1 stock to buy, 1 to dump when markets open: Alibaba, Citigroup

Despite the continuation of the Ukraine/Russia crisis, Wall Street ended modestly higher on Friday as strong US data releases underlined a tighter Fed policy in the coming months.

S&P 500 daily chart

The upbeat report on US government bond yields caused a portion of the yield curve to be closely watched for the first time since 2019. Treasury yields rose to 2.46% on Friday, outpacing yields. US Treasury bonds, which rose to around 2.39%. Inversion now raises the specter of a possible recession to come, as such inversions have historically been known to precede recessions; however, this is.

US Bond Yield Chart

Next week is expected to be another busy one with all eyes on the Fed’s latest policy meeting, due out on Wednesday. Earnings from Constellation Brands (NYSE:), Tilray (NASDAQ:) and Levi Strauss & Co (NYSE:) are also on the agenda.

Regardless of which direction the market takes, below we highlight one stock that is likely to be in demand and one that could see a bigger drop.

Remember though, our deadline is alone for next week.

Stock to buy: Alibaba

Alibaba Group Holdings (NYSE:), whose shares have made a modest recovery since falling to their lowest level since 2016 last month, could see more buying activity in the coming days amid fears that the technology company China’s most valuable be removed from the list. US stock market

China’s securities watchdog on Saturday revised a key confidentiality rule involving overseas listings to meet demands from US regulators, marking Beijing’s latest attempt to resolve a long-running audit dispute with Washington. .

The new proposal could open the door to on-site inspections by US regulators, who require full access to audit working papers from such companies, which are stored in China. The previous draft stated that on-site inspections of Chinese companies listed abroad would be carried out mainly by Chinese regulators.

The changes will facilitate “cross-border regulatory cooperation, including joint inspections, which will help safeguard the interests of global investors,” the China Securities Regulatory Commission (CSRC) said in a statement on its website.

The CSRC said that Chinese and US regulators had recently held several rounds of meetings and that both sides were willing to resolve their audit dispute so that Chinese companies can continue to be listed in New York.

BABA daily chart

BABA, which is up about 50% since hitting a six-year low of $73.28 on March 15, ended the Friday session at $110.20. At current levels, the Hangzhou, China-based tech giant has a market capitalization of $313.3 billion.

Despite the recent rebound, Alibaba shares are still down 7% year-to-date and are about 65% below their record high of $319.32 reached in October 2020.

Alibaba shares collapsed for most of 2021, losing more than half their value amid Beijing’s antitrust crackdown aimed at strengthening regulations for companies with consumer-facing platforms and improving data privacy.

Stocks to dump: Citigroup

Citigroup (NYSE:) saw its shares close at their weakest level since November 2020 on Friday. C could break to new lows in the coming week as investors are monitoring distressing moves in the US Treasury market after a key part of the yield curve inverted.

Bank stocks have historically underperformed in times of inverted yield curves, as they generally benefit by borrowing money short-term and lending it long-term. As such, an inverted yield curve, which, as mentioned above, is generally considered a reliable indicator of a recession, is likely to put pressure on banks’ margins and profitability.

Investors are also bracing for a disappointing earnings report from the US’s fourth largest banking institution, to be released on Thursday, April 14, before the opening bell. Consensus calls for first-quarter earnings of $1.66 per share, falling 54% from EPS of $3.62 in the prior year period amid rising operating expenses. Revenue expectations are equally worrying, with sales growth forecast to fall around 5% to $18.4 billion due to a sharp slowdown in its consumer banking business.

Daily Chart C

C fell to a new 17-month low of $51.76 on Friday, before closing at $52.33, earning the New York City-based megabank a market capitalization of $103.2k. millions.

Citigroup shares have underperformed the other big banks this year, losing 13.3% in 2022. By comparison, the leading financial sector ETF, Financial Select Sector SPDR® Fund (NYSE:), is down only 2.1% so far this year. The S&P 500, meanwhile, fell 4.6% in the same time period.

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