Selling continued after CPI came in hotter than forecast, this time any recovery rally was quickly thrown back by the Bears. The S&P 500 fell 1.7%, Nasdaq Composite fell 3.2%, Russell 2000 fell 2.5% and Dow Jones Industrial Average declined 1.0%. Apple (AAPL 146.50, -8.01, -5.2%) and Tesla (TSLA 734.00, -66.04, -8.3%) led the destruction. DDD holdings were crushed again with Coinbase Global (COIN 53.72, -19.27, -26.4%) and Unity Software (U 30.30, -17.83, -37.1%) the latest to be pillaged.
Natural Gas HH maintained its rally and bounced over $105 from under $100 WTI even after a large Crude build. Crude oil climbed back above its 50-day moving average (105.23) while the S&P 500 to its lowest level since early April 2021.
Rising interest rates, Russia’s war in Ukraine, and China’s COVID-related lockdowns all remain. DDD holdings Upstart and Palantir destruction continued, both proud members of the Dribbler Dirty Dozen and symbolic of the overvalued tech market.
We look at the indices, $AAPL $AAP $DIS $BMBL $BROS $UPST $PLTR $COIN $GRWG $TSLA Gold, Copper, BTC, ETH, Natgas and oil in the podcast. We talk through to today’s action and where to now …
We talk through to today’s action and where to now …
Enjoy live commentary from Our Trading Room at YouTube as the day wraps up – feel free to like and share
In today’s post market wrap live from the trading room traders discuss the patterns through the options and futures markets that have played out perfectly from last week to today. We discuss trading psychology, risk management and trader development in today’s markets. Listen to our technical and market psychology read on the day. Join the Traders Community Podcast crew @traderscom @knovawave @Mahdavi4 @MetaJohnny1 plot out 2022.
Around the table today was packed with the Fed, geopolitics, domestic political influence and distortions, reading sentiment, patterns and order flow. After hours earnings and chart pattern review. This is a high-risk market.
- Crude Oil Futures settled lower settled lower by $3.41 (-3.3%) to $100.02/barrel.
- WTI off the high price of $129.44. The highest in 2008 was $147.27.
- Brent Crude Futures 107.39 -0.12 -0.11
- Natural Gas Futures 7.742 0.275 3.68
- Unleaded Gasoline Futures 3.6792 0.1377 3.89
- Rystad Energy said the war-induced uncertainty is likely to continue to impact gas prices.
- “The gas market remains highly volatile, and news driven,” said Rystad analyst Fabian Rønningen. This week, in particular, “the market remains anxious for clarity on rules governing ruble payments for Russian gas supplies.”
- BNEF data showed gas flows to U.S. export terminals Tuesday rose by +10.7% w/w to 12.8 bcf. In March gas flows to U.S. export terminals rose to a record 13.77 bcf.
Commodities and FX
- The U.S. Dollar Index increased 0.1% to 104.01.
- Gold futures settled $12.70 higher (+0.7%) to $1,853.70/oz, aided in part by this morning’s higher than expected inflation readings.
- Silver Futures 21.560 0.136 0.63
- Copper Futures 4.2160 0.0615 1.48
- Corn Futures 788.75 13.50 1.74
- Wheat Futures 1114.50 21.75 1.99
- Bloomberg Commodity Index 127.41 2.79 2.24
- Bitcoin USD 29083 769 2.72
- Ethereum USD 2093.60 62.44 3.07
US Indices & S&P 500 sector watch:
- Dow industrial average is down -326.63 points or -1.02% at 31834.10 The Dow industrial average decline of -13.85% from its all-time high
- S&P index is down -65.85 points or -1.65% at 3935.19 The S&P index is down -18.33% from its all-time high
- NASDAQ index is down -373.43 points or -3.18% at 11364.25 The NASDAQ index is closing down -29.9% from its all-time high.
- Russell 2000 is down 43.64 points or -2.48% at 1718.14
- NYSE Composite 14902.14 -123.60 -0.82
- CBOE Volatility 32.56 -0.43 -1.30
- NYSE Adv 1361 Dec 13 Vol 1.2 bln
- Nasdaq Adv 1642 Dec 2570 Vol 6.2 bln
- Of the S&P 500 sectors heavily weighted information technology (-3.3%) and consumer discretionary (-3.6%) sectors both dropped more than 3.0%, with huge declines in stocks like Apple (AAPL 146.50, -8.01, -5.2%) and Tesla (TSLA 734.00, -66.04, -8.3%).
- Three sectors were up, energy (+1.4%), utilities (+0.8%), and materials (+0.03%)
Key After Hours
- Amdocs (DOX) beats by $0.30, beats on revs; guides Q3 EPS below consensus, revs in-line, raises low end of FY22 EPS and pro forma revenue growth guidance range… DOX up 6.6%
- AppLovin (APP) misses by $0.13, misses on revs; guides FY22 revs below consensus; reiterates FY23 software platform revs of $2 bln… APP up 22.5%
- Beyond Meat (BYND) misses by $0.60, misses on revs; guides FY22 revs in-line… BYND down 21.7%
- Bumble Inc. (BMBL) beats by $0.04, beats on revs; guides Q2 revs below consensus; reaffirms FY22 revs guidance… BMBL up 11.4%
- Coupang (CPNG) beats single est by $0.05, misses on revs… CPNG up 18.7%
- Dutch Bros (BROS) misses by $0.03, beats on revs; reaffirms FY22 revs guidance… BROS down 36.6%
- Lordstown Motors (RIDE) closes asset purchase agreement with Foxconn… RIDE up 9.3%
- Rivian Automotive (RIVN) beats by $0.23, misses on revs; affirms annual unit production guidance… RIVN up 4.7%
- Sonos (SONO) beats by $0.09, beats on revs; reaffirms FY22 revs guidance… SONO up 15.6%
- Traeger (COOK) beats by $0.09, beats on revs; reaffirms FY22 revs guidance… COOK up 9.0%
- Walt Disney (DIS) misses by $0.11, misses on revs; added 7.9 mln Disney+ subscribers in the quarter; Parks, Experiences, and Products revenue up 109% yr/yr; reaffirms expectation of reaching 230-260 mln Disney+ subscribers by FY24… DIS down 2.5%
- ZipRecruiter (ZIP) beats by $0.07, beats on revs; guides Q2 revs above consensus; guides FY22 revs above consensus… ZIP up 4.0%
US Markets YTD
- Dow Jones Industrial Average -12.4% YTD
- S&P 500 -17.4% YTD
- Russell 2000 -23.5% YTD
- Nasdaq Composite -27.4% YTD
Cboe Daily Market Ratios:
Index – Last – Chg – % Chg
European stock indexes closed near the lows of the day in relentless selling that accelerated after the US open.
- UK: FTSE 100 7347.66 104.44 1.44
- Germany: DAX 13828.64 293.90 2.17
- France: CAC 40 6269.73 152.82 2.50
- Italy: FTSE MIB 23724.20 654.42 2.84
- Spain: IBEX 35 8312.60 173.40 2.13
- Stoxx Europe 600 427.59 7.30 1.74
- Switzerland: Swiss Market 11553.66 11.94 0.10
- Hong Kong: Hang Seng 19824.57 190.88 0.97
- Japan: Nikkei 225 26213.64 46.54 0.18
- China: Shanghai Composite 3058.70 22.86 0.75
- India: S&P BSE Sensex 54088.39 -276.46 -0.51
- Australia: S&P/ASX 7064.7 13.5 0.19
- S. Korea: KOSPI 2592.27 -4.29 -0.17
Recall in January: JP Morgan quant maestro Marko Kolanovic was out with a comment near lows that didn’t go unnoticed.
“Near term we recommend buying the dip on US indices given oversold conditions… though medium term we favor EM/China/Europe on a regional basis on improving activity and easing headwinds, and the UK on valuation.”Marko Kolanovic Jan 10 2022
- We stay positive on equities and expect omicron will ultimately prove a positive for risk assets, as this milder but more transmissible variant speeds the transition from pandemic to endemic with a lower human toll,
- As this wave fades, it will likely mark the end of the pandemic
- omicron’s lower severity and high transmissibility crowds out more severe variants and leads to broad natural immunity
- signs of supply constraints potentially passing their worst point
Recall back in October he said to buy the dip because fears of higher yields were overdone adding the market could absorb higher yields. “We don’t expect a broad market selloff unless yields were to rise above 250-300 bps (US 10y), which we don’t foresee in the near term,” From there the S&P 500 rose 11.5%.
Perhaps this time it’s’ different but nevertheless the algorithms liked it that day but from then ……… not so much
U.S. Treasuries saw gains in most tenors while the 2-yr note finished with a modest loss. The market was able to set fresh highs during the final hour of action even though today’s $36 bln 10-yr note sale was met with mediocre demand.
- 2-yr: +1 bp to 2.64%
- 3-yr: -1 bp to 2.82%
- 5-yr: -4 bps to 2.88%
- 10-yr: -7 bps to 2.92%
- 30-yr: -9 bps to 3.04%
Most of us are familiar with QE but what is QT? When the Fed reduces its balance sheet it is known as quantitative tightening, the flipside of quantitative easing. The US Federal Reserve at its December FOMC put the world on notice that tighter financial conditions are ahead. What does it mean? The possible Bifurcations would make Mandelbrot wince.
Where did it all start?
The Federal Reserve System Chairman Jerome Powell took a decidedly hawkish tone today at last month’s FOMC and the release of Minutes which sent US stock markets sharply lower. That day in the Treasury market the 2-yr yield, which tracks expectations for the fed funds rate, rose seven basis points to 0.83%. The 10-yr yield settled the session four basis points higher at 1.71%, with growing expectations for a run-up to 2.00%.
- The Treasury Budget showed a $308.2 bln surplus in April versus a $225.5 bln deficit in the same period a year ago. The budget data is not seasonally adjusted, so the April surplus cannot be compared to the March deficit of $192.6 bln.
- The budget deficit over the last 12 months is $1.20 trln versus a deficit of $1.73 trln in March.
- The weekly MBA Mortgage Applications Index increased 2.0% following a 2.5% increase in the prior week.
- Weak U.S. 10-year Treasury Bond Auction Graded C Minus with High Yield of 2.943% and 1.4 Basis Point Tail – TRADERS COMMUNITY
- Around The Barrel – US Crude Oil Strategic Reserves Falls at Record Pace to Lowest Since May 2001 – TRADERS COMMUNITY
- U.S. Inflation Higher Than Expected in April CPI +8.3% y/y vs 8.1% y/y – TRADERS COMMUNITY
- American Household Financial Stress Highest Level Since Outset of the Pandemic in April 2020 – TRADERS COMMUNITY
- Strong U.S. 3-year Treasury Bond Auction with High Yield of 2.802% – TRADERS COMMUNITY
- Federal Reserve Financial Stability Report Warns on Worsening Liquidity Risks – TRADERS COMMUNITY
- Ford Sells Almost 8% in Electric Truck Developer Rivian Automotive as Soon as Allowed – TRADERS COMMUNITY
- Into The Vortex – Natural Gas Outlook as Europe Weans Itself Off Russian Supplies – TRADERS COMMUNITY
- Brazil Central Bank Aggressively Raises Rates For Tenth Consecutive Time, Another 100bp to 12.75%, Signals More To Come – TRADERS COMMUNITY
- Federal Reserve Raises Rates 50 Basis Points First Time Since 2000 as Expected – TRADERS COMMUNITY
- Around The Barrel – US Crude Oil Builds as Gasoline and Distillate Draw Again – TRADERS COMMUNITY
- US Mortgage Applications Rise First Time in Two Months Ahead of Federal Reserve Expected to Raise Rates 50bps – TRADERS COMMUNITY
- Baltic Sea Freight Index Gains for Third Straight Month in April – TRADERS COMMUNITY
- Marathon Oil (MRO 26.21, +1.82, +7.5%): best performer in the sector, rallying back above its 50-day moving average (24.99).
- APA (APA 40.01, +2.63, +7.0%): returning to its 50-day moving average (40.69).
- Devon Energy (DVN 67.53, +3.77, +5.9%): returning to its May high (69.75).
- EOG Resources (EOG 124.94, +5.38, +4.5%): rising back above its 50-day moving average (119.64).
- Occidental Petroleum (OXY 62.22, +2.81, +4.7%): rising into the top half of its range from Monday after beating Q1 expectations.
- ConocoPhillips (COP 101.86, +3.86, +3.9%): rising back above its 50-day moving average (99.57).
- Exxon Mobil (XOM 88.07, +3.05, +3.6%): rising into the top half of its range from Monday.
- Williams Companies (WMB 35.27, +1.09, +3.2%): bouncing off its 50-day moving average (33.82).
- Chevron (CVX 165.58, +4.80, +3.0%): rising back above its 50-day moving average (164.41).
- Kinder Morgan (KMI 18.89, +0.37, +2.0%): rising back above its 50-day moving average (18.70).
- Valero (VLO 121.72, +1.73, +1.4%): weakest performer in the sector, trading in the upper half of yesterday’s range.
- The U.K.’s National Institute of Economic and Social Research noted that the Bank of England’s base rate will need to be raised to and held at 2.5% until the middle of the decade to curtail inflation.
- Germany’s April CPI was up 0.8% m/m, as expected (last 2.5%), and up 7.4% yr/yr, as expected (last 7.3%).
- Toyota forecast a 20% drop in profit for the year.
- Press reports indicate that Softbank is down about $25 bln on its investments for the year.
- South Korea is on track to pass an extra budget without bond issuance. President Yoon acknowledged that prices are a concern and that ways to contain inflation need to be considered.
- China’s April CPI was up 0.4% m/m (expected 0.2%; last 0.6%) and up 2.1% yr/yr (expected 1.8%; last 1.5%). April PPI was up 8.0% yr/yr (expected 7.7%; last 8.3%).
- Japan’s March Leading Index was up 0.9% m/m (last -1.2%) and Coincident Indicator was up 0.2% m/m (last 0.5%).
- South Korea’s April Unemployment Rate remained at 2.7%.
The Day Ahead:
- Monday: March Wholesale Inventories (Briefing.com consensus 2.3%; Prior 2.5%)
- Tuesday: April NFIB Small Business Optimism Index (Prior 93.2)
- Wednesday: MBA Mortgage Applications Index (Prior +2.5%); April CPI (Briefing.com consensus 0.2%; Prior 1.2%) and Core CPI (Briefing.com consensus 0.4%; Prior 0.3%); April Treasury Budget (Prior -$192.7B)
- Thursday: Weekly Initial Claims (Briefing.com consensus 191K; Prior 200K) and Continuing Claims (Prior 1384K); April PPI (Briefing.com consensus 0.5%; Prior 1.4%) and Core PPI (Briefing.com consensus 0.6%; Prior 1.0%)
- Friday: April Import Price Index (Prior 2.6%) and Import Price Index, Ex-Fuel (Prior 1.2%); April Export Price Index (Prior 4.5%) and Export Price Index, Ex-Ag (Prior 4.5%); May Preliminary Univ. Of Michigan Index of Consumer Sentiment (Briefing.com consensus 63.5; Prior 65.2)
Monday (May 9)
Pre-Market: ACM AZUL BNTX CLVT COTY DUK ELAN ENR HSKA DINO HGV HEP JLL RIDE MAC MSGE PLTR RCM RDNT TGNA TWKS THS TSN VTRS WOW
After-Hours: DDD AMC AMWL ANGI AZTA BLI BLNK BHF BWXT CARG DHT DNB EQH ESE EVBG FGEN GDRX GRPN HLIO HRTX HI HIMS HBM ICUI IAC IFF JRVR FROG LPSN MGY MAXR MESA MCHP MRC NCMI NHI NVAX OPK OPRT PLUG PRAA PRIM PRA PUBM RNG RBA ROVR SWAV SPG SDC SU SUPN TASK TDUP TREX UNVR UPST VVV VECO VRM XPO YMAB ZNGA
Tuesday (May 10)
Pre-Market: MASS ACRS AHCO ALGM AMRS ARMK AVYA AZEK BHC BSY BCO BLDR CRNC CEVA CHH CRON XRAY DM DBD DSEY EBIX EPC ENOV EVRI FOXA HAE HL H IAA IIVI IGT ITCI KNBE LCII LI MBUU MIDD EYE NXST NCLH NOVT PTON PLNT RETA REYN STER STVN SYY TTGT TPG TDG VERX WMG
During Market Hours: ENTA
After-Hours: EGHT AKA ABCL BIRD ARLO ARRY AXON BOOT ELY CELH COIN COLL CRCT CUTR DAR MSP DV DOUG EA EOLS EXEL FNF FLYW GFS GMED GOCO GO GRWG HALO HCAT ICHR INO IPAR JXN JAMF KGC LNW MTTR MODN NSTG OXY OLO OSUR PLBY PRPL RXT RPAY RBLX RKT SCSC SOFI SWCH SKIN REAL TTD U VUZI WELL WES WYNN YELL ZETA ZD
Wednesday (May 11)
Pre-Market: ATC FVRR KRNT DNUT LTH NOMD OLPX PFGC PRGO SLVM WEN WWW YETI
After-Hours: DIBS ACVA DOX APP ATCO BYND BMBL CPA CPNG BROS FLNC MFC MQ PAAS RIVN SMRT SONO STE SLF COOK DIS ZIP
Thursday (May 12)
Pre-Market: CAMT CYBR CYXT DAVA GENI HIMX HLLY IS KELYA NABL NICE NVMI PGTI PRMW SHCR SIX DTC SQSP TPR TNK USFD UTZ
After-Hours: AFRM AQN BLND BRLT COMP LAW DUOL FIGS HRT INDI LZ MLNK MSI NVTS NEWR PAYO POSH TBLA TOST VZIO VTEX UP
Friday (May 13)
Trust you all had a great day, sleep well and get your trading plan sorted.
Any questions please feel free to ask them below. Trade Smart!