After a bearish start to the day, the bulls worked to begin a relief rally that lacked momentum as investors moved cautiously in this final trading week of September.  The rising bond yields contributed to the uncertainty with the 10-year bonds topping a sixteen-year high.  Today we face more possible market-morning economic reports and a few more notable earnings to inspire the bulls or bears.  Expect the challenging price action to continue and watch and be prepared for some big point whips or reversals and pent-up waiting for an opportunity.

Asian markets closed their Tuesday session red across the board as real estate woes continue with inflation data on the horizon. European markets also trade cautiously bearish this morning with German manufacturing continuing to decline under the economic pressures.  U.S. futures point to a bearish open ahead of earnings and economic data possibly reversing yesterday’s tepid bullishness.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday include AIR, CTAS, COST, FERG, MLKN, SNX, PRGS, & UNFI.

News & Technicals’

The global economy is facing a serious threat from the escalating tensions in Eastern Europe. The war in Ukraine, which started in 2014, has not only caused human suffering and political instability but also strained the relationships between the economic superpowers, such as the US, China, Russia, and the EU. The conflict has also increased the risk of sanctions, trade wars, cyberattacks, and military confrontations. Jamie Dimon, the CEO of JPMorgan Chase, suggested that Eastern Europe was the epicenter of risk, and compared the situation to the aftermath of World War II. He said that the world had not faced such a complex and uncertain scenario before, and warned that it could trigger inflation, deficits, and recessions

Ukraine is facing a challenging situation as it tries to maintain its international support in its conflict with Russia. The war, which has been going on since 2014, has caused thousands of deaths, millions of displacements, and widespread damage. Ukraine relies on its allies, especially the US and the EU, for political, economic, and military assistance. However, some recent diplomatic gaffes, such as the leaked phone call between President Zelensky and President Biden, have raised doubts about the strength of their partnership. Moreover, public opinion in both Europe and the US has shown a decline in support for Ukraine’s cause, especially when it comes to providing more funding and weapons. Some analysts fear that Russia could take advantage of this situation and try to undermine Ukraine’s alliances and increase its aggression.

The artificial intelligence (AI) chip market is heating up as more startups compete with established players like Nvidia and Arm. One of them is Kneron, a U.S.-based semiconductor company that specializes in edge AI solutions. Edge AI refers to the processing of AI tasks on devices such as smartphones, cameras, and robots, rather than on cloud servers. Kneron announced on Tuesday that it raised an additional $49 million in its funding round, bringing its total funding to over $100 million. The round was led by Taiwanese giant Foxconn, the world’s largest electronics contract manufacturer and a key supplier of Apple’s iPhones. Other investors included Alltek, a communications tech company, and several venture capital firms. Kneron said it will use the funds to accelerate the commercialization of its AI chips, which are designed to enable low-power and high-performance edge AI applications across various industries.

After the DIA tested and held its 200-day moving average the bulls worked to provide a little relief rally on Monday but lacked momentum with inflation data looming later this week. The ongoing increase in U.S. Treasury yields, which have reached their highest level for the year, surpassing 4.5% for the 10-year bond added to Monday’s uncertainty. The U.S. dollar, which tends to appreciate when investors seek safety, has also risen sharply. The DXY dollar index is above 105, its highest level for the year, creating some headwinds for global companies and markets.  Today we have a few more notable earnings reports that could provide some inspiration for the bulls or bears and may also give us a glimpse into the 4^th quarter as well as hints to the strength of the consumer.  Investors will have to also deal with Case Shiller, FHFA House Prices, Consumer Confidence, New Home Sales, a 2-year bond auction as well as more Fed member pontifications.  Plan carefully as Asian and European bearishness tries to reverse yesterday’s relief all at once at the open.

Trade Wisely,

Doug

Although many were likely hoping to see a bounce on Friday the uncertainty of the hawkish FOMC and the pending inflation data later this week left behind more questions than answers.  As the Dow hovers near its 200-day average, we can’t rule out the possibility of more bearish pressure this morning.  However, with the short-term oversold condition of the index charts, there is also some hope of a cautious relief rally as we wait on Retail Sales, GDP, and the critical Core PCE numbers.  Will it prove bullish or bearish, that is the big question for the week.  So plan carefully with the path forward so clouded in uncertainty. 

Asian markets began the week mixed waiting on inflation data as interest rates and oil prices worry investors.  European market trade red across the board Monday morning as inflation data looms.  U.S. futures point modestly lower in the premarket as investors try to assess what comes next in the economic data while worries of a government shutdown grow.

Economic Calendar

Earnings Calendar

Notable reports for Monday include THO.

News & Technicals’

Evergrande, the Chinese property giant that is on the brink of default, saw its shares plunge to a record low on Monday. The company announced that it would postpone a crucial meeting with its creditors, which was scheduled for Monday, to discuss a debt restructuring plan. The company also said that it was unable to issue new notes under the plan, due to an investigation into its subsidiary Hengda Real Estate. The news raised doubts about the company’s ability to repay its massive debt of over $300 billion, which could have serious consequences for the Chinese and global economy. Evergrande’s shares fell to 41 Hong Kong cents on Monday, down 11.8% from Friday’s close, and 94% lower than a year ago.

The U.S. government is facing the risk of a shutdown on Oct. 1, as Congress remains deadlocked on the federal budget. The main reason for the impasse is the opposition from some House Republicans, who demand more spending cuts as a condition for approving a short-term bill that would fund the government through Oct. 31. The bill, which also includes a suspension of the debt limit, has been delayed by the House GOP leadership, who are struggling to unify their caucus. Senate Majority Whip Dick Durbin said he was at a loss over the situation, and urged the House to act quickly. A government shutdown would affect millions of federal workers, military service members, and beneficiaries of federal programs. It would also disrupt the operations of national parks, museums, airports, and other public services. A shutdown would also cost the U.S. economy billions of dollars in lost revenues and fees. The U.S. is also facing another fiscal crisis, as it could default on its debt obligations by mid-October if Congress does not raise or suspend the debt limit. A default could trigger a financial crisis and damage the U.S. credit rating. The U.S. is facing a costly and calamitous crisis if Congress fails to act soon.

The ongoing strike by Hollywood writers has disrupted the production of many movies and TV shows. The writers, represented by the Writers Guild of America (WGA), are demanding better pay and working conditions from the major studios, such as Disney, Paramount, Universal, and Warner Bros. Discovery. The strike began in early May after the previous contract expired and the negotiations failed. The WGA and the Alliance of Motion Picture and Television Producers (AMPTP), which represents the studios, resumed talks last week, hoping to reach a new agreement soon. However, the final contract language is still being drafted, and the strike continues.

Equities chopped in a narrow range on Friday trying to come to terms with a still hawkish FOMC and the uncertainty of pending inflation data later this week.  If that were not enough we also have the possible government shutdown at midnight on September 30^th if an agreement is not reached soon in Congress. Index charts have suffered significant technical damage with the Dow nearing its 200-day average and the small caps already below that key level of support.  That said, the indexes are also in a short-term oversold condition so a cautious relief rally could begin at any time as we wait on Retail Sales, GDP, and Core PCE figures later this week.  However, if the bears find inspiration in the pending data a panicked and punishing selloff is not out of the question.  Plan your risk carefully my friends.

Trade Wisely,

Doug

Despite all the talking head predictions the hawkish Federal Reserve reversed early bullish producing a nasty whipsaw that unfortunately left behind some technical damage in the index charts.  This morning we have more data to inspire the bulls or bears with Jobless Claims, Philly Fed, and Current Account figures before the bell.  However, there is little on earnings for the rest of the week.  Watch for potential bounces near support levels and plan for the price volatility to continue with so many companies in their blackout period as we wait on the 4^th quarter earnings results.

While we slept Asian markets traded lower across the board in reaction to the FOMC decision.  European markets trade decidedly bearish this morning falling into negative territory amid central bank actions.  After a bearish reversal on the hawkish Fed, U.S. futures point to a substantial gap down open with several pending economic reports that could quickly make it better or worse by the open. 

Economic Calendar

Earnings Calendar

Notable reports for Thursday include DRI & FDS.

News & Technicals’

The Writers Guild of America (WGA) strike, which has lasted for more than two months and disrupted the production and release of many TV shows and movies, may be nearing its end. According to sources close to the negotiations, the writers and the producers are close to reaching an agreement after meeting face-to-face on Wednesday. The two sides hope to finalize a deal on Thursday, which would end the strike and allow the writers to resume their work. However, the sources also cautioned that if a deal is not reached, the strike could last through the end of the year, causing more losses and delays for the entertainment industry. On Wednesday evening, the WGA and the AMPTP released a joint statement that they met for bargaining and would meet again on Thursday. The statement did not provide any details or specifics about the progress or outcome of the meeting. However, sources said that both sides were willing to compromise and make concessions on some of the key issues. They also said that both sides were hopeful that they could reach a mutually beneficial agreement that would end the strike and restore normalcy to the industry.

The UAW strike, which has affected the U.S. auto industry for more than two months, has caused more layoffs and disruptions for the workers and the companies. GM, one of the largest automakers in the U.S., said it idled an assembly plant in Kansas because of a shortage of parts due to the strike. About 2,000 of its workers were laid off on Wednesday, adding to the tens of thousands of workers who have been affected by the strike. GM also said that because of the strike, the workers laid off on Wednesday will not be eligible for the supplemental unemployment benefits it normally pays, which could hurt their income and well-being. Stellantis, another major automaker, also laid off about 370 workers at three parts factories that supply its Jeep plant in Toledo, where the UAW went on strike last week. The Jeep plant employs about 3,000 workers, who are demanding better wages and working conditions from Stellantis. The layoffs and disruptions at GM and Stellantis show the ripple effects of the UAW strike, which has reduced the production and supply of vehicles in the U.S. market. The strike has also increased the costs and losses for both the workers and the companies, as they lose their revenues and fees. The strike has also affected consumers, who have fewer choices and options in buying new cars. The UAW strike is one of the longest and largest labor disputes in the U.S. auto industry in recent history, and it remains unresolved despite ongoing negotiations between the union and the producers.

Poland, one of Ukraine’s closest allies in its conflict with Russia, has announced that it will stop supplying weapons to Ukraine, as a trade dispute escalates. Poland has been supporting Ukraine since Russia invaded and annexed Crimea in February 2022, and backed the separatist rebels in eastern Ukraine. Poland has donated weapons, tanks, fighter jets and military training to Ukraine’s armed forces, as well as providing diplomatic and humanitarian aid. However, a recent dispute over Ukraine’s agricultural exports has threatened to break the alliance. Ukraine has accused Poland of imposing unfair and discriminatory tariffs and quotas on its agricultural products, such as wheat, corn, and sunflower oil. Ukraine has said that these measures violate the free trade agreement between the two countries, and have caused significant losses for its farmers and exporters. Poland has defended its actions, saying that they are necessary to protect its domestic market and consumers from cheap and low-quality Ukrainian products. Poland has also accused Ukraine of failing to comply with the sanitary and phytosanitary standards required by the European Union, of which Poland is a member. As a result of the trade dispute, Poland has decided to suspend its weapons deliveries to Ukraine, which could weaken Ukraine’s defense capabilities and security situation. The decision has sparked criticism and concern from other European countries and the United States, which have urged Poland and Ukraine to resolve their differences peacefully and constructively. They have also warned that the dispute could benefit Russia, which has been trying to undermine and isolate Ukraine from its Western partners.

Markets began the day with high bullish hopes but the hawkish Federal Reserve meeting on Wednesday engaged the bears creating a nasty whipsaw that left behind technical damage in the index charts. The Fed signaled that it would raise interest rates sooner and faster than expected despite all the predictions from the talking heads. The two-year Treasury yield reached its highest level this year reversing some early weakness in the dollar. Today we have a busy economic calendar with Jobless Claims, Philly Fed, Current Account, Existing Home Sales, Leading Indicators, and Natural Gas numbers to inspire the bulls or bears. Expect the challenging volatility to continue and don’t be surprised if we experience another whipsaw after the gap down as the market reacts to the data.

Trade Wisely,

Doug

Instead of a choppy Tuesday as we waited on the FOMC, the big miss on Housing Starts engaged the bears making lower lows in the index chart before whipsawing back up in the afternoon session. Market Breadth continued to weaken while the VIX ended the day seemingly ambivalent to the volatility.  Today, of course, we will get the FOMC decision and Powell’s press conference which will likely be more relevant to the path forward.  How the market reacts is anyone’s guess so plan your risk carefully.

Asian market finished their Wednesday session mostly lower after China kept its benchmark loan rates unchanged.  However, European markets are green across the board after learning that U.K. inflation came in slightly below forecast.  With a pending FOMC decision, U.S. futures look to follow through on Tuesday afternoon rally pointing to a bullish open ahead of market-moving data that could inspire some big point moves up or down.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday include FDX, GIS & KBH.

News & Technicals’

Deutsche Bank CEO Christian Sewing said Germany was not the “sick man of Europe”, but admitted it had some problems. He said Germany had a recession in the first quarter and faced challenges like aging, low investment, high taxes, and complex rules. He said Germany needed to invest more in digital, green, and social areas, and to reform its tax and labor systems. He said this would make Germany more productive, competitive, and growing.

The global debt stock, which measures the total amount of debt owed by governments, corporations, and households, reached a record high of $307 trillion in the first half of 2023, according to a report by the Institute of International Finance (IIF). This represents an increase of $10 trillion from the end of 2022 and more than $100 trillion from a decade ago. The IIF is a global association of financial institutions that monitors and analyzes the trends and risks in the global debt market. The main reason for the rise in global debt was the surge in inflation, which eroded the real value of debt and reduced the debt-to-GDP ratio. The debt-to-GDP ratio is a measure of how much debt a country or region owes relative to its economic output. The global debt-to-GDP ratio fell from 362% in the first quarter of 2021 to 336% in the second quarter of 2023, as inflation outpaced nominal GDP growth. Inflation was driven by factors such as the pandemic, supply chain disruptions, fiscal stimulus, and commodity price shocks.

The House GOP leadership has postponed a vote on a bill that would prevent a government shutdown at the end of the month. The bill, known as a continuing resolution (CR), would fund the federal government through Oct. 31, giving lawmakers more time to negotiate a longer-term spending plan. However, the bill faces opposition from some House Republicans, who object to its inclusion of a debt limit suspension, which would allow the Treasury Department to borrow more money to pay the government’s bills. The U.S. faces a looming government shutdown if Congress fails to pass a CR by midnight on Sept. 30, which could result in the closure of nonessential federal agencies and services, and the furlough of hundreds of thousands of federal workers. The U.S. also faces the risk of a default on its debt obligations if Congress fails to raise or suspend the debt limit by mid-October, which could trigger a financial crisis and damage the U.S. credit rating. The House GOP leadership pulled the vote originally scheduled for 2:30 p.m. ET on Wednesday, according to an updated schedule, and said they would try again on Thursday. The bill is expected to pass the House with mostly Republican votes, but it will face an uncertain fate in the Senate, where Democrats have vowed to block it.

Indexes whipsawed substantially after Housing Starts came in signifyingly below consensus estimates at a level not seen since June 2020.  The selling was broad-based affecting most sectors however the rally back in the afternoon left behind hopeful hammer candle patterns suggesting a least a short-term relief rally could be near.  Of course, what will determine the day is the FOMC decision and what investors take away from Powell’s press conference about the path forward.  Anything is possible and I think traders should be prepared for big point moves and whipsaws in price as all the pent-up market emotion spills out.  Keep in mind it is also possible the FOMC decision turns out to be a nonevent with so many stocks in their blackout period before 4^th quarter earnings.  Buckle up it could be a wild day.

Trade Wisely,

Doug

It’s no surprise Monday delivered a frustratingly choppy price action day where the bulls and bears were unable to find energy as we wait on the FOMC. Perhaps the handful of earnings and the Housing Starts figures will inject a bit more inspiration this morning but don’t be surprised if that quickly fades into more head fakes and chop.  Remember about 50% of companies are in their blackout period likely keeping volume anemic so expect a lot of consolidation in the charts.

While we slept Asian markets closed mostly lower in a choppy session as they digested the Australian Central Bank’s minutes and waited for the pending FOMC announcement.  European markets are trying to hold mostly bullish this morning in a very light and choppy session as they also wait.  U.S. futures are trying to pump up the premarket for a bullish start to the day ahead of another light day of earnings and economic data as bond yields hold strong. 

Economic Calendar

Earnings Calendar

Notable reports for Tuesday include APOG, AZO, DAVA, and SCS.

News & Technicals’

Huawei, the Chinese tech giant, has surprised the world with its latest smartphone, the Mate 60 Pro, which features a chip that supports 5G technology. This is despite the U.S. sanctions that have tried to cut off Huawei from accessing 5G components and software. The chip called the Kirin 9000s, was made by China’s SMIC, the largest semiconductor manufacturer in the country. The U.S. government is investigating how SMIC was able to produce such a chip without violating the U.S. export restrictions, which prohibit the use of American technology in the chipmaking process. The chip breakthrough could pose a new threat to Apple in China, one of its biggest markets, as Huawei could regain its competitiveness and popularity among Chinese consumers. Huawei was once the world’s largest smartphone maker, but its sales plummeted after the U.S. banned it from using Google’s Android operating system and other key technologies. A resurgent Huawei could also raise questions for Washington, which has accused Huawei of posing a national security risk due to its alleged ties to the Chinese government and military. Huawei has denied any such risk exists. The U.S. has been trying to persuade its allies to exclude Huawei from their 5G networks, but some countries have resisted or delayed their decisions.

The Canadian intelligence agencies are investigating a possible link between Indian government agents and the murder of a Sikh community leader in British Columbia. The victim, Baljit Singh, was shot dead outside his home in Surrey on June 18, in what the police described as a targeted killing. Singh was a prominent figure in the Sikh community and a vocal supporter of the Khalistan movement, which seeks to create an independent Sikh state in India. The Canadian intelligence agencies suspect that Singh was assassinated by Indian operatives who were sent to silence him and other pro-Khalistan activists in Canada. The investigation has sparked a diplomatic row between Canada and India, which have expelled each other’s diplomats in an escalation of bilateral tensions. India has rejected the allegations of its involvement in the killing, calling them baseless and malicious. Canada has urged India to cooperate fully with the investigation and to respect the human rights and freedom of expression of the Sikh community in Canada. The case has also raised concerns about the safety and security of the Sikh diaspora in Canada, which has faced threats and harassment from Indian agents and extremists in the past. The Sikh community has demanded justice for Singh and protection from the Canadian government.

Monday as expected was a choppy price action day on low-volume finding no inspiration in either the earnings or economic calendar.  Unfortunately, today could be much of the same hurry up and wait for the FOMC decision and press conference.  We have some hope that the Housing Starts and Permits report or the handful of earnings will inspire a little action but then again I wouldn’t count on that with 50% of companies in their blackout period.  At times like this, the temptation is to trade simply out of boredom but keep in mind that any position taken, Long or Short, could be whipsawed or completely reversed as the market reacts to the Fed’s decision. As a result, the chop is likely with lots of head fakes on lower-than-average volume.

Trade Wisely,

Doug

Friday the bears reminded us they were still here producing nasty index reversal patterns that broke the 50-day moving averages of the DIA, SPY, and QQQ.  With little on both the earnings and economic calendars to inspire expect choppy price action as wait for the Wednesday rate decision from the Fed.  With nearly 50% of all companies entering their blackout period this week breadth could struggle until the kick of 4^th quarter earnings.

Overnight Asian market closed mixes but mostly lower as they wait on the central bank decisions pending this week.  European markets see red across the board this morning with travel and leisure sectors leading the markets lower.  However, U.S. futures try to hold on to modest overnight gains for a bullish open as we wait with all eyes focused on the Wednesday FOMC decision.

Economic Calendar

Earnings Calendar

Notable reports for Monday include SFIX.

News & Technicals’

House Republicans have released a short-term bill to avert a government shutdown until Oct. 31, as the deadline of Sept. 30 approaches. The bill, known as a continuing resolution (CR), would fund the government at current levels and avoid a lapse in federal services and programs. The bill would also extend several expiring programs, such as the National Flood Insurance Program, the Highway Trust Fund, and the debt limit. However, the bill faces uncertain prospects in the Senate, where Democrats have the majority and have expressed opposition to some of the provisions in the bill. Democrats have criticized the bill for not including funding for disaster relief, Afghan refugees, and health care. They have also accused Republicans of playing politics with the debt limit, which could trigger a default on U.S. obligations if not raised by mid-October. The bill would require 60 votes to pass the Senate, meaning that at least 10 Democrats would have to join all 50 Republicans to support it. If the bill fails to pass both chambers of Congress by Sept. 30, the government will shut down for the first time since 2018.

Streaming has changed how people watch TV and movies, but it has also hurt the media industry. Old media companies have launched their streaming platforms, but they have not made money or matched Netflix’s success. Streaming costs a lot, earns little, and faces many problems. Streaming also affects how writers and actors are paid and what kind of content is made. Hollywood is still trying to figure out how to make streaming work.

Health insurance prices, which have been falling for almost a year, are expected to reverse course and start rising from October, adding to the inflationary pressures in the U.S. economy. According to economists, health insurance prices have been declining roughly 3% to 4% a month since October 2022, due to a temporary change in the way the Bureau of Labor Statistics (BLS) calculates the consumer price index (CPI) for health insurance. The BLS uses a proxy measure based on the medical care services component of the CPI, which has been subdued by the pandemic and the expansion of telehealth. However, starting in October, the BLS will resume using its pre-pandemic methodology, which is based on actual revenues reported by health insurers. This means that the CPI for health insurance will start rising just over 1% month over month for a year, reflecting the higher premiums and fees charged by insurers. Health insurance accounts for about 1.2% of the overall CPI basket, so this change could add about 0.15 percentage points to the annual inflation rate. This could pose a challenge for the Federal Reserve, which is trying to balance its dual mandate of price stability and maximum employment amid the uncertain recovery from the COVID-19 crisis.

With the UAW on strike, and bond yields rising the bear made their presence known on Friday producing nasty index reversal patterns that failed 50-day morning averages.  This week we begin entering the corporate blackout period for nearly 50% of the companies which could have a substantial impact on market breadth for the rest of September.  Today we have very earnings and economic calendars making it difficult for bulls or bears to find much inspiration, especially with the looming FOMC decision coming Wednesday afternoon.  Plan for choppy price action that could whip between support and resistance levels as wait. 

Trade Wisely,

Doug

After a confusing CPI number that showed the largest monthly increase in inflation in a year while still producing a slight decline in the core figures, equity markets continued to chop with frustrating uncertainty.  Focus today shifts to Jobless Claims, Producer Price Index, Retail Sales, and Business inventory numbers to try and find direction.  With a UAW strike looming, next week’s Fed meeting, and the possibility of a government shutdown on the horizon the market has a lot of uncertainty on its plate to digest.  Watch for whipsaws and be ready for just about anything as the data is revealed.

Asian markets didn’t seem to mind the higher inflation reading closing with green across the board overnight.  European markets are also bullish this morning as they wait on an ECB rate decision and auto sales fall 1.2%.  U.S. futures point to a bullish open ahead of several potential market-moving economic reports that could easily improve or quickly reverse the premarket pump.  Buckle up for a morning where anything is possible.   

Economic Calendar

Earnings Calendar

Notable reports for Thursday include ADBE, KFY & LEN.

News & Technicals’

Arm, the chip design company that powers most of the world’s smartphones and tablets, priced its long-awaited initial public offering on Wednesday. The company, which was acquired by SoftBank in 2016 for $32 billion, will list its shares on the London Stock Exchange and the Nasdaq under the ticker symbol ARM. The company set its IPO price at $25 per share, valuing it at about $40 billion. SoftBank will retain about 90% of the company’s ownership after the offering while selling 10% to the public and some of Arm’s customers. Some of the customers that have agreed to buy shares in the IPO include Apple, Google, Nvidia, and Samsung, which are also some of the biggest users of Arm’s chip designs. The IPO is expected to raise about $4 billion for Arm and SoftBank, which will use the proceeds to invest in other technology ventures. The IPO is also seen as a vote of confidence in Arm’s business model, which licenses its chip designs to other manufacturers rather than making its chips. Arm’s chip designs are widely used in mobile devices, cloud computing, artificial intelligence, and the Internet of Things.

Many Americans’ retirement confidence has been shaken due to high inflation, a survey finds. The survey, conducted by Natixis in June 2023, found that 69% of Americans are concerned about inflation eroding their retirement savings, and 62% are worried about rising healthcare costs. The survey also found that only 54% of Americans have a financial retirement plan, and only 37% have calculated how much income they will need in retirement. The survey results come as the consumer price index (CPI), a measure of inflation, posted its biggest monthly gain in 2023 so far. The CPI rose by 0.7% in August, driven by higher prices for gasoline, food, and rent. The annual inflation rate was 5.3%, well above the Federal Reserve’s target of 2%.

Italy’s Prime Minister, Mario Draghi, has hinted at a possible withdrawal from China’s Belt and Road Initiative (BRI), a massive infrastructure project that aims to connect Asia, Europe, and Africa. Draghi told reporters on Sunday at a press conference after the Group of 20 nations leaders’ summit in Delhi that a final decision to leave the BRI was still to be taken. Italy remains the only Group of 7 industrialized countries that is a signatory of Beijing’s signature BRI that President Xi Jinping launched a decade ago. Rome is coming under pressure to recast its relationship with Beijing amid growing concerns over China’s human rights record, trade practices, and geopolitical ambitions. Draghi said that Italy’s participation in the BRI was not consistent with its values and interests and that he would seek a more balanced and transparent approach to China. He also said that Italy would align itself with its European and transatlantic partners on China-related issues. Draghi’s remarks signal a shift in Italy’s foreign policy from the previous government, which joined the BRI in 2019 in a controversial move that angered its allies and raised doubts about its commitment to the Western alliance.

Equity markets continued to chop Wednesday after the CPI recorded a 0.6 monthly inflation increase the strongest increase in more than a year.  However, the core number declined slightly delivering a confusing result to investors that delivered another directionless and frustrating low-volume day of price action.  Today we will have Jobless Claims, Producer Price Index, Retail Sales, Business Inventories, and Natural Gas numbers to provide the bulls or bears inspiration. Perhaps today we pick a direction but watch for substantial whipsaws if the data produces a morning gap.  The indexes are coiled up tightly so be prepared for the possibility of a big point move but still in question is which way.  Plan carefully my friends.

Trade Wisely,

Doug

The wait is almost over and hopefully, the indexes can break the low-volume chop with the release of the CPI inflation report.  With the headline number expected to rise with the core number expected to decline how the market reacts is anyone’s guess.  We will also get Mortgage application data and what could prove to be a very important Petroleum report as energy prices surge putting additional pressures on an already struggling consumer.  Keep in mind Thursday morning is also chalked full of potential market-moving reports so plan your risk carefully.

Overnight Asian markets printed red across the board waiting on the inflation reports pending.  European markets also started the day bearish waiting on inflation data as the U.K. posted a 0.5% economic contraction in July.  U.S. futures point to a modestly bearish open ahead of earnings and economic reports but expect just about anything by the open with all eyes focused on the CPI and what that might mean for the interest rate path forward.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday include CBRL & REVG.

News & Technicals’

Apple, the world’s most valuable company, has raised the prices of its iPhone models in two of its key markets, China and India, despite keeping them the same in the U.S. The company announced its new iPhone 13 lineup on Tuesday, which features improved cameras, displays, and batteries. However, customers in China and India will have to pay more to get their hands on the latest devices, as Apple has increased the prices by up to 6% and 8%, respectively, compared to the previous generation. The price hikes are likely due to several factors, such as currency fluctuations, higher taxes and tariffs, and supply chain challenges. Apple is also facing fierce competition from local rivals such as Xiaomi, Oppo, and Vivo, which offer cheaper and more diverse smartphones in these markets. The price hikes could hurt Apple’s sales and market share in China and India, which are the world’s largest and second-largest smartphone markets, respectively.

The U.S. mortgage market is experiencing a historic slump as higher interest rates and low housing inventory discourage potential borrowers. According to the Mortgage Bankers Association, the total mortgage application volume fell by 0.8% last week compared to the previous week, reaching the lowest level since 1996. The decline was driven by a 5% drop in refinancing applications, which were 31% lower than the same week a year ago, when interest rates were around 3%. The average contract interest rate for 30-year fixed-rate mortgages rose to 7.27%, more than a full percentage point higher than a year ago. The purchase applications also fell by 1% week to week and were 27% lower than the same week a year ago, as homebuyers faced limited choices and high prices in the housing market. The adjustable-rate mortgage share of activity increased, indicating that some buyers were trying to lower their monthly payments by opting for riskier loans. The mortgage demand slump could have negative implications for the U.S. economy, as it could reduce consumer spending, home construction, and wealth accumulation.

Equities closed mostly lower Tuesday on another low-volume choppy price action day with investors waiting on the CPI inflation report for August.  Analysts suggest headline CPI inflation could move higher while also expecting core inflation to decline.  That is a tight line to walk and how the market reacts to such data is anyone’s guess so plan for just about anything this morning.  Bond yields are rising this morning ahead of the report adding more uncertainty.  Other than that we will get the latest read on Mortgage applications and the very important Petroleum numbers as energy prices continue to surge adding pressure to an already struggling consumer.

Trade Wisely,

Doug

After an early session pop the market spent the rest of the waiting mired in low-volume chop as investors exercised caution ahead of pending inflation data.  Expect more of the same hurry-up-and-wait price action today with very little on the earnings and economic calendars to inspire the bulls or bears.  Plan for all the chop to change quickly depending on the reaction to the before-the-bell release of the CPI. We can not rule out a substantial gap up or down in reaction to the data so plan your risk carefully today.

While we slept Asian markets closed mixed with the NIKKEI leading the buying up .95% with Hong Kong and Shanghai selling off modestly.  European markets trade mostly lower with modest losses this morning as they wait on inflation data.  U.S. futures suggest a modestly lower open this morning facing another light day of data to inspire with the CPI report pending Wednesday morning.

Economic Calendar

Earnings Calendar

We have no notable earnings reports for this Tuesday. Those that are reporting are very small cap and low volume names.

News & Technicals’

JPMorgan Chase CEO Jamie Dimon warned on Monday that the U.S. economy, which is currently doing well, could face significant challenges in the future. He said that it would be a “huge mistake” to assume that the current consumer strength would translate into a booming environment for years. He cited several factors that could derail the economic recovery, such as the central banks tightening their monetary policies, the escalating war in Ukraine, and the excessive spending by governments around the world. He said that these factors could create uncertainty, volatility, and inflation, which could hurt the business and consumer confidence. He urged the policymakers to act responsibly and prudently to avoid a potential crisis. “To say the consumer is strong today, meaning you are going to have a booming environment for years, is a huge mistake,” Dimon said.

Oracle, the software giant, reported disappointing results for the fiscal first quarter, missing analysts’ expectations on license and hardware revenue. The company’s total revenue rose by 4% year-over-year to $9.73 billion, but fell short of the consensus estimate of $9.77 billion. The license revenue, which reflects the sales of new software products, declined by 8% to $813 million, while the hardware revenue, which includes the sales of servers and storage devices, dropped by 6% to $763 million. The company also issued weaker-than-expected guidance for the second quarter, projecting a revenue growth of 3% to 5%, below the analysts’ forecast of 5.3%. The company’s shares fell by more than 2% in after-hours trading following the earnings release.

Despite the disappointing results, Oracle highlighted its achievements and innovations in the quarter, such as launching new database hardware and artificial intelligence software features. The company unveiled the Oracle Database 23c, which it claimed to be the world’s first database with built-in machine-learning capabilities. The company also introduced the Oracle Exadata X9M, a new generation of database hardware that delivers up to 25 times faster performance than previous versions. The company said that these products would help it compete with rivals such as Amazon Web Services and Microsoft Azure in the cloud computing market. “We are confident that our cloud strategy and strong product portfolio will continue to drive our growth and profitability in the future,” said Safra Catz, Oracle’s CEO.

We kicked off a new week of trading with an early session surge that quickly faded with the remainder of the day mired in a low volume as traders ponder the pending CPI number out Wednesday morning.  TSLA was a bright shiny spot in the tech sector surging 10% after receiving an upgrade.  Unfortunately, we have another day to wait with little to nothing on earnings and the economic calendar to inspire.  One distraction could be the AAPL product release show that can at times provide some bullish or bearish action in tech gient.  Plan your risk carefully today because the release of the CPI number before the bell tomorrow could create a big market gap up or down depending on investor reaction.

Trade Wisely,

Doug

We closed Friday with the indexes near the flatline with investors in a wait-and-see mode with pending inflation data coming Wednesday this week.  Adding to the uncertainty the slowing Chinese and European economies as well as the rising U.S. bond yields and energy price impacts on an already stressed consumer.  We begin the week with a light day of earnings and economic reports as we ponder what comes next with the pending CPI and PPI reports.  Expect choppy price conditions as we hurry up and wait.

Overnight Asian markets began the week by closing mixed as they wait on key data later this week from Chain and India.  However, European markets see modest bullishness across the board as they work to relive some of last week’s selling.  U.S. futures also point to a modestly bullish open hoping to keep the relief rally alive with the inflation data uncertainty just around the corner.

Economic Calendar

Earnings Calendar

Notable reports for Monday include ORCL, CASY, and FCEL.

News & Technicals’

Europe’s largest economy, Germany, is facing a bleak outlook for 2023 as the COVID-19 pandemic continues to weigh on its recovery. According to the European Commission, Germany is expected to shrink by 0.4% this year, a downward revision of 0.6 percentage points from its previous forecast in May. This would make Germany the only major European economy to contract this year, as its peers are projected to grow by an average of 4.7%. The main reasons for Germany’s poor performance are the prolonged lockdowns, the slow vaccination rollout, and the supply chain disruptions that have affected its export-oriented manufacturing sector. The Commission also warned that Germany faces significant downside risks from the spread of new variants, the uncertainty over fiscal policy, and the potential spillovers from other countries.

Some people who take drugs for diabetes and weight loss have reported an unexpected side effect: they have less desire for addictive substances and behaviors. These drugs, known as GLP-1s, include Ozempic and Wegovy, which have been shown to help people lose weight by suppressing appetite and increasing metabolism. However, some patients also claim that these drugs have reduced their cravings for alcohol, nicotine, opioids, and some compulsive behaviors, such as online shopping and gambling. These anecdotal reports suggest that GLP-1s may have a role in treating addiction, a chronic brain disorder that affects millions of people worldwide. Several studies in animals support this idea, showing that GLP-1s can modulate the reward system in the brain and decrease the reinforcing effects of drugs. However, more research is needed to confirm these findings in humans and to understand the mechanisms and optimal doses of GLP-1s for addiction treatment.

The 10-year U.S. Treasury yield, which reflects the market’s expectations for future interest rates, rose on Monday as investors awaited key economic data due this week. The yield climbed to 1.62%, up from 1.57% on Friday, as bond prices fell. Investors are looking for clues about the strength of the U.S. recovery and the inflation outlook, which could influence the Federal Reserve’s monetary policy decisions. Some of the data releases that could move the market this week are the consumer price index (CPI) on Tuesday, the producer price index (PPI) on Wednesday, and the retail sales and consumer sentiment on Friday. Higher-than-expected inflation or growth figures could fuel expectations that the Fed will taper its bond-buying program or raise interest rates sooner than anticipated, which could put upward pressure on yields. Conversely, lower-than-expected data could ease those expectations and lower yields.

Equity markets closed near the flatline on Friday lacking momentum as pending inflation left investors in a wait-and-see mode.  Chain’s ban on iPhone use for government employees weighed heavily on the tech sector which struggled for direction throughout the week.  The slowing economic numbers out of China and Europe added to the uncertainty while rising bond yields and energy prices piled on keeping traders cautious heading into the weekend.  Monday begins with a very light day of earnings and economic reports likely to keep price action choppy and volume low, as wait on the Wednesday CPI data.  The big question is, will it inspire the bulls or will it bring out the bears? Only time will tell so get ready for a choppy couple of days as we hurry up and wait.

Trade Wisely,

Doug