Higher Rates Eroding Risk Appetite | Morning Express 10/19/2022
Posted: Oct. 19, 2022, 9:47 a.m.
E-mini S&P (December) / NQ (December)
S&P, yesterday’s close: Settled at 3732.75, up 43.50
NQ, yesterday’s close: Settled at 11,198.75, up 88.50
Fundamentals: Risk-assets are on their back foot this morning due to a resurgence in yields, with the U.S. 10-year hitting a new cycle high of 4.102%. Also, the 2-and 30-year are lurking a touch below their peaks. An underlying need for liquidity has forced foreign central banks to sell U.S. Treasuries to raise cash with the most prominent trend being a deluge at the U.S. opening bell. However, sometimes, like today, its steady selling through the overnight. In the mix are two catalysts. Late yesterday, Minneapolis Fed President Kashkari made hawkish remarks in pointing to a terminal rate above 4.4% (the rate noted by Fed consensus at September’s meeting), saying, “"I don't see why I would advocate stopping at 4.5% or 4.75% or something like that [if inflation is still rising]." Additionally, the Bank of England confirmed they will begin asset sales in as early as two weeks, though initially excluding the longer-dated bonds. There is now a 20-year Bond auction, $12 billion, and Fed speak looming. Minneapolis Fed President Kashkari, a 2023 voter, is due to speak at noon CT, Chicago Fed President Evans, also a 2023 voter, is due to speak at 5:30 pm CT, and St. Louis Fed President Bullard, a 2022 voter, speaks at 6:30 pm CT.
Do not miss our daily Midday Market Minute, from yesterday.
Despite the heavy tape, earnings have continued to top expectations. We noted yesterday how we are much more upbeat on this front than consensus. Netflix crushed estimates after the bell yesterday and has surged as much as 15%, before settling in +10%. This morning the top six companies by market cap that reported all beat top and bottom estimates: PG, ABT, ASML, ELV, IBM, and TRV.
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 (December)
Levels Premium
🔒 You need to be a Premium User to unlock this content. Click here to unlock.
Crude Oil (December)
Yesterday’s close: Settled at 82.07, down 2.46
Fundamentals:
Crude Oil is holding ground in positive territory after slipping by 3.97% yesterday. Although we could blame the selling on the White House announcing it will release another 15 mb from the Strategic Oil Reserve, Copper was also oddly down 1.57%. This one-two punch reeks of global growth fears and the potential of another China virus lockdown. We have been discussing our concern the Omicron sub-variant will hit China, reversing our extremely bullish call on Oil (from sub $80) that was underpinned partly by Chinese refiners ramping up in Q4. The bullish call came to fruition as Oil did rally above $90, but the other part of that call was assuming the White House would halt SPR sales. We have been vocal this is not the case, although we see it as being very bullish in the not-too-distant future. Ultimately, we welcome lower prices, sub $80 once again, in order to being presenting, what we believe to be, a terrific opportunity for a Q1 rally.
The private API survey after the bell showed stocks falling across the board, helping to buoy the tape. Estimates for today’s official data are for +1.38 mb Crude, -1.114 mb Gasoline, and -2.167 mb Distillates.
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 (December)
Gold, yesterday’s close: Settled at 1655.8, down 8.2
Silver, yesterday’s close: Settled at 18.600, down 0.119
Fundamentals: Gold and Silver were bludgeoned overnight as both yields and the U.S. Dollar rose. Gold is now trading at the lowest level since the September 28th reversal, though Silver has had an okay week given its fallout to 18.01 on Friday. Regardless, things look bleak in the near-term with precious metals at the mercy of the rate and currency markets. Yesterday’s move in Copper does flash broad warning signs for the metals complex, however, Platinum continues to hold up fairly well. We will be keeping a close eye on Platinum, due to its relative strength, for a potential buying opportunity. At the same time, Platinum can be a laggard if such rate and currency conditions persist, catching up with the selling in Gold and Silver.
There is now a 20-year Bond auction, $12 billion at noon CT, and Fed speak looming. Minneapolis Fed President Kashkari, a 2023 voter, is due to speak at noon CT, Chicago Fed President Evans, also a 2023 voter, is due to speak at 5:30 pm CT, and St. Louis Fed President Bullard, a 2022 voter, speaks at 6:30 pm CT.
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 (December)
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