Calm Before Storm as Nvidia Earnings, Data Deluge, Bigger Trade War Loom

Flirtin’ With Disaster

Speeding down the fast lane, honey
Playin’ from town to town
The boys and I have been burnin’ it up, can’t seem to slow it down
I’ve got the pedal to the floor, our lives are runnin’ faster
Got our sights set straight ahead
But ain’t sure what we’re after
– Thomas, Brown, Hlubek (Molly Hatchet), 1979

Nvidia to Report, and More…

About the only thing I do know is that I don’t know. It feels like a lot of traders and investors are waiting until this evening to get more (or less) involved. Trading volumes have been pretty thin. Are they all just sitting on the edge of their seats in anticipation of this evening’s earnings releases? After the closing bell this evening, AI bellwether Nvidia (NVDA) will go to the tape with quarterly results. The truth is that Nvidia earnings have not really controlled broader equity market performance the past few quarters as they once had.

Then again, this evening, Nvidia will be reporting alongside “best in class” (my opinion) cybersecurity platform provider CrowdStrike (CRWD) and the recently “risen from the dead” Salesforce (CRM). I am sure that whatever Salesforce posts, the super media-friendly CEO Marc Benioff will be everywhere willing to talk about it. So, Sarge… Wednesday will be a “wait and see” session as all eyes and ears look towards the close? Not really.

Before we get to those closing bells down at 11 Wall St. and up at Times Square, both of New York’s leading equity exchanges will, of course, ring opening bells. Before we get to those opening bells at 9:30 a.m. ET, the public will be hit by a plethora of macroeconomic data. This morning, the Bureau of Economic Analysis will publish month of July results for headline and core PCE prices, personal income and personal spending. That agency will also revise their estimate for second-quarter grosss domestic product growth this morning.

Additionally, the Census Bureau will drop July Durable Goods Orders (including core capital goods orders) on the investing public before those bells ring out loud. If that all is not enough, Richmond Fed Pres. Tom Barkin will speak on the economy today from Greensboro, North Carolina, one day before the kick-off of the annual Kansas City Fed economic dog and pony show from Jackson Hole, Wyoming. That’s more than one could shake a stick at, in my opinion. Good thing, nothing else is going on.

Trade War Deepens…

According to reports, it appears that the Trump administration is considering additional trade measures against Canada in the wake of that nation’s Prime Minister Mark Carney having announced a “dollar for dollar” retaliation to increased tariffs imposed by the U.S. Additional U.S. escalation against Canada could include both higher tariffs and other trade actions as well. While Canada will be unable to outlast the U.S. in any trade war due to the size and scale of the U.S. market, this is still an inflationary concern that U.S. leaders will have to consider as the midterm elections are now little more than two months away.

Iran Scrambling…

Facing the imminent impact of increased economic isolation, Iran appears to be working quickly to play nice with others. According to Bloomberg News, Iranian Foreign Minister Abbas Araghchi and his Omani counterpart Badr Albusaidi are discussing an “interim framework” targeted at resuming “harassment-free” travel for civilian vessels through the Strait of Hormuz. A joint statement carried by the Oman News Agency said as much, as the two sides pressed forward with long-running talks over navigation through the key waterway.

Iran and Oman will hold further talks to “negotiate a new permanent route within 30 to 60 days” for shipping through the Strait, according to Iranian Deputy Foreign Minister Kazem Gharibabadi, as reported by the semi-official Tasnim news agency. Of course, this comes one day after the U.S. had announced an increased schedule of new economic sanctions on Iran designed to deter economic and financial partnerships with that nation and other countries.

This also came just hours after Pres. Donald Trump announced that the U.S. Navy had cleared existing mines from that passage, in a move that would further reopen flows of global commerce through the vital waterway. Note that front-month prices for crude oil have dropped a rough 10% since last Thursday. Prices at the pump, at least near me anecdotally, in central Florida on the Atlantic coast, are down about 8% since Monday.

Then There’s the Treasury Department

A week ago, the U.S. Treasury Department announced the intention to double the size of its long-dated bond repurchase program from $2 billion to at least $4 billion per operation. This plan, which will target Ten-Year Notes as well as Twenty and Thirty-Year bonds came after the yield on the long bond had reached a 19-year high.

This move was criticized by the highly respected Stan Druckenmiller in an op-ed published at the Wall Street Journal as “price management” and not liquidity management and he would not be wrong in considering all that debt markets had been forced to price in.

Regardless of any of our opinions, the fact is that the U.S. Thirty-Year Bond paid as much as 5.28% on Friday and as little as 5.15% last night. Coincidentally, the U.S. Ten-Year Note yielded more than 4.74% on Friday and less than 4.63% last night. Hence, it would appear a few days in, that Sec. Scott Bessent’s action has for now effectively placed a constraint on the long end of the Treasury yield curve. That handcuffs federal borrowing costs, which is what he was really after.

Another Meaningless Session?

Looks like it. Vacations? Maybe. Consider though, that traders likely waited for today, maybe later today, to get busy. On Tuesday, the S&P 500 added 0.32% while the Nasdaq Composite tacked on 0.64% as the Philadelphia Semiconductor took back 1.44%. Tech stocks were led by runs made by Advanced Micro Devices (AMD) and Marvell Technology (MRVL). Performance across the small-to-mid-cap space was mixed. While the Russell 200 gained 0.6%, the S&P 600 closed close to flat while the S&P 400 actually closed in the red.

Breadth remained uninteresting. Growth stocks led the marketplace, which is generally seen as a positive, but defensive led cyclicals which is not. Winners beat losers by a seven-to-five margin at the NYSE and by a rough five to three at the Nasdaq. Advancing volume took an impressive 73.6% share of composite Nasdaq-listed trade and a more pedestrian 59% share of NYSE-listed activity. While that is encouraging, coming off of already light levels, aggregate trade was up small across Nasdaq-listings but down further across those names listed at the NYSE. The only thing we do know, is that the rest of the week’s results will likely be more impactful than what we have seen week to date.

Economics (All Times Eastern)

07:00 – MBA 30 Year Mortgage Rate (Weekly): Last 6.77%.
07:00 – MBA Mortgage Applications (Weekly): Last -0.4% w/w.

08:30 – Personal Income (July): Expecting 0.2% m/m, Last 0.2% m/m.
08:30 – Consumer Spending (July): Expecting 0.2% m/m, Last 0.3% m/m.

08:30 – PCE Price Index (July): Expecting 0.1% m/m, Last -0.1% m/m.
08:30 – Core PCE Price Index (July): Expecting 0.2% m/m, Last 0.1% m/m.

08:30 – PCE Price Index (July): Expecting 3.7% y/y, Last 3.7% y/y.
08:30 – Core PCE Price Index (July): Expecting 3.3% y/y, Last 3.3% y/y.

08:30 – Durable Goods Orders (July): Expecting 0.6% m/m, Last 0.3% m/m.
08:30 – ex-Transportation (July): Expecting 0.5% m/m, Last 0.6% m/m.
08:30 – ex-Defense (July): Expecting 0.1% m/m, Last 0.3% m/m.
08:30 – Core Capital Goods (July): Expecting 0.6% m/m, Last 0.9% m/m.

08:30 – GDP Growth Rate (Q2-rev): Flashed 1.5% q/q SAAR.

10:30 – Oil Inventories (Weekly): Last -+4.405M.
10:30 – Gasoline Stocks (Weekly): Last +688K.

The Fed (All Times Eastern)

11:45 – Speaker: Richmond Fed Pres. Tom Barkin.

Today’s Earnings Highlights (Consensus EPS Expectations)

Before the Open: ANF (1.96), KSS (.57), WSM (2.07)
After the Close: CRWD (.29), HPQ (.66), NVDA (2.09), OKTA (.96), CRM (3.27), URBN (1.73)

At the time of publication, Guilfoyle was long CRWD, NVDA, AMD equity.