Stronger Than Expected CPI

Key Takeaways

• CPI Stronger Than Expected
• Oil Prices Coming Down
• Earnings Season Picking Up

Markets started the week with back to back losses in light trading. But volume could pick up today after this morning’s stronger than expected June CPI. Year over year, the number was expected to be up 8.8%, following May’s 8.6% increase, but came in much higher at 9.1%

Today’s CPI number will do little to quell inflation concerns. Much of the increase came from energy, which was up 7.5% in June vs. May. However, it should be noted that number could be slightly outdated as energy prices have been down recently. Yesterday, oil closed a little over $93 a barrel, its lowest close since April. That has translated into falling gasoline prices. According to AAA, the national average for a gallon of gas is currently $4.63. It was just a month ago that gasoline peaked at over $5 a gallon.

Earnings season is beginning and so far we’ve heard from Delta Airlines and Fastenal FAST . While Delta missed on their revenue and profit numbers, they did offer an upbeat outlook. That could be an encouraging sign that airline travel, which has recently come under pressure, could pick back up. Fastenal, on the other hand, beat on profits but offered a more cautious outlook. Attention on the earnings front will now turn to JP Morgan, Morgan Stanley MS and Taiwanese Semiconductor, who all report tomorrow morning. I’ll be very interested to hear Jamie Dimon’s comments and forward looking statements.

Elsewhere, Amazon AMZN alerted employees they plan to slow hiring; a trend we’re seeing in the technology sector. That comes on the heels of Tesla TSLA laying off 229 employees in San Mateo yesterday. And in what is perhaps the least surprising news of yesterday, Twitter filed a lawsuit against Elon Musk after Musk announced over the weekend he is terminating his plan to purchase the company.

In premarket trading, the S&P 500, Nasdaq and oil were all up heading into the CPI number, but have since reversed course. The S&P is now down 1.5%, Nasdaq is down a little over 2% and oil is down around 1%, at just under $92.50. Meantime, volatility has jumped higher with the VIX hovering around $28.30 in premarket, after closing nearly a dollar lower yesterday.

For retail traders, it could prove to be a choppy day, especially given the jump in VIX. Based on premarket activity, stocks look set for a weak open. If you’re a long term investor, there remain plenty of opportunities to add new positions. Options and futures options traders looking to establish new positions will appreciate the uptick in volatility. Most importantly, I think we all need to recognize this is a tough market where buying continues to be met by sellers. If you’re actively participating, I would stay small and stick with uncorrelated positions.

tastytrade, Inc. commentary for educational purposes only.