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Commodity Mania

Happy Friday folks! We hope the week treated you better than it did the markets as we enter this final session. There’s a slew of economic updates spaced throughout the day starting with NY Fed CEO and permanent FOMC member, John Williams giving a speech (which you can watch here) and ending with the weekly CFTC speculative position update, broken down by commodity. Today is already shaping up to be a doozy with equities in Europe largely in the red as their trading day caps off → the NA pre-market is following suit with the Dow, S&P and Nasdaq down 69, 78 and 122 bps respectively.


Markets in Review

After losing 80bps yesterday the market is straddling the 3600-point support level once again, making this another decisive session for the market. One possible saving grace in the markets today could be the plethora of issuers spread into a multitude of sectors reporting today; with mammoth firms such as Verizon and Amex reporting, traders could see positive news as a vote of confidence in the overall health of the economy. However, there has also been a revival of commodity prices recently, especially for some with a high utility such as lumber, which is up 8% on the week while the S&P is down 1% over the same period. This could negatively impact management guidance for Q4 through the rest of this earnings period.


Short: Snap Inc. (SNAP-NYSE) | Timeline: 2 days

Snap Inc. (SNAP), which operates as a social media company internationally reported disappointing earnings yesterday after the market closed, tanking social media stocks coming into today’s pre-market. The company reported its slowest quarterly sales growth ever, saying a decline in advertising spending continues to drag on results. (Full Story) Turning to the chart, technicals support an extremely bearish narrative as the stock has been riding a downwards trending support line for the majority of this year, while buying volume hasn’t held up nearly enough to bring the MACD above zero. That said, expect a gap-down as the market opens this morning, and bears to continue to hammer this stock back down to that sloped line.


Zooming out...

Commodity Mania

Across the board, there is evidence of the commodity supercycle’s continuance - while we touched on lumber earlier (which is up 25% on the month), the ‘price-mania’ so to speak has impacted all categories from Metals, to Agriculture and most of all Energy. Metals: While many thought that maybe base metals would catch a break, the increasing worldwide sentiment to promote resource nationalism is putting a close on many iron and copper channels around the globe - this has also extended to rare-earth metals most recently with the sanctioning of both Russia and China. Ags: It’s been a double whammy of drought and a lack of fertilizer affecting this area and that has made food security number 1 on the agenda of many foreign powers. In turn, this has made international trade of agricultural commodities in general slow down as countries seek to insure themselves before allowing exports. This has been exacerbated further by Russia’s annexation of Ukraine, given Ukraine’s position as a top fertilizer producer. Energy: With the Nordstream 1 pipeline in shambles and OPEC slashing production, it’s going to be one cold and expensive winter in Europe as Natural gas and oil prices will likely appreciate another 20% at least by the year’s end.


Making headlines...

Pakistan’s Imran Khan Disqualified From Office for Hiding Assets

  • Pakistan’s former prime minister was disqualified as a lawmaker and barred from holding public office after officials found him guilty of hiding his assets. (Full Story)

Social media platforms brace for midterm elections mayhem

  • With less than three weeks before the polls close, misinformation about voting and elections abounds on social media despite promises by tech companies to address a problem blamed for increasing polarization and distrust. (Full Story)

Toyota expects to cut full-year output target due to chip shortage

  • Toyota Motor Corp said on Friday its annual vehicle production was likely to come in below its initial target, as a persistent global semiconductor shortage hampers efforts by the world's biggest car maker by sales to boost output. (Full Story)

The US Weighs Security Reviews for Musk Deals

  • Biden administration officials are discussing whether the US should subject some of Elon Musk’s ventures to national security reviews, including the deal for Twitter Inc. and SpaceX’s Starlink satellite network, according to people familiar with the matter. (Full Story)


Chart of the Day: Energy Stocks vs. S&P 500


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