Live Markets: Chip stocks surge after Intel unveils $5.4 bln Tower deal

Me Today

15/02/2022 17:16

* U.S. stock indexes sharply higher: FANGs, chips outperform
    * Tech leads S&P sector gainers; energy weakest group
    * Euro STOXX 600 index ends up ~1.4%
    * Dollar slips; gold off >1%, crude off ~4%; bitcoin rallies
    * U.S. 10-Year Treasury yield jumps to ~2.04%

    Feb 15 - Welcome to the home for real-time coverage of
markets brought to you by Reuters reporters. You can share your
thoughts with us at markets.research@thomsonreuters.com
    
    
    CHIP STOCKS SURGE AFTER INTEL UNVEILS $5.4 BLN TOWER DEAL
(1205 EST/1705 GMT)
    Chip stocks are surging on Wall Street on Tuesday after
Intel  INTC.O  announced it is buying Israeli foundry Tower
Semiconductor  TSEM.TA  for $5.4 billion, a premium of 60% over
its previous stock price.
    Intel rose 1% following the announcement of its deal to
acquire the semiconductor foundry, the latest step in the
Silicon Valley company's aspiration to become a major provider
of manufacturing services to other chip makers.  urn:newsml:reuters.com:*:nL1N2UQ0JK
    "The deal is expensive, but who cares," writes Wedbush
analyst Matt Bryson in a research note. "We believe there were
few other alternatives by which Intel could flesh out its 
perspective foundry business and if Intel is successful in
ramping into foundry, no one will care that Intel (overpaid) for
TSEM." 
     The Philadelphia Semiconductor Index  .SOX  is surging more
than 4%, rebounding from some of the deep losses it has suffered
in recent weeks as investors worried about rising interest
rates, and dumped high growth stocks. 
    Investors have also been debating the risk of chipmakers
building too much new manufacturing capacity in reaction to the
global supply shortage, thereby setting off an industry
downturn.
    Nvidia  NVDA.O  is advancing 8% ahead of its quarterly
report late on Wednesday. Qualcomm  QCOM.O  and Broadcom
 AVGO.O  are both jumping about 4%, and Marvell Technology
 MRVL.O  is powering nearly 7% higher.
    With the smell of M&A in the air, smaller chipmakers are
also rallying, with chip manufacturing equipment maker Amkor
Technology  AMKR.O  jumping 9.5%, programmable chipmaker Lattice
Semiconductor  LSCC.O  up 7.1% and analog component maker
Monolithic Power  MPWR.O  gaining 8.6%.
    The SOX remains down about 11% in 2022, and it is up 9% over
the past 12 months.
    
    (Noel Randewich)
    *****
    
    NO MATTER UKRAINE, INVESTORS TURN LESS BULLISH ON EU STOCKS
(1110 EST/1610 GMT)
    Even before Monday's selloff amid concerns of an imminent
Ukraine/Russia conflict, investors turned less optimistic about
the outlook for European equities vs. last month.
    The BofA fund manager survey for February out today showed
that those expecting European stocks to rise by at least 5% over
the coming twelve months fell sharply to 57% from last month's
81%.
    And that's mostly due to hawkish central banks and incoming
monetary tightening which is seen as the biggest risk factor for
markets by 41% of respondents. Only 7% consider a possible
Ukraine/Russia conflict the most important.
    In more detail, BofA said those expecting downside for EU
stocks rose six-fold to 18% while those saying the region's
stock market has already peaked rose to 22% from 8% last month. 
    Those expecting the bull run to continue until at least Q4
however remained the majority at 29%, but that's down sharply
compared to last month.
             
    
    (Lucy Raitano) 
    *****
    
    BUY SMALL CAP GROWTH, BUT... (1100 EST/1600 GMT)
    While the small-cap Russell 2000 index  .RUT  is
underperforming the large-cap Russell 1000 index  .RUI , BofA
equity and quant strategist Jill Carey Hall still suggests
buying shares of smaller companies, but with caveats.
    Small caps are cheap with a 29% P/E discount to large caps
and in small, growth stocks  .RLG  trade at a historical P/E
discount to value  .RLV . But Carey Hall expects growth to see
better growth in the next 12 months.  
    The relative forward P/E of RUT vs. RUI fell to 0.72x last
month, - its lowest level since the 1998-2001 period and 29%
below average. So small remains cheap vs. large on every metric,
even non-earners and outliers are included. 
    Small-cap energy and financials rank highest "with
inexpensive relative valuations and strong ranks on revisions
and technicals" with both trading at historical discounts to
large cap peers.
    Last month the RLG fell 13% while RLV fell 6%. Currently
growth is down 10.6% YTD vs value's 2.2% dip.
    With the relative forward P/E of small growth vs. value at
1.28x, below the long-term average of 1.33x, Carey Hall says
"the last time the relative multiple fell from highs to similar
levels (in mid-2002), Growth performed in-line with Value over
the next 1-3 months, but outperformed over the next 6-12
months."
    Also small growth will see better earnings, sales growth vs.
value over the next 12 months and has had better estimate
revisions in the last three months, according to Carey Hall.
    But she cautions that the RLG has a higher proportion of
non-earners and a higher exposure to healthcare, which she ranks
poorly, while growth stocks are likely to be hurt by rising
rates and tend to underperform in late cycle. 
    However, after favoring value over growth in 2021, the
strategist suggests "a more barbelled stance in '22." 
    She suggests sticking with quality value and stocks with
attractive free cash flow, because of late cycle/Fed hiking but
"add growth exposure via cyclical growth" and stocks with
"high/expanding margins amid continued inflation."
        
    (Sinéad Carew)
     *****
     
    STRANGE WEATHER: HOT PPI, COOL EMPIRE STATE (1006 EST/1506
GMT)
    Data released on Tuesday did little to assuage investor
fears that the Federal Reserve will try to douse inflation
flames in the coming months with an ice cold bucket of rate
hikes.    
    Producer prices (PPI)  USPPFD=ECI  surged by 1% in January,
twice the rate analysts expected, according to the Labor
Department.  urn:newsml:reuters.com:*:nL1N2UP1TM
    The hot PPI reading, which tracks prices that U.S. companies
get for their goods/services at the proverbial factory door,
suggests U.S. companies will continue passing rising prices
along to the consumer, throwing gasoline on the CPI fire - the
consumer price index hit its highest annual rate in four decades
last month.
    Line-by-line, the report shows the biggest increases coming
from construction services (jumping 3.6%) and processed goods
(rising 1.7%), with unprocessed goods actually posting a 2%
monthly drop, a silver lining which suggests manufacturing input
prices could start coming back to earth.  urn:newsml:reuters.com:*:nW1N2UP008
    Core PPI, which excludes volatile food, energy and trade
services, decelerated ever so slightly, rising 6.9% after
December's upwardly-revised 7% surge.
    The combination of stubborn supply disruptions and elevated
energy prices will prevent producer prices from reverting to
more normal patterns until later this year," writes Mahir
Rasheed, U.S. economist at Oxford Economics, adding that the
report's "reinforce the case for the FOMC to commence rate
liftoff at next month's policy meeting with a rate hike of at
least 25 (basis points)."
    The numbers do seem to suggest that at the conclusion of
next month's monetary policy meeting, Powell & Co will attack
the inflation monster with big guns, with the market now
expecting better-than-even odds of a 50-basis-point rate hike.
    The graphic below shows PPI along with other major
indicators, all of which continue to soar well above the Fed's
average annual 2% inflation target:
    
    
    Separately, factory activity in New York State increased a
wee bit this month after dipping its toes in contraction
territory in January.
    The New York Federal Reserve's Empire State manufacturing
index  USEMPM=ECI  came in at an underwhelming 3.10, well below
the 12.15 consensus.
    Still, the number was an improvement of last month's -0.7
reading, which marked the index's first dip into contraction
since June 2020.
    An Empire State number above zero signifies expanded
activity versus the previous month.
    But do two months make a trend?
    "It's not clear whether the weakness in January and February
marks the start of a sustained slowing in the sector or is just
a consequence of the Omicron wave, which resulted in tens of
millions of lost working days across the country, and perhaps
the severe weather in January," says Ian Shepherdson, chief
economist at Pantheon Macroeconomics.
     
    
    Wall Street is solidly green in morning trading as signs of
a possible easing Russia-Ukraine tensions  urn:newsml:reuters.com:*:nL8N2UQ28Q enticed
buyers back into the fold. 
    The rally is broad-based, with growth  .IGX  preferred over
value  .IVX  and chips  .SOX  having a better day than most.
    
    (Stephen Culp)
    *****
    
    S&P 500 FUTURES WEIGH RUSSIA RELIEF VS PPI POP (0900
EST/1400 GMT)
    U.S. equity index futures are sharply higher on Tuesday on
signs of a de-escalation in tensions between Russia and Ukraine
 urn:newsml:reuters.com:*:nL8N2UQ28Q, and after key inflation data came in above
estimates.  urn:newsml:reuters.com:*:nL1N2UP1TM  .N 
    Based on futures'  EScv1  action, the S&P 500 index  .SPX 
looks poised to jump more than 50 points in early trade, which
would put it back around its 200-day moving average (DMA), which
now resides around 4,455  urn:newsml:reuters.com:*:nL1N2UM0SM:
    
    
    In any event, with Tuesday's strong move in the futures,
tech  XLK.P  is a premarket winner, while energy  XLE.P  is on
the losing side.
    Financials  XLF.P  are also rallying. This, with the U.S.
10-Year Treasury yield  US10YT=RR  jumping back over 2%.
    Here is your premarket snapshot:
    
    
    (Terence Gabriel)
    *****  
    
    FOR TUESDAY'S LIVE MARKETS' POSTS PRIOR TO 0900 EST/1400 GMT
- CLICK HERE:  urn:newsml:reuters.com:*:nL8N2UQ4NY

    
    
    
    
    
    

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SPX02152022    https://tmsnrt.rs/3sGpaam
premarket02152022    https://tmsnrt.rs/3LBlf7h
Inflation    https://tmsnrt.rs/3JqZuFq
Empire State    https://tmsnrt.rs/3uO82Sz
BoFA EU    https://tmsnrt.rs/3sItTZ5
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 (Terence Gabriel is a Reuters market analyst. The views
expressed are his own)