It remains to be seen whether the Fed can tame inflation without bringing on a recession. It is clear that investors are unsure, turning the stock market into a rodeo, for now.

Pixabay

The stock market paused again on Monday and did not continue last Friday's pop upwards. The S&P 500 closed at 4,008, down 16 points, but not below 4,000. The Dow Jones Industrial Average idled at 32,223, closing up 27 points, but the Nasdaq Composite dropped 142 points to close at 11,663.

In morning futures action, as investors look toward Fed Chair Powell's remarks later this afternoon, trades are currently green. S&P market futures are up 54 points, Dow market futures are up 334 points and Nasdaq 100 market futures are up 219 points.

TM contributor Diego Colman finds market sentiment negative writing S&P 500, Nasdaq 100 Forecast: US Stocks Stall Recovery As Traders Lack Faith In Market.

"(Friday's) rally raised hopes that stocks could stop the bleeding and begin to stabilize in the near-term, but the upbeat sentiment was short-lived, with shares falling again on Monday, a sign that traders are not fully convinced that the worst is over and remain reluctant to participate in upside speculation...To shore up sentiment and ease mounting recession concerns, (Tuesday's) retail trade report needs to show that U.S. consumers are still in good health thanks to their solid balance sheets and increasing wages amid tight labor markets. On the flip side, if data disappoint and reveal a rapid slowdown in spending, investors’ mood could deteriorate further, paving the way for stocks to resume the free-fall witnessed earlier this month; after all, there is no worse scenario for corporate earnings than one of soaring inflation, no growth, and rising rates."

Contributor Brandon Chapman  in a twenty minute video round-up of market events, finds that Bernanke Skewers Powell As Market Pauses, VIX Falls And Commodities Pop.

"Bernanke blasts Powell for being too accommodative and not willing to 'shock the market'. He also added a few words on the future of Bitcoin and cryptocurrency. Meanwhile, stocks hesitate, the VIX falls sharply and the commodity rally is reignited. Also, a look at what comes next. (OXY, AAPL, TLRY, CVNA, IYR, TLT, LLY, T)..."

One of the byproducts of the world wide COVID pandemic and ensuing supply-chain snafus was a run-up in commodities of all sorts. Contributor Mike Zaccardi writing in Commodity Caution says that is all coming to a close.

Unsplash

Zaccardi's warning is very straightforward:

• "Weakening technicals, crowded positioning, and the overwhelming bullish consensus make for a treacherous tactical outlook.
• Stretched valuations, strong dollar, and a weakening macro backdrop also present fundamental headwinds across commodities.

It has been an incredible run for commodities in the last two years. From late April 2020, the overall commodities tracking ETF (DBC) is up 167% while the popular oil fund (USO) has surged a whopping 377%. After initiating a bullish outlook on the space in March 2020, it’s time to close this long idea...

We’ve commented quite a bit this year on the imminent rollover of global PMIs. Commodities bull markets eventually succumb to dips in economic activity. Our report outlines why that’s the case this time around. Already in 2022, the consensus full-year global GDP forecast has dropped from near 4.0% in January to about 2.7% at last check.

Bottom Line: We initiate a bearish view on commodities looking ahead through next year. As such, we close our bullish idea on the asset class. It had a good two-year run, but the times they are a changin. Fundamentals, technicals, and macro headwinds are just too great."

As rumors circulate that Elon Musk may be trying to back out of his Twitter deal, contributor Tim Knight brings us the following chart in Twitter Did The Impossible.

"FUN TWITTER FACT: The opening price for TWTR almost a decade ago was 45.10. The closing price today was 37.38, almost 20% lower. And this was during the biggest tech bull market in human history. Well, at least Vijaya Gadde scored her $17 million/year salary, so SOMEONE made $$"

Reflecting the current sour mood for technology issues the Staff at Bespoke Investment Group note: IPOs In Worst Drawdown Since The Dot Com Bust.

"Since peaking with the rest of the most aggressively valued stocks in early 2021, IPOs as a group are in a 60%+ drawdown! While we’ve seen multiple drawdowns of at least 30% for IPOs over the years (during the Financial Crisis, the late 2018 sell-off, and the COVID Crash), the current drawdown has been bigger than any period except for the Dot Com bust from 2000-2002.In case you weren’t aware of how painful the declines have been in “growth” areas of the market like IPOs, one look at the charts below should do the trick."

In the economy perhaps most closely tied to the U.S. economy, contributor Raul Siurano writes China’s Economy Hurting From Covid Lockdowns.

"The National Bureau of Statistics has stated that China’s consumption fell 11.1% on year in April...Covid is now visible in its viral infection of the economy. Many of the official numbers released are the worst since the initial 2020 pandemic. The macroeconomic environment continues to behave with volatility and increasing complexity."

"With certain geographic areas being densely productive, sometimes specialized, and crucial to the overall economy, the effect of Covid on just one or several cities has proven to be immense for China and their trade partners. Balancing public health with economic health has been a pivotal issue for nations throughout the pandemic. The recent numbers are showing that China’s zero-Covid policy is very harsh on their already sensitive economy. The numbers for the second half of the year will have to show a complete turn for the better to get China growing again."

Closing out today's column contributor Tyler Durden in a detailed article checks in with the seers at Morgan Stanley (MS) and finds that Morgan Stanley Sees S&P Tumbling As Low As 3,400: "That's Where Valuation And Technical Support Lie".

"In the latest Morgan Stanley Sunday Start note published over the weekend, which this time featured the bank's chief US equity strategist, Michael Wilson (who after BofA's Michael Hartnett, is easily the street's second most bearish strategist), the bank's strategist elevated his bearish view up another notch, writing that this bear market will not be over until one of two things happens: "either valuations fall to levels (14-15x) that discount the kind of earnings cuts we envision, or earnings estimates get cut."

Writing after the torrid Friday bear-market dead-cat bounce, it is no surprise that Wilson said that "with valuations now more attractive, equity markets so oversold and rates potentially stabilizing below 3%, stocks appear to have begun another material bear market rally." However, returning to his favorite bearish place, he adds that "after that, we remain confident that lower prices are still ahead."

How much lower? Wilson's answer: "in S&P 500 terms, we think that level is close to 3,400, which is where both valuation and technical support lie.""

Read the article, it's got plenty of meat as well as charts.

I'll be back on Thursday.

Unsplash

What the world needs now is wheat and peace.

Support Ukrainian Relief Efforts