Indecision seems to be the name of the game ahead of Jackson Hole as headlines of all kinds are impacting sentiment in regard to the trajectory of rates. One such example is of the “Fed Whisperer” Nick Timaroas at the WSJ today who noted that “Several former Fed officials who have worked closely with Mr. Powell say he is likely to err on the side of raising rates too much, rather than too little”. Despite the hawkishness, markets moved off opening lows and spent most of the day in the green. Tech was able to find its footing, as positive headlines boosted names like Peloton (PTON,  20.36%), who will now sell equipment on Amazon (AMZN, 0.13%). Travel & Leisure was also strong, as government data showed that commercial aircraft bookings climbed. This space has been on our 3m relative low list so this could be a welcome changing in the tide, but the recent trend here says different. Meanwhile, an announcement that President Biden will be forgiving some student loans sparked a lot of opinions, but did little for companies like Sallie Mae, as some analysts noted the company remains well-provisioned for today’s announcement. Also worth noting that the EUR/USD broke parity this week, reconfirming the downtrend. Our team thinks the next stop is 0.9, although it could go as low to 0.82, the 2000 low. As we turn our attention to the rest of the week, the parallels between 2008 are hard to ignore. The market stopped just short of it’s 200 day 2 weeks ago like in ’08, and we remain below that level. Although the VIX was down 6% today, with the last trough at 8/15, the 50 day cycle is calling for the next peak on 9/20 (and on an annual seasonality basis the VIX picks up this time of year). Friday will be critical for sentiment, but we can’t glaze over the plentitude of data between now and then – GDP, Initial/Continuing Claims, and Personal Consumption data, all tomorrow.

The day had a bad flavor from the start, after global inflation fears were worsened post-German PPIs that came in well above expectations. In addition, supply chain issues were on full display this morning, after Deere narrowed its net income forecasts. Despite the negative headlines, the S&P was on track for its 5th weekly gain in a row – instead we got the first red week of the past 5. Certainly some element of a summer Friday on display, with plenty of seats empty, as shown by S&P volumes down 4.8% vs. the 20-day average despite options expiry. We remain above important levels though, notably 4107 on the S&P cash. With earnings dying down the USD hit a one-month high, and oil sits in a range (watch the 90 support on December Brent). There were only a few sectors in the green for most of the day, most notably Pharma & Energy. The first held on better thanks to positive news on Eli Lilly drug sales, in addition to an optimistic Pfizer management presentation. Along with the headlines, some easing of negative sentiment after the recent Zantac lawsuit is giving names much needed room to breathe. Energy’s move was helped by Berkshire Hathaway proposing to take a stake of up to 50% in Occidental Petroleum. On the underperforming side high growth spaces like Semiconductors & Consumer Discretionary lagged. Value outperformed growth today, as 10-year yields moved higher. Next week brings the Fed’s Jackson Hole conference, ahead of which multiple Fed speakers re-iterated that it is far too early to be focusing on rate cuts. Next week also brings PMI, GDP, and the all important PCE Deflator. The last the Fed’s preferred measure of inflation, and with expectations for a YoY decline it provides the opportunity for markets to once again get caught up in cooling data. Enjoy the weekend.

And just like that, we’re back in the green again. Markets managed to shake off inflation fears and rally into the close today— a truly impressive feat. Early on, data showed that the economy was still in strong shape, with Initial and Continuing claims both coming in below expectations. While this data is more regular, the slightly better numbers let investors believe the Fed will keep rates higher for longer. Philly Fed data this morning also added to the narrative, which despite its volatility, showed improving manufacturing activity expansion. Despite the implications that the economy could handle more hikes, the probability of a 75bp hike remained in the mid-30% range (as of this am). Yields moved lower throughout the day, while the dollar strengthened. Energy led thanks to crude’s move on the back of a report showcasing the further dip in US stockpiles. On the other hand were Telcos,  which underperformed on the back of broker downgrades. While value led growth for most of the morning, by the end of the day they were neck in neck. It is also worth noting the move in Bed Bath & Beyond (BBBY, -19.6%), which fell after news broke that Ryan Cohen’s firm was pulling out. The day also brought mixed messages from  Fed speakers – “Bullhorn” Bullard urged another 75bp hike, while Kansas City’s George struck a more cautious tone. The probability of a 75bp hike did increase to 40%, but with little fanfare. Tomorrow brings options expiry, Manufacturing PMI, and further Fed data (along with housing data). While the VIX is below 20, volumes remain muted and thus, moves exaggerated. The week is still far from over.

While some are calling this rally the most hated of the past 12 months given investors have been taken off guard due to positioning, there’s no denying it is significant. Unfortunately, the latest data shows that HFs (non-dealers) are net short the S&P, in fact the largest notional short on record. The speed of this rally has left some unable to make the necessary changes, but that’s not stopping the markets. Keep an eye on 4177 on the S&P and 13k on the Nasdaq 100 though – if we go back below these levels, that would actually give the bears something to hold onto. This morning saw plenty of economic data, which also pointed toward peak inflation having passed. The latest University of Michigan data rose to a 3 month high on better expectations about both the economy and personal finances. Inflation expectations were mixed, and worth noting the year ahead outlook was reduced. Tech was the leading sector today as BAML noted investors are rushing back into stocks & bonds. The positivity on easing conditions may be overdone as the Fed’s Barkin said that more hikes are needed in order to control inflation. This disconnect between what the markets are pricing in and what the Fed is saying leaves plenty of room for a correction. Despite all sectors in the green, Energy lagged thanks to weaker crude, after OPEC forecasted the global oil market will tip into a surplus this quarter. With earnings season pretty much behind us, the market can now look forward. Next week has a bit of housing data, but the real headline will be Fed minutes on Wednesday. The market is pricing in 58% likelihood of a 50bp hike, and 42% of a 75bp one for the September meeting. This (relatively) dovish positioning leaves plenty of room for surprise.

With tech (CCMP) starting the day well above its June lows, it’s no surprise that things slowed down a bit today. While the softer than expected PPI print this morning furthered the narrative that inflation has peaked, the markets seemed to realize that maybe the kneejerk reaction yesterday was a bit more than was merited. The PPI decline was the first in more than two years, due to a dip in the costs of goods (although services prices edged higher). Further, inflation is not the only thing cooling, as this morning we saw that the labor market is also beginning to ease. Any signs of cooling were received well, but with things still elevated, we are far from ok. There is still a long way to go and the S&P demonstrated this, starting in the green but losing confidence as the day wore on. Energy led for most of the day after the IEA said they saw little chance that OPEC+ will supply more oil, and as oil demand forecasts were raised – crude unsurprisingly outperformed. Yields were higher after this morning’s data (and realization the Fed is still targeting 3.9% end of year) brought Banks & Insurance to the front of pack as well. Tech was the day’s underperformer, although they remain far from undoing yesterday’s move. While the macro picture is the hot topic of debate in markets, earnings continue to dictate some single stock moves. Disney (DIS, 4.75%) last night reported better than expected subscriber growth, and said it would raise the price of Disney+ by 39%. Despite strong parks numbers from Disney, Six Flags (SIX, -18.19%) tumbled after its theme park attracted fewer visitors. Though it is worth noting that the US Dollar (DXY) is down for 4th day in a row, and the EURUSD is testing key res 1.034  – a break above this level would confirm rise towards 1.08. Tomorrow brings the latest University of Michigan data, and consumer sentiment is expected to rise. With markets drifting lower throughout the afternoon, we have to hope they don’t do the same into the end of week.

Another day of indices largely being able to hold on to the previous days gains. That’s not to say the market’s performance today was remarkable on its own. Indices did struggle for direction as investors dealt with cooling jobs data, although the far more important Non-Farm Payrolls hit tomorrow. Earnings continued to dominate, with Alibaba (BABA, +1.88%) sales beating estimates and ConocoPhilips (COP, -1.57%) doing the same, although Eli Lilly (LLY, -2.56%) had to cut FY adj. EPS forecasts. Inflationary fears across the globe not going anywhere anytime soon, and the Fed continues to make sure that investors don’t look beyond the rate hikes – Mester today re-iterating that the Fed is resolved to curb inflation with rate hikes. Worth noting some medium term resistances which were in our sights this morning – while the CCMP and FANG+ are above the June highs, the S&P cash is the one to watch. 4177 is the number we have our eye on, 4200 for the S&P futures. The longer we remain unable to get past these levels, the more vulnerable markets could be to a retracement. Growth continues to help the markets with this rally, as highlighted by Redburn’s relative movers list: Apple has made a 12month relative high, and Amazon and Texas Instruments made 3 month relative highs.

After markets held up relatively well yesterday, the geopolitical tension seemed a bit much for markets to handle this morning. Pelosi landed in Taiwan safe and sound though, much to the distaste of the Chinese government. She is the highest ranked US official to visit since 1997, and was “warmly” welcomed by military drills. The added tension from these events led to some indecisiveness from traders, who were already contending with plenty of earnings pre-market, along with JOLTS data. Caterpillar (CAT, -5.85%) this morning missed on revenues, noting dented demand across Asia. Surprisingly, Uber (UBER, +18.91%) reported revenues that beat, as ridership apparently defies inflation (it’s not a luxury, it’s a need!). JOLTS came in below estimates for the first time since January, and while the datapoint is still near highs, with weekly jobless claims rising the number is pointing to a slowing labor market. However, the Fed’s Daly, Evans, and Mester today noted that that the Fed’s work is far from over on curbing the high inflation rate. Evans even said 50 or 75bps was reasonable for the September hike, with the current probability pointing to 60% chance of a 50bp hike. Markets rolled over after investors realized that they couldn’t yet look through to next year’s(ish) cuts.

Thrilled I finally get to say this: that was the end of the week (and month) we were hoping for –the best month in fact since November 2020. After Apple and Amazon last night with positive numbers, there was only one way for markets to go. While it’s still a bit too early to call the rotation as of late a full trend, a break through of the June highs for indices would put us on high alert (June high for the S&P was 4177.51 vs today’s close of 4130.37). Our charts team is also flagging that MedTech names in the US are picking up, while Financials names are deteriorating. The tidal wave of economic data continued this morning – we had the Fed’s preferred inflation gauge, PCE Deflator, which like the rest of inflation data, came in ever so slightly elevated. The latest University of Michigan Sentiment/Current conditions also hit this morning, and with Sentiment and Current Conditions higher than expected, the market had a green light to keep climbing. It did just that, with the index rising throughout the afternoon. Tech and discretionary names led, both after numbers last night and on slightly better consumer data. This wasn’t a hard and fast rule however, as Intel (INTC, -8.56%) slashed forecasts for the year, and was harshly punished.

Less than 24 hours until the Fed decision, and while investors are waiting with baited breath, the day was far from quiet. With earnings season in full swing, there were a number of results to contend with pre market – Coca-Cola (KO, +1.35%) beat on sales and profits and McDonald’s (MCD, +2.62%) also beat, bringing some optimism to the consumer sector. However, last night Walmart (WMT, -7.63%) pre-announced negatively, as a stark reminder about the inventory issues many still face. GM (GM, -3.4%) beat on revenue and maintained its guidance, but missed on profit estimates – another chip shortage story at play. Energy also remained a key focus, with crude higher on news that Gazprom would cut capacity on the Nord Stream 1 to 20% from Wednesday.

Not the end to the week many were hoping for, but things could be worse. Yesterday afternoon may have given some indication things wouldn’t be pretty, with Snapchat (SNAP, -40%) post market reporting crushed sales as advertising spend slumped. Tech’s performance lately has really helped the markets stage the rally, but as negative earnings hit, further outperformance is called into question.