Disinflation Process Has Begun | Morning Express | 2/8/2023
Posted: Feb. 8, 2023, 9:12 a.m.
E-mini S&P and NQ futures finished strongly yesterday, ping-ponging before melting higher in the aftermath of Fed Chair Powell’s brief interview at the Economic Club of Washington D.C. Powell did not walk back last Wednesday’s dovishness and reiterated the “disinflation” process has begun. Risk-assets initially surged on those comments. While the S&P and NQ were led by zero- and one-day option flow, the U.S. Dollar Index dipped back below 103, and the Treasury complex spiked. As the interview unfolded, he explained Friday’s jobs report was very strong, and if the economy continued to trend in that direction, the Fed would have to raise rates more than markets have priced-in. The initial move across assets eroded, leading to a complete reversal of the S&P to make new session lows. Well after Powell was done, 4100 in the S&P held a huge technical level and paved the way for another option-fueled pump; both the S&P and NQ made a run at Friday’s intraday highs of 4194 and 12,878, falling just shy.
Do not miss our Midday Market Minute, from yesterday.
Fed Chair Powell was the highlight of the week, and we now look to a deluge of Fed speak in the coming days. Yesterday, Minneapolis Fed President Kashkari called for a 5.4% terminal rate, and Atlanta Fed President Bostic also pointed to more hikes than markets have discounted, although both are not 2023 voters. New York Fed President Williams speaks today at 8:15 am CT, and Fed Governor Barr follows at 9:00 am CT. Fed Governor Waller is known to be the most hawkish voice, and he speaks at 12:45 pm CT, shortly after the U.S. Treasury auctions $35 billion 10-year notes at noon CT.
E-mini S&P (March) / NQ (March)
S&P, yesterday’s close: Settled at 4175.75, up 52.25
NQ, yesterday’s close: Settled at 12,776.75, up 261.25
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Crude Oil (March)
Yesterday’s close: Settled at 77.14, up 3.03
Fundamentals: Crude Oil roared higher yesterday, catching tremendous momentum after holding a critical area of technical support. News that Saudi Arabia raised prices on March loadings to Asia for the first time in six months certainly helped spark a buying spree. The focus will shift domestically to the weekly inventory report. Analysts’ expectations are for +2.457 mb Crude, +1.271 mb of Gasoline, and +0.97 mb Distillates. Refinery Utilization w/w is expected to snap back sharply at +0.7% from -0.4% last week.
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Gold (April) / Silver (March)
Gold, yesterday’s close: Settled at 1945.3, up 6.1
Silver, yesterday’s close: Settled at 23.836, up 0.103
Fundamentals: Gold and Silver both worked higher overnight, finding support from a broadly softer U.S. Dollar. Near-term action in precious metals will stay closely tied to the movement of the U.S. Dollar and Japanese Yen. A rebound yesterday in the Yen helped buoy Gold and Silver from lows. Still, the U.S. Treasury futures complex finished on session lows into the electronic close yesterday, and if rates continue to edge higher, it provides a difficult near-term landscape for precious metals.
Fed Chair Powell was the highlight of the week, and we now look to a deluge of Fed speak in the coming days. Yesterday, Minneapolis Fed President Kashkari called for a 5.4% terminal rate, and Atlanta Fed President Bostic also pointed to more hikes than markets have discounted, although both are not 2023 voters. New York Fed President Williams speaks today at 8:15 am CT, and Fed Governor Barr follows at 9:00 am CT. Fed Governor Waller is known to be the most hawkish voice, and he speaks at 12:45 pm CT, shortly after the U.S. Treasury auctions $35 billion 10-year notes at noon CT.
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Silver (March)
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