Home › Market News › The Nvidia Rip, Hot Commodities, and Short-Term ES Levels
The Economic Calendar:
MONDAY: Memorial Day Holiday: US Markets Closed
TUESDAY: Case-Shiller Home Price Index, FHFA House Price Index, Consumer Confidence, Dallas Fed Manufacturing Survey, 3-Month Bill Auction, 6-Month Bill Auction, Thomas Barkin Speaks
WEDNESDAY: MBA Mortgage Applications, Susan Collins Speaks, Chicago PMI, JOLTS, State Street Investor Confidence Index, 4-Month Bill Auction, Susan Collins Speaks, Patrick Harker Speaks, Beige Book, Farm Prices
THURSDAY: Challenger Job-Cut Report, ADP Employment Report, Jobless Claims, Productivity and Costs, PMI Manufacturing, ISM Manufacturing Index, Construction Spending, EIA Natural Gas Report, EIA Petroleum Status Report, 4-Week Bill Auction, 8-Week Bill Auction, Patrick Harker Speaks, Fed Balance Sheet
FRIDAY: Motor Vehicle Sales, Employment Situation, Baker Hughes Rig Count
Futures Expiration and Rolls This Week:
Gold futures roll from June (M) to August (Q) on Tuesday, May 30.
Key Events:
The tale of two markets: Technology stocks, and especially AI stocks, are “hot,” and the rest of the market is ho-hum.
The S&P 500 traded higher +0.33% last week, and the Nasdaq index was higher +3.5%.
The story of the week was Nvidia’s stock move post-earnings. Nvidia stock was higher by +28% minutes after its better-than-expected earnings report. The options implied move was only expecting a move of 7.5% before the earnings announcement.
NVDA posted Revenues of $11.0 billion vs. the prior guidance of $7.2 billion. They are also guiding Reveues for 2024 much higher. So how did analysts get it so wrong?
It’s simply a fool’s errand to try and “pick a top” and “Short” these hot sectors on a “valuation” thesis alone.
A few key short-term levels for the S&P 500:
Upside: 4235,4260,4300, 4320
Downside: 4195, 4170,4145,4110
Last week’s Fed meeting minutes were hawkish. Fed members will remain data-driven and won’t commit to pausing interest rate hikes. Comments from Atlanta Fed President Raphael Bostic summed it up: “We’re going to let the data guide us … we don’t want to be locked into any particular movement.”
Fed officials are considering pausing interest rate increases at their meeting on June 14 amid uncertainty over the near-term economic outlook. However, they also signaled they aren’t yet ready to call an end to their battle against inflation.
The chances of a Fed Funds (June 14) rate on hold decreased to 32% (82% last week). Conversely, the probability of a 25 basis point hike increased to 67% (17% last week).
U.S. Treasury yields compared to the last week:
30-Year yield 3.96% vs. 3.93%
10-Year yield 3.81% vs. 3.67%
5-Year yield 3.93% vs. 3.73%
2-Year yield 4.56% vs. 4.27%
2-10 Yield spread -0.75% vs. -0.59%
This recent hawkish shift in interest rates is good for the U.S. dollar but bad for commodity markets. When the U.S. dollar rises, it creates headwinds for dollar-sensitive markets like Corn, Wheat, Bean Oil, Hogs, Sugar, Coffee, and Cocoa.
Traders are focused on the jobs report data and its influence on the Fed’s next interest rate decision.
Traders expect a drop in monthly payroll additions to 180K from 253K in April. The unemployment rate is seen increasing to 3.5% from 3.4%. Average hourly earnings are forecast to decline to a +0.3% pace from +0.5% in April.
The jobs report will arrive eight trading days before the next FOMC meeting and will likely kick off more debate on whether the Fed will raise rates.
Saudi Arabia’s warning to crude oil futures short sellers ahead of the next OPEC decision on June 4th.
The market is shrugging off jawboning from the Saudi Energy Minister Prince Abdulaziz bin Salman at the Qatar Economic Forum. He is telling the short sellers of crude oil to watch out, increasing the odds of another cut in production by OPEC that was expected to stay unchanged.
Russia says they expect no production change at the June OPEC meeting.
But as people seek haven in the U.S. dollar from the political debt ceiling sideshow, the oil inventories look dangerously bullish. The U.S. debt ceiling crisis is about to be resolved, which limits the downside in crude oil prices.
This performance chart tracks the daily, weekly, monthly, and yearly changes of various asset classes, including some of the most popular and liquid markets available to traders.
Traders must pay attention to social media news and verify less credible reports. For example, last Monday, false information of an explosion at the Pentagon, accompanied by an AI-generated image, spread on Twitter, sparking a brief move lower in S&P 500 futures.
Fifteen minutes after the tweet, the stock futures rebounded sharply as The Department of Defense’s Pentagon Force Protection Agency said in a statement on Twitter, “There is NO explosion or incident taking place at or near the Pentagon reservation, and there is no immediate danger or hazards to the public”.
