Morning Reads

Morning Reads

Open Interest Changes



New bear in town

It wasn't too long ago that many were talking about triple-digit oil prices, but things have since been going in the opposite direction. U.S. benchmark West Texas Intermediate has now fallen into a bear market, tumbling more than 20% from its last high of $95 at the end of September. A drop of 5% on Thursday to under $73 a barrel cemented the new milestone, setting up oil for its fourth weekly loss, with a combination of factors attributing to its fall from grace.

Too much supply: Swelling inventories and rising U.S. stockpiles are changing market dynamics, with the latest estimates from the EIA far exceeding expectations. There are also growing signs of non-compliance within OPEC+ over the group's recent production cuts, while a Western price cap meant to dent Russia's oil revenue has largely failed.

Too little demand: The global economic outlook is weakening, especially in China, which is the world's largest importer of crude. Refiners there have cut their daily processing rates, suggesting that more clouds and economic headwinds are on the horizon.

Too many premiums: Prices rose in the summer after additional output and export cuts by OPEC+, and were later helped out by fears of war in the Middle East. Those fears have failed to materialize as the conflict appears to be contained to Israel and Hamas, without disrupting oil supplies from nearby regions.

Too little fundamentals: Commodity traders have been laser-focused on key technicals given the speed at which oil broke below $90 and $80 support levels, as well as softness along the oil futures curve. Those pricing patterns saw both WTI and Brent front-month contracts trade in contango and were likely magnified by automated selling systems.

What to watch: The market is looking to the next OPEC+ meeting in Vienna, which will take place a week from Sunday. The group recently forecast that "global oil market fundamentals remain strong," but that could change as they reconsider extending or deepening their production cuts. Disagreements among the cartel have led to volatile environments and several price wars over the past decade, and there will likely be some difficult discussions this time around to prevent another one from happening.

Auto disruption

Amazon (AMZN) is breaking into the auto retail sector through a partnership with Hyundai Motor (OTCPK:HYMTF). Buyers will have the option to buy the vehicles on the e-commerce giant's website and then pick it up from their local dealer. Hyundai also named AWS as its preferred cloud provider, adding that the Alexa Built-in experience is coming to its next-generation vehicles. The partnerships will be noted in the industry, as it adds incremental competition for auto retailers such as Carvana (CVNA), CarMax (KMX), Vroom (VRM) and AutoNation (AN). (53 comments)

Bunsen burner steaks

Italy has banned the production and sale of lab-grown meat, in line with the government's efforts to defend the country's traditional culinary culture. "Italy is the first nation in the world to be safe from the social and economic risks of synthetic food," said Agriculture Minister Francesco Lollobrigida. While the EU hasn't yet cleared the sale of lab-grown meat, other countries have begun such approvals. Singapore was the first to allow such meat, followed by the U.S. in June. Separately, American producers of plant-based meat substitutes like Beyond Meat (BYND) have been buckling under fading popularity and weak consumer demand. (12 comments)

Shutdown averted

President Biden has signed a short-term government funding bill passed by Congress, avoiding a federal shutdown and pushing the debate over the federal budget into next year. The bill maintains government spending at current levels for two more months, giving lawmakers time to negotiate appropriations bills for the rest of the fiscal year. The measure also doesn't include the $106B that the White House requested for Israel and Ukraine aid, as well as humanitarian funding for Palestinians and other supplemental requests. Congress is expected to focus on that when legislators return to the Capitol in two weeks.

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Today's Markets

In Asia, Japan +0.5%. Hong Kong -2.1%. China +0.1%. India -0.3%.
In Europe, at midday, London +0.8%. Paris +0.9%. Frankfurt +0.8%.
Futures at 7:00, Dow +0.2%. S&P +0.2%. Nasdaq flat. Crude +1.3% to $74.05. Gold +0.3% to $1,992.30. Bitcoin -2.2% to $36,391.
Ten-year Treasury Yield -3 bps to 4.41%.

Today's Economic Calendar

8:30 Housing Starts and Permits
8:45 Fed's Barr: “Payments”
8:45 Fed's Collins: "Rethinking Full Employment"
9:30 Fed's Daly's Speech
9:45 Fed's Goolsbee: U.S. Economy
10:00 E-Commerce Retail Sales
10:00 Quarterly Services Report
10:15 Fed's Collins' Speech
1:00 PM Baker Hughes Rig Count

Companies reporting earnings today »

What else is happening...

Retail watch: Warning at Walmart (WMT), Gap (GPSkeeps outlook.

UAW workers clear deal with GM (GM), Ford (F) and Stellantis (STLA).

Alibaba (BABA) plunges on revenue miss, cloud spinoff plan scrapped.

IBM (IBM) halts advertising on X after ads run next to pro-Nazi content.

Gene editing stocks in focus after world's first CRISPR (CRSPdrug nod.

Applied Materials (AMAT) under probe for evading export controls.

ChargePoint (CHPT) plunges on CEO exit, slashed revenue outlook.

Good sign for Qualcomm? Apple (AAPL) struggles to build iPhone chip.

Mastercard (MA) exec says CBDC adoption would be difficult right now.

Starbucks' (SBUX) Red Cup Day rolls on despite strikes at U.S. stores.

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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