The relief rally extended on Tuesday with a substantial overnight gap that immodestly met with bearish actively pushing the indexes back down to filling gaps ahead of Jerome Powell’s comments.  However, the bulls found inspiration to rally back to morning highs after hearing the fed will continue to raise rates until inflation contracts.  We have a busy day or retail earnings along with  Housing and Petroleum numbers that likely keep traders guessing and price action challenging on Wednesday.

While we slept, Asian markets traded mixed but mostly higher as data revealed Japan’s economy shrank less than expected.  Likewise, European markets trade mixed this morning, searching for direction after the U.K. inflation hits a 40-year high of 9%.  Finally, disappointing results from LOW and TGT have U.S. futures pointing to a modestly bearish open with housing numbers just around the corner. 

Economic Calendar

Earnings Calendar

Wednesday’s earnings calendar remains retail themed, with about 30 companies listed through several unconfirmed.  Notable reports include LOW, ADI, BBWI, CSCO, HWKN, IBEX, SCVL, SQM, SNPS, TGT, TJX, TGI & ZIM.

News & Technicals’

Fed Chair Jerome Powell said he would back interest rate increases until prices fell back toward a healthy level.  “If that involves moving past broadly understood levels, we won’t hesitate to do that,” the central bank leader told the Wall Street Journal.  Just 31% of investors participating in the New York-based bank’s annual shareholder meeting voted in support of a $52.6 million award that was part of Dimon’s 2021 compensation package.  In the form of 1.5 million options that Dimon can exercise in 2026, the bonus was designed to keep the CEO and chairman at the helm of JPMorgan Chase for another five years.  While the so-called “say on pay” vote results are nonbinding, JPMorgan’s board said it takes investor feedback “seriously” and intended Dimon’s bonus to be a one-time event, according to a company spokesman.  Goldman Sachs analysts have cut their China GDP forecast to 4% from 4.5% after weak data in April.  The bank does not expect China will start fully easing Covid controls before the second quarter of 2023.  On Monday, Citi — which had one of the highest China GDP forecasts — cut its outlook for growth to 4.2% from 5.1%.  Finland and Sweden formally applied to join NATO on Wednesday marking another step toward the Western military alliance’s expansion.  Netflix is laying off around 150 employees across the company.  The eliminated positions represent less than 2% of the streamer’s 11,000 staffers, with most of the cuts happening in the U.S.  The staff reductions come less than a month after Netflix reported its first subscriber loss in a decade and forecasted future losses in the next quarter.  U.K. inflation jumps to a 40-year high of 9%, driven by food and energy costs.  A quarter of Britons have resorted to skipping meals as inflationary pressures and a food crisis conflate what Bank of England Governor Andrew Bailey recently dubbed an “apocalyptic” outlook for consumers.  Treasury yields traded flat early Wednesday, with the 10-year pricing at 2.96% and the 30-year at 3.16%.

Although the relief rally extended with a big gap, it quickly found some feisty bears pushing it back to fill gaps.  However, after the Powell speech, where he reaffirmed the FOMC’s inflation-fighting stance, the bulls found a willingness to rally the indexes back to highs of the day to deliver and other day whipsawing prices.  Unfortunately, this morning LOW and TGT delivered disappointing earnings results, and the national average gas prices hit another record high, increasing the bulls’ difficulty in following through on the Wednesday relief.  So, today we will turn our attention to the Housing starts and permits that the consensus suggests declined just slightly last month.  In addition, traders will alos want to keep an eye on Mortage Applications, Petroleum numbers, and a 20-year bond auction.  Price volatility is likely to remain high with overhead resistance levels near. 

Trade Wisely,

Doug