As we waited for the CPI number, Tuesday proved to be a rollercoaster ride of uncertainty, starting with a nasty pop and drop that made new 2022 lows while chopping all afternoon wildly.  We will soon know the result, and the question is, will it inspire the bulls or the bears?  Get past that, and we still have to deal with a PPI number on Thursday as prices at the pump hit new record highs.  So, prepare for just about anything as the drama unfolds amidst another big day of uncertain earnings results.

While we slept, Asian markets caught a modest rally with data showing their inflation heated up in April.  Likewise, European markets are in rally mode despite a substantial jump in natural gas prices as the ECB confirms rate hikes ahead.  With hopefulness, the CPI will show that inflation has peaked, U.S. futures suggest a gap up open similar to yesterday.  Will this one hold, or will we see another disappointing pop and drop?

Economic Calendar

Earnings Calendar

We have a little lighter day on the earnings calendar with under 175 companies listed.  Notable reports include DIS, AWH, BYND, BMBL, CNFR, CPNG, WATT, GPRK, DNUT, NGMS, PAAS, PAYS, PAAS, PRGO, RIVN, SONO, TAK, TM, COOK, WEN, WWW & YETI.

News & Technicals’

Investors are eyeing what could be a pivotal consumer price index report for April, anticipating that the data shows inflation has already reached its height.  Economists warn that prices could remain elevated.  The issue is how fast inflation could decline when determining how the Federal Reserve will respond with interest rate hikes.  CPI is expected to rise 0.2% in April or 8.1% on an annualized basis.  That’s compared with a 1.2% monthly increase or 8.5% gain year-over-year in March.  UST, a so-called stablcoin meant to maintain a $1 peg, was trading at less than 50 cents Wednesday.  Sister token luna dived more than 80%, as the creator said he is close to announcing a recovery plan.  According to a J.D. Power survey published Wednesday, packed planes and more expensive tickets drove down customer satisfaction with airlines over the past year for the first time in a decade.  Customer satisfaction dropped among travelers across all the ticket classes.  According to Adobe data, in March, domestic U.S. airfares were 20% higher than in 2019.  ON TUESDAY, Gas TSO of Ukraine (GTSOU) announced force majeure – unforeseeable circumstances that prevent the fulfillment of a contract – the first declaration of its kind since the Russian invasion.  From Wednesday, it will not accept through its Sokhranivka entry point, which delivers Russian gas to Europe.  TTF European natural gas prices were up more than 6.4% by around 9:15 a.m.  London time on Wednesday, according to Refinitiv data.  Lagarde was cementing market expectations that the ECB will raise its policy rate for the first time in over a decade in July to tame record-high eurozone inflation — the result of surging energy prices spilling over to other goods.  Most other central banks have already raised borrowing costs, but the ECB, which had fought too low inflation for a decade, is still pumping cash into the financial system via bond purchases.  Treasury yields pulled back again in early Wednesday trading, with the 10-year declining to 2.94% and the 30-year dipping to 3.08%.

Tuesday trading was a rollercoaster ride of uncertainty as analysts worked to convince investors that inflation peaked last month even as food and energy prices surged to new records.  National average gas prices jumped to $4.40 a gallon, and diesel increased to $5.55, punishing Americans on everything they buy, sell or do.  As a result, all eyes will be on the CPI number coming out before the bell, so although the futures indicate a hopeful outcome, expect considerable price volatility as the market reacts.  The T2122 indicator suggests that we are overdue for a relief rally; however, the bears are likely to attack if the CPI comes in hotter than expected.  On the other hand, should the CPI come in better than expected, the bulls could trigger a short squeeze rally.  There is a lot at stake with the SP-500 clinging to 4000 and the QQQ trying to hold 3000 price levels.  We also get the Petroleum Statis number and have a 10-year bond auction to keep an eye on today.  As you plan forward into Thursday, remember the PPI number will also be critical to investor sentiment.  Ready or not, here it comes!

Trade Wisely,

Doug