With the deadline drawing near the rhetoric and political gobblygook woke up the bears on Friday as bond yields continue to rise adding pressure to a stressed regional banking sector.  Despite the bearish move, no technical damage occurred in the indexes.  This the market faces some big economic reports, lots of political wrangling over the debt ceiling, and few market-moving earnings reports.  That said, we could experience some big point moves in the market and I would not rule out substantial head fakes and whipsaws to keep traders and investors guessing.

Asian markets traded mostly higher overnight after China leave loan rates unchanged with the tech-heavy HSI leaning the way up 1.17% at the close.  However, European markets are taking a more cautious approach this morning as they monitor the debt ceiling negotiations trading slightly bearish this morning.  With a light day of earnings and a morning filled with Fed speakers, U.S. futures suggest a flat open to begin another week as we wait and hope for a deal out of Congress and some potential market-moving economic report later this week.

Economic Calendar

Earnings Calendar

Although earnings season is winding down we will still have some substantial market-moving reports over the week.  Notable reports for Monday include GLBE, HEI, NDSN, & ZM.

News & Technicals’

The leaders of the Group of Seven (G7), an intergovernmental organization of wealthy Western nations have issued a joint statement that signals their intention to balance their economic ties with China and their security concerns over its actions. The statement says: “We are not decoupling or turning inwards. At the same time, we recognize that economic resilience requires de-risking and diversifying.” This follows the remarks of U.S. Treasury Secretary Janet Yellen, who urged the G7 countries to cooperate in addressing the challenges posed by China at a meeting earlier this month. Some analysts, such as Goldman Sachs economists Hui Shan and Andrew Tilton, expect more measures to come from the G7, especially with the Committee on Foreign Investment in the United States (CFIUS), a body that reviews foreign investments for national security risks.

Meta, the parent company of Facebook, has been hit with a record-breaking fine by the European Data Protection Board (EDPB) for violating the privacy rights of its EU users. The EDPB, which oversees the implementation of the General Data Protection Regulation (GDPR) in the bloc, has ordered Meta to pay 1.2 billion euros ($1.3 billion) for transferring EU user data to the U.S. without adequate safeguards. The EDPB has also given Meta five months to stop any future data transfers to the U.S. and six months to cease processing any EU user data that was previously transferred in breach of GDPR. Meta said it would appeal the decision and the fine, claiming that it was “singled out” and that the ruling “sets a dangerous precedent” for other companies.

Rising bond yields added pressure to the already stressed regional banking sector and the political gamesmanship on the debt ceiling woke up the bears on Friday.  However, other than some possible bearish candle patterns no technical damage was created.  According to Goldman’s report, the CTA”s are maxed out but that doesn’t necessarily mean selling in the market if corporate buy-backs and retail continue to buy.  But, beware, if the profit-taking begins the sell side could quickly gain some momentum so be prepared.  With more political wrangling, some big economic reports, Fed speak, and a few random market-moving earnings reports throughout the week the potential for big price swings traders will have to stay on their toes and be ready for just about anything.

Trade Wisely,

Doug