D&D Note (6.16.2022) ~ Markets Fall to New Lows as Investors Worry the FED will Induce a Recession ~
It was a sea of red today in the markets with selling starting in the Futures market causing the Indices to gap down at the open. The S&P 500 finished off the lows of the day but put in a new low closing print of 3,666.77. The S&P 500 is now 23% off its recent high.
Investors are becoming increasingly worried the FED is going to send the US into a recession as they battle inflation with attempting to slow down the economy with rising interest rates.
JP Morgan says stocks now imply 85% recession odds.
President Biden’s re-election hopes will severely fade if we go into a FED induced recession and Biden today says a recession is “not inevitable”.
In the midst of still high demand for new vehicles and the rising rates the average cost to finance a car has hit a record of $656 per month.
The Swiss Central Bank unexpectedly raised interest rates by 50 basis points.
D&D has cash to deploy but after todays price action we sat on our hands not trying to step in with having very little conviction. We’ll be watching the Futures market tonight to get guidance on how we might open tomorrow.
Three positions D&D is looking to add the final buy to complete each of the positions are: DVN, PANW, LMT.
Other stocks that are on our shopping list include: AAPL, TSM, GOOG, AMZN, MSFT, AMD
To get more conviction that we have had a capitulation event to pinpoint a bottom D&D would still like to see Apple fall to $125, the VIX (known as the fear gauge) hit 40, and Bitcoin get near $15k-18k to knock out the leverage.
Stock Specific News:
Twitter employees hear from Elon Musk today with Elon wanting the company to reach 1 billion daily active users, briefly discussed aliens and says people on Twitter should be allowed to say really outrageous things.
Tesla raises their car prices roughly 6%.
Auto stocks all take a big hit with ongoing supply chain shortages and inflation rising. RIVN down -8.87%, TSLA down -8.52%, F down -8.55%, GM down -8.16%.
Airline stocks tumble despite the summer travel surge with UAL down -8.21% and DAL down -7.45%.
TikTok claims they are not a social network rather an entertainment app.
Market Knowledge Tip:
Don’t try to catch falling knives. Seems pretty obvious but when the stock market is going at lightening speed and falling fast its best not to try and catch a stock bid to buy. Rather just step aside and wait the days trading out.
Closing Markets (as of 1:15pm PST)
DOW down -2.42%
S&P 500 down -3.25% (3,666.77)
NASDAQ udown -4.08%
VIX up 11.24%to 32.95
2 Year Note down -9.54bp to 3.10%
10 Year Note down -8.50bp to 3.20%
Oil up 1.535% to $117.08 a barrel.
Gold up 2.094% to $1857.70 an ounce.
Bitcoin down -5.41% to $20,535.20
Ethereum down -6.21% to $1,088.39
~ Dave James / Principal Trader and Market Strategist