Leadership Amid a Bloodbath | Morning Express 07/06/22

Posted: July 6, 2022, 8:51 a.m.

E-mini S&P (September) / NQ (September)

S&P, yesterday’s close: Settled at 3834.00, up 6.75

NQ, yesterday’s close: Settled at 11,808.50, up 197.25

Fundamentals: If yesterday’s excitement was not enough, the busy, holiday-shortened week really begins to pick up today. Final SPGI Services PMI data for June is due at 8:45 am CT and followed by the more closely watched ISM Non-Manufacturing read at 9:00 am CT, along with JOLTs Job Openings. This afternoon, the Federal Reserve releases the Minutes from their June meeting at 1:00 pm CT. But first, NY Fed President Williams is scheduled to speak at 8:00 am CT. This all builds into jobs data that begins with ADP Payrolls and Initial Jobless Claims tomorrow before a pivotal Nonfarm Payrolls on Friday.

U.S. equity benchmarks finished strongly yesterday, shaking off worsening recession fears in Europe and a fresh 20-year high in the U.S. Dollar Index. Above, we pointed to the heavy slate of data ahead, but decent economic data from Europe so far this week has done nothing to stave off the selling in the Euro. Citi put out a note early Tuesday morning calling for the pair to reach parity if the gas supply does not improve and other banks have followed. The impending energy crisis was all the talk over the weekend with Germany planning to nationalize supply and ration. A hot summer followed by a cold winter would be disastrous, forcing industrial output and thus economic growth to plummet. However, in the meantime, Eurozone Services PMI beat expectations yesterday and was followed by strong Factory Orders from Germany and Industrial Production from Spain this morning. Still, those recession fears tied to the energy crisis have taken the reins, slamming the Euro and surging the U.S. Dollar. Such U.S. Dollar strength coupled with the Federal Reserve’s tightening of monetary policy to squash demand has brought a bloodbath to the commodity landscape while underpinning the Treasury complex. The yield of the 10-year is probing below 2.80%, after hitting a high of 3.497% on June 14th, as inflation expectations come in. In turn, lower yields and constructive technicals since May has helped lift the most beaten down stocks in the Tech space. The NQ gained 1.7% yesterday to the Dow’s loss of 0.4%, but it is ARKK that has not made a new low since May 12th and gained 9.1% to kick off the week.

Do not miss our daily Midday Market Minute, from yesterday.

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NQ (September)

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Crude Oil (August)

Yesterday’s close: Settled at 99.50, down 8.93

Fundamentals: Crude Oil plunged precipitously yesterday amid a barrage of developments, in its worst day since March 9th. A reemergence of virus cases in China and an announcement of mass testing in both Shanghai and Beijing certainly gave market participants jitters. However, yesterday’s bloodbath was not the result of one culprit as the U.S. Dollar surged to a fresh 20-year high and Citi, yes the same Citi that put a sell recommendation at $80 in January and doubled down in February, reiterated a $65 target for Brent by yearend. All commodities were slipping and there was a broad undertow. This barrage dragged Crude Oil through a critical technical trend line from the mid-March low at 103 and a fresh wave of liquidation took hold. In the aftermath, nothing fundamentally has changed, but there is certainly overhead damage we cannot ignore. Last night’s reopen received a supportive jolt on news a Russian court ordered the Caspian Pipeline Consortium (CPC) to halt loadings for 30 days, removing at least 1 mbpd from supply. Also, data overnight showed China again set a fresh record for Russian Oil imports in June. Although the CPC shut down is seen as a positive, especially as China buys Russian Oil hand over fist, price action failed overnight at strong technical resistance.

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Gold (August) / Silver (September)

Gold, yesterday’s close:  Settled at 1763.9, down 37.6

Silver, yesterday’s close: Settled at 19.121, down 0.546

Fundamentals: It was a commodity bloodbath yesterday. Although precious metals did not come close to Crude’s -8.24%, at least yet, the pain was real with Silver already incurring a loss of 5.5% on the month. In fact, Copper lost 5.24% yesterday and is down about 8.5% already on the month. The common denominators across the commodity landscape are the Fed’s tightening, U.S. Dollar strength, and a removal of some geopolitical premiums. This has created recession fears and disinflation domestically, however, Europe’s deterioration has further lifted the U.S. Dollar, in turn further pressuring commodities. As we noted in the S&P/NQ section, the week really begins to pick up today with final SPGI Services PMI data for June is due at 8:45 am CT and followed by the more closely watched ISM Non-Manufacturing read at 9:00 am CT, along with JOLTs Job Openings. Traders must also keep an ear out for Fed speak.

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Silver (July)

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