December 26, 2022 – January 2, 2023

FEAR NOT Brave Investors

Where have we been and where are we going? Join our weekly market thread on Traders Community…

The Week That Was – What Lies Ahead?

Contents

Click on the links below to navigate to the relevant section.

• Part A: Stock markets
• Part B: Bonds
• Fed and Banks
• Part C: Commodities
• Energy – Oil and Gas
• Gold and Silver
• Part D: Foreign Exchange
• Geopolitics and Economics
• Economy Week ahead

Editorial

It’s understandable that the past year may have been chaotic for many people, as the world has faced numerous challenges and changes. It can be helpful to take some time to reflect on the past year and think about how you have navigated these challenges. It’s also important to remember that even in difficult times, it’s possible to find moments of joy, connection, and resilience. It’s good to focus on the things that have gone well and to be grateful for what you have.

It’s also okay to acknowledge and process any difficult emotions or experiences that you may have had during the past year. Looking back on the past year with perspective can help you to gain a greater understanding of what you have been through and how you have coped. I hope that you are able to find ways to manage any challenges that come your way and that you continue to feel fine moving forward. Embrace the chaos that is headed your way in 2023!

Markets didn’t react as Santa rally fans had hoped this past week. The dramatic continual sell off of Tesla not helping the bull’s cause. Tax-loss selling efforts piled on the week’s losses with sentiment souring because of a growing belief that 2023 earnings estimates are unrealistic, China is imploding and downward revisions with an aggressive thread choking off growth lurking. The S&P 500 went from 4,100 last Tuesday to the 3,800-support area without much difficulty.  

It started with a shift from the BoJ on its yield curve control (YCC) policy to allow the 10-yr JGB yield to move +/- 50 basis points from 0.00% versus its prior band of +/- 25 basis points as part of an effort “to improve market functioning.”  The yen surged as much as 4.0% against the dollar. 

This followed a weaker-than-expected NAHB Housing Market Index report for December on Monday. Then more disappointing housing data with an 11.2% month-over-month decline in November building permits (a leading indicator) to a seasonally adjusted annual rate of 1.342 million (consensus 1.480 million). It wasn’t all bad, earnings reports from Nike (NKE) and FedEx (FDX) triggered buying interest.  On the flipside Micron (MU) and CarMax (KMX) were dismal reports that prompted selling.

The week ended with a downbeat November Personal Income and Spending Report with a nod to stagflation. No growth in real spending and PCE and core-PCE inflation rates still too high on a year-over-year basis (5.5% and 4.7%, respectively) for the Fed’s game plan.

The Credit cycle downturn is coming to the surface.

“Moody’s… raised its forecast for speculative-grade corporate defaults in 2023, warning they could more than quadruple under its most pessimistic scenario. The agency predicts the default rate will climb to 4.9% by November of next year under its baseline scenario, from a forecast of 2.9% for the end of 2022. Last month’s year-ahead projection was 4.5%.”

December 16 – Bloomberg (Finbarr Flynn):

China; Behind the Iron Curtain

• “Concerns are growing about the $1.6 trillion of debt from Chinese local government financing vehicles amid one of the fastest declines in the onshore credit market. Wealth-management products, investment pools that have been selling corporate bonds to meet investor redemptions, are one of the major buyers of LGFV yuan notes. Surging yields and widening credit spreads have prompted firms, including many LGFVs, to pull a cumulative 84 billion yuan ($12.1bn) of planned bond sales since the start of November… Yields on some notes from nonfinancial firms including LGFVs rose more than 10 bps Wednesday… Redemptions of WMPs had already resulted in yield premiums for three-year AAA-rated corporate bonds reaching the highest level since August 2020… The deepening selloff in corporate notes is poised to exacerbate refinancing pressure on LGFVs and lead to higher credit risk in the sector.” December 14 – Bloomberg (Wei Zhou)
• “Beijing’s retreat from its zero-Covid policy is causing chaos in the country’s Rmb29tn ($4.1tn) market for wealth management products, with some fund managers having to freeze withdrawals or sell down their holdings as they struggle to cope with a rush of redemptions by investors. Half of the country’s 31,000 outstanding fixed-income WMPs have reported a decline in value since the government first signalled that it would relax its strict approach to Covid-19 on November 11… Wind, a financial data provider, reported that 1,837 fixed-income WMPs, a major source of funding for China’s bond market, were trading below par value as of December 12, compared with 256 at the beginning of November.” December 7 – Financial Times (Sun Yu)

The market rupture tripod of destruction.

• Firstly, financial asset overvaluation has swung way past any sound underlying economic wealth structure.
• Secondly over-leverage in crowded bets.
• Thirdly we have greed enthused, as always in these cycles, risk engineering, transfer and management that ignores or understands bifurcation and contagion outcomes.

Leverage has become toxic, a development that if not addressed will have deep and with far-reaching sequels. It’s not too farfetched to suggest that the markets are on the verge of a rupture that would be difficult to contain. Should the crisis of confidence dynamics that hit Britain feed into other markets a powerful global contagion could be unleashed. The markets are dislocated, and financial stability is at risk. A sobering thought is the UK is just the initial first world pension system in this cycle facing the harsh reality of a steep devaluation of assets and the prospect of widespread insolvencies and debilitating negative sentiment.

Inflation Matters

Inflation with Henry Kaufman

Kaufman is the legendary chief economist and head of bond market research at Salomon Brothers is someone who knows Inflation.  Henry Kaufman in an interview with Bloomberg’s Erik Schatzker Jan 14, 2022:

 “I don’t think this Federal Reserve and this leadership has the stamina to act decisively. They’ll act incrementally. In order to turn the market around to a more non-inflationary attitude, you have to shock the market. You can’t raise interest rates bit-by-bit.”

“The longer the Fed takes to tackle a high rate of inflation, the more inflationary psychology is embedded in the private sector — and the more it will have to shock the system.”

“‘It’s dangerous to use the word transitory,’ Kaufman said. ‘The minute you say transitory, it means you’re willing to tolerate some inflation.’ That, he said, undermines the Fed’s role of maintaining economic and financial stability to achieve ‘reasonable non-inflationary growth.’”

Ahead is China, Tesla and Santa Claus Rally Hopes

It’s the last week of 2022 and it couldn’t end fast enough is a common mantra we hear, the period between Christmas and New Year’s Eve will be quiet across global calendars other than the battle cries over Tesla, twitter and Elon Musk and developments in China. How much will supply chains be damaged by the widespread Covid spread? Distortions are upon us; the magnitude and duration of interruptions and inflation risk and inflation expectations are in focus.

For the US we get investors hoping for a Santa Claus rally. In the US, housing data and several regional PMI readings will take center stage. Japan will release retail sales, industrial production, and unemployment rate while in South Korea, Spain, and Russia the focus will be on inflation rates.

Earnings include GreenTree Hospitality (GHG), Cal-Maine (CALM) and Vizsla Silver (VZLA)

Click here to see the Full Week Ahead List Below

Independence – Never Take It for Granted Traders

“In aggregate, the market goes from order to disorder, and on that journey little pockets of order can form, including in commodities, bonds, stocks, currencies that circle back and reorder disorder. Then there is us the market player that reflects through order and disorder in an ever-evolving loop towards independence. It all starts with gravity and ends with equilibrium and back we go.” KnovaWave “The rules of market flux”

The Fed has kicked off its first real tightening campaign since 1994, with securities markets already at the brink of illiquidity and dislocation. Markets could soon be screaming for assurances of the Fed’s “buyer of last resort” liquidity backstop, while the Fed is prepared to begin withdrawing liquidity by selling Treasuries and MBS.

Another important aspect is the Fed doesn’t Control corporate pricing or wage decisions. Let us be clear geopolitical, climate change developments and what an out of depth, politically motivated administration are outside the Fed’s sphere of influence. There has been over $5.1 Trillion new “money” in 126 weeks, it’s a reasonable conclusion the Fed has lost control of Inflation.

Volatility

The VOLX`s underlying instrument is the Mini VIX™ Future. The CBOE Volatility Index (VIX) is an up-to-the-minute market estimate of expected volatility. The VIX is calculated using a formula to derive expected volatility by averaging the weighted prices of out-of-the-money puts and calls (options) on the S&P 500.

When the VIX is highly reactive, VIX related products can serve as potentially effective hedging tools, when the VIX is not very reactive, traditional hedging techniques may be a better choice.

We need to grasp all the risks to be wary off and received plenty of flak from it. We always talk here about expect the unexpected and now that is front and center, gage the market’s reaction, the market is always right and that’s why we focused on the crowd psychology aspect over the past few weeks.

“We have a market trying to interpret the Fed who is trying to find out how they can interpret their long-only portfolio at a risk parity where rates cannot rise.”

– MoneyNeverSleeps

Cboe Daily Market Statistics

Our weekly reminder for risk. The downside is clear with the absence of moral hazard from repeated Federal Reserve market bailouts in an environment of some would say obscene liquidity pumps. Pure greed is the other part, not wanting to miss out on fees. The obvious question is, how deeply ingrained is this attitude through the markets? How do we ween the markets off this continuous dip feed? At this point the Central Banks have kicked that answer down the road.

Part A – Stock Markets

Weekly Highlights – USA

Indices

• S&P500 slipped 0.2% (down 19.3% y-t-d),
• Dow increased 0.9% (down 8.6%).
• S&P 400 Midcaps increased 0.8% (down 14.3%),
• Russell 2000 was little changed (down 21.6%).
• Nasdaq100 lost 2.3% (down 32.7%).

US Markets YTD

• S&P 500 fell 2.1% (down 19.2% y-t-d)
• Dow lost 1.7% (down 9.4%)
• S&P 400 Midcaps fell 2.1% (down 15.0%)
• Small cap Russell 2000 slumped 1.9% (down 21.5%).
• Nasdaq100 dropped 2.8% (down 31.1%).

Sectors

• Utilities rallied 1.5% (down 1.8%).
• Banks recovered 1.7% (down 24.9%),
• Broker/Dealers gained 1.1% (down 7.5%).
• Transports fell 1.3% (down 17.7%).
• Semiconductors dropped 3.8% (down 35.7%).
• Biotechs dipped 0.6% (down 4.0%).
• With bullion gaining $5, the HUI gold equities index rallied 4.4% (down 10.5%).

Six sectors finished higher, and five sectors finished lower last week. The best performing sectors were energy (+4.4%), utilities (+1.4%), financials (+1.4%), and consumer staples (+1.0%). The weakest were the consumer discretionary (-3.1%) and information technology (-2.0%) sectors dragged down by their mega cap components ($TSLA, $AAPL to name two). The Vanguard Mega Cap Growth ETF (MGK) declined 2.1% for the week. 

Biggest SPX Stock Winners and Losers Last Week

Global Stock Market Highlights

Highlights – Europe Stocks

• U.K.’s FTSE 100:  rallied 1.9% (up 1.2% y-t-d)
• Germany’s DAX:  gained 0.3% (down 12.2%)
• France’s CAC 40:  increased 0.8% (down 9.1%).
• Italy’s FTSE MIB:  increased 0.8% (down 12.7%)
• Spain’s IBEX 35: recovered 1.9% (down 5.1%)

Germany’s benchmark Blue Chip DAX 30 index (Deutscher Aktienindex) expanded to 40 companies on 20 September adding 10 new members to the German stock index from the MDAX which will be reduced from 60 to 50 members.

 Highlights – Asia Stocks

• Japan’s Nikkei declined 4.7% (down 8.9% y-t-d).
• South Korea’s Kospi  fell 2.0% (down 22.3%).
• India’s Sensex dropped 2.4% (up 2.7%).
• China’s Shanghai sank 3.9% (down 16.3%)

 Highlights – Australian Stocks

• Australia’s ASX All Ordinaries: Australia’s ASX All Ordinaries: Friday -0.8% (-1.3% for the week)
• Friday saw strength again in the mining sector led by January iron ore on China’s Dalian Commodity Exchange. Rio Tinto rose 1.3%, while coal player Yancoal gained 2.8%. Ampol closed 2.5% higher, and diversified energy firm New Hope rose 2.8%.

Highlights – Emerging Markets Stocks 

EM equities lower

• Brazil’s Bovespa index rallied 6.7% (down 4.7%),
• Mexico’s Bolsa index recovered 1.9% (down 5.1%)
• Turkey’s Borsa Istanbul National 100 index jumped 4.6% (up 194%).
• Russia’s MICEX equities index slipped 0.4% (down 43.9%).

Technical Analysis

S&P 500

Daily: Friday saw a key rest of the S&P 500 200-day moving average at 4,046 which it broke Wednesday. After the NFP it broke, tested the 4000 level only to spit back above that key level where it vacillated for much of the day. This underscores the power from the SPX spat of June & October lows with impulse through the tenkan and Kijun energized by the daily cloud twist that fueled this rally. The completive wave came off extreme fear and bear that ended with relief. Now we are in the greed phase and short fear phase.

Recall last time we rallied through the daily Tenkan to retest May’s break. Kijun is key and we blew through it with a 1-2, the down sweep was fueled by the spit of the Kijun set the wave 3 or C up with power to close at the June lows. On the downside the Kijun and those June lows now critical and is our trading Bear/Bull pivot in a high vol scenario. Watch each measured 3 wave move on the 240 & Murrey Math highlighted in the podcast. The prices pulled through the downward cloud pulled by the twist ‘helium contusion’ on the completive.

Tracing back from highs the fuel from the top of the channel after completing 3 waves off ATH, accelerated after broke the Tenkan through to the 4600 OI where it reversed with impulse back to Tenkan Bulls this a (ii) of a 5. Bears this is 1-2 of (i) completive V of degree. We watch if this low was a (iii), (a) or C. We have to respect the number of alternatives of degree of 5. With such trends keep it simple resistance is Tenkan and Kijun and watch for ABC. From no fear to panic is the driving element.

For fractal purposes, SPX completed 5 waves up where it reversed with impulse with energy fueled from the power impulse down from +1/8 ATH spit of a spit fail. On the way down (just like up) it accelerated after it broke the Tenkan through the rejected Kijun and then through the median after tapping 8/8.

The breakup was from above the 200dma. The balance from sharp reversal after the initial 3 wave down from the SPX wave 5 extension as Covid19 fed impulse accelerated under the Tenkan. From there we had seen the ABC or 1-2-3 spinning around the 61.8% of the move. Support began at the October 2019 lows. A manic wave 5 or 3 of some degree was a resolution for the ages. Note the 100% extension from the emotive element and MM levels when the spit kicks in. A manic wave 5 or 3 of some degree was a resolution for the ages. Note the 100% extension from the emotive element and MM levels when the spit kicks in

Weekly:

We closed over the 50wma and +1/8, we are playing out S&P 500 energy after it held the sphere of influence from Nov 2020 reversed higher after spitting the 38% and key lows. At the time we opined “We do have a weekly cloud twist; however, the energy is waning without sharp impulse.” We got the sharp impulse right to weekly Kijun. For major cycles we watch the S&P 500 over 4,231, the 50% retracement of losses from the Jan. 3 & June 16 close. Since 1950 there has never been a bear market rally that exceeded the 50% retracement then gone on to make new cycle lows. Is this time different, as we tested and spat those June lows?

Key support is the 38% correction and the previous low. Power came from rejecting the cloud as one would expect in a 3 or C. We have Kijun. the Tenkan and 50wma all above i.e impulse right to the weekly cloud is needed for cycle switching. For that you would have to break the Kijun and 50wma.

On the way up each new high evolved after testing Tenkan key support on the way and we are now getting a retest as resistance. We reiterate this needs to be recovered for a resumption of the uptrend meanwhile the bear market plays out. Watch Tenkan this week and watch for Kijun reaction. Extensions are difficult to time, keep it simple.

THE KEY: Key for the impulse higher was the spit or retest of MM 8/8 and Tenkan San, which held with the previous highs and Tenkan.  To repeat “We look for 3 waves down and reactions to keep it simple with the alternatives in the daily.”  Keep an eye on the put/call ratio with recognition to the sheer size of contracts AND keep in mind the stimulus distortion. The spit per channel fractal and Adams rule launched back over the cloud where we were encased AND we are back testing it. Watch if a spit or clear break support as Chikou rebalances

A reminder that Apple Inc $AAPL, Microsoft Corp $MSFT, Amazon.com Inc $AMZN, Facebook Inc $FB, and Google-parent Alphabet Inc $GOOGL make up approximately 23% of the total weight of the S&P 500. With that comes gyrations that are an outsized impact on broader markets

NASDAQ 100

The down move saw Nasdaq spit the weekly Kijun and a 1-2 off tenkan we spat MM 5/8 after holding the key 61.8% Fib. We watch the Tenkan & Kijun confluence above, the breakup level and between the 38/50 Fibs. The Nasdaq is well behind the S&P pace with the weekly cloud and 50wma well above. Support the 61.8% retest.

Recall ATH was after it broke and held the weekly Tenkan to see a spit of a spit fail which is completive of 5 of some degree with Chikou rebalancing. Watch Chikou for divergence for continuation or failure. Divergence with Russell also a clue.

Dow Jones

The Dow led the indices and closed above the weekly Tenkan after closing and testing last week. Prior test after the reaction off the June lows and sphere of influence. Support is the channel and Fibs. Tenkan and Kijun after the reaction empowered. Support is the channel and Fibs.

Russell 2000

The small cap Russell RUT bounced in double bottom off 1600 5/8 confluence which was the Nov 2020 breakup. Russell 2000 Resistance Tenkan and Kijun, note previous rejections. This is the index showing more of the fast money crowd and is trading like it. Needs to get traction in here for bulls. 7/8 & 8/8 support collapsed on the way down and is now major resistance.

Semiconductors SMH

Semiconductors SMH clean with reaction from above reverted with retest & break of the triple top patterning in a pennant. From there been a fractal on each exhaustion. Pull from Chip players $ON $TSM $NVDA $ASML $AMD $QCOM $AVGO $TXN $INTC $AMAT $LRCX $XLNX

NVidia $NVDA

NVidia’s latest slide was off earnings, back to lows at 4/8 after a failed breakup retest from May 2021. NVidia is a clear leader of #SOX #SMH look for cues there and ABC failures for changes. Above is the Key Break (mauve) and Tenkan to a flat cloud. Support the recent low at the 61.8% extension.

Apple $AAPL

Heading into another Earnings Apple held the sphere of influence after retesting 7/8 & break up. Kijun and Tenkan are about to touch, with earnings we watch for a kiss of death at the cloud as the story. Apple & other mega-cap names dominant the major indices, and a plethora of funds that hold it as a core position. The Vanguard Mega-Cap Growth ETF (MGK) delta is important to watch.

A firm rejection at $175 at +2/8 triggered a waterfall down for Apple. On the way up Apple gently motored up to new ATH over the massive $160 then $170 thru to $180 gamma level on the way down these levels became key energy levels all the way to $132. Support held at the May break (just like NVDA) where from there it spat the cloud pulled by a flat Tenkan and Kijun as it rebalanced Chikou. The old channel break and MM 8/8 is now key. Remember the impact $AAPL has, at least short term on all the major indices.

ARKK ETF

The ARK Innovation ETF (ARKK) finally found some support at -1/8, 78% off highs and the 423.6% extension! The fund is filled with growth stocks and was the top-performing U.S. equity fund tracked by Morningstar in 2020, it has not been a pretty slide.

The ARKK ETF trading clinically, tested triangle breakdown and failed off 50 WMA. Some work at support at 61.8% of whole move and then wrecked again. Clear crowd behavior, we saw ATH in NASDAQ & SPX, yet this couldn’t raise a bid – very telling negative divergence. $ARKK rebalanced Chikou at week’s end

ExxonMobil XOM

Part B: Bond Markets

Bond Watch

Treasuries

U.S. Treasuries were lower by weeks’ end. The core personal consumption expenditure price index (Core PCE prices) in the US, which exclude food and energy, rose by 0.2 percent month-over-month in November of 2022 as expected.  The annual rate, the Federal Reserve’s preferred gauge of inflation, fell to 4.7 percent from 4.7 percent, also with expectations.  Notably real personal spending, adjusted for changes in prices was flat after it rose 0.5% in October which had been the most since the start of the year and largely reflecting a surge in outlays for merchandise. The big move was in currency markets and global spreads after the BOJ moved on spreads.

Treasury Yield Watch

• 2-yr: +6 bps to 4.31% (+11 bps for the week)
• 3-yr: +6 bps to 4.09% (+19 bps for the week)
• 5-yr: +7 bps to 3.86% (+24 bps for the week)
• 10-yr: +8 bps to 3.75% (+27 bps for the week)
• 30-yr: +10 bps to 3.82% (+29 bps for the week)

For our complete Weekly Fixed Interest Analysis and Outlook visit our Bond Traders Weekly Outlook:

Mortgage Market

• Freddie Mac 30-year fixed mortgage rates dropped 11 bps to a three-month low 6.28% (up 318bps y-o-y).
• Fifteen-year rates fell 11 bps to 5.68% (up 330bps).
• Five-year hybrid ARM rates slipped two bps to 5.47% (up 302bps).
• Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates up 14 bps to 6.63% (up 338bps).

Part C: Commodities

Highlights

• Bloomberg Commodities Index was little changed (up 13.5% y-t-d).
• Spot Gold increased 0.3% to $1,798 (down 1.7%).
• Silver gained 2.2% to $23.73 (up 1.8%).
• WTI crude surged $5.27 to $79.56 (up 6%).
• Gasoline rallied 11.8% (up 7%),
• Natural Gas sank 23.0% to $5.08 (up 36%).
• Copper rallied 1.3% (down 15%).
• Wheat jumped 3.0% (up 1%),
• Corn rose 2.0% (up 12%).
• Bitcoin was up $200, or 1.2%, this week to $16,800 (down 64%).

Key Long Term Commodity Charts

Copper

Gold

WTI Oil

Natural Gas

BDI Freight Index

For our complete Weekly Commodity Analysis and Outlook visit our Commodity Traders Weekly Outlook:

Charts and commentary via KnovaWave on:

• Grains: Wheat, Corn, Soybeans
• Metals: Copper, Aluminum
• Precious Metals: Gold Silver
• Lumber
• Oil and Natural gas are covered separately (see below)

Energy

For complete Oil and Natural Gas Coverage please visit our dedicated publications ‘Around the Barrel’ and ‘Into the Vortex.’ – Weekly Analysis and Outlook for Energy Traders and Investors

Part D: Forex Markets

John Maynard Keynes, 1920: “There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction and does it in a manner which not one man in a million is able to diagnose.”

Highlights

• For the week, the U.S. Dollar Index declined 0.4% to 104.31 (up 9.0% y-t-d).
• For the week on the upside, the South African rand increased 3.9%, the Brazilian real 2.8%, the Japanese yen 2.8%, the Mexican peso 2.1%, the South Korean won 2.1%, the Canadian dollar 0.7%, the Singapore dollar 0.6%, the Australian dollar 0.5%, the euro 0.3%, and the Swiss franc 0.1%.
• On the downside, the New Zealand dollar declined 1.5%, the Swedish krona 1.1%, and the British pound 0.8%. The Chinese (onshore) renminbi declined 0.23% versus the dollar (down 9.07% y-t-d).

For our complete Forex Weekly Analysis and Outlook visit our Forex Traders Weekly Outlook:

Charts and commentary via KnovaWave on the US Dollar, Euro, Japanese Yen, British Pound, Euro Pound, Swiss Franc, Canadian Dollar, Australian Dollar, New Zealand Dollar, Turkish Lira, Mexican Peso. Currency dynamics are complex. There are myriad facets to analyze and contemplate that influence all markets.

Cryptocurrencies

Bitcoin

Bitcoin continues to churn following the FTX collapse. BTC had been stuck in the sphere of influence in continuation awaiting a catalyst, and it came. Continues to perform technically to perfection. Impulse begets impulse. To understand panic, understand greed. $BTC tested the top of a rising channel after the preceding sharp downturn which was the downside breakout of an earlier bearish flag, after breaking downside a H&S top and then down it went….

Recall Bitcoin exploded higher following it’s correction impulsively upon completing 5 waves up at +2/8. Each Tenkan and Kijun tap saw an explosive kiss of death until we completed 3 waves to around 28,000. From there we have seen extreme volatility.

Looking back Bitcoin put in a high of $63,000 around Coinbase, the largest US crypto exchange successfully went public which signaled profit-taking. The high over $68,000 came after the launch over the Bitcoin ETF. From that high we have 2 main alternatives a V of a 1 of a V. For bears it a completive five with impulse right to the 50wma – an incredible 26% fall in a Friday night session. That’s impulse!

Ethereum

On the Risk Radar

Fed Warnings on Possible Medium To Long Term Risks

 Geopolitical Tinderbox Radar

Economic and Geopolitical Watch

Banks

Major banks kicking off earnings this quarter, including BlackRock (BLK), Citigroup (C), First Republic Bank (FRC), JPMorgan Chase (JPM) and Wells Fargo (WFC).

Major US Banks Deliver Mixed Results in Q3, 2022

The major money cents banks released earnings with many strong results for Q3. Mainly from the interest rate spreads on the positive side. We see a reversal of loss reserve releases from the pandemic kitty as the economy slides into recession.

• Goldman Sachs Bear Market Woes, Trading Revenue up 11%, Investment Banking Revenue Fell 57%
• Charles Schwab Client Assets Fell $1.4 Trillion to $6.6 trillion in the Third Quarter
• Bank of America Earnings Beat as Net interest Income Jumped 24% Thanks to the Federal Reserve
• PNC Bank Earnings Higher with Widening Net Interest Margin
• JPMorgan Benefitting from Fed Rate Hikes with Record Quarterly Net Interest Income
• Wells Fargo Earnings Again Hit by Regulatory Charges with Another $2 billion in Charges
• US Bancorp Earnings Benefitting from Rising Interest Rates and Loan Growth
• Morgan Stanley Investment Banking Drags Down Earnings
• Citigroup Earnings Boosted by Inflation Spiked Credit Card Revenue
• BlackRock Earnings Cushioned by ETF Products as Assets Under Management Fall 16% To 2020 Levels

Banks are benefiting from the Federal Deposit Insurance Commission intending to ease the Volcker Rule, which restricts banks from making large investments into venture capital. The Volcker Rule was enacted in the wake of the 2008 financial crisis, and the new changes could potentially free up billions in bank capital.

The Week Ahead – Have a Trading Plan

What Macro and Micro Risks and Opportunities Lie Ahead this week

Global Watch

Next 2 Week’s Risk Dashboard via Scotiabank ..

• Inflation strikes cookies, carrots & milk!
• Monitoring China’s supply chains
• Are nonfarm payrolls overestimating jobs?
• Are Canadian jobs still resilient?
• US, Canadian wage pressures
• FOMC minutes
• EZ CPI: peaking headline, not core?
• Other macro

Central bank Watch

The most notable event are the Bank of Japan Governor Kuroda’s speech Sunday night and the central bank’s “Summary of Opinions” for insights on the central bank’s outlook after it unexpectedly increased its yield curve control threshold last Tuesday. The Argentina central bank has an Interest Rate Decision at the end of the week, the benchmark interest rate in Argentina was last recorded at 75 percent

This Week’s Interest Rate Announcements (Time E.T.)

• 20:30 Argentina Interest Rate Decision Friday, Dec. 30

For our complete Central Bank Analysis and Outlook visit our Central bank Watch:

Economic Data Watch

US Data Focus

• Monday: Bond and equity markets closed for Christmas
• Tuesday: November advance goods trade deficit (prior -$99.00 bln), November advance Retail Inventories (prior -0.2%), and November advance Wholesale Inventories (prior 0.8%) at 8:30 ET; October FHFA Housing Price Index (prior 0.1%) and October S&P Case-Shiller Home Price Index (prior 10.4%) at 9:00 ET; and $42 bln 2-yr Treasury note auction results at 13:00 ET
• Wednesday: Weekly MBA Mortgage Index (prior 0.9%) at 7:00 ET; November Pending Home Sales (prior -4.6%) at 10:00 ET; and $43 bln 5-yr Treasury note auction results at 13:00 ET
• Thursday: Weekly Initial Claims (prior 216,000) and Continuing Claims (prior 1.672 mln) at 8:30 ET; weekly natural gas inventories (prior -87 bcf) at 10:30 ET; weekly crude oil inventories (prior -5.89 mln) at 11:00 ET; and $35 bln 7-yr Treasury note auction results at 13:00 ET
• Friday: Chicago PMI (prior 37.2) at 9:45 ET; Treasury market to close at 14:00 ET

Global Data Focus

• OPEC:
• Canada:
• Brazil:
• Mexico:
• Europe:  European Central Bank will be publishing its monetary indicators. Preliminary reading of consumer price inflation rates for Spain and Russia, as well as France’s unemployment data, Swiss KOF Leading indicators and business morale, and Turkey’s manufacturing confidence.
• UK:  UK release of December’s house prices.
• China:
• Japan: Bank of Japan Governor Kuroda’s speech and the central bank’s “Summary of Opinions” for insights on the central bank’s outlook after it unexpectedly increased its yield curve control threshold. Japanese economic releases will include retail sales, industrial production, the unemployment rate, and housing starts.
• India: India third quarter’s current account deficit is expected to surge to a record high as high energy costs and a weak rupee inflated goods import.
• South Korea: South Korea inflation, and consumer and business confidence for December.
• Australia:  
• New Zealand:

Earnings and Event Watch

US Stocks Watch

Investors (and algos) will focus on the conference calls and outlooks. Last quarter everyone expected the worse, we saw critical updates on production in coronavirus impacted regions and if there is extended halting of operations weighing on multi-nationals. 

Events

• Monday. Cinema names on watch with weekend numbers for Avatar: The Way of Water (DIS) second week: AMC; Cineworld (CNNWQ), Cinemark (CNK), IMAX (IMAX), Marcus (MCS), Reading International (RDI), Cineplex (CGX:CA), and National CineMedia (NCMI). The days between Christmas and New Year’s Day typically accounting for as much as 5% of the year’s total box office haul.
• Tuesday Nio (NIO) Nio Day event over the weekend.
• Wednesday Cal-Maine Foods (CALM) will report earnings. The USDA increased its forecast for egg prices for 2023 to a range of +4% to +5% after prices for eggs at retail locations has surged more than 30% this year. Clinical-stage biotech TG Therapeutics (TGTX) action date for the Biologics License Application for ublituximab for relapsing forms of multiple sclerosis.
• Thursday – Roche (OTCQX:RHHBY) (OTCQX:RHHBF) with the FDA expected to make a decision on mosunetuzumab for relapsed or refractory follicular lymphoma.
• Friday – It is the last trading day of the year, which can have portfolio rebalancing implications for certain stocks. Netflix (NFLX) members will be able to stream fitness content from Nike (NKE) Training Club for the first time ever in a partnership seen benefiting both companies. It is the walk date for the Sino-Biopharma (OTCPK:SBHMY) acquisition of F-star Therapeutics (FSTX), as well as the Rogers (RCI) deal to take over of Shaw Communications (SJR). Four-day San Diego Auto Show begins with a media event. Some of the automakers showing off new models include Hyundai (OTCPK:HYMLF), Nissan (OTCPK:NSANY), Stellantis’ (STLA) with the Ram and Jeep brands, Ford (F), and Volkswagen (OTCPK:VLKAF).

Earnings

Earnings Highlights This Week:

• Monday includes U.S. stock markets closed for Christmas holiday. No notable earnings scheduled.
• Tuesday includes GreenTree Hospitality (GHG),
• Wednesday includes Cal-Maine (CALM) Vizsla Silver (VZLA)
• Thursday includes No notable earnings scheduled.
• Friday includes No notable earnings scheduled.

IPO Wrap

US IPO Week Ahead:

Focus on yourself and what YOU CAN INFLUENCE, set your trading plan and goals in be set for 2022.

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