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“When you blow away the foam, you get down to the real stuff.” – T. Boone Pickens

Morning stock market summary

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After a relatively hawkish tone from Fed Chair Powell where he reiterated his view that the regional banking system is doing fine, reports surfaced that PacWest (PACW) is mulling strategic options for its business.  Shares of PACW and other regional banks immediately plunged on the idea that things really aren’t fine, and that pulled futures for the broader market lower as well.  In earnings news, shares of Qualcomm (QCOM) are down over 7% after the company reported weaker-than-expected EPS and lowered guidance.  QCOM’s weak earnings report suggests that sales of handsets have been weak, and on that news, Apple (AAPL) is also trading lower heading into its earnings report after the close.

On the economic calendar today, jobless claims are the primary focus, but we also got updates on Non-Farm Productivity and Unit Labor Costs. Initial claims were slightly higher than expected (242K vs 240K) while Continuing Claims were significantly lower than expected (1.805 million vs 1.865 million).  Non-Farm Productivity fell 2.7% versus forecasts for a decline of 2.0%, and Unit Labor Costs rose 6.3% compared to estimates of 5.6%.

All the headlines surrounding the troubles in the banking sector have weighed on sentiment in the last week as the AAII sentiment survey showed that bulls were unchanged at 24.1%, but bullish sentiment jumped from 38.5% up to 44.9%.

When it comes to trends within individual asset classes, the typical pattern is one of a tide lifting or sinking all boats.  While it hasn’t necessarily been the case over the last two years, when the stock market rallies, most individual stocks rally and vice versa.  Similarly, when bonds rally rates usually fall, even if the move lower is to varying degrees.  One area of financial markets where we have been seeing a wide degree of disparity within the asset class is commodities.

The snapshot from our Trend Analyzer below shows where various commodity-related ETS currently stand relative to their trading ranges.  At the top of the list and all trading in overbought territory are ETFs related to precious metals like gold and silver.  Most of them are also up by double-digit percentages YTD.  While these ETFs have performed well both recently and on a YTD basis, most other ETFs in the sector are down sharply YTD and trading at oversold levels.  Crude oil ETFs like USO and DBO are down 7% over the last week while Natural Gas is sitting on a 55% YTD decline after falling an ominous 6.66% over the last five trading days.  Is it getting hot in here?

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