Heading into tomorrow’s US Jobs Report stock markets rallied for the fourth day with the main indices up at least 1.0% at the close. Advancers led decliners by a roughly 3-to-1 margin at both the NYSE and the Nasdaq. The bounce coincided with the reversal in energy futures and the strength in semiconductors, which hold a leading indicator status. Energy futures reacted positively to both inventory reports. Natural gas settled the session up 13.6% to $6.25/mmbtu. WTI crude oil futures settled the session up 4.0% to $102.68/bbl. Copper rose 3.5% to $3.55/lb. Despite the bounce the 2s10s treasury spread remains inverted. The 2-yr Treasury note yield rose nine basis points to 3.03% while the 10-yr note yield rose ten basis points to 3.01%.
Semiconductors rose with the PHLX Semiconductor Index closing up 4.5%. Every index component closed in the green with the biggest gains seen in ON Semiconductors (ON 51.94, +4.33, +9.1%), KLA Corp (KLAC 314.54, +21.54, +7.4%), and TSMC (TSM 80.75, +5.19, +6.7%).
Germany is being rocked by the Energy crisis and its reliance on cheap Russian gas. German gas giant Uniper SE is in talks with the government over a potential bailout package of as much as 9 billion euros Bloomberg reports.
Enjoy live commentary from Our Trading Room at YouTube as the day wraps up – feel free to like and share
This week we have inflation data and more Central Bank action as a result yields, energy prices and the EURUSD USDJPY are in focus.
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.
- WTI Crude Oil Futures settle at $102.73/BBL, UP $4.20, 4.26%
- Brent Crude Futures settle at $104.65/bbl up $3.96, 3.93%.
- Natural Gas Futures settle at $6.2970/MMBTU.
- Unleaded Gasoline Futures $3.4204 +.1838
- WTI off the 2022 high price of $129.44. The highest in 2008 was $147.27.
- EIA Forecasts US LNG Exports will Increase 22% in 2022 to 11.9 Bcf/d and to 12.6 Bcf/d in 2023
- EIA Raises 2022 Oil Production Forecasts, says OPEC Production Returned to Pre-Pandemic Levels
- 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 climbed up +0.1% to $107.17
- Gold futures settled $3.20 higher (+0.2%) to $1,739.70/oz, snapping the longest losing streak in three years.
- July wheat futures up 32 1/4 cents, closing at $8.24 1/2
- Nov soybean futures up 42 3/4 cents, closing at $13.65 1/2
- Dec corn futures up 11 1/4 cents, closing at $5.96 1/4
- Bloomberg Commodity Index 115.14 4.39 3.96
- Bitcoin USD 21605 -3 -0.02
- Ethereum USD 1236.71 -1.04 -0.08
- Ripple USD 0.3418 0.0020 0.58
US Indices & S&P 500 sector watch:
- DJIA 31384.55 346.87 1.12
- Nasdaq Composite 11621.35 259.49 2.28
- S&P 500 3902.62 57.54 1.50
- Russell 2000 1769.60 42.06 2.43
- NYSE Composite 14676.50 211.21 1.46
- CBOE Volatility 26.08 -0.65 -2.43%
- NYSE Adv 2403 Dec 744 Vol 900 mln
- Nasdaq Adv 3213 Dec 1172 Vol 4.6 bln
- Ten of the 11 S&P 500 sectors closed in positive territory with the lone laggard being utilities (-0.1%). Countercyclical sectors, consumer staples (+0.1%) and health care (+0.1%), closed in the green but trailed behind the broader market.
- The top performing sectors were energy (+3.5%), consumer discretionary (+2.5%), information technology (+2.1%), and communication services (+2.0%).
Market Pre-Market Notables
- Merck (MRK 91.70, -1.43, -1.5%): Merck is in advanced talks to buy Seagen, according to WSJ
- Bed Bath & Beyond (BBBY 4.72, +0.25, +5.6%): Bed Bath & Beyond interim CEO Sue Gove purchased 50,000 shares on July 1
- GameStop (GME 123.92, +6.49, +5.5%): GameStop announces 4-for-1 stock split
- Shell (SHEL 48.35, +0.34, +0.7%): Shell plc provides Q2 update; maintains plans for drilling in the Gulf of Mexico
- Virgin Galactic (SPCE 6.73, +0.28, +4.3%): Virgin Galactic announces agreement with Boeing unit to design and manufacture co’s next generation motherships
US Markets YTD
- Dow Jones Industrial Average: -13.6% YTD
- S&P 400: -18.1% YTD
- S&P 500: -18.2% YTD
- Russell 2000: -21.2% YTD
- Nasdaq Composite: -25.7% YTD
Key After Hours
- Costco (COST) reports that June comparable sales increased by 13.0%, on an adjusted basis… COST down 0.1%
- GameStop (GME) confirms CFO Michael Recupero has been let go; appoints current Chief Accounting Officer Diana Saadeh-Jajeh as CFO, effective immediately… GME down 5.7%
- Levi Strauss (LEVI) beats by $0.06, beats on revs; reaffirms FY22 EPS guidance, revs guidance; also increases dividend by 20%… LEVI up 3.8%
- Nu Skin (NUS) guides Q2 revenue below consensus, citing COVID-related factors in China, the conflict in Ukraine, and a general economic downturn… NUS down 5.0%
- Twitter (TWTR) lower as Elon Musk’s bid to buy the company is in jeopardy, according to The Washington Post; laying off 30% of its talent acquisition team, according to WSJ… TWTR down 3.9%
- WD-40 (WDFC) misses by $0.21, misses on revs; guides FY22 EPS below two analyst estimate, revs below two analyst estimate… WDFC down 9.2%
- Yamana Gold (AUY) reports preliminary Q2 operating results, including total gold equivalent ounce production of 260,960 GEO; Says year-to-date results comfortably position it to achieve annual production and cost guidance… AUY down 0.8%
Cboe Daily Market Ratios:
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 the 2s10s spread remains inverted. The 2-yr Treasury note yield rose nine basis points to 3.03% while the 10-yr note yield rose ten basis points to 3.01%.
- 2-yr: +9 bps to 3.03%
- 3-yr: +11 bps to 3.07%
- 5-yr: +10 bps to 3.05%
- 10-yr: +10 bps to 3.01%
- 30-yr: +8 bps to 3.19%
- Weekly Initial Claims 235K (Briefing.com consensus 234K); Prior 231K; Weekly Continuing Claims 1.375 mln; Prior was revised to 1.324 mln from 1.328 mln
- May Trade Balance -$85.5 bln (Briefing.com consensus -$84.9 bln); Prior was revised to -$86.7 bln from -$87.1 bln
- Into The Vortex – EIA Reports Natural Gas Storage Lower Than Expected Build of 60 Bcf – TRADERS COMMUNITY
- Around The Barrel – US Exports of Refined Products All-Time High – TRADERS COMMUNITY
Index – Last – Chg – % Chg
- UK: FTSE 100 7189.08 81.31 1.14
- Germany: DAX 12843.22 248.70 1.97
- France: CAC 40 6006.70 94.32 1.60
- Italy: FTSE MIB 21558.07 637.08 3.05
- Spain: IBEX 35 8122.50 173.90 2.19
- Stoxx Europe 600 415.01 7.67 1.88
- Switzerland: Swiss Market 10940.98 100.38 0.93
- The IMF is expected to lower its global growth forecast for 2022 and 2023.
- Germany’s May Industrial Production was up 0.2% m/m (expected 0.4%; last 1.3%).
- U.K.’s June Halifax House Price Index was up 1.8% m/m (last 1.2%) and up 13.0% yr/yr (last 10.5%).
- Swiss June Unemployment Rate remained at 2.2%, as expected.
Index – Last – Chg – % Chg
- Japan’s Nikkei: +1.5%
- Hong Kong’s Hang Seng: +0.3%
- China’s Shanghai Composite: +0.3%
- India’s Sensex: +0.8%
- South Korea’s Kospi: +1.8%
- Australia’s ASX All Ordinaries: +0.8%
- Press reports speculated that coronavirus restrictions could be reimposed in Tokyo.
- June throughput at Shanghai’s port was down 7.4% yr/yr.
- The Chinese government will consider extending a tax break for purchasing electric vehicles.
- Japan’s May Leading Index fell to 101.4 from 102.9 and Coincident Indicator was down 1.3% m/m (last 0.0%).
- South Korea’s May Current Account surplus reached $3.86 bln (last deficit of $80 mln).
- Australia’s June AIG Services Index fell to 48.8 from 49.2. May trade surplus reached AUD15.97 bln (expected surplus of AUD10.73 bln; last surplus of AUD10.50 bln) as imports grew 6% m/m (last -1%) and exports rose 9% m/m (last 1%).
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.
- Traders Market Weekly: The Fed’s Fight Against Inflation – TRADERS COMMUNITY
- Monday: Nothing of note
- Tuesday: May NFIB Small Business Optimism Index (prior 93.2) at 6:00 ET; May PPI (prior 0.4%) and Core PPI (prior 0.5%) at 8:30 ET
- Wednesday: Weekly MBA Mortgage Index (prior -6.5%) at 7:00 ET; May Retail Sales (prior 0.9%), Retail Sales ex-auto (prior 0.6%), May Import/Export Prices, and June Empire State Manufacturing (prior -11.6) at 8:30 ET; April Business Inventories (prior 2.0%) and June NAHB Housing Market Index (prior 69) at 10:00 ET; weekly crude oil inventories (prior +2.03 mln) at 10:30 ET; June FOMC Rate Decision (prior 0.75-1.00%) at 14:00 ET; and April net Long-Term TIC Flows (prior $23.10 bln) at 16:00 ET
- Thursday: Weekly Initial Claims (prior 229,000), Continuing Claims (prior 1.306 mln), May Housing Starts (prior 1.724 mln) and Building Permits (prior 1.819 mln), and June Philadelphia Fed Survey (prior 2.6) at 8:30 ET; and weekly natural gas inventories (prior +97 bcf) at 10:30 ET
- Friday: May Industrial Production (prior 1.1%) and Capacity Utilization (prior 79.0%) at 9:15 ET
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!