LIVE MARKETS Red tide quickly returns

5 minute read
Register now for FREE unlimited access to Reuters.com
  • U.S. indexes fall; Nasdaq, small caps, chips lead declines
  • All major S&P 500 sectors red: tech weakest
  • Euro STOXX 600 index pares gains, last up ~0.2%
  • Dollar, crude rise; gold edges red; bitcoin dips
  • U.S. 10-Year Treasury yield falls to ~1.74%

Jan 25 - Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com

RED TIDE QUICKLY RETURNS (1005 EST/1505 GMT)

Wall Street's three major indexes are lower on Tuesday with technology stocks leading the declines as investors wait for the outcome of the Federal Reserve's policy meeting and keep their eyes on the latest news from Russian/ Ukrainian tensions.

Register now for FREE unlimited access to Reuters.com

NATO said on Monday it was putting forces on standby, while the U.S. Department of Defense in Washington said about 8,500 American troops were put on heightened alert and were awaiting orders to deploy to the region, should Russia invade Ukraine. read more

Much like Monday morning's action, the outperformers are more defensive groups such as utilities (.SPLRCU) and real estate (.SPLRCR), while the biggest losers include growth sectors such as technology (.SPLRCT) and communication services (.SPLRCL) as well as cyclical sectors.

Of course investors may also be wary going into Tuesday's session after Monday's dramatic turnaround when the S&P 500 (.SPX) was on correction watch and the small-cap Russell 2000 (.RUT) was on bear watch, but both ended higher with the help of aggressive dip buyers.

A few explanations for Monday's wild swings include U.S. stocks becoming too oversold as measured by the VIX (.VIX), a modest shift in Fed Funds futures with the odds of just 3 rate hikes this year moving slightly higher, according to DataTrek co-founder Nicholas Colas who also wrote that retail investors were "out in force."

With the Federal Reserve meeting this week, with geopolitical risks remaining and with multiples still high, Colas says that despite Monday's impressive turnaround he is "cautious near term on U.S./global stocks," but bullish for the medium and long term.

Here is your early Tuesday trading snapshot:

Wall Street in the red again, at least for now

(Sinéad Carew)

*****

FRENCH BANKS: AIMING FOR BOOK VALUE (0925 EST/1425 GMT)

Jefferies just released a pretty bullish deep dive into the three big French listed banks and according to its analysts, there's a "massive re-rating potential" at hand.

"We think the market under-estimates the RoTE (return on tangible equity) potential of French banks in a 2024 horizon", they write, adding that the country's lenders are set to enjoy a sharp reduction in payments to the European Union's Single Resolution Fund.

French banks are currently trading well below price to tangible book value (PTBV) with Societe Generale at 0.5, BNP Paribas at 0.7 and Credit Agricole at 0.9.

According to Jefferies' analysts, that could evolve for the better in the coming years.

"We expect French banks' shares will significantly re-rate towards TBV (and above) once investors realize that French banks can sustainably achieve a double-digit RoTE", they conclude.

Among the other factors which might help boost their shares, are returns to shareholders seen at 7 to 8% through dividends and buybacks.

Momentum is also expected to be favorable for French banking stocks as they prepare to unveil strategic updates this year.

sd

(Julien Ponthus)

*****

DESPITE NASDAQ'S MONDAY REVERSAL, INTERNALS STILL REELING (0900 EST/1400 GMT)

The Nasdaq Composite (.IXIC) staged a stunning reversal on Monday. The tech-heavy index erased a near-5% collapse to close up around 0.7% on the day.

On the plus side, a number of measures of Nasdaq internal strength may have reached, or be near to, washed-out levels. That said, they still have work to do to prove that they have stabilized.

The Nasdaq McClellan Summation, which is based on advancing and declining issues, improved off its low of the day, but it still closed down for an eighth-straight session, at -5,987. It has yet to break its March 2020 trough, at -6,207, but it remains below its 10-day moving average. read more

The Nasdaq New High/New Low (NH/NL) index ended at 12.6%, or just a tick above its 12.5% December 6, 2021 trough:

IXICNHNL01252022

It now remains to be seen if this is a sufficiently washed-out reading for this measure, but it still has room to fall to reach previous major lows.

Of note, it bottomed on March 23, 2020 with the Nasdaq's pandemic-crash low, at 1.2%. It hit a low of 1.6% just two trading days (tds) after the market's December 24, 2018 trough.

In early 2016, the NH/NL index bottomed on January 21 at 2.4%. It then converged bullishly over the next 15 tds into the Composite's final low.

In 2011, this measure fell to as low as 3.5% on October 4, or one trading day after the Composite's October 3 bottom.

Its lowest reading ever, using Refinitiv data back to mid-1995, occurred during the Financial Crisis. On November 24, 2008, it fell to 0.5%. It established a slightly higher trough at 0.9% with the Nasdaq's major low on March 9, 2009.

Meanwhile, amid heightened volatility, the Nasdaq looks to kick off Tuesday's session on the back foot again. CME e-mini Nasdaq 100 futures are down around 2% in premarket trade. read more

(Terence Gabriel)

*****

FOR TUESDAY'S LIVE MARKETS' POSTS PRIOR TO 0900 EST/1400 GMT - CLICK HERE: read more

Register now for FREE unlimited access to Reuters.com
Terence Gabriel is a Reuters market analyst. The views expressed are his own

Our Standards: The Thomson Reuters Trust Principles.