A Little Something for Everyone I Morning Express | 2/28/2023
Posted: Feb. 28, 2023, 9:05 a.m.
Fundamentals: It is the final day of February, a month that has given everyone a little something. As of this morning, E-mini S&P futures are down about 2.25% on the month, and E-mini NQ futures are flat. After surging to start the year, with each index gaining 9% and 17%, reaching the highest level since August and September, they have fallen 6.2% and 8% from their peaks, respectively. The month has been characterized by choppiness and indirection due to data showing the economy and inflation were reinvigorated in January. This was a drastic difference from December’s data in January, which signaled the erosion of each. Ultimately, the bad news was good for the market in January, and the good news was bad for the market in February. In discounting the good news, last Friday’s Core PCE Index, the Fed’s preferred inflation indicator, was the final effort in pricing out Fed cuts in 2023. According to the CME’s FedWatch Tool, probabilities favor hitting a terminal rate of 5.25-5.50%, a level maintained through yearend. Even St. Louis Fed President Bullard, largely believed to be the most hawkish Fed committee member, sees a terminal rate of 5.375%. With this now being the highest probability scenario, will good news become good news once again? For starters, hot inflation data out of France and Spain early this morning quickly extrapolated tighter ECB policy, yet stock benchmarks from Europe and the U.S. have battled well off their overnight lows to turn positive. This is very similar to Friday, after Core PCE was hot, the S&P finished nearly 1% from session lows, and it is very uncommon for markets to bottom on Fridays. House Price data is due at 8:00 am CT, and CB Consumer Confidence follows at 9:00, but the real test will be ISMs, starting with Manufacturing tomorrow and Services on Friday. The market, economy, and Fed policy have certainly hit an inflection point, just as we welcome the month of March tomorrow.
E-mini S&P (March) / E-mini NQ (March)
S&P, yesterday’s close: Settled at 3988.00, up 12.25
NQ, yesterday’s close: Settled at 12,083.25, up 86.25
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NQ (March)
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Crude Oil (April)
Yesterday’s close: Settled at 75.68, down 0.64
Fundamentals: Crude Oil is up by more than 2% this morning. The move comes ahead of U.S. inventory, which begins with API after the bell today, and PMIs from China tonight at 7:30 pm CT. While a weaker U.S. Dollar is bringing some support to Crude and the products, reports that Saudi Arabia will raise their prices to Asia again is likely the driving force. Saudi Arabia last raised prices on February 7th, and Crude Oil gained 4% on the session.
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Gold (April) / Silver (May)
Gold, yesterday’s close: Settled at 1924.9, up 7.8
Silver, yesterday’s close: Settled at 20.793, down 0.143
Fundamentals: Gold and Silver used the final day of January to muscle out a positive session after starting lower. Will today bring a similar feat after Gold hit the lowest since December 22nd and Silver November 4th. Yesterday, the U.S. Dollar slipped but could not bring a true supportive hand to precious metals as Treasury yields remain very elevated. However, the U.S. 2-year Note could not hold above Friday’s high of 4.84%, whereas the longer-end 10s and 30s have hit a bit of a wall over the last week. To that point, inflation data from France and Spain this morning was much hotter than expected, helping to underpin the higher yield story but also weakening the U.S. Dollar.
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Silver (May)
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