Today’s market rallied hard for most of the day into tomorrow’s NFP after shrugging off a fiscal Q4 earnings warning from Dow component Microsoft (MSFT 274.58, +2.16, +0.8%) before the open who shared in an 8K filing that it now expects fiscal Q4 EPS to range from $2.24-2.32 versus its prior guidance of $2.28-2.35. From there major indices all closed at their best levels for the session, gaining between 1.3% and 2.7%. In turn, the CBOE Volatility Index dropped 4.2% to 24.62 and saw its first move below 25.00 since May 4
Kohl was a dangerous minefield of news bombs after hours *Sycamore and Franchise Group Submit Bids for Kohl’s, Sources Say — WSJ $KSS bounced from a $36.70 low on an initial pulled auction story and bounced to $44.72 to up 9.45%
Enjoy live commentary from Our Trading Room at YouTube as the day wraps up – feel free to like and share
WTI crude futures did much the same, sold off and rallied. From under $112.00/bbl early it rebounded on the news that OPEC+ is planning to allow for a production increase of an underwhelming 0.648 mb/d in July and August versus a previous plan that would raise output by 0.432 mb/d. EIA saw a draw of 5.07 million barrels last week. WTI crude futures settled their session up 1.3% at $116.80/bbl.
Treasuries saw the 10-yr note yield slip two basis points to 2.91% while the 2-yr note yield also fell two basis points to 2.63%.
We talk through to today’s action and where to now ….
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 at $116.87 Up $1.61 or 1.4% despite OPEC+ low $111.20
- CL_F low for the day 114.58. The high for the day 117.8
- WTI off the high price of $129.44. The highest in 2008 was $147.27.
- Brent Crude Futures 118.16 0.55 0.47
- Natural Gas Futures 8.438 -0.258 -2.97
- Unleaded Gasoline Futures 4.2330 0.1614 3.96
- 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.”
Commodities and FX
- The U.S. Dollar Index fell 0.7% to 101.81, retracing yesterday’s advance.
- Gold futures settled $22.70 higher (+1.2%) to $1,871.40/oz
- Silver Futures 22.345 0.430 1.96
- Copper Futures 4.5565 0.2280 5.27
- Corn Futures 728.75 -2.50 -0.34
- Wheat Futures 1061.50 20.25 1.94
- Bloomberg Commodity Index 133.83 1.03 0.77
- Bitcoin USD 30282 637 2.15
- Ethereum USD 1826.75 32.53 1.81
- Ripple USD 0.4001 0.0053 1.34
US Indices & S&P 500 sector watch:
- Dow industrial average is up 434.79 points or 1.33% at 33248.03
- S&P index is closing up 75.64 points or 1.84% at 4176.88
- NASDAQ index is closing up 322.44 points or 2.69% at 12316.90
- Russell 2000 is up 42.84 points or 2.31% at 1897.67
- NYSE Composite 15960.53 250.92 1.60
- CBOE Volatility 24.72 -0.97 -3.78
- NYSE Adv 2469 Dec 813 Vol 908 mln
- Nasdaq Adv 3500 Dec 1167 Vol 4.3 bln
- S&P energy sector (-0.3%) was the only S&P 500 sector to close the day in negative territory. Gains for the remaining sectors ranged from 0.6% (utilities) to 3.0% (consumer discretionary).
Key After Hours
- Asana (ASAN) beats by $0.06, beats on revs; guides JulQ EPS below consensus, revs above consensus; guides FY23 revs above consensus… ASAN down 6.4%
- Cooper (COO) misses by $0.19, beats on revs; guides FY22 EPS below consensus, revs in-line… COO down 1.9%
- Costco (COST) reports May adjusted comparable sales growth of +11.8%… COST down 0.1%
- CrowdStrike (CRWD) beats by $0.08, beats on revs; guides Q2 EPS above consensus, revs above consensus; guides FY23 EPS above consensus, revs above consensus… CRWD down 3.3%
- JOANN Inc. (JOAN) misses by $0.30, misses on revs, comps of -12.9% as supply chain remains challenged… JOAN down 13.3%
- Kohl’s (KSS) falls on report auction delayed indefinitely as several suitors bowed out, according to NY Post… KSS down 7.1%
- lululemon athletica (LULU) beats by $0.05, beats on revs; guides Q2 EPS above consensus, revs above consensus; guides FY23 EPS above consensus, revs above consensus… LULU up 2.1%
- Okta (OKTA) beats by $0.07, beats on revs; guides Q2 EPS above consensus, revs above consensus; guides FY23 EPS above consensus, revs above consensus… OKTA up 16.1%
- RH (RH) beats by $2.45, beats on revs; guides Q2 revs below consensus; guides FY23 revs below consensus, has experienced a softening in demand which began at time of Russian invasion Ukraine; also increased share repurchase authorization by $2.0 bln… RH down 1.9%
- StoneCo (STNE) beats by BRL 0.12, beats on revs; guides Q2 revs above consensus… STNE up 24.6%
US Markets YTD
- Dow Jones Industrial Average -8.4% YTD
- S&P 400 -10.4% YTD
- S&P 500 -12.4% YTD
- Russell 2000 -15.5% YTD
- Nasdaq Composite -21.3% YTD
Cboe Daily Market Ratios:
Index – Last – Chg – % Chg
- UK: FTSE 100 7532.95 -74.71 -0.98
- Germany: DAX 14485.17 144.70 1.01
- France: CAC 40 6500.44 81.55 1.27
- Italy: FTSE MIB 24426.50 142.94 0.59
- Spain: IBEX 35 8744.10 -3.10 -0.04
- Stoxx Europe 600 441.23 2.51 0.57
- Switzerland: Swiss Market 11550.20 56.08 0.49
- Japan’s Nikkei: -0.2%
- Hong Kong’s Hang Seng: -1.0%
- China’s Shanghai Composite: +0.4%
- India’s Sensex: +0.8%
- South Korea’s Kospi: -1.0%
- Australia’s ASX All Ordinaries: -0.8%
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 added to their losses from yesterday with shorter tenors leading the retreat. The 2-yr yield rose 11 bps to 2.65% while the 10-yr yield rose nine basis points to 2.93%.
- 2-yr: -2 bps to 2.63%
- 3-yr: -2 bps to 2.82%
- 5-yr: -3 bps to 2.91%
- 10-yr: -2 bps to 2.91%
- 30-yr: UNCH at 3.08%
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%.
- Meta Platforms (FB 189.94, +1.30, +0.7%): Mark Zuckerberg confirms Sheryl Sandberg will depart FB as COO, Javier Olivan will become new COO
- NetApp (NTAP 75.00, +2.49, +3.4%): beats by $0.14, reports revs in-line; guides JulQ EPS in-line, revs in-line; guides FY23 EPS in-line, revs in-line
- MongoDB, Inc. (MDB 263.20, +21.39, +8.9%): beats by $0.30, beats on revs; guides JulQ EPS below consensus, revs above consensus; guides FY23 EPS above consensus, revs in-line
- Elastic (ESTC 65.98, +4.04, +6.5%): beats by $0.05, beats on revs; guides Q1 EPS in-line, revs above consensus; guides FY23 EPS in-line, revs above consensus
- Hewlett Packard Enterprise (HPE 15.09, -0.69, -4.4%): misses by $0.01, misses on revs, as-a-service orders increased 107%; guides Q3 EPS in-line; guides FY22 EPS in-line, reiterates revenue growth of 3-4%, adjusted for currency
- Chewy (CHWY 28.22, +4.73, +20.1%): beats by $0.17, reports revs in-line; guides JulQ revs in-line; reaffirms FY23 revs guidance
- PVH Corp (PVH 74.00, +2.89, +4.1%): beats by $0.34, beats on revs; guides JulQ EPS below consensus, revs below consensus; guides FY23 EPS below consensus, revs below consensus; increases planned 2022 share repurchases to $400 mln
- Q1 Productivity was revised to -7.3% (consensus -7.5%) from the preliminary reading of -7.5%. Unit labor costs were revised to +12.6% (Briefing.com consensus +11.6%) from the preliminary reading of +11.6%.
- Initial jobless claims for the week ending May 28 decreased by 11,000 to 200,000 (consensus 210,000). Continuing jobless claims for the week ending May 21 decreased by 34,000 to 1.309 million, which is the lowest level since December 27, 1969.
- Factory orders for manufactured goods increased 0.3% m/m in April (consensus +0.7%) following a 1.8% increase in March. Shipments of manufactured goods rose 0.2% after increasing 2.2% in March.
- Around The Barrel – Crude Oil Draws -5.068Mbbls with Gasoline Stocks at Lowest Since May 2014 – TRADERS COMMUNITY
- Into The Vortex – EIA Reports Natural Gas Storage Added 90 Bcf as Temperatures Heat Up – TRADERS COMMUNITY
- ADP Reports US Added Just 128K Jobs in May at Slowest Pace Since Covid Lockdowns – TRADERS COMMUNITY
- Federal Reserve Beige Book Highlights Price Increases Through Districts – TRADERS COMMUNITY
- San Francisco Federal Reserve Governor Daly Says Open to Pulling the Reins Back on The Economy – TRADERS COMMUNITY
- Manufacturing ISM in May Stronger Than Expected as New Orders Rise – TRADERS COMMUNITY
- US Job Openings for April 11.400M Down From 11.855M in March – TRADERS COMMUNITY
- Eurozone’s April PPI 1.2% m/m (expected 2.3%; last 5.3%); 37.2% yr/yr (expected 38.5%; last 36.9%)
- Spain’s May Unemployment Change -99,500 (last -86,300)
- Swiss May CPI 0.7% m/m (expected 0.3%; last 0.4%); 2.9% yr/yr (expected 2.6%; last 2.5%)
- France’s CAC 40 Weakest European Bourse in May, closes Down 1% for the Month – TRADERS COMMUNITY
- Eurozone Inflation Accelerates in May to New Records, Follows German and Spanish CPI – TRADERS COMMUNITY
- German and Spanish Inflation Soar to Records with Consumer Sentiment at All Time Lows Ahead of ECB Meeting – TRADERS COMMUNITY
- South Korea’s May Nikkei Manufacturing PMI 51.8 (last 52.1)
- Australia’s April trade surplus AUD10.495 bln (expected surplus of AUD9.300 bln; last surplus of AUD9.314 bln). April Imports -1% m/m (last -5%) and Exports 1% m/m (last 0%). April Retail Sales 0.9% m/m, as expected (last 0.9%)
- New Zealand’s Q1 Terms of Trade Index 0.5% qtr/qtr, as expected (last -0.9%)
- Australia Current Account Surplus Twelfth Straight in Q1 2022 but Lowest Since Q4 2019 – TRADERS COMMUNITY
The Day Ahead:
- Traders Market Weekly: Memorial Weekend a Time for Reflection – TRADERS COMMUNITY
- Monday: Bond and equity markets closed for Memorial Day
- Tuesday: March FHFA Housing Price Index (prior 2.1%) and March S&P Case-Shiller 20-city Home Price Index (prior 20.2%) at 9:00 ET; May Chicago PMI (prior 58.5) at 9:45 ET; May Consumer Confidence (prior 107.3) at 10:00 ET
- Wednesday: Weekly MBA Mortgage Index (prior -1.2%) at 7:00 ET; final May IHS Markit Manufacturing PMI (prior 57.5) at 9:45 ET; April job openings (prior 11.549 mln), April Construction Spending (prior 0.1%), and May ISM Manufacturing Index (prior 55.4%) at 10:00 ET
- Thursday: May ADP Employment Change (prior 247,000) at 8:15 ET; weekly Initial Claims (prior 210,000), Continuing Claims (prior 1.346 mln), revised Q1 Productivity (prior -7.5%), and revised Q1 Unit Labor Costs (prior 11.6%) at 8:30 ET; April Factory Orders (prior 2.2%) at 10:00 ET; weekly natural gas inventories (prior +80 bcf) at 10:30 ET; and weekly crude oil inventories (prior -1.02 mln) at 11:00 ET
- Friday: May Nonfarm Payrolls (prior 428,000), Nonfarm Private Payrolls (prior 406,000), Average Hourly Earnings (prior 0.3%), Average Workweek (prior 34.6), and Unemployment Rate (prior 3.6%) at 8:30 ET; final IHS Markit Services PMI (prior 53.5) at 9:45 ET; and May ISM Non-Manufacturing Index (prior 57.1%) at 10:00 ET
- Monday (May 30)
- Pre-Market: None
- After-Hours: None
- Tuesday (May 31)
- Pre-Market: BEKE
- After-Hours: AMBA APPS HPQ CRM SPWH VSCO
- Wednesday (June 1)
- Pre-Market: CPRI CONN DCI WB
- After-Hours: AI CHWY CRDO DSGX ESTC GME HPE MDB NCNO NTAP PSTG PVH SMTC S PATH VEEV
- Thursday (June 2)
- Pre-Market: CAE CIEN DBI HRL SCWX SPTN TTC
- After-Hours: ASAN CVGW COO CRWD JOAN LULU OKTA PD PHR RH ZUMZ
- Friday (June 3)
- Pre-Market: None
- After-Hours: None
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!