LIVE MARKETS Exchange-traded funds: now on a blockchain?

0
  • Dow Jones, S&P trough > 1%, small caps outperform
  • Consumer Staples is the weakest S&P sector; energy drives winners
  • dollar dip; gold gain, raw, bitcoin
  • 10-year US Treasury yield drops to ~1.86%

February 28 – Welcome home to real-time market coverage from Reuters reporters. You can share your thoughts with us at [email protected]

EXCHANGE-TRADE FUNDS: NOW ON A BLOCKCHAIN? (1330 ET/1830 GMT)

Exchange-traded funds (ETFs) are among the biggest investment vehicles on the market. The CFRA estimates that as much as $700 billion was invested in equity-focused ETFs alone in 2021.

Join now for FREE unlimited access to Reuters.com

Register

With their lower fees and relative ease of trading, it’s no surprise that crypto-curious investors are eagerly awaiting approval for a cash bitcoin ETF, but so far they’ve had to make do. a handful that follows futures contracts.

Meanwhile, Arca, a digital asset management company focused on institutional investors, thinks a next iteration of funds could involve the integration of blockchain technology – a “blockchain-transferred fund” (BTF).

A BTF would issue its shares on a blockchain instead of a regular exchange. In one white paper released on Monday, Arca says it would allow for lower fees, the ability to transfer between peers, real-time settlement, and potentially higher liquidity.

Arca already offers the Arca US Treasury Fund, a BTF that tracks US Treasuries. It issues digital assets called ArCoins where an ETF would issue traditional stocks.

Still, there are hurdles, particularly down to the Securities and Exchange Commission’s rules regarding digital assets, which have yet to be ironed out. Until those rules are established, “utility in a market sense isn’t there yet,” said Arca CEO Rayne Steinberg.

He also notes that some of the benefits of BTFs, including how blockchain-based funds could reduce costs, will really manifest themselves once these products can be offered at scale. This may take some time, given the regulatory outlook.

Meanwhile, Steinberg says Arca has seen interest from large institutions as well as retail traders around their existing BTF.

*****

UNCERTAINTY LIKELY TO DRIVE VOLATILITY (1235 EST/1735 GMT)

The Russian invasion of Ukraine intensified risky actions.

Indeed, according to Bob Doll, Chief Investment Officer at Crossmark Global Investments, the market outlook is highly uncertain and volatility in either direction seems likely.

Either way, in his latest “deliberations,” Doll says the US economic outlook is “rather optimistic” and unlikely to be upended by events in Ukraine.

He points out that from the early January peak to last week’s low, US stocks have fallen almost 15%. Meanwhile, he says the P/E ratio has gone from 22x to 19x.

While Doll doesn’t yet see this as ‘cheap’, he thinks selective additions to stock holdings are warranted given that Crossmark’s year-end target for the S&P 500 (.SPX) remains at 4. 500, just over 3% above current levels.

In conclusion, Doll does not expect the Ukrainian developments to deal a significant blow to global growth and therefore expects the cyclical outlook to remain bearish for bonds and neutral for equities.

However, he believes stock markets were oversold and hit a significant low last week.

(Terence Gabriel)

*****

FOURTH QUARTER PROFIT MARGINS (1105 EST/1605 GMT)

With fourth-quarter earnings for 95% of S&P 500 companies, DataTrek Research co-founder Nicholas Colas released a note on the earnings trend.

“The overall story here is very good,” Colas wrote, noting that the benchmark S&P 500 index as a whole posted net margins (after tax) of 12.4% for the fourth quarter, compared to 11% it a year ago.

But under the hood, there are “distinct winners and losers,” with six of 11 industry sectors seeing their profit margins rise and five seeing their margins fall.

On the winning side:

Energy: 9% net margin in Q4 2021 vs. net loss in Q4 2020

Industrials: 7.8% vs. 4.5% a year ago

Materials: 12.9% versus 10.2%

Consumer Discretionary: 7.6% vs. 5.7%

Technology: 26% versus 24.1%

Healthcare: 10.6% versus 9.4%

On the losing side:

Utilities: 10.0% versus 11.9%

Real estate: 34.2% versus 34.7%

Finance: 18.3% versus 18.7%

Communication services: 12.3% vs. 12.4%

Basic consumption: 6.4% compared to 6.5%

But overall, Colas’ conclusion is that US large caps on average have weathered the surge in domestic inflation well because economic growth has been strong.

(Sinead Carew)

*****

US STOCKS SLIDE AS SANCTIONS BECOME MORE SERIOUS (1000 EST / 1500 GMT)

Major Wall Street indexes slipped in early trading Monday as investors weigh the fallout from a new round of sanctions imposed by Western countries on Russia following its invasion of Ukraine.

Global stocks are lower, oil prices are higher and the Russian ruble slumped to record lows after Western allies blocked Russian banks from the SWIFT financial network and limited Moscow’s ability to deploy its 630 billions of dollars in foreign exchange reserves. Read more

All major sectors of the S&P 500 (.SPX) fell into the red initially, with Financials (.SPSY) being the hardest hit. Banks (.SPXBK) are particularly weak. This, while the 10-year US Treasury yield fell back below 1.90%.

Energy (.SPNY) is moving back into positive territory. This, as tensions with Russia escalate and NYMEX crude futures rise more than 3%.

Here’s your first business insight:

earlytrade02282022

(Terence Gabriel)

*****

KEEP CALM AND STAY OVERWEIGHT (0911 EST/1411 GMT)

That, in a nutshell, is what Bernstein tells his equity clients after Russia’s invasion of Ukraine this month boosted volatility to multi-month highs and put European stocks in their worst month since October 2020.

“Despite short-term volatility and increased geopolitical risk, real yields are still very low, earnings momentum is strong and we remain in an inflationary environment. All of these factors mean investors need to maintain or increase their exposure. to equities at any given strategic horizon,” say strategists at the U.S. investment house.

And while they believe greater caution is warranted in the near term, they are also “cautiously” maintaining their tactical overweight position in Europe versus US equities.

“Recent events in Ukraine clearly challenge this view. The possibility of further sanctions could drive energy prices even higher, leading to slower growth in the region. In this scenario, we would reduce our exposure to Europe,” they note.

“However, we believe it is too early to make a call on this, as there are too many unknowns at this stage regarding future sanctions, government reactions in terms of fiscal support, etc. Basically, the the earnings situation for Europe is strong, redemptions are favorable and the equity yield gap with the US is widening,” they say.

(Danilo Masoni)

*****

S&P 500 INDEX ATTEMPT TO MARK LOW (0900 EST / 1400 GMT)

The S&P 500 Index (.SPX) has mounted an impressive pullback from its low last week. With this, the benchmark has formed a hammer candle pattern on the weekly charts, suggesting potential for a larger upward price reversal:

SPX02282022

After slipping more than 5% at one point last week, taking its decline from its early January high to almost 15%, the SPX then rallied and ended the week with a gain of almost 1 %. Read more

A classic hammer candlestick formed in which the lower shadow of the pattern was more than twice the height of the actual body, as in the market “hammers” a base and tries to find a bottom.

That said, traders may want to see a confirmation, that is, the price quickly following the rise to build confidence in this pattern. So far on Monday, however, the CME e-mini S&P 500 futures, although off their overnight lows, are still showing a loss of around 1.4%, suggesting a significantly lower decline. low for the cash index.

It should be noted that a strong rally in late January, which clearly weighed on futures, resulted in several weeks of upward tracking.

However, the SPX failed to end a week above its declining 10-week moving average. This moving average has capped strength on a weekly closing basis since the SPX broke down in mid-January.

Therefore, traders can look for an SPX weekly close above the moving average to build confidence that the index has established a stronger floor.

The candle low at 4,114.65 is now seen as important support.

(Terence Gabriel)

*****

FOR MONDAY LIVE MARKET PUBLICATIONS BEFORE 0900 EST/1400 GMT – CLICK HERE: read more

Join now for FREE unlimited access to Reuters.com

Register

Terence Gabriel is a market analyst at Reuters. Opinions expressed are his own.

Our standards: The Thomson Reuters Trust Principles.

Share.

About Author

Comments are closed.