Jerome Powell’s comments helped provide a nice relief rally to the market suggesting a modest increase of just 25 basis points.  However, the big question is yet to be answered can the bullishness follow through with Brent Crude pricing above $115 a barrel this morning?  Indexes remain in downtrends with substantial overhead price and technical resistance that the bulls will require tremendous effort to overcome.  With inflation rising and the massive geopolitical concerns impacting the economy, that’s a big ask.  So, expect the extreme price volatility to continue.

Overnight Asian markets mostly rallied overnight as they tried to ignore the impacts of rising energy prices.  However, European markets find it difficult to rally as Russia seizes another major city tightening its grip on Ukraine.  U.S. futures indicate modest declines ahead of earnings and economic data at the open.  Stay focused on price action and don’t rule out continued whipsaws or overnight reversals in the days ahead.

Economic Calendar

Earnings Calendar

We have nearly 200 companies listed today on the Thursday earnings calendar, with a few that are unconfirmed.  Notable reports include AVGO, AVAV, BBY, BIG, BJ, BURL, CNQ, COST, EGLE, FNKO, GPS, GOGO, KR, PBYI, SWBI, TWI, TTC, TD, UTZ, VERI, & WB.

News & Technicals’

Fed Chairman Jerome Powell said Wednesday he still sees interest rate hikes ahead though he noted the “implications for the U.S. economy are highly uncertain” from the Ukraine war.  Powell called the labor market “extremely tight” and said inflation has risen well above the Fed’s 2% target.  His remarks are part of mandatory appearances this week before House and Senate committees in Congress.  The G-7 (Group of Seven) major economies have imposed unprecedented punitive sanctions against the Central Bank of Russia along with widespread measures by the west against the country’s oligarchs and officials.  On Tuesday, French Finance Minister Bruno Le Maire told a French radio station that the latest round of sanctions aimed to “cause the collapse of the Russian economy.”  There are fears that high oil prices will be highly recessionary, destroy oil demand and slow down a lot of economies, said Paul Sankey of Sankey Research.  According to a research note, the firm sees oil trading in a range of $100 per barrel to $150 per barrel until the situation in Ukraine is resolved.  “There’s a major, physical, immediate outage that caught an already tight market with very low inventories,” he said.  The Turkish lira has lost roughly 47% of its value in the last full year, in a rout driven by Erdogan’s refusal to raise rates as inflation consistently climbed.  The currency’s turbulence has hit Turks hard, as the value of their salaries dropped and living costs dramatically increased.  Since September, Turkey’s central bank has cut interest rates by 500 basis points to 14%.  Shipping giants including Switzerland-based MSC, Denmark’s Maersk, and France’s CMA CGM all announced on Tuesday that they would halt cargo bookings to and from Russia until further notice.  The move exempted deliveries of essential supplies, such as food, medical equipment, and humanitarian goods.  The confluence of Russia’s invasion of Ukraine and the barrage of punitive Western sanctions has triggered a mass corporate exodus from Moscow.  Treasury yields edged slightly higher in early Thursday trading, with the 10-year pricing at 1.8784% and the 30-year rising to 2.25%. 

Wednesday saw a nice relief rally after Jerome Powell suggested a more modest rate increase of 25 basis points.  However, he suggested that the uncertainty of the war in Ukraine could substantially impact the economy.  With Brent Crude pricing over $115 a barrel this morning, the Fed will have a substantial change ahead of them due to the inflationary impacts and puts the credibility of the FOMC in question.  Today the market will turn its attention to the Jobless claims, Productivity, Factory Orders, and the possible market-moving report from COST.  Yesterday’s rally, though encouraging, still has a tremendous amount of work to do if it is to break downtrends and push through the substantial overhead resistance.  With the VIX closing, the day above 30 handles, traders will have to stay on their toes, watching for whipsaws and overnight reversals.  As you plan forward into Friday, keep in mind the Employment Situation number coming out before the open.

Trade Wisely,

Doug