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And here we are.

Well folks, yesterday came and it went. The aftermath however was that the cost of borrowing is at least 75bps more expensive than it was just 24 hours ago and despite being past this, the market is still pricing in one more supersized rate hike during November’s FOMC meeting. So buckle up as the market is still adjusting to this shift in the cost of capital as we head into the Q3 reporting season!

Lastly, our short recommendation on Charter Communications ($CHTR) has returned 2.73% since yesterday’s open, as such it’s important to remember that if you’re in one of our plays, mind the timeline and trade with a 3% stop loss - now with that said, read on for your daily dose of market inspiration in these increasingly curveballed markets!


Markets in Review

The S&P, Nasdaq, and Dow are respectively trading +0.05%, -0.09%, and +0.14% in the premarket. It’s likely that the S&P will perform a reversal from these levels and remain within its current channel, trading near the 50-day moving average as an area of value as the market looks towards this Q3 reporting period as the broad-reaching catalyst for higher prices. In our opinion, with over 60% of S&P 500 member firms having revised guidance for this period, Q3 reporting could prove fruitful given the final stabilization of supply chains and sustained sub-$100 oil prices over the quarter... Moreover, the anticipated return to a lower inflationary environment following these last three rate hikes creates a strong case for management’s issuance of positive forward-going guidance. Following are some key metrics as we head into the early beginnings of this reporting period next week. Earnings Growth: For Q3 2022, the estimated earnings growth rate for the S&P 500 is 3.5%. If 3.5% is the actual growth rate for the quarter, it will mark the lowest earnings growth rate reported by the index since Q3 2020 (-5.7%). Earnings Revisions: On June 30, the estimated earnings growth rate for Q3 2022 was 9.8%. Ten sectors are expected to report lower earnings today (compared to June 30) due to downward revisions to EPS estimates. Earnings Guidance: For Q3 2022, 65 S&P 500 companies have issued negative EPS guidance and 40 S&P 500 companies have issued positive EPS guidance. Valuation: The forward 12-month P/E ratio for the S&P 500 is 16.4. This P/E ratio is below the 5-year average (18.6) and below the 10-year average (17.0). Earnings Scorecard: For Q3 2022 (with 3 S&P 500 companies reporting actual results), 1 S&P 500 company has reported a positive EPS surprise and 2 S&P 500 companies have reported a positive revenue surprise.


Trade of the Day - Short: General Mills, Inc. (GIS-NYSE) | Timeline: 2 days

General Mills, Inc. (GIS), which manufactures and markets branded consumer foods worldwide, reported some spectacular earnings yesterday morning, but traders may have gotten too greedy and buyers have started to back off as the stock enters extremely overbought territory. Turning to the chart, the stock popped just over 7% in the 48 hours following to the report and has started to experience some form of consolidation as traders battle at all-time highs. However, not only did the MACD pop to above 1 but the stock went well above its upper Bollinger Band, signalling extreme overbuying and a major increase in volatility, giving traders the opportunity to capitalize on the stock's downward oscillation at the open.


Zooming out...

Soaring German PPI

The German Producer Price Index rose to its highest ever change in price on a year-to-year basis. This new record meant prices were up 7.9% on a month-over-month basis while rising an astonishing 45.8% from last year. Much of this increase is a result of the elevated energy prices that have been plaguing the continent. Energy prices as a whole climbed by 139% from a year earlier, while also climbing 20.4% from July. Electricity specifically rose 139% compared to 2021, while other staples such as capital, and durable goods rose 7.8%, and 10.9% respectively. These unsustainable price increases have wreaked havoc across the German economy, with many wondering how the nation will be able to sustain itself as we head into the winter months.

What do the upcoming referendums in occupied Ukraine mean?

In recent days, Russia has begun to set up referendum votes within the Ukrainian territories that they occupy, in an effort to solidify gains made throughout the past seven months. These votes are intended to act as a legitimate written record of the territories voting to exit Ukraine, and join Russia. You may be asking yourself “why?”, well, although Putin is a modern villain, and should not have attacked Ukraine, he is still crafty. On paper, once the territories vote to secede they will become part of regular Russian territory. This means that any further action committed against these territories, such as an attempted liberation, would be seen as aggression committed against the Russian state directly. While not making too much of a difference in the current day, if these votes are able to pass, and Russia is able to defend their gains long enough for the West to come to the bargaining table, Putin will have his claws sunk into Ukraine for the long haul. DXY Rising

The US dollar has continued its meteoric rise throughout the past weeks with the DXY hitting over $111. While in theory, a strong US dollar is a good thing for the American people, it’s not as simple as you may think. This strong dollar is wreaking havoc across international markets as struggling countries begin weakening their own currencies in an effort to pay back US dollar-denominated debt, while also making life tough for American exporters as their goods have shot up in price relatively speaking. This high dollar may also lead to a global trend of de-dollarization, as countries across the world sell their US dollars in an effort to buoy their own currency, Sri Lanka’s collapse is a prime example of this scenario unfolding. This problem is not limited to developing countries, however, as many advanced US trading partners are feeling the same burn of relative currency depreciation.


Making headlines...

Ukraine taking back…

  • Ukraine has retaken 1,000 square kilometres from Russia in the past week. (Full Story)

U.S. lawmakers pile pressure on big banks over China ties…

  • Top U.S. bankers came under pressure from lawmakers on Wednesday to take a tougher stance on doing business with China amid growing tensions between Washington and Beijing over Taiwan's sovereignty and China's human rights record. (Full Story)

New York AG sues Trump, 3 of his children and their company…

  • New York Attorney General Letitia James filed suit on Wednesday against former President Donald Trump, his three eldest children and the Trump Organization in connection with her years-long civil investigation into the company’s business practices. (Full Story)

Top bank CEOs decline radical climate demands from Rep. Tlaib…

  • Leaders in the banking industry clashed with Rep. Rashida Tlaib, D-Mich., Wednesday after Tlaib demanded that they commit to immediately end all financing of all fossil fuel products. (Full Story)

Otterbox stops shipping to Quebec…

  • Quebecers wanting to buy an OtterBox are going to have to find another way as the Colorado-based accessory manufacturer says, that "due to the French language requirements of Bill 96, we have temporarily suspended shipments to Quebec, Canada." (Full Story)


Chart of the Day - Chinese vs. US Interest Rate Policy Differential


"Inspiration is for amateurs, the rest of us just show up and work."

- Casey Neistat


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