January 8 -14 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?
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
The first week of 2023 closed with a bounce on Friday with the main indices all up at least 2.0%. The lead came from the Treasury market, highlighted by a 32 basis points decline in the 10-yr note yield to 3.56%. The 2s10s inversion widened to 71 basis points (from 54 basis points at the start of the year) while the 3mo10yr inversion widened to 105 basis points (from 53 basis points at the start of the year). A standout off the ‘bear trap’ aspect was Tesla (TSLA 113.06, +2.72, +2.5%), after trading down as much as 7.7% in the wake of a Wall Street Journal report that it has cut prices again in China for its Model Y and Model 3 vehicles.
The move followed the December jobs report average hourly earnings growth moderating to 4.6% year-over-year from 4.8% in November. It is a key gauge for the Fed and front end led a broad-based rally fueled by short covering. The soft wages data had some kindling thrown on from ISM services and factory orders, both much weaker than anticipated. The US dollar concurred with the Bond market and weakened sharply against most major currencies after the reports.
Markets are pricing in a 4.95% peak Fed funds rate at the June 14th FOMC meeting, with rates then declining to 4.48% by the final meeting of the year on December 13th. Any manic asset pricing or robust numbers expect swift push back against market expectations for a 2023 Fed pivot. The FOMC is at least broadcasting strong consensus on the committee that tight conditions will be necessary, at least through the end of the year. Stay alert, is the message from us.
Commodities in the first trading week of the year saw a lot of continued trends, namely natural gas futures got wrecked again, losing another 16% after losing 11% for the week, and down 33% for December. Gasoline, WTI, Brent Oil and Heating oil were all lower. Wheat, Corn, Wheat and Oats all dropped between 6 and 2%. for the week. The common denominator with natural gas was milder weather. Copper, gold and cotton were the best performer for the week. The Bloomberg commodity index dumped 4.2% for the week.
It was a big move ahead of next weeks’ December inflation report, Fed Chair Powell’s speech at the Riksbank International Symposium, and the University of Michigan’s consumer sentiment report. There is a firm belief the Central Banks are blindly raising rates because ‘they have to’ and the consequences will be dire, furthermore that the US Administration is bumbling along with damaging decisions one after the other
No doubt about a deflating economy, the historic gigantic “tech” Bubble popped ad nauseum and continues to deflate with layoffs accelerating. Amazon’s 18,000 job cuts announcement representative of the effect of smaller margins, Tesla’s missed orders and need to discount another example. The high-risk places continue to unravel, Silvergate Capital saw a run-on deposits and a massive loss, intensifying fears the collapse of crypto exchange FTX may seep elsewhere into the financial system.
Some things never change, when you think Greed is Good
Swirling greed and know it all came home to roost. FOMO (fear of missing out) and TINA (there is no alternative) ended how they always do. The company made one of US banking world’s biggest bets on crypto. after the company’s announcement, Silvergate shares cratered a record 49%.
Where to from here? 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!
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
- “US and European investment into mainland China has largely been channeled through offshore vehicles set up by Chinese companies in tax havens, according to newly-published research, suggesting that foreign exposure to Chinese assets is much larger than recorded by official statistics. US and European investors’ holdings of equities and bonds issued by offshore vehicles controlled by Chinese companies… reached $1.4 trillion at the end of 2020, according to new estimates from the Global Capital Allocation Project based at Columbia and Stanford universities.” January 5 – Bloomberg (Tom Hancock and Spe Chen)
- “China is planning to relax restrictions on developer borrowing, dialing back the stringent ‘three red lines’ policy that exacerbated one of the biggest real estate meltdowns in the country’s history. Beijing may allow some property firms to add more leverage by easing borrowing caps, and push back the grace period for meeting debt targets set by the policy… The easing could mark the most dramatic shift in China’s real estate policy, adding to a clutch of measures issued since November to bolster the battered sector that accounts for about a quarter of the nation’s economy.” “January 6 – Bloomberg
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 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 CPI, Powell and Big Bank Earnings
It’s the second week of 2023 and earnings are upon us, big bank earnings start this week, and we get CPI and a Powell talk.
For the US center stage is the CPI report, Fed Chair Powell’s speech at the Riksbank International Symposium, and the University of Michigan’s consumer sentiment. CPI data will be released for China, India, Mexico, and Brazil. Foreign trade data for China, Australia, Euro Area, and UK and November GDP growth figures for the UK and the monetary policy meeting in South Korea.
Earnings include Delta Air Lines, KB Home, Taiwan Semiconductor, JP Morgan, BlackRock, Citigroup, Wells Fargo & Company and Bank of America
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.
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
- S&P500 gained 1.4%,
- Dow rose 1.5%.
- S&P 400 Midcaps jumped 2.5%,
- Small cap Russell 2000 gained 1.8%.
- Nasdaq100 increased 0.9%.
US Markets YTD
- Dow Jones Industrial Average: -8.8% YTD
- S&P Midcap 400: -14.5% YTD
- S&P 500: -19.4% YTD
- Russell 2000: -21.6% YTD
- Nasdaq Composite: -33.1% YTD
- Utilities increased 0.7%.
- Banks surged 4.4%,
- Broker/Dealers jumped 3.0%.
- Transports advanced 3.6%.
- Semiconductors surged 4.1%.
- Biotechs gained 2.1%.
- With bullion jumping $42, the HUI gold equities index surged 9.6%.
Biggest SPX Stock Winners and Losers Last Week
Global Stock Market Highlights
Highlights – Europe Stocks
- U.K.’s FTSE 100: jumped 3.3% (up 2.9% y-o-y).
- Germany’s DAX: jumped 4.9% (down 8.4%).
- France’s CAC 40: surged 6.0% (down 5.0%).
- Italy’s FTSE MIB: surged 6.2% (down 8.8%).
- Spain’s IBEX 35: rose 5.7% (down 0.6%).
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 +0.6% (-0.5% for the week),
- Hong Kong’s Hang Seng: -0.3% (+6.1% for the week),
- China’s Shanghai Composite: +0.1% (+2.2% for the week),
- India’s Sensex: -0.8% (-1.6% for the week),
- South Korea’s Kospi: +1.1% (+2.4% for the week),
Asia Pacific Region Equity Markets in 2022
- Hong Kong Hang Seng Closes Down 14.4% in Worse Year Since 2011
- Japanese Defense and Reopening Stocks Cushioned the Nikkei Dow and Topix in 2022
- South Korea’s Kospi the Weakest Stock Market in Asia This Year, Closing Down 24.9%
- China’s Shanghai and Shenzhen Stock Markets Plunged in 2022
- India’s Sensex Stock Market Performed the Best in Asia in 2022, Closing Up 4.4% in 2022
- Resilient Australian Stock Market Outperformed in 2022, Supported by Mining and Energy Stocks
Highlights – Australian Stocks
- Australia’s ASX: All Ordinaries +0.7% (+1.2% for the week).
- Miners led Friday where BHP jumped 3.2% to $47.51, and Rio Tinto jumped2.4% to $119.63. Fortescue Metals jumped 3.7% to $21.81.
- For 2022: Whitehaven Coal Ltd. (+303%) New Hope Corp (+194%) Woodside Energy Group (+64%)
- For 2022: Core Lithium Ltd. (+66%) Sayona Mining Ltd. (+46%) Mineral Resources Ltd. (+43%)
- Resilient Australian Stock Market Outperformed in 2022, Supported by Mining and Energy Stocks
Highlights – Emerging Markets Stocks
EM equities mixed
- Brazil’s Bovespa index slipped 0.7% (up 6.1%),
- Mexico’s Bolsa index surged 6.7% (down 2.8%).
- Turkey’s Borsa Istanbul National 100 index fell 3.0% (up 163%).
- Russia’s MICEX equities index was little changed (down 42.8%).
Daily: The daily SPX on Friday closed out the year right in the sphere of interest at the cloud twist. The market after spitting the 4100 and 38.2% retracement broke through all near support., though managing to capture the Tenkan on the last day of the year. 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 have sated much of the greed phase and short fear phase. We have completed that cycle and from here we measure the alternatives.
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 is likely 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.
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.
For fractal purposes, SPX completed 5 waves up where it reversed with impulse. 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.
Weekly: In the last week of 2022 we again closed under the Tenkan and 8/8 after the failed rally was rejected at the 50wma and +1/8. 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.
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?
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
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.
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.
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 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’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.
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.
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
Part B: Bond Markets
The Treasury market had a flying start to the new year, highlighted by a 32 basis points decline in the 10-yr note yield to 3.56%. The 2s10s inversion had widened to 71 basis points (from 54 basis points at the start of the year) while the 3mo10yr inversion widened to 105 basis points (from 53 basis points at the start of the year). Friday’s dollar index told us much of the story. The U.S. Dollar Index, up 0.5% just before the employment report was released, was down 1.1% to 103.90 by the close.
The soft wages data had some kindling thrown on from ISM services and factory orders. The December ISM Non-Manufacturing Index also registered its first contraction reading (49.6%) since May 2020, and November factory orders (-1.8% m/m) were much weaker than expected with declines both durable goods and nondurable goods orders.
Treasury Yield Watch
- 2-yr: -18 bps to 4.27% (-15 bps for the week)
- 3-yr: -24 bps to 3.98% (-25 bps for the week)
- 5-yr: -20 bps to 3.71% (-30 bps for the week)
- 10-yr: -16 bps to 3.56% (-32 bps for the week)
- 30-yr: -11 bps to 3.69% (-28 bps for the week)
For our complete Weekly Fixed Interest Analysis and Outlook visit our Bond Traders Weekly Outlook:
- Freddie Mac 30-year fixed mortgage rates added three bps to 6.44% (up 322bps y-o-y).
- Fifteen-year rates declined three bps to 5.77% (up 334bps).
- Five-year hybrid ARM rates fell nine bps to 5.53% (up 312bps).
- Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates down 12 bps to 6.47% (up 311bps).
Part C: Commodities
- Bloomberg Commodities Index dropped 4.2% (up 6.7% y-o-y).
- Spot Gold rose 2.3% to $1,866 (up 3.8%).
- Silver slipped 0.5% to $23.83 (up 6.5%).
- WTI crude sank $6.49 to $73.77 (down 7%).
- Gasoline slumped 8.7% (down 2%),
- Natural Gas sank 17.1% to $3.73 (down 5%).
- Copper rallied 2.6% (up 3%).
- Wheat dropped 6.1% (down 2%),
- Corn fell 3.6% (up 8%).
- Bitcoin rallied $400, or 2.4%, this week to $16,980 (down 59.2%).
Key Long Term Commodity Charts
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
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
- Oil and Natural gas are covered separately (see below)
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.”
- For the week, the U.S. Dollar Index increased 0.4% to 103.88 despite Friday’s sharp fall. 2022 gains were 8.2%
- For the week on the upside, the Mexican peso increased 1.8%, the Brazilian real 1.1%, the Australian dollar 0.9%, the Canadian dollar 0.8%, and the British pound 0.1%. The Chinese (onshore) renminbi gained 1.03% versus the dollar.
- On the downside, the Norwegian krone declined 2.0%, the Swedish krona 0.9%, the Japanese yen 0.7%, the euro 0.6%, the South African rand 0.4%, the Swiss franc 0.4%, the South Korean won 0.3%, and the New Zealand dollar 0.1%.
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.
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!
On the Risk Radar
Geopolitical Tinderbox Radar
Economic and Geopolitical Watch
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
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 is FOMC minutes. St. Louis Federal Reserve Bank President James Bullard is scheduled to give a presentation on the U.S. Economy and Monetary Policy on Thursday. Richmond Federal Reserve Bank President Thomas Barkin and Atlanta Federal Reserve Bank President Raphael Bostic are scheduled to give speeches Friday.
This Week’s Interest Rate Announcements (Time E.T.)
- None Seen
For our complete Central Bank Analysis and Outlook visit our Central bank Watch:
Economic Data Watch
US Data Focus
- Monday: November Consumer Credit (Prior $27.0B)
- Tuesday: November Wholesale Inventories (Prior 0.5%) U.S. Energy Information Administration will release its monthly Short-Term Energy Outlook.
- Wednesday: MBA Mortgage Applications (Prior -13.2%); EIA Crude Oil Inventories (Prior 1.69M)
- Thursday: December CPI (Prior 0.1%) and Core CPI (Prior 0.2%); Initial Claims (Prior 204K) and Continuing Claims (Prior 1694K); EIA Natural Gas Inventories (Prior -221 bcf); December Treasury Budget (Prior -$248.5B)
- Friday: December Import Prices (Prior -0.6%) and Export Prices (Prior -0.3%); January Preliminary Univ. of Michigan Consumer Sentiment (Prior 59.7)
Global Data Focus
- Europe: Eurozone unemployment rate and industrial for the Eurozone, Germany, and France. Meanwhile, Germany preliminary 2022 GDP data, Euro Area balance of trade; France’s final inflation figures and foreign trade; Italy’s retail sales and industrial production; Switzerland’s unemployment rate; Turkey’s jobless data and industrial output; and Russia’s inflation rate.
- UK: GDP, foreign trade, industrial production, and construction output.
- China: Chinese trade data, CPI, PPI, and housing price prints.
- Japan: November’s current account and Tokyo inflation.
- India: Industrial production figures and the inflation rate for November, followed by December’s trade balance.
- South Korea: Bank of Korea is expected to continue raising borrowing costs.
- Australia: January’s Westpac consumer confidence, November’s trade balance and retail sales count, and fresh labor data for December.
- New Zealand: PMI figures.
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.
- Monday. ICR Conference; Macy’s (M), Five Below (FIVE), Jack in the Box (JACK), First Watch (FWRG), and Boot Barn (BOOT). Guidance updates are expected to pour in during the conference. JPMorgan Healthcare Conference includes Bristol-Myers Squibb (BMY), Centene (CNC), Merck (MRK), and Walgreens Boots Alliance (WBA).
- Tuesday ICR Conference; Crocs (CROX), Urban Outfitters (URBN), Shake Shack (SHAK), Dutch Bros. (BROS), and Planet Fitness (PLNT). Guidance updates are anticipated to pour in during the conference. JPMorgan Healthcare Conference includes Halozyme Therapeutics (HALO), BioCryst Pharmaceuticals (BCRX), and AbbVie (ABBV). Intel (INTC) will host a launch event for its 4th Gen Intel Xeon Scalable processors and the Intel Xeon CPU Max Series, as well as the Intel Data Center GPU Max Series for high performance computing and AI.
- Wednesday JPMorgan Healthcare Conference includes Veeva Systems (VEEV), Viatris (VTRS), and Clover Health (CLOV).
- Thursday – JPMorgan Healthcare Conference includes bluebird bio (BLUE), Cryoport (CYRX), and TELA Bio (TELA). Semtech’s (SMTC) deal to acquire Sierra Wireless (SWIR) is expected to close.
- Friday – Reports from Robinhood Markets (HOOD) on operating data and from Caterpillar (CAT) on quarterly machines deliveries are due in around this date. Also watch for the monthly videogames sales report from NPD Group.
Earnings Highlights This Week:
- Monday includes Tilray Brands (TLRY), Jefferies Financial (JEF), Acuity Brands (AYI), PriceSmart (PSMT), and WD-40 Company (WDFC)
- Tuesday includes Albertsons Companies (ACI), Bed Bath & Beyond (BBBY) and TD Synnex (SNX)
- Wednesday includes KB Home (KBH)
- Thursday includes Taiwan Semiconductor Manufacturing Company (TSM),
- Friday includes UnitedHealth Group (UNH) Delta Air Lines (DAL) JP Morgan (JPM), Citigroup (NYSE:C), Wells Fargo & Company (WFC) and Bank of America (BAC)
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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