Stock Market Today
Interestingly, the US and European futures are trading higher as investors feel relieved that China’s response to Pelosi’s visit to Taiwan was somewhat muted. Traders feared for a lot worse situation, but in reality, we had just a military drill and some supply chain disruptions.
Nonetheless, US stock futures are trading higher and the focus for today is on the economic numbers, economic activity and the fresh comments from the Fed members. These factors are likely to drive the price action. While traders must keep a close eye on the volatility index as an abnormal activity, there could be an early clue that things are about to become sour.
Oil prices will also be on close watch today, and they will also be dictating the stock futures as the OPEC meeting will be taking place today.
Yesterday and earlier today, we heard some bullish comments from some Fed members who believe it is perfectly okay for the Fed to keep going at the pace they currently have. The big question for traders is if they have priced in the Fed’s next interest rate move wrong, given that the expectations are that the Fed will only increase their interest rate by 50 basis points, not by 75 basis points. The Fed members like James Bullard and Charles Evans believe that if the Fed wants to quell inflation, they need to have an aggressive monetary policy stance. This means that the dollar index could be undervalued, and the EUR/USD, which is trading higher today, could face some correction.
We think that the path of the least resistance for the EUR/USD is still skewed to the downside, and it is only a matter of time before the EUR/USD breaks the parity. The upcoming economic numbers, slated for this week, could easily make that happen, especially if the US NFP data on Friday prints a robust number. A strong US NFP number will increase the odds that the Fed will increase the interest rate by 50 basis in their next meeting, if not 75 basis points, and the interest rate hike in the following meeting could be for another 50 basis points.
Stocks To Watch
PayPal stock is likely to see another volatile day after surging yesterday. There is a lot of optimism among investors and traders as the company announced a share buyback and tightening of its belt in terms of its cost structure. In addition, Elliot has shown a sizable share in PayPal, favouring the stock market today.
Robinhood, which grew extraordinarily during the covid crisis, announced last night that the company would cut more staff. Another 23% of the employee force will be leaving; this makes the company even more attractive for takeover. Remember, FTX is a potential buyer who wants to acquire Robinhood, and given the lean structure, we could see a new deal flow between FTX and Robinhood coming out soon.
AMD failed to impress market players in its earnings report yesterday. The company did produce strong EPS and revenue numbers but failed to impress on its September forecast. The company blamed two crucial factors in its earnings report. Firstly, the most predicted one is the disruption of the supply chain; however, it has started to source them from other alternatives. The other factor that dragged the stock lower is the cost efficiency factor and willingness to not invest due to the slow down in the economic activity.
Oil traders are feeling skeptical today that OPEC+ will pay attention to Biden’s request to increase oil production to lower prices. What is anticipated from them is to increase the production slightly, and that is if they increase the oil supply. It is in OPEC’s favor not to lower the oil prices by increasing production.
Brent oil price is struggling to move above the 200-day SMA on the daily time frame, which means that fundamentals and technical studies aren’t on the same side. The technical analysis shows that the price action is prone to more correction. If the price of oil fails to break above the 200-day SMA, oil prices will likely be heading lower, and we could see the Brent oil prices heading towards $90.