Traders Market Weekly: Half Year Rebalancing High Wire Act

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    U.K.’s May CPI 0.7% m/m (expected 0.6%; last 2.5%); 9.1% yr/yr, as expected (last 9.0%). May Core CPI 0.5% m/m (expected 0.6%; last 0.7%); 5.9% yr/yr (expected 6.0%; last 6.2%). May Input PPI 2.1% m/m (expected 1.9%; last 2.7%) and Output PPI 1.6% m/m (expected 1.5%; last 2.8%)
    The U.K.’s CPI was up 9.1% yr/yr in May, representing the sharpest pace of increase in 40 years.
    British Deputy Prime Minister Raab said that giving in to demands of striking railroad workers would add to inflation.
    France’s central bank lowered its growth forecast for France to 2.3% from 3.4% while increasing the inflation forecast to 5.6% from 3.7%.
    Italy is planning to spend another EUR3 bln to offset the impact of higher energy bills.


    The S&P 500 futures are 1.6% below fair value; the Nasdaq 100 futures are 2.0% below fair value; and the DJIA futures are 1.3% below fair value

    Key factors driving the futures market:

    Inability to follow through on yesterday’s gains undercuts sentiment
    Lingering concerns about global growth prospects in face of aggressive rate hikes by central banks
    Cautious disposition in front of Fed Chair Powell’s Semiannual Monetary Policy Report to Senate Banking Committee at 9:30 a.m. ET
    President Biden calls on Congress to suspend national gas tax
    UK inflation hits 40-year high of 9.1% year-over-year
    IEA warning Europe to get ready for the shutdown of Russian gas exports
    Geopolitical tension thickening between Russia and NATO following move by Lithuania to block export of some Russian goods to Kaliningrad
    MBA mortgage applications index up 4.2% week-over-week. Purchase applications, led by ARMs, up 8% week-over-week (but still down 10% year-over-year)
    Winnebago (WGO) and La-Z-Boy (LZB) jump following better-than-expected earnings results


    Brokerage research calls of note:



    U.S. Treasuries are on track for a firmly higher start.

    Treasury futures began rising shortly after yesterday’s cash close, continuing their advance into the night. The market found some resistance at the start of the European session, but it reached fresh highs in recent trade, rising alongside other sovereign debt as concerns about growth return to the forefront.

    France’s central bank lowered this year’s growth forecast for France to 2.3% from 3.4% while increasing the inflation forecast to 5.6% from 3.7%.
    The latest inflation report from the U.K. showed that CPI was up 9.1% yr/yr in May, representing the sharpest rate of increase in 40 years.

    The U.S. Treasury will hold a $14 bln 20-yr bond reopening at 13:00 ET
    Fed Chairman Powell will testify before Congress today and tomorrow. Today’s appearance before the Senate Banking Committee will begin at 9:30 ET.

    Yield Check:
    2-yr: -10 bps to 3.12%
    3-yr: -10 bps to 3.26%
    5-yr: -10 bps to 3.28%
    10-yr: -10 bps to 3.21%
    30-yr: -9 bps to 3.30%


    Dow 30,530.25 641.47 2.15%
    S&P 500 3,764.79 89.95 2.45%
    Nasdaq 11,069.30 270.95 2.51%
    GlobalDow 3,526.72 -26.02 -0.73%
    Gold 1,846.20 7.40 0.40%
    Oil 102.33 -7.19 -6.57%


    Good morning & thanking Truman for a ton of great updates above
    Equities will struggle even after a great day of buying yesterday
    as cautious DAY TRADERS can make good $$$ in volatile times
    PPPPPLLLLUUUUUNNNGGGGGEEEE to start today with DOW futures @ -400


    European indices recover of lows but still close lower on the day

    German DAX, -1.11%
    France’s CAC, -0.81%
    UK’s FTSE 100, -0.88%
    Spain’s Ibex, -1.1%
    Italy’s FTSE MIB, -1.35%

    Looking at the benchmark 10 yields in Europe, declines range from -14.3 basis points to -16.4 basis points.

    Germany, 1.627%, -14.4 basis points
    France, 2.164%, -15.9 basis points
    UK, 2.487%, -16.7 basis points
    Spain, 2.694%, -17 basis points
    Italy, 3.642%, -17.5 basis points

    Re: fragmentation, the spread between the Italian 10 year and the German 10 year has moved down from 254 basis points to 202 basis points (since the peak on June 14).

    The pressure is off a bit, but the yield spread is still up from about 136 basis points at the end of 2021.


    Summer Grilling season:

    They are ‘grilling the shorts in Traeger and Weber today AH via #MoneyNeverSleeps
    $WEBR 8.62 ▲ 0.80 (10.23%) 10.60▲ 1.97 (22.83%) After Hours
    $COOK 4.23 ▲ 0.16 (3.93%) 4.41▲ 0.18 (4.26%)

    After Hours Update


    We are saved:

    US Admin official says G7 will address energy and food issues

    Via Reuters remarks from a senior U.S. administration official

    G7 meeting will build on work of G7 leaders to increase pressure on Russia
    G7 will address impact of Putin’s “war on prices” on global energy security and food security
    G7 will formally launch global infrastructure partnership to offer high-road, transparent alternatives for low- and middle-income countries
    Biden to have bilateral meetings with German chancellor Scholz, president Sanchez of Spain and king of Spain
    Leaders of NATO countries will endorse new strategic concept
    NATO leaders will announce new force posture commitments at next week’s NATO summit
    G7 and NATO leaders will have a chance to hear from Ukrainian President Zelenskiy at the summit
    NATO summit’s inclusion of leaders from Australia, New Zealand, South Korea and Japan shows world is not taking eye off China
    Zelenskiy will address Ukraine’s battle plan and security assistance needed to support it
    US. Remains confident that turkey’s concerns will be addressed in relation to Sweden and Finland’s NATO bids
    Global economy will be key point of discussion at G7 meeting
    G7 expected to focus more on China’s coercive economic practices
    China’s practices have become even more aggressive and more prominent in global economy


    MUFG see USD/JPY as high as 138.50 ahead. Says the main risk is Bank of Japan intervention

    MUFG Bank like USD/JPY higher, see a 130 to 138.50 range in the weeks ahead.

    Risk-off and general tighter financial conditions remain a key catalyst for further US dollar strength.

    The historic norm of USD/JPY falling in those market conditions will only return if risk-off starts to influence US yields lower. That has not been the case so far this year and hence the risk correlation with JPY is less robust. We do not expect that to change over the short-term and hence we hold a bullish bias on USD/JPY direction over the short-term. Elevated US rates and JPY valuation should limit the scale of JPY depreciation from here.

    MUFG on Japanese authorities:

    The statement this month from the BoJ/MoF/FSA expressing concern over JPY depreciation may act to slow or curtail JPY depreciation at higher levels closer to 140.00. In addition, continued concerns over inflation and limited scope for US rates to correct lower should provide support for USD/JPY, especially if rates volatility eases and Japan investor buying of UST bonds starts to pick up again

    And, the risk to a higher USD/JPY is …. intervention:

    The main downside risk for USD/JPY in the month ahead would be if the scale of JPY weakness finally triggers a joint policy response from the government and BoJ. But the scale of JGB buying by the BoJ last week suggests action to limit yen weakness is unlikely over the short-term. A sharper correction in US rates lower is another key downside risk and while we expect that to materialize later, it is premature to expect that over the short-term with the primary focus of the Fed still on tackling upside inflation risks.


    Dow 30483.13 -47.12 (-0.15%)
    Nasdaq 11053.07 -16.22 (-0.15%)
    SP 500 3759.89 -4.90 (-0.13%)

    NYSE Adv 1638 Dec 1634 Vol 1.2 bln
    Nasdaq Adv 2297 Dec 2289 Vol 5.1 bln

    Strong: Health Care, Utilities, Communication Services, Real Estate
    Weak: Energy, Materials, Industrial, Information Technology, Financials

    A fairly steady performance from the mega-cap stocks helped hold the index line, which was also supported by relative strength in the real estate (+1.6%), health care (+1.4%), and utilities (+1.0%) sectors. That helped offset relative weakness in the information technology (-0.4%) sector and the more cyclically-oriented energy (-4.2%), materials (-1.3%), and industrials (-0.5%) sectors.

    Energy was a major drag throughout the day, giving in to global growth concerns that knocked WTI crude oil futures down 3.2% to $106.07/bbl. There was no pull from the demand-supportive news that President Biden has called on Congress to suspend the national tax on gas and diesel for three months.

    copper futures fell 2.1% to $3.95/lb on the growth concerns, which also manifested themselves in the Treasury market. The 2-yr note yield dropped 17 basis points to 3.05% and the 10-yr note yield dropped 15 basis points to 3.16%.


    Dow Jones Industrial Average: -16.2% YTD
    S&P 500: -21.1% YTD
    S&P 400: -21.3% YTD
    Russell 2000: -24.8% YTD
    Nasdaq Composite: -29.4% YTD


    U.S. Treasuries ended Wednesday with solid gains across the curve, reclaiming their losses from Tuesday.

    Yield Check:

    2-yr: -17 bps to 3.05%
    3-yr: -16 bps to 3.20%
    5-yr: -15 bps to 3.23%
    10-yr: -15 bps to 3.16%
    30-yr: -15 bps to 3.24%


    WTI crude: -3.2% to $106.07/bbl
    Gold: UNCH at $1838.40/ozt
    Copper: -2.1% to $3.95/lb
    EUR/USD: +0.3% to 1.0568
    GBP/USD: -0.1% to 1.2266
    USD/CNH: +0.2% to 6.7075
    USD/JPY: -0.3% to 136.22

    The Day Ahead:
    8:30 ET: Weekly Initial Claims ( consensus 230,000; prior 229,000), Continuing Claims (prior 1.312 mln), and Q1 Current Account Balance ( consensus -$279.00 bln; prior -$217.90 bln)
    10:30 ET: Weekly natural gas inventories (prior +92 bcf)
    11:00 ET: Weekly crude oil inventories (prior +1.96 mln)


    Albertsons (ACI): five largest shareholders agree to extend lock-up to Sep 10 from June 30 as co continues its previously announced review of strategic alternatives… ACI up 1.1%
    H.B. Fuller (FUL) beats by $0.04, beats on revs; reaffirms FY22 EPS guidance… FUL down 0.4%
    KB Home (KBH) beats by $0.29, beats on revs; homes delivered essentially flat; tightens FY22 housing revenue guidance, raises average selling price guidance… KBH up 3.5%
    Steelcase (SCS) beats by $0.13, beats on revs; guides AugQ EPS below consensus, revs above consensus… SCS up 5.2%
    Tesla (TSLA) CEO Musk comments on the company’s two factories in TX and Berlin “losing billions of dollars,” according to Automotive News… TSLA down 0.3%

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