❤️Why the Market Seems to Love Tightening Conditions
By -Edward Lance Lorilla
July 20, 202228 minute read
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Good morning. Stocks got a boost yesterday on news that the European Central Bank may raise...
It's the monthly jobs numbers today and they're not going to be pretty and will be possibly the tip of the iceberg as we head into May.
Good morning. Stocks got a boost yesterday on news that the European Central Bank may raise interest rates by 50 basis points. This would follow on the increasing monetary tightening seen in the US under the Federal Reserve.
Rising interest rates mean a higher cost of capital for any person or business that needs a loan—whether for the purchase of a car, a home, or to get a company off the ground. So why does the market love tightening? It's likely because the more things tighten now, the sooner the tightening can end. A number of traders are already starting to bet on interest rate cuts in the US next year.
Until that actually happens, it's prudent to stay cautious. Rising rates may help crush inflation, but they'll also slow an already-slow economy. That could lead to more market volatility in the months ahead.
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Congress is weighing on legislation to support domestic semiconductor production before it goes on recess. The goal is to counter the global chip shortage. If passed, it will make it easier for mega-factories to be built stateside, but the chip shortage is still likely to continue.
That's because demand remains strong, and many new technologies require a larger number of more advanced chips than ever before. That bodes well across the industry.
David Taylor, a director at Delta Airlines (DAL), recently added 10,000 shares. The buy increased his holdings by just over 21 percent, and came to a total price of just over $293,000.
This marks the second buy at the company this year, also from a director. Company executives have been sellers of shares this year, as high oil prices have weighed on returns. Over the past three years, insider buying has been fairly steady after drops, with insider sales rising after a rally.
Shares of consumer tech giant Apple (AAPL) sank 2 percent on Monday on news that hiring would slow at the company. One trader sees shares shaking off the news and moving higher in the next few weeks.
That's based on the August 26th $147 calls. With 37 days until expiration, 15,718 contracts traded compared to a prior open interest of 176, for an 89-fold surge in volume. The buyer of the calls paid $6.93 to make the trade.
Housing starts came in at 1.56 million in June, slightly lower from May's adjusted rate of 1.59 million. The number came in just under expectations, also at 1.59 million. In the meantime, permits came in at 1.69 million slightly over expectations of 1.68 million, but down from 1.7 million in the prior month.
State-owned Russian energy giant Gazprom has state that it cannot comply with contracts based out of Europe, and is claiming "force majeure" on its supplies. The move comes as Russia has been largely frozen out of traditional international markets. As a result, Gazprom may not be able to fulfill contracts to supply energy to Europe.
The cost of booking a shipping container have dropped to about $6,400. That's down from a peak of $11,000 last year, and from a high of $9,300 at the start of the year. A majority of analysts now see conditions improving, with no major shippers reporting worsening conditions.
After previously announcing a new policy to ban developers from selling open source software, tech giant Microsoft has decided not to introduce the policy. The wording of the policy could have prevented those from using open source software to create their own unique programs from monetizing it on the Windows app store.
Chinese ride-sharing company Didi is facing a fine over $1 billion. The fine comes after a yearlong investigation into the company's data storage practices. As the penalty is paid, the government plans to ease restrictions on the company, and to allow new users onto the platform.
S&P 500 MOVERS
TOP
CZR
9.158%
PVH
8.5%
MTCH
8.276%
CCL
7.358%
MAC
7.014%
BOTTOM
IBM
5.64%
SBNY
4.699%
JNJ
2.416%
BMY
0.753%
KR
0.31%
Quote of the Day
When we think about earnings and we think about where stocks are now, we think there's upside simply because there may be overpricing of this recession that some people think is imminent or already upon us.
- Julian Emanuel, senior managing director at Evercore ISI, on why the stock market rally of the past few weeks may continue as earnings data comes in.
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