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Slowing Inflation Ramps Risk Assets | Morning Express 08/11/2022

Posted: Aug. 11, 2022, 8:29 a.m.

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

S&P, yesterday’s close: Settled at 4210.00, up 85.50

NQ, yesterday’s close: Settled at 13,392.00, up 360.50

Fundamentals: U.S. equity benchmarks posted a banner day yesterday after CPI signaled inflation was flat month over month for July. Surging prices have forced the Federal Reserve to keep their foot on the gas, hiking rates. Although the bank is expected to raise rates by another 50 basis points in September, yesterday’s inflation data, right here, right now, provides a light at the end of the tunnel. The gauge measuring producer prices is now on deck, due at 7:30 am CT. PPI is a leading indicator of CPI and will be watched closely to confirm a reprieve from the steadfast rise in inflation. Headline July PPI is expected at +0.2% MoM and +10.4% YoY, down from +1.1% and +11.3% in June. Core PPI, excluding food and energy, is expected at +0.4% MoM and +7.6% YoY.

Do not miss our daily Midday Market Minute from yesterday.

Aiding the rally overnight was strong earnings from Disney. The company beat top-and bottom-line expectations as well as subscriber growth. The stock is up more than 8% ahead of the open. Also, yesterday’s 10-year auction saw solid demand, keeping a yields suppressed. Today, the U.S. Treasury will auction $21 billion in 30-year bonds.

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NQ (September)

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Crude Oil (September)

Yesterday’s close:  Settled at 91.93, up 1.43

Fundamentals: Crude Oil gained significant ground yesterday after EIA weekly inventory data showed strong Gasoline demand. With inflation cooling, further confirmed by today’s PPI, on the heels of last Friday’s strong jobs report, there is a one-two punch echoing Gasoline may have slid too far. This morning, month to month PPI actually deflated by -0.5%. The dataset, which also showed YoY PPI at 9.8% and below the 10.4% expected, is bringing added tailwinds to the risk landscape. Monthly reports from both OPEC and the IEA are also helping to characterize the session. Although OPEC trimmed its demand growth for 2022 by 260,000 bpd, the IEA seems to have made a larger impression increasing their demand forecast, citing soaring gas prices as forcing some consumers to switch to oil.

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Gold (December) / Silver (September)

Gold, yesterday’s close: Settled at 1813.7, up 1.4

Silver, yesterday’s closeSettled at 20.74, up 0.26

Fundamentals: Given the soft inflation data and weaker U.S. Dollar, Gold and Silver have traded very disappointingly. However, for what its worth, Silver is trading higher than it was the last time the U.S Dollar Index was below 105.00, before July 5th. Still, as expectations for continued rate hikes by the Federal Reserve erode a bit, we would have imagined a better and more steadfast reaction in Gold and Silver. Keeping a lid on the excitement is a potential turn in the economy after last week’s Nonfarm Payrolls. Higher prices are likely coming from short covering, but at this point it seems Gold and Silver need a renewed catalyst for fresh buying.

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Silver (September)

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