Macro Landscape Overshadows U.S. Equity Rebound | Morning Express 07/20/22

Posted: July 20, 2022, 8:39 a.m.

E-mini S&P (September) / NQ (September)

S&P, yesterday’s close: Settled 3937.50, up 103.75

NQ, yesterday’s close: Settled at 12,274.00, up 367.00

Fundamentals:

U.S. equity benchmarks powered higher yesterday, rebounding strongly from Monday’s disappointing turn. The session was terrific from start to finish and capped off by an upbeat earnings report from Netflix. The former darling beat earnings estimates and missed on revenues, but it was subscriber numbers that lifted the stock as much as 7%. The company lost 970,000 subscribers in Q2, smaller than the 2 million projected, and expects a return to subscriber growth in the current quarter. Although indices drifted higher in the overnight, macro developments have overshadowed the U.S. open and strengthened the safe haven U.S. Dollar off session lows. Comments from European officials and Russian Foreign Minister Lavrov spiked the Dollar and derailed risk-assets. European Commission President Von Der Leyen said a seventh package of sanctions on Russia is underway, warned of a full cut-off of Russian gas and proposed targeting a 15% reduction of Natural Gas use across all EU countries for August through March. The EU Energy Chief Simon followed by warning of a worse gas crisis in the winter of 2023-2024 without action now and how a gas halt could cut GDP by up to 1.5%. One would think if there were ever a time to abandon or pause unrealistic climate goals, that time is now. Unfortunately, the globalist agenda is about much more than climate and also shoots to erode the prosperity of capitalism. As some may have come to expect, Russia is tactically changing their mission in Ukraine as the war drags on and Foreign Minister Lavrov confirmed that this morning. He noted, “the geographical objectives of Russia’s special operation in Ukraine have changed from the Luhansk and Donetsk regions to a number of other territories.” Also, Nord Stream 1 remains at the forefront, due to scheduled maintenance, and flows of Russia gas via the pipeline are expected to restart tomorrow. Complicating matters has been the ability to mobilize and repair a Russian turbine due to sanctions. Canada did approve and repair the turbine. The EU expects it to be delivered on time to Russia’s Gazprom, however, as the political game continues, Gazprom said this morning it hasn’t received the proper documents to allow for delivery. Despite the macro landscape throwing a wrench in the continuation of yesterday’s strength, the S&P has so far held above Monday’s high.

Do not miss our daily Midday Market Minute, from yesterday.

On the economic calendar, MBA Mortgage Applications fell by 6.3% WoW. This is the third consecutive weekly drop and brings applications to a 22-year low. On the heels of underwhelming new housing data yesterday, we look to Existing Home Sales this morning at 9:00 am CT. The earnings calendar does not boast any mega-cap names before Tesla after the bell. ASML, the Dutch semiconductor equipment company, is holding ground down less than 2% after a disappointing report. On the topic of chips, Speaker of the House Pelosi said the House aims to vote on the chips subsidy bill as early as next week. Her husband purchased $5 million worth of NVIDIA stock in June.

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