The bears gained ground slightly last week as investors weighed the impacts of rapidly rising inflation and the Fed talking aggressively hawkish.  In addition, as investors continue to deal with the uncertainties in Ukraine, the likely supply chain issues due to China’s lockdowns earnings season ramps up.  Can companies continue to perform with the rising costs and consumers forced to make spending habit changes?  Prepare for intraday whipsaws and overnight reversals as the data rolls out.

Asian markets closed mixed overnight, with Chinese economic data raising concerns about a slowing economy with lockdowns entering another week.  However, European markets trade with modest gains across the board after the ECB confirms the end of bond-buying to address their punishing inflation.  Though well off the overnight lows, U.S. futures point to a slightly bearish open as earnings season shifts into high gear.

Economic Calendar

Earnings Calendar

We have about 60 companies listed but less than 20 confirmed reports to kick off the new trading week.  Notable reports include JNJ, NFLX, BAC, IBM, BK, SCHW, ELS, FNB, JBHT, PNFP & SYF.

News and Technicals’

American’s new CEO Robert Isom said the airline is adequately staffed for the summer travel season.  However, airline passengers have at times faced thousands of flight cancellations and delays due to understaffing over the past year.  Earlier this month, American’s partner, JetBlue, said it would trim summer flying by as much as 10%.  A court filing out late Friday said a judge ruled Tesla CEO Elon Musk knowingly made false statements when he tweeted about a take-private deal for the company in 2018.  Shareholders are suing Tesla and Musk to recover the money they lost after Musk tweeted that he was considering taking the automaker private at $420 a share and had “funding secured” to do so.  After those tweets, the SEC charged Musk with civil securities fraud.  They struck a revised settlement agreement in 2019, but Musk is trying to terminate that agreement now.  Finally, Twitter adopted a limited duration shareholder rights plan, often called a “poison pill,” a day after billionaire Elon Musk offered to buy the company for $43 billion, the company announced Friday.  Such a move is a common way to fend off a potential hostile takeover by diluting the entity’s stake eying the takeover.  The board voted unanimously to adopt the plan.  The city said that three people have died as of Sunday, attributing the deaths to preexisting health conditions.  The official announcement noted all three people were elderly and were not vaccinated against Covid-19.  The city also said it would begin another round of mass virus testing, set to end Thursday.  Treasury yields traded higher in early Monday trading, with the 10-year rising to 2.866% and the 30-year trading at 2.942%.

We finished last week with the bears gained ground with a slight advantage as investors grappled with pricing stock amid rapidly rising inflation.  This week traders turn their attention to a big week of earnings reports with uncertain about gains due to producer inflationary impacts.  Unfortunately, we also have to deal with Russia gaining ground in Ukraine and the China lockdowns expected to affect supply chains substantially.  As a result, price volatility in the week ahead is likely to continue as the bulls try to defend the 50-day averages in DIA, currently the only index able to hold this crucial psychological level last week.  As bond yields continue to rise, QQQ could struggle the most if tech earnings begin to slow as strained consumers change buying habits.  So get ready for just about anything as silly season kicks into high gear. 

Trade Wisey,

Doug