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The S&P 500 breaks through important technical levels as the …

Stock index futures are mixed after the Wednesday sell-off. Apple warns suppliers of low demand for iPhone 13. Boeing 737 MAX regains access to Chinese markets. The VIX reflects the increased fear and uncertainty among investors. Retailers make Christmas difficult for Santa.

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The central theses

  • Stocks are trying to rebound from Wednesday’s sell-off

  • The VIX hits March 2021 levels as uncertainty turns to fear

  • Retailers put an end to lackluster Christmas shopping

JJ Kinahan, Chief Market Strategist, TD Ameritrade

(Thursday Market Open) Stock index futures are mixed ahead of the open as investors digest yesterday’s sell-off. Strong sales to the end are often viewed as a bad sign for stocks, so a positive move is good if it can hold. The S&P 500 (SPX) broke support yesterday by trading below its August high. In addition, the index broke below its 50-day moving average. Many technical analysts will see these events as a bearish sign for stocks, at least in the short term.

The Nasdaq Composite (COMP: GIDS) is testing its 50-day moving average and is unlikely to get any help from Apple (AAPL) today. Apple is trading almost 3% lower after it became known that it told its suppliers that demand for the iPhone 13 is lower than expected. This is Apple’s second warning this year about its iPhone 13 product.

It’s not all bad for tech stocks, however. Snowflake (SNOW) rose nearly 14% in pre-trading. The company reported higher-than-expected earnings and sales and made better forecasts for future earnings developments.

The Dow Jones Industrial Average ($ DJI) could get a boost from its component Boeing (BA), which is up 5.19% in pre-trading. The Chinese Aviation Authority has given a positive rating to the Boeing 737 MAX, which will allow the model to return to China after two and a half years.

In the fight against Omicron, GlaxoSmithKine (GSK) and Vir Biotechnology (VIR) have provided data showing that their vaccine against the new variant is effective. Glaxo and Vir traded 0.65% and 13.9% higher in pre-trading hours, respectively.

Crude oil is a little lower before the bell this morning. According to The New York Times, OPEC-Plus is meeting today to discuss Omicron’s uncertainty and angry customers. The group will determine its oil production as oil prices have fallen sharply. You may want to cut production to set a “floor” on the price of oil and possibly even push prices up.

Measurement uncertainty

The Cboe Market Volatility Index, or VIX, rose above 31 yesterday but has fallen to around 29. Level 30 has historically been an important point for the VIX. To add context, the VIX was trading between levels 15 and 16 around November 1st. The increase reflects the mounting uncertainty and fear investors are currently experiencing in the markets. In fact, this is the highest level the VIX has seen since March 2021.

Rising fear often leads to market volatility as investors look to the options and futures markets to hedge their portfolios. The Omicron variant apparently spooked investors, to say the least, and now they seem to be hedging their portfolios. The strength of the futures on the Dow Jones Industrial Average Index this morning could also reflect an “escape to quality,” or in other words, investors could move to more established companies that can withstand the storms better.

Retail rollover

In a few weeks until Christmas, retailers are hoping for more consumer spending. For many, the Christmas shopping season started earlier in the year, which could have left recent shopping events like Black Friday and Cyber ​​Monday a little lackluster. In addition, other factors could put pressure on year-end purchases, such as inflation, a new variant of the coronavirus and problems with the supply chain. In the past few weeks, some of these factors may have influenced the recent rollover of the S&P Retail Select Industry Index ($ SPSIRE). However, investors might want to keep an eye on the longer-term historical support at 11,500 to see if prices can be held above this broader range.

Treasury Yield picTABLE OF THE DAY: FIRE SALE. The S&P Retail Select Industry Index ($ SPSIRE – Candlesticks) collapsed after its breakout and is approaching old support levels. Data sources: ICE, S&P Dow Jones indices. Diagram source: The thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.

Analyst Expectations: By and large, analysts across the retail spectrum expect December Christmas sales to meet increased expectations. However, many have noted an unusually low level of retail shopping spree this year, possibly due to a return to normal holiday get-togethers, higher prices, early demand to overcome supply chain issues, or inventory levels for products.

Recent shopping events like Cyber ​​Monday grossed retailers $ 10.7 billion, or 1.4% less than last year, according to Adobe Analytics. Adobe found this was the first drop in ecommerce transactions since 2012. However, much of the seasonal spending this year has been distributed as retailers started their promotions early. Additionally, pent-up demand from consumers with higher savings could boost retail sales in December, according to former Saks chairman and CEO Steve Sadove.

New variant: The fear of the new Coronavirus variant Omicron broke when consumers prepared for shopping on Black Friday. At this time, these concerns are not having a material impact on retail, but it may be too early to tell. Since little is known about the variant at this point in time, news reports were followed by volatile market reactions. Comparing the variant to COVID-19 will likely determine its impact on the retail economy.

This is not the first time consumers have been exposed to a variant of the coronavirus. First discovered late last year, the Delta variant had no significant impact on retail growth or the overall economic recovery. It also seems that this holiday season looks different than last year, as the majority of Americans are vaccinated. Some analysts go a step further and believe that the Omicron variant could actually boost retail sales. Consumers planning other experiences like vacations or going to the theater might choose to shop more instead.

Santa’s Supply Chain Problems: Retail supply chain problems are still very mixed. Some retailers receive an abundance of products that have been previously ordered, giving them a much wider range of goods for seasonal buyers. These retailers have a significant competitive advantage over those who are still waiting for month-long inventory orders. In addition, retailers who receive their Christmas products in February could see significant losses in the coming year as they have to make high product discounts. Ultimately, it is up to the retailers, who have received new inventory or may have new offers, to effectively get that information to consumers and get them to spend more money.

Good deal,

YY

@TDAJJKinahan

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