Although yesterday mainly saw choppy consolidating price action, it was a win for the bulls allowing volatility and fear to contract as if the market paused to catch its breath.  Though the SPY is within striking distance of new records, the DIA, QQQ, and IWM still have substantial overhead resistance overcome.  This morning we will turn our attention to the Jobless Claims but don’t be too surprised if price action remains a bit choppy as we wait on inflation details in the Friday CPI report.

During the night, Asian markets traded mixed with talk of U.S. delisting and pandemic risks.  European markets trade primarily in the red this morning, with U.K. officials concerned about infection rates that appear to be doubling every 2 to 3 days.  U.S. futures point to a lower open as investors monitor Chinese delisting risks and the new variant potential impacts ahead of jobs data.

Economic Calendar

Earnings Calendar

On the Thursday earnings calendar, we have 24 companies listed with a few unconfirmed reports.  Notable reports include COST, AVGO, CHWY, CIEN, HRL, FIZZ, KSPN, LAKE, LESL, LULU, MESA, & MTN.

News & Technicals’

The Fed expects to say it will double the pace of its bond purchase taper next week while also likely hinting at more aggressive rate hikes in 2022.  If it meets those expectations, it will mark at least the fourth significant policy change under Chairman Jerome Powell’s leadership. However, with their policy so unpredictable and forecasts proving often unreliable, the Fed could be facing a substantial credibility challenge.  As regulatory risks rise in China, investors should reduce their exposure to Chinese stocks listed in the U.S., according to Jack Siu, chief investment officer for Greater China at Credit Suisse.  “We think it’s prudent for holders of these stocks to … diversify, hedge their exposure, maybe switching to some of the Hong Kong-listed stocks where there’s a dual listing to hedge against this delisting risk,” Siu said.  Many companies targeted by Chinese regulators have ADR listings in the U.S. At the same time, the Securities and Exchange Commission finalized rules that allow it to delist foreign stocks if they don’t meet audit requirements.  The increase in omicron cases in the U.K. is on such a steep trajectory that the country’s health security agency has issued a stark warning.  Omicron cases are doubling every 2-3 days in the country.  “The omicron data is enormously worrying,” immunologist Danny Altmann told CNBC, pointing to the U.K’s 2.5-day doubling time of cases.  Italy’s antitrust regulators fined Amazon $1.28 billion, saying the company harmed competing operators in the eCommerce logistics service.  Regulators around the world are clamping down on Big Tech platforms.  Treasury yields dipped in early Thursday trading, with the 10-year edging down to 1.5024% and the 30-year slipping slightly to 1.8722%. 

Wednesday’s mostly choppy consolidating price action helped the VIX pullback as market fears diminished.  That said, the bulls maintained control throughout the day while still challenged by overhead resistance levels in the index charts.  The SPY is easily within striking distance of a new record, but the DIA and QQQ continue to lag, with more substantial resistance levels yet to recover.  IWM remains the weakest indexes, still struggling to reclaim its 50-day average.  Yesterday we learned that job openings topped 11 million, and this morning we will get the latest reading on the jobless claims. Unfortunately, we will have to wait until after the bell for the most consequential earnings of the day.  As you plan forward, remember we will get a reading on inflation with the CPI report before the bell on Friday.  It will not be a big surprise if the market continues in light choppy price action as we wait. 

Trade Wisely,

Doug