3 Things… 

1. Trends/Bonds: S&P500 climbed to just under 14% below its 200, downtrend continues despite momentum to the upside; NASDAQ climbed to just under 19% below its 200, downtrend intact despite upside momentum; 15% of the S&P 500 and 20% of the NASDAQ, respectively, are above their 50-Days; Bulls18:Bears41; VIX 28.41; [1] The yield on the benchmark 10-year Treasury note fell to3.096%. 2yr/10yr hit 0.97. The yield on the 30-year Treasury bond moved higher to 3.216%. Yields move inversely to prices and 1 basis point is equal to 0.01%. [2]
2. Sectors: Best 1-month sectors: Discretionary (+4.21%), Tech (-0.61); Staples (-1.19%),  Crypto/Bitcoin stabilizes $21,259.11; [3]
3. Structured Note Values
   1. KRE Pricing Value 2/28/22: 73.49, Current 58.31-Delta -20.66%
   2. XLE/XOP Lowest, XLE Pricing Value 3/25/22: 78.75, Current: 71.20, Delta -9.58%; XOP Pricing Value 3/25/22: 138.60, Current Value: 120.65, Delta -12.95%
   3. Lower of GDX/GDXJ; GDX Pricing Value: 4/29/22: 34.99, Current: 28.91 Delta -17.38%; GDXJ Pricing Value 4/29/22: 42.95, Current: 34.37 Delta -19.98%
   4. Lower of GDX/GDXJ; GDX Pricing Value: 5/26/22: 32.39, Current: 28.91 Delta -10.74%; GDXJ Pricing Value 5/26/22: 39.67, Current: 34.37, Delta -13.36%
   5. ARKK Pricing Value 6/15/22: 39.42, Current: 45.58, Delta +15.63 [4]

This Week’s Quotable

“[The rally in equities is] a relief measure. It’s relief after a difficult week, a difficult six weeks, a difficult year, and we’re having a relief rally, and that’s really welcome.

Still, the firm’s chief economist pointed to troubling signs in the bond market, which is pricing in a “higher risk of a recession” just as the Federal Reserve shifts to a more aggressive stance against inflation. Fed chair Jerome Powell signaled

“The market is saying ‘whoa, be careful,’ because the economy is weakening not just in the U.S., but around the world. So it’s two different narratives right now in the stock market and the bond market. And the key issue is that once again, it is the bond market that is leading the Fed, and not the Fed that is leading the market.”  Noted Economist and Allianz Advisor Mohamed El-Erian on CNBC’s “Squawk Box” Friday. [5]

Recent Highlights

• Crude Inventories increased to 5.61 million (06/23)
• Initial Claims decreased to 229,000 (06/23)
• Existing Home Sales decreased to 5.4 million (06/21)
• Industrial Production increased by 0.2% (06/17)

In the Markets

Wall Street closed higher on Thursday, led by defensive and tech stocks. Investors continued to weigh in the possibility of an economic downturn, and markets were driven by defensive sectors like utilities and health care, which will be relatively unaffected if the economy enters into recession. The yield on the 10-year treasury note hit its lowest level in roughly two weeks. All three major stock indexes ended in the green.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) rose 0.6% or 194.23 points to close at 30,677.36. Twenty components of the 30-stock index ended in the green, one remained unchanged, while nine ended in the red.

The tech-heavy Nasdaq Composite finished at 11,232.19, adding 1.6% or 179.11 points.

The S&P 500 gained 1% or 35.84 points to close at 3,795.73. Seven of the 11 broad sectors of the benchmark index closed in the green. The Utilities Select Sector SPDR (XLU), the Health Care Select Sector SPDR (XLV) and the Real Estate Select Sector SPDR (XLRE) rose 2.4%, 2.2% and 2%, respectively, while the Energy Select Sector SPDR (XLE) declined 3.7%.

The fear-gauge CBOE Volatility Index (VIX) went up 0.4% to 29.05. A total of 12.4 billion shares were traded Thursday, lower than the last 20-session average of 12.5 billion. Advancers outnumbered decliners on the NYSE by a 1.41-to-1 ratio. On the Nasdaq, a 1.67-to-1 ratio favored the advancing issues.

Investors Rush to the Safety Of Defensive Stocks

Fears of an impending recession have been ruling investor sentiment for the past few weeks due to various policy tightening measures, primarily interest rate hikes, taken up by the Fed to tackle inflation. Markets remained volatile as investors guessed and second-guessed the impact of these policies on the U.S. economy in the coming months. Weekly losses were, however, interspersed with days when markets finished in the green. Thursday was one such day when investors saw sectors like utilities and health care as reasonable fallback options that will be relatvely unaffected in the event of a recession.

Oil Prices Remain A Drag On The Energy Sector

Oil prices fell on Thursday on concerns that rate hikes by the Fed could push the U.S. economy into recession, reducing fuel demand. Brent crude fell $1.69 to settle at $110.05/barrel, while WTI crude fell $1.92 to settle at $104.27/barrel. The Energy sector fell 3.8%, dragged down primarily by oil prices and continued its recent slump after outperforming other sectors throughout 2022, erasing further gains it had made earlier in the week. Energy was the single biggest drag on the S&P 500 on Thursday.

Tech Sector Boosted By Falling Yields In The Bond Market

Yields fell in the U.S. bond market on a belief that yields may have peaked in the near term even if inflation stayed high. Yields have dropped from their highest levels in over a decade reached before last week’s Fed meeting, when the 75-basis-point-rate hike, the biggest increase since 1994, was announced. The benchmark U.S. 10-year treasury note yield fell to 3.005% in the session, before finishing at 3.070%. The yield has dropped from 3.498% on Jun 14, the worst fall since April 2011.

Bond yields move inversely to prices, and growth stocks, such as from the mega-cap tech space, look lucrative in the event of yields going down as they do not look overvalued in the near term. Nasdaq was the biggest mover on the day, riding on tech stocks.

Consequently, shares of Apple Inc. (AAPL) and Microsoft Corporation (MSFT) gained 2.2% and 2.3%, respectively.

Economic Data

The Labor Department said on Thursday that initial jobless claims fell by 2,000 to 229,000, for the week ending Jun 18. The previous week’s level was revised up by 2,000 from 229,000 to 231,000. The four-week moving average came in at 223,500, marking an increase of 4,500 from the previous week’s revised average of 219,000.

However, continuing claims came in at 1,315,000, increasing 5,000 from the previous week’s revised level. The previous week’s numbers were revised down by 2,000 from 1,312,000 to 1,310,000. The 4-week moving average came in at 1,310,000, a decrease of 7,000 from the previous week’s revised average. This is the lowest level for this average since Jan 3, 1970, when it was 1,280,250.

American Petroleum Institute reported that U.S. crude inventories had risen by 5.61 million barrels against a consensus of decline of 1.43 million barrels. This is the first build of more than 5 million barrels since mid-February. [6]

Sources: [1][3][4] Stockcharts.com; [2] CNBC.com; [5] Stock futures rise as Wall Street looks to snap a three-week losing streak (cnbc.com); [6] Zacks Professional Services, “Today’s Key Market and Economic News” for Friday June 24, 2022;