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“You can only really build something new if you destroy the old.” – Karl Lagerfeld
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Futures are lower again this morning, and while tech has led the last few days, the Nasdaq is leading the downside in the pre-market, down 0.7% while the S&P 500 is down just 0.2%. The culprit has been – you guessed it – oil. WTI is up again and now trades above $99 per barrel while Brent is already well above $100. With that increase, Treasury yields are also surging, with the 10-year yield up 4 bps to 4.88%. Gold and Bitcoin are moving in the other direction, falling 1% each. It will be nearly impossible for stocks to remain at these levels if crude oil keeps rising by multiple percentage points per day.
The Nikkei finished slightly higher overnight, gaining 0.2%, but the Hang Seng went in the other direction, falling 1.3%. Onshore Chinese stocks fell 0.4%, and the Kospi dropped an even more modest 0.3%.
European trading has also gotten off to a quiet start today ahead of today’s expected ECB rate hike at 8:15. The STOXX 600 is barely trading lower, as Italy and Spain buck the trend with modest gains. German CPI increased 0.2%, which was right in line with expectations and down from the 0.8% increase in July. In Italy and Spain, Industrial Production rose more than expected
The US economic calendar is busy today. At 8:30, we’ll get the usual weekly jobless claims, and along with that we’ll get the August PPI, which will get the most focus ahead of tomorrow’s CPI, and all of these reports were roughly in line with forecasts, although Core PPI came in weaker than expected. At 10 AM, we’ll get Existing Home Sales and Wholesale Inventories. In addition, weekly natural gas inventories will hit the tape at 10:30 AM, and then at noon, the weekly energy inventories from the DoE. As if that wasn’t enough, after the close, Adobe (ADBE) and Oracle (ORCL) will headline a relatively busy earnings afternoon for this time of year.
The last week of trading has been relatively lackluster at the index level for the S&P 500, which is little changed since last Tuesday’s close, but sector performance has varied widely. Investors have rotated back into Technology as the sector ETF (XLK) is up over 2% as the sector flirts with overbought territory. No other sector is up more than 1%, but Utilities and Energy have joined tech as the only other sectors with gains. Energy is also the only sector that remains in overbought territory.
To the downside, five sectors are down over 1%, including Health Care and Consumer Staples, which are both down over 2.5%. With those losses, the majority of sectors (6) are now at oversold levels, including Industrials (XLI) and Real Estate (XLRE) closed yesterday at extreme oversold levels.
Technology has been the best-performing sector over the last five trading days, but it still has something to prove as the downtrend from the early June high remains in place. On Tuesday, XLK rallied right up to that downtrend but couldn’t break through. Until that upside break occurs, the burden of proof is on the bulls.
Health Care is the worst-performing sector over the last five trading days, but unlike the Technology sector, which still has something to prove, the Health Care sector ETF’s (XLV) uptrend remains intact. While it has dropped sharply from its 8/19 high, especially in the last two trading days, the uptrend from the spring lows remains in place. Just yesterday, XLV managed to stop the bleeding right at its 50-DMA.
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