You kids see that? Zero-dark thirty (around 03:30) New York Time. Crude oil was already having a pretty good week. Suddenly, the last sale for March West Texas Intermediate (WTI) crude futures ran from under $78 a barrel to more than $80 a barrel in about half an hour's time. Brent futures ran from a little above $84 to a little below $87 over that same time frame.
Yes, I get it. Recovering demand in China and increased mobility across the rest of the developed world for now is outweighing fears of a global recession. That was at least (mostly) why crude had been higher for the week going into this pop, but this is more than that.
There are several balls in play here...
1) It appears that a control room at the port of Ceyhan, Turkey, at the eastern end of the Mediterranean Sea has been too severely damaged by this week's earthquakes to resume exports of crude anytime soon. The port normally handles roughly 1 million barrels of crude from Azerbaijan and Iraq. BP PLC BP, which has a 30.1% stake in the pipeline that runs from Azerbaijan to Ceyhan, has indicated that a full assessment of damage at the port is still underway.
2) Oil production out of Kazakhstan has been cut back by a need for unplanned maintenance at that nation's Tengiz Field. This work has reduced output from that country by about 200,000 barrels per day.
3) Last, and perhaps most sensationally, early on Friday morning Russia announced plans to reduce March output by 500,000 barrels per day. The cut is in response to western price caps that have been put in place to hamper the Kremlin's ability to finance its invasion of Ukraine and continued occupation of significant portions of that nation.
Of course, this is all on top of Saudi Arabia's increased prices for Asian customers and a disruption in production at Norway's largest producing field in the North Sea, which we already knew about earlier in the week. This has most of the energy sector trading higher overnight in an otherwise down (it's still very early) tape. The Energy SPDR ETF (XLE) closed on Thursday up 1% week to date. That movement looks likely to be extended here on Friday morning.
Equity index futures markets had been trying to recover from Thursday's trade where a bullish trading-volume-based takeaway from Wednesday's session led to a gap-up opening for equities in the US supported by a positive response to Disney's DIS earnings and reorganization plan. It did not take investors long to recognize that early-morning positivity as an opportunity to take profits in both Disney and the market at large.
For a second consecutive daily session, all 11 S&P sector SPDR ETFs closed in the red, led lower by Communication Services (XLC) . That fund was off 2.19%, as the Dow Jones US Internet Index gave up 3.71% for the session. The big losers here were Snap (SNAP) and Alphabet (GOOGL) . Those two names gave up 5.02% and 4.39%, respectively. For GOOGL, this came in addition to a drop of 7.68% on Wednesday.
Interestingly, Technology (XLK) was not terribly impacted as the Dow Jones US Software Index did back up 0.64% for the Thursday session, but the Philadelphia Semiconductor Index actually gained 0.13% for the day. This was the only index among the many I follow to close in the green. The Dow Transports, for example, gave up 2.12% as the rails and the truckers were slapped around. Crude oil prices should help those rails today, one would think.
Breadth was poor again for the day as trading volume expanded. This gives the overnight session a little more of a negative feel than I thought I felt 24 hours ago as I wrote this column. On Thursday, losers beat winners by a rough 11 to 4 at the New York Stock Exchange and by 7 to 3 at the Nasdaq. Advancing volume took a 25% share of composite NYSE-listed trade and a 28.1% share of that same metric for Nasdaq listings. However, there is a difference from the day prior. Aggregate trading volume for NYSE-listed securities increased 6% day over day and 9.6% day over day for Nasdaq listings. Aggregate trading volume also increased across the constituencies of both the S&P 500 and Nasdaq Composite.
For the Nasdaq Composite, Thursday's trading volume exceeded the 50- day trading volume simple moving average for the index and was also the first time that we saw a two-day losing streak with aggregate trading volume higher for the second day since Dec. 27 and 28. What does this mean? Well, it's hard to put a positive spin on that with the Nasdaq 100 still up 13.16% year to date and the Nasdaq Composite up 12.64% for 2023.
In Other News...
The U.S. State Department revealed on Thursday evening that the Chinese balloon that was somehow permitted to traverse the entire North American continent for eight days before being dealt with was indeed equipped with multiple antennas and other gear consistent with the functions of surveillance and intelligence gathering. State also revealed that Beijing had or has used a number of similar balloons to fly at great altitude over five continents and 40 countries.
The Biden administration also revealed separately that there are additional details concerning this balloon that link it to the Chinese military and indicate that it was not used for weather research. Beijing had claimed that this was a civilian craft used for that kind of research. In addition, the Financial Times is reporting that U.S. Secretary of Defense Lloyd Austin apparently tried to reach his Chinese counterpart over the past weekend and was not able to. Hmm. That's not good.
Just the Beginning?
On Thursday, according to The Wall Street Journal, Payward Inc.'s Kraken platform has come to an agreement to halt its practice of offering "crypto staking services" in the US and pay $30 million in penalties to the Securities and Exchange Commission. We all know that SEC Chairman Gary Gensler has been trying to crack down on what he sees as widespread noncompliance by crypto platforms with laws that govern securities in the US. The argument for the most part is over whether crypto assets are securities at all.
For those unaware, staking is the practice of offering investors a yield in return for temporarily passing these assets over to intermediaries. A federal judge will need to approve this deal in order for it to become effective.
Is the SEC coming for the rest of the industry? On Thursday, Coinbase Global (COIN) did announce that its staking program, which is part of its "blockchain rewards" product, remains in place.
Believe me. I'm always looking for good dietary substitutes. A nasty case of Covid in 2020 permanently (so far) took away my ability to tolerate anything dairy-related. Not just lactose, but anything dairy. That case of Covid also left me with blood pressure volatility issues that I had not had before. So, I also try to watch my sodium intake. No ice cream. No pizza. No to a whole lot of things. I'll live. I actually now prefer oat milk to cow's milk or at least what I remember of cow's milk. I now prefer cashew milk yogurt to traditional yogurt. I think. Fortunately, I have a vegan niece who has helped a great deal in this area, even if she does not know it.
Am I ready for this? I don't know. You may have noticed the shares of Beyond Meat (BYND) get beaten down more than 8% on Thursday. This is because the culinary team at Chick-fil-A, after four years, has come up with a plant-based sandwich that does not pretend to be meat. Apparently, a breaded marinated cauliflower sandwich on a bun with pickles is on the way. Don't know about you, but I know I'll give it a try. Maybe they'll have a grilled version. Three grams of cauliflower delivers 77% of your recommended daily intake of Vitamin C. No scurvy for you.
Come on in...
The water's fine. Maybe. Another prominent activist investor has jumped on the Salesforce (CRM) bandwagon. Dan Loeb's Third Point Management is known to have made an investment in Salesforce according to The Wall Street Journal. Third Point Management joins Elliott Management, ValueAct Capital, Starboard Value and Inclusive Capital in targeting Salesforce, which has been set back by both slow growth and C-Suite turnover.
You kids know I love when activist investors enter into a name I'm already in. I was almost disappointed to hear Nelson Peltz call a truce with Bob Iger. It appears that so did a lot of other investors. Thank goodness I made that partial overnight sale of Disney early on Thursday morning. Should have sold more. No shoulda, woulda, coulda. You guys already know where I see support for Disney (DIS) . Now, let's look at CRM.
Readers already knew that CRM had broken out from my Pitchfork model in early January. Now, the stock is technically overbought with a daily moving average convergence divergence (MACD) that's begging for some profit taking. Let's zoom in...
It's already started. Thursday, in my opinion, was just a headline-inspired interruption. This is where CRM develops a handle to attach to that cup pattern that lasted from early August into early February. I need a bit more of a discount to get interested in adding. With a pivot of $179. I would like to see a depth that approaches the intersection of the 21-day exponential moving average (EMA) and 200-day simple moving average (SMA) in the $160-$161 area. That for me would be the sweet spot. If I can get that, I can see a technical case for $205.
Economics (All Times Eastern)
10:00 - U of M Consumer Sentiment (March-F): Expecting 65, Last 64.9.
13:00 - Baker Hughes Total Rig Count (Weekly): Last 759.
13:00 - Baker Hughes Oil Rig Count (Weekly): Last 599.
14:00 - Federal Budget Statement (Jan): Last $-85B.
The Fed (All Times Eastern)
12:30 - Speaker: Reserve Board Gov. Christopher Waller.
16:00 - Speaker: Philadelphia Fed Pres. Patrick Harker.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: (ENB) (0.73), (ESNT) (1.49), (MGA) (1.08), (NWL) (0.11)