Market Wrap – What Fed? Employment is Up, Tom Brady is Back. Stock Pump Continues March 16, 2002

FOMO eyes have a tendency to see what they want and today was a great example, as shorts unwound and Chinese and Hong Kong pumped on Chinese Administration moves. The S&P 500 rose 2.2% on brushing off a hawkish-sounding FOMC decision once Fed Chair Powell started speaking and soothed the market saying that he thinks the probability of a recession within the next year is low. The Nasdaq Composite (+3.8%) and Russell 2000 (+3.1%), the Dow Jones Industrial Average increased 1.6%.  The move has been fueled to the upside comes after the NASDAQ price spat under the previous low for the year from February 24 causing some auto shorts. The FOMC as expected raised rates by 25 basis points and signaled a series of rate hikes in 2022 and potentially into 2023.

After hours LEN rose when they reported earnings guidance. This is a high-risk earnings season. We saw another Bear Market rally after soaring on BTFD. We look at the indices, $AAPL, $AMZN, Gold, Copper, BTC, ETH, Natgas and oil in the podcast. We talk through 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

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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 earnings season. We got the Bear Market rally resolution which has angered the BTFD quotient.


Market Closes

Energy

  • April WTI crude oil (CLJ22) futures settled down 0.8%, or $0.74, to $95.42/bbl. 
  • Off the high price of $129.44. The highest in 2008 was $147.27.
  • April RBOB gasoline (RBJ22) closed down -17.08 (-5.39%).
  • April Nymex natural gas (NGJ22) settled up 18.0 cents day/day and settled at $4.748. May rose 16.7 cents to $4.784.
  • NatGasWeather noted that warm conditions permeated the southern United States Wednesday, with highs from the 60s to the 80s. Comfortable temperatures spanned the northern half of the country, too, with highs of 40s to 60s. The firm projected more of the same the rest of the week and into next. With “little subfreezing air anywhere in the U.S. the next seven days, national demand will be the lightest since last fall,” NatGasWeather said.
  • “The energy market fallout from Russia’s egregious invasion in Ukraine continues,” said EBW Analytics Group’s Eli Rubin, senior analyst. Traders “are pulling back from Russian supplies, with estimates of 2-3 million b/d of oil and product supply unable to find buyers as traders fear official new sanctions, desire to avoid being seen financing Russia, and freight and insurance costs spike.”
  • BNEF data showed gas flows to U.S. export terminals Tuesday rose +7.9% y/y to 12.166 bcf.  On Feb 18, gas flows to U.S. export terminals rose to a record 13.482 bcf.

Commodities and FX

  • The U.S. Dollar Index fell 0.8% to 98.34.  
  • Gold futures settled $20.50 lower (-1.1%) to $1,909.20/oz a two-week low ahead of this week’s Fed meeting.
  • May silver (SIK22) closed down -0.448 (-1.78%). 
  • CME Bitcoin Futures Settle MAR 22 +1160 40920.0

Stocks

For The Day

  • Dow industrial average rose 518.74 points or 1.55% at 34063.12
  • S&P index up 95.49 points or 2.24% at 4357.92
  • NASDAQ index up 487.94 points or 3.77% at 13436.56
  • Russell 2000 rose 61.75 points or 3.14% at 2030.72.
  • NYSE Adv 2541 Dec 639 Vol 1.4 bln
  • Nasdaq Adv 3137 Dec 932 Vol 6.4 bln

S&P 500 sector watch:

  • 8 of the 11 S&P 500 sectors closed higher
  • Eight of the 11 S&P 500 sectors closed higher, with the consumer discretionary (+3.4%) and information technology (+3.3%) sectors also rising more than 3.0%.
  • The energy (-0.4%) and utilities (-0.2%) sectors closed lower. 

Key Earnings Reviews


  • Smartsheet (SMAR 40.98, -2.51): -5.8% after guiding EPS for Q1 and FY23 below consensus, overshadowing its better-than-expected quarterly results and upbeat revenue guidance for Q1 and FY23. 
  • SentinelOne (S 29.50, -1.39): -4.5% despite beating top and bottom-line estimates and guiding Q1 revenue above consensus. 

US Markets YTD

  • Dow Jones Industrial Average -6.3% YTD
  • S&P 500 -8.6% YTD
  • Russell 2000 -9.6% YTD
  • Nasdaq Composite -14.1% YTD

Cboe Daily Market Ratios:

Cboe Daily Market Statistics

Europe

  • German Dax, Unchanged
  • France’s CAC -0.25%
  • UK FTSE 100, -0.25%
  • Spain’s Ibex, Unchanged
  • Italy’s FTSE MIB +0.2%

Asia

  • Japan’s Nikkei: +1.6%
  • Hong Kong’s Hang Seng: +9.1%
  • China’s Shanghai Composite: +3.5%
  • India’s Sensex: +1.9%
  • South Korea’s Kospi: +1.4%
  • Australia’s ASX All Ordinaries: +1.1%.
  • Hong Kong’s Hang Seng Index soared 9.1% and China’s Shanghai Composite surged 3.5%. Those power moves came on the heels of Wall Street’s positive showing on Tuesday and state media reports touting efforts to stabilize equity markets, including reports of progress with U.S. regulators on a cooperation plan for Chinese stocks listed in the U.S., a push to end the crackdown on Internet platform companies, and providing some stability for the real estate sector.

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 yields backtracked from highs, but they still settled on a curve-flattening note. The 2-yr yield increased 13 basis points to 1.97% (hit 1.92% post-settlement), the 10-yr yield increased two basis points to 1.18%.

  • 2-yr: +13 bps to 1.97%
  • 3-yr: +10 bps to 2.15%
  • 5-yr: +8 bps to 2.19%
  • 10-yr: +2 bps to 2.18%
  • 30-yr: -4 bps to 2.46%

Solid U.S. 30-year Treasury Bond Auction with High Yield of 2.375% Follows Screeching CPI – TRADERS COMMUNITY

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.

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%.

News Highlights

USA

  • The Retail Sales increased 0.3% month-over-month in February (consensus +0.4%), yet they were actually stronger than expected after accounting for the large upward revision to January to +4.9% from +3.8%. 
  • The same goes for retail sales, excluding autos. They were up 0.2% month-over-month (consensus +0.8%), yet that followed an upward revision for January to +4.4% from +3.3%. Gasoline station sales (+5.3%) were the difference maker in February. Excluding gasoline stations, retail sales declined 0.2% month-over-month, providing a sign of things to come perhaps as gas prices have moved higher in March.
  • Import prices rose 1.4% in February after increasing 1.9% in January. Excluding oil, import prices rose 0.8% after increasing 1.3% in January. Export prices rose 3.0% after increasing 2.8% in January. Excluding agriculture, export prices also rose 3.0% after increasing 2.8% in January.
  • The NAHB Housing Market Index for March decreased to 79 (Briefing.com consensus 81) from a revised reading of 81 (from 82) in February.
  • Business inventories increased 1.1% m/m in January following a revised 2.4% increase (from 2.1%) in December.
  • The weekly MBA Mortgage Applications Index declined 1.2% following an 8.5% increase in the prior week. 

Europe

  • Germany’s January Current Account Balance EUR11.0 bln (prior EUR24.6 bln)
  • Italy’s February CPI +0.9% m/m (+0.9% expected; prior +1.6%) and +5.7% yr/yr (+5.7% expected; prior +4.8%)

Asia

  • Japan’s February Exports +19.1% yr/yr (+21.0% expected; prior +9.6%) and Imports +34.0% yr/yr (+28.0% expected; prior +38.7%); March Reuters Tankan Index 8.0 (prior 6.0)
  • China’s February House Prices +2.0% yr/yr (prior +2.3%); January Industrial Production -0.8% m/m (-1.3% expected; prior -1.3%)
  • South Korea’s February Unemployment Rate 2.7% (prior 3.6%)

Looking ahead:

Monday: 

  • India, February consumer price index (CPI) data,
  • UK, Office for National Statistics annual review of the “shopping basket” of items making up the suite of consumer price inflation indices

Tuesday: 

  • Canada, January manufacturing data
  • China, monthly retail sales figures
  • EU, January industrial production data France, February inflation rate Germany, research group ZEW economic sentiment survey
  • India, trade statistics
  • Japan, balance of trade data
  • Opec monthly oil market report
  • UK, March payroll employment figures plus February insolvency numbers
  • US: February labour statistics US February PPI (prior 1.0%), Core PPI (prior 0.8%), and March Empire State Manufacturing Survey (prior 3.1) at 8:30 ET

Wednesday: 

  • Canada, February CPI data
  • International Energy Agency monthly oil market report
  • Italy, February CPI data
  • Japan, January industrial production figures
  • US: Weekly MBA Mortgage Index (prior 8.5%) at 7:00 ET; February Retail Sales (prior 3.8%), Retail Sales ex-auto (prior 3.3%), and February Import/Export Prices at 8:30 ET; January Business Inventories (prior 2.1%) and March NAHB Housing Market Index (prior 82) at 10:00 ET; weekly crude oil inventories (prior -1.86 mln) at 10:30 ET; and March FOMC Rate Decision (prior 0-0.25%) at 14:00 ET

Thursday:

  • St Patrick’s day: Irish taoiseach Michael Martin will hold the annual shamrock ceremony with US president Joe Biden in Washington
  • Norway, 23 Nato members plus Finland and Sweden begin winter exercises in northern Norway in the Cold Response 2022 event
  • Australia, Reserve Bank of Australia’s quarterly bulletin
  • EU, February inflation data
  • Japan, two-day Bank of Japan monetary policy committee meeting begins plus February CPI data
  • Spain, January trade balance figures
  • UK, Bank of England’s monetary policy committee vote on interest rates
  • US: February Housing Starts (prior 1.638 mln), Building Permits (prior 1.899 mln), weekly Initial Claims (prior 227,000), Continuing Claims (prior 1.494 mln), and March Philadelphia Fed Survey (prior 16.0) at 8:30 ET; February Industrial Production (prior 1.4%) and Capacity Utilization (prior 77.6%) at 9:15 ET; and weekly natural gas inventories (prior -124 bcf) at 10:30 ET

Friday: 

  • Holi, the Hindu festival of colors
  • Sikh festival of Hola Mahalla begins
  • Canada, January retail trade figures EU, January trade figures Italy, January trade balance figures UK, February retail sales figures
  • US: Quadruple Witching Day, when stock index futures, stock index options, stock options and single-stock futures expire February Existing Home Sales (prior 6.50 mln) at 10:00 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!