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Happy Sunday! I hope everyone is having a wonderful weekend! After last week's wild ride in the NASDAQ, the coming week promises no shortage of excitement as well.
Next week will be a bit lighter on the econometrics and other economic events, but earnings season is kicking in to full swing and we have VIXperation on Wednesday as well!
Economic calendar
I'll be watching the NAHB Housing Market Index, Housing Starts, Existing Home Sales, Crude Oil Inventories, Philly Fed Manufacturing Index, Unemployment Claims, Natural Gas Storage, as well as Flash Services and Manufacturing PMIs.
Last month the NAHB Housing Market Index fell for a sixth straight month, to 67, the lowest reading since June of 2020. Because the housing market has been showing signs of slowing down, watching how the data that pertains to that part of the economy comes in will be key. Housing makes up about 15-18% of US GDP.
I'm also interested in crude oil inventories as last week we saw a reasonably large (and somewhat unexpected) 3.3M barrel build. If that trend continues it will be quite bearish for WTIC prices short-term. One lingering concern is that gasoline demand has dropped despite this being peak summer driving season. Another is the broader weakness we're seeing spread throughout the US and parts of the global economy. While supply is likely to remain constrained, subdued demand could pull prices down.
I am also watching natural gas storage for similar reasons, to see whether or not summer electricity demand lowers an already historically low level of storage. When the Freeport LNG terminal was knocked offline by a large explosion, it took a significant amount of natural gas demand with it, and as a result prices crashed over 15% following that event, and subsequently further still after a build in storage. But we've seen some stabilization of late.
Philly Fed is a measure I like to watch because it can be indicator of business activity trends on the goods producing side, and after the Empire State Index showed signs of weakness underneath the surface I'm curious what's going on in Philly. The last Philly Fed reading suggests a decrease in activity, which is quite negative for the third Federal Reserve district's regional economy, and beyond. I'll certainly be watching the Flash PMI releases for similar reasons: to see how the manufacturing and services sectors look, but from a broader geographic sampling.
Finally, I expect Unemployment Claims to continue to rise as we see the labor market show signs of emerging weakness.
Earnings calendar
The week ahead is loaded with earnings as we see earnings season kicking off in to full swing. Just about every company on the above list is worth watching, but in particular I am interested in AA, AAL, ASML, AXP, BAC, BKR, COF, DOW, DPZ, HAL, IBM, LMT, JNJ, MTB, NDAQ, NFLX, TSLA, T (the Death Star), TWTR, UAL, and VZ.
With Ayesha on-board to cover earnings, fundamentals, and macro, we'll be diving in to much more depth this earnings season! Check out her latest post on JPM here.
Treasury calendar
We've got a somewhat busy week ahead for Treasury auctions, with 4, 8, 13, and 26-week bills, a 20-year bond, and 10-year TIPS auction. The bill auctions should be soaked up readily, but I will be watching the 20-year bond and 10-year TIPS auctions closely to see how much demand there is and how well the market performs afterwards.
In conclusion
The week ahead is very heavy on earnings, and that will be the focal point for markets. But we also have some key econometrics and of course volatility product expiration on Wednesday, and those are likely to bring about some additional tail risk. Typically VIXperation is a left tail risk driver, but given all the other catalysts at play here, and especially earnings, I wouldn't be banking on that.
Stay tuned, as we will be covering this earnings season, and more, as the month moves forward! If you aren't yet a Traderade member, you can sign up for only $20/month or $200/year by visiting our services page.
If the 20 yr catches a bid, I’m thinking that will be bad for equities, as that will likely mean recession is top of
mind. Then again, we’ve seen that near 1:1 correlation b/t TLT, QQQ, ARKK, etc. I wonder if this is the week that correlation starts to loosen due to some problematic earning/guidance…