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Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
It could be worse. US equity futures are down across the board this morning as traders return to work after the long holiday weekend. Dow futures are down 0.8%, but the damage is much less in the S&P (-0.3%), while Nasdaq futures are barely lower (-0.1%) as the picture has been improving all morning. Why could it be worse? That’s because crude oil keeps rising, with WTI trading nearly 3% higher to $94 per barrel. Along with rising crude oil, energy products are also trading higher off already high levels.
Energy prices can’t keep rising without impacting the market, and at some point even a tame inflation report later this week may not mean much if crude oil prices remain in the mid-90s, approaching triple digits.
Outside of equities and energy markets, Treasury yields are little changed this morning, gold is down nearly 1%, and Bitcoin is down over 1%.
Asian equities were mostly lower overnight except for onshore Chinese stocks, which rallied modestly. The Nikkei fell 1.7% while South Korea fell a more modest 0.6%. In economic data, Japan’s Q2 GDP report showed stronger-than-expected growth at 0.4% q/q versus forecasts for an increase of 0.3%, while South Korean GDP was right in line with expectations at 0.6%.
European equities are little changed, with the STOXX 600 down less than 0.1% and no major country’s benchmark down more than half a percent as a rate hike at its policy meeting later this week is a near certainty.
In the US today, it’s a quiet morning with NFIB Small Business Sentiment being the only report on today’s calendar. That reading for August declined more than expected, but the NFIB’s chief economist Bill Dunkelberg noted that “Uncertainty remains elevated among small business owners as they face a mixed set of challenges”. Besides that report, we’re in the heart of conference season, so be on guard for companies issuing not-so-rosy comments at some of these meetings across Wall Street this week. Looking forward, while today’s calendar is quiet, the PPI and CPI reports on Thursday and Friday will be main events.
Back in late July, as the dollar was breaking out to multi-year highs versus the Japanese yen, authorities intervened to stop the slide. The yen immediately rallied, taking the cross versus the dollar down to its 200-DMA for the first time since last fall. After the initial rally, though, the yen slowly started weakening again, leading some to question the move’s efficacy.
The last week may have been quiet for US markets, but it’s been a big move in the yen. The currency has resumed its rally versus the dollar as market participants increasingly expect the BoJ to raise rates at its meeting next week. This morning, it’s trading at its strongest levels relative to the dollar since February. As the WSJ noted this morning, “Bessent’s Yen Bet Is Paying Off—for Now”.
While the yen is rallying, the Nikkei 225 has been under some pressure. The index peaked in mid-June and has been trending lower ever since. The index briefly peaked its head above the 50-DMA for about a week in early to mid-August, but quickly lost momentum. On Monday, the Japanese benchmark made another attempt to reclaim that level, but reversed lower overnight.
The picture for European stocks looks similar. The STOXX 600 peaked in early August, but it too has been trending with weaker momentum for the last few weeks, and it now also finds itself trading below the 50-DMA.
Moving closer to home, the S&P 500 went into Labor Day weekend trading above both its 50- and 200-DMAs, but it too has been trading in a sideways range since its high on August 13th. Based on where futures are trading this morning, last week looks to have been the second-lowest high since that peak in a very tight downward-sloping range of less than 3%. Not a terrible setup, but not the momentum bulls want to see heading into the weakest month of the year.
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