Economic Data

August 15, 2024 by Doug Campbell

US equity futures saw modest gains as traders anticipated a busy morning filled with economic data releases. Investors are particularly keen on the upcoming retail sales data, which will provide further insights into the economic trajectory. Additionally, Walmart’s earnings report, scheduled for release before the market opens, is expected to shed light on consumer spending patterns, making it a focal point for market watchers.

On Thursday, European stocks continued their upward trend, buoyed by cooler-than-expected inflation readings that bolstered investor confidence. This positive momentum was further supported by the latest U.K. GDP data, which revealed a 0.6% expansion in the second quarter, aligning with market expectations. The combination of these factors contributed to a generally optimistic outlook for European markets as the week progressed.

In the second quarter, Japan’s economy outperformed market expectations, with its gross domestic product (GDP) rising by 0.8% quarter-on-quarter, surpassing the 0.5% increase anticipated by economists polled by Reuters. Meanwhile, China’s retail sales experienced a year-on-year growth of 2.7%, slightly exceeding the forecasted 2.6% growth. However, the urban unemployment rate in China saw a minor uptick, climbing to 5.2% from 5% in June.

Economic Calendar

Earnings Calendar

Notable reports for Thursday before the bell include WMT, BABA, AIT, CLBT, GRAB, NICE, SPTN, & TPR. After the bell include AMCR, AMAT, COUR, HRB, & ROST.

News & Technicals’

Cisco reported its third consecutive quarter of declining revenue, marking its first full fiscal year drop since 2020. Despite this, the company’s earnings and revenue exceeded analysts’ expectations. In response to the ongoing challenges, Cisco announced a 7% reduction in its global workforce. Prior to Wednesday’s close, Cisco’s stock had fallen by 10% this year, contrasting sharply with the Nasdaq’s approximately 15% gain.

More than a week into Ukraine’s unexpected incursion into Russia’s Kursk region, the gains have likely surpassed Kyiv’s highest expectations. Ukrainian forces now control over 1,000 square kilometers of Russian territory and have captured 74 settlements, according to Ukraine’s top military commander, Oleksandr Syrskyi. While Moscow has yet to mount a significant response, it has warned of a ‘worthy’ retaliation. Analysts suggest that Ukraine faces a critical decision: whether to reinforce its troops and hold or advance its position, or to withdraw before Russia launches what is expected to be a fierce and deadly counterattack.

Starbucks has announced a substantial compensation package for its incoming CEO, Brian Niccol, who is transitioning from Chipotle. Niccol will receive $10 million in cash and $75 million in equity awards upon joining the company. His annual base salary will be $1.6 million, with the potential to earn an additional $7.2 million in cash. As he steps into his new role, Niccol faces the significant challenge of revitalizing Starbucks’ struggling business.

Payments firm Airwallex has achieved an impressive annual revenue run rate of $500 million, driven by substantial growth in its North American and European operations, according to CEO Jack Zhang. Zhang aims to prepare Airwallex for an initial public offering (IPO) by 2026. The company, which was recently valued at $5.6 billion and is backed by Tencent, is considered a strong contender among major fintech IPO candidates.

With a very busy morning of potential market-moving economic data traders should prepare for just about anything.  The relief rally is starting to get a little long in the tooth and perhaps today’s data can continue to inspire the bull higher.  However, we should not be surprised to see a little profit-taking begin at any time.  That said, avoid chasing with the fear of missing out.

Trade Wisely,

Doug

Consumer Price Index

August 14, 2024 by Doug Campbell

U.S. futures traded with a mix of anticipation and uncertainty, hovering around the flatline as investors awaited the release of the July Consumer Price Index (CPI) report. Scheduled for 8:30 a.m. ET, the CPI reading is expected by economists polled by Dow Jones to show a 0.2% increase from the previous month and a 3% year-over-year gain. This report follows a day after lighter-than-expected wholesale inflation figures provided a boost to stocks, adding to the market’s cautious optimism.

European stocks saw an uptick on Wednesday, driven by a mix of economic indicators and corporate performance. U.K. inflation rose to 2.2% in July, slightly below expectations but surpassing the Bank of England’s 2% target, signaling potential monetary policy adjustments. Swiss bank UBS experienced a notable increase of 2.95% after significantly exceeding net profit forecasts for the second quarter, boosting investor confidence. Sector-wise, auto stocks gained 1.2%, reflecting positive market sentiment, while mining stocks declined by 0.7%, indicating sector-specific challenges.

Asia-Pacific markets experienced a positive trend on Wednesday, buoyed by significant economic and political developments. The Reserve Bank of New Zealand’s decision to cut benchmark lending rates provided a boost to investor confidence, while Japan’s Prime Minister Fumio Kishida’s announcement of his impending resignation in September added a layer of political uncertainty. Despite these events, the Bank of Japan’s quarterly survey revealed a decline in business sentiment, with the sentiment index for manufacturers dropping to +10 in August and the non-manufacturers index falling to +24.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday before the bell include ARCO, EAT, CAE, CAH, DOLE, GLBE, MRX, PFGC, RSKD, SFL, SDHC, UBS, & WKHS.  After the bell include CSCO, DLO, LITE, PYCR, & STNE.

News & Technicals’

Japanese Prime Minister Fumio Kishida’s decision to not seek reelection as leader of the ruling Liberal Democratic Party paves the way for new leadership in Japan, the world’s fourth-largest economy. Kishida’s tenure has been marred by a scandal involving his party and persistent deflationary pressures on the economy. His resignation opens the door for a successor to address these challenges and steer Japan towards a more stable and prosperous future. This transition marks a significant moment in Japanese politics, with potential implications for both domestic and international economic policies.

Intel has divested its 1.18 million share stake in British chip company Arm Holdings, as revealed in a recent regulatory filing. This move comes amid Intel’s ongoing restructuring and cost-cutting initiatives, aimed at enhancing its competitive edge in the rapidly evolving semiconductor industry. The sale of its stake in Arm Holdings reflects Intel’s strategic efforts to streamline operations and reallocate resources as it navigates the challenges posed by fierce competition in the chip market.

General Motors is facing a lawsuit from the state of Texas, as announced by Attorney General Ken Paxton. The lawsuit stems from an investigation initiated in June, which is examining whether several automakers, including GM, collected and sold large amounts of data without drivers’ consent. The technology in question was reportedly installed in most GM vehicles starting with the 2015 model year. According to Paxton, insurers could potentially use this data to make decisions about raising premiums, canceling policies, or denying coverage. This legal action highlights significant concerns about data privacy and the ethical use of technology in the automotive industry.

In July, U.K. inflation rose to 2.2%, slightly below expectations but surpassing the Bank of England’s 2% target, according to data from the Office for National Statistics. The increase was primarily driven by housing and household services, with gas and electricity prices falling less than they did a year earlier. This uptick in inflation highlights ongoing cost pressures in essential services, reflecting broader economic challenges and potential implications for future monetary policy adjustments.

Up, down, sideways, and whipsaws are all possible today as the market reacts to the July Consumer Price Index report.  Emotions are high and there is a lot at stake for the technical patterns in the index charts.  Keep in mind Thursday is a huge day economic data as well so the wild price swings may not be finished just yet.

Trade Wisely,

Doug

Key Inflation Data

August 13, 2024 by Doug Campbell

U.S. stock futures climbed early Tuesday as investors eagerly anticipated the release of key inflation data this morning. The focus is on the producer price index (PPI), a critical measure of wholesale prices, which is scheduled for release at 8:30 a.m. ET. According to Dow Jones consensus estimates, the PPI is expected to show a monthly increase of 0.2% in July, mirroring the previous month’s growth.

European stocks saw an uptick on Tuesday, maintaining a cautiously positive trend following last week’s volatility. The latest data from the U.K.’s Office for National Statistics revealed that wages, excluding bonuses, increased by 5.4% year-on-year between April and June, marking the slowest growth rate in two years. Additionally, the unemployment rate dropped to 4.2% from 4.4%, defying economists’ expectations of a rise to 4.5%, as per a Reuters poll.

Asia-Pacific markets experienced a general uptick, reflecting investor optimism despite a turbulent session in the U.S. overnight. This volatility in the U.S. was largely due to anticipation surrounding the upcoming release of the U.S. consumer price index (CPI) for July, a crucial metric for gauging the health of the U.S. economy. Meanwhile, in Asia, market participants were busy analyzing Japan’s producer price index data and Singapore’s second-quarter GDP growth figures, both of which are significant indicators of economic performance in the region.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday before the bell include HD, HBM, HUT, HUYA, HIS, JHX, LOAR, MLCO, MRSN, MSGS, ONON, PSFE, SE, SLF, TLN, & TME.  After the bell include DUOT, FNV, IBTA, INTA, KYTX, MRCY, NATL, NPCE, NU, USPH, & XP.

News & Technicals’

Share transactions in China have plummeted to their lowest level in over four years, driven by a fervent local bond rally amidst a weakening economy. The world’s second-largest stock market is on course for its fourth consecutive year of losses, exacerbated by an unprecedented housing crisis that has severely restricted investors’ options. This situation has led to a surge in demand for government bonds, raising concerns among regulators. Historically, similar episodes in China have triggered panic-driven selling, pushing the market to new lows, and the current scenario appears to be following this troubling pattern.

Shares of Home Depot dropped over 2% in premarket trading after the home improvement retailer issued a warning about weaker-than-expected sales for the second half of 2024. The company now anticipates full-year comparable sales to decline by 3% to 4%, a significant adjustment from its earlier forecast of a roughly 1% decrease. This revised outlook has raised concerns among investors about the company’s performance and the broader economic environment affecting consumer spending.

Carry trades, a popular foreign exchange strategy where investors borrow in low-interest currencies like the Japanese yen to invest in higher-yielding assets, have gained significant traction in recent years. This popularity stemmed from expectations that the yen would remain cheap and Japanese interest rates would stay low. However, this trend took a sharp turn last week when the Bank of Japan’s interest rate hikes strengthened the yen, triggering an aggressive unwinding of yen-funded carry trades. This sudden shift led to a dramatic sell-off in global markets, highlighting the volatility and risks associated with such strategies.

The Social Security Administration (SSA) is grappling with a “record-breaking backlog” of open cases, which has resulted in an estimated $1.1 billion in improper payments to beneficiaries, according to a recent report from the SSA Office of the Inspector General. This backlog has highlighted significant challenges within the SSA, with experts emphasizing the urgent need for increased budgetary funding to address what they describe as a “customer service crisis.” The situation underscores the critical importance of adequate resources to ensure timely and accurate service delivery to beneficiaries.

The wait for the key inflation data of the PPI report.  The question now, will it inspire the bulls or bears?  We should also consider the possibility of a sideways move as we wait for the more important CPI numbers on Wednesday.  That said, be prepared for anything including gaps and big point whipsaws as the market reacts.

Trade Wisely,

Doug

Pending Inflation Data

August 12, 2024 by Doug Campbell

U.S. equity futures remained nearly unchanged on Monday as investors prepare for pending inflation data following Friday’s relief rally. Callie Cox, chief market strategist at Ritholtz Wealth Management, noted that high emotions and clustered market swings could lead to another turbulent week. Investors are particularly focused on the upcoming July producer price index report, with the consumer price index set to follow on Wednesday, both of which are expected to significantly influence market sentiment and trading strategies.

European stocks began the new trading week on a positive note, initially rising before paring some of their earlier gains. Investors are closely watching for indications that the market turbulence from the previous week has subsided. The financial services and insurance sectors were among the top performers, each advancing by approximately 0.6%. This week, market participants are particularly focused on upcoming inflation data from the U.S. and U.K., which are expected to play a significant role in shaping market sentiment and investment decisions.

Asia-Pacific markets experienced a positive start to the week, with most indices showing gains on Monday. This comes after a tumultuous week marked by significant selloffs and a subsequent sharp recovery, particularly in Japanese stocks. Investors are now turning their attention to upcoming economic indicators from India, specifically inflation and industrial output data, which are expected to be released later in the day. These figures will likely influence market sentiment and trading strategies moving forward.

Economic Calendar

Earnings Calendar

Notable reports for Monday before the bell include BLDP, ESPR, FTRE, BEKE, & MNDY.  After the bell include ALC, DHT, KGS, PACS, & RUM.

News & Technicals’

Veteran investor David Roche anticipates a bear market in 2025, driven by factors such as smaller-than-expected rate cuts, a decelerating U.S. economy, and an AI bubble. He predicts these elements could lead to a market decline of around 20%, potentially beginning at the end of this year. However, Roche also notes that the Federal Reserve will have the flexibility to adjust in response to these economic challenges.

The Pentagon has deployed a guided missile submarine, and a carrier strike group equipped with F-35C fighter jets to the Middle East, citing the need to bolster U.S. military presence and capabilities in response to rising regional tensions. This move follows a statement from Iran’s leadership vowing retaliation against Israel after the assassination of Hamas’ former political chief, Ismail Haniyeh, in Tehran on July 31. The Pentagon’s actions underscore the escalating conflict and the U.S.’s commitment to maintaining stability in the region.

The Biden Administration has launched a comprehensive, multi-agency regulatory initiative aimed at curbing corporate practices that are perceived to waste consumers’ time and impose unnecessary bureaucratic hurdles. White House domestic policy advisor Neera Tanden highlighted that these practices often involve companies delaying services or making it excessively difficult for consumers to cancel services, thereby retaining customers’ money for extended periods. Central to this new effort are a series of rulemakings by the Consumer Financial Protection Bureau, which aim to address and mitigate issues related to customer service “doom loops” and the use of chatbots.

U.S. short seller Hindenburg released a report on Saturday alleging that Madhabi Puri Buch, the chair of the Securities and Exchange Board of India, had previously invested in offshore funds also utilized by the Adani Group. In response, Buch dismissed the claims as baseless. According to the report, Adani Group companies experienced a significant market impact, losing approximately $2.4 billion in value on Monday.

There is a good chance of a choppy hurry up and day with the markets highly anticipating the Tuesday PPI and Wednesday CPI reports. Earnings numbers will decline sharply by mid-week removing a major source of inspiration and price volatility. However, the economic data this week could keep the wild whipsaws going as the market reacts to the results.

Trade Wisely,

Doug

Grappling with Uncertainty

August 8, 2024 by Doug Campbell

On Thursday, stock market futures declined with Wall Street grappling with uncertainty after several volatile sessions. All three major indices have now fallen in four of the past five trading days. Investors remain cautious due to ongoing economic concerns, geopolitical tensions, and the upcoming November elections. Market participants are closely monitoring Thursday’s weekly jobless claims and a slew of earnings reports, which could influence market sentiment.

European markets experienced a downturn, struggling to maintain positive momentum. The technology sector saw a significant decline, shedding 1.85%, while mining stocks also pulled back by 1.39%. The absence of major data releases contributed to the lackluster performance, leaving investors without new information to drive market sentiment.

Asia-Pacific markets largely mirrored the downturn seen on Wall Street, with most indices closing in the red. In a widely anticipated move, the Reserve Bank of India maintained its key interest rate at 6.5% for the ninth consecutive meeting, aligning with economists’ expectations. Meanwhile, Mainland China’s CSI 300 index managed to recover from earlier losses, finishing the day nearly unchanged at 3,342.94.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday before the bell include FOLD, CARS, LNG, CHH, CCOI, COMM, CYBR, DDOG, LLY, FA, ULCC, GERN, GDRX, HBI, HGV, HIMX, INSM, IRWD, KELYA, KOP, DNUT, LAMR, LFST, MLM, MDU, MUR, NXST, NRG, PZZA, PAR, PH, PENN, PLL, PLUG, PRVA, SBH, SEE, SN, TNC, TKO, UAA, USFD, VTRS, VITL, WD, WRBY, XPEL & YETI.  After the bell include AKAM, ALRM, AMN, AMPL, ARLO, ARRY, ARWR, BE, CPRI, CARG, CPK, CLSK, COLL, CEIX, CYTK, DOCN, DIOD, DEI, DOCS, DBX, ELF, EVH, EXPE, FIVN, FNKO, G, GILD, GDOT, IOVA, MERC, MLNK, NTRA, NWSA, NUS, LPRO, PARA, PAY, PBA, PBI, PUBM, RXT, TBA, RKLB, SVV, SSP, SOLV, SOUN, STEP, SLF, SG, SYNA, TTWO, TTGT, SKIN, TTD, TTEC, U, VIAV, WEST, WPM, & YELP.

News & Technicals’

Walmart, McDonald’s, and Kroger have become focal points in the political debate over rising prices and other financial pressures affecting American consumers. Politicians on the campaign trail are leveraging public frustration with high costs, though Republicans and Democrats attribute these issues to different causes. According to Cait Lamberton, a marketing professor at the University of Pennsylvania’s Wharton School, pledging to address everyday expenses is a strategic move, especially for politicians in swing states, during these contentious times.

A state of emergency has been declared in Kursk due to a Ukrainian incursion into the Russian border region. Acting regional Governor Alexey Smirnov reported that the “operational situation” in the border areas of Kursk remained “complicated” as of Wednesday. This development underscores the ongoing tensions and instability in the region, highlighting the challenges faced by local authorities in managing the security situation.

Following the assassination of its former political chief, Ismail Haniyeh, Hamas has appointed Yahya Sinwar as the leader of its political wing. Sinwar, known for his ruthlessness and widely regarded as the mastermind behind the October 7 attack, now stands as the most powerful figure within the organization. The transition to a more hardline leader in the wake of Haniyeh’s killing is expected to significantly diminish the prospects for a cease-fire, further complicating the already tense situation.

On Thursday, German industrial technology giant Siemens reported a quarterly operating profit that exceeded expectations, reaffirming its full-year outlook. The company achieved an industrial profit of 3 billion euros ($3.3 billion) for the quarter ending in June, marking an 11% increase compared to the same period last year. This strong performance underscores Siemens’ resilience and effective strategies in navigating the current economic landscape.

Jobless claim and a huge number of earnings will likely be very important in shaping Thursday’s market sentiment while grappling with uncertainty of the economy, political landscape and geopolitical pressures.  With the VIX closing above 27 plan for the challenging price action conditions to continue.  

Trade Wisely,

Doug

Recovery Rally Continues

August 7, 2024 by Doug Campbell

Stock futures surged on Wednesday as the recovery rally continues, with the indexes quickly closing in on substantial overhead resistance. Investors were eager to recoup more of the losses on Monday. Despite the broad-based rally on Tuesday, which saw gains across all 11 sectors of the S&P 500, the sustainability of this rebound remains uncertain. LPL Financials’ chief global strategist, Quincy Krosby, cautioned that turbulent times may still lie ahead, reflecting the ongoing volatility and unpredictability in the market.

European stocks saw an uptick on Wednesday as global markets attempted to recover from Monday’s significant downturn. The regional markets have been volatile, experiencing sharp declines at the start of the week. On Tuesday, European markets opened on a positive note but later reversed course, ending the day lower amid choppy trading. This seesaw pattern reflects the ongoing uncertainty and cautious sentiment among investors as they navigate the fluctuating global market conditions.

Asia-Pacific markets experienced a positive uptick on Wednesday, buoyed by a rebound in major Wall Street indexes that ended a three-day losing streak. Investors in the region closely analyzed China’s July trade balance data, which revealed a faster-than-anticipated growth in imports. However, this optimism was tempered by the fact that exports fell short of expectations. This mixed trade data from China played a significant role in shaping market sentiment across Asia.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday before the bell include DIS, ACMR, ASTE, AVA, BTG, BCO, BN, CEVA, CRL, CNDT, CVS, DIN, DT, EDIT, EMR, ENOV, EXTR, GPN, GOGO, GFF, HLT, HLLY, IMXI, INSW, ITCI, KMT, KRNT, KYMR, LPX, LYFT, NYT, NI, NOMD, ODP, OGE, OSCR, PAYO, PLTK, RL, REYN, ROK, ROX, SHOP, SU, SUN, TBLA, TH, TGI, PRKS, VVV, VERX, WMG, WIX, WWW, & ZBH.  After the bell include ACVA, ASLE, ALLO, DOX, APP, ATO, BYND, BLNK, BOOT, BHF, BMBL, CACI, CENT, CF, CHRD, CLNE, CDE, CWX, CW, DGII, APPS, DBRG, DLB, DUOL, BROS, ET, ENS, NVST, EQIX, FSLY, FLNC, FRWD, FNV, GNK, GH, HCAT, HOOD, HI, HMN, HUBS, HPP, ICUI, JXN, FROG, KVYO, KTOS, KLIC, LZ, LESL, RAMP, MGNI, MTW, MNKD, MFC, MRO, MCK, MNST, NTR, OXY, PAAS, PETQ, PRI, RYN, RGLD, SRPT, SBGI, SITM, SM, SEDG, SONO, STAA, TALO, MODG, UGI, UPRK, VSAT, VTLE, WBD, WTS, WES, ZD, & ZG.

News & Technicals’

Claudia Sahm, chief economist at New Century Advisors, asserts that the U.S. Federal Reserve does not need to implement an emergency rate cut, despite the recent economic data falling short of expectations. Sahm’s perspective suggests confidence in the current monetary policy framework, indicating that the weaker-than-expected data does not warrant immediate intervention. This stance reflects a measured approach to economic fluctuations, emphasizing stability over reactive measures.

A recurring theme in the latest earnings reports from U.S. companies is the negative impact of the China market. Starbucks reported a significant 14% drop in same-store sales in China for the quarter ending June 30, compared to a modest 2% decline in the U.S. McDonald’s chairman and CEO, Christopher Kempczinski, highlighted the weak consumer sentiment in China during the same period. Similarly, General Mills CFO, Kofi Bruce, noted that after a strong start to the year, the quarter ending May 26 experienced a notable downturn in consumer sentiment. These reports underscore the challenges U.S. companies are facing in the Chinese market, reflecting broader economic uncertainties.

A recurring theme in the latest earnings reports from U.S. companies is the negative impact of the China market. Starbucks reported a significant 14% drop in same-store sales in China for the quarter ending June 30, compared to a modest 2% decline in the U.S. McDonald’s chairman and CEO, Christopher Kempczinski, highlighted the weak consumer sentiment in China during the same period. Similarly, General Mills CFO, Kofi Bruce, noted that after a strong start to the year, the quarter ending May 26 experienced a notable downturn in consumer sentiment. These reports underscore the challenges U.S. companies are facing in the Chinese market, reflecting broader economic uncertainties.

The vacation rental company, Airbnb, has cautioned investors about a potential slowdown in year-over-year growth for its key “Nights and Experiences” category in the upcoming quarter. The company noted a trend of shorter booking lead times globally and observed some signs of decreasing demand from U.S. guests. Despite these concerns, Airbnb reported a record-breaking 125.1 million Nights and Experiences booked in the second quarter, marking its highest result for this period. This mixed outlook highlights both the company’s recent successes and the challenges it anticipates in maintaining growth momentum.

Another day and yet another big overnight gap as the recovery rally continues but I highly recommend caution as we approach significant price and technical overhead resistance.  According to JP Morgan the yen carry trade still has about 50% unwind left so avoid chasing with the fear of missing out. Remember the VIX remains very elevated so along with big gaps comes the possibly of big point whipsaws.

Trade Wisely,

Doug

Relief Rally

August 6, 2024 by Doug Campbell

S&P 500 futures experienced a relief rally following the broad index’s worst day in nearly two years, triggered by a global market sell-off. Many investors see Monday’s downturn as a necessary correction in a market characterized by high valuations and record highs. However, caution remains, with some experts, like Keith Lerner, Truist’s co-chief investment officer, warning that the market may still face further challenges. Lerner noted that significant damage has been done and that the recovery process will likely be gradual.

European stocks showed a mixed performance as markets attempted to recover from Monday’s significant sell-off. Banks and tech stocks, which had been among the hardest hit, managed to regain some ground in the early hours of trading. Tech stocks maintained their upward momentum, ending the day 1.03% higher. However, bank stocks faced a slight setback, closing 0.06% lower.

Japan’s stock market experienced a remarkable surge on Tuesday, with the Nikkei index soaring by 10.23% to close at 34,675.46. This marks its largest daily gain since October 2008 and the highest spike in index points ever recorded. Similarly, the Topix index saw a significant rise, finishing the day up 9.3% at 2,434.21. Meanwhile, the Reserve Bank of Australia announced that its cash rate would remain steady at 4.35%, providing a stable outlook for the Australian economy.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday before the bell include CAT, GOLF, AHCO, ADNT, ALIT, ANIP, ARMK, ATI, ATKR, AVNT, BLDP, BAX, BLUM, BR, BRKR, CELH, CLVT, CEG, DK, ENR, NPO, EXPD, FIS, FWRG, FOXA, GENI, GFS, GPRE, GXO, HRMY, HSIC, HLMN, H, ICHR, IDXX, INGR, J, JLL, KVUE, KNE, LCII, MPC, TAP, MPLX, OGN, OC, PLNT, PTLO, QSR, SSTK, STWD, TPX, TWKS, BLD, TPG, TDG, TRMB, UBER, VMC, WLK, KLG, YUM, & ZTS.  After the bell include ACAD, ATGE, ABNB, AIN, AFG, AWR, AMGN, ANDE, AAOI, ALTM, ASH, AZPN, AIZ, ALAB, AXON, AZTA, BGS, BL, CRC, CERT, CRUS, CMP, CPNG, DVA, DVN, EVCM, EXEL, FLWY, FTNT, GMEN, GPRO, GO, HALO, HL, IAC, ILMN, INGN, CART, IFF, IRBT, JACK, LUMN, LAZR, MTTR, MOS, MRC, MYGN, OSUR, PR, PGNY, QLYS, RDDT, RDFN, RVLV, RIVN, SKY, STEM, LRN, RUN, TOST, COOK, TRIP, UPST, VFC, VECO & WYNN.

News & Technicals’

Morningstar DBRS analysts have cautioned that ongoing market declines following the recent global sell-off could potentially become a “self-fulfilling prophecy,” leading to a recession. Despite banks being one of the most heavily affected sectors, the analysts believe that the impact of market volatility on banks will likely be limited. The end of last week and Monday saw global markets tumble amid growing fears of a U.S. recession. However, there were signs on Tuesday that stocks might begin to recoup some of their losses, offering a glimmer of hope amidst the uncertainty.

Aramco reported a net income of $56.3 billion for the first half of the financial year, a decrease from $62 billion during the same period last year. Despite this decline, the company reaffirmed its second-quarter base dividend of $20.3 billion and announced a performance-linked dividend of $10.8 billion to be paid in the third quarter. Meanwhile, the kingdom’s gross domestic product has contracted for four consecutive quarters, a trend economists attribute largely to oil production cuts. This financial performance and economic context highlight the challenges faced by the oil industry and the broader economy.

John Schulman, who has been instrumental in refining the models behind OpenAI’s ChatGPT chatbot, is set to join the company’s safety and security committee following the departure of two safety leaders. Schulman emphasized that OpenAI’s executives have consistently demonstrated a strong commitment to safety and security. This move underscores OpenAI’s ongoing dedication to maintaining robust safety standards and ensuring the responsible development of its AI technologies.

West Texas Intermediate (WTI) has erased most of its gains for the year, while Brent crude is now down for 2024. This downturn has been driven by weak economic data from the U.S., which has sparked a sell-off in equity markets amid growing fears of a looming recession. Additionally, ongoing economic softness in China has been unsettling oil market traders, further contributing to the decline in oil prices. This combination of factors highlights the current volatility and uncertainty in the global oil markets.

The T2122 indicator continues to show a significant short term oversold condition so a relief rally is likely, but I would not expect it zoom all the way back.  With volatility so high, plan for very challenging price action with big point whipsaws.  With little on the economic calendar markets will focus with much more scrutiny on earnings results.  Plan carefully and have a great day.

Trade Wisely,

Doug

Global Market Sell-off

August 5, 2024 by Doug Campbell

U.S. stock futures plummeted on Monday, contributing to a global market sell-off. Investors are increasingly worried that the Federal Reserve is lagging in reducing interest rates to counteract the economic slowdown. Additionally, there is a notable unwinding of the previously booming artificial intelligence trade. As a result, tech shares were among the worst performers in early trading on Monday.

European stocks experienced a sharp decline at the start of Monday’s session, driven by ongoing global volatility and concerns over a potential U.S. recession. Tech stocks initially dropped by as much as 5% before slightly recovering to trade down 3.5%. Similarly, oil and gas stocks fell by 3.94%, while banking stocks were down 3.62%. The VIX, an indicator of expected market volatility, surged to 41.65, its highest level since October 2020, reflecting the mounting recessionary fears.

The Nikkei experienced a significant 12.4% drop, marking its worst day since the infamous “Black Monday” of 1987. This sharp decline erased all the gains the index had accumulated throughout the year, pushing it into a loss position. Concurrently, the yen strengthened to its highest level against the dollar since January, with the exchange rate last recorded at 142.09. In South Korea, the Kospi index also faced a substantial fall of 8.77%, triggering circuit breakers that halted trading for 20 minutes to curb the market’s volatility.

Economic Calendar

Earnings Calendar

Notable reports for Monday before the bell include AMR, BCRX, BNTX, CG, FRPT, CRYS, SAH, SHC, THS, &TSN.  After the bell include, ADUS, ADTN, ACM, AMRC, AHR, AESI, SESI, CAR, BRBR, BCC, BWXT, CBT, CSWC, CHGG, CSX, DH, FANG, EHC, WTRG, EVER, FNF, GBDC, HPK, HIMS, HUN, IIPR, JJSF, JRVR, KMPR, MTRN, MWA, NSA, NVTS, OGS, OKE, OTTR, PLTR, PLMR, PLAYA, PRIM, KWR, O< SPG, SPR, SUM, TDC, AAN, TBI, UIS, VEMO, VNOM, VSTO, VNO, WMB, YUMC, & ZI.

News & Technicals’

Berkshire Hathaway’s cash reserves surged to an unprecedented $276.9 billion last quarter, driven by Warren Buffett’s substantial divestment in stock holdings, including Apple. This marked a significant increase from the previous record of $189 billion set in the first quarter of 2024. The notable rise in cash hoard occurred after the Oracle of Omaha sold nearly half of his stake in the Tim Cook-led tech giant during the second quarter.

Treasury yields fell on Monday as investors sought refuge in traditionally safer assets amid a global stock market sell-off driven by fears of a looming U.S. recession. Early this morning, the yield on the 10-year Treasury dropped by 5 basis points to 3.744%, reaching its lowest level since July 2023. Meanwhile, the 2-year Treasury yield decreased by more than 9 basis points, settling at 3.772%.

The yen exchange rate has emerged as a key driver of global markets, according to financial historian Russell Napier. In a recent installment of his “Solid Ground” macro strategy report, Napier, co-founder of the investment research portal ERIC, highlighted how changes in Japanese monetary policy can significantly impact U.S. financial markets. His observations come at a time when many market participants have been surprised by the rapid rally of the yen.

UBS has issued a cautionary note about investing in Japan, likening it to “catching a falling knife.” According to Kelvin Tay of UBS, the primary reason for the strong performance of the Japanese market over the past two years has been the significant weakness of the Japanese yen. While Tay acknowledged that corporate restructuring efforts by the Tokyo Stock Exchange have contributed to some market gains, he emphasized that the main driver has been the yen’s depreciation.

As the global market sell-off intensifies try not to panic.  Focus carefully on your trading plan and rules.  Expect massive price volatility with wide bid/ask spreads with options prices jumping due to with will implied volatility change.  This will pass and there will eventually be a relief rally but be very thoughtful avoiding revenge or shooting from the hip trading because the whipsaws can very punishing.  Plan carefully and remember CASH is a position!

Trade Wisely,

Doug

Rate-Cutting Cycle?

August 1, 2024 by Doug Campbell

Despite Federal Reserve Chair Jerome Powell’s efforts to keep the Fed’s options open, the market is largely anticipating the start of a rate-cutting cycle in September. Stock futures rose on Thursday as investors evaluated the latest corporate earnings reports. Investors are also bracing for a busy day filled with additional earnings and economic reports, which will further influence market sentiment.

European markets declined on Thursday as investors digested a series of central bank actions. The Bank of England is set to announce its latest monetary policy decision at midday London time, with market pricing slightly favoring a 25-basis point interest rate cut. However, analysts note increased uncertainty around the decision, as some voting members remain concerned about service sector inflation and wage growth.

Asian markets are evaluating business activity readings from across the region, including the Caixin purchasing managers index from China. Australia’s S&P/ASX 200 reached new all-time highs, rising 0.28% to close at 8,114.7. In contrast, Japan’s Nikkei 225 fell by 2.49%, primarily due to declines in real estate stocks and losses among heavyweight exporters as the yen strengthened.

Economic Calendar

Earnings Calendar

Notable reports for Thursday before the bell include, ACAW, ADT, AER, AGIO, APD, ALGM, ALE, ALNY, ATUS, AME, HOUS, SPLS, APG, APPN, APTV, MT, ARW, AUPH, AXTA, BALL, BAND, BHC, BCE, BDX, BDC, BIGC, BIIB, BIP, CWT, CAMT, CNQ, CWEN, CIGI, COP, CROX, CMI, D, LPG, DRVN, DNB, ETN, ECVT, ETR, NVRI, ES, EVGO, EXC, EXLS, FTDR, GWW, HSY, HTZ, DINO, HII, IDA, INMD, NSIT, NSP, IBP, ICE, IDCC, IONS, IRM, ITRI, ITT, JHG, K, KRP, KMI, KEX, KTB, LH, LAUR, LTH, LNC, LAD, MTSI, MIDD, MBLY, MRNA, NBIX, OCSL, OMCL, PATK, PBF, BTU, PNW, PDS, PWR, PACK, REGN, RBLX, RUSHA, SABR, SNDR, SHAK, SIRI, SWI, SO, STGW, TNK, TFX, CI, TRI, THRY, TRN, TBP, UNIT, UPBD, UTZ, VCEL, VSTS, WNT, W, WEN, WCC, XEL , & XPO.  After the bell include, AAON, APPL, ACCO, ADPT, AEM, AL, ALHC, LNT, ALTR, AMZN, AMH, ACA, ARDX, TEAM, BECN, BZH, BBAI, BIO, SQ, BKNG, BFAM, CABO, CPT, CWST, CE, CC, CIVI, CLFD, CLX, NET, COIN, ED, CRSR, CTRA, CUBE, CTOS, DRH, DASH, DORM, DKNG, LOCO, ELME, EOG, FRT, FND, FOXF, FDP, GEN, GDDY, GDYN, HTGC, HUBG, IVFI, INST, IAS, INTC, ITRC, LEG, LMAT, MTZ, MATX, MMSI, MTD, MCHP, MSTR, MIR, MPWR, MSI, MP, NXT, LASR, OHI, OTEX, OPEN, OEC, PCTY, POST, PCOR, PRU, REG, RGA, RMD, RNG, RLJ, RKT, ROKU, RYAN, SEM, SIMO, SNAP, SWM, SPT, SPXC, SNDX, TNDM, SKT, TROX, TWLO, X, OLED, VREX, VTR, VRTX, WK, XHR & XPOF.

News & Technicals’

The AI Act, a landmark regulation designed to oversee the development, use, and application of AI, has received final approval from EU member states, lawmakers, and the European Commission. Four years after its initial proposal, the law goes into effect on Thursday. The legislation employs a risk-based approach, meaning different AI applications are regulated according to the level of risk they pose to society. The AI Act’s implications extend beyond the EU, as it applies to any organization with operations or impact within the EU, making it relevant to entities worldwide.

China’s economic officials have decided against implementing additional stimulus measures for the second half of the year, opting to focus on existing policies and long-term objectives such as technological advancement. Despite achieving 5% growth in the first half of the year, a slowdown in retail sales growth to 2% in June has cast doubt on meeting the full-year growth target. While central authorities have refrained from introducing large-scale consumption vouchers, some local governments, like Lu’an City, are issuing their own vouchers to boost spending in sectors such as dining, home goods, and car purchases.

Shell reported adjusted earnings of $6.3 billion for the three-month period ending in June, surpassing analysts’ expectations of $5.9 billion as per LSEG estimates. In addition, Shell announced a $3.5 billion share buyback program to be executed over the next three months, maintaining the same pace as the previous quarter. This positive financial performance led to a 1.4% rise in the company’s London-listed shares on Thursday morning.

Carvana is anticipating a record year in 2024 for its used-car retail business. In the second quarter, the company reported a net income of $48 million, achieving a net income margin of 1.4%. Additionally, Carvana announced plans for an at-the-market stock offering valued at approximately $1 billion, involving around 35 million shares. This strategic move aims to bolster the company’s financial position and support its growth ambitions.

Hopeless of a rate-cutting cycle beginning in September inspired another big point afternoon whipsaw. Expect more challenging price action with huge number of earnings reports highlighted by the highly anticipated AAPL and AMZN after the bell.

Trade Wisely,

Doug

FOMC’s Monetary Policy Decision

July 31, 2024 by Doug Campbell

Stock futures climbed on Wednesday as investors analyzed the latest earnings reports and prepared for the FOMC’s monetary policy decision. Microsoft shares fell by over 2% due to the disappointing performance in its cloud business. Boeing is scheduled to report its earnings before the market opens, while Carvana and Qualcomm are set to release their reports after the market closes. The central bank is anticipated to maintain steady interest rates, with attention focused on Chair Jerome Powell for any indications of potential rate cuts in the near future.

European markets continued their positive momentum on Wednesday, trading higher following an unexpected rise in euro zone inflation. According to the European Union’s statistics agency, headline price increases in the 20-nation euro zone climbed to 2.6% in July, up from 2.5% in June. This rise surprised economists, who had anticipated the rate to remain steady, as per a Reuters poll.

Japan’s Nikkei 225 index experienced an uptick as the country’s central bank raised benchmark interest rates to approximately 0.25%, marking the first time since December 2008 that the rate has exceeded 0.1%. Meanwhile, China’s factory activity saw a slight acceleration in its contraction during July, with the official manufacturing purchasing managers’ index (PMI) registering at 49.4. In Australia, inflation for the second quarter increased by 1% compared to the previous quarter, resulting in a year-on-year inflation rate of 3.8%.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday before the bell include, ATEC, NO, ASC, ATHM, ADP, AN, AVNS, BLCO, BA, CBZ, CDW, COR, CVE, GIB, CHEF, CLH, CNH, CMCO, DAN, DAY, DSX, DD, ENTG, FVRR, FTS, GRMN, GTES, GEHC, GNRG, THRM, ROCK, GSK, HES, HESM, HUM, JCI, KKR, KHC, LNTH, LECO, LIVN, LXP, MAC, MAR, MNRO, EDU, NCLH, OMF, OSW, OPCH, OSK, PSN, PERI, PNM, PUMP, SAGE, SMG, SLGN, SITE, SITE, SR, SCL, STRA, SXC, TEVA, COCO, TKR, TMUS, TT, TTMO, ULS, UTHR, VRSK, WAT, WEC , & WIND.  After the bell include ACHC, AFL, AGI, ALB, ALKT, ALL, AIG, AWK, ANSS, AM, AR, APA, ARM, AVB, ACLS, BALY, BKH, BV, CHRW, WHD, CWH, CP, CDNA, CVNA, CAKE, CWAN, CGNX, CTSH, COHU, CODI, CFLT, CRBG, CTVA, CCRN, DLX, EBAY, EIG, ERII, ENVX, EPR, ETD, ETSY, EG, EVTC, EOLS, EXAS, EXPI, FICO, FMC, FORM, FCPT, FNV, GFL, GIL, GKOS, GT, GRBK, THG, HLF, IEX, IRT, NGVT, JAZZ, KRC, KN, KD, LRCX, MGY, VAC, MAX, META, MEOH, MET, MTG, MGM, MAA, MCW, MUSA, MYRG, NFG, NRDS, NTGR, NMFC, NE, OLO, PTVE, PGRE, PK, PAYC, PRDO, PDM, PPC, PTC, QTWO, QGEN, QCOM, QDEL, RDN, RELY, RIOT, RSI, RHP, SDGR, TSLX, SNBR, SON, RGR, SUI, NOVA, TDOC, TENB, TSLX, TTEK, TMDX, UDMY, VICI, WDC, & ZETA.

News & Technicals’

Iranian officials are condemning what they claim was an Israeli strike on Tehran that resulted in the death of Hamas leader Ismail Haniyeh. In a statement, Iranian Supreme Leader Ayatollah Khamenei declared that “the criminal and terrorist Zionist regime has prepared the ground for severe punishment with this action.” As of now, Israel has not commented on Haniyeh’s death.

The Biden administration is once again preparing to forgive the student debt of tens of millions of Americans, following the Supreme Court’s rejection of its initial attempt last year. President Biden has now instructed the U.S. Department of Education to proceed with the regulatory process. In the coming days, the Education Department will start emailing borrowers who may qualify for the widespread loan cancellation, as announced on Wednesday.

Headline inflation in the euro zone unexpectedly increased to 2.6% in July, according to the European Union’s statistics agency. Core inflation, which excludes the more volatile prices of energy, food, alcohol, and tobacco, rose to 2.9% in July, surpassing expectations. The closely monitored services inflation rate was 4% for July, showing a slight decrease from the 4.1% recorded in June.

Japan’s central bank has recently increased its benchmark interest rate to approximately 0.25%, up from the previous range of 0% to 0.1%. This adjustment marks the highest interest rate since October 2008, when it was set at 0.3%. Additionally, the bank announced plans to reduce its monthly outright purchases of Japanese government bonds to about 3 trillion yen ($19.64 billion) per month during the January to March 2026 quarter. These measures reflect a significant shift in monetary policy aimed at addressing economic conditions and stabilizing the financial market.

Hope, hype and uncertainty are likely to wild price volatility today as we wait for the FOMC’s monetary policy decision in between huge numbers of earnings report both before and after the bell today. Futures are pumping the up the premarket strongly so continue to watch for the possibility of whipsaw as the market continues to struggle with breadth.

Trade Wisely,

Doug