Magic of Santa

Magic of Santa

As we begin another trading week, we have the magic of Santa competing with weakening economic numbers and worries about a challenging recession over next year’s horizon.  Yet, the bulls showed incredible tenacity with a willingness to buy, buy, buy despite the hot jobs numbers likely to keep the FOMC hawkish.  With many of the Dow component stocks in very extended parabolic patterns, traders will have to watch for possible big-point bear attacks, though the Santa rally hopes remain high. 

While we slept, Asian markets rallied as China relaxed some pandemic rules prompting Hong Kong to surge 4.51%.  However, European markets trade mixed this morning, with oil moving higher as price controls compete with OPEC’s production cutbacks.  After Friday’s big recovery rally, U.S. futures point to a modest gap open as we wait for earnings and economic data.  Plan carefully for another week of volatile data-charged price action as Santa hope battles recession fears.

Economic Calendar

Earnings Calendar

Earnings reports will be light this week, but we will still have some notables to keep us on our toes.  Notable reports for Monday include GTLB & SUMO.

News & Technicals’

The Netherlands is outsized in the global semiconductor supply chain because of its star company, ASML.  ASML produces a cutting-edge chip-making machine, and China is keen to have access.  The U.S. is worried that if ASML ships the machines to China, chipmakers in the country could begin to manufacture the most advanced semiconductors in the world, which have extensive military and advanced artificial intelligence applications. 

Foxconn said November revenue totaled 551.1 billion new Taiwan dollars ($14.7 billion), down more than 29% versus October and over 11% lower compared to Nov. 2021.  The Taiwanese firm said the fall was due to “production gradually entering off-peak seasonality and a portion of shipments being impacted by the epidemic in Zhengzhou.”  Zhengzhou, a city in China, is home to the world’s largest iPhone assembly plant, which Foxconn runs.  In late October, the factory had an outbreak that Foxconn battled to control. 

The European Union is poised to ban all imports of Russian seaborne crude from Monday.  The Kremlin has previously warned that any attempt to impose a price cap on Russian oil will cause more harm than good.  Oil prices have fallen below $90 a barrel from more than $120 in early June ahead of potentially disruptive sanctions on Russian oil. 

As we begin another trading, there is still hope for the magic of Santa to keep the rally going.  First, however, Santa will need to overcome the economic data showing a slowing economy while job growth remains stubbornly strong.  In addition, the growing worries of recession, a disinflationary cycle, or even the dreaded stagflation still worry investors making for some high-risk volatility.  To begin the trading week, we have a light earnings calendar with Factory orders, ISM Services, and PMI composite readings to try and gain some inspiration.  The indexes remain in bullish patterns, yet many of the Dow component stocks are very extended in parabolic patterns, so we will have to stay focused for signals of bear attacks or longer choppy consolidations as it rests. 

Trade Wisely,

Doug

Slowing U.S. Economy

Slowing U.S. Economy

Economic reports continue to point to a slowing U.S. economy, but the bulls show no signs of concern as the index trends remain bullish in stark contrast to the data.  After the data-driven price volatility, the volume quickly declined into a choppy afternoon session, waiting for today’s Employment Situation report.  With little on the earnings calendar, the job numbers will be the source of bullish or bearish inspiration as we slide into the weekend.  Plan carefully and remember to take some profits because this extended market condition could bring sudden bear attacks, so avoid complacency. 

Asian markets had a rough overnight session, wanting clarity on pandemic rules as the lockdowns continue.  European markets trade slightly bearish this morning as they wait on the U.S. job data.  With a very light day of earnings, all eyes will focus on the Employment Situation number out before the bell.  The question is will it inspire the bulls or the bears?  We will soon find out, so plan carefully and expect a shot of price volatility as we wrap up another trading week.

Economic Calendar

Economic Calendar

We have a light day on the Friday earnings calendar to wrap up the week.  Notable reports include CBRL & GCO.

News & Technicals’

While the European Union has dubbed China as a “strategic rival” on different occasions, it is pursuing a different approach from the U.S.  Data from Europe’s statistics office showed that China was the third largest buyer of European goods and the most important market for imported EU products in 2021.  The importance of China as a market for Europe becomes even more relevant at a time when its economy is struggling from Russia’s invasion of Ukraine. 

OPEC+, a group of 23 oil-producing nations led by Saudi Arabia and Russia, will convene on Sunday to decide on the next phase of production policy.  The highly anticipated meeting comes ahead of potentially disruptive sanctions on Russian oil, weakening crude demand in China, and mounting fears of a recession.  However, RBC Capital Market’s Helima Croft said there was no expectation of a production increase from the upcoming OPEC+ meeting and a “significant chance” of a deeper output cut.

The Senate passed legislation that would force a tentative rail labor agreement and thwart a national strike.  A separate vote on adding seven days of paid sick leave to the agreement failed.  The legislation now goes to President Joe Biden, who urged Congress to move quickly on its passage.

Economic data continued to roll in, indicating a slowing U.S. economy, and although we saw some selling, the index trends remained bullish in another light volume session.  However, as we slide into the weekend, we could get a spark of inspiration today from the Employment Situation numbers.  Once again, the T2122 indicator is signaling a short-term overbought condition, but despite so many parabolic-looking charts, we still have no sign the bulls are ready to stop.  That said, stick with the trend but be careful not to overtrade, watching for a bearish attack that could begin any time.  Remember to take some profit along the way and enjoy the ride as long as it lasts.

Trade Wisely,

Doug

Powerful Short Squeeze

Powerful Short Squeeze

Though yesterday’s economic data was primarily bearish, Powell’s statement of slower rate increases triggered a powerful short squeeze ripped through recent price resistance levels.  The emotional move was remarkable, considering rate increases will continue to a restrictive level according to the chairman’s comments.  So, the question for today is, can the bull hold or even follow through to the upside with another busy morning of market-moving economic data?  Expect more wild price gyrations as this very emotional market reacts.

While we slept, Asian markets rallied in response to the Fed’s smaller rate hikes.  Likewise, European markets are trading with bullish energy across the board as the Powell comments reverberate worldwide.  However, U.S. futures point to a slightly lower open, possibly suffering from a little hangover after parting hard yesterday afternoon with another big round of economic data just ahead. 

Economic Calendar

Earnings Calendar

Notable reports include AMBA, AOUT, BIG, CHPT, DBI, DG, GIII, KR, LI, MANU, MRVL, PCEO, TD, ULTA, VEEV, WEBR, & ZS.

News & Technicals’

The 27 countries of the European Union agreed in June to ban the purchase of crude oil from Dec. 5.  They have been working on the details ever since.  The EU discussed a $62 barrel limit this week, but Poland, Estonia, and Lithuania refused, arguing it was too high.  India and China are crucial to the success of the ban.  But India’s Petroleum Minister Shri Hardeep S Puri told CNBC in September: “We will buy oil from Russia, we will buy from wherever.” 

A year after being promoted to the co-CEO role alongside Marc Benioff, Bret Taylor is leaving Salesforce.  It’s the second time in less than three years that Benioff has lost a co-CEO.  Keith Block held the position for 18 months before leaving in 2020. 

Former FTX CEO Sam Bankman-Fried said he’d had a “bad month” but denied committing fraud at his crypto exchange.  Bankman-Fried spoke at the Dealbook Summit weeks after FTX filed for bankruptcy protection amid a cryptocurrency meltdown.  He also started Alameda Research, a crypto hedge fund that allegedly commingled FTX customer funds with trading funds.  Yet, the former FTX CEO claims he committed no fraud.

Jerome Powel triggered a powerful short squeeze Wednesday, stating a slower pace of rate increases is possible beginning in December, with increases continuing to a restrictive level.  The emotional reaction to was nothing short of remarkable as the indexes sliced right through resistance levels, and the SPY popped its 200-day average for the first time since last April.  Interestingly, most of the economic data delivered yesterday were bearish, indicating that the economy is slowing down.  So, now the big question is can it hold or follow through?  This morning we face Jobless Claims, a Core PCE reading, PMI MFG., ISM MFG. numbers meaning a volatile morning of price action is likely.   

Trade Wisely,

Doug

Frustrating Day

Frustrating Day

The wait for the GDP report and another speech from Jerome Powell was not a surprise to have produced another frustrating day of low-volume chop.  However, today we have a lot of potentially market-moving data, but will it inspire the bulls or the bears?  The stakes are high, with the SPY and QQQ near critical support levels, so plan carefully with a likely spike in price volatility.  Intraday whipsaws, head fakes, and quick reversals could be seen today as the data rolls out.

Asian markets finished the day primarily bullish after a volatile session as China’s factory activity declined.  European markets are moving higher this morning, reacting to a decline in inflation to 10%.  U.S. futures traded flat most of the night, but as the premarket pump began, the bulls try to put on a brave face with GDP, housing, and jobs data just around the corner.  So, buckle up, keeping in mind that Uncle Jerome will have the final say on today’s overall market sentiment later this afternoon.

Economic Calendar

Earnings Calendar

The Wednesday earnings calendar picked up the pace of reports with nearly 30 confirmed though several are tiny small caps.  Notable reports include DCI, FIVE, FRO, HRL, LZB, NTNX, OKTA, WOOF, PSTG, PVH, RY, CRM, SNOW, SPLK, SNPS, TITN & VSCO.

News & Technicals’

A Nov. 9 software update included an additional AirDrop feature applying only to iPhones sold in mainland China.  AirDrop, which allows users to share content between Apple devices, has become important in demonstrators’ efforts to circumvent authoritarian censorship.  The feature relies on wireless connections between phones rather than internet connectivity, placing it beyond the scope of internet content moderators.  While Chinese authorities could gradually unwind restrictions in March, zero-Covid policies are starting to hurt global confidence in the country’s industrial supply chains, said Li Daokui, Mansfield Freeman professor of economics at China’s Tsinghua University.  In the short term, supply chains will be largely unaffected since factories are still operating, Li, a former advisor to the People’s Bank of China, said in an extended interview with CNBC’s “Squawk Box Asia” on Wednesday.  If China relinquishes its Covid-zero policies, it should be able to get back to a “magic” growth rate of 5% to 6%, which is the right amount of growth given the current size of China’s labor market.

The Euro Zone reported slightly easing inflation to 10% due to a modest decline in energy prices.  Energy and food continued to contribute to the lofty inflation figures, but with a noticeable drop in the former.  According to Eurostat, energy is expected to have stood at an annual rate of 34.9% in November, compared with 41.5% in October.  With inflation at record highs and a number of rate hikes under its belt, markets are awaiting details on how and when the European Central Bank will sell bonds.  In October, ECB President Christine Lagarde said the discussions over bond sales would consider three main factors.  “It is appropriate that the balance sheet is normalized over time in a measured and predictable way,” Lagarde said Monday.

Tuesday turned out to be another frustrating day of choppy price action accompanied by low-volume waiting on the GDP and more conversation from Jerome Powell.  Perhaps today, with all the data coming our way, the bulls or bears will find inspiration, breaking the wide-range consolidation in the index prices.  The good news is that the selling has successfully relieved the short-term overbought condition providing some upside space if today’s reports can inspire the bulls.  On the other hand, both the SPY and QQQ are flirting with critical price support, so if it happens to be the bears that find inspiration today, a painful market selloff could result.  It would be wise to plan for considerable price volatility, including substantial intraday whipsaws, head fakes, and reversals. 

Trade Wisely,

Doug

Weakness in the Bullish Armor

Weakness in the Bullish Armor

Concerns around Chinese protests and hawkish Fed statements allowed the bears to exploit some weakness in the bullish armor on Monday.  Although the pullback may have been painful for those that jumped into trades late last week, the selling produced little to no technical damage in the index charts.  That could change if the bears find the inspiration to follow through to the downside today, but directional momentum remained unclear with volume so low yesterday. 

Asian markets rebounded during the night, led by Hong Kong, up 5.24% as Chinese protests subsided.  This morning, European markets trade primarily positively in a choppy session trying to gauge the Chinese lockdowns.  U.S. future currently suggests a flat to slightly bullish open ahead of earnings and economic data as both bulls and bears struggle to find momentum in a low-volume environment.  Plan for the choppy and challenging price action to continue as hawkish FOMC member statements raise uncertainty about the path forward.

Economic Calendar

Earnings Calendar

The Tuesday earnings calendar is a bit busier, but the market-moving reports continue to dwindle.  Notable reports include BZUN, BILI, CMP, CRWD, HE, HIBB, INTU, NTAP & WDAY.

News & Technicals’

Top U.S. health officials said China’s zero Covid strategies are ineffective in controlling the virus, and Beijing should focus on vaccinating the elderly.  The White House, in a statement, said the Chinese people have the right to protest peacefully.  Over the weekend, riots broke out against Covid lockdowns in Beijing, Shanghai, Urumqi, and other cities.  Mainland China reported the first decline in daily Covid infections in more than a week on Monday.  There was no indication of new protests after public demonstrations over the weekend.  Stringent Covid controls this year have weighed heavily on business activity and economic growth in China. 

S&P Global Ratings earlier this month affirmed its positive outlook on the country, citing a net external creditor position and the implementation of some of the government’s long-desired structural reforms.  However, South Africans have faced rolling blackouts as Eskom — which has long been a thorn in the side of the country’s economy — contends with shortfalls in generation capacity due to equipment failures and diesel shortages.  Headline inflation rose from an annual 7.5% in September to 7.6% in October, defying the South African Reserve Bank’s expectations for price pressures to ease.

In a series of tweets, Twitter owner Elon Musk claimed that Apple had threatened to remove the Twitter app from the App Store as part of its app review moderation process.  “Apple has also threatened to withhold Twitter from its App Store, but won’t tell us why,” Musk tweeted. 

Although the bears found a weakness in the bullish armor, Monday’s selling may have raised some concerns, but there was little to no technical damage in the index charts.  The DIA remains the strongest of the indexes, be it a bit parabolic, while the QQQ continues to lag behind.  News of Apple’s production problems due to Chinese lockdowns and protests only adds uncertainty to the tech sector.  Perhaps this afternoon’s reports from HPE, INTU, and NTAP can boost the lacking sector momentum.  The hawkish statements from the FOMC committee members cloud the direction forward and will likely keep price volatility high until the next meeting in mid-December.  Hopefully, the volume will pick up today as traders return to work and holiday sales deals end. 

Trade Wisely,

Doug

Anything is Possible

Anything is Possible

Combine Chinese lockdown protests, a robust retail response to Black Friday, a big return home travel day, and the Cyber Monday event distractions, and we have an anything is possible trading day.  The low-volume rally Wednesday and Friday puts the Dow in an overextended condition, with many of its component stocks shorting parabolic appearance.  However, the hopes of a Santa Claus rally fueled by better-than-expected retail sales could keep the bulls inspired despite the worries of additional rate increases and worldwide recession. 

Lockdown protests in China and the biggest-ever rate hike in New Zealand brought out selling across all Asian indexes overnight.  However, European markets are responding in kind to the Chinese restrictions and public protests.  U.S. futures also suggest a bearish open with little inspiration on the earnings and economic calendars with the distraction of Cyber Monday shopping events. 

Economic Calendar

Earnings Calendar

We have small-cap companies reports primarily to kick off the new trading week.  Notable reports include ARWR and AZEK.

News & Technicals’

Rare protests broke out across China over the weekend as groups of people vented their frustration over the zero-Covid policy.  The unrest came as infections surged, prompting more local Covid controls, while a central government policy change earlier this month had raised hopes of a gradual easing.  However, it was not immediately clear whether the protests reached a meaningful scale in a country of 1.4 billion people or whether a broad demographic participated.  Despite this weekend’s protests, analysts said China wouldn’t likely make major changes to its Covid policy in the near future.   “Without a clear guidance from the top, local officials are inclined to play safe by sticking to the existing zero-Covid stance,” said Larry Hu, chief China economist at Macquarie.  “It upset many people, who expect[ed] more loosening following the ’20 measures’” announced earlier this month.  “In the short term, the Covid policy will only be fine-tuned without moving the needle,” said Bruce Pang, chief economist and head of research for Greater China at JLL.

According to Adobe, consumers spent a record $9.12 billion online shopping during Black Friday this year.  Overall online sales for Black Friday were up 2.3% year-over-year.  In addition, buy Now Pay Later payments increased by 78% compared with the past week, beginning Nov. 19, as consumers continue to grapple with high prices and inflation.  Walmart took the top spot among shoppers who are searching online for Black Friday discounts, according to data from Captify.  Last year, Amazon topped the ad tech company’s list, but this year fell to fourth place as of Friday morning.  Retailers are battling for shoppers’ eyeballs and wallets amid an unusual holiday shopping season clouded with sky-high inflation.

Better-than-expected Black Friday sales results, protests in China, holiday return travel, and Cyber Monday distractions set the stage for an anything is possible trading day.  We have little to inspire the bull or bears on the earnings and economic calendars, so watch for sensitivity to the news cycle.  The extremely low-volume rally before and after the holiday has the T2122 indicator back in the bearish reversal zone, with Dow stocks showing the most extreme parabolic extensions.  That said, we should not rule out the possibility of additional upside pressure with all the financial news hype of a Santa Claus rally.  Black Friday sales may help fuel that fire while the worries of a worldwide recession continue to loom. 

Trade Wisely,

Doug

Low-Volume Holiday Market

Monday was a typical low-volume chop fest, as the dollar popped higher along with bond yields as we slid toward the holiday shutdown.  With a flurry of earnings reports this morning, we may get a bit more activity but expect volume to diminish quickly.   It can be very easy to overtrade out of boredom, so be careful planning your trades and keep in mind a low-volume condition can produce a lot of head-fake entry signals that just as quickly disappear.  Also, expect sensitivity to the news cycle as automated institutional algorithms churn prices to generate fees.

While we slept, Asian markets traded mixed as China held benchmark lending rates steady as pandemic concerns rose.  Across the pond, European markets trade flat to bullish this morning as they ponder possible Chinese restrictions and the economic outlook.  However, with a flurry of retail earnings reports and a very light economic calendar plan for a surge of activity in the morning session, volumes quickly decline, and likely price action becoming choppy here in the U.S.

Economic Calendar

Earnings Calendar

Due to the shortened holiday week, today is our biggest day for earnings reports, with a heavy concentration on retail.  Notable reports include ANF, AEO, ADI, ADSK, BBY, BIDU, BURL, CSIQ, DKS, DLTR, GES, HPQ, JACK, MDT, JWN, VIPS, VMW, & WMG.

Trade Wisely,

Doug

Complex Challenges

The market faces some complex challenges this week with the rising pandemic concerns in China,  crypto market uncertainties,  and rising U.S. layoffs as we slide toward a holiday shutdown.  With earnings inspiration winding down, only one day of market-moving economic reports, expect news sensitivity, choppy conditions, and declining volume this week.  Plan your risk carefully, as holiday weeks typically suffer declining volume as traders and investors head out for holiday plans.

Asian markets mostly declined while we slept, even as China held steady benchmark lending rates with pandemic concerns rising.  European markets trade red across the board this morning as recession worries persist.  U.S. futures point to a modestly bearish open as earnings inspiration declines and holiday travel sets the stage for choppy market conditions.

Economic Calendar

Earnings Calendar

Though the bulk of 4th quarter earnings has passed, we still have a few each day as the theme of retail reports continues.  Notable reports include A, DELL, SJM, J, LI, URBN, WEBR, & ZM.

News & Technicals’

Bob Iger is back as CEO of Disney.  Bob Chapek was named CEO in February 2020 and came under fire for various decisions.  Shares of Dow 30 component Disney jumped in premarket trade Monday.  Bob Iger has disapproved of several of Bob Chapek’s changes to Disney despite handpicking him as his successor in early 2020, sources have told CNBC.  Disney shares have fallen more than 40% this year, including slumping on weak fiscal fourth-quarter results earlier this month.  The biggest point of contention may be Chapek’s reorganization of the company, which established a new division called Disney Media and Entertainment. 

Bitcoin hovered around a one-week low on Monday, and other major cryptocurrencies fell sharply as the impact of the dramatic collapse of FTX continued to ripple through the market.  The cryptocurrency market has come under pressure over the last two weeks as problems at major exchange FTX came to light.  From Nov. 6 — the day Binance CEO Changpeng Zhao said his exchange would liquidate its FTT tokens — the crypto market has lost more than $260 billion of value. 

The latest NFIB monthly small business confidence and jobs reports show that Main Street is still looking to hire even as economic sentiment continues to decline.  But the vast majority of open positions (90%) are seeing few to no qualified applicants apply even as layoffs mount throughout the economy.  In addition, higher wages get harder for business owners to offer as inflation increases as a margin pressure amid a lower sales outlook.  Still, other work benefits and perks can be used to attract talent. 

As the Thanksgiving shutdown approaches, the market faces some complex challenges, with layoffs rising in the U.S., and new pandemic issues in China, while the crypto market uncertainty continues.  As a result, expect exchange volumes to decline sharply this week as traders and investors head out for holiday plans.  Chop may be the word of the week as earnings inspiration dwindles and all the potential market-moving economic reports bunched up on Wednesday morning.  Holiday weeks can be very news-sensitive, so plan your risk accordingly.

Trade wisely,

Doug

Another Big Point Whipsaw

The theme of the week continued with Thursday producing another big point whipsaw as robust economic data encouraged more hawkish statements from Fed members.  Though the recovery rally left a lot of bullish engulfing patterns across charts, index volumes remained noticeably low with significant overhead resistance that the bulls have yet to breach.  As you plan forward, keep in mind the holiday week ahead, and the likelihood of choppy light volume as traders hit the airports and byways.

After Japan reported the highest inflation in 40 years, the Asian markets closed the day mixed and relatively flat.  However, European markets trade decidedly bullish this morning as rate hikes and recession worries linger.  The U.S. futures point to another morning gap up, hoping to capitalize on yesterday’s recovery rally with housing data ahead as we slide into the weekend and toward the Thanksgiving holiday.  Expect the volatility to continue.

Economic Calendar

Earnings Calendar

The Friday earnings calendar only has eight confirmed reports.  Notable reports include BKE, FL, & JD.

News & Technicals’

Swedish and Danish investigators are investigating a flurry of detonations on the Nord Stream 1 and 2 pipelines on Sept. 26 that sent gas spewing to the surface of the Baltic Sea.  The explosions triggered four gas leaks at four locations — two in Denmark’s exclusive economic zone and two in Sweden’s exclusive economic zone.  The Swedish Prosecution Authority said in a statement that “residues of explosives have been identified on several of the foreign objects seized,” according to a translation. 

St. Louis Fed President James Bullard noted that “the policy rate is not yet in a zone that may be considered sufficiently restrictive.”  Using the so-called Taylor Rule for monetary policy, Bullard suggested the proper zone for the fed funds rate could be in the 5%-7% range, higher than current market pricing and unofficial Fed forecasts indicate. 

Internal Slack messages shared with CNBC showed engineers and other employees posting goodbye messages to a “watercooler” chat group during the 5 p.m. ET Thursday deadline that Musk set just a day earlier.   Hundreds of salute emojis (which convey the message “thank you for your service”) streamed by, along with dozens of goodbye messages.  Amazon will continue to lay off employees in the coming year, CEO Andy Jassy wrote in a memo to workers on Thursday.  The company began informing workers this week that they were being let go.  “I’ve been in this role now for about a year and a half, and without a doubt, this is the most difficult decision we’ve made during that time,” Jassy wrote. 

Thursday proved to be just another big point whipsaw, with the Dow swinging more than 350 points from low to high, reacting to better-than-expected economic data and hawkish Fed statements.  However, after gapping sharply lower at the open, it was nothing but buying the rest of the day, leaving behind a lot of bullish engulfing patterns in the charts.  Unfortunately, the index volumes were markedly low, and bulls still have significant overhead yet to breach.  So, take caution over overtrading as we head into the weekend, remembering subsequent week volumes are likely to decline sharply due to the holiday.

Trade Wisely,

Doug

Confusing and Contradictory

Confusing and Contradictory

With some confusing and contradictory data on Wednesday morning, the dollar bounced, and bond yields rallied as thoughts of recession danced in traders’ minds.  The QQQ, SPY, and IWM felt some selling pressure while the Dow chopped in a frustrating 160-point range.  In a time when good economic numbers are bad and bad numbers are good, how we react to today’s housing, jobless, and manufacturing numbers is anyone’s guess.  The one constant we can seem to count on is the price volatility so plan your risk carefully!

While we slept, Asian markets struggled to close the day primarily red.  European markets waiting on U.K. budget details trade mixed but mostly lower this morning.  Finally, after a mix of post-market earnings results, U.S. futures point to a lower open ahead of earnings and economic data that could quickly reverse or worsen the open.  Be prepared for more big-point price whips and challenging price action as the market reacts to the data.

Economic Calendar

Earnings Calendar

We have about 40 companies on the Thursday calendar; however, many are small-cap names.  Notable reports include BABA, AMAT, BJ, DOLE, FTCH, GPS, KSS, M, NTES, PANW, ROST, STNE, PLCE, UGI, VIPS, & WB.

News & Technicals’

Markets were buoyed last week after U.S. inflation came in below expectations for October, prompting investors to bet that Federal Reserve policymakers would soon have to slow or stop the monetary policy tightening measures they have deployed to bring down inflation.  Though surging stocks suggest markets are reaffirming hopes of a soft landing from the Fed, BlackRock’s top strategists disagreed and remained underweight developed market stocks. 

Amazon sent out “voluntary severance” offers to some employees this week as it looks for ways to rein costs beyond the announced massive layoffs.  Employees have until Nov. 29 to agree to resign, and their last day of employment will be Dec. 23, according to documents viewed by CNBC.  In addition, more than 100 unionized Starbucks locations plan to strike on one of the chain’s biggest sales days of the year, Red Cup Day.  At the 113 striking locations, the union will be distributing its own version of the reusable red cup that features the Grinch’s hand holding an ornament with the logo of Starbucks Workers United.  The action comes after contract negotiations between Starbucks Workers United and the company broke down.

Nvidia reported fiscal third-quarter results on Wednesday for the period ending in October, with sales beating analyst expectations but earnings per share coming in light.  Analysts and investors closely watch Nvidia as a leading indicator for the health of the technology industry because it sells chips and software to many PC makers and cloud providers.  Cisco reported fiscal first-quarter results on Wednesday that beat analysts’ estimates on the top and bottom lines.  The company cited an “easing supply situation” and lifted its guidance for fiscal 2023.  Revenue increased 6% from a year earlier. 

With a mix of confusing and contradictory data, Wednesday morning bond yields rose, the dollar bounced, and Dow chopped sideways in a 160-point range.  Though the QQQ, SPY, and IWM experienced some selling pressure, no technical damage occurred.  However, a mix of earnings results after the bell, with Fed members remaining hawkish, has many thinking about recession with  4th quarter rally hopes diminishing.  This morning we face housing data, Jobless Claims, Philly Fed numbers, and a parade of Fed speakers to keep traders guessing what comes next.  While there is a lot of uncertainty about the path forward, there is one thing that seems inevitable, challenging price volatility.  

Trade Wisely,

Doug

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