Credit card

Quiet season, oil, credit card boondoggle, Cisco strike, Nvidia home run

The S&P 500 lost only a little ground on Wednesday. The Nasdaq composite? Same. Narrower and more forced measures of the performance of large-cap stocks, such as the Dow Industrials and the Dow Transports, have been more difficult.

The breadth of Wednesday was a bit knotty, as it has been all week. The total number of losers more than doubled the number of winners in both the Big Board and Midtown. Total trading volume moved sideways for names listed on the NYSE, while trading volume declined significantly for names listed on the Nasdaq on Wednesday compared to Tuesday. Growth volume was only 31.8% of the composite for NYSE-domiciled stocks and 35.2% for Nasdaq stocks.

Those who actively trade in these markets have surely felt, to a greater extent, the movement of the indices, and more particularly, and hopefully appreciated the volatile movements in the narrow and “younger” parts of our market. , such as electric vehicles and all that has to do with what is now widely accepted as a general industrial transition, at least in developed economies. The S&P 500 has been (perhaps) building a basis for consolidation for almost two weeks now. Ditto for the Nasdaq Composite.

Readers will see (and likely benefit) from the October to early November breakout for the broad market from a pivot of 4665 created by September’s “double bottom” pattern. (We have telegraphed this volatility well in advance here in this column as well as on national television several times.)

Now comes what we call the “quiet season”.

Of course, this is not an exact science. Most of us, including your author, expect to see a rally at the end of the year. But first, these higher prices must be digested. The reduction in both participation and trading volume that typically accompanies a time of year that sees both the end of the third quarter earnings season and the start of the holiday season can often offer traders this respite.

Once the wins are over and the other season begins in earnest, we find out who has “finished” for the year, who will go into a “preemptive” defense and who needs to catch up. At this point, the desperate hunting performances while other more fortunate souls selectively take losses for tax purposes. Yet we are a month away from this chaos. For now, with the exception of specific news events, we are silent. We “fall”.

About crude oil

I see WTI crude futures trading near $ 78 a barrel early Thursday morning. On Wednesday, hitting a low just above $ 77 a barrel, WTI traded at a six-week low, after trading at a six-year high in October. While U.S. production has declined by about 12% from pre-pandemic highs in response to the Biden administration’s initial domestic policy changes, energy prices have proven to be the primary driver of this. which now seems to be “out of control” (transitory or not) price at the level of consumption.

The Biden administration has turned to several sources to try to bring this soaring energy-driven inflation under control. The administration called on the Saudis, Russians and several other OPEC + countries to increase production. The administration also considered releasing crude from the strategic reserve, while the president asked Chinese President Xi to do the same at Monday’s virtual summit.

In a letter to FTC President Lina Khan on Wednesday, President Biden mentioned “growing evidence of anti-consumer behavior” on the part of the two “biggest oil and gas companies.” Biden continues … “The result is this: Gasoline prices at the pump remain high, even as costs for oil and gas companies are falling.”

The two largest US oil and gas companies by market capitalization are Exxon Mobil (XOM) and Chevron (CVX). Shares of both companies were down 1.1% and 1.6%, respectively, for the session while the ETF (XLE) was down 1.53%.

Of the two oil and gas giants, Exxon and Chevron did not comment directly. The American Petroleum Institute called the president’s letter “a distraction from the fundamental market shift underway” while directly accusing the administration of cutting US supplies.

On that note, Beijing announced overnight that China would release crude from its strategic reserves after being invited by the United States to participate in a joint sale. This, along with the letter from the Biden administration, is why your oil stocks suddenly got worse midweek.

In my experience, if the demand is there, and it is now, the outflows of strategic reserves have only a temporary impact. The FTC? You never know how far it goes. Different chair. Different FTC head.

Credit card boondoggles

For example, e-commerce giant Amazon (AMZN) has announced that it will stop accepting Visa (V) credit cards issued in the UK from January 19. The high interchange fees are to blame, according to Amazon.
The story became infinitely more interesting once Bloomberg News reported that Amazon may consider removing its highly popular co-branded credit card from Visa and creating a new deal with Mastercard (MA). Shares of Visa and Mastercard as well as much of the FinTech space have moved sideways to decline in recent weeks. Even “BNPL” (Buy Now, Pay Later) type names such as Affirm Holdings (AFRM) have stalled.

What investors need to understand is not so much what’s going on in the UK, although that does matter, but would Amazon actually end the current deal with Visa? Maybe this is the way Amazon plays hardball.

It would seem that easy pair trading would be a long Mastercard, a short Visa, but it’s way too obvious. Granted, it would be much easier for Visa to offer new terms than to risk losing not only an e-commerce giant, but by far the dominant player in this space.

Forget about trading in pairs, this could be the time when buying a “cheap” Visa or Mastercard looks good. Just know that with BNPL stealing market share and Amazon sparking competition on the credit card side, it would seem to that casual observer that high interchange fees will only come under downward pressure from there. here.

If one has to or wants to play in space, I would go for undersized exposure to Mastercard, but I wouldn’t expect it to be easy.

The mighty Casey?

Disappointment. Seems to be almost quarterly. I mean usually Cisco Systems (CSCO) exceeds expectations for both top and bottom results. However, investors never seem satisfied. This time around, for the company’s fiscal first quarter, Cisco fell short of the highest expectations and lowered its revenue generation forecast for the current quarter well below consensus. The forecast for fiscal year 2022 will not knock you down either.

Above all, the numbers within the numbers, to a large extent, also disappointed. On the product side, Hybrid Work fell into outright contraction, while End to End Security, which is supposed to be a growth area, only managed to grow by 4% compared to last year, white collar workers. Americans still working largely remotely.

Even more disappointing, I found, was that Cisco’s transition to a recurring revenue model appeared to be stalled. Eighty percent of software revenue was generated through the subscription model, compared to 81% sequentially. The remaining performance obligation ended the quarter below its starting point. After the business has disappointed on revenue? It’s not good.

The most encouraging thing I can say about Cisco this morning is that the company is paying shareholders $ 1.48 per share per year to lag behind with a 2.6% dividend yield. On top of that, Cisco is leaving around $ 7.7 billion on its current share buyback authorization. Are these reasons enough for shareholders to attack the company? Not for me. This stock now appears to be almost a year away.

Overnight, I see CSCO trading at around $ 53, down 6.6%. This puts my position down 3.3%. I expect to trade the stock long enough to smooth out its individual impact on my P / L, and then it will be … See Ya !!

Really stick cleaning

His face surely belongs to Mount Rushmore of corporate CEOs. Nvidia (NVDA) CEO Jensen Huang stepped in on Thursday night and hit another home run.

Record gaming revenue, record data center revenue. Margin up. Great orientation.

I follow the name long, and it probably needs a piece of its own. BRB.

Economy (All Eastern hours)

8:30 a.m. – Initial unemployment claims (weekly): Expected 260K, Last 267K.

8:30 a.m. – Continuing complaints (weekly): Last 2.16M.

8:30 a.m. – Philadelphia Fed Manufacturing Index (November): Expected 22.6, last 23.8.

10:30 am – Natural gas inventories (weekly): Last + 7B cf.

11:00 a.m. – Kansas City Fed Manufacturing Index (November): Last 31.

The Fed (All Eastern hours)

08h00 – Speaker: Atlanta Fed. Raphaël Bostic.

9:30 a.m. – Speaker: new York Fed. John Williams.

2:00 p.m. – Speaker: Chicago Fed. Charles Evans.

3:30 p.m. – Speaker: San Francisco Fed. Marie Daly.

Highlights of today’s earnings (Consensus expectations for BPA)

Before opening: (KSS) (0.70), (M) (0.31)