Market concentration continues to narrow in on Big Tech. With no large catalysts, the market can maintain this pattern for some time, data suggests. Yahoo Finance reporter Jared Blikre stopped by to let investors know which stocks and sectors to watch out for.
The Drewry World Container Index, which tracks the price of shipping containers, shows that the cost of a 40-foot shipping container is up more than 250% compared to a year ago. Since October, escalating violence in the Red Sea has kept rates elevated as ships favor longer, less risky routes. FreightWaves founder and CEO Craig Fuller joined the show to give insight into increased shipping rates and what this means for global trade moving forward.
Citi Global Markets is out with new data measuring the impact of election years on different sectors. Yahoo Finance reporter Alexandra Canal joined the show to break down the top-performing sectors as voters head to polls, particularly when an incumbent is on the ballot.
We’re going to be breaking down the trends of today that will move stocks tomorrow.
There is a lot to keep track of.
So we’re focusing on what you need to know to get ahead of the curve.
Here are some of the trends.
We’re going to be diving into the S and P 500 trading in the flat line in today’s session.
This is investors wait for tomorrow’s big inflation print, but the feds fight to 2% may have an adversary elevated shipping rates.
Plus what goes up must come down.
Space junk is becoming a big problem for earth’s orbit.
We’re going to hear from one start up trying to solve that problem and regardless of who you’re voting for in November, you may have reason to celebrate this year election years with an incumbent in the running have historically been solid for the broader market.
We take a closer look in our chart of the day now, shipping rates just keep sailing higher shipping consultant Drey’s world container index rising 4% this week and is up more than 250% from a year ago.
Since October escalating violence in the Red Sea has kept rates elevated and ships favor longer, less risky routes.
And joining me now to talk about all this is Craig Fuller founder and CEO of freight waves.
I don’t know if you saw it was in Barons just talking about this very topic and talk about how shipping rates have soared.
That according to the report, Craig sending goods around the world by ship is at least five times as expensive as it was last year.
Yeah, Josh, this is a a big topic in supply chain circles is what’s happened in the ocean market really driven by two things.
One is import volumes are much higher than expected and continue uh to be incredibly robust.
It tells us that retailers are pretty confident about consumers in the second half as well as they are prepositioning products uh to prepare inventories, uh potential uh labor issues on the east coast, but also uh tariffs that may come with the new administration should, should we see a change in the election?
So that’s one issue.
And the second issue is there is a little bit of, of, of because we’ve had geopolitical disruptions, particularly with the Red Sea.
We’ve seen uh a risk premium put on it, almost a war risk premium that the ocean shipping container lines are passing on to their customers.
So Craig just to dive into that age specifically.
So what you’re suggesting is so because we have Houthis attacking these vessels, the vessels Craig have to actually go around Africa.
They can’t use that shorter red Sea route.
And that, that’s meaning increasing, obviously time and costs.
Yeah, that, that takes capacity o off the market because if you think about it, the capacity constraint is how long it takes to ship from point A to point B and if having to add time, it just takes a lot of available days of capacity off the market.
And that’s exactly what’s happening.
But also I think the shipping container lines, I mean, they have a massive amount of market share.
The top 10 container lines had 90% of the market share uh share in containers.
And his historically have been bad at managing price and, and passing those uh some of their costs on to consumers and managing uh their ability to manage price.
Uh since COVID, they’ve gotten their act together and have been able to really uh uh have an enormous amount of pricing power over their customers.
And we’re seeing that play out of the market right now.
Are there certain companies or certain sectors Craig that are going to be more effective than others, you know, is it car makers or apparel makers, for example.
Yeah, most of what you see in containers is a consumer and retail centric.
So 75% of the imports that come in containers are actually consumer goods uh headed for retail.
So these are products that you would see at a big box retailer or potentially online ecommerce that’s for the majority of products, containers.
The stuff that we typically think of as raw materials uh is not moving historically in containers.
A lot of the raw materials move in bulk and that’s like an entirely different market.
The good news about the fact that we’re talking container specific is we’re talking about one part of the economy which is consumer consumption uh and not really related to wholesale input costs.
So uh a lot of what you see in terms of the transportation cost and those retail goods, transportation is a relatively small piece of the actual cost of goods sold.
So consumers will not see an enormous impact in terms of, of inflation on what they actually buy or erosion of their pricing power uh versus what you would see uh if this was raw material, input, input goods which tend to show up in all sorts of manufactured items.
Craig if I asked you to take out your, your crystal ball here, I mean, where do you see those headed?
Are we gonna stabilize here or do we keep moving higher?
Yeah, I think this is, uh, this is the time of the year of the next two months where we’ll see peak activity, ocean shipping container, uh, volumes drop precipitously in October.
So, what you’re seeing right now is really a preclude for what you’ll see for the rest of the really rest of the shipping season.
Uh, And so, um it is going to say pretty high, but like I said, I think consumers are not going to experience the level of uh price increases or inflation that they experienced back in COVID.
These rates are much lower even at $7000 a container.
It’s much lower than it was during COVID when we were out to $20,000 a container.
So it won’t be as significant.
And the most important thing that drove a lot of the inflation uh was really the lack of products that we saw during COVID and that’s not happening right now.
There is no shortage of capacity to move transportation.
This is merely a pricing issue that uh retailers are having to contend with and their input cost.
But it’s gonna be marginally impactful to consumers.
How there are apparently a strike by, by dock workers.
Craig could be coming, tell us about that and potential impacts.
Well, this, this happens every couple of years somewhere in the North America where we see the threat of strikes.
A couple of years ago, it was the, uh west coast longshoremen.
Uh, that was a discussion.
They ended up not striking, they ended up having, uh, threatening to strike, but those issues were resolved.
Uh We saw, uh, Vancouver and British Columbia, uh, dock workers, uh did end up striking that, that did get resolved.
Uh We’re now seeing it play in the east coast.
So these things periodically, uh, pop up, we see shippers have become very accustomed to that.
These are companies that pay for shipping services have become very accustomed to these types of labor disruptions.
And so they will route products to different parts of the country.
So there is some good element of this is that this is the east coast and because it’s the east coast and not the west coast is that most of the items we expect for retail tend to come through the west coast and less so on the east coast.
Uh, so that, uh, shippers can plan accordingly and use other ports.
Uh, because they have the alternatives.
A west coast, uh, strikes would have been far more disruptive.
Little change as investors assess fresh economic data while also looking ahead to the latest reading on the Fed’s preferred inflation gauge.
Yahoo Finance’s Jared Blick joins us now for more on the trading day takeaways, Jared.
Thank you, Josh.
Uh A lot of ink has been spilled about some of the moves that have been made in the market, especially the A I trade.
But what do you do if you’ve missed the boat until now?
Well, we got a lot of stocks and sectors to watch here.
So let me just go through a couple of the recent things that are on my radar here and I’m going to start with the NASDAQ 100 this is where we see the action.
By the way, all these returns are year to date.
So Josh, I’m looking at Amazon here, the stock has really picked up over the last two days.
But what I’m interested in is this pattern that has formed over the last few years.
This is a five year chart we’ve just traced out is this giant consolidation, nice cup there, tiny little handle and we have broken into the upside as we can see there.
Now, I’m also taking a look at Tesla.
Interestingly, both of these stocks are the two biggest components of consumer discretionary.
What you notice with Tesla is, uh there’s a lot of consolidation in here and I’m interested in a pattern that’s happening in this year.
So I’m gonna, I’m gonna go down to a one year chart and specifically with candlesticks, you can kind of see what’s happening here.
This is an inverse head and shoulders that’s tracing out here with the potential neck line at about $200.
And this is a stock, you know, a lot of people pay attention to it.
Well, I’ve also been tracking biotech and this is something IBB is a ticker I’m using.
You can also take a look at XB.
I, let’s see if I can find IBB on here and uh well, we’ll see if we can uh see if we can chart this, not seeing IBB.
Um Unfortunately, however, I can, I can assure you that it is there.
I’ll put some lines on and you can see here’s another giant cup.
I’ve heard some folks say about this sector, by the way, a little bit like health care they kind of see it as a way.
They, they see the kind of offensive and defensive names in there.
So I like XL C. Uh but I’m really watching Amazon and Tesla.
Now.
Take away number two, take away number two, I’m on pins and needles here myself.
We got market concentration.
Yes, I was writing about this in the uh brief overnight published this morning and I was looking at this chart from Bank of America.
This goes all the way back to 1990.
What we are looking at here is three months, correlation of all the stocks within the S and P 500.
So these spikes here, I’m gonna show you this happened during the pandemic.
Sell off when correlations rise steeply like that because everything is going down.
So you don’t want to see that if you’re a stock B when you get down here, what you’re thinking is, well, maybe we’re gonna go back up here.
But the Point Bank of America is making, we’ve been down here several times and guess what?
Look at the early nineties to mid nineties.
You had years and years just staying at that level.
So the concentration that we’re, and this is what we’re measuring market concentration.
Uh This can last for a long time.
In other words, the rally is narrow, but a rally can stay narrow for a while if there’s no big catalyst, if everything doesn’t fall off together, you can just kind of persist this way for years.
So, you know, when the vic spikes, that’s the fear gauge.
And let me show you, this is uh this purple line is the average of the vics uh throughout the year, going back all the way to 1990.
That’s when calculations began.
And the Cyan line here is what has happened so far this year.
And so you can see it’s not a perfect correlation here, but it kind of, it kind of fits rather well.
And if you’re taking a look at the next potential spike, that’s when we would expect the next downturn that would come at the end of July.
So, you know, maybe something to keep and, but you’ll notice until then pretty low.
So maybe we get a rally.
How does this, how does this seasonality kind of ma map with the other seasonality trends?
You’ve been bringing us Jared?
I showed this chart uh last week and this is the 1st 10 in the last 10 days of every month.
And what we’re seeing here is the 1st 10 days of July by far, the best performance of the year.
But if you’re putting this all together the vic seasonality, plus this probably got some tail winds until at least the end of July.
And if you’re really paying attention here, the big spike up in the Vicks that tends to happen in September, October.
On the other side, we’re gonna take a look at one thing that’s become a major problem, space debris to discuss when asking for trend returns reaching sustainability beyond earth and into space.
There are thousands of satellites currently overhead with more than 9000 metric tons of space to bring in earth’s orbit as thousands of more satellites are on track to launch to the end of this decade where taking a closer look at how to clean up this space junk here with more is Luke Gay Clear Space founder and Ceo Luke.
It is good to see you.
So let, let’s start when we talk about space three space junk.
So I think that the space debris are typically caused by either rocket bodies or satellites that are uh uh that are at the end of their life or that failed in orbits.
And that essentially generates uh that remain in orbit because of their, their velocity, right to keep something in orbit has to go at 28,000 kilometers per hour in, in low earth orbit.
And uh and those objects remain there and become essentially a projectile uh over time.
What can happen is that those, those objects go through fragmentation events that are caused either by a collision or an explosion on board.
Uh In general, it can generate very large fields of debris which all continue orbiting at the same speed.
So this is a major issue and it is actually rapidly increasing in in lower orbit, in particular.
And Luke who’s creating a lot of this space debris, I mean, is it the US China Russia who, who’s responsible for a lot of this, a little, a little of everyone, right?
Uh A lot of debris have been created by anti satellite missile tests in the past.
Um Today, there’s a lot of rocket bodies that are from Russia.
Uh There’s uh rocket bodies from China, there’s, there’s obviously American objects as well.
There’s some European one, there’s a long list of objects that are up there.
They’re typically cataloged.
So we know which, who owns which in general and then a lot of objects come from collision, in particular in, in 2009, there was this collision between the cosmos and iridium satellite.
So Cosmos was a Russian S satellite, iridium, uh an operational American communication satellite that collided and generated a large field of debris.
But uh but it’s a big mix up there, which is, which belongs to a little of every, of every space faring nation.
And so Luke, so the purpose of your company is get there, clean it up, clean out this space debris.
How do you do that?
So what, what we, what we work on is developing if you want a service or, or a tow truck for orbits.
Um We, we developing this, the intention is to go pick up larger pieces of debris or larger objects in space and then, and then help them support them for their reentry, getting back under control and then make sure that they’re reentering to atmosphere.
Once you’re in to do that in orbit, you’re actually able to provide multiple other services.
Essentially.
What happens right now is that the space debris problem is if you want a side effect of an industry that doesn’t have any servicing capability instead of like if you would be operating the road transportation industry for 60 years without tow truck, you would have broken cars everywhere and that’s more or less what we have in space.
If you think about it, the the road transportation, we are servicing and maintenance intervention integrated into it to the aviation industry or the shipping industry.
This is not the case with the space industry, which could not have that kind of services in orbit over the past years today, the technologies make it possible and that’s what we’re building a tow truck for space.
So in, in the first phases of our development, it is essentially an institutional mission that we’re leading today.
We have a mission with the European Space Agency for about 100 million.
There’s another mission we work on with UK Space Agency.
There’s a third mission where we work on the Life extension, the capacity to capture satellite extended slides and most of the initial phase of development and non recurring engineering costs are essentially driven by institutional mission.
On the long term.
We think that it is essentially the beneficiary of the space infrastructure that will uh pay for the for the services that are needed.
What happens today is that launching states are liable for the objects in orbit as long as they remain there and will require probably as things move on more and more ex expand the requirements for satellite operators to make sure that they leave us a safe and sustainable environment behind them.
And this is already we can already see this trend.
The US FCC moved from 25 years authorized for satellites in orbit to five years of authorized time in orbit after the life of a satellite, operational life of the satellite.
So those changes are probably going to generalize across the globe, all the different launching states and requirements for satellite operators or agencies alike.
So just so I’m understanding because that’s interesting.
So are you saying there’s sort of efforts now um to stop the problem of space junk spa space debris before it even becomes a problem?
Me, meaning you create spacecraft, that’s sort of designed a program to kind of de orbit on their own once once the mission is over.
So most of the satellites today are programmed to the orbit themselves on their own at the end of their mission.
Now, there’s two problems happening is that in general satellite is a certain percentage of failure in orbit.
This means you cannot guarantee 100% of the satellite is going to be able to to the orbit at the end of their mission, the space environment is particularly harsh which makes it even more difficult.
But beyond that, there’s other cases where, for example, if you’ve got a really large satellite which is let’s say 23 or four tons, a lot of, a lot of the propellant of the satellite, it will be used just for the de orbiting because you cannot just drop it wherever over the surface of the earth, you need to deorbit it over the South Pacific where there’s no human life, right.
And this requires a huge amount of propellant.
In those kind of those cases of South actually could use this their, their propellant to extend the lives of the satellite for several investment cycle and then use the servicing to de orbit them.
So there’s different cases, use cases for the kind of services that we’re building.
Um but in principle, it’s either removing satellite that cannot get removed by themselves or satellites where actually the the economics of assisted removal makes a lot of sense.
Luke It, it is such a fascinating topic.
Thank you so much for taking the time to join the show and walk us through it.
Ask you for a trend on the other side, city global markets out with a new chart measuring the impact of election years on different sectors.
Yahoo Finance’s Alexander Canal joins me now with a closer look.
So ahead of tonight’s first debate between President Joe Biden and former president, Donald Trump.
I thought it would be appropriate to take a look back at how some of the major sectors and indexes have performed during an election year.
And as you can see a bit of volatility across the board demonstrated over here by the V with modest gains in the S and P and the tech sectors.
However, once you have an election year with an incumbent president in the running, we see that volatility goes down and the average returns of those sectors along with the S and P 500 go up.
Now city argues that this is driven by investors pricing in the potential for continuity in policy.
So bottom line there, the return of an incumbent president often reduces the possibility of a po the surprise in any form in the information technology sector.
That’s typically the best performer during those years and by a pretty substantial margin, I would say as well the tech sector being right there.
But now I want to take a look at what we’re seeing here to date in 2024.
We’re just far and above that did the averages that we’ve seen in the past with the exception of course, being real estate all the way down there is, the housing market remains in recovery mode at this high interest rate and environment.
But I will say that those high rates, it’s not stopped the rest of this market.
We see tech, we see communication services significantly ahead while the V is down so far.
This year, the S and P has climbed about 15% year to date.
Typically during an election year, we see gains of just over 11% there.
So clearly what we’re seeing so far in the market shows that there is potentially more room to run here.
That is a wrap on today’s asking for a trend be sure to come back tomorrow at 430 pm Eastern for all the latest market, moving stories affecting your wallet.