Wall Street sees a bright side in ‘healthy’ tech selloff By Reuters


© Reuters. FILE PHOTO: A street sign is seen in front of the New York Stock Exchange on Wall Street in New York

By Lewis Krauskopf

NEW YORK (Reuters) – Some of Wall Street’s biggest players are viewing the stock market’s recent tech-led selloff as a bout of turbulence rather than the start of a longer slide — and they don’t see it as a reason to run for the door.

Invesco this week called the Nasdaq’s sharp decline a “healthy period of consolidation” while fund manager Lord Abbett said U.S. stock valuations are likely merited, based on an analysis of companies’ earnings.

On Sept. 4, Goldman Sachs (NYSE:) reiterated its year-end price target of 3,600 on the S&P 500, roughly 6% above the index’s close on Wednesday, while UBS Global Wealth Management recommended clients “ease into the markets” rather than stay on the sidelines.

Their optimism highlights how the Federal Reserve’s pledge to keep interest rates at record lows and hopes of a breakthrough in a vaccine for COVID-19 have underpinned market gains this year, though many remain wary that the U.S. presidential election and massive options bets on tech-related stocks could exacerbate market swings in the remaining months of 2020.

“What we think we are going through is a healthy correction, removing the froth,” said Troy Gayeski, co-chief investment officer of SkyBridge, an alternative investments firm. “We certainly could fall more. But if you’re a tech investor you had to understand that the valuations were very high.”

The Nasdaq posted its best day since April on Wednesday, a day after falling into correction territory, commonly defined as a fall of 10% or more from a recent peak. The other major indexes also rebounded on Wednesday after steep declines.

“I think of this rout not so much as a correction, but as a digestion,” Kristina Hooper, Invesco’s chief global market strategist, said in a recent note.

Second-quarter reported earnings on the S&P 500 were 23.1% above expectations, far above the trailing five-year average of 4.7%, analysts at Lord Abbett said in a recent note.

“Earnings momentum, and the magnitude of analyst earnings revisions, is outpacing that in other markets, suggesting that higher valuations on U.S. equities are merited,” the report said.

Still, some believe more volatility is in store. A recent poll of investors from UBS Global Wealth Management showed 65% viewed politics as their top concern, with the Nov. 3 U.S. presidential election just weeks away.

Prominent investor Stanley Druckenmiller – a skeptic of this year’s rally – again sounded a bearish note on Wednesday, warning on CNBC https://www.cnbc.com/2020/09/09/stanley-druckenmiller-says-were-in-a-raging-mania-and-the-next-3-to-5-years-will-be-challenging.html that the stock market is in a mania fueled by the Federal Reserve.

Uncertainty over huge options purchases by SoftBank Group Corp (T:) also hung over markets, creating another risk.

Gayeski, of Skybridge, said he could see an opportunity to increase equity risk if there was a sharper drop, such as the Nasdaq falling 20% or the S&P 500 declining 15% from their respective highs and there were other supportive signs for the market such as the Fed’s expanding its balance sheet further.

Any selling that spreads beyond the big tech-related stocks that have led markets higher could be an indication that the pullback may be extending further, said Willie Delwiche, an investment strategist at Baird.

In the coming days, Delwiche is looking for signs of increasing investor caution — such as buying of put options, outflows from equity funds and diminishing bullish views in surveys — that indicate any over-exuberance has waned.

Another indicator is how investors respond to key technical support levels, said Keith Lerner, chief market strategist for Truist/SunTrust Advisory. The Nasdaq, for example, on Tuesday closed below its 50-day moving average for the first time since April, but was back above it on Wednesday.

“If you see these markets just slice through support levels, that’s a sign that the sellers have the upper hand,” Lerner said.





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Hit by COVID-19, Thyssenkrupp sees early signs of stabilisation By Reuters


© Reuters. FILE PHOTO: The logo of German steelmaker ThyssenKrupp AG is seen on an escalator at Frankfurt’s main railways station in Frankfurt

FRANKFURT (Reuters) – Ailing conglomerate Thyssenkrupp (DE:) on Thursday said some businesses were stabilising in the current quarter after suffering a heavy blow due to the coronavirus pandemic.

The group said its fiscal third-quarter adjusted operating loss from continuing operations, which strips out the elevator business it recently sold, came in at 679 million euros ($800 million), less than the up to 1 billion it had flagged in May.

“We have worked hard to keep our costs under control and secure liquidity,” Chief Executive Martina Merz said. “As a result we came through the crisis slightly better than initially feared in the third quarter overall.”

The company, which sold its elevator unit to a private equity consortium for 17.2 billion euros, said most businesses were stabilising or even improving quarter-on-quarter, with the exception of its struggling steel division.

Thyssenkrupp Steel Europe, the continent’s second-largest player after ArcelorMittal (AS:), is expected to rack up a 1 billion euro adjusted operating loss in the fiscal year to September, the company said.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Saudi Aramco’s profit plunges, sees signs of oil market recovery By Reuters


© Reuters. FILE PHOTO: Logo of Aramco is seen as security personnel walk before the start of a press conference by Aramco at the Plaza Conference Center in Dhahran

By Saeed Azhar and Rania El Gamal

DUBAI (Reuters) – Saudi state oil group Aramco (SE:)’s profit plunged 73% in the second quarter of the year, as a slump in energy demand and prices due to the coronavirus crisis hit sales at the world’s biggest oil exporter.

All major oil companies have taken a hit in the second quarter as lockdowns to contain the coronavirus limited travel, which reduced oil consumption and sent prices tumbling to levels not seen in nearly two decades.

Aramco, which listed in Riyadh last year in a record $29.4 billion flotation, said the rapid spread of COVID-19 globally had significantly reduced demand for , and petroleum products.

“The COVID-19 crisis is unlike anything the world has experienced in recent history and we are adapting to a highly complex and rapidly changing business environment,” CEO Amin Nasser said in a statement on Sunday.

“We are seeing a partial recovery in the energy market as countries around the world take steps to ease restrictions and reboot their economies,” Nasser said.

Aramco reported a 73.4% fall in second-quarter net profit, a steeper drop than analysts had forecast, and said it expected capital expenditure for 2020 to be at the lower end of a $25 billion to $30 billion range.

Net profit fell to 24.6 billion riyals ($6.57 billion) for the quarter to June 30 from 92.6 billion riyals a year earlier.

Analysts had expected a net profit of 31.3 billion riyals in the second quarter, according to the mean estimate from three analysts, provided by Refinitiv.

“Aramco figures are healthy compared to other global peers,” Mazen al-Sudairi, head of research at Al Rajhi Capital, said. “This was the worst quarter in the modern history of oil industry, and surviving it with healthy figures points to a very positive outlook.”

Aramco shares were up 0.4% in early trade. The group is currently the world’s second most valuable publicly traded company after Apple (NASDAQ:) which overtook the oil group to take the number one slot in terms of market value earlier this month.

Aramco said it would distribute a dividend of $18.75 billion for the second quarter of this year, in line with its plan to pay a base dividend of $75 billion for 2020.

The group’s dividends play a critical role in helping the Saudi government to manage its fiscal deficit.

BP (NYSE:) earlier this month cut its dividend for the first time in a decade after a record $6.7 billion second-quarter loss, while Royal Dutch Shell (LON:) in April cut its dividend for the first time since World War Two.

Aramco’s free cash flow stood at $6.1 billion in the second quarter and $21.1 billion for the first half of 2020, respectively, compared to $20.6 billion and $38.0 billion for the same periods in 2019.

Aramco’s gearing ratio was 20.1% at the end of June, mainly reflecting the deferred consideration for the acquisition of Saudi Basic Industries Corp and the consolidation of SABIC’s net debt on to Aramco’s balance sheet.($1 = 3.7501 riyals)

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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His fund is up 60% this year after he called the March bottom — now, he sees potential for a ‘severe collapse’


Michael Gayed says he’s not trying to scare anyone, but you wouldn’t know it from his latest take.

Back in May, the fund manager warned of the possibility of two crashes: first bonds, then stocks. With his ATAC Rotation Fund
ATACX,
-0.06%

continuing to deliver the goods — it’s up almost 60% so far this year to rank among the best in its category — he’s still waving the yellow flag.

“It is a wild time in the markets,” said Gayed, who also runs the Lead-Lag Report. “Despite a crippling global pandemic, where the U.S. is failing miserably at a response with daily record after daily record cases being broken, and a U.S. economy that seems to be teetering on the edge of yet another Fed Monetary Policy response, stock markets have not seemed to blink when recovering.”

Yes, 2020 is certainly unique, considering, as he pointed out, that stocks crashed by more than 30% at one point, only to rally almost 50% from there. All that in less than eight months.

After having been bullish near the March bottom, Gayed now says that leading market indicators could very well be signalling a “severe collapse” in stocks.

The yield on the 10-year Treasury
TMUBMUSD10Y,
0.534%

, for instance, is looking at around 0.5%, while the yield on the 30-year
TMUBMUSD30Y,
1.197%

is under 1.5%., which he says is setting up for a potential reversion to the mean.

“It’s often said that bond-market investors are the smart money and tend to lead the stock market in anticipating economic activity,” Gayed explained. “The fact that yields have not risen meaningfully (quite the opposite) in the very short term is quite troubling as historically such short-term movement has tended to precede major periods of equity stress.”

Add to that, action in the utilities sector, which is seen as a recession-proof, safe-haven investment, could spell trouble for the broader market, he said, pointing to this chart showing how the defensive investments have managed to outperform the S&P 500 in the past month:

“That should raise some red flags as an equity investor, and frankly this alone gives me pause,” he said. “A similar movement occurred right before the COVID crash this year.”

Lastly, complacency could become a serious issue, with Gayed pointing to several factors, including the wild recent trading antics of Robinhood traders.

“The S&P 500 is now positive in a year that is expecting economic catastrophe. The Nasdaq is flying. And no one seems to think the market can ever go down,” he wrote in a recent note. “It sure feels like everyone forgot that investing in stocks carries risk — and the conditions are changing so rapidly right now, it looks like risk might come back into full force.”

No big crash Monday, with the Dow Jones Industrial Average
DJIA,
+0.43%

, S&P 500
SPX,
+0.76%

and Nasdaq Composite
COMP,
+1.48%

all starting off the week in the green.



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Samsung sees pickup in chip demand from new phones, second quarter profit jumps By Reuters


© Reuters. FILE PHOTO: A woman walks past a Samsung brand store in central Kyiv

By Joyce Lee and Heekyong Yang

SEOUL (Reuters) – Samsung Electronics (OTC:) Co Ltd (KS:) said on Thursday it expects a further pick-up in chip demand in the second half of the year, driven by new smartphone launches, but warned the coronavirus pandemic and trade disputes pose risks.

Samsung, the world’s top maker of memory chips and smartphones, posted a 23% jump in operating profit in the April-June quarter on the back of strong DRAM chip sales.

The second quarter sales spike was largely due to a jump in the number of people working and learning online from home because of the pandemic.

Fellow Korean company SK Hynix (KS:) and U.S. firm Micron Technology Inc (O:) have also flagged increased demand from this trend for DRAM chips, which provide devices with temporary workspaces and allow them to multi-task.

Samsung said it expects “solid server demand” to continue in the second half, but it would closely monitor customer inventory and investment plans.

That outlook is more positive than SK Hynix and many analysts, who believe DRAM prices will fall in the second half after the stockpiling in the first half.

“I expect DRAM prices to fall in the second half because server customers need time to reduce inventories they have built because of supply chain concerns,” said Park Sung-soon, analyst at Cape Investment & Securities.

Samsung’s chip business saw operating profit jump 60% to 5.43 trillion won in the second quarter, accounting for two-thirds of its total profit.

Operating profit in the mobile division rose 25% to 1.95 trillion won despite weaker smartphone shipments, helped by lower marketing expenses and offline promotions amid the COVID-19 outbreak.

Samsung said it plans to unveil new flagship smartphones including the Galaxy Note and a foldable phone in the second half, while seeking to expand sales of mid-tier models.

The company’s shares rose 1.2% in morning trade on Thursday, ahead of a 0.3% gain in the wider market (), extending gains in previous days.

Samsung said a one-off gain at its display business helped boost its profit, without elaborating further. Samsung’s display business counts Apple Inc (O:) as a customer.

Operating profit rose 8.1 trillion won ($6.81 billion), from 6.6 trillion won a year earlier, in line with the company’s estimate earlier this month.

Revenue dropped 6% to 53 trillion won. Net profit rose 7% to 5.6 trillion won.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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