Recession Trade, Rotation, or Digestion of Gains? | Morning Express| | 04-05-23 |
Posted: April 6, 2023, 10:35 a.m.
E-mini S&P (June) / E-mini (NQ)
S&P, yesterday’s close: Settled at 4117.25, down 11.75
NQ, yesterday's close: Settled at 13,079.75, down 139.75
Bias: Neutral/Bullish
Resistance: 4126.75-4129***, 4135.25-4137.75***, 4143.25-4144**, 4154.50***, 4177-4183**
Pivot: 4115.25-4117.25
Support: 4107.75-4111.50**, 4099-4103.25***, 4088.50-4093.25***, 4078-4080****
NQ (June)
Resistance: 13,071-13,092**, 13,124**, 13,154-13,168***, 13,209-13,236**, 13,303-13,311***
Support: 12,980-13,011****, 12,928-12,937**, 12,854-12,890***, 12,732***
Fundamentals: The recession trade took hold yesterday. Industrials like Caterpillar and Deere lost 5.4% and 4.2%, respectively, the XLE gave back 1.8% from Monday’s surge, and Consumer Discretionary was broadly lower though strong showings from Amazon, Nike, and Chipotle staved off the worst. Some of this can be attributed to banking fears that reemerged at the forefront after JPMorgan Chief Jamie Dimon said, “The banking crisis is not yet over and will cause repercussions for years to come.” KRE, the regional bank ETF, was down more than 3% and pared losses to finish at -2.2%. Although XLF, the financial sector ETF, lost only 0.93% yesterday, names like Bank of America, Wells Fargo, and Morgan Stanley were all down more than 2%. However, there were bright spots within Healthcare, Communication Services, and Tech, helping to lift sentiment from the worst levels of the session. Surprisingly, the weak session came on the heels of February JOLTs data showing job openings below 10 million for the first time since June 2021. A resilient amount of job openings has underpinned the tight labor market, a theme that is front and center leading into Friday’s Nonfarm Payroll report. A tight labor market is a leading indicator of inflation and will be a crosswind for the Federal Reserve turning dovish amid other economic fears. Furthermore, the first look at March job growth via ADP Payrolls this morning came in lower than expected at 145k versus 200k and did very little to jump-start risk-sentiment across E-mini index futures. This week could prove to be an inflection point, given signs that inflation is coming down, the market is exemplifying more concerns about a recession. Is this emphasized due to early quarter re-positioning, or will this become a theme until the Federal Reserve vocalizes a pivot? For now, this increases the importance of today’s Services sector data. The final March SPGI read is due at 8:45 am CT, followed by the more closely watched ISM Non-Manufacturing report highlighting the rising Services Prices trend.
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Crude Oil (May)
Yesterday’s close: Settled at 80.71, up 0.29
Fundamentals: As noted in the S&P/NQ section, the recession trade took hold yesterday. Crude Oil did gain marginal ground yesterday, but Gasoline slipped -0.74%, Heating Oil barely reacted to the OPEC+ news, and CRAK, the VanEck Oil Refiners ETF, fell -2.2%. There were certainly political jabs behind Saudi Arabia’s swing production move over the weekend, but it is also cannot be ignored there are real global growth fears, and the announcement is an attempt to stabilize Oil while getting ahead of those fears.
Weekly EIA inventory data is due at 9:30 am CT. Last night’s private API survey helped lift prices early, posting -4.346 mb Crude, -3.97 mb Gasoline, +3.693 mb Distillates, and -1.035 mb at Cushing. Expectations for today’s official report are -2.329 mb Crude, -1.729 mb Gasoline, and -0.396 mb Distillates.
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Gold (June) / Silver (May)
Gold, yesterday’s close: Settled at 2038.2, up 37.8
Silver, yesterday’s close: Settled at 25.101, up 1.08
Fundamentals: Gold and Silver responded strongly to yesterday’s JOLTs data, the first read below 10 million since June 2021. However, the move likely comes with pent-up strength after a muted reaction to Monday’s weak ISM Manufacturing data, and as Jamie Dimon reinvigorated banking fears. Gold responded to the soft ADP Payrolls report this morning by briefly extending its range higher, but the emphasis today with be March ISM Non-Manufacturing due at 9:00 am CT, after the final SPGI read released at 8:45 am CT.
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Silver (May)
Resistance: 25.40-25.70***, 26.16***, 26.50***
Pivot: 24.95-25.10
Support: 24.53-24.78***, 24.28-24.34***
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