Market Noms — Curated Market Digest #20220510

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Hello to all readers and welcome to Market Noms. I doubt there are any readers. This will serve as merely a collection of my thoughts as I review the day from both an investing and speculative standpoint. I hope to remain consistent in order to both sharpen my writing and keep myself disciplined. Thank you for coming.

Wow, my last post was one week ago on May 3rd and a lot has unfolded since, so let’s get into it. The S&P 500 closed under 4000 for the first time in what seems like ages. The last time the S&P500 traded under 4000, in fact, was over one year ago around March 2021. In those 13 months, the Fed has announced that record levels of inflation were transitory only to backtrack and begin rate hikes. Jerome Powell has also indicated that the Fed will not hike rates by 75 bps or higher this year and while the market rallied a bit during the presser, this actually marked the start of the next S&P 500 drop, the current one that took it below 4000. Today, the index closed just a hair above that level at 4000.04, capping off a green 0.25% day that saw a green open, followed by about half a trading session in the red, and a bump to green into close.

$UPST was a stock that I had kept an eye out on since IPO. The day it IPO’d, back in December 2020, the stock traded in the $44 range. Shortly after, the stock began a momentous bull run that led the stock to as high as 401.49. There were some rocky fallouts prior to today but after announcing earnings last night, the stock plummeted 56% today to close at just 33.61, trading at levels the stock had never seen before. Rising interest rates have caused the AI-enhanced lending company to cut revenue forecasts for 2022 by nearly 10% due to the climate of rising interest rates. $UPST joins a list of other stocks that have seen dramatic collapses in the past few weeks ($NFLX, $TDOC, $LYFT are a few that come to mind).

Goldman Sachs announced they are pulling out of most SPACs over the threat of new liability guidelines from regulators. Most investors are aware of the ambiguous nature of a merger between a well-known company and a blank check company to go public via SPAC. However, while the SPAC market had blossomed in early 2021, the market just as quickly dissipated as investors incurred large losses on big names such as $UWMC and $SOFI. There is usually a third party in these SPAC deals, the underwriters, and typically underwriters of these large SPAC deals are actually able to lock in a favorable return-on-investment via a combination of shares and warrants they can either sell or redeem once the deal is reached. While SPACs have lost interest to the general public, it does seem likely that part of the large drop in nearly every IPO-via-SPAC company could be due to institutional underwriters having begun selling their ownership as well.

In the sea of red, there is one curious stock that I have been keeping my eye on — $CLX or Clorox, the manufacturer well known for sanitation and cleaning products. With the flurry of bird flu cases spreading across the United States, we could see some action here. The stock hit its 2022-low of 131.09 on March 14th and today closed at 156.23, a 19% rise from its year-to-date low. This stock rose over 35% in less than a week when the initial COVID-19 lockdown happened in March of 2020.

Bonds saw a bit of a relief rally today as $TLT, the 20+ Year Bonds ETF, traded nearly 2% higher today before closing green at 0.91%. Bond yields for the 7 and 10 Year bonds settled at 3.00%, providing some gap between the 30Y yield which sits at 3.13 today. The broader equities market may see some relief here as the 30Y has been flirting with inverting against the 10, 7, and 5 Year yields for quite some time, but today the bond markets rallied harder for the shorter term bonds, showing some confidence in the US economy short term. $DIS reports earnings tomorrow and if they can report positive guidance with entertainment parks rolling out new features and announcements, new movies, and Disney+ subscriptions, all with a green broader market rally, the stock may provide some help for a stock that is down over 30% on the year.

Bitcoin traded below 30000 for a brief time yesterday and seems to be flirting with the level again today, currently at 31037.26. There is actually a slight gap I’ve drawn that should act as a demand zone (or buy signal) for me that ranges between the 20K and 30K range. This range has largely not seen too much volume at all, as the cryptocurrency spent only three trading weeks to break through this range back in December 2021 before reaching the 65000 level in April this year. Ethereum saw a drop below the 2200 levels yesterday and is now trading at 2323.37.

The broader NFT market has seen a slight sell-off this week as well. While it is a bit difficult to monitor the prices of blue chip NFT projects such as Bored Ape Yacht Club or CryptoPunks, a couple of high profile projects such as Doodles had some uncharacteristically low sales. I saw some Doodles sell for around the 15 ETH mark after comfortable trading above 20 ETH just the day before. Some Invisible Friends sold for as low as 3.6 ETH while trading above the 5 ETH mark. The big story as of late, however is Azuki.

Azuki, the premier anime-themed NFT project that arguably launched one of the largest waves in the NFT world of anime-themed artwork and derivatives, was trading comfortably with an average price of around 22 ETH just two days ago on May 8th. After the pseudo-anonymous founder ZAGABOND.ETH (@Zagabond on Twitter) revealed that they had been involved in three other projects in less than a year that had been abandoned. Several investors questioned if this history constituted as a rug-pull and if this is something of a trend to be seen in Azuki as the floor price came crashing below 10 ETH shortly after the announcement. However, today, the project is seeing an insane level of activity, with already over 1,100 transactions on OpenSea as of writing. This translates to roughly 15,309 ETH volume traded at an average price of 13 ETH. It seems that the initial reaction to the announcement may have subsided and investors are excited to join the project at the lower price levels.

Alright, other than that, that’s all I really have to write about. I’ve been going back and forth with myself and some buddies regarding next plays and thoughts on the direction of the economy. As the equities markets continue to show weakness, DXY (or the US Dollar Index) is up 8.29% on the year, showing that many supply chain, commodity price inflation, and bond sell-off woes may not be targeted just to the American economy. $UUP, which is the Invesco US Dollar Index Fund, is nearing the 28 level it reached on a spike during the initial US COVID-19 lockdown and is currently trading at 27.78. At the current trend, it looks likely the stock will reach its all-time-high sometime this week as well.

Monitoring our own professional careers and noticing the types of jobs we are getting recruited to (as well as cultural shifts within our own organizations), I am noticing that there is a large discrepancy in companies looking to hire for roles that plan to return-to-office (RTO) soon and workers actively looking for full-remote roles. I will do a bit more research before reporting more here but I am monitoring the situation with company return-to-office plans, the plentitude of job openings, and companies that are favoring a termination of their office building leases to transition to a full remote environment. A couple of stocks that I am researching myself are $JLL and $CBRE, both commercial real estate giants. Both stocks are starting off the year in the red, down over 27% on the year. I question whether commercial property values can hold up during this time of flux in supply-and-demand and whether office rent costs can be maintained as such high levels, but again, I’ll try to report back with anything more I can find here.

Market Noms is not written by a financial advisor and is not financial advice. Please do your own research before investing in any type of security.