Midterm uncertainty and rising layoffs brought the bears back to work on Wednesday ahead of today’s CPI reading.  Unfortunately, failures of 50-day moving averages and lower highs in the SPY, QQQ, and IWM raise additional concerns technically.  That said, the damage could quickly reverse or worsen this morning depending on the reaction to the CPI and Jobless numbers coming out before the bell.  Plan for another opening gap and considerable price volatility as the market reacts.

Asian markets traded lower across the board overnight as Chinese producer prices declined.  European markets trade flat in a choppy cautious morning session as they wait on U.S. inflation data.  However, in the usual fashion of late, U.S. futures try to pump up a positive open ahead of the CPI despite the uncertainty of what it may reveal about the path forward.  So, buckle up for another wild morning where anything is possible.

Economic Calendar

Earnings Calendar

Our most hectic day of the week on the earnings calendar, with nearly 200 verified companies reporting quarterly results; however, many of them are little small-cap names.  Notable reports include MT, AXN, BZH, BDX, BAM, COMP, DDS, FLO, HNST, IAA, LZ, MTTR, NIO, POSH, RL, RYAN, SBH, SIX, SSYS, SWHC, TRP, TOST, UTZ, WRBY, WB, WRK, WE, & YETI.

News & Technicals’

Binance is backing out of its plans to acquire FTX, the company said Wednesday.  “The issues are beyond our control or ability to help,” Binance said in a tweet.  FTX, valued at $32 billion earlier this year, is now in jeopardy of collapsing.  As possibilities of bankruptcy loom, venture capital firm Sequoia Capital will mark down to zero its investment of over $210 million in the cryptocurrency exchange FTX.  “Based on our understanding, we are marking our investment down to $0,” the Silicon Valley-based firm said Wednesday. 

New York-based Citigroup let go of roughly 50 trading personnel this week, according to people with knowledge of the moves who declined to be identified speaking about layoffs.  Bloomberg reported Tuesday that the firm also cut dozens of banking roles amid a slump in deal-making activity.  In addition, London-based Barclays cut about 200 positions across its banking and trading desks this week, according to a person with knowledge of the decision.  Underperformers may also be at risk at JPMorgan Chase, which will use selective end-of-year cuts, attrition, and smaller bonuses to rein in expenses, according to a person with knowledge of the bank’s plans.

According to filings published Tuesday, Elon Musk sold nearly $4 billion of Tesla shares.  That follows his sale of billions of dollars in stock last year and earlier this year.  Tesla’s stock price has been sinking for much of 2022 due to economic concerns and Musk’s purchase of Twitter, which closed in late October.  In addition, rocket Lab delivered quarterly results on Wednesday that boasted record revenue, with the space company tacking on additional contract wins across its business.  The company reported third-quarter revenue of $63.1 million, up 14% from the second quarter.  The spacecraft and components business also won several contracts during the third quarter.

The bears showed their teeth on Wednesday due to midterm uncertainty and rising layoff announcements.  Technically, the DIA suffered no damage from its extended condition, but the lower highs in the SPY, QQQ, and IWM raise some concerns of more trouble ahead.  In addition, the SPY and IWM dipping below their 50-day averages may signal that the earnings rally has run its course.  Of course, today’s reading on CPI has the potential to reverse or confirm those concerns quickly.  As a result, we should prepare for another market gap at the open and expect considerable price volatility as the market reacts. 

Trade Wisely,

Doug