The Chairman Speaks And Prime Day Dates Announced

Key Takeaways

• Chairman Powell Begins Two Days Of Congressional Testimony
• Amazon Announces Prime Days Date
• FedEx Guides Lower

Stocks head into Wednesday following two consecutive days of losses and a warning by FedEx
FDX
is unlikely to help the situation. The S&P 500 fell by 0.5% on Tuesday while the Nasdaq Composite was down 0.2%. Market volatility ticked up ever so slightly with the VIX closing at 13.88, still well below its historical average.

Despite losses over the past two trading sessions, the S&P 500 remains up 14% year-to-date and 5% for June. The Nasdaq Composite is up over 30% year-to-date and over 5.5% for the month. In the face of rising interest rates and the banking crisis which began in March, markets have proven exceptionally resilient and those betting against it have been left a bit quiet.

Short interest in U.S. markets topped $1 trillion this month, according to an article in today’s Wall Street Journal. That’s the highest level since April of 2022. Tesla
TSLA
tops the list of most shorted stocks, with Amazon
AMZN
, Apple
AAPL
, Microsoft
MSFT
and Nvidia also on the list. The high level of short interest also comes at a time when bullish sentiment is at its highest level since November of 2021, according to the American Association of Individual Investors. What makes this particularly interesting is how the trades themselves are actually structured. While short interest may be high, we’ve also seen some heavy buying of call options in the market. Therefore, I’m a bit hesitant to draw any conclusions about the high level of short interest as it may simply be a hedge against long calls.

Shares of Tesla are indicated slightly higher in premarket following news Rivian Automotive will begin using Tesla’s Supercharging network. The deal with Rivian follows recent deals with Ford and GM who will also be using Tesla chargers and speaks to Elon Musk’s vision of Tesla being a tech company, not just an EV manufacturer. Since the end of April, shares of Tesla are up over 80%.

There are some potential headwinds facing investors as we head into the halfway point of this holiday shortened week. After the close on Tuesday, FedEx posted earnings and its third consecutive drop in quarterly revenue. The company also guided lower, projecting single digit revenue growth for the year and citing inflation, interest rates as well as a slowdown in global trade as obstacles facing the company. Shares of FedEx are indicated lower by 3% in premarket.

FedEx is often seen as a proxy for online shopping and there’s no bigger name in that category than Amazon, who announced this morning their annual Prime Day sale which will take place July 11-12. Initially launched to much fanfare, Prime Day has since lost a bit of its luster as competitors such as Walmart
WMT
, Best Buy
BBY
and others tend to announce similar sales. I’m curious to see how this summer’s sale performs, especially in light of the warning from FedEx. Shares of Amazon are indicated flat in premarket trading but are up 50% for the year.

Another item of note today is Chairman Powell who begins two days of Congressional testimony. While the Fed left interest rates alone at their last meeting, markets are assigning an almost 80% chance of a quarter-point rate hike at the next meeting, scheduled for the end of July. I’m very interested in hearing what Powell has to say, not just about the upcoming meeting, but also his outlook for the rest of this year and how markets react to his statements. Testimony is scheduled to begin at 9am CT, so markets may start the day relatively subdued as investors wait for Powell to begin speaking. As always, I would stick with your investment plan and long term objectives.

tastytrade, Inc. commentary for educational purposes only. This content is not, nor is intended to be, trading or investment advice or a recommendation that any investment product or strategy is suitable for any person.