Though the semiconductor sector attracted the majority of the bearish activity on Monday, the overall market experienced a chop fest as we waited for the uncertainty of inflation numbers and the earnings season kick-off.  Unfortunately, we see bond yields surging higher this morning with little else in the earnings or economic calendars to inspire as we again wait.  Watch for sensitivity to the news cycle as geopolitical tensions grow, and earnings warnings are seemingly on the rise.

While we slept, Asian markets mostly declined, with Taiwan stocks down 4% as TSMC plunged 8%.  European markets see only red this morning as the dollar’s strength and weakening global growth worries persist.  With another day of waiting ahead and bond yields surging, U.S. futures suggest a bearish open, with the QQQ leading the selling. 

Economic Calendar

Earnings Calendar

We have five verified reports on Tuesday, but only two qualify as somewhat notable.  They are AZZ and PNFP.

News & Technicals’

The Bank of England intervenes in the bond market again today.  “Dysfunction in this market and the prospect of self-reinforcing ‘fire sale’ dynamics pose a material risk to UK financial stability,” the Bank of England warned.  The move marks the second expansion of the central bank’s extraordinary rescue package in as many days after it increased the limit for its daily gilt purchases on Monday ahead of the planned end of the purchase scheme.  Israel and Lebanon reached a historic agreement to resolve a long-running maritime border dispute following months of negotiations guided by the United States.  “This is a historic achievement that will strengthen Israel’s security, inject billions into Israel’s economy, and ensure the stability of our northern border,” Israel’s Prime Minister Yair Lapid said in a statement.  His comments came after Lebanon received the final draft of the U.S.-brokered agreement with Israel. 

“I hope Musk cleans up Twitter,” JPMorgan CEO Jamie Dimon said in a CNBC interview.  The remarks are Dimon’s first on the Musk-Twitter deal, revived last week after a fresh bid from Musk to buy the company.  Dimon echoed Musk’s concerns about spam accounts and said Twitter should give users more control over its recommendation algorithms.  Delta will have an exclusive five-year partnership with Joby operating electric vertical takeoff and landing aircraft, or eVTOLs, as part of the Delta network.  As a result, Delta CEO Ed Bastian envisions moving passengers to and from airports quicker and with less hassle. 

Two subsea pipelines connecting Russia to Germany are at the center of international intrigue after a series of blasts caused what might be the single largest release of methane in history.  Many in Europe suspect the incident resulted from an attack, particularly during a bitter energy standoff between the European Union and Russia.  However, the Kremlin has repeatedly dismissed claims it destroyed the pipelines, calling such allegations “stupid” and “absurd.” 

As mentioned in Monday’s report, the hurry-up and wait in the market evolved into a chop fest as we ponder on inflation data and the beginning of the earnings season.  The semiconductor attracted the most bear activity due to the new U.S. chip regulations temporally pushing the QQQ to a new 2022 low.  Though we saw a  reprieve from bond yield worries, they are back with a vengeance this morning, with the 2-year climbing to 4.32% in early Tuesday.  In addition, the national average gas price continues to rise at $3.92, adding worries that the core inflation rate could rise despite the rapid rate-increasing efforts of the FOMC.  Unfortunately, we face another day of waiting with little on the earnings and economic calendars to inspire.  Plan for markets to be sensitive to early earnings warnings and geopolitical events and keep a close eye on support challenges as the bears continue to drive sentiment.

Trade Wisely,

Doug