CPI Inflation Report

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

Mired in low-volume Chop

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

Wait-and-See Mode

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

Closed with Losses

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

Fed’s Actions

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

Building on the Gains

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 5th 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

Bullish Follow-Through

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

Relief Rally

Markets around the world enjoyed a relief rally with choppy price action in the U.S. with overhead resistance levels holding with bond yields adding worries to future rate increases.  Today traders will have much more earnings and economic data to inspire with Case-Shiller, Consumer Confidence, and JOLTS figures pending.  Light choppy price action could be possible as we wait for the Wednesday release of the GDP providing the uncertainty.

Overnight Asian markets continued their relief rally led by Hong Kong up 1.95% at the close as Japan reported higher than expected unemployment.  European markets also advance building on the bullish momentum.  Ahead of earnings and economic data, U.S. futures point to a bullish open with the uncertainty of the GDP report looming Wednesday.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday include AMBA, AMWD, BBY, BIG, BOX, CTLT, DCI, HPE, HPQ, SJM, MBUU, NIO, PDD, PVH, & ZTO.

News & Technicals’

Lithium is a metal that is used in various applications, such as batteries, electric vehicles, aerospace, and medicine. It is considered a critical mineral for the transition to a low-carbon economy. However, the supply of lithium may not be able to keep up with the growing demand, as a research unit of Fitch Solutions warned. According to BMI, “Global lithium supply is expected to enter a deficit relative to demand by 2025”. This means that there could be a worldwide shortage of lithium soon, which could affect the prices and availability of lithium products. The main factors that contribute to the supply-demand imbalance are the limited production capacity, the environmental and social challenges, and the geopolitical risks of lithium mining and processing. Therefore, it is important to find alternative sources of lithium, such as recycling, seawater extraction, and geothermal brines.

Toyota Motor, the world’s largest automaker by sales, has faced a major disruption in its production system due to a technical glitch. The company announced on Tuesday that it has halted operations at all 14 of its assembly plants in Japan, affecting its domestic output of about 30,000 vehicles per day. The company said that the malfunction occurred in its information system that connects the production lines and the parts suppliers, causing delays and errors in the delivery of components. The company apologized for the inconvenience and said that it is working to restore the system as soon as possible. The suspension of operations could have a significant impact on Toyota’s sales and profits, as well as on its global supply chain and customers.

Artificial intelligence (AI) is a powerful technology that can have both positive and negative impacts on humanity. Brad Smith, president and vice-chairman of Microsoft, one of the leading companies in AI development, said that AI has “the potential to become both a tool and a weapon”. He stressed the need for human control over AI to “slow things down or turn things off” in case of any harmful or unethical outcomes. His statement came amid the growing popularity and controversy of ChatGPT, a generative AI-powered chatbot that can produce humanlike responses to any input. ChatGPT has been praised for its creativity and versatility, but also criticized for its potential risks of spreading misinformation, manipulation, and violence. Some tech leaders have warned that AI poses a human extinction risk on par with nuclear war if it becomes too intelligent and autonomous. Therefore, it is important to establish ethical principles and regulations for AI to ensure its safe and beneficial use for humanity.

Indeses enjoyed a relief rally in the U.S. on light choppy price action with bond yields rising during government auctions. Today investors have more data on the earnings and economic calendars for the bulls or bears to find inspiration.  Asian and European relief rallies are helping to lift premarket bullish spirits despite their weakening economic figures.  Keep a close on overhead resistance levels in price and technicals such as the 50-moving averages that could harbor entrenched bears.  Don’t be too surprised by light volumes and choppy price action with the uncertainty of the GDP report coming Wednesday morning.

Trade Wisely,

Doug

Interpret Fed Chair

Markets whipsawed as investors tried to interpret Fed Chair Powell’s comments. Although the indexes enjoyed a late day relief rally from the short-term oversold conditions bond yields on the short end of the curve continued to rise.  This week’s plan for the price action instability continue with a slew of jobs data, GDP, PMI and manufacturing data for the bulls and bears to find inspiration. 

Asian markets followed the U.S. markets overnight reliving recent selling pressure even as real estate issues in China expanded with Evergrande shares plunging.  European markets are also trading higher this morning in a modest relief rally as China uncertainty expands.  Ahead of a light day of earnings and economic data U.S. futures point to bullish open hoping to continue the relief rally started Friday afternoon to test overhead resistance levels.

Economic Calendar

Earnings Calendar

Notable reports for Monday include HEI.

News & Technicals’

China Evergrande Group, one of the largest real estate developers in China, has been facing a severe liquidity crisis that has shaken the confidence of its investors and creditors. The company’s shares have been suspended from trading on the Hong Kong exchange since March 21, 2023, after closing at a record low of 1.65 Hong Kong dollars ($0.13) per share on March 18. The suspension came as the company reported a massive loss of 39.25 billion yuan ($5.38 billion) for the first half of 2023, with total liabilities reaching a staggering 2.39 trillion yuan. The company has been struggling to repay its debts and avoid default, as it faces regulatory pressure, legal challenges, and public protests from its customers and suppliers.

The labor market in the United States has witnessed a surge of strikes and protests by workers who demand better pay and working conditions from their employers. According to data from the Cornell University School of Industrial and Labor Relations, more than 320,000 workers have participated in at least 230 strikes so far this year, affecting various industries such as health care, education, hospitality, and manufacturing. Some of the workers have successfully negotiated favorable labor deals, such as UPS workers and airline pilots, while others are still in the process of bargaining or threatening to walk out, such as Hollywood writers and actors and auto workers. The wave of labor unrest reflects the growing dissatisfaction and frustration of workers who feel underpaid, overworked, and unsafe amid the pandemic and the economic recovery.

Microsoft, the tech giant and the owner of Xbox, has made a renewed bid to acquire Activision Blizzard, the American game publisher behind popular titles such as Call of Duty, World of Warcraft, and Candy Crush. The company has submitted a fresh takeover proposal of $69 billion to the U.K. regulators, who rejected its initial offer on the grounds of anti-competitive concerns in the nascent cloud gaming market. Brad Smith, Microsoft’s vice-chairman and president, told CNBC that the company “really tried to take concerns to heart” and addressed the issues raised by the regulators in its new proposal. He also said that the deal would benefit both gamers and developers by creating more diverse and innovative games. However, he acknowledged that the final decision rests with the regulators and that “it will be up to them to decide whether that path is clear”.

On Friday, stock markets rose as they tried to interpret Fed Chair Powell’s speech at the Jackson Hole symposium for any hints about future interest-rate moves. Chair Powell struck a balanced tone, saying that the Fed would base its decisions on the data but said rate increases may not be over. Global markets had mixed results, and Treasury yields as shorter-term rates went up.  Today we have a light day on both economic and earnings calendar, however, later this week will be filled with jobs data and a key GDP report.  Plan for price volatility to remain high with investors hoping for a relief rally with the uncertainty of the weaking China economy as there real estate crisis expands and the consumer in the U.S. consumer shows signs of inflation impacts with record credit card and household debt burdens.   

Trade Wisely,

Doug

Retail Earnings

Retail Earnings

Mixed results from the retail sector suggest that consumers are inflation worry and beginning to make different choices in their spending fading premarket gains and ending the day lower.  The T2122 indicator continues to signal a short-term oversold condition on a light volume day as investors dealt with more banking downgrades and higher bond yields adding to the pressure.  However, the highly anticipated NVDA earnings and the talking head marketeering from Jackson Hole could quickly shift sentiment for a relief rally.  Of course, the results from today’s earnings and economic reports will have something to say about direction and could keep volatility high.

Asian market traded mixed after business activity reports from Australia and Japan.  European markets look to extend yesterday days gains with gains across the board this morning despite lower PMI numbers.  U.S. futures once again push for a bullish open but have already faded slightly after early retail earnings results.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday include ANF, AAP, ADI, ADSK, BBWI, DY, FL, GES, KSS, NTAP, NVDA, PTON, SNOW, SPLK, & WSM.

News & Technicals’

The eurozone economy showed signs of recovery in the second quarter of 2021, despite the impact of the Covid-19 pandemic. According to the latest data, the region’s gross domestic product (GDP) grew by 0.3% in the April-June period, compared to 0.1% in the previous quarter. However, this growth rate was still lower than the pre-pandemic level, as the data excluded the months when most countries imposed lockdowns and restrictions to contain the virus. If the pandemic months are excluded, the latest numbers point to the lowest reading since April 2013. The European Central Bank (ECB) is expected to maintain its accommodative monetary policy stance, as analysts predict that it will leave its main interest rate unchanged at 3.75%. The ECB has been providing stimulus to the eurozone economy through its quantitative easing program and its pandemic emergency purchase program. The bank will announce its next policy decision on September 7, 2021.

FedEx pilots are facing uncertainty about their future as the company struggles with a sharp decline in package volume. According to the latest statistics, FedEx Express delivered 3.19 million packages a day within the US during its fiscal year 2022, down from 3.283 million in fiscal 2021. This drop in demand is partly due to the impact of the Covid-19 pandemic, which disrupted global trade and travel, as well as the loss of some major customers, such as Amazon and Walmart. FedEx has been trying to cut costs and improve efficiency by consolidating its operations and offering voluntary buyouts to some employees. However, some pilots fear that these measures may not be enough to avoid layoffs or furloughs in the near future.

Japan is preparing to release more than a million tons of treated radioactive water from the Fukushima Daiichi nuclear power plant into the Pacific Ocean, a controversial decision that has sparked protests and criticism from its neighbors. The water release, which is expected to start in 2023 and take decades to complete, comes more than 10 years after a massive earthquake and tsunami triggered the second-worst nuclear disaster in history, causing meltdowns at three reactors and forcing the evacuation of thousands of people. Japan’s government has argued that the discharge of the water, which has been filtered to remove most of the radioactive elements except for tritium, is safe and necessary to make room for more contaminated water accumulating at the site. The U.N.’s nuclear watchdog, the International Atomic Energy Agency (IAEA), has endorsed the move, saying Tokyo’s plans are consistent with international standards and will have a “negligible” impact on people and the environment. However, neighboring countries such as China, South Korea, and Taiwan are far from happy, as they fear the water release will harm their marine ecosystems, fisheries, and public health.

U.S. stocks ended the day in the red after retail earnings showed mixed results and consumers changing spending habits. Macy’s, a major retailer, reported that it had more credit card defaults than expected in the second quarter, which made investors worry about the U.S. consumer’s spending power. The financials sector also suffered a hit, as S&P Global lowered the ratings of five U.S. regional banks on Monday and bond yields continued to rise adding additional pressure. Today we have a busier earnings calendar with the highly anticipated report from NVDA after the bell with PMI, New Home Sales, and Petroleum Status data pending on the economic calendar. 

Trade Wisely,

Doug