Market Extended

With remarkable confidence or irrational speculation ahead of huge market-moving data, the stock market extended gains to begin the week.  Today begins the FOMC meeting and we will get the highly anticipated reports from Google and Microsoft with bond yields rising due to pending rate decisions from the Fed as well as other central banks through the week.  Expect considerable price volatility watching for intraday whipsaws, reversals, and substantial morning index gaps as the market reacts.  Anything is possible with bullish enthusiasm at such an extreme so plan your risk carefully.

Overnight China announced stimulus plans to aid their decorating property market moving all but the Nikkei higher as Hong Kong lept higher closing up a whopping 4.10%.  As European markets await an ECB rate decision markets are modestly bullish this morning as earnings keep spirits high.  U.S. futures also point to a modestly bullish open reversing some overnight selling with huge anticipation of Google and Microsoft earnings after the bell. 

Economic Calendar

Earnings Calendar

Notable reports for Tuesday include GOOG, GOOGL, MSFT MMM, ALK, ACI, ADM, ASH, AVY, BIIB, CALM, CNI, CB, GLW, DHR, DOV, GEHC, GE, GM, IVZ, KMB, LW, MCO, MISCI, NEE, NEP, NUE, NVR, PACW, PHM, SHW, SNAP, SPOT, TXN, TRU, UHS, VZ, V, WM, WFG, and XRX.

News & Technicals’

As China faces a slowing economy amid the pandemic and other challenges, its leaders are preparing to take various steps to stimulate growth and recovery. A high-level meeting of the Politburo, the ruling Communist Party’s top decision-making body, will be held this week to assess the country’s economic performance in the first half of the year and set the tone for the second half. Analysts expect that China will focus on boosting domestic consumption, innovation, and green development, as well as easing monetary and fiscal policies. However, China’s economic slowdown will have significant implications for the rest of the world, especially for commodity exporters and industrial sectors that depend on Chinese demand. Rory Green, chief China economist at TS Lombard, warned that China’s shift away from its traditional growth drivers will also create “second-order impacts” for the global economy in the long term.

The U.S. bond market was under pressure Tuesday as investors awaited the outcome of the Federal Reserve’s two-day meeting that will likely result in a rate hike. The Fed is widely expected to raise its benchmark interest rate by a quarter percentage point on Wednesday, the first increase this year and the sixth since it began normalizing rates in 2015. However, investors are more interested in the Fed’s projections for future rate hikes and its assessment of the economic outlook. The Fed is one of several major central banks that will announce their policy decisions this week, along with the European Central Bank and the Bank of Japan. While the ECB and the BOJ are expected to maintain their ultra-loose monetary policies, investors are looking for clues on when they might start to tighten or taper their stimulus measures. The diverging paths of monetary policy among the world’s leading economies could have significant implications for global financial markets and currencies.

The U.S. stock market extended its winning streak on Monday, with the Dow Jones Industrial Average posting its longest run of gains in more than three years. The market was lifted by strong earnings reports from some of the biggest companies in the energy and financial sectors, which offset the weakness in the utilities and healthcare sectors. The market also shrugged off the mixed performance of global equities due to the political turmoil in Japan and the economic recovery in Europe.  Today the market’s focus will be the big reports from the tech giants GOOG and MSFT after the bell.  The FOMC meeting begins today, which will likely announce another interest rate hike on Wednesday. However, their guidance on its future policy plans is the biggest uncertainty. With the indexes so extended on tremendous anticipation and speculation wild price volatility is likely so watch for whipsaws, reversals, and morning gaps that could be substantial in the days ahead.

Trade Wisely,

Doug

Mixed Performance

Indexes had a mixed performance on Friday with the DIA stretching into a 10-day rally while the SPY, QQQ, and IWM pulled back in a low-volume rest from their short-term overbought condition. However, this week expects high emotions with a week of market-moving events such as an FOMC decision, tech giant earnings, along several key economic reports.  That said, today could be a hurry-up-and-wait anticipation day with a PMI report with a few notable earnings reports to inspire the bulls or bears.

Asian markets traded mixed with the NIKKEI leading the bulls up 1.27% and Hong Kong favoring the bears down 2.13%. European markets trade mixed and muted with a pending ECB rate decision on the horizon.  U.S. futures continue to show incredible confidence pointing to a bullish open ahead of the big week of data making anything possible with gaps, reversals, and wild price volatility as the market reacts. Tighten up your seatbelt it’s likely going to be a wild ride!

Economic Calendar

Earnings Calendar

Notable reports for Monday include AGNC, ARE, BRO, CDNS, CLF, DPZ, FFIV, LOGI, MEDP, NXGN, NXPI, PKG, RRC, SSD, and WHR.

News & Technicals’

The U.S. housing market has been on a strong upward trend for the past 10 years, but that could change soon as the Fed tightens its monetary policy. According to Yale economist Robert Shiller, who co-created the S&P Case-Shiller U.S. National Home Price Index, the anticipation of higher interest rates has fueled the demand for homes among both existing and potential buyers. However, once the Fed stops raising rates, the price growth could slow down or even reverse, Shiller warned.

Oil prices are set to surge in the coming months as the global demand for crude oil outstrips the supply, according to Goldman Sachs. The bank expects the oil market to face a “sizeable deficit” of 2.5 million barrels per day in the fourth quarter of 2023, driven by strong economic recovery, low inventories, and limited spare capacity. As a result, Goldman Sachs predicts that Brent crude, the international benchmark for oil prices, will climb from its current level of around $80 per barrel to $86 per barrel by the end of the year, reaching an “all-time high” in real terms.

JP Morgan has turned bearish on Country Garden and Country Garden Services, two of China’s largest property developers, amid the ongoing turmoil in the real estate sector. The bank lowered its ratings for both companies from neutral to underweight, citing concerns over their liquidity, profitability, and growth prospects. JP Morgan also slashed its target prices for Country Garden and Country Garden Services by more than 50%, from HK$8.5 to HK$4 and from HK$40 to HK$18, respectively.

The U.S. stock market showed a mixed performance Friday, with the S&P 500 rising and the Nasdaq falling, as technology shares continued to lose momentum after disappointing earnings results. The Dow, however, extended its winning streak to 10 days, the longest in four years. This week will bring a flurry of important data and events, including the second-quarter GDP report, the PCE inflation measure, the Fed’s policy decision, and the earnings reports of some of the biggest tech companies. I would expect considerable price volatility with whipsaws and overnight reversals as markets react to all the data.  Plan your risk carefully!

Trade Wisely,

Doug

Massive Enthusiasm

Massive Enthusiasm

Tuesday started the day slightly negative but the bulls quickly surged higher on massive enthusiasm as better-than-expected earnings triggered a fear of missing out rally pushing indexed into an extremely overbought condition.  AI announcements kept the bullish energy going right into the close of the day. Today we ramp up the number of earnings events that could keep the party going but traders chasing already-extended stocks is risky because a pullback wave could begin at any time.  Plan your risk carefully to avoid the fear of missing out chase.

Asina markets mostly advanced while we slept with only the tech-heavy Hong Kong exchange ending the day down modestly.  European indexes trade bullishly this morning as the U.K. posted inflation figures less than expected at 7.9%. With a big day of earnings data, U.S. futures suggest another bullish open in anticipation but remember that can get much better or reverse as the data is revealed. Plan for another wild day of highly emotionally charged trading.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday include AA, ALLY, ASML, BKR, CFG, CNS, CCI, DFS, DFX, FHN, GS, HAL, IBM, KMI, LVS, MTB, NDAQ, NFLX, REXR, SLG, STLD, TSLA, USB, UAL, ZION.

News & Technicals’

Microsoft’s stock price soared to a new record high after the tech giant unveiled its latest innovation: an AI-powered add-on for its Office suite. The Copilot service, which will be available as a monthly subscription for $30, promises to enhance the productivity and creativity of Office users by providing smart suggestions, insights, and automation for Word, Excel, and Teams. Analysts estimate that Copilot could boost Microsoft’s revenue by up to 83% from enterprise customers who are willing to pay more for the advanced features.

The US antitrust authorities have issued new rules for assessing the competitive impact of mergers and acquisitions in the rapidly evolving digital economy. The Federal Trade Commission and the Department of Justice Antitrust Division announced that they will apply a more dynamic and forward-looking analysis to determine if a deal harms consumers or innovation. The new guidelines are intended to provide clarity and transparency to businesses and courts on how the agencies evaluate the potential benefits and harms of a merger.

Tuesday started a bit bearish but despite the weak retail sales and industrial production figures stretching the indexes back into an extremely overbought condition with massive enthusiasm.  The bulls keyed off better-than-expected earnings from major banks to begin the day and then surged after Microsoft announced a $30  generative AI subscription. Today with a big increase in earnings events, Housing, and Petroleum numbers the bullish enthusiasm may well continue.  After the bell today we will get reports from TSLA and NFLX so expect morning gaps to begin as the market reacts. At the risk of sounding redundant raise stops or consider taking some profits and try to avoid chasing stocks that are already extended because a pullback wave could begin at any time due to the short-term overextended conditions.

Trade Wisely,

Doug

Focused on Earnings

With very little data to begin the week, markets focused on earnings that ramp up today and the high hope the results can support the very extended condition of the indexes.  The VIX suggests high confidence or perhaps complacency while at the same time, the T2122 indicator flashes overbought warnings in the short term.  Today we have both market-moving data on earnings and economic calendars so traders should plan for the possibility of gaps, whipsaws, and considerable price volatility as the market reacts.

Asian markets mostly declined with only the Nikkei seeing gains up 0.32% with Hong Kong leading the selling down 2.05%.  European markets are also mixed with modest moves this morning as they wait on the busy day of data ahead.  U.S. futures currently suggest an uncertain open ahead of retail sales, industrial production, and a slew of earnings reports that could fuel the rally higher or inspire profit-taking if the bears find a reason to engage. Get ready for the bumpy ride ahead!

Economic Calendar

Earnings Calendar

Notable reports for Tuesday include BAC, BK, SCHW, HAS, IBKR, JBHT, LMT, MS, NVS, OMC, PNFP, PNC, PLD, SYP, & WAL.

News & Technicals’

The latest data on inflation has given some hope to the financial markets that the worst of the price pressures may be over. However, the economy still faces many challenges, such as the high cost of energy and the sluggish housing sector. Some experts warn that the current situation may not last long and that more work is needed to ensure a sustainable recovery. The White House also acknowledged that the inflation problem is not solved yet and that it will continue to monitor the situation closely.

The CEO of Stability AI, a company that develops software using artificial intelligence, has warned that most of India’s coders are at risk of losing their jobs due to the advances in AI. He said that AI can now create software with much less human input and that this will affect different countries differently. He said that in France, for example, coders have more job security than in India, where many of them work for outsourcing firms. He predicted that most of the low-level and mid-level programmers in India will be replaced by AI in the next couple of years.

. Monday was a quiet day in terms of news and data, so the market focused on earnings and the possibilities of what comes next in the price action. The financial’s and technology sectors led the gains, along with increases in small caps. Global stocks were lower, the dollar declined with metals rising as oil declined with worries of China demand after missing growth targets. Today trades should plan for considerable price volatility as earnings ramp up with several big banks reporting before the bell.  We will also have some potential market-moving economic data with Retail Sales, Industrial Production, Business Inventories, and Housing Market Index numbers to inspire the bulls or bears.  Fear remains low in the VIX while the T2122 Indicator continues to flash an overbought condition which is a very interesting circumstance as earnings numbers increase.

Trade Wisely,

Doug

Earnings Season

Big banks reported better-than-expected results kicking off earnings season on Friday though the indexes declined slightly from their very extended positions. However, the bulls continue to dominate with little to no fear despite the earnings uncertainty ahead. Today we will get the latest reading on Empire State Manufacturing and a few regional bank reports to inspire the bulls or bears.  China’s economic growth miss may have a temporary negative impact on sentiment but it may be wise to watch for some profit-taking to enter the picture if the bears become more emboldened to attack.

As we slept Asian markets declined modestly after a miss on China’s economic growth expectations raising concerns about their recovery.  European markets trade lower across the board as momentum wanes after last week’s surge higher.  With manufacturing numbers and regional bank reports in focus, U.S. futures suggest a modestly bearish open as the uncertainty of market-moving earnings ramps up this week.

Economic Calendar

Earnings Calendar

Notable reports for Monday HDB, CFB, ELS FBK & HBCP.

News & Technicals’

The media industry is facing a crisis as it grapples with multiple challenges, including two labor disputes that have paralyzed Hollywood production, a decline in advertising revenue due to the pandemic and the shift to digital platforms, and fierce competition in the streaming market that is draining resources and profits. Even Disney, one of the most successful media giants, is rethinking its strategy and considering whether its traditional TV business is still essential to its future. Meanwhile, Netflix, the leader in streaming, is enjoying a strong performance and is expected to report positive results when it announces its earnings on Wednesday.

The global wheat market was shaken by the announcement that Russia had withdrawn from the Black Sea grain initiative, a deal that facilitated the export of agricultural products from Ukraine to Turkey and other countries. The move was seen as a sign of escalating tensions between Moscow and Kyiv over the conflict in eastern Ukraine and the fate of Crimea. Wheat prices soared 3.5% as traders feared a disruption in supply and a potential trade war. The Russian Foreign Ministry said it had informed Turkey, Ukraine, and the U.N. of its decision, citing security and environmental concerns.

China’s economic growth slowed down in the second quarter of 2023, as the world’s second-largest economy faced headwinds from the pandemic, trade frictions, and domestic challenges. According to the official data, China’s gross domestic product (GDP) expanded by 6.3% year-on-year in the April-June period, down from 7.9% in the previous quarter. Quarterly, the growth rate decelerated to 0.8%, compared with 2.2% in the first quarter. Despite the slowdown, a spokesperson for the National Bureau of Statistics expressed confidence that China could still meet its annual growth target of around 5%, which was announced by the government in March. He also acknowledged that China faced a complex and uncertain global situation.

The S&P 500 edged down by 0.10% on Friday, but still posted a weekly gain of more than 2.4% as earnings season began. The index was boosted by strong earnings from U.S. banks and lower-than-expected inflation data this week. Stock indexes in Europe and emerging markets also did better than the U.S. last week. We begin the new week with an Empire State Manufacturing report and some regional bank earnings reports as we wait on more big bank reports coming Tuesday. The pullback on Friday eased a little of the short-term overbought conditions but the bulls continue to dominate with big tech leading the way.

Trade Wisely,

Doug

Markets Soared

With a better than expected markets soared with a big gap up but struggled the rest of the day in a tight range choppy session.  Bond yields relaxed and the dollar pulled back sharply giving upside energy to commodities such as oil, gold, copper, and steel.  Today we kick things off with better-than-expected results from PEP and a few more notable reports as we move toward the big bank reports beginning Friday morning.  We will also have the Jobless claims and PPI numbers to inspire the bulls or bears in this short-term overextended market condition so be prepared for price volatility as we move toward the weekend.

Overnight Asian markets reacted bullishly to the U.S. CPI data with Hong Kong surging 2.60%.  European markets look to extend yesterday’s rally trading bullishly across all indexes.  With pending earnings, jobs, and producer price data U.S. futures point to a bullish open.  Of course, anything is possible after the number are revealed.

Economic Calendar

Earnings Calendar

Notable reports for Thursday include CAG, DAL, FAST, PEP, PGR, & WAFD.

News & Technicals’

PepsiCo, the world’s second-largest soft drink maker, reported strong results for the second quarter of 2023, surpassing analysts’ expectations on both earnings and revenue. The company attributed its performance to its diversified portfolio of snacks and beverages, as well as its investments in innovation and digital capabilities. PepsiCo also raised its guidance for the full year, signaling confidence in its growth prospects. Investors welcomed the news, sending the company’s shares up in premarket trading.

Disney announced on Wednesday that it is extending the contract of its CEO Bob Iger through 2026, giving him more time to oversee the entertainment giant’s recovery from the pandemic. Iger, who returned to the helm in November after stepping down in February, has been leading a major overhaul of the company’s operations, including cutting thousands of jobs and streamlining its divisions. Iger will discuss his plans and vision for Disney in an exclusive interview with CNBC’s David Faber on CNBC’s “Squawk Box” at 8 a.m. ET on Thursday.

Elon Musk has launched a new venture in the field of artificial intelligence. The company, called xAI, aims to “understand the true nature of the universe” by using advanced machine learning and quantum computing. Musk and his team of experts will reveal more details about their ambitious project in a live Twitter Spaces chat on Friday, according to the company’s website.

On Wednesday, stock markets soared as CPI data showed lower-than-expected inflation for both headline and core measures. The S&P 500 gained about 0.7% by the end of the day which spent most of the day chopping in a small rage after the morning gap. Treasury bond yields fell and, the U.S. dollar also weakened in reaction to the data giving energy to commodity sectors. Today we have a few notable earnings to inspire the bulls or bears, along with Jobless Claims and the PPI reports could prove market moving before the bell.  Keep in mind Friday is the official kickoff of 3rd quarter’s earnings with several big banks set to report.  Expect some volatility as this short-term over extended market reacts to the data.

Trade Wisely,

Doug

Seemingly Confident

Tuesday indexes rallied into resistance levels with the bulls seemingly confident the CPI will show a decline in inflation when the data is reviled this morning.  Bond yields declined and the dollar continued to fall as the T2122 indicator once again reached an overbought condition.  We will soon find out if they are right but be prepared because the rest of the week could be a wild ride of volatility if the number happens to disappoint. Traders will then quickly turn their attention to the Thursday claims and PPI numbers with the big bank reports kicking off earnings season on Friday.

Overnight Asian markets closed mixed as they waited on the inflation data from India and the U.S. while still hoping the Chinese government will once again print money to backstop their failing real estate market.  European markets trade green across the board with apparent confidence in the pending inflation data.  U.S. futures point to a bullish open ahead of the CPI number which has the potential to inspire the bulls or the bears so be ready for some price volatility as the market reacts.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday include ANGO, & MLKN.

News & Technicals’

The Biden administration is facing pressure from some lawmakers to look into the alleged misuse of taxpayer data by tax prep software companies and tech giants. According to a letter signed by Senator Elizabeth Warren and others, the tax prep companies shared personal and financial information of millions of Americans with Meta and Google, without proper consent or disclosure. The letter cited reporting from The Markup and The Verge, which exposed the data-sharing practices. The lawmakers accused both the tax prep companies and the tech firms of being “reckless” with the sensitive data and violating the privacy rights of taxpayers.

The United Auto Workers union and the three major Detroit automakers have begun formal talks on Wednesday to negotiate new labor contracts for thousands of workers. The UAW President has promised to fight hard for better wages, benefits, and working conditions for the union members, who make up a large portion of the workforce at General Motors, Ford Motor, and Stellantis. The talks come amid a global chip shortage, rising inflation, and labor unrest, which could lead to a prolonged worker’s strike that would hurt the automakers’ profits and production.

Illumina, a leading DNA sequencing company, has been hit with a record-breaking fine by the European Union regulators for violating antitrust rules. The company was fined 432 million euros ($476 million) for completing its acquisition of Grail, a cancer test developer, without getting the approval of the European Commission. The regulators had previously blocked the $7.1 billion deal, arguing that it would reduce competition and innovation in the emerging market for cancer detection tests. Illumina said it would appeal the fine and defend its acquisition.

Equities rose on Tuesday in a light volume session with investors seemingly confident that this morning’s CPI inflation report will show that inflation is easing. The buying was boosted by the bond market with the 10-year Treasury yield drifting below 4.0%. The dollar also weakened for the fourth day in a row. In Asia, markets gained in hopes of more stimulus from the government to support the failing property market.  If the bulls are right then look for a bullish pop after the release of the data.  If they are wrong be prepared for a substantial pullback as the T2122 indicator is already showing a significantly over-bought condition in the short term. Past that, we will have more Fed speak, Petroleum numbers, a 10-year bond auction, and the Beige Book.  Keep in mind we have the kickoff of earnings season Friday with some of the big banks reporting.  Buckle up the rest of the week could be a wild ride.

Trade Wisely,

Doug

On Hold

On Hold

The DIA and IWM had a pretty good day rallying toward overhead resistance levels but investors were mostly on hold in a hurry-up and wait session on lower-than-average volume.  Unfortunately, we could see another day of light choppy price action today with nothing to inspire the bulls or bears on either the earnings or economic calendars.  Instead, markets are likely to focus on the uncertainty that lies ahead with the Wednesday morning release of the CPI.  What happens then is anyone’s guess so plan your risk carefully and try not to overtrade.

Asian markets broke their 3-day losing streak while we slept with Australia leading the buying up 1.50%.  With record U.K. wage growth adding to inflation fears European markets trade mixed but though mostly cautiously higher this morning.  U.S. futures also trade cautiously higher as we wait for the CPI report tomorrow morning with little else to inspire the interim.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday include BYRN, & AMX.

News & Technicals’

Microsoft is undergoing a major restructuring of its salesforce, as it announced a new round of layoffs that will affect hundreds of employees. The company did not disclose the exact number or location of the affected workers, but some of them took to social media to share their news. The latest cuts are separate from the 10,000 job reductions that Microsoft announced in January as part of its shift to focus on cloud computing and artificial intelligence. The move reflects the changing dynamics of the software industry, as Microsoft faces increasing competition from rivals like Amazon and Google.

HCA Healthcare, one of the largest hospital chains in the US, has confirmed that its patient data has been breached by hackers and is now being offered for sale on the dark web. The dataset contains about 27 million records of patients’ names, dates of birth, social security numbers, insurance information, and visit details. The hack affects patients who visited HCA Healthcare facilities in 22 states, mostly in Florida and Texas, between 2018 and 2021. The company said it is working with law enforcement and cybersecurity experts to investigate the incident and protect its patients’ privacy.

Europe and the U.K. are facing a challenge of rising wages and inflation, as the latest data showed that both regions recorded their highest annual growth in pay in more than a decade. The strong wage growth reflects the recovery of the labor market from the pandemic but also adds to the pressure on the central banks to tighten their monetary policies sooner than expected. Meanwhile, the economic outlook for Germany and the eurozone worsened in July, as the ZEW survey of investors and analysts showed a sharp decline in confidence due to the spread of the Delta variant of Covid-19 and the risk of new lockdowns.

Investors were mostly on hold ahead of important inflation figures and the beginning of the earnings season for the second quarter. Communication services and tech stocks underperformed, while value stocks did better than growth stocks. U.S. used-car prices, which have been a major contributor to core inflation declined slightly and bond yield relaxed.  Today has very little for the investors to find inspiration with a light day on the earnings and economic calendar. Don’t be surprised if we see light and choppy price action as we wait for the core CPI numbers before the bell on Wednesday. 

Trade Wisely,

Doug

What the Fed will do next?

The substantial rise in bond yields and strength in the jobs sector kept the bears active selling into the Friday close worried about what the Fed will do next. Markets hate uncertainty and with a Wednesday CPI report, PPI on Thursday with the big bank reports starting on Friday to begin 3rd quarter earnings we have a basket full of uncertainty. However, with light earnings and economic calendars both Monday and Tuesday we could see a lot of choppy price action as we wait. 

Asian markets finished Monday mixed after China missed expectations in June’s inflation data.  However, European markets trade modestly bullish this morning recovering some of the early losses.  U.S. futures have chopped around the flatline with some trepidation as we wait for inflation data the big bank reports later this week.

Economic Calendar

Earnings Calendar

Notable reports for Monday include PMST & WDFC.

News & Technicals’

The future of midsized banks in the US looks uncertain as they face multiple challenges in the post-pandemic economy. With interest rates rising, commercial real estate suffering, and regulators tightening their oversight, many regional banks may struggle to maintain their profitability and independence. Analysts expect a surge of consolidation in the banking sector, as half of the existing banks could be acquired by larger rivals in the next 10 years. However, some banks may be able to survive and grow by becoming acquirers themselves, according to Lazard’s new CEO Peter Orszag. The fate of these banks will become clearer as they report their second-quarter earnings this month, which are likely to show declining revenues for some of them.

Goldman Sachs predicts that India will rise to the rank of the world’s second-largest economy by 2075, surpassing the US and Japan. The main factors behind this projection are India’s large and growing population, which is expected to reach 1.6 billion by 2050, and its rapid development in innovation and technology sectors, such as software, biotechnology, and renewable energy. The investment bank also expects India to increase its capital spending and improve its labor productivity, which is currently below the global average. These reforms will boost India’s economic growth and income levels, making it a major force in the global market.

China’s economy continued to face deflationary pressures in June, as both producer and consumer prices fell below expectations. The producer price index (PPI), which measures the cost of goods at the factory gate, dropped 5.4% year-on-year, the sharpest decline in more than four years. The consumer price index (CPI), which tracks the changes in the prices of goods and services purchased by households, remained flat in June, after rising slightly in May. The fall in pork prices, which had been a key driver of inflation in the past year, contributed to the weak CPI performance. In response to the sluggish economic recovery, Chinese Premier Li Keqiang vowed to provide more policy support, especially for small and medium-sized enterprises, which are vital for job creation and growth.

The market is still focused on what the Fed will do next, and the June employment report was the main driver of Friday’s trading. Stocks ended slightly lower, as the market interpreted the job and wage numbers as strong enough to keep the Fed on track to raise rates in the near future. The bond market also showed this, with interest rates rising significantly lately adding to the uncertainty and making the bears a bit more active.  With CPI and PPI numbers to deal with and the beginning of 3rd quarter earnings that will kick off this Friday with some big bank reports expect considerable pensiveness in the price action for Monday and Tuesday as we wait.

Trade Wisely,

Doug

Block Chinese Firms

Talk that the U.S. may block Chinese firms from using cloud-computing services engaged the bears on Wednesday but once again the desire to buy up a handful of tech giants reduced the bearish impact.  Not surprisingly the Fed minutes add to the odds of more rate hikes on the way with core inflation remaining well above the committee’s 2% target.  Today we have a busy day of economic reports that could prove to be market moving along with a very light day of earnings to find inspiration. Volume could remain light as we wait for the big bank’s reports to kick off 3rd quarter’s earnings still a week away.

Asian markets extended the selloff with Hong Kong leading the way down 3.02% in reacting to the future rate increases from the Fed.  European markets are also decidedly bearish this morning with red across all indexes.  With a busy morning of economic reports ahead, the U.S. futures suggest a bearish open with the bears showing a bit more vigor in the tech sector than we have seen for some time. 

Economic Calendar

Earnings Calendar

Notable report for Thursday is LEVI after the bell.

News & Technicals’

Meta, the company formerly known as Facebook, has launched a new text-based messaging app called Threads. The app is designed to look and feel like Twitter but with some key differences. Users can sign up with their Instagram usernames and follow the same accounts they already follow on Instagram. This could give Threads an edge over Twitter, which has been struggling with various problems since it was acquired by Tesla CEO Elon Musk. Threads aim to offer a simpler and more engaging way to communicate with friends and influencers.

The world economy is facing a serious threat of recession as commodity prices plunge to their lowest levels in a year. The S&P GSCI Commodities index, which tracks the prices of 24 major commodities, has fallen by more than 25% since last November, reflecting weak demand and oversupply. Commodities such as oil, copper, iron ore, and soybeans are vital for industrial production and consumption, and their falling prices signal a slowdown in global growth and trade. Market watchers warn that the commodity slump could trigger a vicious cycle of deflation and debt.

OpenAI, the artificial intelligence research company, is facing a legal challenge from two authors who accuse it of using their books to train its chatbot, ChatGPT, without permission. ChatGPT is a conversational agent that can generate natural language responses based on user input. The authors, Paul Tremblay and Mona Awad claim that ChatGPT can produce “very accurate summaries” of their novels, “A Head Full of Ghosts” and “Bunny”, respectively. They argue that this implies that ChatGPT was trained on their copyrighted works, which would constitute an infringement of their intellectual property rights.

On Wednesday, stocks fell as reports of a U.S. plan to block Chinese firms from using cloud-computing services increased geopolitical tensions and reduced risk appetite after the holiday break. The sector performance and the lagging of small-caps showed a slight preference for defensive sectors, which will be tested by the economic and inflation indicators in the coming days. The June jobs report on Friday, the June consumer price index (CPI) report and the second-quarter earnings season next week will be the main events to watch. Analysts expect core CPI to drop from 5.3% in May to 5.0% (year-over-year) in June. These employment and inflation data will have a significant impact on the market expectations for the Fed’s actions and the stock- and bond-market behavior as the summer goes on.

Trade Wisely,

Doug