Traders and investors alike are in for a busy week with key inflation data, FOMC minutes, retail sales, and the big bank earnings that officially begin the 2^nd quarter silly season.  The index charts remain challenged by overhead resistance levels but the bulls keep knocking on the door despite the low volume and uncertainty that lies ahead.  Emotions will likely be very high this week so plan for possible big point moves, whipsaws, and overnight reversals as the market tries to guess the path forward amid all the market-moving data. 

Asian markets begin the week mixed with modest gains and losses across the indexes as investors ponder slowing economies.  However, European markets trade higher this morning trying to build off the bullishness that closed the indexes higher last Thursday.  U.S. futures on the other hand seem less certain trading modestly and mixed as they ponder pending inflation data and the earnings season beginning on Friday as jobs data indicate the economy is slowing.

Economic Calendar

Earnings Calendar

We start the week light and ramp up the official 2^nd quarter earnings kick-off on Friday with big bank reports.  Notable reports for Monday include GBX, PSMT & TLRY.

News & Technicals’

According to the Labor Department’s report, nonfarm payrolls grew by 236,000 in March which is about in line with the Dow Jones estimate of 238,000. The unemployment rate fell to 3.5% from the previous month’s 3.6%. The March jobs report showed a resilient economy and moderate inflation which pushed stock futures and Treasury yields higher. However, the New York Stock Exchange was closed for Good Friday. “As such, the odds of another quarter-point rate hike in May should go higher as the data does not appear to justify a Fed pause,” he added.

Last week’s data hinted at a slowdown in job growth which caused U.S. government debt prices to be higher on Monday. The yield on the benchmark 10-year Treasury note slipped to 3.363% while the yield on the 30-year Treasury bond dipped to 3.581%. The 2-year note yield fell 4 basis points to 3.931%. Remember that prices move inversely to yields.

The U.S. Defense Department is launching an interagency investigation into the source and the damage potential of a trove of classified documents that were leaked onto social media over the past few days. According to reports, the documents contained sensitive information on not just Ukraine but also China, the Middle East, and Africa. They also revealed the rate of expenditure of Ukraine’s S-300 air defense systems and a timeline suggesting when they would be depleted – and that they are running dangerously low.

Investors are in for a busy week of economic data. The latest consumer price index and producer price index data are due out Wednesday and Thursday, respectively. These will be key in determining if or when the Fed will pause or put an end to its rate-hiking campaign. The first batch of companies reporting first-quarter financial results will also be released this week. Tilray Brands kicks things off on Monday. The major banks – JPMorgan Chase, Wells Fargo, and Citigroup – will report on Friday.  Plan for just about anything this week with so much uncertainty intraday whipsaws and big point overnight reversal is certainly possible.

Trade Wisley,

Doug

Declining private payrolls and the shrinking services sector created a chop fest on Wednesday and traders ponder the economic slowdown and if that means a recession is just around the corner.  Volume was low and looking at the VIX suggests no fear even though there is a record outflow to money market funds as investors look to protect capital.  We will hear Jobless Claims numbers before the bell and comments from James Bullard later this morning with pending Employment Situation numbers on Friday when the market is closed.  Anything is possible by Monday morning so plan carefully.

Asian markets traded mixed overnight after a surprise move from India to hold rates steady.  However, European markets want to shake off the slowing economic conditions this morning seeing green across the board.  U.S. futures on the other hand suggest a mixed open ahead of potential market-moving economic data and the pending Good Friday holiday closure.

Economic Calendar

Earnings Calendar

Notable reports for Thursday include LW, LEVI, RPM, STZ, WDFC.

News & Technicals’

Dave Burt, CEO of investment research firm DeltaTerra Capital, was one of the few skeptics who recognized the housing market was on the brink of collapse in 2007. He believes that an overlooked and unpriced climate risk could see history repeating itself. Burt said that “We think of this repricing issue as maybe a quarter of the size and magnitude of the [global financial crisis] in the aggregate but of course very, very damaging within those exposed communities.”

According to the latest projections for Social Security and Medicare, two of the three major trust funds may be insolvent in the next decade. Lawmakers may consider a host of changes to resolve those issues, from raising taxes to cutting benefits or both. Experts weigh in on what changes would be on their wish lists. Social Security’s woes largely come down to demographics. Since 2010, the program has been spending more on benefits than it has been bringing in from payroll tax revenues. By 2030, all baby boomers will be age 65 or older, according to the U.S. Census Bureau.

According to the new CNBC Supply Chain Survey, only about one-third of supply chain managers think warehouse inventories will return to normal before 2024. A little over one-quarter (27%) say companies are selling excess inventory on the secondary market because high storage prices are hitting the bottom line, with impacts to materialize in upcoming quarterly results. As expectations rise that Wall Street will revise earnings estimates lower in a weaker economy, almost half of those surveyed said the biggest inflationary pressures they are paying are warehouse costs, followed by rent and labor, and many are continuing to pass those costs on to consumers.

Wednesday’s price action was a low-volume chop fest as the declining ADP numbers and shrinking services sector added to worries of a slowing economy and possible recession.  Before the market opens we will get the Jobless Claims number and will hear from James Bullard at 10 AM Eastern.  Will it be enough to inspire a bullish or bearish move or will traders take the day to reduce risk ahead of the Friday Employment Situation report with the market closed for Good Friday? That raises the risk of a substantial Monday morning gap but the direction of the move is anyone’s guess so plan your risk carefully.

Trade Wisely,

Doug

With the decline in the JOLTS report the market acknowledged the slowing economy and worries about a recession reliving some of the overbought conditions with some profit-taking.  Though the indexes pulled back no substantial technical damage occurred except for the lower high at price resistance in the IWM.  One day does not make a trend so it will be very important to see if the bears can follow through today or if the bulls have the energy to defend and recover.  Prepare for just about anything as the market reacts to the economic reports and continue to watch out for the big point whipsaws plaguing the market of late.

While we slept Asian markets closed mixed as New Zealand hiked interest rates by 50 basis points.  European markets trade mostly lower as slowing economies and recession worries resurface.  At the time of writing this report, U.S. futures suggest a slightly bearish open that could easily improve or worsen as the pending economic data is revealed.   

Economic Calendar

Earnings Calendar

Notable reports for Wednesday include CAG, SCHN & SMPL.

News & Technicals’

Johnson & Johnson has agreed to pay $8.9 billion over the next 25 years to settle allegations that the company’s baby powder and other talc products caused cancer. The proposed settlement was announced in a securities filing and would require approval in bankruptcy court. J&J’s subsidiary LTL Management also refiled for Chapter 11 bankruptcy protection after its first attempt was thwarted. More than 60,000 claimants have committed to support the proposed resolution, according to the filing.

Virgin Orbit’s outgoing Chief Operating Officer Tony Gingiss sent a companywide email that appears to call out Virgin Orbit CEO Dan Hart, although not by name. Gingiss offered an apology to employees that they “have not heard from the person who should be saying it.” Virgin Orbit filed for Chapter 11 bankruptcy protection on Tuesday and noted in a securities filing that Gingiss was laid off as one of the 675 positions eliminated.

Federal Reserve Bank of Cleveland President Loretta Mester said on Tuesday that the U.S. central bank likely has more interest rate rises ahead amid signs that recent banking sector troubles have been contained. To keep inflation on a sustained downward path to 2% and keep inflation expectations anchored, Mester said she sees monetary policy moving “somewhat further into restrictive territory this year, with the fed funds rate moving above 5% and the real fed funds rate staying in positive territory for some time.”

Although the economic data has suggested we’ve had a slowing economy for some time the market decided yesterday with the decline in the JOLTS report to acknowledge the weakness.  The Tuesday selling relieved some of the overbought condition as the dollar weakened and the precious metals surged as the worries of recession circulated.  However, no significant technical damage occurred though the price patterns likely raised the level of uncertainty.  Continue to watch for whipsaws as markets react to economic data with special attention to the oil numbers in light of the OPEC decision and its recent surge higher.

Trade Wisely,

Doug

Despite the surging oil prices that could raise inflationary pressures the rally continued on Monday as the talking heads seem to sing in the chorus for a typical spring rally as if banking concerns no longer exist.  The weak PMI, ISM, and construction spending numbers also did nothing to dissuade the bulls from running.  Today we have Factory Orders and the JOLTS report for the bulls or bears to find inspiration.  Like yesterday keep an eye on overhead resistance and watch out for those nasty big point whipsaws. 

Asian markets mostly rallied overnight with modest gains and losses as Australia’s central bank held rates steady.  European markets appear to have no concern over the rising energy prices as Finland joins NATO raising the ire of Russia seeing only green across the indexes.  U.S. futures are also looking to extend the bullish run with the Nasdaq joining the party and brushing off the energy cost concerns of yesterday.

Economic Calendar

Earnings Calendar

If this looks like a repeat of yesterday it is because I accidentally used the Tuesday notables on the Monday blog.  So here they are again AYI, LNN, MSM, RGP, SGH.

News & Technicals’

Jamie Dimon, the longtime CEO of JPMorgan Chase, recently commented on the latest financial shock in his annual letter. He stated that “The current crisis is not yet over, and even when it is behind us, there will be repercussions from it for years to come.” However, he added that “recent events are nothing like what occurred during the 2008 global financial crisis”. The recent banking issues in the U.S. began with the collapse of Silicon Valley Bank. Regulators closed it on March 10th as depositors pulled tens of billions of dollars from the bank.

Virgin Orbit has filed for Chapter 11 bankruptcy protection in the U.S. after failing to secure a funding lifeline. This comes days after the company’s CEO Dan Hart told employees during an all-hands meeting that the company was ceasing operations “for the foreseeable future”. The company’s last mission suffered a mid-flight failure, with an issue during the launch causing the rocket to not reach orbit and crash into the ocean.

The rally continued on Monday with talking heads talking up the typical spring rally despite the surge in oil prices that impact the consumer at the pump while increasing inflation pressures for the Fed.  After rising 350 points the Dow whipsawed in a quick round of selling dropping more than 150 points before slowly grinding its way back to close at the high of the day.  The QQQ was the only index in the red as it acknowledged the costs of rising oil but also found buyers in the afternoon to close it well off its intraday low.  The stretch to the upside continues to present a short-term overbought condition so watch resistance levels and be prepared for a possible profit-taking pullback that could begin at any time.

Trade Wisely,

Doug

It took until Friday afternoon for the end-of-quarter window dressing activity to finally trigger s short squeeze surging indexes higher into the Friday close.  The question now is can they follow through with the uncertainty of 2^nd quarter earnings and a T2122 indicator showing an overbought index condition?  Surging oil prices will be a help to the bulls after the surprise production cut decision from OPEC this weekend.  However, PMI, ISM, and construction spending numbers have recently shown a very weak economic condition the bears may also find inspiration to fight back.  Expect some big price moves, and watch for the possibility of quick intraday whips as a new quarter of trading begins.

During the night Asian markets mostly rallied with modest gains with surging oil prices rising costs. Though UBS falls 4% this morning and Europe worries about the rising oil prices their indexes continue to push upward across the board this morning. However, U.S. futures trade mixed this morning with Dow benefiting from the rising oil prices while tech indicates a bearish open with the SP-500 suck somewhere in the middle.

Economic Calendar

Earnings Calendar

We have a very light week on the earnings calendar as we wait for the official kick-off of the 2^nd quarter with the big bank earnings beginning April 13^th.  Notable reports for Monday include AYI, LNN, MSM, RGP, & SGH.

News & Technicals’

Several OPEC+ members have announced intentions to voluntarily cut a further combined 1.16 million barrels per day of production. This move is independent of the broader bloc’s output strategy and will challenge consumer governments, such as the U.S., which are already tackling high inflation and volatility in the banking sector. A formal meeting of an OPEC+ technical committee takes place Monday to review the group’s existing strategy. It cannot change policy. Oil prices soared as much as 8% at the open after OPEC+ announced it was slashing output by 1.16 million barrels per day. The voluntary cuts will start from May to the end of 2023, Saudi Arabia announced, saying it was a “precautionary measure” targeted toward stabilizing the oil market.

Burger chain McDonald’s is temporarily closing its U.S. offices this week as it prepares to inform corporate employees about its layoffs as part of a broader company restructuring. “During the week of April 3, we will communicate key decisions related to roles and staffing levels across the organization,” the Chicago-based company said in the message viewed by The Wall Street Journal. McDonald’s also asked employees to cancel all in-person meetings with vendors and other outside parties at its headquarters. McDonald’s is expected to begin announcing key decisions by Monday.

The end of the quarter finally developed into a short squeeze on Friday afternoon with a strong buying push into the close of the day.  At the same time, however, the T2122 indicator reached an overbought condition adding to the question if the bulls will have the energy to follow through with more buying in the Monday market.  On the other hand, Goldman suggests this weekend that the institutional CTA’s are overly short and could begin a buying spree this week unless we see a substantial downside move.  Adding additional upside pressure was the surprise OPEC decision to cut oil production substantially causing oil prices to surge this morning.  That said we still face PMI, SIM, and Construction Spending data that have been very weak economic indicators of late.  With lots of job data ending with the employment situation report on Friday traders should prepare for just about anything.

Trade Wisely,

Doug

With the quarter coming to an end keep an eye out for the possibility of institutional window dressing over the next couple of trading days.  Index charts improved on Wednesday helped in large part by the rally of the big tech giants.  However, volume remained suspiciously low as the indexes stretch upward to test significant overhead resistance levels.  With a reading on GDP and Jobless claims before the bell anything is possible at the opening of the day to be prepared for some early session price volatility. 

Overnight Asian markets mainly rallied but with modest upside results despite the easing of banking fears.  European markets are also pushing higher this morning decidedly bullish across the board.  Ahead of market-moving economic data U.S. futures indicate a bullish open but expect some price volatility as the market reacts to the data.  Will it inspire the bulls or the bears?  We will soon find out of plan your risk carefully!

Economic Calendar

Earnings Calendar

Notable reports for Thursday include ANGO, BB, LAC, NEOG & MDRX.

News & Technicals’

Anna Ashton, China director at the Eurasia Group, said that a meeting between Taiwan’s President Tsai Ing-wen and U.S. House Speaker Kevin McCarthy will provoke a strong reaction from China. Taiwan’s President Tsai Ing-wen will likely meet face-to-face with Kevin McCarthy when she makes a transit visit through Los Angeles next week. According to Ashton, “The reality is that McCarthy is third in line to the presidency. A meeting like this would be the senior-most U.S. official meeting with a sitting Taiwan president on U.S. soil ever,”

Elon Musk and other tech industry figures have urged artificial intelligence labs to stop training AI systems more powerful than GPT-4, OpenAI’s latest large language model. In an open letter signed by Musk and Apple co-founder Steve Wozniak, technology leaders urged for a six-month pause to the development of such advanced AI, saying it represents a risk to society. Musk, who is one of OpenAI’s co-founders, has criticized the organization a number of times recently, saying he believes it is diverging from its original purpose.

Big Tech stocks contributed to Wednesday’s advance. Amazon popped 3%, while Meta and Netflix each gained more than 2%. Regional banks, closely followed since Silicon Valley Bank’s collapse earlier this month, also finished the session higher, with the SPDR S&P Regional Banking ETF (KRE) adding around 1%. On Thursday, investors will watch for economic data on weekly jobless claims and the gross domestic product. Boston Federal Reserve President Susan Collins, Richmond Fed President Thomas Barkin, and Minneapolis Fed President Neel Kashkari are all slated to speak in the afternoon.

Technically speaking the index charts improved yesterday with QQQ leading the way.  However, with significant overhead resistance, there is still a lot for the bulls to accomplish before an all-clear can be sounded.  With the pending GDP and Jobless Claims reports before the bell anything is possible by the open depending on whether the bulls or the bears find inspiration in the data.  Watch for whipsaws and big price moves as we push to test overhead resistance with the possibility of a short squeeze mixed in if end-of-quarter window dressing becomes a factor. 

Trade Wisely,

Doug

The painful overnight reversal on Wednesday on the spreading banking contagion subsided by the end of the day as Credit Suisse found another benefactor to backstop the embattled bank, sparking an end-of-day rally.  However, if a relief rally can begin, we must first get past Housing, Jobless, Pilly Fed, and Import/Export economic reports before the bell.  Once again, anything is possible as investors try to digest all the data to predict what the FOMC will do next week.  So expect the challenging price action to persist as the bulls and bears slug it out for directional control.

Asian markets saw declines across the board as we slept with investors grappling over what comes next in the pending FOMC decision.  However, European markets feel much better this morning as Credit Suisse recovers after burrowing 54 billion from Swiss National.  With market-moving economic reports just around the corner, U.S. futures suggest a mixed open, but everything could quickly change after the data release.  Plan for another volatile morning with significant price swings possible before the opening.

Economic Calendar

Earnings Calendar

Notable reports for Thursday include ASO, AUY, DBI, DG, COOK, FDX, GIII, MOMO, HNST, JBL, SIG, TITN & WSM.

News & Technicals’

Wall Street has been debating whether the economy is heading into a recession for months.  However, the rapid market moves after the regional bank failures in the U.S. has some strategists now expecting a contraction in the economy to come sooner.  Economists are also ratcheting down their growth forecasts on the assumption there will be a pullback in bank lending. 

Credit Suisse will borrow up to 50 billion Swiss francs ($53.68 billion) from the Swiss National Bank under a covered loan facility and a short-term liquidity facility.  The measures come after the lender’s shares saw sharp declines on Wednesday after its top investor Saudi National Bank said it could not provide further assistance. 

Snap shares surged nearly 8% to $11.15, while Meta shares rose slightly over 3% to $203.49 after The Wall Street Journal reported that TikTok faces a possible ban in the U.S. if ByteDance fails to comply with the Biden Administration’s proposition.  Investors believe that if TikTok were to be banned in the U.S., social media companies like Snapchat and Meta would regain users lost to the short-form video platform.  However, ByteDance said, “If protecting national security is the objective, divestment doesn’t solve the problem: a change in ownership would not impose any new restrictions on data flows or access.”

Wednesday’s significant overnight reversal saw the Dow sink 700 points before whipsawing and recovering nearly 400 points by the close as worries over the spreading banking contagion subsided.  While the DIA, SPY, and IWM saw a rough day, the QQQ, led by the big tech giants, traded like nothing was happening, retesting its downtrend.  The T2122 suggests we are overdue for a relief rally.  Perhaps with the Swiss National Bank providing a backstop for Credit Suisse, the banking fears will subside slightly, encouraging the bulls to defend recent support levels.  Of course, to do that, we will need to get past the Housing, Jobless, Pilly Fed, and Import/Export reports that could encourage the bulls or the bears.  Plan for another wild day ahead.

Trade Wisely,

Doug

Though filled with big point whipsaws the Tuesday relief rally was a welcomed sight but the banking uncertainty continues to cloud the path forward.  However, hopes for further recovery are in question this morning with the indexes pointing to a full reversal of yesterday’s gains in the premarket.  With potential market-moving economic data pending anything is possible so traders should plan for substantial price swings as the market reacts.  The huge global bank of Credit Suisse dropping 20% and suggesting a sub two dollar open only adds to the uncertainty ahead. 

During the night Asian markets rebound with modest gains despite posting as slow start for there post pandemic recovery.  However, European indexes see only red this morning as they reverse the Tuesday relief rally.  U.S. futures also suggest a full reversal at the open as we wait on several market moving reports that have the potential to add to the selling pain or completely reverse the open depending on the data revealed.  Buckle up for another wild ride.

Economic Calendar

Economic Calendar

Notable reports for Wednesday include ADBE, ARRY, EBIX, FIVE, FNV, PTRA, PLCE, PATH & ZTO.

News & Technicals’

Diamond Sport Group, an unconsolidated and independently run subsidiary of Sinclair Broadcast Group, filed for bankruptcy protection on Tuesday.  The company, which airs local NBA, NHL and MLB games across the country, said it plans to restructure its more than $8 billion debt load.  Diamond said it was still finalizing the restructuring support agreement with creditors. The plan could see Diamond separate from Sinclair to become a standalone operation, Diamond said. 

Democratic Sens. Elizabeth Warren and Richard Blumenthal asked the DOJ and SEC to open a probe of executives at Silicon Valley Bank.  The letter came on the heels of a joint announcement by the Justice Department and the SEC about a pending investigation into the SVB failure.  The inquiry will take place in separate and preliminary phases and look into stock sales that SVB executives conducted ahead of the bank’s collapse. 

“The challenging adjustment to the exit from zero-COVID, for both borrowers and lenders, will weigh on banks’ asset quality and profitability over the next 12-18 months,” said Moody’s analysts in a note Wednesday.  Moody’s had changed its outlook on China’s banks to “negative” from “stable” in November due to “deteriorating operating environment, asset quality and profitability.”

Tuesday’s relief rally was needed but proved challenging as it whipped in big point swings as the banking uncertainty keeps investors on edge hoping the contagion is now contained.  Unfortunately, we wake this morning to see a full overnight reversal a the global bank of Credit Suisse tumbles 20% after the Saudi backer says no more assistance as outflows surge.  If that were not enough we also face a big day of economic data that has the potential to move the market dramatically.  Traders should prepare for substantial price swings that could easily test the wide range between support and resistance levels.  The QQQ has held better than the other indexes but also indicates in the premarket a possible full reversal from yesterday’s close.  If the DIA, SPY and IWM make news lows it will become difficult for the QQQ to continue to buck the trend.   

Trade Wisely,

Doug

Last week’s financial failures quickly highlighted how fragile our banking system has become with a slowing economy and a quantitative tightening cycle to battle inflation.  However, as federal regulators work to backstop the SVB failure, worries grow about just how far the contagion has already spread.  Add in a massive week of market-moving economic data and the stage for another week of wild price volatility as investors face a very uncertain path forward.  Expect face-ripping whipsaws of significant overnight reversals as the market comes to grips with inflation, a possible recession, and a slowing economy.

Asian markets trade mixed as Hong Kong surges 1.95% and Japan falls 1.11% as uncertainty grips the financial system.  On the other hand, European markets trade decidedly bearish this morning as banks sell off 5.7% as the bank failures ripple through the monetary system.  U.S. futures went on a rollercoaster ride at night after regulators announced a backstop plan for SVB as investors worry about the potential contagion spreading to other banks.  Prepare for another wild day of price action.

Economic Calendar

Earnings Calendar

With first-quarter earnings winding down and the stock buyback blackout period about to begin, so will all the hyper-earnings emotion until we begin the 2^nd quarter silly season.  Notable reports for Monday include GTLB & KOD.

News & Technicals’

Regulators approved plans Sunday to backstop depositors and financial institutions associated with Silicon Valley Bank.  Officials will unwind both SVB and Signature Bank, ensuring that depositors can access their funds on Monday.  The Federal Reserve stepped in with a separate facility that will provide loans for up to one year for institutions affected by bank failures.  “Today, we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system,” leading regulators said in a joint statement. 

Billionaire investor Bill Ackman said the U.S. government’s intervention to protect depositors after the implosion of Silicon Valley Bank is “not a bailout” and helps restore confidence in the banking system.  In a tweet, Pershing Square CEO said SVB’s fallout on Monday noted the government did the “right thing.”  But not all Wall Street analysts are convinced the regulator’s action will shore up confidence in the U.S. banking system and limit the fallout.   “I don’t think that you can understate the danger that the American banking system is in,” veteran bank analyst Dick Bove told CNBC’s “Squawk Box Asia” on Monday. 

“In light of the stress in the banking system, we no longer expect the FOMC to deliver a rate hike at its next meeting on March 22,” Goldman economist Jan Hatzius said in a Sunday note.  The firm expects the latest measures to “provide substantial liquidity to banks facing deposit outflows” and boost confidence among depositors.

The failures of Silvergate and SVB banks brought out the bears in a big way last week, bringing to light just how fragile our banking system has become in the slowing economy.  Suddenly the Fed is back into bailout mode as the market worries just how far the banking contagion might spread.  Nevertheless, the futures market rallied sharply during evening trading after the decision to announce the SVC backstop plans to regulators.  However, the bailout enthusiasm seems to have faded substantially this morning, and traders should plan for considerable price volatility as the market comes to grips with the uncertainty of what comes next.  With a massive week of market-moving economic data, prepare for just about anything in the week ahead.

Trade Wisely,

Doug

Disappointing economic data and continued hawkish comments from Powell kept the bears engaged Wednesday.  Still, the bulls defended vital price support levels at the close, raising hope of a near-term relief rally while evidence of a pending recession grows.  Today investors will deal with Jobless Claims and more Fed comments as we wait for the potentially market-moving Employment Situation report Friday before the bell.  Big point moves and substantial intraday whipsaws remain likely, so plan your risk carefully.

While we slept, Asian markets traded mixed as China reported inflation growth of 1%, the slowest pace so far this year.  This morning, European markets trade with modest declines across the board as investors grapple with higher interest rates and growing recession concerns.  However, U.S.  futures trade near the flat line this morning as we wait on Jobless claims while hoping for a relief rally inspired by the buying into the Wednesday close.  Expect the challenging price action to continue as we wait for the Friday Employment Situation report.

Economic Calendar

Earnings Calendar

Notable earnings for Thursday include AOUT, BIRD, BJ, DOCU, LOCO, FCEL, GPS, GCO, JD, FIZZ, SWBI, TTC, MTN, WPM, ULTA & ZUMZ.

News & Technicals’

The Netherlands has become embroiled in political tensions between the United States and China, with the former looking to ensure that Beijing does not use the most advanced chip technology.  As a result, Dutch Foreign Trade Minister Liesje Schreinemacher said, “the existing export control framework for specific equipment used for the manufacture of semiconductors needs to be expanded in the interests of national and international security.”  China has been working to bolster its domestic semiconductor industry, but it remains far behind the likes of Taiwan, South Korea, and the U.S.  New semiconductor export controls have been imposed by the U.S. on China, and the eurozone nations will soon follow suit.

President Joe Biden this week called for higher taxes on wealthy Americans to extend Medicare funding as part of his 2024 budget.  The plan would increase the net investment income tax to 5%, from 3.8%, for earnings of more than $400,000, including regular income, capital gains, and so-called pass-through business income.  However, the plan is unlikely to pass in the Republican-controlled House of Representatives. 

Solanezumab’s failure is a blow to efforts to treat Alzheimer’s in people in the very early stage of the disease and has not yet shown clinical symptoms.  In addition, Solanezumab did not clear or halt the accumulation of brain plaque and did not slow cognitive decline in the treatment participants.  Lilly is developing two other Alzheimer’s treatments in late-stage clinical trials.

Inflationary economic data and the continued hawkish comments from the Fed kept the bears engaged on Wednesday though the VIX showed little fear and key price supports held in the major indexes.  However, the U.S. dollar remained strong, and the bond inversion worsened during the day, suggesting a recession that will likely be made worse by the Fed having to raise rates to combat inflation.  Evidence is mounting that it’s much less a question of whether the market will decline but more of when the decline gains strength.  That said, the current short-term oversold condition may trigger a little relief rally but don’t ignore the overhead resistance as the likely area where the bear could gather for the next attack.

Trade Wisely,

Doug