CPI, Retail Sales, OPEX, Earnings | Top Three Things to Watch this Week

CPI ahead of the Fed

Before starting the macro talk, we would like to remember the 20th anniversary of 9/11 and everyone who we lost that day and in the years since. Our hearts and prayers go out to the victims and their loved ones! #NeverForget

The macro landscape shows no signs of being less eventful than it has been in the weeks and months past. NY Fed's Williams noted that monetary policy will need to be adjusted in case of persistent, high inflation and/or a faster jobs recovery. Non-voting Mester, who will join the committee members in 2022, echoed the message of tapering this year (adding to voices calling for tighter monetary conditions.)

List of voting and non-voting members

On Wednesday, the BLS released its July JOLTs Job Openings report and there are 10.9 million jobs to fill with record quit rates.

As we've pointed to in prior editions of this writing, the Fed wants to avoid a wage-price spiral; whether that's in the hands of businesses or policy makers to determine is a different question but we will surely monitor the wage landscape rather closely.

- NFIB Small Business Job Openings Hard to Fill (white line)

- NFIB Small Business Hiring Plans (blue line)

- NFIB Small Business Compensation Plans (orange line)

This is undoubtedly strong demand for jobs by small businesses and we will either see wages increase - leading to inflationary pressures, - or employment not recover to the extent that the Fed would like to see.

It is still reasonable to assume labor supply coming onto the market as pandemic related benefits have expired on a federal level; nevertheless, a higher rate of technology adoption combined with unwillingness to work will make it hard for labor participation to recover.This week we will turn to CPI at 7:30 am CT on Tuesday, right ahead of next week's Fed policy meeting concluding on the 22nd.

  • Core CPI MoM exp. +0.3% (prev. 0.3%)

  • Core CPI YoY exp. 4.2% (prev. 4.3%)

  • CPI MoM exp. +0.4% (prev. 0.5%)

  • CPI YoY exp. 5.3% (prev. 5.4%)

We sound like a broken record but it is a matter of transitory vs. more sticky inflation components and whether there'll be surprises on either side.

Home prices have continued to accelerate, shipping costs haven't cooled down, and the ISM New Orders Index is closing in on the ISM Supplier Delivery Index.

- ISM Supplier Deliveries Index (white line)

- ISM New Orders Index (blue line)

No matter how you slice it, CPI will be a highly anticipated number and serve as one-last inflation figure ahead of the Fed.

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Retail Sales

At 7:30 am CT on Thursday, macro traders will get a read on the shape of the U.S. consumer with August Retail Sales due.

  • Retail Sales Advance MoM exp. -0.8% (prev. -1.1%)

  • Retail Sales Ex Auto MoM exp. -0.1% (prev. -0.4%)

  • Retail Sales Ex Auto and Gas exp. -0.1% (prev. -0.7%)

We've seen a steep decline in Michigan Consumer Sentiment and a deceleration in Retail Sales to a lesser extent. The consumer is important and a bad print would likely spur the fiscal push from the Dems, driving demand side economics.

Weekly retail trade data from the Chicago Fed has seen a deceleration but nowhere near what consumer sentiment might indicate -- are we dealing with a lag from retail data or is consumer sentiment less relevant?

Chicago Fed Advance Retail Trade Summary Weekly Index of Retail Trade

If credit card data is indeed a good way of projecting future retail sales, a weak number wouldn't come as a surprise.

Since CPI will be released on Tuesday, we see retail sales as a confirmation parameter. Should CPI stick and retail sales confirm what debit & credit card data indicates, stagflationary concerns could become the narrative and feed on itself into an important options expiration cycle this week.

Food for Thought

Relevant Options Expiration Dates and FOMC:

  • 9/15/21 VIX Expiration

  • 9/17/21 Large Quarterly OPEX

  • 9/22/21 FOMC

  • 09/30/21 Quarterly Index Options Expiration

We've seen the market bounce time and again on the back of options expiries where every 3rd Friday of the month, dealers had to start buying back futures after short puts rolled off the board. Naturally, stocks drifted higher as a result of money flows.

Is the story going to be similar this time around or will volatility complacency in very short-dated puts lead to a reflexive event. We recommend this article from SpotGamma:

Reflexivity & the Weatherman

If you're further interested in how gamma positioning works and why it matters in modern markets, Market Huddle podcast #148 with SpotGamma founder Brent Kochuba is a great way to learn about it.

Podcast Slides from SpotGamma

Brent starts talking about the options markets around 1h.

Container Shipping Giant Freezes Spot Rates Amid Trade Chaos

  • CMA CGM SA values long-term customer relationships and capped spot rates for the next 5 months

  • Newly formed National Shipper Advisory Committee, consistent of 24 importers and exporters, will advice on the shipping situation globally

What we will watch:

  • Continued expression of concerns on quarterly earnings calls by companies

  • Will competitors follow in the footsteps of CMA CGM SA and cap pricing

  • Will container manufacturing become a national security threat and will there be actions in terms of addressing an oligopoly in the space

  • Port volumes/demand

  • Geopolitical implications between the U.S. and China


Oracle (ORCL) after the bell on Monday:

  • Consensus: EPS est. $0.97; Revenue est. $9.77bn

  • Data has been king and we expect strong trends to continue in the industry

  • Can Oracle compete against competitors and retain its position in the market?

Jinko Solar (JKS) ahead of the bell on Wednesday:

  • Consensuses: est. ($0.23) EPS; Revenue est. $1.22bn

  • Global solar trends and renewables

Blue Line Capital

If you have questions about any of the earnings reports, our wealth management arm, Blue Line Capital, is here to discuss! Email info@bluelinecapllc.com or call 312-837-3944 with any questions! Visit Blue Line Capital's Website

Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.

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