to step down from his position and selected Matthew Whitaker as his temporary replacement. The Mueller investigation appears to have advanced prior to the midterm elections, Allen said in a note, but Whitaker will likely immediately take steps to limit the scope and duration of the probe.
On November 1–8, US equity indexes had the following correlations with US crude oil December futures: the S&P Mid-Cap 400 (IVOO): 31% the Dow Jones Industrial Average (DIA): 22% the S&P 500 (SPY): 20.8%
On November 8, US crude oil prices were 20.6% below the almost four-year high closing level of $76.41 on October 3. On the same date, US crude oil prices entered a bear market.
PPI cranked up to +0.6% for the month of October ??? roughly double what analysts had been expecting, and the highest month-over-month increase in the last 6 years.
As we noted previously, steel stocks like AK Steel (AKS) and ArcelorMittal (MT) are trading with a year-to-date loss. Steel stocks have underperformed broader equity markets (DIA) in 2018 despite President Trump’s Section 232 tariffs. In this part, we’ll discuss the key reasons why bears love steel stocks.