With bond rates risking, the QQQ remained under pressure from the bears while the bulls focused their efforts on the DIA.  So far, the DIA and SPY have successfully held their 50-day averages though the IWM failed to hold, and QQQ looks to violet this crucial technical level at the open today.  This week’s theme will be inflation as we get readings for CPI and PPI, which are both expected to come in hot, clearing a path for an aggressive rate hike by the Fed.  We can hope for the best, but traders should prepare for more challenging volatility in this holiday-shortened week.

Overnight Asian markets closed in the red, with Hong Kong leading the selling down over 3% after the release of surging producer price numbers.  European markets traded mixed this morning with worries about inflation and the intensifying war in Ukraine.  With bond rates rising, inverted U.S. futures point to a flat, slightly bearish open with inflation data just around the corner. 

Economic Calendar

Earnings Calendar

We have just over 20 companies to kick off the short week of trading.  However, there is only PCYO confirmed.

News & Technicals’

Elon Musk informed Twitter on Saturday morning that he would not take the board seat.  However, CEO Parag Agrawal announced publicly on Sunday that Musk remains the largest shareholder of Twitter, and the company will remain open to his input.  Musk’s appointment would have started on April 9, contingent on a background check and formal acceptance.  Nio announced Sunday it would raise the prices for its three SUVs — the ES8, ES6, and EC6 — by 10,000 yuan ($1,572), effective May 10.  A day earlier, on Saturday, Nio said it suspended production due to Covid-related restrictions in the last several weeks that halted production at suppliers’ factories.  Many other electric car companies, from Tesla to Xpeng, have raised prices in the last several weeks.  French leader Emmanuel Macron and his far-right rival, Marine Le Pen, face off in the final vote on April 24.  A flurry of early projections and exit polls showed the incumbent.  Macron came first with 28.1-29.5% of the vote, followed by Le Pen with 23.3-24.4%.  The rising cost of living and the Russia-Ukraine war has been front and center.  Support for Macron had jumped following Russia’s unprovoked invasion of Ukraine and his mediation efforts earlier this year.  Federal Reserve policymakers will try to slow down the economy and subdue inflation.  Higher rates make money costlier and borrowing less appealing.  That, in turn, slows demand to catch up with supply, which has lagged badly throughout the pandemic.  Fed officials also have talked tough on inflation to dampen future expectations.  Potential effects include lower wages, a halt or even a drop in home prices, and a decline in stock market valuations.  Treasury yields continue to be a concern, with the 5-year trading at 2.8154%, the 10-year climbing to 2.7629%, and the 30-year pricing at 2.7629% in early Monday trading.

While the DIA found some bullish price action, the QQQ remained under pressure, with bond rates rising while inverted.  Though the bulls have defended the 50-day support of the DIA and SPY, IWM failed this fundamental psychological level, and the QQQ is likely to follow suit at open today.  Moreover, with news that the war in Ukraine intensified over the weekend, the uncertainty could keep the market on edge in this holiday-shortened week.  Though we have several Fed speakers today, there is not much else providing inspiration today.  However, with hot numbers expected in the CPI on Tuesday and the PPI on Wednesday, traders will should expect considerable volatility in the days ahead.  If that’s not enough to deal with, we will have Retail Sales on Thursday before closing for the Good Friday holiday.  I hope you are rested from the weekend because it could be a challenging 4-days ahead!

Trade Wisely,

Doug