Doom and gloom reigns in the markets with Central Banks raising rates and scorching inflation with CPI and PPI breaking records in America. The Dow and S&P extended their losing streaks to 5 straight down days after both $MS and $JPM missed earnings. Stocks did bounce off their low after Federal Reserve Waller said he sees neutral as 2-2.25% and added that you don’t want to overdo rate hikes. Bonds quickly rebounded on that and at the lows the Dow was down -628.86 points or -2.04% to close -142.62 points or -0.46%. The S&P was down -81.53 points or -2.14% to close down -11.4 points or -0.30% to 3790.37. Nasdaq index rose 3.61 points or +0.03% at 11251.20.
We head into tomorrow’s retail sales and more bank earnings with a Friday OPEX. The bounce also coincided with the reversal in energy futures and the strength in semiconductors, which hold a leading indicator status.
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
Live on YouTube
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.
Market Closes
Energy
- NYMEX WTI Crude Oil August futures settle at $95.78/bbl, down 52 cents or 0.54%
- Brent Crude futures settle at $99.10/bbl, down 47 cents or 0.47%.
- NYMEX Natural Gas August futures settle at $6.6000/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.
- Copper futures made big downside moves today, settling down 2.5% to $3.24/lb.
- Sept wheat futures down 15 3/4 cents, closing at $7.95
- Nov soybean futures down 8 1/2 cents, closing at $13.41
- Dec corn futures up 5 3/4 cents, closing at $6.01
- Bloomberg Commodity Index 112.64 0.92 0.83
- Bitcoin USD 20694 34 0.16
- Ethereum USD 1212.41 20.93 1.76
- Ripple USD 0.3416 0.0118 3.58
Stocks
US Indices & S&P 500 sector watch:
- Dow industrial average -142.62 points or -0.46% The low price reached 30141.93. The high reached 30680.12
- S&P index fell -11.4 points or -0.30% to 3790.37. The low reached 3721.56. The high reached 3796.41
- Nasdaq index rose 3.61 points or +0.03% at 11251.20. The low reached 11005.93. The high reached 11279.97
- Russell 2000 fell -18.53 points or -1.07% at 1707.50. The low reached 1684.85. The high reached 1712.28.
- NYSE Composite 14171.24 -169.04 -1.18
- CBOE Volatility 26.40 -0.42 -1.57
- NYSE Adv 794 Dec 2245 Vol 904 mln
- Nasdaq Adv 1434 Dec 2798 Vol 4.4 bln
- 3 of the 11 S&P 500 sectors closed in positive territory, information technology (+0.9%), consumer staples (+0.2%) and utilities (+0.01%). The technology sector got a boost today from semiconductor related names after Taiwan Semi (TSM 83.67, +2.38, +2.9%) beat on earnings and revenue and issued forward guidance above consensus.
- The remaining nine sectors showed losses ranging from 0.1% (consumer discretionary) to 1.9% (financials).
Market Pre-Market Notables
- JPMorgan (JPM 108.56, -3.35, -3.0%): JPMorgan Chase misses by $0.15, misses on revs; suspends stock buybacks
- Morgan Stanley (MS 75.00, +0.02, +0.1%): Morgan Stanley misses by $0.17, misses on revs
- Taiwan Semi (TSM 82.69, +1.40, +1.7%): Taiwan Semi beats by NT$0.62, beats on revs; guides Q3 revs above consensus
- Conagra (CAG 35.50, -0.24, -0.7%): Conagra beats by $0.02, reports revs in-line; guides FY23 EPS below consensus
- Intel (INTC 37.06, -0.15, -0.4%): Intel has informed customers that it plans to raise prices on a majority of microprocessors and chip products later this year, according to Nikkei
US Markets YTD
- Dow Jones Industrial Average: -15.7% YTD
- S&P 400: -20.5% YTD
- S&P 500: -20.5% YTD
- Russell 2000: -24.0% YTD
- Nasdaq Composite: -28.1% YTD
Key After Hours
- 10x Genomics (TXG) guides Q2 revs below consensus… TXG down 14.0%
- APA Corp. (APA) elects H. Lamar McKay as the next chairman of the board following current chairman John E. Lowe’s decision to retire; change will be effective September 1… APA up 0.6%
- Codexis (CDXS) guides Q2 revs below consensus; lowers FY22 revenue guidance; signs deal with Pfizer to supply enzyme used in PAXLOVID… CDXS down 18.3%
- Peabody Energy (BTU) guides Q2 revs below consensus… BTU down 3.7%
- Pinterest (PINS) moving higher after hours following WSJ report that activist Elliott Management Corp. has built a stake of over 9% in PINS… PINS up 15.8%
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
Bonds
U.S. Treasuries the 2s10s spread remains inverted. The 10-yr yield rose six basis points to 2.96% while the 2-yr yield slipped one basis point to 3.12%.
- 2-yr: -1 bp to 3.12%
- 3-yr: +2 bps to 3.15%
- 5-yr: +4 bps to 3.06%
- 10-yr: +6 bps to 2.96%
- 30-yr: +4 bps to 3.10%
USA News
- Fed’s Waller Says You Don’t Want to Overdo Rate Hikes Giving Bonds Some Relief – TRADERS COMMUNITY
- Into The Vortex – EIA Reports Natural Gas Build of 58Bcf with Scorching Temperatures and Humidity – TRADERS COMMUNITY
- US Producer Price Inflation Continues Elevated in June PPI +1.1% m/m +11.3% y/y – TRADERS COMMUNITY
- Morgan Stanley Investment Banking Hit by Capital Markets Seizing Up – TRADERS COMMUNITY
- JPMorgan Sets Aside More for Bad Loans and Suspends Buybacks after Earnings Miss – TRADERS COMMUNITY
- Chinese Chip Designer Nano Labs IPO Tied to Grin Crypto Mining Sector and Metaverse – TRADERS COMMUNITY
- Weekly Initial Claims 244K (consensus 239K); Prior 235K; Weekly Continuing Claims 1.331 mln; Prior was revised to 1.372 mln from 1.375 mln, initial claims have been inching higher in steady fashion since they reached a low of 167,000 at the end of March and are now at their highest level since early February.
Europe
Europe Stocks
Index – Last – Chg – % Chg
- UK: FTSE 100 7039.81 -116.56 -1.63
- Germany: DAX 12519.66 -236.66 -1.86
- France: CAC 40 5915.41 -84.83 -1.41
- Italy: FTSE MIB 20554.33 -732.00 -3.44
- Spain: IBEX 35 7804.30 -140.60 -1.77
- Stoxx Europe 600 406.50 -6.31 -1.53
- Switzerland: Swiss Market 10799.52 -105.33 -0.97
Europe News
- Germany’s June WPI 0.1% m/m (last 1.0%); 21.2% yr/yr (last 22.9%)
- Swiss June PPI 0.3% m/m (expected 0.9%; last 0.9%)
Asia
Asia Stocks
Index – Last – Chg – % Chg
- Japan’s Nikkei: +0.6%
- Hong Kong’s Hang Seng: -0.2%
- China’s Shanghai Composite: -0.1%
- India’s Sensex: -0.2%
- South Korea’s Kospi: -0.3%
- Australia’s ASX All Ordinaries: +0.6%
Asia News
- Japan’s chief cabinet secretary expressed concern about the rapid weakening of the yen, which fell to its lowest level against the dollar since 1998.
- Tokyo is expected to raise its coronavirus alert level.
- China’s National Development and Reform Commission said that the 2022 CPI target of about 3.0% remains within reach. Australia’s unemployment rate fell to its lowest level since 1974, boosting expectations for a 75-bps rate hike from the Reserve Bank of Australia.
- Japan’s May Industrial Production -7.5% m/m (last -4.9%) and Capacity Utilization -9.2% m/m (last 0.0%)
- India’s June WPI Inflation 15.18% yr/yr (expected 15.50%; last 15.88%)
- Australia’s June employment change 88,400 (expected 30,000; last 60,600) and full employment change 52,900 (last 69,400). June Unemployment Rate 3.5% (expected 3.8%; last 3.9%) and Participation Rate 66.8% (expected 66.7%; last 66.7%). MI Inflation Expectations 6.3% (last 6.7%)
- Singapore’s Q2 GDP 0.1% qtr/qtr (last 1.4%); 4.8% yr/yr (expected 5.2%; last 4.0%)
What You Need Know About Quantitative Tightening QT Bifurcations Explained – TRADERS COMMUNITY
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.
Looking ahead:
Economic Data:
The market will receive a few more noteworthy economic reports on Friday:
- 8:30 a.m. ET: June Retail Sales (consensus 0.8%; prior -0.3%), Retail Sales ex-auto (consensus 0.6%; prior 0.5%), June Import/Export Prices, and July Empire State Manufacturing survey (consensus -0.9; prior -1.2)
- 9:15 a.m. ET: June Industrial Production (consensus 0.2%; prior 0.2%) and Capacity Utilization (consensus 80.0%; prior 79.0%)
- 10:00 ET: May Business Inventories (consensus 1.2%; prior 1.2%) and preliminary July University of Michigan Consumer Sentiment survey (consensus 49.4; prior 50.0)
Earnings:
More bank earnings will be released ahead of Friday’s open with BlackRock (BLK 588.63, -7.75, -1.3%), Citigroup (C 44.14, -1.36, -3.0%), and Wells Fargo (WFC 38.74, -0.33, -0.8%) headlining the list. Major health care component UnitedHealth (UNH 502.43, +1.19, +0.2%) will also report its earnings tomorrow morning.
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!