Time for a June Swoon? | 09 June 2023

#SP500:

The Federal Reserve will still likely pause later this month, despite payroll report, because policy makers are focused on the lagged effects of the previous rate hikes. Job gains in May were incredibly strong, adding uncertainty to the future path of interest rates. The establishment survey, which tracks changes in company payrolls, showed that firms added 339,000 jobs in May. But, the household survey, which shows the number of working individuals, showed a net decline in 310,000 employed people. This divergence is not necessarily a problem but it highlights the fact that during times of transition, some metrics reveal a different story than others. Most voting members of the Federal Open Market Committee do not believe the economy has felt the full impact of tighter financial conditions. If they pause this month, there is a growing expectation the Committee will hike in July if the economy continues to run hotter than expected.

Trading recommendation: buy 4260 and take profit 4319.

#HewlettPac:

HP and its subsidiaries announced fiscal 2023 second quarter net revenue of $12.9 billion, down 21.7% from the prior-year period. Accounts receivable ended the quarter at $4.1 billion, up 1 day quarter over quarter to 29 days. Inventory ended the quarter at $7.2 billion, up 5 days quarter over quarter to 65 days. Accounts payable ended the quarter at $13.3 billion, up 10 days quarter over quarter to 120 days. For fiscal 2023, HP anticipates generating free cash flow in the range of $3.0 to $3.5 billion. Following the release of the negative financial report, we expect the share price to fall.

Trading recommendation: sell 31.20 and take profit 30.01.

#WTI:

Oil prices rose after the U.S. Congress passed a debt ceiling deal that averted a government default in the world's biggest oil consumer and jobs data fueled hopes for a possible pause in Federal Reserve interest rate hikes. The U.S. Senate approved a bipartisan deal to suspend the limit on the government debt ceiling, following approval in the House of Representatives, staving off a default that would have rocked financial markets. U.S. employment increased more than expected in May, but a moderation in wages could allow the U.S. Federal Reserve to skip a rate hike this month for the first time in more than a year, which could support oil demand. Open interest in futures contracts rose to the highest since March 2022 for WTI.

Trading recommendation: buy 71.55 and take profit 73.95.