STATE OF THE MARKETS

Profits booked ahead of CPI. US stocks snapped eight days of winning streaks, after the producer price index rose as expected, adding fears to rising inflation. Dow (-0.31%), Nasdaq (-0.60%) and S&P (-0.35%) were sold-off as profit taking became the order of the day, ahead of the CPI reading on Wednesday. The 10Y benchmark dipped to 1.42% as Dollar (DXY) closed below the 94 handle amid safe haven flows.

In the commodities market, crude advanced further for the third day, settling above $84.60/bl as EIA projected a short term demand recovery amid the coming winter. Gold continues to be on bids for the fourth day, breaking up the $1,820/oz barrier ahead of inflation reading on Wednesday. Elsewhere, iron ore dipped further to $94.36/tn as China reported cooling demand.

In the FX space, Yen, Swiss, Euro, Dollar and Aussie were seen synching across short and medium term accounts, in opposite polar to long term accounts, amid rebalancing and potentially turning around in trends as global equities flirted with all time highs. Markets are looking forward to reading higher inflation (5.8% vs 5.4%) and lower jobless claims (276k vs 284k) on Wednesday, plus earnings reports from Wendy (WEN), Disney (DIS) and Dillards (DDS) to name a few. EIA petroleum status will be in the spotlight for crude traders.

OUR PICK – No New Stock Pick

No new stock picks as we are at maximum equities exposure. Currently we are holding 8 stocks – 7 longs and 1 short. We are long AUY (19% undervalued) with dividends yielding 2.86%, T (19% undervalued) at 8.36% yields and COG (CTRA) (14% undervalued) yielding 2.31%. CLVS is currently 20% overvalued with -7.19 z-score but Tudor Investment had stepped in recently and we decided to hold. We remain bullish with VIPS (44% undervalued with 5.59 z-score), GT (47% undervalued with 1.28 z-score) and CRON (18% undervalued with 9.18 z-score) while bearish GE (17% overvalued with 1.36 z-score).

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Note: Cabot Oil & Gas (COG) recently merged with Cimarex Energy to form Coterra Energy (CTRA).