The Get Out Of Jail Free Card | Morning Express 07/26/2022

Posted: July 26, 2022, 8:41 a.m.

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

S&P, yesterday’s close: Settled at 3970.00, up 5.00

NQ, yesterday’s close: Settled at 12,354.50, down 69.00

Fundamentals: U.S. equity benchmarks are consolidating ahead of tomorrow’s FOMC policy decision. Essentially, they are holding at the highest level since June 10th, the Friday fallout after the May CPI release. All things considered, this is extremely efficient from both the viewpoint of the upcoming Fed decision and the deluge of earnings. That hot May CPI read echoed a very tough battle with inflation and how the Fed must hike more aggressively. Such direction by the Fed also gave many companies a ‘Get Out of Jail Free card’. The Fed’s more aggressive path would further slow growth and underpin U.S. Dollar strength. If you are a CEO, this is your opportunity to trim the fat and lay out all negatives, setting a low bar to improve upon. In the month and a half since, prices have come down, and there is reason to believe the even hotter CPI read for June was a near-term peak, at the least. From an earnings perspective, this week is the big dance; Alphabet and Microsoft report after the bell today, Meta tomorrow, Apple and Amazon on Thursday, and there are many, many blue chips in between. The efficiency lies in the market gravitating back to the scene of the crime, a moment that defined the second quarter, now waiting to dissect the central bank’s message and earnings announcements every which way.

Moments after indices rallied into yesterday’s close, Walmart lowered its profit outlook due to inflation concerns. All things considered, the market held ground well overnight and earnings this morning were broadly upbeat from a slew of names KO, MCD, UPS, RTX, MMM, and GE. From the economic calendar, we look to S&P Case Shiller at 8:00 am CT, followed by CB Consumer Confidence, New Home Sales, and Richmond Fed Manufacturing at 9:00 am CT. The U.S. Treasury will auction $46 billion worth of 5-year Notes at noon CT.

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NQ (September)

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Crude Oil (September)

Yesterday’s close: Settled at 96.70, up 2.00

Fundamentals: A strong technical landscape, highlighted here yesterday, catapulted Crude Oil to a terrific start to the week. After gaining 2.1% yesterday, Crude has so far tacked on another 1% this morning. Underpinning the energy complex is a surge in Natural Gas prices. U.S. Henry Hub has gained nearly as much as 10% on continued delays from Nord Stream 1 before what will be reduced flows; the Kremlin said the turbine is on its way after maintenance and has not been installed yet. To the other end, Libya said its Crude production is back to 1.1 mbpd, nearing its target of 1.2 mbpd. This was expected and was likely digested through much of last week’s selling. As the session unfolds, weekly inventories will also come into the picture. Early estimates are for -1.121 mb Crude, -1.1 mb Gasoline, and +0.467 mb Distillates.

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Gold (August) / Silver (September)

Gold, yesterday’s close: Settled at 1719.1, down 8.3

Silver, yesterday’s close: Settled at 18.328, down 0.289

Fundamentals: Gold and Silver are again trading with a lack of enthusiasm, lower from overnight highs. Today is the expiration of August options on both. Although this is a major contract expiration for Gold, it is not as large as June and December. Still, Gold’s plummet below $1800 and to levels last hit nearly a year ago have created a Gamma effect typically incurred in equity indices. There are more than 18,000 Put options still open from the 1800 strike down to 1720. We believe today’s expiration will encourage a bullish unwind. However, traders must factor in tomorrow’s Fed policy decision, which will be a over-powering force in the near-term. The European energy crisis and sharply higher gas prices have reinvigorated U.S. Dollar strength. Case Shiller House Price Index came in a touch lower than expected and we now look to CB Consumer Confidence, New Home Sales, and Richmond Fed Manufacturing at 9:00 am CT.

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Silver (September)

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