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

Indexes closed with losses on a light day of data here in the U.S., while Asian and European economic news started the day off with a little bearish sentiment.  The pressure continued to grow as oil rose to a 10-month high adding worries to its potential inflation impact and helping bond yields to surge higher on the day.  To find inspiration today we have Mortgage, Trade, PMI, ISM, Beige Book, Fed speak, and just a few notable earnings events for the bulls and bears to wrangle over.  Plan for price action to remain challenging as the bulls look for anything to resume the relief rally and the bears look for some inspiration to resume selling.

While we slept Asian markets traded mixed even as Country Garden made payments allowing China real estate stocks to surge.  However, European markets trade bearishly across the board as surging energy prices add additional challenges to an already struggling economy. U.S. futures also suggest a modestly bearish open ahead of earnings and economic data worried about the inflationary and economic impacts of rising energy prices.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday include AEO, AI, CNM, GME, PLAB, PLAY, SPWH, PATH, & VRNT.

News & Technicals’

The European Commission, the executive branch of the European Union, has announced that it has identified six tech giants as “gatekeepers” under its new Digital Markets Act (DMA) — a landmark law that aims to curb the power of the dominant digital platforms. The six gatekeepers are Alphabet, Amazon, Apple, ByteDance, Meta, and Microsoft. These are large digital companies that provide core platform services, such as online search engines, app stores, social networks, and messaging services. The DMA imposes a set of obligations and prohibitions on these gatekeepers to prevent them from abusing their market position and harming competition and consumers. The DMA is one of the first regulatory tools to comprehensively regulate the gatekeeper power of the largest digital companies. The DMA complements but does not change EU competition rules, which continue to apply fully. The European Commission is the sole enforcer of the DMA and will monitor the compliance of the gatekeepers with the law.

The U.S. government is facing the risk of a shutdown at the end of September unless Congress passes a spending bill to fund its operations. The White House and the leaders of both chambers of Congress have agreed to support a stopgap measure, also known as a continuing resolution, that would keep the government running until December 3. However, the stopgap measure still needs to be approved by both the House and the Senate, which could face some challenges from lawmakers who oppose certain provisions or demand additional funding for their priorities. A government shutdown would have negative consequences for the economy, public services, and federal employees. The last government shutdown occurred in 2018-2019 and lasted for 35 days, the longest in U.S. history.

Country Garden, a Chinese property developer, has seen its shares rise after it narrowly avoided defaulting on its bond payments. The company reportedly paid $22.5 million in bond coupon payments on Tuesday, just hours before a 30-day grace period expired. The bond payments were originally due in August, but Country Garden had requested an extension due to liquidity problems. The company has been facing financial difficulties amid the tightening regulations and slowing demand in China’s real estate sector. The successful payment of the bond coupons has eased some of the market concerns and boosted the confidence of the investors. Country Garden’s shares rose by 4.6% on Wednesday, outperforming the broader market.

Tuesday, the stock market closed with losses, while the bond market and the dollar gained. There was no major news that moved the market, but some weak economic data from abroad caught some attention. The services sector in China grew slower than expected in August, showing that the stimulus measures have not boosted consumption yet. Similarly, the final numbers for the services sector in the eurozone were lower than the initial estimates, indicating some slowdown in growth. The energy sector was the best performer today, as oil prices rose after Saudi Arabia announced that it would keep its voluntary production cuts until the end of the year. Oil prices reached a ten-month high of $87 per barrel. Today investors will have Mortgage Applications, International Trade, PMI, ISM, Beige Book, and some Fed speak along with a handful of notable earnings to find bullish or bearish inspiration.

Trade Wisely,

Doug

Conflicting jobs data, rising bond yields, and Fed member hawkish speeches have not stopped the market and the talking heads from predicting the Fed’s actions pushed stocks higher last week with high hopes they will be right this time.  China and European economies continue to raise uncertainties as does the changing habits of U.S. consumers as energy, food, & housing prices continue to rise. We have a light week of earnings and economic reports this week so expect anything in price action with a sensitivity to the news cycle.

Asian markets mostly declined overnight as Australia held interest rates with health care and real estate dragged markets down.  European markets trade mixed this morning as the eurozone PMI figures were revised lower changing investor early sentiment.  U.S. futures chop around the flatline facing a light week of data as worldwide economic uncertainty mutes last week’s relief rally follow-through.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday include AVAV, CRMT, BRC, GTLB, & ZS.

News & Technicals’

Baidu, the Chinese tech giant and the leader in artificial intelligence (AI), has announced some of its latest achievements and products based on generative AI at an event on Tuesday. Generative AI is a type of AI that can create new content or data from existing ones, such as images, text, audio, or video. One of the products that Baidu showcased was an AI-powered tool that is integrated with its cloud service, which is similar to Google Drive. This tool can help users generate various types of documents, such as resumes, contracts, reports, and summaries, based on their needs and preferences. Baidu said that more than 6 million users have used this tool so far. Another product that Baidu demonstrated was a generative AI-based system that can assist with different scenarios, such as traffic management, financial research, and coal mine logistics. For example, the system can generate optimal traffic plans, financial reports, and coal transportation schedules based on the input data and the objectives. Baidu also mentioned that ChatGPT, a generative AI-powered chatbot developed by OpenAI, a research organization backed by Microsoft, is not officially available in China, where Google and Facebook are banned. ChatGPT is a chatbot that can produce humanlike responses to any input and has gained popularity and controversy around the world.

Mercedes and BMW, two of the most renowned German automakers, have unveiled their new electric vehicle (EV) concepts at the IAA auto show in Munich. The Mercedes-Benz Concept CLA Class and the BMW Vision Neue Klasse are the latest models that showcase the future of EV design and technology from the two brands. These cars are built on entirely new platforms that will support both their EV offerings for the coming years. This is a sign of the most aggressive push into the EV market from Mercedes and BMW, as they aim to compete with Tesla, the current leader in the EV industry. The Mercedes-Benz Concept CLA Class is a sleek and sporty four-door coupe that features a minimalist interior, a large touchscreen, and a high-performance battery. The BMW Vision Neue Klasse is a compact and elegant sedan that combines a spacious cabin, a digital dashboard, and an efficient drivetrain. Both cars are expected to go into production by 2025.

North Korea and Russia are strengthening their military and political ties, as Moscow seeks to acquire more weapons amid the ongoing war in Ukraine. According to the data I found, North Korea and Russia have recently held several meetings and joint exercises, signaling their closer cooperation and mutual support. For example, in August 2023, North Korea’s leader Kim Jong-un met with Russia’s President Vladimir Putin in Vladivostok, where they discussed regional security issues and economic cooperation. In September 2023, North Korea and Russia conducted a joint naval drill in the Sea of Japan, where they practiced anti-submarine warfare and missile defense. These moves indicate that North Korea and Russia are trying to counter the influence and pressure of the United States and its allies in the region, as well as to boost their defense capabilities. North Korea is also hoping to get more economic and humanitarian aid from Russia, as it faces severe sanctions and food shortages. Russia, on the other hand, is looking to expand its arms market and access to North Korea’s natural resources. The growing alliance between North Korea and Russia poses a challenge and a threat to the stability and security of Northeast Asia and beyond.

Stock markets ended slightly higher on Friday, continuing the positive mood of the week that was driven by optimism about the economy and the Fed’s actions. Interest rates also went up, with the 10-year Treasury yield near 4.2%. However, the bond market this week saw a decline in rates from last week’s 2023 highs, as the market expected fewer rate hikes from the Fed. Oil and gold prices rose, while sectors, such as energy, materials, financials, and industrials, led gains. To kick off a short trading week light day of earnings and economic reports with bond yields rising as economic uncertainty weighs on investors. Expect price volatility to continue as traders and investors continue trying to guess the Fed’s next actions despite their year-long poor track record in doing so.

Trade Wisely,

Doug

Indexes advanced slightly on Wednesday building on the gains as the relief rally continued on a low-volume day.  The hesitation likely has a lot to do with the wait on the Core PCE numbers coming out before the bell this morning and what that might mean for future Fed decisions.  Along with several notable earnings reports we also have Jobless Claims, Chicago PMI, and Natural Gas numbers to provide buy or sell inspiration.  Keep in mind we have the Employment Situation number Friday morning as we slide into a busy travel 3-day weekend.

While we slept Asian markets closed mixed as China’s factory activity contracts for the 5^th month in a row.  European markets also trade mixed this morning as they try to celebrate the UBS earnings while dealing with higher inflation data.  The U.S. futures also trade mixed this morning as we wait on potential market-moving jobs and inflation data.

Economic Calendar

Earnings Calendar

Notable reports for Thursday include ASO, AVGO, DELL, DOOO, CAL, CPB, DG, GCO, LULU, MOMO, HRL, MDB, NTNX, OLLI, GIS, TITN, VMW, UBS.

News & Technicals’

China’s manufacturing sector continued to shrink in August, indicating that the world’s second-largest economy is facing persistent headwinds from both domestic and external factors. According to the official data released by the National Bureau of Statistics (NBS), the manufacturing purchasing managers’ index (PMI) rose slightly to 49.7 in August, from 49.3 in July, but remained below the 50-point threshold that separates expansion from contraction. This was the fifth consecutive month that the index showed a contraction, and worse than the median forecast of 49.2 by economists surveyed by Bloomberg. The NBS attributed the weak performance to the impact of floods, typhoons, and COVID-19 outbreaks in some regions, as well as the slowdown in global demand and supply chain disruptions. The sub-indexes for production, new orders, and new export orders all improved slightly from July but still stayed in the contraction zone. The sub-index for employment also fell further to 48.1, suggesting that manufacturers were cutting jobs amid the downturn. The NBS said that the manufacturing sector faced “increased difficulties and pressures” and called for more policy support to stabilize production and market expectations.

The euro zone’s inflation rate remained at a 10-year high in August, exceeding the analysts’ expectations and posing a challenge for the European Central Bank (ECB). According to the preliminary data released by Eurostat on Thursday, the annual inflation rate was 5.3% in August, the same as in July. This was higher than the 5.1% forecast by a Dow Jones poll of economists. The inflation rate was also far above the ECB’s target of below but close to 2%. The main drivers of inflation were energy, food, and services prices, which rose by 15.4%, 2.7%, and 3.1% respectively. The core inflation rate, which excludes energy, food, alcohol, and tobacco, was 2.6% in August, up from 2.5% in July. The high inflation rate puts pressure on the ECB to consider tapering its massive stimulus program, which has been supporting the euro zone’s economic recovery from the pandemic. However, the ECB has repeatedly said that it expects the inflation spike to be temporary and that it will look through it until the medium-term outlook improves. The ECB will hold its next monetary policy meeting on September 9, where it will update its economic projections and discuss its policy stance.

The trade relationship between China and the U.S. deteriorated in the first half of the year, as the U.S. imposed tariffs and export controls on Chinese goods and technology. According to Xie Feng, China’s ambassador to the U.S., the bilateral trade volume dropped by 14.5% year on year in the first six months of 2021. He said that the U.S. measures were harmful to both countries and the global economy, and urged for a path to expand mutually beneficial economic cooperation and trade. He also criticized Biden’s executive order that restricts U.S. investments in Chinese companies that are involved in semiconductor and AI industries, calling it “a violation of the principle of free trade”. He said that China and the U.S. should respect each other’s core interests and avoid confrontation and conflict.

Stock markets ended slightly higher on Wednesday, building on the gains made earlier this week as volume weakened. The focus on job numbers and the implications of the data for the next Fed decision continues today. However, the Personal Income and Outlays data including the Core PCE which is the favorite number of the Fed for reading inflation can move the market substantially this morning. On the last trading day of August, plan for just about anything as investors deal with China, European, and Fed uncertainty contributing to the challenging price volatility while the so-called magnificent seven dominate the indexes.

Trade Wisely,

Doug

The relief rally expanded with a big bullish follow-through after seeing a sharp decline in the JOLTS report hoping that will ease the hawkish Fed.  However, we also ignored the sharp decline in consumer confidence suggesting that consumers are likely changing spending habits due to their weariness of high prices.  This morning expect price volatility with ADP, GDP, International Trade, and inventories data before the bell.  We also have Pending Home Sales and Petroleum numbers and several notable earnings reports to inspire the bulls or bears. 

Asian market closed mostly higher drawing on the bullish energy of the U.S. rally with only Hong Kong closing flat on the day.  European markets gave up some early gains after Germany and Spain released data that brought out the bears.  U.S. futures gave back overnight gains suggesting a flat to slightly bearish lean as the GDP data looms.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday include BF.B, CHWY, CONN, COO, CRM, CRWD, FIVE, MCFT, OKTA, PDCO, VEEV, & VSCO.

News & Technicals’

The Bank of England (BoE) is facing a significant increase in losses on its bond-buying program, which is aimed at supporting the U.K. economy during the pandemic. According to Deutsche Bank, a leading financial institution, the BoE’s losses on its asset purchase facility (APF) will be “materially higher than projected” by the BoE itself. The APF is a scheme that allows the BoE to buy government and corporate bonds from the market, injecting money into the economy and lowering borrowing costs. However, as interest rates rise, the value of these bonds falls, resulting in losses for the BoE. The BoE estimated in late July that it would need the U.K. Treasury to cover £150 billion ($189 billion) of losses on its APF. However, Deutsche Bank Senior Economist Sanjay Raja said that this figure is too low and that the actual cost to the Treasury will be around £173 billion ($218 billion) over the next two fiscal years. This is £23 billion higher than the forecast made by the Office for Budget Responsibility (OBR) in March. This means that the Treasury will have to borrow more money or raise more taxes to compensate for the BoE’s losses, which could have implications for the U.K.’s fiscal policy and public debt.

Spain and Germany, two of the largest economies in the eurozone, have reported contrasting inflation and trade data for August and July respectively. Spain’s inflation rate rose to 2.6% year on year in August, matching the analysts’ expectations, according to the flash estimate released by the National Statistics Institute (INE). This was the highest inflation rate since October 2012, driven by higher energy and food prices. The inflation rate was also above the European Central Bank’s (ECB) target of close to but below 2%. Meanwhile, Germany’s imports fell by 13.2% year on year in July, the biggest decline since January 1987, according to the data published by the Federal Statistical Office (Destatis). This was much worse than the analysts’ forecast of a 4.5% drop, reflecting the impact of supply chain disruptions and labor shortages on the German economy. The trade surplus also narrowed to 12.3 billion euros ($14.5 billion) in July, from 15.6 billion euros ($18.4 billion) in June.

Indexes logged a big day of bullish follow-through after seeing a sharp decline in the JOLTS report but unfortunately, we also recorded a substantial miss in Consumer Confidence that the market chose to ignore. The bullish surge broke back above the daily 50-moving averages on the DIA, SPY, and QQQ while the IWM lagged. The big test for today, Can we follow through and prove to hold these key technical support levels?  The answer will likely come down to the data we receive in the GDP.  We will also deal with ADP, International Trade, Pending Home Sales, and a Petroleum number as well as some notable earnings reports to find inspiration.  Plan for price volatility to remain challenging with a focus on job numbers for the rest of the week.

Trade Wisely,

Doug