Midday Market Minute
Both headline and Core CPI came in hotter than estimates, and interest rate cut expectations have been reduced! The Russell 2000 is leading equity indices lower, while the Nasdaq 100 is holding firm support. Despite higher yields, silver is trying to break-out!
Transcript
Good afternoon traders. It’s Chris Chavez with blue line futures and it’s your daily, midday market minute. inflation rate accelerates here putting pressure on risk assets sending treasury yields higher. But before we get to it, if you’re watching this video, like and subscribe, if you’re on our website, there’s a link to directly to YouTube and you can subscribe that way, we would love for you to follow us, we would love for you to help us build our following. Let’s get into it. Looking at the markets here today, CPI came in hotter than estimates, the headline number came in at three and a half percent year over year versus 3.4%. That was expected and core CPI 3.8% versus 3.7% expected. Now of course, we did see a little bit of heating up when looking at energy, but also some other sticky areas specific to this report would be healthcare services, health care services really looking sticky in some areas, specifically hospital services and some other areas too. So you know, again, this number here heated up a little bit here and you’re seeing treasury yields, react to that accordingly. And interest rate cut expectations really shifting today we’re gonna get into some of those probabilities here in just a bit now the Russell really underperforming here today, the Russell 2000 index down over two and a half percent. The NASDAQ is actually the best index from a negative perspective outperforming the s&p and the Dow Jones some names within the index like Nvidia semiconductor company meta is well in positive territory today. So I would say that overall, this actually isn’t too discouraging from a equity market standpoint, of course, you are seeing the most sensitive interest rate sensitive index, the Russell 2000 in lower territory, which is to be expected. But I do like some of the price action that we’re seeing in the NASDAQ, even though you’re really seeing a large repricing of interest rate cuts. And I want to transition that over to the precious metals, which are looking very resilient today. I mean, it’s feels like you know, a few months ago, if we were to get some hotter than expected CPI print, you know, silver would be down nearly $1 or even more, and we’re looking at Gold, you know, we’d be down 20 to $30 an ounce as well. So I think that we’re really holding up nicely here, as we’ve seen this precipitous rally in the precious metals. And one thing I’ve been noticing is really the strength in the overnight session, the overnight trading session, Asia hours are looking really constructive as well. And I think that I am pinning this rally in the precious metals to a global growth reacceleration led by China. And here’s what I mean by that is when you look at some some of the data that we’ve got from China here, as of late, specifically the manufacturing sector, we’ve actually started to see a little bit of trough in some expansion that has been happening in the manufacturing sector for the first time and, you know, quite a while. So I think that that could be you know, signaling the fact that maybe China is starting to enter an expansionary phase in their business cycle. When you look at the Hang Seng Index, you know, it looks like we may have bottomed and you know, the Hang Hang Seng finished positive yesterday up about 1.8%. And if China data continues to look strong, that can further fuel these commodity prices, you know, the industrial metals, copper, silver, precious metals, gold, but also energies and gasoline as well as demand starts to pick back up. Now, when getting into some of the interest rate price action that we’re seeing today, fed fund futures are now pricing in only 35 basis points worth of cuts, that compares to the previous Feds summary of economic projections of 75 basis points. So the markets have almost taken off half of what the Fed has projected, really seeing a lack of conviction in, you know, the 75 basis points that the Fed just came out with. And of course, the data is really influencing that, which is why we’re seeing it. But when looking at interest rate cut probabilities, the highest probability of a cut now has been pushed back to September. And I think that’s really an interesting takeaway, because when you’re looking at September, there’s not really even a lot of conviction in that cut taking place really about, you know, just over 55% or so odds of a cut taking place in September. So, you know, really the question remains, are we actually going to see any interest rate cuts in 2024? We’ll definitely have to see how the data shakes out and you know, pushing into the next year with it being an election year, potentially a new administration. But it does seem that as of right now, the markets are less convinced that we will actually get 325 basis point cuts. Moving closer to 50 Potentially I think is the next target now’s data to pay attention to overnight. We spoke about China and the potential reacceleration and Chinese growth and global growth as a whole Chinese inflation data is coming out in the overnight hours. CPI and PPI are due Chinese loans also got pushed back again to tomorrow. So some really important stuff to pay attention to You and tomorrow PPI here in the US producer prices are due, as well as claims data and more fed speak. So there is a lot to still finish out this week. We’re not in the clear just yet. But some important things to pay attention to. Now in looking at some of the support and resistance levels looking at the s&p three star support pocket that we are actually trading around right now as I’m shooting this video 5191 and a half 251 96 and three quarters looking at the NASDAQ 103 Star support levels going to be 18,051 to 18,070. Same thing we’re right within this pocket. Now, as long as we can maintain above this level, I do think that is still looks pretty encouraging here for stock indices and it doesn’t look like the interest rate landscape is affecting us as much as what some may think. Now looking at crude oil three star support that we’d have held here real nicely we actually probed into this area today and then reversed 8464 to 8493. If we can still maintain above this level, I like the price action of crude moving forward and potential higher crude prices to come again with reacceleration of growth in China potentially stimulating that and finally getting into silver three star overhead resistance we continue to test this range. Even though CPI came in hotter today silver in positive territory, so the next level to watch, we can break and close above 2852 to 2857 think we can then push up into $29 territory for the silver market. If you have any questions reach out to our trade desk we’re here for you. Remember, futures trading involves substantial risk of loss and is not suitable for all investors.