As soon as Micron (MU -3.5%) announced they would be following in the footsteps of NVDA’s (-4%) warning from yesterday, investors knew markets would be on shaky ground today. Especially since semis have been a bit of a leading indicator for the broader tech sector lately. But, as much as further evidence of a slowdown in chips was not what investors wanted to hear, semis weren’t the only sector dragging major indices. Consumer Durables underperformed as well after Ralph Lauren (-5.5%) and Signet Jewelers (-12%) both posted disappointing outlooks, with the latter also announcing a purchase of Blue Nile. Energy stocks were the strongest sector, despite crude in the red, after Berkshire Hathaway increased their stake in OXY (+4%) to 20%. Higher yields also meant financials sat towards the top of the S&P. But the stronger sectors were unable to save the Nasdaq from suffering its third down day in a row and the S&P from closing down 40bps. Especially since there was also some negative data. Apparently, optimism among small US business owners barely improved in July, and remained well below pre-pandemic levels. Furthermore, 37% of business owners reported that inflation is still their single biggest problem. Thus, the real focus remains on tomorrow’s CPI, which will be quite binary in nature. One major risk is that LO’s haven’t participated in this rally and a lower number could produce a real squeeze towards 4400 (even 4600) on the S&P. Worth keeping an eye on 2 things: food prices and DXY. While input costs are easing as crop futures have retreated to pre-war levels, the U.S. Dept. of Ag is expected to cut its outlook for US corn & soybean yields – the real effects of the heat wave being revealed. In terms of the DXY, a break below 105.50 would be a sure sign of change.

Just when it looked like growth was about to take back the crown, jitters going into big tech earnings this week SNAPped growth’s recent outperformance (see what I did there?). The SGX underperformed SVX by over 1.3% today as a volatile start the week gave investors pause, leaving the S&P slightly higher +13bps and the Nasdaq down -43bps. The weakness was led by Tech and Consumer Discretionary names, with many due to report in the next few days.

Everything was cruising along for the market again today until someone typed “what happens when we pause hiring” into their Google search engine. The stock came off highs thanks to that unconfirmed headline (though closed flat) and added to a growing list of companies potentially pausing hiring. Any recessionary signs are unhelpful in this environment and markets dropped, but ultimately held onto positive territory (4th up day out of 5 for the Nasdaq).

Similar to Europe, the US endured a woefully dull session that meandered lower throughout on meagre volumes as the market digested last week’s squeeze. June is still down a gentle -5.6% with H1 -18%, but some recent green shoots have provided a little hope (though see below meme for caveat). Last week, the S&P got back above 3810/15, the mid-May breakdown point.

If appears investors weren’t the only ones depleted by last week’s crusher. The sell-off itself seems to have run out of steam, which led to a minor rebound on Friday and somewhat of a “sympathy bounce” today. It was as if the optimism was pre-determined this am— it was evident from the start with all sectors opening (and also closing) in the green, led by energy, autos and tech. There seemed to be no obvious trigger for the move higher beyond an offhand comment from Pres Biden saying recession isn’t “inevitable” as well as some media outlets noting that inflation may be peaking. Bloomberg spoke to global food concerns beginning to ease thanks to better planting conditions (weather related) and also as Beijing and Shanghai curb Covid outbreaks. Further, existing home sales were right in line –the first print that wasn’t below expectations in four months. But more interestingly was an uptick in housing supply to 1.16m units from April’s 1.03m (though still lower than a year ago). However, those few headlines didn’t seem impactful enough to support the +2.5% moves by the S&P and Nasdaq. It begged the question — was last week’s selloff (to the tune of $2 trillion off the S&P) a form of capitulation? Possibly, but the trend currently remains negative, especially until we see the RTY through 1712 and the S&P above 3810. The fact of the matter is housing data may have shown better supply, but prices have continued to climb. Homebuilder Lennar (+1.6%), which reported better-than-expected results, flagged a pause in buying by homeowners due to rates and prices. However, it didn’t stop their revenues from climbing as home deliveries rose and its sales prices jumped 17%. And the firm expects prices will be higher still next quarter. And lest we forget last week’s retail sales and CPI data. Still, today’s market was determined to be “chipper” as Nvidia (+4.3%) led the semis AMD (+2.7%), Qualcomm (+2.8%), and Analog Devices (+2.6%) higher (yeah I did). Prudent to note that despite today’s broader rally, the current market environment remains one of the most difficult ones investors have seen in recent years. Thus, no sudden move may be the best move at this juncture.

Markets took the highest rate hike since 1994 in stride today. At first. But as the initial dust settled, major indices fell right back to where they started before the decision was announced. It was seemingly bang in line with expectations –75bps was already priced. And Esther George dissenting – already priced. Not much new to report. However, as Powell calmly delivered the hawkish message of 3.4% by year end —175bps more to go, he also pacified investors by saying jumbo rate hikes (like 75bps) won’t be common going forward. Except for July. And even though he utterly dismissed the possibility of any 75bps hikes a mere 6 weeks ago. Nonetheless, bonds and stocks celebrated into the last hour of the day. Goodbye uncertainty, hello optionality?? After all, outsized moves now apparently leave the door open to slow and reverse beyond that point. Flexibility is good, except there was very little color on how they will orchestrate a so-called soft landing —higher, faster is bound to lead to a recession…? But again, that seemed to be ignored for the time being. There were a couple of major changes to the statement: 1) a line was added saying The FOMC is “strongly committed” to returning inflation to its 2% objective” and 2) they removed prior language that said the FOMC “expects inflation to return to its 2% objective and labor markets to remain strong.” Meanwhile, the dollar saw a reversal lower and crude fell over 2.5%, leaving energy stocks as the worst performing sector in the S&P. How now, brown cow? Markets ended the day off highs while bonds ripped (yields closed on lows at 3.31). Yields moved aggressively going into today so a bit of a bond bounce back may have been warranted, but when the macro players return tomorrow, things could look a little different. And lest we forget the massive expiry on Friday which will likely bring another wave of volatility. 3700 is a big level to watch for Gamma players (or so they tell me). As Macro Man said today “getting The Fed right doesn’t necessarily mean getting the trade right…”

Friday’s blistering CPI upside shocker, alongside horrible U. of Michigan sentiment and inflation expectations, basically crystallized the market’s worst fears – the Fed has a lot of work to do. And after the bleakness in crypto markets this weekend, it wasn’t a surprise to see a continuation of the gruesome play out today. There was nowhere left to hide except for USD—even the seemingly bulletproof commodities gave back a bit today as crude traded lower until the last few hours of the day in which it snuck into positive territory.

Systematic buying in equities ran rampant yesterday, giving bears a run for their money and leaving some positive data points to be pondered. The SML, MID & RTY all went above their 50d moving averages. That said, The RTY still wasn’t able to sneak above 1930 and the Nasdaq 100 stayed well below 13000, the levels we would need to get excited. Meanwhile, the S&P remains in a tight sideways range between 4100 and 4200 (zzzz) with today’s move lower bringing it closer to the former.

Memorial Day Weekend beckoned, giving US indices one last boost to mark the unofficial start of summer, by snapping their weekly losing streak and crowning this the “comeback week.” Yesterday’s session saw the biggest laggards / short-covering lead the charge and today followed suit once more. In the last 3 days the moves were specific — XRT +13.5%, GS Most Short +12.83%, NYFANG +10.5%, etc. This morning started with futures extending gains as the PCE Deflator data (Core YoY +4.9% vs 5.2% previous) seemed to shows signs of having peaked.

The number of negative narratives impacting the markets are well known at this point. And while long term views differ on the ultimate economic impact of a tightening Fed, short term opportunities do exist. Question is how short will those rallies be, and if they are the start of something more meaningful. After last week’s poor performance by the broader indexes, this week has been met with some cautious buying. Obviously inflation remains forefront to both the Fed (and investors), and today’s calendar was busy with speakers.