Counterintuitive Reactions Ahead of the Fed | Morning Express 07/27/2022
Posted: July 27, 2022, 8:50 a.m.
E-mini S&P (September) / NQ (September)
S&P, yesterday’s close: Settled at 3923.25, down 46.75
NQ, yesterday’s close: Settled at 12,112.50, down 242.00
Fundamentals:
Earnings misses from each Microsoft and Alphabet ignited a rebound from yesterday’s poor close. Yes, that is right, a miss on both the top-and bottom-line from the S&P’s second and third largest companies did not crater the tape to new lows as one would expect. Instead, it has lifted it by as much as 1%. The negative earnings surprise is feared by everyone in this bear market and especially within a theme that earnings compression will be the catalyst for the next leg lower. However, we have not shared the same theme. In fact, we have leaned on extreme negativity heading into earnings season as a reason to believe much of it could be discounted. Remember, both Microsoft and Alphabet laid groundwork for an underwhelming quarter in the prior weeks. Both stocks are trading higher by about 3.5%. Microsoft’s strength is keying of CEO Nadella’s strong outlook for Azure. As for Alphabet’s modest beat on ad revenue was a relief after Snap last week. This morning, T-Mobile also reported both a top-and bottom-line miss, but the stock is higher by about 3% after beating on subscriber growth after AT&T and Verizon lowered the bar. Meta and Qualcomm report after the bell.
It is Fed Day, and the central bank concludes its two-day policy meeting with a rate decision and statement at 1:00 pm CT. The odds for a 75-basis point hike sit at 75% this morning. However, it is not so much about today’s maneuver and more about the bank’s path in the second half of the year. There is a 54% probability they hike by at least another 75-basis point in September, but odds for hikes thereafter become a bit muted, even signaling a potential cut by next June. With commodity prices cratering, signs housing is coming down, and layoffs kicking in, the Fed is achieving its goal of slowing the inflation components it can control, demand. Expectations for July CPI show a much slower month to month rise over the last month than from May to June. According to the Cleveland Fed Nowcast, headline CPI is expected to rise by 0.27% versus 1.3% and Core 0.48% versus 0.7%. Although it is way too early for a victory lap, any signal by Fed Chair Powell acknowledging inflation is receding or alluding to any pause of rate hikes within in his press conference would be seen as very bullish.
Do not miss our daily Midday Market Minute, from yesterday.
Bill Baruch joined the TD Ameritrade Network yesterday morning to discuss commodities.
Technicals Premium
🔒 You need to be a Premium User to unlock this content. Click here to unlock.
Levels Premium
🔒 You need to be a Premium User to unlock this content. Click here to unlock.
NQ (September)
Levels Premium
🔒 You need to be a Premium User to unlock this content. Click here to unlock.
Crude Oil (September)
Yesterday’s close: Settled at 94.98, down 1.72
Fundamentals: Crude Oil has firmed slightly from yesterday’s low and settlement with inventory data eyed. Yesterday’s private API survey showed a much larger draw than expected at 4.037 mb Crude, -1.1 mb Gasoline and -0.554 mb Distillates. Price action reversed sharply yesterday from early highs, after the White House announced another 20 mb release of SPR. We also see the reversal as technical after failing at the 21-day moving average. Crude Oil remains in a consolidation pattern but added weakness kicked in yesterday with Natural Gas reversing from its early melt-up that nearly tagged $10. The three-week ascent in U.S. Natural Gas may have hit a near-term peak on news Russia will reduce flows through Nord Stream 1 to 20%, squeezing Europe’s storage season. Inventory data will be front and center this morning and we will keep a close eye on the impact of SPR, Net Imports, and Cushing.
Technicals Premium
🔒 You need to be a Premium User to unlock this content. Click here to unlock.
Levels Premium
🔒 You need to be a Premium User to unlock this content. Click here to unlock.
Gold (December) / Silver (September)
Gold, yesterday’s close: Settled at 1735.7, down 1.4
Silver, yesterday’s close: Settled at 18.535, up 0.207
Fundamentals:
Gold and Silver are again getting sold upon the traditional intraday open at 7:20 am CT. This is also coming as an initial reaction to robust headline Durable Goods data. The Core read, excluding the more volatile transportation items, only beat with 0.3% MoM versus 0.2%. However, headline crushed at 1.9% versus -0.5%. Transportation items alone came in at 5.1% and signal that carmakers likely have the chip components to move forward in production. This should be a good signal for everything from chip stocks to carmakers like Ford, and even Platinum. However, defense spending was another cornerstone component with Durables Excluding Defense only +0.4% versus -0.5%. We would imagine Gold and Silver perform well amid signs of an ongoing conflict; it just has not been the case.
Next up is the Federal Reserve policy decision at 1:00 pm CT. We encourage you to read our S&P/NQ section, where we elaborate on the trajectory of rates and a potential outcome.
Technicals Premium
🔒 You need to be a Premium User to unlock this content. Click here to unlock.
Levels Premium
🔒 You need to be a Premium User to unlock this content. Click here to unlock.
Silver (September)
Levels Premium
🔒 You need to be a Premium User to unlock this content. Click here to unlock.
In case you haven't already, you can sign up for a complimentary 2-week trial of our complete research packet, Blue Line Express.
Sign up for a Free Trial
Start Trading with Blue Line Futures
Don't have an account with Blue Line Futures?
Futures trading involves substantial risk of loss and may not be suitable for all investors. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
Blue Line Futures is a member of NFA and is subject to NFA’s regulatory oversight and examinations. However, you should be aware that the NFA does not have regulatory oversight authority over underlying or spot virtual currency products or transactions or virtual currency exchanges, custodians or markets. Therefore, carefully consider whether such trading is suitable for you considering your financial condition.
With Cyber-attacks on the rise, attacking firms in the healthcare, financial, energy and other state and global sectors, Blue Line Futures wants you to be safe! Blue Line Futures will never contact you via a third party application. Blue Line Futures employees use only firm authorized email addresses and phone numbers. If you are contacted by any person and want to confirm identity please reach out to us at info@bluelinefutures.com or call us at 312- 278-0500
Like this post? Share it below:
Back to Insights
In case you haven't already, you can sign up for a complimentary 2-week trial of our complete research packet, Blue Line Express.
Free Trial