Bank Day II: Morgan Stanley, Goldman Sachs and Bank of America Report Earnings

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Our View

Globex

The ES rallied up to the 6309 level on Globex just after the open, pulled back to the 6300 area, back and filled, and then shot up to the 6335.00 level just before 10:00 pm as news broke about NVDA saying the Trump administration agreed to reinstate sales of key AI chips to China. It sold off to under 6310 and rallied back up to the 6333 area, back and filled in a 5-point range until 5:30 am, traded up to the 6342 area, and then sold off down to the 6325 level at 8:23. It then shot up to 6343.00 by 8:30 ET when the Consumer Price Index showed inflation picked up in June at a 2.7% annual rate.

Car prices fell 0.3%, apparel rose 0.4%, rents fell 2.9%, food increased 0.3%, and energy prices reversed a loss in May and rose 0.9% but were still lower than last year.

Day Session

The ES opened Tuesday’s regular session at 6338.00 and sold off down to 6302.75 at 10:55, rallied up to the 6317 level, and then got hit by five separate sell programs, which pushed it down to a new low at 6291.75. It rallied up to the 6312 area and then got hit by another round of sell programs that pushed the ES down to a new low at 6291.25, rallied a little when the MIM came out $1.5 billion to buy, and traded 6282.25 on the 4:00 cash close. It then sold off down to 6272.50 and settled at 6273.75, down 37.25 points or -0.59%.

I said early on that the NQ would not go back to unchanged, but it ended up closing down 0.08%.

In the end, it was a big sell-the-news event supported by a very weak bond market and bond auction. In terms of the ES’s overall tone, it was all about selling the open and staying short. In terms of the ES’s overall trade, volume was higher at 1.23 million contracts traded.

Bond Scare

I asked @HandleStats about the bonds after the May 22 low at 109.20 vs. the September contract after the future rallied up to the 116.03 level and quickly reversed lower. I remember Rich saying that if the (ZBU25) started to take out that low, the bonds could end up in a free fall. Yesterday, they broke down to the 111.30 level.

Look, I want to make good calls; it pains me when I don’t. But when Jeff Hirsch interviewed me a few months ago, the last question he asked me was if there was one spot in the economy that bothered me the most, and I said it was the Treasury market. Then I flipped to the dollar and the interest on the national debt, which is going through the roof.

War Is In The Air

After Trump agreed to a multi-billion military delivery to Ukraine with some of our most sophisticated weapons in the US’s arsenal that can reach Moscow, there were two other stories.

The first is about North Korea supplying 50% of the arms Russia is using in the war. The later headline was Chinese President Xi Jinping pledging to deepen support for Russia after Trump threatened to levy sweeping secondary sanctions on Russia’s trading partners if the Kremlin does not stop its war in Ukraine in 50 days.

Call me old-fashioned, but I also said the path of the war in Ukraine was laid out a few years ago when Xi and Putin met in Beijing in February of 2022, when they declared a “no limits” partnership during the Beijing Winter Olympics, weeks before Russia’s invasion of Ukraine. That was when the state planners started laying out how to draw the US into a wider conflict.