Coffee With Greta: Bear Market Bounce Time?


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DJIA Futures: +134 (+0.4%)

SPX Futures: +23 (+0.6%)

NASDAQ Futures: +103 (+0.9%)

Good morning friends!

Futures are bouncing a day after the S&P 500 notched a new low for the year and closed in an official bear market.

Let’s get right to it!

Wholesale Inflation Surges

Producer-side inflation pressures surged in May. 

The Bureau of Labor Statistics producer price index jumped 0.8% monthly and 10.8% year-over-year. 

The monthly gain was in-line with economists’ expectations and was a doubling of 0.4% in April.

The core PPI, which excludes food, energy, and trade, rose 0.5% monthly and 6.8% annually. 

That was slightly lower than the 0.6% estimate but an increase from 0.5% in April. 

The PPI is a forward looking indicator for the CPI, as producers pass-down higher costs to consumers. 

Economists Expect Larger Rate Hike

Economists are hiking their expectations for this week’s Fed meeting. 

Goldman Sachs economists said Monday they were officially altering their expectations to a 0.75% hike instead of just 0.5%.

This comes after the Wall Street Journal reported on Monday the Fed is likely to consider that larger move.

Before Fed officials entered their pre-meeting quiet period on June 4, they signaled plans to stick to a 0.5% hike.

But they also said that depended on the evolving inflation situation. 

Since then both the May CPI and PPI came in hotter-than-expected.

In an interview last month, Fed Chair Jerome Powell said, “What we need to see is clear and convincing evidence that inflation pressures are abating and inflation is coming down. And if we don’t see that, then we’ll have to consider moving more aggressively.”

CME Group’s FedWatch Tool shows 94.8% of traders now expect a 0.75% rate hike while just 5.2% are anticipating a 0.5% hike.

The Fed meeting kicks off today, the rate hike decision will be released at 2:00 p.m. ET on Wednesday, followed by Fed Chair Jerome Powell’s press conference at 2:30 p.m. ET.

Bitcoin Tumbles to $22,000

Cryptocurrencies are falling further today as traders continue to dump risk assets. 

Bitcoin is down another 8.6% in the past 24 hours, trading just above $22,000.

The coin briefly dropped below $21,000 earlier in the morning.

Ethereum is down 6.4% at under $1,200. 

The global crypto market cap is down to $967 billion, under $1 trillion for the first time since February 2021.

Coinbase Lays Off 18% of Workforce

Coinbase (COIN) shares are tumbling 6.2% in premarket trade after the company announced it will layoff 18% of its workforce. 

The crypto exchange sent an email to employees this morning about those cuts. 

Coinbase has about 5,000 full-time workers, which means around 1,100 people will be let go. 

In the email, CEO Brian Armstrong said in the email, “We appear to be entering a recession after a 10+ year economic boom. A recession could lead to another crypto winter, and could last for an extended period.”

He added, “Our employee costs are too high to effectively manage this uncertain market. While we tried our best to get this just right, in this case it is now clear to me that we over-hired.”

Oracle Rallies on Strong Earnings

Oracle (ORCL) shares are rallying 12.9% ahead of the open after beating fiscal Q4 expectations. 

The company reported adjusted earnings of $1.54 per share on $11.8 billion in revenue. 

That was better than analysts’ expectations for adjusted EPS of $1.37 on $11.61 billion in revenue. 

Oracle brought in $7.61 billion in cloud services and license support revenue vs analysts’ estimates of $7.83 billion. 

The company’s CEO said, “We experienced a major increase in demand in our infrastructure cloud business —which grew 39% in constant currency.”

The company forecast fiscal Q1 earnings between $1.09 and $1.13 per share vs analysts’ expectations for $1.13.

Gas Prices Continue Record-Breaking Climb

U.S. gas prices are pushing further above $5 after surpassing that milestone over the weekend. 

AAA shows the national average for regular gas rose to $5.016/gal today. 

Diesel prices are also at a fresh record-high after cooling in recent weeks. 

The national average for diesel jumped to $5.775/gal today. 

Supply Concerns Boost Oil Prices 

Oil prices are rising today as supply concerns outweigh worries about the latest Covid outbreak in China and recession fears in the U.S. 

West Texas Intermediate crude futures are up 0.9% at $122 bbl while Brent crude futures are up 0.9% at over $123 bbl. 

Already tight supply has been worsened by a drop in exports from Libya. 

And other OPEC+ countries are struggling to meet their production quotas. 

The American Petroleum Institute releases its weekly report on U.S. inventories later today.

In Case You Missed It

  • U.S. consumers hiked their short-term inflation expectations in May. The New York Fed’s survey of consumer expectations shows Americans expect inflation to still be at 6.6% 1-year from now. That was up from the April forecast for 6.3%. 3-year inflation expectations were unchanged at 3.9%. 

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