Analysis: INTC AMD TSM

Equities look to attempt a rebound Tuesday following five days of losses that put the S&P 500 at its lowest level since 2020 with market breadth at its worst level in 32 years, according to Bespoke Investment Group. We'd remind readers that some of the sharpest short-term rallies happen in bear markets, when they become oversold. Indeed yesterday, we shared we could see a bounce higher in the coming days.

Given the prospects for higher interest rates, slowing enterprise spending, and currency headwinds, the upcoming September-quarter earnings season will be a real test for these markets. While we will look to be opportunistic where it makes sense, we largely expect to remain cautious given our concerns about what lies ahead for earnings expectations and for the market at large.

We will be on lookout for earnings pre-announcements ahead of the upcoming earnings season, which kicks off on October 13 led by the usual parade of bank earnings. Between now and then, several key pieces of economic data will lead the Atlanta Fed to update its GDPNow model for the current quarter. We'll see if it moves from its current reading of 0.3% into negative territory, matching the GDP readings for the first two quarters of 2022. Should that happen, we are likely to see another bout of worry emerge over the Fed's stated course.

On our latest Action Alerts PLUS Podcast posted yesterday, we presented our view that the Fed is unlikely to waver in its comments over the coming days as a bevy of Fed heads make the rounds, confirming it will not back off until it has inflation back toward its 2% target. What will be said today from Chicago Fed President Charlie Evans and Cleveland Fed President Loretta Mester reinforce the view we shared with members.

In his prepared remarks, Evans said:

"Reducing inflation to a level consistent with the Fed's 2 percent objective will require a period of restrictive financial conditions. These will generate below-trend growth and some softening of labor market conditions and restore better balance between supply and demand conditions in the U.S. My FOMC colleagues and I are acutely aware that this slowdown will, unfortunately, cause difficulties for some households and businesses. Yet, failing to restore price stability would result in far greater costs."

Mester's comments also reinforce the Fed's conviction:

"The median path among FOMC participants moved up again in response to the implications of incoming data for the outlook. In particular, high inflation is proving to be more persistent, and more restrictive policy will be needed and for longer to ensure that inflation expectations do not move up and that inflation moves back down....I am going to be very cautious and not assume that one or two improved readings on inflation mean inflation is on a downward path or that inflation expectations are firmly anchored at our goal when expectations measures are elevated. Wishful thinking cannot be a substitute for compelling evidence."

Today's Economic Data

The pace of economic data quickens today with several August releases, including Durable Orders at 8:30 AM ET and New Home Sales at 10:00 AM ET. Even as we get ready to close the books later this week on September, July data is still being published, including the FHFA Housing Price Index and the S&P Case-Shiller Home Price Index, both of which will be out at 9 AM ET. Rounding out the day's gauntlet, at 10 AM ET, the September print for Consumer Confidence will be released and it's expected to rebound from 103.2 in August.

Watching Intel's Innovation Conference

Intel's (INTC) annual Innovation Conference is today. The event will include a keynote address by CEO Pat Gelsinger and updates on the 13th Gen Intel Core series.

Given the reported weakness in the PC market and the portfolio's position in Advanced Micro Devices (AMD) , we would look for an update on what Intel is seeing for that as well as the data center market. We'll also be curious to hear what Intel has to say about its developing foundry business as well as spending associated with the recently passed CHIPS Act. Reports from DigiTimes, suggest Taiwan Semiconductor (TSM) has seen its major fabless customers start cutting back wafer starts for 2023, which could lead it to revise its 2023 outlook lower in the coming months.

Ian, Noru, and the Nord Stream pipeline

We will be monitoring developments with Hurricane Ian, which strengthened to category 3 and is expected to make landfall near Tampa, Fla. later this week, a city that hasn't had a direct hit from a hurricane in 100 years. Mandatory evacuations have been declared in several areas of Tampa and Clearwater, Fla. In addition to the potential harm, we'll be looking to assess the potential impact on the economy as well as any disruption on the energy front.

In addition to what is happening in the southeastern U.S., Vietnam evacuated more than 400,000 people ahead of the arrival of Typhoon Noru, the strongest the country has seen in two decades. Noru has the potential to renew supply-chain disruptions for the textile, apparel, footwear, and electronics industries.

And sticking with potential supply issues, Bloomberg reports European authorities are probing "unprecedented" damage to the Nord Stream pipeline system that transports Russian gas to the region. There have been reports of Germany getting close to filling natural gas storage ahead of the upcoming winter, but the rest of Europe continues to worry about its energy situation. Another potential supply imbalance the market will need to factor into its thinking in addition to the upcoming turnoff of the spigot to the U.S. Strategic Petroleum Reserve and the December 5 halt for the EU to crude purchases from Russia.