Not Out of the Woods | Morning Express | 4/28/22
Posted: April 28, 2022, 9:03 a.m.
E-mini S&P (June) / NQ (June)
S&P, yesterday’s close: Settled at 4180.25, up 9.75
NQ, yesterday’s close: Settled at 13016.00, down 519.75
Fundamentals: U.S. equity benchmarks are attempting another rally. Our theme this week has been focused on “measured downside” from 4200. On Tuesday, we gave several fundamental and technical reasons why, from there, the risk has flipped to the upside, rather than the downside. We concluded with the dependence on earnings. After a failed rally attempt yesterday, earnings from tech after the bell made a championship caliber save. Facebook led the charge with daily active users bouncing back in the first quarter. The company did beat earnings estimates but missed on revenues. Added tailwinds are coming from Qualcomm, PayPal, and Service Now, who all beat top and bottom-line estimates. This morning, healthcare is trying to keep the momentum going with beats across the board; Thermo Fisher is +5%, Eli Lilly +3.5%, and Merck +1.5%. Still, it will come down to big tech after the bell with Apple, Amazon, and to a lesser degree Intel headlining today’s board.
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Keeping a lid on risk-assets is the U.S. Dollar continuing its run. The U.S. Dollar Index is at session highs and below the March 2020 high by one tick, a level higher than the 2017 run, and the highest since December 2020. The first look at Q1 U.S. GDP is front and center this morning after surprisingly contracting by 1.4%, when +1.1% was expected. Also, Core PCE Prices came in at 5.2% for Q1, versus 5.4% expected. The data should theoretically halt the Dollar’s ascent, but the Federal Reserve faces the task of cooling inflation and the currencies in which the Dollar is pared against are in a freefall. The Euro has traded a 1.04 handle and the Yen has collapsed by 12% in the last two months, extending its losses overnight after the Bank of Japan remained dovish.
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NQ (June)
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Crude Oil (June)
Yesterday’s close: Settled at 102.02, up 0.32
Fundamentals: All things considered, Crude Oil is having a great week. Crude Oil hit a high of 105.42 on April 21st, the day the U.S. Dollar Index was at its recent low of 99.81. In one week, the Dollar has risen by as much as 4.1%. Crude has rallied as much as 8% alongside Dollar strength, an eroding narrative of when the EU will ban Russian Oil, and now faces contracting U.S. GDP. As we pointed out in yesterday’s Midday Market Minute, the EIA data was bullish with draws across the board despite a rise in Net Imports. Next week, OPEC+ meets and is expected to rubber stamp a 400,000 bpd increase for June. Remember, the only problem, they were over-compliant by more than 130% in March, and we expect it to be higher in April; there is no spare capacity.
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Gold (June) / Silver (July)
Gold, yesterday’s close: Settled at 1888.7, down 15.4
Silver, yesterday’s close: Settled at 23.505, down 0.085
Fundamentals: Gold and Silver remain on their backfoot, despite a whiff on Q1 GDP, which surprisingly contracted at -1.4% versus +1.1% expected. Also, Core PCE Prices for the quarter came in at 5.2%, below the 5.4% expected. Still, the U.S. Dollar is holding firm, just below the March 2020 spike high and at the highest area since December 2002. The Dollar is also up another 1% against the Chinese Yuan today, marking a 4.74% rally this month. Also, rates are rising, and this makes it difficult for Gold to dig out of this week’s gutter. Regardless of these reasons, we find Gold and Silver attractive at the technical levels in which they are testing, as long as one manages their risk well.
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