Category: Market Action

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TXPR closed at 628.87, up an impressive 1.45% on the day. Volume of 1.45-million was the lowest of the past thirty days.

CPD closed at 12.53, up 1.54% on the day. Volume of 94,041 was the lowest of the past thirty days.

ZPR closed at 10.17, up 3.19% on the day. Volume of 323,170 was more or less average in the context of the past thirty days.

It was a marvellous finish to the year, but the TXPR Total Return Index is still down 1.58% on the month and a very nasty 10.01% on the quarter.

But here’s to better things next year!

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TXPR closed at 619.90, up a stunning 3.15% on the day on the first day following tax-loss selling season. Volume of 1.46-million was the lowest of the past thirty days.

CPD closed at 12.34, up 2.15% on the day. Volume of 159,992 was fourth-lowest of the past thirty days.

ZPR closed at 10.04, up 3.19% on the day. Volume of 236,190 was the fourth-lowest of the past thirty days.

A very nice day, but without much volume. Those inclined to read too much into a single day’s returns should note that today’s win still leaves the TXPR total return index below the level of December 17 and is still down 3.02% on the month.

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TXPR touched a new 52-week low of 596.56 undercutting the prior 52-week low of 599.70 reached on December 24 before closing at 600.96, up 0.15% on the day. It gained 73bp in the last half hour! Volume was average in the context of the past thirty days at 2.39-million shares.

CPD closed at 12.08, down 0.17% from December 24’s close. Volume of 394,950 was third-highest of the past thirty days, beaten only by December 12 and December 6.

ZPR closed at 9.73, up 0.21% on the day. Volume of 606,299 was the fourth-highest of the past thirty days.

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Equities got hammered again:

The S&P 500 tumbled to the brink of a bear market on Monday as U.S. stocks extended their steep sell-off in a pre-holiday shortened session, with investors rattled by the U.S. Treasury secretary’s convening of a crisis group and by other political developments.

All three major indexes ended down more than 2 percent the day before the Christmas holiday. The S&P 500 finished about 19.8 percent below its Sept. 20 closing high, just shy of the 20 percent threshold commonly used to define a bear market.

Treasury Secretary Steven Mnuchin called top U.S. bankers on Sunday amid the pullback in stocks and said he was calling a meeting of financial regulators to discuss ways to ensure “normal market operations.”

Investors also were grappling with the federal government shutdown and reports that President Donald Trump privately discussed the possibility of firing the Federal Reserve chairman.

And the ever-helpful President of the United States weighed in:

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Criticizing the Fed is bad enough, but I can’t imagine anything worse for the US – and global – economy than firing Powell, an idea that has been allegedly discussed. In the first place, who’s going to take the job? None of the top-rank people want to be remembered as Trump’s Lackey. So it will be somebody with a less than sterling central banking reputation. And secondly, will the Chairman be able to force the votes on the FOMC? FOMC members are pretty weighty guys in their own right – it will be pretty funny to see a lot of 11-1 votes with the Chairman dissenting!

TXPR closed at 600.04, down 0.82% from December 21‘s close, after touching a new 52-week low of 599.70, undercutting the previous 52-week low of 604.53 set on December 21. Volume was low at 1.75-million shares in a day that closed early so practitioners of the highest paid profession on earth could go out and complain about lousy service in bars nowadays.

CPD closed at 12.10, down 0.74% from yesterday’s close after touching a new 52-week low of 11.96, undercutting the prior 52-week low of 12.11 touched on December 6. Volume of 239,285 was higher than might be expected given the early close.

ZPR closed at 9.71, down 1.52% on the day; the close marked a new 52-week low, undercutting the prior 52-week low of 9.80 reached on December 6. Volume of 256,406 was surprisingly high for Christmas Eve.

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TXPR closed at 605.00, down 0.58% from yesterday‘s close, after touching a new 52-week low of 604.53, undercutting the previous 52-week low of 607.63 set on December 20. Volume was elevated at 3.38-million shares, but nothing special by recent standards. There was a huge number of issues trading more than 10,000 shares, suggesting that there is a lot of retail action.

CPD closed at 12.19, up 0.49% from yesterday’s very poor close and a little above the 52-week low of 12.11 touched on December 6. Volume of 207,008 was high, but nothing special in the context of the past thirty days.

ZPR closed at 9.86, down 0.30% on the day, and within shouting distance of the 52-week low of 9.80 reached on December 6. Volume of 513,624 was fifth-highest of the past thirty days.

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Wild drone story in the news today:

Britain sent troops to its second-biggest airport after an unprecedented attempt to cripple Christmas travel with large drones forced all flights to be cancelled on Thursday.
…
Flights were halted at 2103 GMT on Wednesday after two drones were spotted near the airfield, triggering the biggest disruption at Gatwick since a volcanic ash cloud in 2010.

Police said more than 20 units were hunting the operators near Gatwick airport, 50 kilometres south of London.

Transport Secretary Chris Grayling said it was clearly a deliberate act. “This is a commercial-sized drone,” he said. “Every time Gatwick tries to reopen the runway, the drones reappear.”
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Richard Parker, head of air traffic management technology firm Altitude Angel, said this was the first time a major airport had been hit by such a sustained and deliberate incursion into its airspace.

“It’s sophisticated, not from a technology side, but it’s organized. People have charged lots of batteries, and are deliberately trying to avoid being caught, probably by driving around to different locations,” he told Reuters.

“It really is unprecedented.”

Gatwick’s Chief Operating Officer Chris Woodroofe described one of the drones as a heavy industrial model.

“The police advice is that it would be dangerous to seek to shoot the drone down because of what may happen to the stray bullets,” he told BBC radio.

This is probably kids having a laugh, but it’s also the sort of low-grade annoyance that an irate foreign power might try. Particularly an irate foreign power that has no problem actually killing people in the UK.

I think global authorities have screwed up. What they really need at Gatwick, right now, are drone fighters. Semi-autonomous drone killers, perhaps equipped with nets.

TXPR closed at 608.54, down 0.92% from Wednesday‘s close, after touching a new 52-week low of 607.63, undercutting the previous 52-week low of 609.77 set on December 6. Volume was very high at 4.85-million shares, beaten over the past thirty days only by December 12 at 4.96-million. There was a huge number of issues trading more than 10,000 shares, suggesting that there is a lot of retail action.

CPD closed at 12.13, down 2.10% from Wednesday’s close and just barely above the 52-week low of 12.11 touched on December 6. Volume of 325,763 was high, but not even in the top 5 of the past thirty days.

ZPR closed at 9.89, down 1.30% since Wednesday, and within shouting distance of the 52-week low of 9.80 reached on December 6. Volume of 433,206 placed it fifth-highest of the past thirty days.

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The FOMC Statement was released on schedule:

Information received since the Federal Open Market Committee met in November indicates that the labor market has continued to strengthen and that economic activity has been rising at a strong rate. Job gains have been strong, on average, in recent months, and the unemployment rate has remained low. Household spending has continued to grow strongly, while growth of business fixed investment has moderated from its rapid pace earlier in the year. On a 12-month basis, both overall inflation and inflation for items other than food and energy remain near 2 percent. Indicators of longer-term inflation expectations are little changed, on balance.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee judges that some further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective over the medium term. The Committee judges that risks to the economic outlook are roughly balanced, but will continue to monitor global economic and financial developments and assess their implications for the economic outlook.

In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 2-1/4 to 2‑1/2 percent.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

Voting for the FOMC monetary policy action were: Jerome H. Powell, Chairman; John C. Williams, Vice Chairman; Thomas I. Barkin; Raphael W. Bostic; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Mary C. Daly; Loretta J. Mester; and Randal K. Quarles.

No dissenters! The market was quick to note:

In previous statements, the Fed had said it planned “further gradual increases” in its benchmark rate, conveying to investors that additional hikes were expected. Wednesday’s statement slightly calibrated those expectations by adding the word “some” to the beginning of that phrase, suggesting that the pace of rate increases is likely to slow.

A majority of Fed officials on Wednesday predicted the central bank would raise rates no more than twice next year. In September, most Fed officials had predicted at least three rate increases.

The S&P 500-stock index, which had been up more than 1 percent early in the day whipsawed wildly after the 2 p.m. announcement from the central bank, paring gains and at times slipping into negative territory. But the sell-off worsened during the news conference that accompanied the announcement, with stocks falling below 2 percent at moments.

A separate economic outlook from the Fed showed 2019 growth tapering slightly from September’s projections, with the central bank now expecting gross domestic product of 2.3 percent for the year, down from its previous projections of 2.5 percent.

Treasury yields declined on the day, while the five-year Canada rate, important in FixedReset pricing, was down 4bp to 1.89%.

I’m pleased to see guaranteed minimum income getting some political support:

Prime Minister Justin Trudeau and Social Development Minister Jean-Yves Duclos have argued that the Liberal-created Canada Child Benefit, among other measures, amounts to a guaranteed minimum income already.

But in an interview this week with The Canadian Press, Duclos said the current suite of federal programs could one day be enhanced to provide a minimum income of sorts to all Canadians, particularly those without children who aren’t eligible for federal benefits for families, seniors or the working poor.

“Whether this is going to be enhanced eventually to a broader guaranteed minimum income for all Canadians, including those without children that are not currently covered by a guaranteed minimum income at the federal level, I believe the answer is yes,” Duclos said. “At some point, there will be a universal guaranteed minimum income in Canada for all Canadians.”

As for implementation, just make it a refundable (and taxable!) tax credit. Start it off small and increase it.

PerpetualDiscounts now yield 5.98%, equivalent to 7.77% interest at the standard conversion factor of 1.3x. Long corporates now yield a little over 4.05%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 370bp, a significant increase 360bp reported December 12. I find this spread level to be incredible, particularly since it doesn’t make much sense for a declining yield environment. We seem to have entered a Twilight Zone in which PerpetualDiscounts are priced off FixedResets, rather than independently.