(Justin Vaughn, Editor, Options Trading Report)
After three days of down indices, Wednesday turned positive, with help…as energy stocks came alive, and perked up and buoyed all markets. Until Wednesday, investors and traders were influenced by several negatives; rumblings of interest rates rising, the service industry is weaker than through. Even manufacturing news wasa pessimistic, as earnings numbers were not as expected. Brian Price, head of investment management at Commonwealth Financial Network noted: “The market is in this ‘treading water’ phase right now. It’s hovering near flat in anticipation of [Federal Reserve Chairman Jerome] Powell’s speech.” He is referring to the upcoming annual economic policy ‘symposium’ in Jackson Hole on Thursday as Mr. Powell will address inflation and the tightening issue. Oil prices have edged up to the $100.00 mark, effected to a great degree by the suggestion that ‘OPEC+ group’ are contemplating cutting output to combat fluctuations in price. Wednesday’s close for brent crude finished at $101.22 a barrel. As a direct result energy stocks flexed and nearly all moved up, shoving the S&P 500 upward. The two-year yield is steady at 3.384%, while the 10-year Treasury note nudged a bit upward to 3.105% from 3.053% at Tuesday’s finish. Both the 10-year and two-year trends point to a recessionary future.
Natural Gas Prices Soar, like never before, doubling futures in a year. The culprits: the Russian war in Ukraine, extreme hot weather in Europe and Asia, harrowing inflation, and supply constraints have push demand to unheard of levels, not experienced ever. Storage facilities are not at capacity, as excess gas is being diverted to needy countries pressing to bolster reserves, anticipating winter conditions. The world’s largest exporter of natural gas is the U.S. and the largest producing stat is Texas. A disastrous fire shut down the Freeport LNG plant in early June responsible for producing one sixth of U.S. production, will be back in partial operation by November and at full capacity in March 2023. “We are beginning to see a lag in storage builds that could lead to a precarious situation during the draw season in the event of a harsher-than-expected winter,” said Neal Dingman, an energy equities analyst at Truist Securities. He adds, “there is potential for a winter U.S. superspike.”
Your Morning Cocktail Will Cost More…as orange juice prices are poised to accelerate in the coming weeks, as old-man-weather is the culprit in both hemispheres. Florida and California, the biggest producers of oranges in the U.S., are at high risk for bad weather in an already low-inventory market. Brazil, the world’s largest producer of orange juice is presently ‘crippled’ by bad weather, and more is coming. Brazil’s weather patterns are more susceptible, as ‘LaNiva can impact weather globally, but effects on Brazil are usually more severe. Add in the possible drought conditions, which are facing Brazil this year, and you have potential low crop production. Shawn Hackett, president of Hackett Financial Advisors, says, “It’s possible we could test all time highs.” Currently orange juice is steady at $1.76 a pound, up from $1.15 at the first of November, last year, according to data collated by the TradingEconomics-.com website. Our good morning ‘swig’ of orange juice will cost a bit more and tast a lot better.
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RUMBLINGS ON THE STREET
Mark Kolanovic, J.P. Morgan’s chief global markets strategist, Barron’s “Given our core view that there will be no global recession and that inflation will ease, the variable that matters the most is positioning,” he said. “And positioning is still very low…it is now in the -10th percentile.” That means that funds relative exposure tio the stock market has only been lower in 10% of historical readings, according to Kolanovic, a long time bull.
Lina Khan, chair of the Federal Trade Commission, Barron’s “In all too many areas of the economy, airlines, healthcare, we’ve seen significant consolidation and reduction of competition.”
Tom Kloza, global head of energy analysis at the Oil Price Information Service, a unit of Dow Jones & Co., publisher of Barron’s andMarketWatch, Barron’s “Commercial and industrial customers around the world are jumping through hoops to come up with methods of substituting oil, diesel, and marine gas oil for natural gas.”
Veneta Dimitrova, Ned Davis Research, Barron’s “The cyclical slowdown in housing will likely pull the broader economy in the same direction. Single-family home sales tend to lead retail sales by about six months and suggest slower consumer spending growth for the rest of the year.”