Inflation Front and Center | Morning Express
Inflation is front and center, June CPI data across the board was hotter than expected. Core CPI MoM was +0.9% versus +0.4%. Let us not forget, this comes on the heels of +0.7% MoM for May and +0.9% for April. On a YoY basis, Core CPI for June was the highest yet at +4.5%. It has now climbed sharply for three months in a row after +3.0% for April and +3.8% for May. When it comes to data points, anyone who reads our research understands that we look to three as a trend. Maybe this pace is unsustainable and maybe the reopening, supply chain bottlenecks and low base numbers make this transitory. Regardless, we now have three hot inflation reads. Even if the economy is at a place where inflation cools due to reduced transitory factors in July and August, the Federal Reserve must plan for what could come in Q4. In a Wall Street Journal article released this morning, St. Louis Fed President Bullard reiterated his hawkishness saying, “the right moment has come to reduce the Fed’s stimulus”. There are fears that growth is cooling, he added his belief that, “some of the Q2 growth will be pushed to H2”. The inflation argument and the Fed’s path will be the hot topic today and through the week, as we look to Fed Chair Powell’s Congressional testimony tomorrow.
JPMorgan, Goldman Sachs, and PeipsiCo kicked off earnings season this morning. JPMorgan topped estimates but the stock has traded down about 1%. Contributing to the beat was a $2.3 billion benefit from releasing loan loss reserves. During peak pandemic uncertainty last year, banks stashed away cash to cushion loan losses. However, due to both monetary and fiscal stimulus measures many of the banks came out unscathed. Goldman Sachs crushed estimates once again. Investment banking revenue amid a busy IPO market was a bellwether for the quarter. The stock is up more than 1% ahead of the bell. PepsiCo also topped estimates and raised guidance; the stock is up more than 1 ahead of the bell.
Today’s economic calendar has Atlanta Fed President Bostic scheduled to speak at 11:00 am CT and 1:30 pm CT. He is a 2021 voter and highly touted to move up the ranks within the central bank; his words after today’s CPI read must be watched closely. Also, there is a 30-year Bond auction at noon CT. Treasuries have traded slightly lower following the data but are largely holding ground well given the hot read. The U.S Dollar Index has jumped to the highest since last Thursday, an area that is the highest since early April.
On the commodities front, U.S. Dollar strength has yet to truly weigh on Crude Oil and Gold. However, Silver, Copper, and Platinum are all about 1.5% from their overnight highs. The path of the U.S. Dollar and Treasuries will play a critical role for the metals but less so the energy complex. In their Monthly Report this morning, the IEA warned that OPEC+’s impasse can “significantly tighten the supply-demand landscape and stoke inflation”. Weekly inventory data will also hit the picture as the day unfolds. Will we see a continuation of the record setting July 4th weekend Gasoline demand or will it dissipate and weigh on the market trading at the round $2.30?
E-mini S&P (September) / NQ (Sept)
S&P, yesterday’s close: Settled at 4376.50, up 16.50
NQ, yesterday’s close: Settled at 1869.25, up 58.75
Price action is battling to regain unchanged after a small wave of selling from the hot CPI data. What matters is how the tape acts through the first 60 minutes after the opening bell. Both the S&P and NQ dipped below our momentum indicators which are denoted as our Pivots below; traders should look to these as a point of balance through the first 60 minutes. For the S&P, first key support at 4360 is unchanged on the week and second key support at 4353.25-4354.75 aligns multiple technical levels with the opening bell low from yesterday morning. For the NQ, first key support aligns both the opening bell low from yesterday and unchanged on the week. A decisive break below these levels will invite added waves of selling. However, a continued hold of such will help build for a move to 4400 in the S&P and 15,000 in the NQ.
Resistance: 4389.75***, 4400-4405**
Support: 4360**, 4353.25-4354.75**, 4339.50-4342.75**, 4328.25***, 4307.50-4313***,
Resistance: 14,883**, 14,946-15,000****, 15,593***
Support: 14,795-14,810**, 14,755**, 14,668**, 14,520-14,550***, 14,451-14,487***
Crude Oil (August)
Yesterday’s close: Settled at 74.10, down 0.46
Waves of weakness has held major three-star support at 72.85-73.25. This has come to define stability from last week’s rebound; continued action above here will help build for new swing highs and a test of the psychological $80 mark. Our momentum indicator comes in at 74.15 and the tape has regained this mark after some early weakness; continued action above here will set a tone of strength on the session and help build for a third attempt to chew through first key resistance at 74.56-74.86.
Resistance: 74.56-74.86**, 74.93-75.16***, 76.01-76.22**, 76.89-76.90****
Support: 72.85-73.25***, 71.01**, 69.17-69.54****
Gold (August) / Silver (Sept)
Gold, yesterday’s close: Settled at 1805.9, down 4.7
Silver, yesterday’s close: Settled at 26.239, up 0.005
Gold and Silver are
Overnight strength has broadly come in after the hot CPI number, but Gold is certainly not going down without a fight. After a dip to 1798.7 that again held key support at 1793-1796, it has battled back into major three star resistance at 1815. Despite the strength, it has struggled to chew through the massive damage from June. Similarly, Silver ran to an overnight high of 26.44 and the 26.50 key resistance ceiling before slipping back to the $26 mark. Our momentum indicators are our Pivots and will act as a point of balance at 1807 for Gold and 26.25 for Silver.
Resistance: 1815***, 1828-1835***
Support: 1793-1796**, 1783.3-1785.9**, 1775-1777***
Resistance: 26.50**, 26.94-27.09**, 27.32-27.36***, 27.85***
Support: 25.74***, 25.40**, 24.80***
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