U.S. IPO Market: Nipped in the bud
S&P 500, Nasdaq dip, DJI gains
Jan Case Shiller MM -0.4% vs -0.5% est
Energy leads S&P 500 sector gainers; comm svcs weakest group
Euro STOXX 600 index off ~0.2%
Dollar, bitcoin dip; gold, crude up slightly
U.S. 10-Year Treasury yield edges up to ~3.566%
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U.S. IPO MARKET: NIPPED IN THE BUD (1015 EDT/1415 GMT)
Following the slowest year for new issuance in decades, the first quarter of 2023 continued the trend with 23 IPOs raising $2.2 billion, according to Renaissance Capital.
"Deal flow started at a decent pace but failed to pick back up after the February lull, as hawkish signals from the Fed, renewed recession fears, and turmoil within the banking industry caused a spike in volatility," said Renaissance, a provider of pre-IPO institutional research and IPO ETFs, in its quarterly review
The mix of issuers this quarter has been fairly diverse, although the three largest offerings were all from energy-related companies, Renaissance pointed out.
Eight IPOs raised at least $100 million, led by solar equipment maker Nextracker Inc's NXT.O $638 million deal. And though U.S. IPOs in aggregate have averaged a flat return from issue price, the $100 million-plus deals delivered a "solid 11% gain," per Renaissance.
Coming off its worst year since inception (down 57%), Renaissance noted that its IPO Index rallied 25% through early February, but seesawed from there. Still, its IPO index is on track to finish the quarter up about 11% and is well outperforming the S&P 500 .SPX.
Should market conditions become more accommodative to new issues, Renaissance indicated the IPO pipeline currently has 147 companies on file seeking to raise a total of $14 billion. That includes 105 in the "active pipeline" which have filed or updated their paperwork with the SEC within the last 90 days.
Stable, profitable businesses remain the most likely IPO candidates in the near term, a common theme among the largest names in the queue, Renaissance said.
The firm highlighted Johnson & Johnson's JNJ.N spinoff of its consumer health business Kenvue Inc KVUE.N, which could raise $5 billion, car sharing marketplace Turo Inc TURO.N and Cummins Inc's CMI.N filtration unit Atmus Filtration Technologies Inc among notable offerings in the pipeline.
(Lance Tupper, Chuck Mikolajczak)
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"BUY EUROPE" TRADE: DOWN, BUT NOT OUT(0949 EDT/1349 GMT)
When it became clear in 2022 that Europe had dodged an economic recession - at one point the consensus - big money from overseas began flowing into the region's equities, driving a rare outperformance versus the U.S..
Propelled by a big valuation discount, the "Buy Europe" trade climbed to fresh highs in early 2023, but the unpredictable crisis that slammed the banking system on both sides of the Atlantic this month has cast doubts over its upside potential.
Recession warnings popped up again, Fed rate hike bets were reversed and markets suddenly re-discovered their appetite for U.S. tech - the key beneficiary of the secular bull run on Wall Street that stumbled when the Fed stated its hiking cycle.
Does this mean it's game over for Europe's outperformance versus the U.S.? Probably not, at least, according to some investors who spoke to Reuters during the wild days of the latest bank confidence crisis.
"The perception of a shift to cuts by central banks coupled with QE and a quick return to the liquidity-driven environment of the last economic cycle has been driving long-duration stocks like tech. That seems unlikely to last," said Jeffrey Kleintop, Chief Global Investment Strategist at Charles Schwab.
"Inflation is likely to remain sticky, and as chairman Powell pointed out...: bumpy. The bumps in inflation may change investors perception of how quickly and aggressively central banks cut rates this year. As that gets reassessed by the market, international leadership may continue," he added.
But what about if more banks go belly up?
Kleintop says European banks have high liquidity coverage, deposits have grown until this year and have cash parked with the ECB. And concludes: "Europe dodged an energy crisis this winter and it may dodge a financial one this spring".
Schwab's is not an isolated view.
Luca Finà, head of equity at Generali Insurance Asset Management, says the recent relative pullback is consistent with moves seen over the past year and sees potential for Europe to outperform in the coming weeks and months.
"On valuation ground, China exposure and the macro implications of this banking crisis, I think there is still a gap to be closed in favor of Europe vs U.S.," he said.
Others are morecautious.
Michelle Cluver, Portfolio Strategist at Global X, says Europe's outperformance depended fully on risk sentiment: "I believe the crisis in confidence in the banking system could result in larger shock factors that may shift the focus away from Europe towards quality and areas perceived as safer".
The S&P 500 .SPX is flat so far this month, the Nasdaq 100 .NDX has gained over 5%, while the STOXX Europe 600 .STOXX, which is relatively low in tech exposure, is down around 4%.
(Danilo Masoni)
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NASDAQ COMPOSITE: READY TO BLOOM? (0900 EDT/1300 GMT)
It's been a choppy couple of months for the Nasdaq Composite .IXIC.
However, one beaten-down measure of the Nasdaq's internal strength is suddenly springing to life, suggesting the Composite may be on the verge of a surprise advance:
On Feb. 2, the IXIC rallied to a more than five-month high. From there, the index fell as much as 10% into its mid-March trough, before recovering somewhat. It ended Monday off just 3.5% from that early-February high.
Meanwhile, the Nasdaq new high/new low (NH/NL) index .AD.O topped on Feb. 3 at 79.2%. Last Thursday it had plunged to 13.9%, putting it at a five-month low, while at the same time potentially suggesting the Composite had become washed out internally.
Since the Nasdaq's bear market began in late 2021, this measure has seen numerous troughs between 3.8% and 18%, from which the Composite has been able to launch rally-phases.
The NH/NL index has now turned up and ended Monday at 17%. Bulls will now want to see the 13.9% low hold, and the measure reclaim its descending 10-day moving average (DMA), which ended Monday at 18.4%.
The Nasdaq NH/NL index has ended below its 10-DMA for 32-straight trading days, which is its longest such streak since a 33-trading day period from mid-August to early-October 2020.
(Terence Gabriel)
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FOR TUESDAY'S LIVE MARKETS POSTS PRIOR TO 0900 EDT/1300 GMT - CLICK HERE
IXIC03282023https://tmsnrt.rs/40IayGY
STOXX vs SPX500https://tmsnrt.rs/3lRB1Tx
IPO performance vs S&P 500https://tmsnrt.rs/3KeDQYc
(Terence Gabriel and Lance Tupper are Reuters market analysts. The views expressed are their own)
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