KG on Core PCE's Importance This Week, Crude Levels to Watch, SPCX Starship Launch

Sam (0:00)

Yeah, so let's get out to Kevin Green, who joins me just for a walkthrough of these market levels. Good morning, KG, hope you had a nice weekend. Just talk us through what you're watching right now.

Kevin Green (0:09)

Well, Sam, obviously, we are seeing a little bit of a pullback for the SP500, pretty much across the board, actually, if you're looking at the indexes. And the only sector that are really advancing to the upside is energy. And obviously, that's because of the news headlines. We have real estate as well as consumer staples catching a bit. And consumer staples is actually very interesting. The latter half of last week, you actually did see a pretty decent bid in the Costco, and even Walmart for that matter. So let's see if that trend is going to continue a little bit more defensive in nature. But overall, we're going to be focusing on yields this week. A lot of economic data as you talked about with PCE coming out, we're going to get an update on GDP as well. And then we have the jobs report, the ADP report on Wednesday, the jobs report on Friday, and a significant amount of Fed speakers throughout the week as well. So we know that we're probably going to see a little bit of volatility heading into the middle to the end of this week.

But I think it's going to be very interesting to see what happens at the 10 year. Yes, it does have some negative headlines around it, and the fundamentals do not look that great. But are we already kind of pricing in some of the news that we're going to get this week, like PCE coming in hot, or maybe some of these Fed members really speaking and providing a little bit more of a hawkish tone. This could be a setup for a potential dead cat bounce in the treasury market, meaning prices go higher, yields may be stabilized or go a little bit lower. And that's what I'm keeping my eye out for for the remainder of this week. Just given the environment that we're in right now.

Sam (1:32)

Data on the tap, we're going to be watching that 10 year very, very closely, but it is so closely correlated with what we're seeing as far as the moves in oil as well. And, you know, obviously interesting, given Trump has rejected Iran's proposal here, expecting to resume these attacks and bombing after the midterms. Just talk us through what you're seeing as far as the chance today.

Kevin Green (1:53)

Yeah, you know, there's a lot of headlines around the resumption of strikes. But we are also seeing headlines this morning that the US and Iran are going to be speaking with mediators today and tomorrow, not directly to each other, but with mediators. That's why we have seen the price of crude oil actually move lower here, trading at around $96.54 earlier in the session, now trading around $94.

There is also a news report that Saudi Arabia is looking at actually providing a discount for some of its prices for the oil that it ships out of the Omani ports here. That is to be able to try to recapture some market share as well as maybe to entice some of these tankers to come into the straight-up port moves as well as into the Gulf. That's also pushing prices a little bit lower. You're seeing the differential between Brent and just WTI crude coming into around that $4 or $4.15 level. There's usually around a $6 spread between the two. I would say the fundamentals are still relatively bullish if you are oil bull right now, just given the fact that we have that shortage of supply, especially in Europe. It sounds like not only Saudi Arabia is going to be holding off on diesel shipments over to Europe. There could be something that's in the works here in the United States, so maybe constrain some of that supply.

All of that is really bullish for the fundamentals for the energy patch right now, but it just takes one headline to really break this market down. I'm still looking between $93 and $105 in WTI as that risk zone for bulls as well as for bearers. If you're able to get above that 105 and close above it with some conviction, that's when we can probably go back up to that 120 But I think the skews a little bit more bearish over the next two weeks, three weeks rather than bullish if you're just looking at the dynamics and the news flow that we are seeing.

Sam (3:37)

Okay, so we're waiting on the PCE, we're waiting on the jobs report. I know that you're going to be watching Consumer Confidence as well. We've got ISMPMIs. Which is the most important catalyst to watch, do you think?