Morning Reads


Todays Open Interest Change




Fed is watching:
 Jerome Powell has explained that the central bank's inflation fight had yet to be resolved, as "this economy is very strong, and what's driving it is a very strong labor market." As such, it will take "some softening of the labor market for inflation to come down" closer to the Fed's 2% inflation goal. Aside from the lingering labor shortage, the Fed will also keep an eye on wage growth. Average hourly earnings are expected to rise 0.3% M/M in June, unchanged from the prior month, though it should tick down to 4.2% from 4.3% on a Y/Y basis.

Despite the Fed's resolve to squash inflation, having jacked up its benchmark rate to a target range of 5.0%-5.25% from near-zero over a year ago, a slew of data this week has pointed to a tight labor market. Thursday's ADP's measure of private hiring smashed expectations and the Challenger Job Cuts Report signaled a sizable drop in job cuts, which sent Treasury yields soaring. Conversely, the JOLTS report showed a fall in job openings, while the quits rate ticked up to 2.6%, and the number of Americans filing for initial jobless claims rose over the past week.

SA commentary: A lower-than-expected NFP reading could drive a "substantial rally" that "leads to new local highs," said SA analyst Christopher Robb, but for "there to be a major selloff, I think what would be needed would be a miss that is way outside of expected numbers like that which occurred in the ADP report." Eric Basmajian, Investing Group Leader of EPB Macro Research, also notes that investors should divide the labor market report into three segments: cyclical economy, total economy and non-cyclical economy. "If we see more weakness in the Cyclical Employment baskets, we know with a higher level of confidence that recessionary conditions are biting, and there is grave business cycle risk imminently ahead. However, if the Cyclical Employment sectors do not show an increasing pace of deterioration, then that could certainly prolong the onset of the recession."

Cage fight

Twitter is threatening Meta (META) with legal action over its Instagram Threads launch, as Elon Musk tries to take off his gloves following a sparring match with Mark Zuckerberg. Twitter lawyer Alex Spiro has accused Meta of poaching former Twitter employees with access to trade secrets to build the competitor app, which has garnered 30M downloads within 24 hours. Many analysts have lauded Threads, with some projecting a long-term sales boost for Meta, while Investing Group Leader Daniel Jones acknowledged some risks associated with the launch, but believes the good outweighs the bad. (114 comments)

Chip glut

While the recent AI frenzy is expected to boost memory chip sales, the time hasn't come yet. Samsung Electronics (OTCPK:SSNLF), the world's largest memory chip maker, expects second-quarter operating profit to plunge about 96% Y/Y as the memory chip downturn continues amid persistent oversupply. The downbeat outlook comes despite Samsung cutting its memory chip production following a global demand slowdown that weighs on prices. The production cut will likely take place in the third quarter, which could prop up prices, according to Daiwa Capital's SK Kim. (4 comments)

Show of force

In an announcement expected to come later today, the U.S. will outline the supply of cluster bombs in a new Ukrainian military aid package worth up to $800M. U.S. defense companies have moved away from the controversial munitions, which can cause civilian casualties long after a conflict comes to an end, with Textron (TXT) - the last U.S. manufacturer of cluster bombs - ending production in 2016. Northrop Grumman (NOC) also backed out of a government maintenance contract in 2021. Cluster bombs would upgrade Kyiv's firepower as it gets a long-planned counteroffensive underway, and would add to the supply of more advanced weapons like M1 Abrams tanks and heavy artillery. (4 comments)

Today's Markets

In Asia, Japan -1.2%. Hong Kong -0.9%. China -0.3%. India -0.8%.
In Europe, at midday, London -0.3%. Paris +0.5%. Frankfurt +0.5%.
Futures at 7:00, Dow flat. S&P -0.1%. Nasdaq -0.2%. Crude +0.5% to $72.14. Gold +0.4% to $1,922.10. Bitcoin -3.3% to $30,174.
Ten-year Treasury Yield +2 bps to 4.06%.

Today's Economic Calendar

8:30 Non-farm payrolls
10:30 EIA Natural Gas Inventory
1:00 PM Baker Hughes Rig Count

Companies reporting earnings today »

What else is happening...

Biogen (BIIB), Eisai (OTCPK:ESALF) win FDA nod for Alzheimer's drug.

Tesla (TSLA) reportedly sacks some battery workers at Shanghai factory.

Amazon (AMZN) CEO confident on delivery upside ahead of Prime Day.

Levi Strauss (LEVI) falls on dimmed outlook as U.S. shoppers spend less.

GTCR to buy major stake in Fidelity National Information's (FISWorldpay.

Online food delivery apps battle New York City over minimum wage law.

JetBlue (JBLU) hits some turbulence after ending American (AALalliance.

AbbVie (ABBV) updates full-year earnings forecast below consensus.

Shell (SHEL) CEO says cutting oil production now would be 'dangerous.'

Google (GOOGGOOGL) delays customized smartphone chip till 2025.

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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