Is A VIX Floor Approaching?

The housing market is resilient. Sales of newly constructed homes were up 12.2% in May from April, and up 20% from a year ago. Homeowners with ultra-low mortgage rates don’t want to sell and buy another home at a much higher rate according to Bloomberg. Will this continue?

Market

Prices as of 4 pm EST, 6/27/23

Macro

US consumers are feeling more optimistic.

The Conference Board’s index of consumer confidence rose to its highest level since January 2022 in June.
Consumers’ view on current conditions jumped to its highest in nearly 2 years while their 6-month outlook also improved.
Inflation expectations fell to their lowest since 2020.
Even so, 69% of consumers still think a recession is likely within the next 12 months.

US business spending on equipment may be bottoming out.

Orders for durable goods rose unexpectedly in May for the 3rd straight month.
Total sales rose by 1.7% (vs.-1% expected) led by a surge in transportation equipment.
Non-defense goods excluding aircrafts—a proxy for business investment—increased by 0.7% (vs. 0% expected).
Shipments of core capital goods and non-defense capital goods—which are used in GDP calculations—grew by 0.2% and 3.4%, respectively.

Sales of new US homes increased for the 3rd consecutive month in May, jumping by the most (12.2%) since August 2022 (chart).

The median sales price fell 7.6% YoY to $416,300.
Meanwhile, Case-Shiller home prices similarly rose for the 3rd straight month with prices increasing 0.5% in April.
Despite falling on an annual basis for the first time in 11 years, home prices are just 2.4% below their June 2022 peak.

@lizannsonders

Stocks

“What would you say you do here?” is a question many Credit Suisse workers may soon be facing from their new employer.

UBS plans to cut more than half of Credit Suisse’s 45,000 employees.
The goal is to reduce the bank’s new combined 120,000-worker headcount by ~30% (35,000).
The first of 3 rounds of cuts is expected to begin in July and will continue in September and October.
Elsewhere on Wall Street: JPMorgan, Morgan Stanley, and Goldman Sachs have similarly announced thousands of job cuts of their own.

Major brands like American Express, Disney+, Samsung, and Johnson & Johnson may have a bone to pick with Google.

According to research firm Adalytics, Google violated its promised standards when placing video ads on other websites about 80% of the time.
This includes ad placements on low-quality sites trafficking in clickbait or misinformation, as well as small, muted, and auto-play videos that appear off to the side of a page’s main content.
After reviewing the research, some ad buyers are asking for a refund.

The Volatility Index (VIX) remains near its lowest levels since February 2020.

Fear over a drop in stock prices just ain’t what it used to be.
However, this month has seen more VIX call options traded than any other month on record and as BofA strategist write, “seasonality suggests a VIX floor could be near–even if the catalyst higher remains elusive”.
Are current levels of complacency in line for a reversal?

BofA

Energy

US stockpiles of commercial crude fell by more than expected last week.

It was the second straight weekly drawdown and the largest in 5 weeks.
Crude inventories fell by 2.4 million barrels while gasoline stocks dropped by 2.85 million barrels.
Cushing stocks and distillates saw builds.

Zero Hedge

Earnings

Yesterday’s highlights:

Walgreens WBA: $1.00 EPS (vs. $1.07 expected), $35.42 billion in sales (vs. $34.24B expected).

Walgreens missed earnings estimates for the first time since July 2020 on weak consumer spending and lower demand for Covid vaccines and testing.
It also lowered its full-year earnings guidance significantly, from a range of $4.45-4.65 to $4.00-4.05.
The company will increase its cost-cutting initiative to $4.1 billion.

What we’re watching today:

Micron Technology MU
General Mills GIS
Roivant Sciences ROIV
Concentrix CNXC
H.B. Fuller FUL
Unifirst UNF
Worthington Industries WOR
Blackberry BB
SIGNA Sports SSU

Top Headlines

No recession: President Joe Biden believes the US economy will avoid a recession.
2026 recession: Analysts at Credit Suisse don’t see a recession until June 2026.
Chips curb: The Biden administration is considering new restrictions on the export of AI chips to China.
Chipmakers slump: As a result, shares of Nvidia and other chipmakers are falling.
USD dominance: The Official Monetary and Financial Institutions Forum predicts the US dollar will maintain its reserve currency status over the next decade.
Ford layoffs: Ford plans to pay off at least 1,000 salaried employees in North America to offset investments in EVs.
Stress test: The Fed’s bank stress test results are due this afternoon–how does it work?
Global liquidity: Rising stock markets around the world suggest global liquidity is once again expanding.

Crypto

Prices as of 4 pm EST, 6/27/23

ETF rush: Fidelity is expected to join others in filing for a spot Bitcoin ETF
BlackRock ETF: Speculation is growing that BlackRock will win approval for its Bitcoin ETF.
SBF rejected: A federal judge rejected Sam Bankman-Fried’s bid to dismiss most of the criminal charges against him.
Digital euro: The EU has published a digital euro bill that aims to provide a free digital payment system available to “everyone, everywhere, for free”.
Receivership: A Nevada regulator has filed to place crypto custodian Prime Trust in receivership due to an $83 million shortfall in customer funds.

Deals

Annuities: Brookfield has offered to buy insurer American Equity for $4.3 billion.
Industrial sale: Circor International will sell itself to KKR for $1.7 billion after rejecting a higher bid from Arcline Investment Management.
Antitrust: New merger rules requiring companies to provide more information about their transactions have the potential to delay multi-million dollar deals by months.
Gaming: A Sony executive testified that Microsoft’s acquisition of Activision would “degrade” the gaming experience on PlayStation.
Golf M&A: Under the proposed new entity with LIV Golf, PGA Tour will maintain a controlling interest on the board of directors.