LIVE MARKETS Use short films to find the first winners in 2022
- The Dow goes up, the S&P 500 turns red, the Nasdaq goes down
- Staples lead S&P 500 winners; lowest energy group
- Euro STOXX 600 index ends at ~ 0.1%
- Dollar, gold, drop in crude; bitcoin earnings
- The 10-year US Treasury yield is ~ 1.54%
December 29 – Welcome home for real-time market coverage presented by Reuters reporters. You can share your thoughts with us at [email protected]
USE SHORTS TO FIND THE FIRST WINNERS IN 2022 (1201 EST / 1701 GMT)
While most investors with big winners will likely wait until after the start of the new year to sell in order to delay paying taxes, short sellers who have made money will wait until next year to cover. their positions, giving investors a sense of which stocks could recover to start the year, according to Schaeffer’s investment research.
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Senior quantitative analyst Rocky White has looked at stocks over the past four years with short interest that was 10% above the free float and their performance since the start of the year to isolate those that are very sold at discovered and also recorded sharp price declines. These stocks would probably have the best chance of progressing on a short rally covering early in the year.
Stocks that had fallen more than 10% posted the best returns in the first week of the year between 2018 and 2021.
White then narrowed down that list using only data from the most recent year and found that while the shorter names that were priced more than 10% down were not the top performing group. of those that were positive or down by less than 10%, the average return still exceeds the returns of the SPY (SPY.P) and IShares Russell 2000 ETF (IWM.P) in the first week of the new year.
White then looked at stocks that were down 10% or more in 2021 with at least 10% of their float sold short to identify 25 that could rise due to short hedging earlier in the year.
Below is White’s list of the top 25 shortcover candidates for early 2022:
BEWARE OF THE GAP: PENDING RETIREMENT FROM HOME SALES, TRADE DEFICIT REACHES HIGH (1100 EST / 1600 GMT)
Data released on Wednesday showed soaring house prices are weighing on homeownership opportunities as the goods trade deficit – the chasm between imports and exports – climbed to its highest level on record.
Contracts signed for the sale of used homes in the United States (USNCH = ECI) unexpectedly fell 2.2% last month, according to the National Association of Realtors (NAR). Read more
The reading marked a reversal from October’s 7.5% rise and defied the 0.5% increase expected by analysts.
Pending home sales, along with building permits and loan applications to buy homes, are among the sector’s most forward-looking indicators and provide further evidence that the housing market is starting to weaken under the weight of its economic growth. own success.
The pandemic has sent homebuyers rushing to the suburbs in a mad foreclosure for elbows and home offices, sending available homes on the market to record highs. This, in turn, propelled house prices into the stratosphere, a phenomenon illustrated by yesterday’s Case-Shiller report.
This has resulted in affordability evaporating for many potential buyers, especially in the lower end of the market.
“The competition from buyers alone is relentless, but housing seekers have also had to deal with the negative impacts of supply chain disruptions and labor shortages this year,” said Lawrence Yun, Chief Economist at NAR. “These aspects, along with the sky-high prices and the lack of available housing, have created a much more difficult buying season.”
It should be noted, however, that pending home sales data remains well above pre-pandemic levels, as illustrated in the graph below:
Separately, the Commerce Department released its advance estimate of the trade balance and wholesale inventories for November.
The report showed that the gap between the value of goods imported from overseas and domestic goods exported to the United States’ trading partners (USGBAL = ECI) widened by almost 18% to a record high of $ 97.78 billion, wiping out the narrowing deficit seen in October. Read more
As the United States’ economic recovery from the global health crisis overtakes much of the world, and the dollar has steadily strengthened since September – which made products made in the United States more expensive – the trade deficit has weighed on GDP in the last five consecutive quarters.
“Looking ahead, we expect the trade deficit to remain historically high until concerns about the pandemic abate,” writes Nancy Vanden Houten, chief US economist at Oxford Economics. “The increase in Covid cases abroad threatens again to restrict global demand, risking an even larger deficit if export growth slows more than imports.”
“However, a wider distribution of vaccines and the dissipation of supply constraints in the coming quarters should allow more normal trade flows”, adds Houten.
For an interactive graphic from Reuters on the status of global vaccine deployment, click here.
On the other hand, a positive sign of economic growth in the fourth quarter, the value of goods stored in the warehouses of US wholesalers (USAWIN = ECI) increased by 1.2%, marking a deceleration from the increase of 2, 2% of the previous period.
Private stocks, held back by lingering supply chain challenges, weighed on GDP in the first half of the year, but contributed two percentage points in the final quarter to the 2.3% figure.
Market players appear to be staying away as Wall Street grapples with light volume, while still struggling to find the intrigue.
The Dow blue chips (.DJI) sets a provisional course for its sixth consecutive gain. That said, the names of communications services (.SPLRCL) weigh on the Nasdaq (.IXIC), while the S&P 500 (.SPX) hovers just above the flat line.
IN THE MIDDLE OF TRICKLING VOLUME, US STOCKS ARE SUBMITTED AT THE START OF TRADE (1007 EST / 1507 GMT)
Major Wall Street indices were little changed on Wednesday morning amid low trading volumes, as caution was called for after daily COVID-19 infections in the United States hit an all-time high.
Indeed, Monday and Tuesday of this week recorded the two slowest volume days of 2021. And with total volume so far this week now just over 17 billion shares, the pace suggests it could. potentially the slowest weekly turnover since the end of the week. On February 21, 2020, when only 31.5 billion shares changed hands.
Either way, one of the drivers today is the yield on the 10-year US Treasury. Earlier, the return had hit a three-week high of 1.5310%.
Here’s where the markets are at the start of trading:
DOW INDUSTRIAL: SIX RIGHT OR SINK? (9:00 am EST / 1400 GMT)
The Dow Jones Industrial Average (.DJI) has now risen five straight days. This is his longest streak of higher daily closings since a seven-day stretch of March 5-15 this year.
That said, with CBT e-mini Dow Futures roughly stable in pre-market trading, traders will have to wait to see which side of the fence the momentum will land on.
On Tuesday, the blue chip average flirted with its record close of 36,432.22 on November 8 and its intraday high of 36,565.73 on November 8. The DJI reached 36,527.26 before reselling to finish at 36,398.21:
Since we again used the 1929 log-scale broken resistance line as a launching pad in early December, and then the 200-day moving average (DMA) as support on December 20, a push to new highs can probably be expected. pave the way for the ascent. to the early 2018 resistance line, which is now around 37,050.
This line remains a significant barrier as it capped strength in early November. Overwhelming it, however, would suggest potential for the 39,000 area in Q1 2022, if indeed the S&P 500 (.SPX) more directly challenges its log-scale resistance line of 1929. Click here: learn more more
In any event, given the streak and resistance to the highest Dow Jones records, some pullback would not come as a surprise. However, the higher 50-DMA, which ended around 35,675 on Tuesday, may appear to contain weakness.
A reversal of the DJI below larger support from 200-DMA, which ended around 34,710 on Tuesday, to the December 1 low at 34,006.98, however, will have the potential to signal a major trend change.
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Terence Gabriel is a market analyst at Reuters. The opinions expressed are his
Our Standards: Thomson Reuters Trust Principles.