The recent breakout in oil/gas prices has now inspired a breakout in the 10Y.
It’s an important headwind for the Fed, which had relied on falling energy prices to keep inflation and interest rates at an acceptable level.
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We might be done with inflation, but judging by the oil/gas markets, it’s not done with us. Both CL and RB have now broken out of channels dating back to early 2022 – with CL pushing above its 200-day moving average this morning.
The Fed has its work cut out for it this week – and for the next several months.
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ES nailed our initial downside target yesterday and is currently off about 10 points this morning following weaker than expected nonfarm payrolls.
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The Fed will release its June minutes this afternoon, potentially shedding some light on why they paused their rate hikes. But, thanks to plenty of Fedspeak – including Jay Powell’s testimony – we already know that they are as confused and conflicted as everyone else. As always, they are more concerned about markets than anything else.
Futures are off about 0.50% as we approach the open.
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May PCE and core PCE were in line with expectations at 0.1% and 0.3% MoM respectively. YoY core came in at 4.6%, slightly below expectations of 4.7%. The most notable surprise was MoM personal spending which tumbled from 0.6% to 0.1%.
Futures, already up moderately following VIX’s overnight drop, ramped even higher.
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“Inflation pressures continue to run high, and the process of getting inflation back down to 2% has a long way to go,” Powell asserted in prepared remarks in advance of his testimony before the House Financial Services Committee.
Our charts certainly agree. As posted last week, there is little chance of inflation not bouncing back up unless oil and gas prices collapse from current levels.
Futures are off moderately in anticipation of Powell’s truth-telling.
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Futures are off modestly following the long holiday weekend, OPEX and much hotter than expected housing starts.
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Futures ramped up past a key Fib level overnight on hopes that the Fed will pause any further rate hikes this week. Will SPX follow suit?
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The prop job continues, with VIX reaching a lower low and the DXY still under pressure.
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Initial claims spiked to levels not seen since October 2021, another indication of a slowing economy. Applications rose by 28,000 to 261,000, well above the consensus of 237K.
So far, futures have ignored the print.
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