Inflation and Earnings Face Off | Morning Express 07/29/2022
Posted: July 28, 2022, 10:34 a.m.
Earnings
- Amazon is the big mover, gaining 11% after topping revenue estimates (missing EPS), but more importantly upping guidance for Q3.
- Apple beats top- and bottom-line estimates. The stock gains more than 2% after CEO Cook said, “expects revenue to accelerate in September quarter despite some pockets of softness.”
- Did Apple and Amazon have blowout quarters? No, and neither did Microsoft or Alphabet. Their strength exudes a theme of excessive negativity already discounting earnings compressions. Something we have been vocalizing for weeks.
- Chevron, Exxon, and Phillips 66 all beat top- and bottom-line estimates this morning.
Inflation
- Is market rally on? Not if Core PCE can do anything about it.
- The Federal Reserve’s preferred inflation indicator for June came in hotter than expected at +0.6% MoM versus +0.5% and +4.8% YoY versus 4.7%.
- The strength in June is partially a byproduct of a lukewarm read in May. Remember, May Core PCE was not what May CPI was.
- Personal Spending and Personal Income both rose more than expected at 1.1% versus 0.9% and 0.6% versus 0.5%.
- The Employment Cost Index also rose more than expected at 1.3% versus 1.2%
- Still, Core PCE was a June number, and the disinflationary effects are being felt in July.
Do not miss our daily Midday Market Minute, from yesterday.
E-mini S&P (September) / NQ (September)
S&P, yesterday’s close: Settled at 4073.50, up 49.00
NQ, yesterday’s close: Settled 12,737.50, up 118.50
- Can the two-day rip keep ripping? We do not envision eager sellers ahead of month-end, especially after getting Alphabet, Microsoft, Apple, and Amazon earnings out of the way.
- However, PCE will weigh on the minds of market participants to potentially trim positions while giving the bears renewed ammo.
- Still, Core PCE was a June number, and the disinflationary effects are being felt in July.
- Regardless, as we always say, some back and fill must be expected. Especially after the key driver, Tech, hit our next upside target, major three-star resistance in the NQ at 12,924-12,944.
- We remain cautiously Bullish in Bias and view yesterday’s move as a breakout leg as long as the S&P holds out above major three-star support at 4041.4042.75 and the NQ above 12,646-12,698.
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NQ (September)
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Crude Oil (September)
Yesterday’s close: Settled at 96.42, down 0.84
- Supportive technical landscape brewed as higher lows unfolded from Wednesday’s pullback, a low that held above Monday and helped develop the right shoulder of an inverse head and shoulders.
- A stew of comments from Russia supporting China and China interested in strengthening its relationship with Iran have all helped underpin today’s rally ahead of the weekend.
- Continued maintenance on the Nord Stream pipeline keeping a bid under energy space.
- Saudi Arabia and Russia announce cooperation ahead of next week’s OPEC+ meeting.
- U.S. Dollar strengthens on heels of CPI, keep an eye on commodities.
- Price action ripped through the 21-dma at 97.81 early this morning and used it as a floor, support created on low price thereafter at 97.78.
- 103.10 is unchanged on the month of July, June’s settlement.
- Added buying invited upon a close above major three-star resistance at 100.57-100.74.
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Gold (December) / Silver (September)
Gold, yesterday’s close:Settled at 1769.2, up 31.7
Silver, yesterday’s close:Settled at 19.868, up 1.268
Fundamentals:
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Silver (September)
- Can Gold and Silver hold onto big gains this week? A hot Core PCE is certainly trying to throw a wrench in it.
- The U.S. Dollar Index is nearly 1% off its session low of 105.41, the lowest since July 5th, but up less than 0.25% on the session.
- USDCNH hit lowest since July 14th and rebounding after PCE.
- Silver’s 50-day moving average is 20.60. It has not closed above here since April 20th. If you are a long-time reader of ours, you’ve heard us say before how we believe Silver likes to stay decisively above or below its 50-dma for extended periods of time.
- Rare major four-star resistance in Silver comes in at 20.33-20.52, the 50-dma will dip into here.
- Gold’s 50-dma is 1816 and will likely dip into our next major three-star resistance at 1803.4-1808.
- Absolutely critical battle for Gold at 1774.3, it did not settle above this major three-star resistance yesterday and our momentum indicator has now caught up at 1772.5.
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