Wall Street has continued to rattle off some new record highs in October, but the absence of one major index from the list is starting to become glaring, according to Raymond James. Quantitative and technical strategist Javed Mirza pointed out in a note to clients that the Nasdaq 100 has not set a record high since July. The relative struggle of that tech-heavy index is possibly a sign that the broader bull market is on the verge of entering into a new phase — and getting close to a peak, according to Mirza. “The Nasdaq 100 is a good proxy for the more ‘growthy’ areas of the market and this negative divergence suggests that Portfolio Managers have begun to shift away from the more growth-oriented areas of the market, consistent with a shift into the late stages of the current 4-Year Cycle. The Nasdaq 100 has failed to reclaim the highs it set in July, despite the S & P 500 , TSX Composite, and Dow Jones Industrials all scoring new all-time price highs,” Mirza wrote. .NDX 6M mountain The Nasdaq 100 has not set a new record high since July. On Monday, the Nasdaq 100 was trading about 2% below its record close. Technical indicators suggest that it won’t close that gap any time soon. “The Nasdaq 100 just triggered a new short-term ‘mechanical sell’ signal, diverging from the other North American equity indices,” Mirza said. The Nasdaq 100’s slump is not the only factor pointing to toward a new phase for the bull market. Other notable data points include the Cboe Volatility Index (VIX) making higher lows and the Canadian TSX Composite outperforming the S & P 500, while WTI crude pushing above $94 per barrel would be a fourth point, Mirza wrote. To be sure, even the late stage phases of a bull market can last for quite a while. Mirza does say that the “path of least resistance” is still higher for stocks overall heading into 2025.
Tag: NASDAQ 100 Index
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CNBC Daily Open: Make way for the bull market?
[ad_2]Visitors around the Charging Bull statue near the New York Stock Exchange on June 29, 2023.
Victor J. Blue | Bloomberg | Getty Images
This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
What you need to know today
All-time high
The S&P 500 closed at an all-time high on Friday, rising 1.23% to close at 4,839.81, setting fresh record intraday and closing highs from January 2022. The Dow Jones Industrial Average, which set its own record at the end of last year, added 395.19 points, or 1.05%, to end at 37,863.80. The Nasdaq Composite advanced 1.70% to 15,310.97.Macro triggers
The U.S. will be releasing two big economic reports this week which could give fresh clues to which way the Federal Reserve could move. On Thursday, the Commerce Department will be releasing its initial estimate of fourth quarter gross domestic product, and on Friday, the December reading of the personal consumption expenditures price index — the Fed’s favored inflation gauge.DeSantis out
Florida Gov. Ron DeSantis dropped out of the 2024 presidential race two days before the Republican New Hampshire primary — endorsing front-runner Donald Trump, just as other candidates did after they cut their campaigns.Dispirited travel
A federal judge’s order blocking a $3.8 billion-dollar deal that would have JetBlue Airways purchase rival Spirit Airlines leaves Spirit with an uncertain future — hitting budget travelers and the Arnold Palmer Regional Airport, an hour outside Pittsburgh, hard.[PRO] Earnings season
Tesla, Netflix, Intel and Alaska Air are among nearly 70 S&P 500 companies that are scheduled to report earnings this week. Just 69% of the roughly 52 S&P 500 companies that have reported, according to FactSet, have surpassed expectations.The bottom line
Make way for the bull market please.
The S&P 500 benchmark hit fresh all-time intraday and closing highs on Friday, and by some technical indicators, entered a bull market.
A clutch of fourth-quarter earnings and several key macroeconomic data points will provide fresh insights and catalysts for investors this week.
Not too long ago, recession talk dominated Wall Street predictions even as the U.S. equity markets roared back in 2023 after a lackluster 2022.
Even the Fed’s own staff were expecting a downturn after the central bank raised interest rates 11 times by a total of 5.25 percentage points to stymie rising inflation rates in the most aggressive cycle since the early 1980s.
The outsized rally in the major technology counters has been among the big drivers for this emerging bull market — seemingly impervious to any broader geopolitical unrest globally and deepening Washington turmoil ahead of U.S. presidential elections in November.
The same could well happen this year, extending the rally in the U.S. market — though some may still have lingering doubts, almost suspicious that further gains may be too good to be true.
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Single-stock ETFs tap into the market’s ‘gambling mindset,’ expert says. What investors need to know
Traders work on the floor of the New York Stock Exchange.
Brendan McDermid | Reuters
More than a year after single-stock exchange-traded funds hit the U.S. market, risk-seeking investors continue to dive in.
Single-stock ETFs were first introduced in Europe in 2018. There are now nearly four dozen single-stock ETFs in the U.S., many of which track the so-called “Magnificent Seven” stocks — Apple, Microsoft, Alphabet, Nvidia, Amazon, Tesla and Meta. Other names on Morningstar’s list of single-stock ETFs include Coinbase and Alibaba.
Collectively, single-stock ETFs have about $3.3 billion of net assets, according to Morningstar.
The growth of these single-stock ETFs, which are leveraged, is not particularly surprising, given that the Nasdaq is up more than 40% this year and big-tech stocks in particular are soaring. But they’ve likely earned a long-term spot in the market.
Single-stock ETFs “are here to stay,” said Bryan Armour, director of passive strategies research for North America at Morningstar. The strategy “taps into some of the gambling mindset that exists in markets,” he said.
Here’s what investors need to know about the growth of the single-stock ETF market and where it could be heading.
Where the single-stock ETF action is, starting with Tesla
There are 45 single-stock ETFs in total, according to Morningstar, from a handful of providers including Direxion, AXS, GraniteShares and YieldMax. These ETFs follow bull, bear or option income strategies.
The largest by asset size is the Direxion Daily TSLA Bull 1.5X Shares, which tracks Tesla. In July, it became the first of its kind in the U.S. to surpass the $1 billion asset mark.
The second-largest single-stock ETF by asset size is the YieldMax TSLA Option Income Strategy ETF, which had around $841 million of assets at the end of November, according to Morningstar.
In third place by asset size is the GraniteShares 1.5x Long NVDA Daily ETF, which tracks Nvidia and has soared in a year dominated by artificial intelligence optimism and the gains for chipmakers. It had about $245 million in assets at the end of November, Morningstar data shows.
To achieve their stated returns, leveraged and inverse ETPs often use a range of investment strategies. This can include swaps, futures and other derivatives as well as long or short positions, according to a FINRA explainer.
Expect more high-risk ETFs to hit the market
Rich Lee, head of program and ETF trading at Robert W. Baird & Co., expects to see more single-stock ETFs with an options overlay strategy and income component. YieldMax offers several of these ETFs that seek to generate monthly income by selling/writing call options on single company stock exposures.
There is continuous appetite for single-stock ETFs, and there will continue to be innovation, combining themes and exposures under the ETF wrapper, Lee said. “It’s a way to get quick exposure with leverage.”
While the number and assets within these ETFs has mushroomed, there have been duds. Single-stock ETFs tracking Nike and Pfizer — the former whose shares are close to flat this year and the latter whose shares are down 45% — among a few others, closed down. Some stocks are too bland to get investors riled up one way or another, Armour said. If an ETF can’t get enough traction, investment managers have to decide where to focus their resources, he said. It’s something for investors to keep in mind: What’s on the market today may not be in a few months.
Using single-stock ETFs is not a long-term strategy
Performance is all over the map. The Direxion Daily TSLA Bull 1.5X, for instance, had a total one-year return of about 12% through November, but it’s up about 148% year to date through Dec. 15, according to Morningstar. The GraniteShares 1.5x Long COIN Daily ETF, which tracks Coinbase, had a one-year return through November of about 206% and returned about 488% year to date through Dec. 15, according to Morningstar.
Not surprisingly, single-stock ETFs that take a bear strategy have seen negative returns of late.
But performance over time isn’t really the point.
The market for these vehicles is mostly traders and individual investors with an extremely high risk tolerance. There are other ways to gain leverage, without needing to pay fees in the 1% range, but for some more sophisticated retail investors who don’t have experience with leverage, a single-stock ETF can be a safer option, Armour said. “It’s just not a smart long-term strategy. It’s a very costly way to gamble in the stock market.”
The SEC’s warning to retail investors
These vehicles are appropriate for sophisticated retail investors and professionals that are willing to take a short-term view and are willing to monitor their positions daily, said Ed Egilinsky, head of sales and distribution and alternatives at Direxion.
“These are not buy-and-hold products,” he said. “If someone is looking to buy something and not pay attention to it, this is not the vehicle.”
The U.S. Securities and Exchange Commission issued an investor warning in August, reiterating the extra risks inherent to single-stock ETFs. “Because leveraged single-stock ETFs in particular amplify the effect of price movements of the underlying individual stocks, investors holding these funds will experience even greater volatility and risk than investors who hold the underlying stock itself,” the SEC said.
“You definitely have to understand what investing or hedging investment you’re trying to achieve with these products,” Lee said. “For a lot of these leveraged products, people are using it to get intraday exposure or use it for some sort of hedging.”
Which stocks could be targeted for the next hotly traded single-stock ETF?
Success is determined in part by assets, daily volume and scale, said Egilinsky. While he declined to be specific about where Direxion is next looking to add to its single-stock ETF lineup, he did say AI is a hot area. “We’re going to let this play out over time. It’s still in its infancy stages and we’ll continue to look for single stocks that make sense for us to bring to the market.”
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You don’t want to be a hero in this environment, says ‘Big Short’ investor Steve Eisman, Part 2
Steve Eisman, Neuberger Berman sr. portfolio manager, “Big Short” investor, hedge fund manager, with more on what the SVB collapse could mean for markets. With CNBC’s Melissa Lee and the Fast Money traders, Tim Seymour, Karen Finerman, Steve Grasso and Guy Adami.
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Earnings Alert: Lennar on the move
CNBC’s Diana Olick looks at homebuilder Lennar after earnings. With CNBC’s Melissa Lee and the Fast Money traders, Karen Finerman, Tim Seymour, Guy Adami and Courtney Garcia.
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Final Trades: M, JPM, DHI & KO
The final trades of the week. With CNBC's Sara Eisen and the Fast Money traders, Tim Seymour, Courtney Garcia, Jeff Mills and Steve Grasso
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Why the housing market is in increasingly big trouble
CNBC’s Diana Olick on why the housing market is in deep trouble. With CNBC’s Sara Eisen and the Fast Money traders, Tim Seymour, Courtney Garcia, Jeff Mills and Steve Grasso
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Confidence crisis at Goldman Sachs? The Fast Money traders debate
Are the knives coming out for Goldman Sachs CEO David Solomon? With CNBC’s Melissa Lee and the Fast Money traders, Tim Seymour, Steve Grasso, Guy Adami and Jeff Mills.
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Philadelphia Eagles’ Ndamukong Suh on balancing an investment career
Philadelphia Eagle Ndamukong Suh discusses his forays into the investment world. With CNBC’s Melissa Lee and the Fast Money traders, Tim Seymour, Steve Grasso, Guy Adami and Jeff Mills.
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Building gains into housing stocks and how to trade the sector
CNBC’s Diana Olick digs into today’s housing data. With CNBC’s Melissa Lee and the Fast Money traders, Tim Seymour, Karen Finerman, Dan Nathan and Guy Adami.
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Banks bounce back after reporting results, help drive market higher
Big banks and the markets erase early losses as investors digest earnings. With CNBC’s Melissa Lee and the Fast Money traders, Tim Seymour, Bonawyn Eison, Steve Grasso and Jeff Mills.
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Final Trades: TGT, EWZ, XLE & LMT
The final trades of the week. With CNBC's Melissa Lee and the Fast Money traders, Tim Seymour, Dan Nathan, Guy Adami and Bonawyn Eison.
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Why the Chartmaster Carter Worth sees more pain for the hard hit financials
Carter Worth of Worth Charting looks at what’s next for regional banks. With CNBC’s Melissa Lee and the Fast Money traders, Tim Seymour, Dan Nathan, Guy Adami and Bonawyn Eison.
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Blackstone drops as the SEC looks into real estate fund redemptions
BX was down another 4% this week as BREIT draws SEC interest. With CNBC's Melissa Lee and the Fast Money traders, Tim Seymour, Dan Nathan, Guy Adami and Bonawyn Eison.
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Oil plunge, tech collapse and Fed cuts? Strategist shares possible 2023 market ‘surprises’
A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, August 29, 2022.
Brendan McDermid | Reuters
After a tumultuous year for financial markets, Standard Chartered outlined a number of potential surprises for 2023 that it says are being “underpriced” by the market.
Eric Robertson, the bank’s head of research and chief strategist, said outsized market moves are likely to continue next year, even if risks decline and sentiment improves. He warned investors to prepare for “another year of shaken nerves and rattled brains.”
The biggest surprise of all, according to Robertson, would be a return to “more benign economic and financial-market conditions,” with consensus pointing to a global recession and further turbulence across asset classes next year.
As such, he named eight potential market surprises that have a “non-zero probability” of occurring in 2023, which fall “materially outside of the market consensus” or the bank’s own baseline views, but are “underpriced by the markets.”
Collapsing oil prices
Oil prices surged over the first half of 2022 as a result of persistent supply blockages and Russia’s invasion of Ukraine, and have remained volatile throughout the remainder of the year. They declined 35% between June 14 and Nov. 28, with output cuts from OPEC+ and hopes for an economic resurgence in China preventing the slide from accelerating further.
However, Robertson suggested that a deeper-than-expected global recession, including a delayed Chinese recovery on the back of an unexpected surge in Covid-19 cases, could lead to a “significant collapse in oil demand” across even previously resilient economies in 2023.
Should a resolution of the Russia-Ukraine conflict occur, this would remove the “war-related risk premia” — the additional rate of return investors can expect for taking more risk — from oil, causing prices to lose around 50% of their value in the first half of 2023, according to Robertson’s list of “potential surprises.”
“With oil prices falling quickly, Russia is unable to fund its military activities beyond Q1-2023 and agrees to a ceasefire. Although peace negotiations are protracted, the end of the war causes the risk premium that had supported energy prices to disappear completely,” Robertson speculated.
“Risk related to military conflict had helped to keep front contract prices elevated relative to deferred contracts, but the decline in risk premia and the end of the war see the oil curve invert in Q1-2023.”
In this potential scenario, the collapse in oil prices would take international benchmark Brent crude from its current level of around $79 per barrel to just $40 per barrel, its lowest point since the peak of the pandemic.
Fed cuts by 200 basis points
The main central bank story of 2022 was the U.S. Federal Reserve’s underestimation of rising prices, and Chairman Jerome Powell’s mea culpa that inflation was not, in fact, “transitory.”
The Fed has subsequently hiked its short-term borrowing rate from a target range of 0.25%-0.5% at the start of the year to 3.75%-4% in November, with a further increase expected at its December meeting. The market is pricing an eventual peak of around 5%.
Robertson said a potential risk for next year is that the Federal Open Market Committee now underestimates the economic damage inflicted by 2023’s massive interest rate hikes.
Should the U.S. economy fall into a deep recession in the first half of the year, the central bank may be forced to cut rates by up to 200 basis points, according to Robertson’s list of “potential surprises.”
“The narrative in 2023 quickly shifts as the cracks in the foundation spread from the most highly leveraged sectors of the economy to even the most stable,” he added.
“The message from the FOMC also shifts rapidly from the need to keep monetary conditions restrictive for an extended period to the need to provide liquidity to avoid a major hard landing.”
Tech stocks fall even further
Growth-oriented technology stocks took a hammering over the course of 2022 as the steep rise in interest rates increased the cost of capital.
But Standard Chartered says the sector could have even further to fall in 2023.
The Nasdaq 100 closed Monday down more than 29% since the start of the year, though a 15% rally between Oct. 13 and Dec. 1 on the back of softening inflation prints helped cushion the annual losses.
On his list of potential surprises for 2023, Robertson said the index could slide another 50% to 6,000.
“The technology sector broadly continues to suffer in 2023, weighed down by plunging demand for hardware, software and semiconductors,” he speculated.
“Further, rising financing costs and shrinking liquidity lead to a collapse in funding for private companies, prompting further significant valuation cuts across the sector, as well as a wave of job losses.”
Next-generation tech companies could then see a surge in bankruptcies in 2023, shrinking the market cap share of these companies on the S&P 500 from 29.5% at its peak to 20% by the end of the year, according to Robertson.
“The dominance of the tech sector in the S&P 500 drags the broader equity index lower too,” he suggested, adding: “The tech sector leads a global equity collapse.”
