February 19-26, 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

The week finished pressuring asset prices, fear levels rose and confusion reigns. Both market participants and Central Bankers are acting belligerent in where they think prices should be. Bottom line is we getting robust signals from the economy about a year-and-a-half into upward pressure on market-based borrowing costs, why? The macroeconomic environment has been better than feared and certainly a lot better than some of the end of the world narratives.

Air came out as we expected after much of the short asset squeeze pulled back, be it in consolidation or topping. We saw significant moves in stocks, commodities and bond prices. With that we saw some closing of the recent divergence between Fed and market expectations. The reports for Consumer Price Index, Retail Sales, Industrial Production, and Producer Price Index all suggested strength of some degree. Housing Starts showed us how much rates are hurting however.

About half of the 11 S&P 500 sectors gained this week led by consumer discretionary (+1.6%) and consumer staples (+0.9%). The energy sector (-6.9%) was the worst performer by a wide margin amid falling oil prices. WTI crude oil and natural gas futures fell this week. The U.S. Dollar Index rose 0.2% for the week to 103.88. 

Data this week was in that slot of solid, but not too solid with a few dingers.

• US Producer Price Inflation Hotter Than Expected in January, Prior Month Revised Higher
• US Housing Starts Fall to 31 Month Low in January While Building Permits Rise
• Australian Unemployment Rises to 3.7% with Unexpected -11,500 Job Losses
• US Consumer Inflation Moderating in January but Services Prices Still Accelerating

Looking ahead the key will be the extent to which downside risks to the US economy have been reduced enough to influence global central banks.

Real policy rate measures range from below to at best approaching peaks of past cycles which may be insufficient if this cycle has unique supports. If the economy has greater supports into a hiking cycle than in the past, then persistent inflation risk is higher and the hiking cycle arguably has to lean more firmly on the exit button. – Scotiabank

Where is the fear?

Annualizing the New York Fed’s Q4 household borrowing data, Credit card debt expanded at a 26% pace and total debt at a 9.5% rate during the quarter. The Fed’s aggressive tightening cycle has had little affect on loose financial conditions.

“The United States is on track to add nearly $19 trillion to its national debt over the next decade, $3 trillion more than previously forecast, as a result of rising costs for interest payments, veterans’ health care, retiree benefits and the military, the Congressional Budget Office said“

Some things never change, when you think Greed is Good

Globally we saw the wipeout of over $120 billion from Indian billionaire Adani’s companies market caps after a report alleging fraud, Ponzi’s and a shell game. We keep an eye on follow on from this story and its global knock-on affect.

We saw the debt ceiling reached on January 19, prompting the Treasury to begin employing extraordinary measures that should prevent a technical default until early June. The expectation this is all political showboating, but what if it more than that?

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

A big shift in 2022, China’s population is now falling and below that of India. China’s population fell for the first time since 1961 as births have steadily fallen in recent years despite the removal of the “one child policy”. The stalling working age population and its likely decline ahead means that potential growth in China is down from around 10% or so in the 2000s to around 4-5% now.

• “A $2 trillion swathe of China’s local bond market is approaching a risky inflection point as issuers struggle to refinance maturing debt. Net financing — new yuan bond issuances minus maturities — for the country’s local government financing vehicles, or LGFVs, turned negative in the fourth quarter of 2022 for the first time in at least four years, according to… S&P Global Ratings. While the measure turned positive in January, it was still down 83% from a year earlier at 48.9 billion yuan ($7.1bn). The funding slump, which has coincided with an uptick in pulled bond deals, adds to signs of strain in a murky corner of the debt market that has long been flagged by China skeptics as a threat to financial stability…” February 16 – Bloomberg

• “Bao Fan’s knack for closing complicated deals and spotting rising tech stars made him one of China’s most influential financiers. His sudden disappearance this week — linked to a Chinese government investigation — is now sending chills through the country’s business elite and raising fresh doubts about whether President Xi Jinping’s crackdown on the private sector has run its course.” February 17 – Bloomberg

The Market 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 PCE, Fed Minutes, BOK and RBNZ

Eyes will be on top macroeconomic reports such as the PCE, Fed’s preferred inflation gauge. Second estimate for the fourth-quarter GDP. A final reading for the University of Michigan’s consumer sentiment and interest rate decisions in Korea, New Zealand and Turkey

Earnings reports include Home Depot, Walmart, and Nvidia are the most prominent companies to report.

Multiple central Bankers are out to test their resolve, and the markets resolve.

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 0.3% (up 6.2% y-t-d),
• Dow was little changed (up 2.0%).
• S&P 400 Midcaps rose 1.0% (up 9.7%),
• Small cap Russell 2000 gained 1.4% (up 10.5%).
• Nasdaq100 increased 0.4% (up 13.0%).

Sectors

• Utilities recovered 0.9% (down 3.9%).
• Banks declined 0.5% (up 10.9%),
• Broker/Dealers gained 1.1% (up 11.9%).
• Transports added 0.6% (up 13.0%).
• Semiconductors slipped 0.2% (up 18.7%).
• Biotechs advanced 1.3% (up 4.6%).
• With bullion down $23, the HUI gold equities index sank 4.8% (down 2.3%)

Biggest SPX Stock Winners and Losers Last Week

Global Stock Market Highlights

Highlights – Europe Stocks

• U.K.’s FTSE equities index rallied 1.5% (up 7.4% y-t-d).
• France’s CAC40 rallied 3.1% (up 13.5%).
• German DAX equities index gained 1.1% (up 11.2%).
• Spain’s IBEX 35 equities index jumped 2.4% (up 13.4%).
• Italy’s FTSE MIB index rose 1.8% (up 17.1%).

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 Equities Index declined 0.6% (up 5.4% y-t-d).
• South Korea’s Kospi index declined 0.7% (up 9.6%).
• India’s Sensex equities index increased 0.5% (up 0.3%).
• China’s Shanghai Exchange Index fell 1.1% (up 4.4%). 

 Highlights – Australian Stocks

• Australia’s S&P/ASX 200: -0.9% Friday (-1.2% for the week)
• Goldman Sachs forecasts a 20 per cent surge in iron ore prices in the second quarter of 2023, as the physical market swings into a “significant” deficit which will lift prices to a projected $US150 ($218) a tonne.

Highlights – Emerging Markets Stocks 

EM equities mixed.

• Brazil’s Bovespa index rallied 1.0% (down 0.5%),
• Mexico’s Bolsa index jumped 2.5% (up 11.0%).
• Turkey’s Borsa Istanbul National 100 index rallied 20.1% (down 8.8%).
• Russia’s MICEX equities index dropped 4.1% (up 0.7%).

Technical Analysis

S&P 500

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

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

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 ended the week sharply lower note in response to the much stronger than expected Employment Situation report for January. Treasuries widened their post-NFP losses after the ISM Services Index for January (actual 55.2%; consensus 50.3%) returned into expansionary territory. The fed funds futures market is now pricing in another 25-bps rate hike in May. Today’s selling returned 10s and 30s to little changed for the week while shorter tenors turned negative for the week. The 2s10s spread tightened by seven basis points to -76 bps.

Treasury Yield Watch

• 2-yr: +21 bps to 4.29% (+8 bps for the week)
• 3-yr: +21 bps to 3.97% (+5 bps for the week)
• 5-yr: +18 bps to 3.67% (+5 bps for the week)
• 10-yr: +14 bps to 3.53% (+1 bp for the week)
• 30-yr: +7 bps to 3.63% (UNCH 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 declined three bps to 5.99% (up 244bps y-o-y).
• Fifteen-year rates increased three bps to 5.18% (up 241bps).
• Five-year hybrid ARM rates fell five bps to 5.42% (up 271bps).
• Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates down 15 bps to 6.32% (up 257bps).

Part C: Commodities

Highlights

• Bloomberg Commodities Index rallied 1.5% (down 3.7% y-t-d).
• Spot Gold was about unchanged at $1,866 (up 2.3%).
• Silver declined 1.6% to $22.00 (down 8.1%).
• WTI crude recovered $6.33, or 8.6%, to $79.72 (down 1%).
• Gasoline surged 7.9% (up 2%),
• Natural Gas rallied 4.3% to $2.51 (down 44%).
• Copper fell 1.0% (up 5%).
• Wheat jumped 3.9% (down 1%),
• Corn increased 0.4% (unchanged).
• Bitcoin dropped $1,670, or 7.2%, this week to $21,670 (up 31%).

Key Long Term Commodity Charts

Copper

Gold

WTI Oil

Energy

Natural Gas

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
• Lumber
• 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.”

Highlights

• For the week, the U.S. Dollar Index increased 0.7% to 103.63 (up 0.1% y-t-d) 2022 gains were 8.2%
• For the week on the upside, the Mexican peso increased 1.6%, the Swedish krona 0.7%, the Norwegian krone 0.7%, the Canadian dollar 0.4%, the Swiss franc 0.3%, and the British pound 0.1%.
• On the downside, the South Korean won declined 2.8%, the South African rand 2.1%, the Brazilian real 1.6%, the euro 1.1%, the Singapore dollar 0.5%, the New Zealand dollar 0.4%, the Japanese yen 0.1% and the Australian dollar 0.1%. The Chinese (onshore) renminbi declined 0.24% versus the dollar (up 1.23% 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 Q4, 2022

The major money cents banks released earnings with many strong results for Q4. 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.

• PNC Bank Earnings Hurt by Fall in Fee Income and Higher Credit Loss Provisions
• Citigroup Record Fixed Income Sales & Trading Revenue Cushion Earnings
• JPMorgan Earnings Boosted by Higher Interest Rates but Sets Aside $2.29 billion for Loan Losses
• Another Swing and a Miss from Wells Fargo Earnings
• Bank of America Earnings Beat, Benefiting Most from the Federal Reserve’s Interest Rate Hikes

The Week Ahead – Have a Trading Plan

What Macro and Micro Risks and Opportunities Lie Ahead this week

Global Watch

Next Week’s Risk Dashboard via Scotiabank

• Why growth is resilient so far…
• …and the forces working against tighter monetary policy It’s the real term structure that matters…
• …and it’s not outlandishly restrictive
• FOMC minutes to refresh path guidance
• Canadian core inflation likely increased
• What makes this Canadian inflation reading special
• Global PMIs to inform Q1 growth tracking
• Fed’s preferred inflation gauge to follow CPI
• US consumption, incomes likely leapt forward
• RBNZ expected to hike again Bank of Korea is a tough call
• Australian wages to inform
• RBA’s stance Peru’s Q4 GDP to assess protest effects
• CPI: Japan, Malaysia, Sweden

Central bank Watch

In the week ahead we have the FOMC Meeting minutes and speeches by Fed officials. Central banks in South Korea, New Zealand, and Turkey will have monetary policy meetings.

The Fed’s preferred PCE inflation gauges are released on Friday for January. Headline PCE inflation is likely to rise at a slightly slower pace than headline CPI’s 0.5% m/m gain and also for core PCE inflation ex-food and energy that should rise a little more softly than the 0.4% m/m core CPI gain.

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

• Tuesday, February 21, 2023
• 20:00 RBNZ Interest Rate Decision
• Wednesday, February 22, 2023
• 20:00 Bank of Korea Interest Rate Decision
• Thursday, February 23, 2023
• 06:00 Central Bank of Turkey Interest Rate Decision

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

Economic Data Watch

US Data Focus

• Monday: Nothing of note
• Tuesday: January CPI (prior -0.1%) and Core CPI (prior 0.3%) at 8:30 ET
• Wednesday: Weekly MBA Mortgage Index (prior 7.4%) at 7:00 ET; January Retail Sales (prior -1.1%), Retail Sales ex-auto (prior -1.1%), and February Empire State Manufacturing Survey (prior -32.9) at 8:30 ET; January Industrial Production (prior -0.7%) and Capacity Utilization (prior 78.8%) at 9:15 ET; December Business Inventories (prior 0.4%) and February NAHB Housing Market Index (prior 35) at 10:00 ET; weekly crude oil inventories (prior 2.42 mln) at 10:30 ET; $15 bln 20-yr Treasury bond auction results at 13:00 ET; and December net Long-Term TIC Flows (prior $171.5 bln) at 16:00 ET
• Thursday: January Housing Starts (prior 1.382 mln), Building Permits (prior 1.330 mln), January PPI (prior -0.5%), Core PPI (prior 0.1%), weekly Initial Claims (prior 196,000), Continuing Claims (prior 1.688 mln), and February Philadelphia Fed survey (prior -8.9) at 8:30 ET; and weekly natural gas inventories (prior -217 bcf) at 10:30 ET
• Friday: January Import Prices (prior 0.4%), Import Prices ex-oil (prior 0.4%), Export Prices (prior -2.6%), and Export Prices ex-agriculture (prior -2.7%) at 8:30 ET; and January Leading Indicators (prior -1.0%) at 10:00 ET

Global Data Focus

• OPEC:
• Canada:  January CPI report and retail sales figures for December.
• Brazil:
• Mexico:
• Europe: Flash S&P PMIs for the Eurozone, Germany, and France. German ZEW indicator of economic sentiment, the GFK consumer confidence, and the Ifo business climate indicator are all set to improve for the fifth month. Eurozone final inflation figures for January and the flash consumer survey; Germany’s Q4 GDP and consumer prices update; European Union car registrations; Sweden’s home prices; France’s business and consumer survey; and Switzerland’s balance of trade. Turkey will be deciding on interest rates.
• UK: Key, the GfK Consumer Confidence indicator, flash S&P PMIs Other data covers CBI gauges for industrial trends orders and distributive trades, as well as public sector net borrowing.
• China: PBoC will announce key loan prime rates. Markets expect the one-year LPR to remain at 3.65% and the five-year tenor at 4.3%, especially after new bank loans jumped more than projected to a record CNY 4.9 trillion last month and as the PBoC left the medium-term lending facility rate steady the previous week.
• Japan: Flash PMIs for February, providing a first assessment of economic conditions during the month. Inflation figures
• India: Consumer and wholesale inflation will be in the spotlight, with retail inflation seen accelerating to 5.9% from 5.7% and the WPI seen slowing to 4.5% from 4.95%.
• South Korea: Central bank of South Korea is forecast to pause its tightening cycle and keep interest rates unchanged
• Australia: Flash PMIs, wage price index, construction, and private investment for Q4 will be in the spotlight.
• New Zealand: RBNZ is widely expected to deliver a smaller 50bps rate hike after a 75bps increase in November.

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. U.S. stock market is closed for the President’s Day holiday.
• Tuesday – Consumer Analyst Group of New York Conference scheduled for New York City. Heavy focus on food stocks with Sysco (SYY), General Mills (GIS), ConAgra (CAG), Coca-Cola (KO), Kraft-Heinz (KHC), PepsiCo (PEP), J.M. Smucker (SJM), and Hostess Brands (TWNK) all set to appear. BioXcel Therapeutics (BTAI) will present full Phase 2a data on pembrolizumab at a Key Opinion Leader event. WTI crude March futures will expire. Williams Companies (WMB) will host its 2023 Analyst Day event in New York.
• Wednesday – Barclays Industrial Select Conference presentations by Cintas Corporation (CTAS), Knight-Swift Transportation (KNX), Honeywell (HON), Aptiv (APTV), General Dynamics (GD), Rockwell Automation (ROK), DuPont (DD), Rocket Lab USA (RKLB), and General Electric (GE). Radware (RDWR) will hold a virtual investor and analyst meeting.
• Thursday – Fed speakers scheduled include Raphael Bostic and Mary Daly.
• Friday – Walk date for the VMware (VMW)-Broadcom (AVGO) and F-star Therapeutics (FSTX)-Sino Biopharma (OTCPK:SBHMY) deals will hit. Shareholders with Horizon Therapeutics Public Limited Company (HZNP) will vote on the buyout deal from Amgen (AMGN).

Earnings

Earnings Highlights This Week:

• Monday includes U.S. stock market closed for President’s Day holiday.
• Tuesday includes Walmart (WMT) Home Depot (HD) Diamondback Energy (FANG), Palo Alto Networks (PANW), Coinbase Global (COIN), Caesars Entertainment (CZR), Molson-Coors (TAP), Medtronic (MDT), Arconic (ARNC), Dana Incorporated (DAN), and Toll Brothers (TOL)
• Wednesday includes Nvidia (NVDA) TJX Companies (TJX) Lucid Motors (LCID) Baidu (BIDU), Lucid Group (LCID), eBay (EBAY), Stellantis (STLA), Copart (CPRT), Etsy (ETSY), Wingstop (WING), Bumble (BMBL), Teladoc (TDOC), Five9 (FIVN), Unity Software (U), DaVita (DVA), Bath & Body Works (BBWI), and Dutch Bros (BROS)
• Thursday includes Alibaba (BABA) Moderna (MRNA) Intuit (INTU), Carvana (CVNA), Cheniere Energy (LNG), MercadoLibre (MELI), Booking Holdings (BKNG), NetEase (NTES), Keurig Dr Pepper (KDP), Block (SQ), Li Auto (LI), Dominos Pizza (DPZ), Norwegian Cruise Line Holdings (NCLH), Planet Fitness (PLNT), Melco Resorts (MLCO), and Wayfair (W)
• Friday includes Fomento Económico Mexicano (FMX) Brady Corporation (BRC), Carter’s (CRI), and BASF SE (OTCQX:BASFY)

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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