A Dynamic Tape, Crosswinds of Newsflow | Morning Express | 11/22/2022

Posted: Nov. 22, 2022, 8:56 a.m.

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

S&P, yesterday’s close: Settled at 3958.00, down 16.00

NQ, yesterday’s close: Settled at 11,588.00, down 120.00

Fundamentals: T

U.S. equity benchmarks have so far survived an uphill battle to start the week. China reported more than 27,000 cases on Monday and nearly 28,000 on Tuesday, the most since 28,973 set a record in April. Through today, there have been three deaths (all 87 years and older), the first since May. The surge in cases has led the government to implement a fresh wave of lockdowns, in sharp contrast to hopes the communist nation was easing its zero-virus policy and taking steps to reopen. Outbreaks in Beijing and the southern manufacturing hub of Guangzhou are most notable and could lead to a record number of lockdowns, disrupting both supply chains and the demand landscape.

Supportive tailwinds yesterday came from Cleveland Fed President Mester, a 2022 voter, and San Francisco Fed President Daly, a 2024 voter, who reiterated the Fed is likely to move to a slower pace of rate hikes. Their dialogue was refreshing for a market battling the virus news out of and coming on the heels of St. Louis Fed President Bullard’s comments on Friday, where he spoke of a terminal rate between 5-7%, with 5% becoming a new floor. Mester, who votes in December, notably said, “the market’s expectations of peak around 5% are not far off.” Today, Mester speaks again at 10:00 am CT, Kansas City Fed President George at 1:15 pm CT, and Bullard at 1:45 pm CT. All have a vote in December, before rotating out in 2023.

Richmond Manufacturing is due at 9:00 am CT. The U.S. Treasury will auction $35 billion in 7-year Notes. Tomorrow, the Fed will release the Minutes from their November meeting.

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NQ (December)

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Crude Oil (January)

Yesterday’s close: Settled at 80.04, down 0.07

Fundamentals: Crude Oil made a face-ripping rebound yesterday from the depths of massive support at $75. The virus surge in China and ensuing lockdowns (discussed in the S&P/NQ section) dragged the tape to a two-month low before the Saudi Energy Minister spoke. In a very apparent defense of price action, he denied a Wall Street Journal report OEPC+ is considering increasing production and said, “the current cut of 2 mbpd will be maintained until the end of 2023 and they are ready to intervene if additional measures are required to balance supply and demand.” His comments, furthered by the Kuwait and Iraq, lit a fire under the market driving it 6% into settlement, and higher into this morning. Ultimately, OPEC+ defined their floor, in contrast to the White House dumping SPR in order to suppress prices. During the week of November 7th, the administration dumped more than 4 mb from the SPR. Weekly U.S. inventories will begin hitting the picture today.

 

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Gold (December) / Silver (December)

Gold, yesterday’s close:  Settled at 1739.6, down 14.8

Silver, yesterday’s closeSettled at 20.872, down 0.125

Fundamentals: Gold and Silver struggled to start the week due to the U.S. Dollar’s ascent, bolstered by Chinese Yuan weakness. Ultimately, the surge in virus cases and ensuing lockdowns is an exportation of deflation from China. Although the Yuan has rebounded by nearly 0.50% today, it is still off its best local level by 1.7%. It is no coincidence that Gold has become exhausted in correlation, not only because it neared the $1800 mark. Things are on the mend so far today with the U.S. Dollar Index slipping slightly and the 10-year yield back below 3.80%. Traders should gear up for comments from Cleveland Fed President Mester at 10:00 am CT, Kansas City Fed President George at 1:15 pm CT, and the hawkish St. Louis Fed President Bullard at 1:45 pm CT. All have a vote in December, before rotating out in 2023. Richmond Manufacturing is due at 9:00 am CT. The U.S. Treasury will auction $35 billion in 7-year Notes. Tomorrow, the Fed will release the Minutes from their November meeting.

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Silver (December)

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