Wedneday's Close

E-mini S&P 500 Futures (September): Settled at 4394.75, down 20.25

E-mini Nasdaq-100 Futures (September): Settled at 15,073.50, up 27.25

U.S. benchmarks have battled crosswinds throughout the week, but as always, it is Tech underpinning the risk environment once again. More specifically, Semiconductors have gained about 2.5%, fueled by AMD’s meme relevance on the heels of a blowout earnings report last week.

Broadly speaking, the Federal Reserve wants to be able to taper assets, but the reemergence of another Covid wave has buoyed markets, specifically Tech, as it may elongate the Fed’s path. Markets faced two waves of selling early yesterday. The first came after ADP Payrolls whiffed on job creation for July at 330k versus 695k expected. The second was a one-two punch by influential Fed Governor Clarida and a record-setting ISM Services read.

After comments over the weekend by the two most notable doves supported risk assets, Fed Governor Brainard and Minneapolis Fed President Kashkari, Clarida reminded markets the Fed is on track to peel back asset purchases later this year and expects to meet its goals for a rate hike by yearend 2022. At the same time, ISM Non-Manufacturing roared to a record 64.1.

This caused rates to rise, reversing the early crater due to the ADP miss and supposedly a fund buying to tap out of a multi-billion-dollar short loss. Though each wave was thematically conflicting with the other, they have ultimately kept markets rangebound ahead of tomorrow’s pivotal Nonfarm Payroll report.

Weekly Initial Jobless Claims were in line with expectations at 385k versus 384k. The U.S. Trade Balance hit another record deficit, with both Imports and Exports rising. Comments by Bank of England Governor Bailey are also hitting the tape. He is pointing to the need to taper the central bank’s assets, adding that if the economy faces a negative shock, they could always restart purchases. By purchases, he means Quantitative Easing, yes this is your reminder that central banks are continuously easing policy and the Federal Reserve’s balance sheet increased to a fresh record of $8.2 trillion through the end of July.

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