Well folks, yesterday bore quite a risk-off sentiment for markets as the S&P dropped to within basis points of its 52-week lows - regardless, our short recommendation on Paypal printed to the tune of 5% by close and given the market’s posturing in the premarket today, with the Dow, S&P and Nasdaq all down around 20-30bps, it’s likely to get dragged down once again. We have some great stories for you, with commentary on the Nasdaq today, as well as more in-depth coverage of the conflict in Ukraine, read on for your daily dose of market inspiration in these choppy waters.
Markets in Review
Let's zoom into the tech market today with the Nasdaq 100 index which is also trading dangerously close to its 52-week lows after having dropped 5% over the last week worth of trading sessions. Despite its 35% drop from highs, the Nasdaq seems to be losing this key support level as the index is still in overvalued territory, clocking in with a p/e of 22.32 while there are still many material risk-off catalysts on the horizon for these tech-heavy equities, such as another three interest rate raises planned by the Fed. Additionally, the volatility index for the Nasdaq 100, $VOLQ, has much outpaced the S&P’s $VIX over the same time period, with the fear gauge up 108% YTD and currently posturing for a move above 40 by late this week or early next.
Short: Richardson Electronics, Ltd. (RELL-NASDAQ) | Timeline: 2 days
Richardson Electronics, Ltd. (RELL), which engages in the power and microwave technologies, customized display solutions, and healthcare businesses reported some stellar earnings last week - resulting in buyers flooding into the stock that beat earnings and revenue estimates by 80.0% and 8.26%, respectively. (Full Story) Referring to the chart, the stock jumped 30% in only three days after the announcement, an unsustainable move for most. As buyers exit the market, the stock must retest previous highs in the mid-teens and let indicators come down from extremely overbought levels (RSI approaching 80!).
Zooming out...
Troop Movements
Reports have begun to emerge that Putin has been, and currently is moving troops into Belarus en masse. This comes as President Lukashenko of Belarus ordered his troops to deploy on the Ukrainian border in a “defensive” move. Belarus isn’t officially participating in the conflict, however, they have already stated that any actions from Ukraine would yield a response. This is following a pattern set since the early days of the conflict, as Belarus previously allowed Russians to deploy into Ukraine from their territory, most notably for the Antonov airport fiasco. This move is yet another in a series of escalatory actions that have been taken over the past week. Debt Crises on the Horizon Across the Pond As we noted in yesterday’s report France is currently experiencing gasoline shortages as refinery workers across the country go on strike. This news was followed by the announcement of a new state plan set to spend €11B to reduce inflation. While not necessarily from the same root cause, France seems to be experiencing similar problems and trialling the same solutions as its neighbours. They are just the most recent in a series of European nations who’ve unveiled financial easing measures. Another is Germany, which has recently announced a €200B umbrella bailout to shield individuals and businesses that many leaders claim will disrupt the continent’s energy markets. Will these measures work? Only time will tell. What’s certain though, is that European economic unity continues to fracture as each nation attempts to tackle a common problem in a different way.
Making headlines...
Goldman Says It’s Too Early to Price in a Pivot
Goldman Sachs Group Inc. analysts say it’s “too early” to price in a dovish turn in Federal Reserve policy as the economic outlook isn’t bad enough yet, and rates markets remain too volatile. (Full Story)
Missiles hit Ukrainian city, alarms elsewhere keep up fear
A new round of missile attacks struck the southern Ukrainian city of Zaporizhzhia Tuesday, as the death toll from the previous day's widespread Russian missile barrage across Ukraine rose to 19. (Full Story)
US Pledges Support as More Missiles Strike
Russia launched fresh strikes in Zaporizhzhia and Lviv as air-raid sirens sounded across Ukraine, one day after the most intense barrage since the first days of the invasion and President Vladimir Putin’s threats to hit more infrastructure targets. (Full Story)
Oil Affected by Recession Fears
Oil prices sank by nearly 2% on Monday, after five straight sessions of gains, as investors worried that economic storm clouds could foreshadow a global recession and erode fuel demand. (Full Story)
IMF, WorldBank warn of Global Recession
The heads of the International Monetary Fund (IMF) and the World Bank on Monday warned of economic headwinds that are raising the risk of a global financial recession. (Full Story)
Chart of the Day: USD/JPY
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