Worries of soaring energy prices and the inflationary pressures it causes crated a nasty whipsaw, likely disappointing morning session buyers. Unfortunately, that resulted in another failure at the DIA 50-day average while also creating low high failures on SPY and QQQ. The technical damage adds additional uncertainty as we await the beginning of 4th quarter earnings. After the JOLTS report, this morning could easily experience more of the same choppiness with JPM earnings, consumer price data, and possible clues of taper in the FOMC minutes on Wednesday. Plan your risk carefully.
Overnight Asian markets traded red across the board, with the HSI leading the way down 1.43%. European markets trade mainly lower this morning with modest losses as investors monitor declining global sentiment. U.S. futures that were lower most of the night now point to a modestly bullish open as the premarket pump tries to shake off rising energy price impacts to inflation.
Economic Calendar
Earnings Calendar
On the Tuesday earnings calendar, we have 13 companies listed, but only six are confirmed reports. Notable reports include AZZ, FAST, PNFP, & SGH.
News and Technicals’
China is not alone — India is also teetering on the edge of a power crisis. As of Oct. 6, 80% of India’s 135 coal-powered plants had less than eight days of supplies left — more than half of those had stocks worth two days or fewer. The power crisis would likely have an immediate impact on India’s nascent economic recovery, created by industrial activity instead of services, according to Kunal Kundu, India economist at Societe Generale. Millions of Americans will be one step closer to receiving a Covid booster shot when a key FDA panel meets this week to debate extra doses of the Moderna and J&J vaccines. The Biden administration hopes boosting the U.S. population will ensure long-term and durable protection against severe disease. “Even with delta, the current vaccines are holding up quite well as far as hospitalization and severe disease,” said Norman Baylor, former director of the FDA’s vaccines office. Treasurys were relatively flat in early Tuesday, trading ahead of the August job openings reports. The 10-year edged higher to 1.6137%, while the 30-year ticked lower to 2.156%.
Yesterday’s price action whipsaw was likely quite disappointing for those trying to buy the morning rally in hopes it would zoom higher as it has in recent dips. However, this time, the bears seem to be willing to fight, and for a good reason. First, soaring energy prices are and will continue to pressure the inflation worries, with all products moving higher as a result. In addition, with winter on the way keeping your home warm will be double the cost or more than just last year. Finally, with food, energy, and shelter costs consuming a more significant portion of income, companies may find it challenging to compete for the remaining disposable income. The consensus suggests the JOLTS report could top 11 million job openings today and could move the market, but I suspect we will again see choppy price action as we wait for JPM earnings, a reading on CPI, and the FOMC minutes on Wednesday.
Trade Wisely,
Doug
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