Servers on a Beach

Working much harder than New Jersey Governor Chris Christie ever would

 

After a heavy week on the economic front, investors will turn their attention to the testimony of Fed Chair Janet Yellen in front of the House Financial Services Committee. On the economic front, we have CPI, Retail Sales and University of Michigan Sentiment.

Oil: Brent oil finished the week below $46 after US Crude Production surged putting downward pressure on the black gold. Last week also saw the US Oil rig count climb to 763 as their price point still makes it cost effective for them to increase rigs. Investors will watch to see if the global glut continues to put downward pressure on oil, or if algos have their way and push the commodity higher.

Janet Yellen Testimony: On Wednesday (7/12) Fed Chair Yellen is scheduled to testify before the House Financial Services Committee on Monetary Policy. After giving a prepared statement, the committee will than have a Q&A section which could see volatility based on Janet’s responses. If she mentions that the Fed may tighten faster than the market expects, we can expect to see Treasury yields rise. If she sounds more accommodative towards monetary policy, we can expect to see Treasury yields fall.

Fed Members Speak: This week, we have 4 FOMC members scheduled to give speeches across the country. With Treasury Yields spike of late, investors will be listening to clues to see If they are still on track for another rate hike later this year, and additional details as to the exact start of the unwinding of the balance sheet.

CPI: On Friday (7/14), CPI is released. Should CPI come in stronger than expected, it would signal that the consumer is able to absorb the latest interest rate hike. If it comes in weaker than expected, it may give the Fed reason to pause before potentially raising rates again later this year.

2Q Earnings Seasons Begins: Earnings season commences with 9 S&P 500 companies due to report this week.  So far, only 7% of companies in the S&P 500 have reported Q2 earnings. Traders can see individual stocks have huge price swings if a company’s earnings outpace or fall short of what the street expected.

North Korea: The red headed step child wild card. With North Korea’s latest missile launch, we briefly saw a market pullback and a move to safety such as gold (which went lower anyway) and the Japanese Yen. Investors will watch to see the latest out of the hermit kingdom and if the situation were to escalate, we would see markets sell off with a move to safe haven assets such as gold and the Japanese yen. However, algos would be confused as it tries to buy Japanese Yen since the missiles North Korea would launch would potentially go to Japan, which would see the Japanese Yen drop.

Gold: Gold has been down 4 weeks in a row. We have seen an inverse relation as bonds sell off increasing yields, the price of gold drops as a safe haven. Investors will watch to see if gold continues to fall and goes below the psychologically important $1200 level.

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