Case in Point; Bad Data Is Good | Morning Express | 10/25/2022
Posted: Oct. 25, 2022, 9 a.m.
E-mini S&P (December) / NQ (December)
S&P, yesterday’s close: Settled at 3809.25, up 45.25
NQ, yesterday’s close: Settled at 11,478.75, up 120.25
Fundamentals: U.S. equity benchmarks held their ground to start the week, finishing near the upper end of a volatile range. Bad news helped underpin some of yesterday’s strength as flash PMIs whiffed across the board. Odds for a 50bps hike at the Federal Reserve’s December meeting have slipped to 51.6%, down from 54.9% yesterday. Given that next week’s 75bps hike is a near conclusion, and despite other crosswinds, this huge week of earnings is front and center. The second and third largest U.S. companies by market cap, Microsoft and Alphabet, report after the bell today, along with Visa, the tenth largest. Coca-Cola is up by more than 2% this morning after topping profit and revenue estimates. UPS is also up by more than 2% after affirming the company’s outlook and beating earnings but missing on revenue. Raytheon topped earnings expectations but also missed on revenue, the stock is holding ground slightly red. The international picture is mixed, HSBC is -5%, but UBS is +5%, and SAP is +3%.
On the economic calendar, S&P Case Shiller was released at 8:00 am CT, and home prices for August fell more than anticipated month-over-month while rising less than expected year-over-year. The miss on data should help underpin strength within the ‘bad news is good news narrative. CB Consumer Confidence and Richmond Manufacturing are due at 9:00 am CT. The Treasury will auction $42 billion of 2-year Notes at noon today, $43 billion 5-years tomorrow, and $35 billion 7-years Thursday. The hawkish Fed Governor Waller will speak at 12:55 pm CT.
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NQ (December)
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Crude Oil (November)
Yesterday’s close: Settled at 84.58, down 0.47
Fundamentals: Chinese Yuan weakness continues to be a massive headwind to commodities; it essentially exports deflation. Despite a deluge of economic data from China Sunday night that was broadly better than expected, the Yuan fell to the lowest against the U.S. Dollar since December 2007, and this tells us all we need to know about President Xi’s supremacy. That slate of data showed softer Crude Oil Imports into China, down 2% YoY. Another negative factor is China’s imports of Russian Crude are up 22% YoY, and China’s exports of refined fuel is up 36% YoY. Although the international community has shunned Russian Oil, its is in the market.
U.S. inventory estimates will hit the picture today. The early look tells us +0.20 mb Crude, -1.179 mb Gasoline, and -1.067 mb Distillates.
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Gold (December) / Silver (December)
Gold, yesterday’s close: Settled at 1654.1, down 2.2
Silver, yesterday’s close: Settled at 19.189, up 0.123
Fundamentals: In the Crude Oil section, we spoke of the weakening Chinese Yuan and the headwind it brings to commodities. Of all commodities, the Yuan has the largest impact on metals. Gold and Silver slipped by more than 1% overnight as the Chinese Yuan fell to the lowest against the U.S. Dollar since 2007, while Copper was tagged for about 2%. The weak Case Shiller data has laid the groundwork for a broadly softening U.S. Dollar, helping to underpin a bounce ahead of the bell. CB Consumer Confidence and Richmond Manufacturing are due at 9:00 am CT. We certainly think there is room for metals to bounce, but we cannot ignore overhead technical resistance.
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Silver (December)
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