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ECB calms markets ahead of the Fed

We’re seeing a modest recovery in equity markets ahead of some key central bank meetings but investors remain wary of what’s to come. It’s become…

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We’re seeing a modest recovery in equity markets ahead of some key central bank meetings but investors remain wary of what’s to come.

It’s become very clear that central banks are going to have to be very aggressive in countering mounting price pressures around the globe and that the probability of recessions has increased. Stagflation is not yet here but the risks around it have risen considerably in recent months which makes central bank responses all the more critical. Central banks were always going to be the highlight this week and that has increasingly become the case.

The Fed meeting this evening was always the week’s headline event, although as it turns out other central banks have since put themselves in contention. What was looking like a straightforward 50 basis point hike and warning of at least one more to come has become far more complicated since Friday’s inflation reading and the market fallout.

Markets are now almost fully pricing in a 75 basis point hike – the first since 1994 – as well as another in July with the rate hitting 3.5-3.75% in December. Some are even suggesting a 100 basis point hike would be more suitable under the circumstances but that strikes me as highly unlikely this time around.

Either way, the message is clear. Many more rate hikes will be demanded in the short term to get a degree of control over inflation before it spirals out of control. A soft landing is looking increasingly unlikely as well, with recession indicators starting to flash as interest rate expectations are raised.

The monetary policy conundrum is troubling different central banks in very different ways. Take the ECB which today called an extraordinary meeting to deal with its unique problem of fragmentation across the bloc. Many years of QE have suppressed yields and prevented any flare-ups but the pandemic and the inflation aftermath have drastically changed that, with the Italian 10-year jumping above 4% earlier this week.

After the emergency meeting today, the ECB elaborated on the promises it made last week and committed to applying flexibility to reinvesting redemptions under PEPP with an eye on reducing unwanted fragmentation and accelerating the completion of a new anti-fragmentation instrument. It has basically sought to buy itself some time and the decline in yields and recovery in stocks, particularly those in Italy, suggest they may have done just that. It isn’t a permanent solution but it may be enough for now.

Oil eases amid recession talk

Oil prices are easing again on Wednesday as they continue to slightly pare recent gains. The rally over the last month has been intense and the economic fears we’re seeing now appear to have taken some of the heat out of it. Throw in restrictions in China and we may see a little more two-way price action. That said, the risks still remain tilted to the upside with producers seemingly incapable of keeping up with demand.

Gold claws back losses ahead of the Fed

Gold is fighting back a little ahead of the Fed meeting, as the dollar pares recent gains. The yellow metal sold off heavily earlier this week breaking through the bottom of its month-long range around USD 1,830 in the process. It’s now seeing some reprieve around USD 1,800 but it’s not looking particularly strong given the backing the dollar is getting. We’ve entered another phase of inflation panic and until that passes, the dollar may remain king and that’s not good news for gold.

Strong to make a bullish case for bitcoin

Bitcoin isn’t feeling the love at the moment and I’m struggling to envisage a scenario in which that changes. Risk appetite has been obliterated and the days of ultra-low rates are behind us. There isn’t the same speculative mood that existed when bitcoin was exploding higher. There may still be a belief that bitcoin can thrive in the future but something that offers little now beyond speculative rallies is going to continue to struggle. Especially when we’re seeing headlines like those around Celsius and Binance. What once looked like solid support below USD 20,000 suddenly looks very unstable.

For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/

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Stocks

Peloton reveals new measures to cut costs

Peloton Interactive Inc (NASDAQ: PTON) is up 15% on Friday after the connected fitness company made a string of announcements that reiterated its commitment…

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Peloton Interactive Inc (NASDAQ: PTON) is up 15% on Friday after the connected fitness company made a string of announcements that reiterated its commitment to “profitability”.

Peloton is cutting jobs

The Nasdaq-listed firm says it will cut 780 jobs (including in-house support team) and shutter an undisclosed number of retail locations to minimise costs. It also partnered with 3rd party providers to quit last-mile logistics. In a memo to employees, CEO Barry McCarthy wrote:

The shift of our final mile delivery to 3PLs will reduce our per-product delivery costs by up to 50%. These expanded partnerships mean we can ensure we have the ability to scale up and down as volume fluctuates.

Once a pandemic darling, the Peloton stock is currently down more than 65% versus its year-to-date high in early February. Still, Wall Street currently has a consensus “overweight” rating on PTON.

Peloton is raising prices

Store closures, as per Peloton, will start in 2023. On top of that, the fitness equipment manufacturer announced a $500 and $800 increase in the price of its Bike+ and Tread, respectively.

Earlier this year, PTON terminated in-house production and doubled down on its agreement with Taiwan-based Rexon Industrial. CEO McCarthy has been announcing these moves since he joined in February to put the company on the path to profitability.

Peloton Interactive is expected to report its results for the fiscal fourth quarter on August 25th. Consensus is for it to lose 71 cents a share (unchanged from last year) on $722 million in revenue (down 23% year-over-year).  

The post Peloton reveals new measures to cut costs appeared first on Invezz.

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Economics

Best Stocks to Buy in August 2022

The markets have seen positive growth over the past month. That being said, the best stocks to buy in August will see much greater returns.
The post Best…

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Stocks rose again today as the S&P 500 had its fourth positive week in a row, gaining 0.6%. The DJIA (Dow Jones Industrial Average) rose about 0.5% and Nasdaq 0.7%. That being said, the best stocks to buy in August 2022 will see much greater returns. Is the bear market run finally over? Is this a sign that inflation is slowing down?

At the beginning of 2022, the S&P 500 was trading at just under $4,800. And since a June low of $3,600, the S&P 500 has recovered quite nicely, now reaching over $4,200 and climbing. The Nasdaq has seen similar results, increasing 14.5% in the past month alone.

But with all of this increased market activity, where should investors be looking? For the answer, we looked to our very own IU Einstein’s latest picks for the best stocks to buy in August 2022.

The Best Stocks to Buy in August 2022

Technical Options Expert Bryan Bottarelli on the best stocks to buy in August 2022…

Bryan BottarelliStarbucks (Nasdaq: SBUX)

Last week, Starbucks released quarterly results, which beat estimates on the top and bottom lines. Specifically…

  • Revenues of $8.15 billion beat the expectation of $8.14 billion.
  • Adjusted earnings per share (EPS) of $0.84 beat the expectation of $0.76.
  • U.S. same-store sales growth of 9% beat the expectation of 8.85%.

So you have a company that’s outperforming in the midst of a multitude of pressures – including 40-year inflation highs, a recession risk, rising labor costs and unionization efforts.

Despite the risk of consumers pulling back on discretionary spending, “Starbies” (as my daughter calls it) continues to grow.

Read the full article here

Chief Investment Expert Alexander Green on the best stocks to buy in August 2022…

Alexander Green – Follow the Insiders

One of the best strategies you can follow is to ride the coattails of knowledgeable insiders.

Why? Because they have access to all sorts of material, non-public information, like…

  • The direction of sales since the last quarterly report
  • New products and services in development
  • Any expansion plans
  • Potential mergers and acquisitions
  • Whether the company has gained or lost any key customers
  • The status of outstanding litigation
  • Whether the company will put itself up for sale
  • Plans to take the company private

… And plenty of other good stuff unavailable to those of us on the outside looking in.

Read the full article here

Income Expert Marc Lichtenfeld on the best stocks to buy in August 2022…

Marc Lichtenfeld – Beaten-up stocks (with dividends)

Technical analysis – the use of stock charts to analyze the markets and individual stocks to inform buy and sell decisions – is great for creating a trading plan.

As I always say, technical analysis is not a crystal ball. But it does help you increase the chances of being right and, just as importantly, minimize your losses when you’re wrong.

Everyone’s trading style is different, and there are lots of technical analysis tools that fit any individual’s preferred method.

As a long-term investor, I’m a value investor. I like to buy beaten-up stocks (with dividends) and watch them bounce back over time.

So it’s no surprise that, as a trader, I do the same thing – just with a much shorter time horizon.

With the goal of entering a trade at a discount, I may buy a stock that’s predominantly moving up a trend line and yet has momentarily returned to support – the price level at which a stock’s downtrend reverses.

Read the full article here

Fundamental Options Expert Karim Rahemtulla on the best stocks to buy in August 2022…

Karim RahemtullaFord Motor (NYSE: F)

The company just released earnings, which came in better than expected.

Then it let investors in on a couple pieces of news that bolstered the case for investing in the company.

Here is the important information…

  • Ford is increasing its dividend to $0.15 per share, which will bring the company back to pre-pandemic levels.
  • The company sees the Ford+ plan as the biggest opportunity since the scaling of the Model T.
  • Demand for EVs is overwhelming, and the company has strong multiyear order banks.
  • More than 3,000 electric E-Transit Vans were sold in the second quarter, giving the company a 95% share of the electric van market.

Read the full article here

The Best Stocks to Buy in August 2022 – Summarized

As you can see, our Einstein’s follow insider activity, beaten-up stocks with dividends and even solid retail or EV buys. The market may not be out of the woods yet, but with the positive sentiment growing, we could see even more increases. After all, if you’re in it for the long haul, why not get in at a discount? The best stocks to buy in August may not be this cheap for long. For all the latest investment information, sign up for one of the best investment newsletters on the planet today.

The post Best Stocks to Buy in August 2022 appeared first on Investment U.

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Economics

This Shale Pioneer Refocusing on Natural Gas

Investors Alley
This Shale Pioneer Refocusing on Natural Gas
Forget oil—the real money is in natural gas. Or at least that’s the message coming from…

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Investors Alley
This Shale Pioneer Refocusing on Natural Gas

Forget oil—the real money is in natural gas.

Or at least that’s the message coming from a pioneer of the U.S. shale revolution, Chesapeake Energy (CHK).

From Prince to Pauper to Prince Again?

Once upon a time—when its stock was valued at more than $35 billion and its CEO, Aubrey McClendon, had the biggest pay package of any CEO of a listed firm—Chesapeake Energy was America’s best-known fracker.

But those glory days disappeared quickly, and Chesapeake became the poster child for the shale sector’s excesses.

About a year and a half ago, in the autumn of 2020, Chesapeake was in the midst of bankruptcy proceedings after the coronavirus pandemic-led crash in energy demand proved to be the final straw in the company’s fall from grace.

And for the industry more broadly, the prospects for liquefied natural gas (LNG) exports were looking bleak after a $7 billion contract to supply the French utility Engie went down the tubes on concerns over the emissions profile of U.S. natural gas.

Fast forward to 2022 and the picture has changed dramatically. Natural gas exports are booming!

Thanks to the Russian invasion of Ukraine and subsequent sanctions, Europe is in the middle of an energy crisis. It is buying up as much American LNG as it can. Those concerns about emissions are long forgotten.

In the first four months of the year, the U.S. exported 11.5 billion cubic feet a day of gas in the form of LNG, an 18% increase from 2021. Three-quarters of those exports went to Europe. And European leaders have pledged to ratchet up their imports by the end of the decade. There is also a massive opportunity in Asia, where LNG demand is set to quadruple to 44 billion cubic feet a day by 2050, according to a recent report released by think-tank, the Progressive Policy Institute.

And even here in the U.S., natural gas supplies look set to be tight this winter. Hot summer weather and high demands for power generation are sucking up supplies and leaving storage precariously low.

The investment bank Piper Sandler believes U.S. storage is on pace to fill just 3.4 trillion cubic feet of gas by the time winter arrives. That would be short of the 3.8 trillion cubic feet buffer usually needed to heat the country through a cold winter season. That could send already-elevated natural gas prices even higher in the months ahead.

These factors combined were behind the decision by Chesapeake Energy management to ditch oil in favor of gas.

Chesapeake: All in on Gas

OnAugust 2, Chesapeake announced its plan to exit oil completely and return to its roots as a natural gas producer. The company said it would offload oil producing assets in south Texas’s Eagle Ford basin, allowing it to focus solely on gas production from Louisiana’s Haynesville basin and the Marcellus Shale in Appalachia.

Its CEO Nick Dell’Osso said the company made the decision because of better returns from its gas assets—it has had more success driving down costs and improving efficiency there when compared with oil.

Chesapeake emerged from bankruptcy in February 2021, vowing to shift from its previous model of growth at all costs to one of capital discipline and higher shareholder returns.

The company has expanded its natural gas portfolio of assets since its emergence from bankruptcy. It bought gas producer Vine Energy for $2.2 billion last August to bolster its position in the Haynesville, which sits close to gas-export facilities on the US Gulf Coast. And in January, it bought Chief Oil & Gas, a gas operator in north-eastern Pennsylvania’s section of the prolific Marcellus shale field, for $2.6 billion. Chesapeake also recently offloaded its Wyoming oil business to Continental Resources, the company controlled by shale billionaire Harold Hamm.

In summarizing Chesapeake Energy’s strategy, Dell’Osso said, “What’s different today than the past… is that we are allocating capital in a way that maximizes returns to shareholders, rather than maximizing [production] growth.”

Speaking with the Financial Times, Del’Osso added: “The industry was built on [oil and gas production] growth expectations, and company stocks were valued on growth expectations. That all had to get broken down.” The “reset” had been painful, but management teams would stick with the new model, the CEO said.

The strategy seems to be working. In May, Chesapeake reported record-high adjusted quarterly free cash flow of $532 million from the first three months of 2022.

Also in the second quarter, it announced an agreement to supply gas with the Golden Pass LNG facility. Golden Pass LNG is a joint venture company formed by affiliates of two of the world’s largest and most experienced oil and gas companies: QatarEnergy (70%) and ExxonMobil (30%).

The company now plans to pay $7 billion in dividends over the next five years. That is equivalent to well over half of its current market capitalization!

Chesapeake boasts of its best-in-class shareholder return program. It has completed about a third of its $2 billion share and warrant repurchase program, and it raised the base dividend by 10%, to $2.20 per share annually.

The company has a juicy variable dividend as well. Its next quarterly dividend will consist of the $0.55 per share base dividend and a variable dividend of $1.77. Management projects that, in the third quarter, it will pay out total dividends of $275 million to $285 million. The total dividend payout for 2022 should come in at between $1.3 billion and $1.5 billion.

Chesapeake’s yield is a very impressive 10% and I do not see that changing much as gas prices stay elevated. The stock is a buy anywhere in the $90s.

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This Shale Pioneer Refocusing on Natural Gas
Tony Daltorio

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