LiveWire

Oil fell below pre-Russia's invasion of Ukraine levels at one point, in a sign that there are serious demand concerns as investors weigh fears of recession or a significant slow-down as consumers grasp with rising costs, virus curbs in China, and spending fatigue after rising interest rates and falling asset prices hurt wallets. In the near term, oil could be supported by a lack of public statements from President Biden about Middle East producers potentially increasing production. 

Inflation rose 9.1% in June in the US, even more than the 8.8% expected as sharply higher prices for a range of goods continued to pressure consumers. Excluding food and energy prices, core CPI rose 5.9%, versus the 5.7% estimate. It is likely to continue to pressure the Fed to act in an attempt to cool down the economy and control prices. The market reaction is swift with the Nasdaq plunging more than 2% and 10-year bond yields gaining 10bps to 3.05%. 

Stocks reacted negatively to a stronger-than-expected US jobs report. It increases the odds the Fed will continue its very aggressive tightening policy, with a 75bps hike in July, which has been weighing on the prices of financial assets. The report is also a touch positive as it reduces the fears of recession, which indicates the US economy remains in good shape. Nonetheless, as 10-year Treasury yields jump past 3.08%, it is pressuring stocks lower. 

Samsung reported better than expected revenue, signaling tech earnings may not be as bad as some feared about weakening demand and a rise in material costs. Investors are slowly shifting toward the view that the economic slow down may not be as painful as thoughts a few weeks earlier and there are increasing signs that inflation should ease in the medium term. As a result, stock investors are beginning to look past the pressure from higher yields, but the sentiment is still weak, despite improving recently. Looking at technicals for the Nasdaq 100, the tech-heavy indice in the US, it still needs to break free from its trading range, but recent action is encouraging for more upside ahead. 

Stocks are trading mixed while Treasuries are sliding following US ISM non-manufacturing and JOLTs data. The report showed that despite all the growth worries, the US economy (service and employment) was still quite resilient to inflationary shocks in June, but slowing down. It’s all consistent with a downshifting in the pace of growth, but for now, there isn’t much evidence that things are falling off a cliff.