Need to Know: The value trade that investors could be about to miss out on

A thrashing whale has hit this market this morning.

Pretty much everything is getting crushed against the yen after the Bank of Japan lifted its giant tail fin out of the water and brought it crashing back down. When a whale does it, that move can be heard for several hundred meters away.

Same thing — more or less — goes for the yen, after Bank of Japan Governor Haruhiko Kuroda told BBC Radio 4 that there is no need for or possibility of helicopter money. Our Chart of the Day provides a closer look at the damage inflicted on dollar/yen so far.

Stock futures are stepping back just a little, and it remains to be seen how investors will cope with the stimulus rug potentially being pulled from Japan. The Dow and S&P 500 closed at fresh record highs on Wednesday. Whether markets can stay on track for another win may depend on today’s crop of earnings, and there are plenty of those. Around 14% of S&P 500 companies have reported results, and 64% of those have beaten views.

Surprises in this market are the name of the game — as are the blink-and-you-miss-it kind of stuff that burns investors at times. This group of tourists on a whale-watching trip in Australia, who looked one way as Mother Nature paid a huge visit, could probably relate:

Our call of the day is offering up what could be the next big move for markets. Get ready to throw one popular group of stocks overboard in favor of a bunch that haven’t been as popular.

Key market gauges

The open was looking quiet until Kuroda got busy chatting, and Dow US:YMM6  and S&P 500 ESU6, -0.08%  futures are in the red now. In Asia ADOW, +0.44% Hong Kong stocks neared bull-market territory, and the Nikkei closed higher before Japan’s central banker started speaking. The yen USDJPY, -0.63%  is lording it over everything. (See Chart of the Day below.)

European stocks SXXP, -0.25%  are in the red, with airlines falling after warnings linked to terror attacks. Oil prices CLQ6, +0.45%  are still getting a boost from Wednesday’s oil supply data. Gold GCQ6, +0.10%  is tipping south.

The chart

Here’s a closer look at dollar/yen this morning after Kuroda’s comments.

The call

It’s time to go long on value stocks, say Khuram Chaudhry, Dubravko Lakos-Bujas and team at J.P. Morgan.

“Our regional (USA, Europe & Asia Pac/EM) Quant Macro Indices — QMI are all pointing to the ‘recovery’ phase of the cycle. Globally and across the regions, our strongest style conviction during this phase is to be overweight value stocks,” they say in a note to clients.

On the other hand, time’s up for momentum and low-volatility stocks, which they say are “overall unattractive based on lofty valuations, extreme investor positioning and less negative macro signals.” Particularly pricey are stocks in the U.S. and Europe. Stateside, Amazon AMZN, +0.78%   and Facebook FB, +1.09%  get the thumbs down.

Value stocks are cheap by comparison, both on a historical basis, and relative to momentum and volatility, they say.

J.P. Morgan

Some of the stocks on that cheap value list are Valero Energy VLO, -0.14% Xerox XRX, +2.51% United Continental UAL, +0.94% General Motors GM, +0.77% (reporting Thursday) and Hewlett-Packard HPQ, +0.78%

As always, there are detractors to any view, and Wednesday’s column talked about how biotech stocks, one player in the growth-stock arena, have never been cheaper.

The economy

Weekly jobless claims, a Philly Fed survey and the Chicago Fed national index are all due at 8:30 a.m. Eastern Time. Existing home sales and leading indicators are on tap for 10 a.m. Eastern.

The European Central Bank holds its first meeting since the Brexit vote, though it may be too soon to expect anything more than hints of easing. Read: What to expect from the ECB today


Dunkin’ Brands DNKN, +1.14% GM GM, +0.77% (See preview), Southwest Airlines LUV, -1.62% Travelers TRV, -0.03% Blackstone BX, +2.13% Biogen BIIB, +1.00% Domino’s Pizza DPZ, +0.99%  and Dish DISH, -0.23%  all the list ahead of the bell this morning.

Intel INTC, +1.54%  shares fell late Wednesday after the chipmaker reported slower-than-expected growth in sales, amid troubles with the cloud.

EBay EBAY, +1.85%  is up 6% after slightly better-than-expected results, in which the online auctioneer got a little help from Brexit-driven currency swings.

The buzz

And what was the Master Plan that Tesla TSLA, +1.38%  CEO Elon Musk finally came up with? He sees a future with heavy electric trucks and buses, and autonomous electric car-sharing networks, all powered by solar energy. More on that here.

You can’t buy happiness, but you can get Joy for about $3 billion. That is, mining-equipment maker Joy Global JOY, +1.07%  , which got a $2.89 billion buyout offer from Japanese construction machinery maker Komatsu 6301, +2.26% Joy is up 20% in premarket.

The Feds have given their blessing to Anheuser-Busch InBev’s BUD, +1.31%  $108 billion acquisition of rival SABMiller SAB, +0.15%  .

SoftBank 9984, -0.33%  it expects ARM Holdings, the U.K.-based chip designer it plans to buy, to produce 1 trillion chips a year.

So freaked out is the Japanese government ahead of Nintendo’s 7974, +0.85%  expected launch of Pokémon Go on that country’s shores, that it has released safety guidelines. Meanwhile, Apple AAPL, +0.09%  stands to make billions from the game, says analyst.

The quote

“I was just sitting in the back like, ‘I gotta be dreaming. This ain’t even real. Is somebody going to wake me up and say, ‘You overslept.’” — Missy Elliot gets star-struck after carpooling with first lady Michelle Obama and “The Late Late Show” host James Corden.

Random reads

Things got crazy again at the Republican National Convention last night. Ted Cruz got booed off the stage after failing to endorse Donald Trump.

But everyone needs to calm down over that Laura Ingraham raised-arm salute.

The man on the street has been asked, and potential VP Mike Pence has a face that’s hard to place.

Syrian graphic designer is using Pokémon Go to show how war has impacted his people.

One of the world’s most popular torrent-sharing websites is down after its owner was arrested in Poland.

Never been to North Korea? Check out this rare, 360 degree tour through Pyongyang.

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. Be sure to check the Need to Know item. The emailed version will be sent out at about 7:30 a.m. Eastern

More from MarketWatch

Leave a Reply

Your email address will not be published. Required fields are marked *