Last Friday as we headed into a 3-day weekend the six-day winning streak broke with a modest decline.  Is this a temporary pause or could we be at or near a summer market high as we wait for the next round of earnings?  Currently, the SP-500 10-year P/E ratio is 29.8 which is 47.4% above the modern-ear market average of 20.2 suggesting an overbought condition.  However, investor enthusiasm for risk may still push the index toward a 4500 print.  We have a light day on both the earnings and economic calendar with a bit of follow-through selling pressure showing up in the pre-market.

Asian markets traded mixed with modest gains and losses, however, the tech-heavy HSI fell 1.54%.  European markets trade red across the board this morning following Monday’s declines.  Ahead of a light day of earnings and economic reports U.S. Futures point to a lower open to begin our holiday-shortened week.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday FDX & LZB.

News & Technicals’

The situation in Ukraine has escalated as Russian forces continue to launch air strikes on several cities and towns. The Ukrainian government has declared a state of emergency and activated its air defense systems. However, it admits that its counteroffensive is proving challenging due to the overwhelming number of Russian troops and aircraft. The international community has condemned the Russian aggression and called for an immediate ceasefire and dialogue.

The Bank of England faces a difficult decision as it prepares to announce its latest policy stance on Thursday. The central bank has to balance the risks of rising inflation and labor shortages against the uncertainties of the post-pandemic recovery and the potential impact of new variants of the coronavirus. The latest inflation data, due on Wednesday, is expected to show a further increase in consumer prices, adding to the pressure on the Bank to tighten monetary policy sooner rather than later.

The S&P 500 six-day winning streak broke on Friday which had lifted it to new highs for the year closing only slightly in the red. The big question is, have we put in a top or is this just a short-term pause in the overall rally? Investors have high hopes that the Fed is done raising rates despite the fact the committee suggested their terminal rate is 50 basis points higher as they work for the 2% target. The rally was more broad-based recently with more sectors and stocks joining the upward trend, but the Nasdaq still led the way, posting its best weekly performance since late January. Hopes of more stimulus from China and a weaker dollar also helped the bullish mood. Asian markets followed suit, as the Bank of Japan kept rates steady. Meanwhile, government bonds fell as the 10-year Treasury yield climbed to 3.77%.

Trade Wisely,

Doug

Although the Fed skipped a month in raising rates their hawkish look forward added uncertainty to the path forward.  The Dow experienced a huge whipsaw while a handful of tech stocks managed to hold the QQQ in the green for the close.  This morning traders face a busy morning of economic data that could move the market substantially as investors react to a complex summer outlook.  Bond yields surged higher after the Fed decision pressuring an already strained financial sector.  Whipsaws and price volatility are expected to remain challenging as the data rolls out this morning.

While we slept Asian markets traded mixed in reaction to the Fed decision but the tech-heavy HSI surged 2.17%.  European market trade was mostly lower this morning expecting a rate increase from the ECB.  Ahead of a busy morning of economic reports U.S. futures trade modestly lower but as the data is revealed anything is possible depending on the possible inspiration of the bulls or bears.

Economic Calendar

Earnings Calendar

Notable reports for Thursday include ADBE, JBL, and KR.

News & Technicals’

After two weeks of labor unrest that disrupted trade at 29 West Coast ports, a tentative agreement was reached on Thursday night between the Pacific Maritime Association and the International Longshore and Warehouse Union. The six-year deal covers 22,000 workers who handle about half of the nation’s cargo. The terms of the agreement were not disclosed, but both sides expressed relief and gratitude for the assistance of Acting U.S. Secretary of Labor Julie Su. The port congestion caused by worker slowdowns and stoppages is expected to take several days to clear out.

The war in Ukraine has escalated as Russian mercenaries clashed with the Kremlin over their role and strategy in the conflict. The leader of the Wagner Group, Yevgeny Prigozhin, has refused to sign a contract with the Russian Defense Ministry, which wants more control over the volunteer formations. Meanwhile, Ukraine and its allies are holding a meeting in Brussels to discuss how to bolster Kyiv’s air defenses and artillery against Russian aggression. The meeting comes after Ukraine launched a counteroffensive last week to reclaim some of the territory occupied by Russia. The war has killed at least 10 people and wounded dozens more in Kyiv’s hometown of Kryvyi Rih, where Russian missiles hit civilian buildings.

The Federal Reserve’s decision added uncertainty keeping rates unchanged while raising the terminal rate expectations. The Fed suggested, however, that it might hike rates two more times, as its latest “dot plot” showed a higher fed funds rate target of 5.6%, up from 5.1% in March. Chair Powell said in his remarks that he hoped inflation would start to ease soon, as he saw some signs of a cooling in the labor market. It was a mixed day for stock markets on Wednesday, as the S&P 500 and Nasdaq managed to end the day higher, while the Dow Jones finished lower. Meanwhile, bond yields rose after the Fed meeting, as markets wondered if the Fed would tighten more than expected. The 2-year Treasury yield jumped by 0.10% to 4.68%, almost 1.0% above its lows in mid-May. Today we have a very busy economic calendar filled with possible market-moving reports. Plan for substantial volatility, whipsaws, and big point moves as the traders react to the data.

Trade Wisely,

Doug

The lowest CPI reading in 2 years inspired the bulls and investors cheered pricing the market with an expectation the Fed will pause hoping this is the end of the rate hiking cycle. Today at the 2 PM announcement and the following press conference we will find out if the hawks have left the building or not.  Before that excitement keep in mind we have Morage Apps, PPI, and Petrolem numbers likely adding to the emotional volatility of the day.  Be prepared it could get wild if Powell surprises the market or continues to suggest the rate hike cycle may not be over just yet.

Asian market closed mixed with we slept with the Nikkei hitting fresh new highs and the HSI leading the sellers in the tech-heavy index.  However, European markets trade higher across the board this morning with the FTSE MIB leading the way up 1.38% at the time of this writing this report. With a light day of earnings and a busy day on the economic calendar U.S. futures currently trade mixed but could and will likely change significantly based on the pending data reaction.  Buckle up, emotions are high so plan for significant volatility.

Economic Calendar

Earnings Calendar

The only notable report for Wednesday is LEN.

News & Technicals’

Advanced Micro Devices (AMD) has revealed its new A.I. chip, the MI300X, which is designed to challenge Nvidia’s dominance in the fast-growing artificial intelligence market. The MI300X is AMD’s most advanced graphics processing unit (GPU), the category of chips that are used to build cutting-edge AI programs such as ChatGPT. The MI300X can use up to 192GB of memory, which means it can fit even bigger AI models than other chips. AMD said the MI300X will start shipping to some customers later this year and will be more meaningful in 2024. AMD’s CEO Lisa Su said AI is the company’s “largest and most strategic long-term growth opportunity” and that GPUs are enabling generative AI.

Vodafone and CK Hutchison have agreed to merge their UK mobile businesses, creating the country’s largest mobile operator with more than 27 million subscribers. The deal, which was announced on Wednesday, will give Vodafone a 51% stake and CK Hutchison a 49% stake in the combined group. The new group will be led by Vodafone UK’s current CEO Ahmed Essam and will invest £11 billion over 10 years to build “one of Europe’s most advanced standalone 5G networks”. The merger is expected to face scrutiny from competition regulators, who have previously blocked a similar deal between Three and O2 in 2016.

Investors cheered as the latest inflation data showed a slowdown to 4% in May, the lowest rate in over two years and in line with expectations. The market is priced for the belief that the Fed will keep rates unchanged at today’s rate announcement at 2 PM Eastern. Although Powell is not known for surprising the market, if he should do so and raise rates expect a very disappointed market that may unleash the bears.  Cyclical sectors and small-cap stocks led the gains, while bond yields rose. Asian markets also got a boost from hopes of more stimulus from China. Oil prices bounced back 3% after a sharp drop on Monday.

Trade Wisely,

Doug

The bull run continued on Monday with high hopes the pending CPI number will weaken enough to give the Fed cover to pause rate increases Wednesday afternoon.  Be prepared for a big potential move in the indexes particularly if the number happens to disappoint due to the tremendous anticipation.  Interestingly the VIX rallied yesterday indicating an increase in fear even as the indexes surged higher.  With no notable earnings reports to inspire bulls or bears, all eyes will key off the economic calendar reports.

Asian markets rallied led by Japan surging 1.80% and topping 33.000 at the close.  European markets trade cautiously flat this morning as they wait on the central bank rate decisions.  U.S. futures tick higher this morning as we wait on the results of the consumer price index that is highly anticipated to support at Fed rate pause.

Economic Calendar

Earnings Calendar

There are no notable earnings reports for Tuesday.

News & Technicals’

Investors cheered as stocks rose on Monday amid expectations that the Federal Reserve will pause its aggressive rate hikes at its next meeting on Tuesday. The Fed has raised its key interest rate 10 times since last year to combat inflation, which has soared to its highest level in decades. However, some economists believe that the Fed will signal that it is not done tightening monetary policy and that more rate increases are likely in 2023. The S&P 500 and Nasdaq Composite gained 0.93% and 1.53%, respectively, closing at their highest level in 13 months. The Dow Jones Industrial Average added 189.55 points, or 0.56.

Many are hopeful that the US consumer price index report on Tuesday will reveal a slowdown in inflation that will allow the Fed to skip a rate hike on Wednesday. This would be the first time they do not raise the key rate after 10 straight hikes since March 2022.

The U.K. saw its short-term borrowing costs soar to their highest level since the financial crisis on Tuesday after strong labor data fueled expectations of more interest rate hikes by the Bank of England. The yield on two-year government bonds, which influences mortgage rates, climbed above 4.75%, surpassing the peak reached during the market turmoil triggered by the former government’s “mini-budget” last year. The labor report showed that wages excluding bonuses grew by a record 7.2% in the February-April quarter, while employment hit a record high. The Bank of England is under pressure to raise interest rates further to rein in inflation, which stood at 8.7% in April.

The bull run continued around the world on Monday, with Japan and Europe leading the way, as investors anticipated a break in the Fed’s rate hike cycle. Growth-oriented sectors such as technology, communication services and consumer discretionary outperformed, extending their year-to-date rally. Bond markets were calm, with little movement in interest rates. The 10-year Treasury yield stayed close to 3.75%. The market mood improved as the day went on, as hopes grew that the Fed will skip a rate hike at its meeting on Wednesday.

Trade Wisely,

Doug

Trading was subdued as we wrapped up May with only the QQQ producing a monthly gain with just a handful of tech giants doing the work.  The bears showed a little more effort early in the day but the bulls once again staged a late-day rally while waiting for a debt ceiling vote.  Now that the bill has passed the House it is on to Senate for more wrangling and deal-making that could last through the weekend.  Combine that with a busy morning of economic data and some notable earnings reports traders should prepare for just about anything as June trading begins.

While we slept Asian markets traded mixed but mostly higher responding bullishly to the debt ceiling vote in the House.  European markets are also seeing a relief rally after hitting 2-month lows yesterday on an inflationary decline to 6.1% which was better than expected.  U.S. futures recovered from modest overnight lows suggesting a bullish open ahead of a busy economic calendar and a smattering of earnings reports.

Economic Calendar

Earnings Calendar

Notable reports for Thursday include AVGO, CAL, CVGW, CHPT, COO, DELL, DBI, DG, FIVE, HRL, LULU, M, MDB, S, VMW, ZS, & ZUMZ.

News & Technicals’

The U.S. Congress has taken a major step to avoid a default on its debt obligations. On Wednesday night, the House of Representatives passed the Fiscal Responsibility Act, which would raise the debt ceiling until December 2022. The bill was the result of a bipartisan agreement between House Speaker Kevin McCarthy and President Joe Biden, who praised the lawmakers for their “courage and compromise”. The bill now heads to the Senate, where Majority Leader Chuck Schumer vowed to “do everything we can to move the bill quickly” and prevent a catastrophic economic crisis.

The inflation pressure in the eurozone eased slightly in May but remained well above the European Central Bank’s target. According to official data released on Thursday, the annual headline inflation rate in the 19-country bloc dropped to 6.1% from 7% in April, defying analysts’ expectations of 6.3%. The core inflation rate, which excludes volatile food and energy prices, also fell to 5.3% from 5.6%. Despite the moderation, investors still anticipate the ECB to tighten its monetary policy further in the coming months, as it has already raised its key interest rate twice this year to curb inflation to its 2% goal.

The global market mood was subdued on Thursday as investors weighed a mixed bag of economic data and corporate earnings. U.S. stocks fell for a second day, with the Nasdaq being the only major index to post a monthly gain in May, thanks to a handful of tech giants that led the rally. Commodities also retreated, as China’s manufacturing sector showed signs of weakness despite easing pandemic restrictions, dampening the demand for oil and metals. Meanwhile, U.S. Treasury yields declined, with the 10-year yield hovering around 3.6%, but the yield curve remained inverted, signaling a pessimistic outlook for growth. Today along with some notable earnings reports we face a big morning of possible market-moving economic data so prepare for some volatility on our first trading day in June.

Trade Wisely,

Doug

Monday began inspired by a compromise in Congress but the early enthusiasm faded as the path passage looks to have a challenging and uncertain outcome.  However, a late-day rally led once again by the very extended tech giants left indexes little changed by the close.  Today we have several Fed speakers, Chicago PMI, JOLTS, the Beige Book, and several notable earnings reports to inspire the bulls or bears.  Unfortunately, it will be the news about the progress or lack thereof that’s likely to determine the deminer of the market as we wait.

Asian markets traded sharply lower overnight as China’s factory activity numbers disappointed and new signs of real estate defaults reemerge shaking the confidence of recovery. European markets also trade red across the board as they monitor the political wrangling in Congress.  U.S. futures though off of their overnight lows continue to point to a bearish open ahead of earnings and economic data with plenty of Fed speak tossed in for good measure.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday include AAP, AI, CPRI, CHWY, CONN, CRWD, CRM, DCI, FRO, GME, NTAP, JWN, OKTA, PSTG, TCOM, and VSCO.

News & Technicals’

The U.S. Congress moved closer to averting a historic default on Monday as a bipartisan bill to raise the debt ceiling cleared a crucial hurdle in the House of Representatives. The bill, which would suspend the debt limit until December 2022, passed the House Rules Committee with the support of Rep. Tom Massie, a key Republican swing vote who had previously opposed raising the debt ceiling. The bill now heads to the full House for a final vote, where it is expected to pass with mostly Democratic votes. The Senate had already approved the bill last week with 50 Democrats and 14 Republicans voting in favor. The compromise bill came after weeks of tense negotiations and brinkmanship between the two parties over how to address the debt ceiling, which is the legal limit on how much the federal government can borrow to pay its bills. If Congress fails to raise or suspend the debt ceiling by Monday, the U.S. Treasury would run out of cash and be unable to pay its obligations, triggering a default that could have catastrophic consequences for the global economy.

The CEO of JPMorgan Chase & Co, Jamie Dimon, urged the leaders of the U.S. and China to talk more and solve their problems on Wednesday. He said this during his first trip to China since he said sorry for making a joke about China’s ruling party in 2021. Dimon said the U.S. and China are the biggest economies in the world and they have some issues about trade and security that can be fixed. He said they should not cut off their ties but try to make them safer. Dimon’s bank wants to grow more in China and it was the first foreign bank to own all of its securities business there. The U.S. and China have not been getting along well for a long time and they have been arguing about many things. Last week, some officials from both sides met and talked about trade. On Tuesday, the U.S. said a Chinese plane was too aggressive when it flew near a U.S. plane over the sea.

After a positive start, enthusiasm faded learning that the debt deal had a difficult road to passage whipsawing prices and keeping uncertainty high.  The S&P 500 finished flat on Tuesday following news that a tentative agreement on the debt limit has been reached in Washington. Global equities were generally mixed on the day, as were commodities with gold moving higher and oil lower. Interest rates were down with the 10-year Treasury yield back near 3.7%. The technology sector was once again the decisive leader with a handful of tech giants doing most of the work.  Today Fed member talk increases with Chicago PMI, JOLTS figures, and the Beige Book this afternoon.  Traders will also have some notable earnings to inspire the bulls and bears as we wait on demagoguery and political gamesmanship driving market emotions to end.

Trade Wisely,

Doug

The President came to a tentative debit agreement over the long weekend providing some bullish premarket inspiration.  However, tentative is the keyword here as the R’s and D’s in the congressional bodies try to pass the 2-year deal by Wednesday.  I wouldn’t be surprised if we experience some substantial whipsaws as they let the rhetoric fly adding uncertainty to the process.  After Friday’s rally on the disappointing Core PCE numbers we face a big week of Jobs data, a declining number of earnings events, and the question of can big tech giants continue to rally on all the AI without a correction.

Asian markets traded mostly higher overnight as they wait on the key U.S. debt vote later this week.  European markets appear a bit more tentative as they wait for Congress trading mixed this morning.  However, U.S. futures continue to power higher this morning driven mostly by the tech giants continuing to shrug off Friday’s rising inflation data.  Watch for possible a whipsaw after the morning gap.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday include AMBA, BOX, CGC, HPE, HPQ, & SPWH.

News & Technicals’

Stocks are set to rise on Tuesday after a deal to raise the debt ceiling for two years was reached by Biden and McCarthy. The deal needs Congress’s approval by Wednesday to avoid a default by June 5. Investors are relieved by the deal amid inflation and banking woes.

North Korea has confirmed its plan to launch a military spy satellite in June, which it claims is needed to monitor the U.S. and its allies’ military activities in the region. The announcement has raised alarm among neighboring countries, especially Japan, which has ordered its forces to shoot down the satellite or any debris if they enter its territory. The launch is seen as a provocation by North Korea, which has been testing missiles and nuclear weapons since 2022 in defiance of U.N. sanctions. The launch also coincides with the 70th anniversary of the U.S.-South Korea alliance, which has been conducting joint military exercises near the border with North Korea. The launch news has boosted the shares of South Korean defense companies, such as Firstec, Victek, and Korea Aerospace Industries, which rose by 3.8%, 3.3%, and 0.6% respectively on.

The war between Russia and Ukraine escalated on Tuesday as Moscow reported a drone attack on its capital that damaged several buildings and injured two people. The Russian Defense Ministry accused Kyiv of being behind the attack, which it said involved eight drones that were all shot down by air defenses. Ukraine has not commented on the allegation. The drone attack came after Kyiv suffered three Russian bombardments in 24 hours, killing one woman and wounding 13 others. The Ukrainian authorities said the attacks were carried out by missiles and drones launched by Russia.

As we begin a holiday-shortened week the bulls are inspired due to the tentative debt agreement between the President and Speaker. Now comes the task of passing the 2-year deal by Wednesday so I would not rule out some substantial whipsaws as the rhetoric flies between the R’s and D’s along the way.  With the number of earnings declining markets will have a lot of jobs data to react to this week as traders grapple with the next FOMC rate decision coming up on June 14^th after the disappointing Core PCE last Friday.  Can giant tech continue to rise on AI hopes without a correction? We will soon find out, so buckle up for another wild week.

Trade Wisely,

Doug

The debt ceiling negotiations showing little progress brought out the bears Wednesday with the DIA suffering the majority of the technical damage closing below its 50-day average.  The NVDA blowout report has the tech sector flying high this morning despite the Fitch AAA negative watch on the U.S. with the House saying they will go home for the weekend with no deal!  Europe is now officially in a recession and the substantial decline shown in the Monday Suppy report suggests the U.S. is not far behind unless something changes soon.  With a big day earnings, economic reports, and plenty of uncertainty to go around plan for substantial price volatility.

Asian markets closed mostly lower overnight with Hong Kong declining 1.93% as the Bank of Korea holds rates steady.  After officially entering a recession, European markets trade mixed near the flatline this morning as they monitor the debit ceiling dog and pony show that shows little progress.  With a busy morning of earnings and economic data pending U.S. futures trade mixed as the tech sector surges on the back of the NVDA homerun report. 

Economic Calendar

Earnings Calendar

Notable reports for Thursday include ADSK, BBY, BURL, CTLT, COST, DECK, DLTR, GPS, GCO, MANU, MRVL. MDT, NTES, NTNX, ME, PDD, RL, SUMO, TITN, TD, ULTA, VMW, WB, & WDAY.

News & Technicals’

Nvidia, the leading provider of advanced GPU chips for artificial intelligence, reported stellar first-quarter earnings for its fiscal 2024 on Wednesday. The company beat analysts’ expectations on both revenue and earnings per share, thanks to the surging demand for its data center products. Nvidia’s shares spiked 26% in extended trading, reaching a new all-time high. The company’s CEO Jensen Huang attributed the strong performance to the growing adoption of generative AI applications like OpenAI’s ChatGPT, which rely on Nvidia’s GPU chips to train and deploy. Nvidia also raised its guidance for the next quarter, signaling confidence in its future growth prospects.

The United States’ AAA long-term foreign-currency issuer default rating, the highest possible rank by Fitch Ratings, is under threat due to the ongoing political deadlock over the debt ceiling. Fitch has placed the rating on negative watch, meaning that it could downgrade it if the U.S. fails to raise or suspend the debt limit before the x-date, which could be as early as June 1. The rating agency warned that such a scenario could lead to the government missing payments on some of its obligations, which would have severe implications for the global financial system. The news rattled the markets, as futures linked to the Dow Jones Industrial Average fell after Fitch issued its warning. However, Fitch also noted that it still expects a resolution to be reached before the deadline, as it has been in previous episodes of debt ceiling brinksmanship. House Speaker Kevin McCarthy said that negotiations with the White House were progressing toward a deal, but disagreements over spending remain.

The big overhang for markets Wednesday was the U.S. debt ceiling negotiations showing little progress engaged the bears creating some index technical damage in the DIA. Bond yields rose slightly adding pressure to already challenged banks and the Money Supply report indicated substantial contraction. After the bell, NVDA reported blowout earnings fueled by the massive interest in AI chips lighting a fire under the NASDAQ futures this morning.  Today is our biggest earnings day with a GDP, Jobless Claims, Pending Home Sales, and more Fed speeches to add to the likely volatility as the House goes home for the weekend with no deal.

Trade Wisely,

Doug

Investors grew nervous Tuesday bringing out the bears as another day passed with no progress on the debt ceiling negotiations with the June I deadline looming.  The DIA suffered a little technical damage by failing its 50-day morning average and though the SPY, QQQ and IWM experienced some selling no technical damage was created.  Today we have a light morning economic calendar with the release of the FOMC minutes this afternoon.  We have a few more earnings events to keep traders guessing with the possible market-moving NVDA report coming after the bell.

As we slept Asian markets declined across the board led by Hong Kong down 1.62% as another wave of pandemic infections breaks out in China.  European markets are also decidedly bearish this morning despite the decline in U.K. inflation to 8.7%.  U.S. futures suggest a bearish open as debt negotiation uncertainty moves ever closer to the deadline with little to no progress.  Plan for possible big moves as the news and rhetoric spew from Washington.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday include ANF, AEO, ADI, APPS, CRMT, DY, GES, KSS, MOD, NVDA, WOOF, PLAB, PLCE, PATH, SNOW, and SPLK.

News & Technicals’

The U.K. economy has shown resilience in the face of Brexit uncertainty, but inflation has been a persistent challenge. In April, however, inflation fell sharply to 8.7% year-on-year, the lowest level since December 2021. This was mainly due to lower prices for clothing, footwear, and household goods, as well as a base effect from the spike in energy prices a year ago. Some analysts believe that inflation will continue to decline in the coming months, as weak consumer demand and tighter monetary policy take their toll. The Bank of England, which has raised interest rates four times since November 2022, may have to revise its inflation forecast downward in its next report.

The U.S. government is facing a looming deadline to raise the debt ceiling and avoid a default that could have consequences for the global economy. Treasury Secretary Janet Yellen warned that the Treasury Department will run out of cash by June 1 unless Congress acts soon. However, House Republicans questioned the urgency of her warning and accused her of using scare tactics to pressure them into a deal. President Joe Biden and House Speaker Kevin McCarthy met on Monday to try to break the impasse, but they still have several sticking points to resolve. These include Republican demands for changes in energy policy, welfare programs, and pandemic relief spending.

The U.S. stock market closed lower on Tuesday, as investors grew nervous about the possibility that debt negotiations could fail to reach a deal by June 1. President Biden and House Speaker McCarthy met on Monday to try to reach a deal, but they did not announce any breakthrough. The uncertainty weighed on market sentiment, especially in Europe, where luxury goods makers also suffered from China’s crackdown on excessive consumption. The only bright spot was the energy sector, which benefited from higher oil prices. Bond yields and the dollar also rose slightly, reflecting the risk-off mood. Today traders will have to deal with Mortgage Apps, Petroleum Status, Fed speak, bond auctions, and the FOMC minutes.

Trade Wisely,

Doug

While waiting for a debt ceiling deal the major indexes chopped in a narrow range with the Dow, particularly volatile with sharp whipsaws through the day. Lowe’s reported a disappointing quarter this morning but we still have several notable reports today to inspire the bulls or bears.  We also face PMI, New Home Sales, and Richmond MFG numbers with more Fed member talk while debt ceiling pontificating continues.  Expect some sharp big point moves in this emotionally charged market environment.

Asian markets turned mostly lower overnight led by selling in China down 1.52% as real estate default worries reemerge.  European markets trade mostly lower this morning while monitoring debt ceiling negotiations.  With political wrangling continuing along with earnings and economic data pending, U.S. futures suggest a modestly bearish open.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday include A, AZO, BJ, DKS, INTU, PANW, LOW, TOL, URBN, VFC, VIPS & WSM.

News & Technicals’

Lowe’s Cos Inc, one of the largest home improvement retailers in the United States, has cut its full-year sales and profit forecasts for 2023, as demand for its products wanes amid high inflation and a shift in consumer spending patterns. The company reported a decline in net sales and comparable sales for the first quarter, missing analysts’ expectations. Lowe’s attributed the weak performance to adverse weather conditions, falling lumber prices, and lower spending on discretionary items such as appliances and tools. The company now expects its full-year comparable sales to drop by 2% to 4%, compared to its previous guidance of flat to down 2%. It also lowered its full-year adjusted earnings per share range from $13.60-$14.00 to $13.20-$13.

JPMorgan Chase CEO has warned that some banks could face trouble, especially in certain markets and sectors. He said that commercial real estate is the area most likely to cause problems for lenders, as remote workers are reluctant to return to offices and high inflation forces consumers to cut back on spending. He said that banks need to be prepared for interest rates to rise far higher than most expect, and that credit is already tightening up as banks try to retain capital. Dimon made these remarks during his bank’s investor conference on Monday.

Shell, the British oil giant, is facing an over at its annual general meeting on Tuesday. A group of climate-focused investors, led by the Dutch activist group Follows This, has proposed a resolution that urges Shell to align its emissions targets with the Paris Agreement and cut its carbon footprint by 45% by 2030. The resolution has been backed by some of Shell’s largest shareholders, including Dutch pension managers MN and PGGM. Shell, which reported record profits of $39.9 billion for 2022, has rejected the resolution and said it is already committed to becoming a net-zero emissions business by 2050.

The major indexes chopped in a narrow range Monday, with the S&P 500 rising just 0.02%, as markets tread water while debt-ceiling negotiations continue. Fed officials continued to talk hawkishly yesterday adding uncertainty leave markets searching for any indications of whether June will bring another hike or a pause. Traders today will have a few more notable earnings reports, PMI, New Home Sales, Richmond MFG numbers along with more Fed speak and of course the debt ceiling drama to navigate. 

Trade Wisely,

Doug