All economic worries fell into the background on Friday with a huge reversal that I think can correctly be called the Apple effect after the companies better than expected report.  Now that the indexes are back in the choppy range they have traded for the past month can the bulls follow through with CPI and PPI reports pending?  There will be plenty of earnings events to keep traders guessing with regional banking woes and debit ceiling wrangling in Congress keeping the uncertainty of the path forward challenging.

Overnight Asian markets mostly rallied with the tech-heavy HSI leading the buying, up 1.24%.  European markets also trade bullishly this morning as the relief rally continues.  U.S. futures also suggest a mostly bullish open ahead of earnings with nothing of consequence on the economic calendar as traders monitor debt ceiling talks and the pressures in regional banking.

Economic Calendar

Earnings Calendar

Notable reports for Monday include ADTN, BNF, CBT, DDD, DBA, DVN, ENR, FN, FRPT, HI, HPP, IIPR, IFF, KKR, LCID, LL, MCK, PLTR, PLUG, PYPL, PGNY, ROVR, SIX, SWKS, TSN, VECO, & WDC.

News & Technicals’

The U.S. is facing a looming crisis as the debt ceiling deadline approaches. The debt ceiling is the legal limit on how much the federal government can borrow to fund its operations and pay its bills. If Congress does not raise the debt ceiling by June, the Treasury Department will run out of ways to avoid paying its obligations. This would have disastrous consequences for the economy, according to Treasury Secretary Janet Yellen. She warned that a default would trigger a “steep economic downturn”. She urged lawmakers to act swiftly and responsibly to avoid this scenario.

Jerome Powell thinks the US economy can skirt recession. But the odds are stacked against him considering the banking stress, debit, and debt ceiling politics.  The Fed boss thinks the US economy is doing well because many people have jobs. He saw this in the latest report that showed more jobs were added last month. He thinks this will help the US economy avoid a big slowdown, even though the Fed has raised interest rates.  But the Fed might have to keep interest rates high for a long time because there are too many jobs and not enough workers. This makes it more likely that the US economy will slow down a lot making for a not-so-soft landing after all.

I think we could correctly call the huge Friday reversal the Apple effect as the better-than-expected report had investors shake off the debt ceiling, regional banking, hot jobs figures, and higher rates. However, despite the surge higher, the indexes finished the week within the wide-ranging chop zone that has trapped prices for a month.  The QQQ has the best chance of breaking overhead resistance but we face the uncertainty of the CPI report on Wednesday and the PPI on Thursday. Toss in banking woes, the debt ceiling battle, and a slew of earnings events and we can plan for another wild week of price action!

Trade Wisely,

Doug