US stocks snapped a 3-day losing streak for the S&P and Nasdaq. The Dow snapped a 2-day decline. U.S. Treasuries ended Wednesday higher for the second consecutive day of solid gains in most tenors. All this after Red Hot PPI. We go through how the markets flow and how they interact with each other, currencies, commodities, stocks and bonds.
WTI crude futures closed higher again at $104.25, +3.56, +3.5%. Natural gas saw prices not seen since 2014 over $7 Btu. We look at the indices, $AAPL $WMT $VERU $ATER $TSLA Gold, Copper, BTC, ETH, Natgas and oil in the podcast. 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.
- May WTI crude oil (CLK22) futures $104.25, +3.56, +3.5% despite a bearish inventory data from the EIA and a downwardly revised 2022 global demand growth forecast from the IEA.
- WTI off the high price of $129.44. The highest in 2008 was $147.27.
- Brent crude settled up $4.14, or 4%, to $108.78.
- May RBOB gasoline (RBK22) closed up by +14.15 (+4.49%).
- The May Nymex gas futures contract added nearly 4.8% to end at $6.887 per million British thermal units after tapping a high at $7.025.
- 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.”
- Maxar Technologies said Wednesday that below-normal temperatures are expected in the Eastern half of the U.S. from April 18-22, and below-normal temperatures are expected for the Interior West from April 23-27. As a result, the concern is rising that the colder U.S. spring temperatures will delay the rebuilding of U.S. nat-gas inventories already at a 3-year low.
- BNEF data showed gas flows to U.S. export terminals Wednesday at 95.0 bcf, up +2.6% y/y. In March gas flows to U.S. export terminals rose to a record 13.77 bcf.
- Baker Hughes reported Friday that the number of active U.S. nat-gas drilling rigs in the week ended March 25 were unchanged at a 2-1/4 year high of 137 rigs. Active rigs have recovered sharply from the record low of 68 rigs posted in July 2020 (data since 1987).
Commodities and FX
- The U.S. Dollar Index touched a fresh high for the year in morning trade before reversing. The Index slipped 0.4% to 99.86, giving back yesterday’s gain
- Gold futures settled $8.60 higher (+0.4%) to $1,984.70/oz, higher amid a dip in the dollar and treasury yields.
- May silver (SIK22) closed up +0.748 (+2.99%).
- Bitcoin 41,185.04+1,666.34 (+4.22%)
For The Day
- Dow up 344.25 points or +1.01% at 24564.60
- S&P up 49.14 points or +1.12% at 4446.60
- Nasdaq up 272.03 points or +2.03% at 13643.60
- Russell 2000 +38.16 points or 1.92% at 2025.10
- NYSE Adv 2373 Dec 858 Vol 790.0 mln
- Nasdaq Adv 3348 Dec 1222 Vol 4.8 bln
S&P 500 sector watch:
- Nine of the 11 S&P 500 sectors closed positive
Key After Hours
US Markets YTD
- Dow Jones Industrial Average -5.8% YTD
- S&P 500 -7.7% YTD
- Russell 2000 -11.5% YTD
- Nasdaq Composite -14.5% YTD
Cboe Daily Market Ratios:
- UK FTSE 100 -0.4%
- German DAX -0.5%
- French CAC -0.3%
- Italy MIB -0.4%
- Spain IBEX -0.2%
- Stoxx 600 -0.3%
- Japan’s Nikkei: +1.9%
- Hong Kong’s Hang Seng: +0.3%
- China’s Shanghai Composite: -0.8%
- India’s Sensex: -0.4%
- South Korea’s Kospi: +1.9%
- Australia’s ASX All Ordinaries: +0.5%.
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 ended Wednesday higher for the second consecutive day of solid gains in most tenors. Today’s $20 bln 30-yr bond reopening was met with weak demand. The sale completed this week’s note and bond auctions that were underwhelming despite a technical rebound in the Treasury market.
- 2-yr: -5 bps to 2.34%
- 3-yr: -4 bps to 2.56%
- 5-yr: -3 bps to 2.64%
- 10-yr: -4 bps to 2.69%
- 30-yr: -3 bps to 2.79%
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%.
- 30-year Treasury Bond Auction with High Yield of 2.815% Follows Screeching PPI – TRADERS COMMUNITY
- Around The Barrel – Crude Oil Builds 9.3mbbls Offset By -3.6mbbls Gasoline and -2.902mbbls Distillate Draws – TRADERS COMMUNITY
- The Producer Price Index for final demand jumped 1.4% month-over-month in March (consensus 1.2%) following an upwardly revised 0.9% increase (from 0.8%) in February. The index for final demand, less foods and energy, rose 1.0% month-over-month (consensus 0.5%) following an upwardly revised 0.4% increase (from 0.2%) in February. On a year-over-year basis, the index for final demand was up 11.2% while the index for final demand, less foods and energy, was up 9.2%. The accompanying tables for the report show a lengthy list of double-digit percentage increases on a year-over-year basis for many categories.
- The weekly MBA Mortgage Index fell 1.3% to follow last week’s 6.3% decrease. The Refinance Index fell 4.9% while the Purchase Index rose 1.4%.
- Weak U.S. 10-year Treasury Bond Auction Graded F with High Yield of 2.720% – TRADERS COMMUNITY
- Inflation Surge Higher Continues in March US CPI +8.5% y/y largest Increase in Forty Years – TRADERS COMMUNITY
- JPMorgan Chase (JPM 130.00, -1.54): -1.2% after missing EPS estimates. The provision for credit losses was $1.5 billion, reflecting a net reserve build of $902 million. CEO Jamie Dimon said, “we remain optimistic on the economy, at least for the short term … but see significant geopolitical and economic challenges ahead due to high inflation, supply chain issues and the war in Ukraine.”
- BlackRock (BLK 719.00, +2.17): +0.3% after beating EPS estimates on below-consensus revenue.
- First Republic Bank (FRC 155.73, +0.68): +0.4% after beating EPS estimates. The bank also announced an increase of $0.05 in its quarterly cash dividend to $0.27 per share.
- Delta Air Lines (DAL 40.97, +2.35): +6.1% after beating top and bottom-line estimates. The company guided Q3 (Sep) revenue below consensus.
- Fastenal (FAST 59.20, +1.51): +2.6% after beating EPS estimates.
- U.K.’s March CPI 1.1% m/m (expected 0.7%; last 0.8%); 7.0% yr/yr (expected 6.7%; last 6.2%). March Core CPI 0.9% m/m (expected 0.5%; last 0.8%); 5.7% yr/yr (expected 5.4%; last 5.2%). March Input PPI 5.2% m/m (expected 2.5%; last 1.8%) and Output PPI 2.0% m/m (expected 1.2%; last 0.9%)
- Italy’s February Industrial Production 4.0% m/m (expected 1.4%; last -3.4%); 3.3% yr/yr (expected 0.7%; prior -2.7%)
- Spain’s March CPI 3.0% m/m, as expected (last 0.8%); 9.8% yr/yr, as expected (last 7.6%)
- U.K.’s inflation remained above target for the eighth consecutive month, accelerating to the fastest rate since 1992.
- Finland lowered its 2022 growth forecast to 1.5% from 2.9%.
- Hungary’s finance minister said that this year’s growth pace is uncertain but the country’s economy remains on an upward trajectory.
- China’s March trade surplus $47.38 bln (expected surplus of $22.40 bln; last surplus of $115.95 bln). March Imports -0.1% yr/yr (expected 8.0%; last 15.5%) and Exports 14.7% yr/yr (expected 13.0%; last 16.3%)
- Japan’s February Core Machinery Orders -9.8% m/m (expected -1.5%; last -2.0%); 4.3% yr/yr (expected 14.5%; last 5.1%). April Reuters Tankan Index 11 (last 8)
- South Korea’s March Unemployment Rate 2.7% (last 2.7%)
- Australia’s Westpac Consumer Sentiment -0.9% (last -4.2%)
- New Zealand’s March FPI 0.7% m/m (last -0.1%)
- Japan’s Prime Minister Kishida said that the supply of power will be “tight” in the summer and winter. A former Bank of Japan governor warned that recent weakness in the yen will benefit large companies and will not be welcomed by small companies or households.
- The Reserve Bank of New Zealand raised its official cash rate by 50 bps to 1.50% against expectations for a 25 bps hike.
- The Day Ahead:
- 7:00 ET: Weekly MBA Mortgage Index (prior -6.3%)
- 8:30 ET: March PPI (Briefing.com consensus 1.2%; prior 0.8%) and Core PPI (Briefing.com consensus 0.5%; prior 0.2%)
- 10:30 ET: Weekly crude oil inventories (prior +2.42 mln)
- Treasury Auctions:
- 13:00 ET: $20 bln 30-yr Treasury bond reopening results
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!