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China Unexpectedly Cuts Key Rate, Adds Liquidity As Economic Growth Slowed, Retail Sales Slump

China Unexpectedly Cuts Key Rate, Adds Liquidity As Economic Growth Slowed, Retail Sales Slump

A busy night started with weakness in US equity futures (Nasdaq down 0.5%) and an unexpected cut in a key China policy rate and a modest addition..

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China Unexpectedly Cuts Key Rate, Adds Liquidity As Economic Growth Slowed, Retail Sales Slump

A busy night started with weakness in US equity futures (Nasdaq down 0.5%) and an unexpected cut in a key China policy rate and a modest addition of liquidity. This was then followed by a mixed bag of China macro with a GDP beat (but slowing growth) but ugly retail sales disappointment. All of which sent the Yuan lower...

As Bloomberg reports, China lowered a key interest rate for the first time since the peak of the pandemic in 2020 as a property-market slump and repeated virus outbreaks dampened the nation’s growth outlook. The People’s Bank of China cut the rate on its one-year policy loans by 10 basis points to 2.85%. That’s the first reduction since April 2020. It also slashed the rate on the seven-day reverse repurchase agreements by the same magnitude to 2.1%.

The central bank made the move while offering 700 billion yuan ($110 billion) via the medium-term lending facility, exceeding the 500 billion yuan coming due. It added 100 billion yuan with seven-day reverse repos.

“The PBOC has accelerated its pace of policy easing in order to guide borrowing costs lower and to encourage credit supply,” said Yewei Yang, an analyst at Guosheng Securities Co.

“The move suggests China’s economic is weak and it will trigger a significant slide in borrowing costs.”

The cut to policy rates indicates the PBOC is taking easier stance to deal with economic downward pressures which were reflected somewhat in a mixed set of data from China that showed growth slowing (albeit better than expected) and retail sales notably disappointing.

  • China 4Q GDP Grows 4% Y/Y; Est. 3.3%, but notably below Q3's +4.9%

  • China Dec. Industrial Output Rises 4.3% Y/Y; Est. 3.7%

  • China Jan.-Dec. Fixed Investment Rises 4.9% Y/Y; Est. 4.8%

  • China Jan.-Dec. GDP Grows 8.1% Y/Y; Est. 8%

  • China End-Dec. Survey Jobless Rate Rises to 5.1% vs 5.0% Prior

  • China Dec. Retail Sales Rise 1.7% Y/Y; Est. 3.8%

As is clear in the chart below, all of the key macro measures worsened...

As Bloomberg's Enda Curran notes, the retail sales weakness looks broad based. There was a big decline in sales of household electronics and automobiles and also contraction for restaurant/catering, clothing, jewelry and furniture. Given the news through January regarding the virus outbreaks, one wonders if that can turn around materially in the near term. The annual new years holiday would be an obvious boost in other years, but less clear how it plays out this year.

On a seasonally adjusted month/month basis, China’s retail sales rose in just four months last year. Even during 2020’s pandemic impacts, there were five months of such sales growth.

On top of the big miss for retail sales, online shopping shows more worrying signs for the country’s weakening consumer demand. Online retail sales grew 14.1% in 2021, the slowest annual pace since 2014.

Chang Shu and David Qu, economists at Bloomberg Economics, say the bigger-than-expected cut to the one-year MLF rate shows it’s serious about supporting the economy.

We give the final words to Peiqian Liu, an economist at NatWest Markets:

This is a decisive dovish tilt as the policymakers acknowledged the importance to stabilize short term growth.

The rate cut may translate into a broad-based 10bps lower in 1Y and 5Y LPR on Thursday.

In terms of our outlook for monetary policy in 2022, we think the PBOC will unlikely resort to “flood-style stimulus” of consecutive and aggressive rate cuts. Instead, we see room for moderate easing with another 20bps rate cut and 100bps RRR cut for the rest of this year.

US equity futures extended their losses despite the MLF rate cut...

The stock market reaction to the PBOC’s interest rate cut is relatively muted because “the latest cut seems to be in line with the targeted pro-growth policy guidance for 2022 as highlighted by the key economic working group,” says Kelvin Wong, analyst at CMC Markets

One last thing of note, China’s stats folks say the country’s population was about 500,000 people more at year’s end than a year earlier (albeit a rounding error), but it signals that China hasn’t gotten to peak population just yet apparently.

So, as we pointed out in December, it is now clear that China is shifting to an easing mode as the rest of the world is shifting to a tightening cycle.

Tyler Durden Sun, 01/16/2022 - 21:28

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Economics

5 Top Consumer Stocks To Watch Right Now

Are these consumer stocks a buy amid the earnings season?
The post 5 Top Consumer Stocks To Watch Right Now appeared first on Stock Market News, Quotes,…

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5 Trending Consumer Stocks To Watch In The Stock Market Now         

As we tread through the earnings season, consumer stocks could be worth watching in the stock market this week. This would be the case since a number of big consumer names such as Costco (NASDAQ: COST) and Macy’s (NYSE: M) will be posting their financials for the quarter. As such, investors will be keeping an eye on these reports for clues on the strength of consumer spending amid this period of high inflation.

However, despite the soaring prices across the economy, it seems that consumers are surprisingly showing resilience. According to the Commerce Department, retail sales in April outpaced inflation for a fourth straight month. This could suggest that consumers as a whole were not only sustaining their spending, but spending more even after adjusting for inflation. Ultimately, it could be a reassuring sign that consumers are still supporting the economy and helping to diminish the narrative of an incoming recession. With that being said, here are five consumer stocks to check out in the stock market today.

Consumer Stocks To Buy [Or Sell] Right Now

Nordstrom

retail stocks (JWN stock)

Starting off our list of consumer stocks today is Nordstrom. For the most part, it is a fashion retailer of full-line luxury apparel, footwear, accessories, and cosmetics among others. The company operates through multiple retail channels, boutiques, and online as well. As it stands, Nordstrom operates around 100 stores in 32 states in the U.S. and three Canadian provinces.

Yesterday, the company reported its financials for the first quarter of 2022. Starting with revenue, Nordstrom pulled in net sales worth $3.47 million for the quarter. This marks an increase of 18.7% from the same quarter last year. Its Nordstrom banner saw net sales rise by 23.5% year-over-year, exceeding pre-pandemic levels. Next to that, its Nordstrom Rack banner saw a 10.3% increase in net sales from last year. Besides, net earnings were $20 million, with earnings per share of $0.13 for the quarter. Considering Nordstrom’s solid quarter, should you invest in JWN stock?

[Read More] Best Stocks To Invest In Right Now? 5 Value Stocks To Watch This Week

The Wendy’s Company

best consumer stocks (WEN stock)

Next up, we have The Wendy’s Company. For the most part, it is the holding company for the major fast-food chain, Wendy’s. Being one of the world’s largest hamburger fast-food chains, the company boasts over 6,500 restaurants in the U.S. and 29 other countries. The chain is known for its square hamburgers, sea salt fries, and the Frosty, a form of soft-serve ice cream mixed with starches. WEN stock is rising by over 8% on today’s opening bell.

According to an SEC filing, Wendy’s largest shareholder, Trian Partners, is looking into making a potential deal with the company. Trian said that it is considering a deal to “enhance shareholder value.” Also, the firm adds that this could lead to an acquisition or business combination. In response, Wendy’s stated that it is constantly reviewing strategic priorities and opportunities. It added that the company’s board will carefully review any proposal from Trian. Given this piece of news, will you be watching WEN stock?

[Read More] 4 Semiconductor Stocks To Watch In The Stock Market Today

Foot Locker

FL stock

Another stock investors could be watching is the shoes and apparel company, Foot Locker. In brief, the company uses its omnichannel capabilities to bridge the digital world and physical stores. As such, it provides buy online and pickup-in-store services, order-in-store, as well as the growing trend of e-commerce. Some of its most notable brands include Eastbay, Footaction, Foot Locker, Champs Sports, and Sidestep. Last week, the company reported its results for the first quarter of the year.

For starters, total sales came in at $2.175 billion, a slight uptick compared to sales of $2.153 billion in the year prior. Next to that, Foot Locker reported a net income of $133 million. Accordingly, adjusted earnings per share came in at $1.60, beating Wall Street’s expectations of $1.54. CEO Richard Johnson added, “Our progress in broadening and enriching our assortment continues to meet our customers’ demand for choice. These efforts helped drive our strong results in the first quarter, which will allow us to more fully participate in the robust growth of our category going forward.”  As such, is FL stock one to add to your watchlist? 

Tyson Foods 

TSN stock

Tyson Foods is a company that built its name on providing families with wholesome and great-tasting protein products. Its segments include Beef, Pork, Chicken, and Prepared Foods. With some of the fastest-growing portfolio of protein-centric brands, it should not be surprising that TSN stock often comes to mind when investors are looking for the best consumer stocks to buy. 

Earlier this month, Tyson Foods provided its fiscal second-quarter financial update. The company’s total sales for the quarter were $13.1 billion, representing an increase of 15.9% compared to the prior year’s quarter. Meanwhile, its GAAP earnings per share climbed to $2.28, up 75% year-over-year. According to Tyson, these financial figures are a reflection of the increasing consumer demand for its brands and products. To top it off, the company was also able to reduce its total debt by approximately $1 billion. Thus, does TSN stock have a spot on your watchlist?

[Read More] Stock Market Today: Dow Jones, S&P 500 Rise, Wendy’s Stock Gains On Potential Deal

DoorDash

food delivery stocks (DASH Stock)

DoorDash is a consumer company that operates an online food ordering and delivery platform. In fact, it is one of the largest delivery companies in the U.S. and enjoys a huge market share. The company connects hundreds of thousands of merchants to over 25 million consumers in the U.S., Canada, Australia, and Japan through its local logistics platform. Accordingly, its platform allows local businesses to thrive in today’s “convenience economy,” as the company puts it.

On May 5, the company reported its first-quarter financials for 2022. Diving in, it posted a revenue of $1.5 billion, growing by 35% year-over-year. This was driven by total orders that grew by 23% year-over-year to $404 million. Along with that, it reported a GAAP gross profit of $662 million, an increase of 34% year-over-year. The company said that it added more consumers than any quarter since Q1 2021, due in part to the growth of its DashPass members. The growth in Monthly Active Users and average order frequency has helped it gain share in the U.S. Food Delivery category this quarter as well. Given DoorDash’s performance for the quarter, should you watch DASH stock?

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The post 5 Top Consumer Stocks To Watch Right Now appeared first on Stock Market News, Quotes, Charts and Financial Information | StockMarket.com.

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Economics

Philly Fed: State Coincident Indexes Increased in 50 States in April

From the Philly Fed: The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for April 2022. Over the past three months, the indexes increased in all 50 states, for a three-month diffusion index of 100. Additiona…

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From the Philly Fed:
The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for April 2022. Over the past three months, the indexes increased in all 50 states, for a three-month diffusion index of 100. Additionally, in the past month, the indexes increased in all 50 states, for a one-month diffusion index of 100. For comparison purposes, the Philadelphia Fed has also developed a similar coincident index for the entire United States. The Philadelphia Fed’s U.S. index increased 1.1 percent over the past three months and 0.3 percent in April.
emphasis added
Note: These are coincident indexes constructed from state employment data. An explanation from the Philly Fed:
The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing by production workers, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.
Click on map for larger image.

Here is a map of the three-month change in the Philly Fed state coincident indicators. This map was all red during the worst of the Pandemic and also at the worst of the Great Recession.

The map is all positive on a three-month basis.

Source: Philly Fed.

Philly Fed Number of States with Increasing ActivityAnd here is a graph is of the number of states with one month increasing activity according to the Philly Fed. 

This graph includes states with minor increases (the Philly Fed lists as unchanged).

In April all 50 states had increasing activity including minor increases.

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Economics

Finding Shelter in an Inverse ETF

As the old saying goes, “What goes up must come down.” Indeed, up until the recent selling wave caused by Russia’s war against Ukraine and the continued…

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As the old saying goes, “What goes up must come down.”

Indeed, up until the recent selling wave caused by Russia’s war against Ukraine and the continued effects of supply chain disruptions amid the COVID-19 pandemic, tech stocks, including semiconductors, were the darlings of the investment world. That is, it seemed as if the sky-high valuations of some tech stocks were sustainable in an atmosphere of seemingly perpetual growth.

That, of course, was not the case, and the too-good-to-be-true valuations were quickly brought down to earth by the forces of inflation and tight monetary policy. As a result, the tech-heavy Nasdaq entered a free-fall that has not yet found a bottom.

At the same time, that does not mean that we should abandon the sector as a lost cause. One such way to play the sector during its downhill slide is the exchange-traded fund (ETF) Direxion Daily Semiconductor Bear 3X Shares (NYSEARCA: SOXS).

As its title suggests, this is an inverse ETF, meaning that it is built to go up in value when its parent index goes down. Specifically, SOXS provides three times leveraged inverse exposure to a modified market-cap-weighted index of semiconductor companies that trade in American markets by using swap agreements, futures contracts and short positions.

While the index’s holdings are weighted by market capitalization, the fund’s managers cap the weights of the top five securities in the portfolio at 8% each. The weight of the remaining securities is capped at 4% each.

As of May 24, SOXS has been up 0.37% over the past month and up 24.73% for the past three months. It is currently up 60.47% year to date.

Chart courtesy of www.stockcharts.com

The fund has amassed $258.15 million in assets under management and has an expense ratio of 1.01%.

In short, while SOXS does provide an investor with a way to invest in an inverse ETF, this kind of ETF may not be appropriate for all portfolios. Thus, interested investors always should conduct their due diligence and decide whether the fund is suitable for their investing goals.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

The post Finding Shelter in an Inverse ETF appeared first on Stock Investor.

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