Markets Looking For A Winning Week

Key Takeaways

• Markets Looking To End The Week Higher
• Inflation Remains In Focus
• Looking For Volatility Confirmation

In spite of a shortened week or perhaps because of it, markets have thus far managed to rally 4% heading into today. It has been a relatively quiet week for economic news; however, later this morning will bring the latest Consumer Confidence Index as well as a reading on new home sales for May. Both of these numbers could potentially take on added significance simply because of the lack of news this week and it’s something I’ll be watching closely.

If there was a big news item this week, it was Jerome Powell’s two-day testimony to Congress. The bottom line in his message was a willingness to do whatever it takes to get inflation under control. Although bonds have rallied much of the week, bringing down yields in the process, in the premarket this morning yields are up slightly.

Continuing with the inflation narrative, it was an interesting week in the commodities space. Corn, soybeans, natural gas and oil are all down on the week. This is something to which I’m paying particular attention. It will be very interesting to see if this is simply a temporary relief in prices or part of a longer term trend that may signal an easing of inflationary pressures.

Looking to next week, Nike
NKE
reports earnings on Monday. That offers a glimpse into China and their economy, and it will be interesting to hear their future projections on what are truly discretionary spending items. We’ll also hear from Bed, Bath and Beyond. It’s been a very mixed bag in the retail sector with both Target
TGT
and Walmart
WMT
taking big hits following their earnings, while higher end retailers offered more optimistic news. Micron is also on deck to report, giving investors another look into the tech sector.

One thing retail investors should probably continue to keep in mind is the overall level of volatility. Although equity markets have been up this week, volatility has not come in much at all. The VIX remains well above 28. That reading may be a sign to expect continued choppy trading. If we rally further today, ideally, those with a bullish bent would like to see volatility contract some as a confirmation of easing worry over equity prices. One caveat to that could be today’s Russell Index rebalance which has the potential to affect volatility as funds make adjustments to match any changes to the Russell and has a potential to move some things around.

tastytrade, Inc. commentary for educational purposes only.