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Msg  69671 of 70166  at  5/11/2021 11:52:29 AM  by


The Launch Pad

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The Launch Pad
May 11, 2021
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S&P 500 futures dropped 0.8% and Nasdaq-100 futures retreated even more, suggesting that tech stocks are poised for further losses. Investors are betting that inflation is likely to climb steeply in coming months, and this is sending a shiver down the spine for tech/growth investors. Yesterday the 50-day moving average for the NASDAQ broke, and today it will open below the 100-day moving average. Meanwhile, the S&P 500 is just a day removed from an all-time high and still rests loftily above both its short and longer-term moving averages.

The VIX is jumping higher, it's up above 22 as we write, quite a difference from closing at 16.7 last Friday. Despite markets set to open lower this morning, the U.S. dollar isn’t getting much of a bid. The Yen and Euro are today’s risk off winners. Even overnight, the C$ dipped into the 1.20s. Global markets are all significantly lower in trading this morning, and bond yields have moved slightly higher ahead of tomorrow’s highly anticipated CPI print. Actually, U.S. yields are almost flat while European yields are all up 3-5bps, which explains the euro strength.

So why does ‘inflation fear’ get a free pass to explain market weakness? While inflation rising YoY is an absolute, the big debate is how transitory this higher inflation will be. Should it persist, the Fed could reduce its $120bn of monthly asset purchases that have boosted equity markets through the pandemic more rapidly than it currently intends to. This leaves the most richly valued shares, such as those of big tech companies, most vulnerable to a correction.

Besides the inflation fears, the market is also grappling with a fuel shortage. Gas stations along the U.S. East Coast are starting to run out of fuel as North America’s biggest petroleum pipeline fights to recover from a cyberattack that has paralyzed it for days. It may take until the weekend for the pipeline to fully reopen.

The mood is improving across the pond. Sentix's index of eurozone investor morale has risen from 13.1 last month to 21 this month, the highest reading since March 2018. Respondents to a Reuters poll had predicted a gain to 14.

Happy National Eat What Your Want Day! The possibilities are endless, and go figure. None of the delicious food I like is a vegetable. Well I guess a lettuce slice on a burger counts. Ever wonder how there is basically a ‘national day’ for everything, and how we know about it? Well, there’s a site for that, of course.

Since the bottom of the pandemic, the stock market has had a record recovery. However, just because the stock market is at all-time high's, doesn't mean all stocks are. Nothing works forever, and there are many new investors learning that new hard truth.

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Company news

Facebook was down over 4% yesterday following a broader technology setback and negative news surrounding their Instagram Kids application. As a result of a higher demand for discount products due to the pandemic, Giant Tiger Stores will be opening 41 new locations, increasing its store count across Canada to 300. In addition, it will invest in upgrades for both e-commerce sites and physical stores. Wattpad Corp. plans to grow its team nearly 50% by opening approximately 100 positions throughout the year, following its cash-and-stock acquisition by South Korean company Naver. Vice Media is negotiating a merger with SPAC 7GC & Co. Holdings in a deal that values the company at about $3 billion, almost half its value four years ago.


Oil prices are down this morning as what seems to be a broader market pullback. At the time of writing NYM WTI Crude futures are down -0.88% to US$64.35/bbl. ICE Brent Crude futures are down -0.85% to US$67.74/bbl. Fears over a long-term shutdown of the Colonial Pipeline have eased. Full services are expected to be back online by the end of the week, but make no mistake, this will disrupt supply for a period of time. Several gas stations on the U.S. east coast have already run out of fuel. US Gulf to Europe shipping rates skyrocketed as several refiners scrambled to store their fuel without the pipeline.

Gold Spot price continues its move higher this morning. At the time of writing, the yellow metal is up +0.24% to US$1,839.89/oz. A weak US dollar being the culprit for the rise in gold this morning.

Fixed income and economics

Loonies are holding steady at time of writing with the USD/CAD cross sitting right at the 1.2100 level with the CAD keeping their gains made yesterday. Our dollar touched a 3.5 year low overnight of 1.2079 and has gained nearly +3.5% over the past two weeks. The chart technicians will tell you this was expected with the cross firmly mired within its downward descending channel carved out since last May when we breached the 1.4000 level. And despite the likely worries coming out of Ottawa of having an dampening effect on our global trade demand from foreigners, the strength for the CAD doesn’t seem likely to abate anytime soon. The broad U.S. dollar weighted index (DXY) sank another 15 pips this morning to 90.05 and it’s lowest since the last day of February. Once one though of as a breakout above the 93.50 mark six weeks ago has given way to a freefall that sees the USD attempting to test the 88.25 low from early 2018. There’s little in the way of economic data nor central bank talk today to cast a move in either direction, so expect broad sentiment to seek the safety of risk havens such as the Yen throughout the session. Credit markets are posting mild losses (versus their equity counterparts anyway) on the broad risk-off tone as we await tomorrow’s highly anticipated U.S. inflation update (which at +3.6% in the headline forecast would mark the fastest since mid-2011).

Chart of the day


Quote of the day

If you cannot control your emotions, you cannot control your money.

—Warren Buffett

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