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Economic Indicators: U.K. GDP Drop and EU Industrial Production

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Economic Indicators: Tom Essaye Quoted in Barron’s

Gloomy Economic Data Weigh on European Trading

Economic indicators such as, “U.K. GDP dropped…after hot wage data yesterday, bolstering stagflation fears while EU Industrial Production fell,” said Tom Essaye, the founder of Sevens Report Research.

“Despite the recently soft data, rates markets continue to price in a 75% chance of an ECB rate hike this week.”

Also, click here to view the full Barron’s article published on September 13th, 2023. However, to see Tom’s full comments on the current market environment sign up here.

Economic Indicators

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What the Fed Decision Means for Markets

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What’s in Today’s Report:

  • What the Fed Decision Means for Markets
  • EIA Analysis and Oil Market Update

Futures are moderately higher mostly on momentum as yesterday’s FOMC decision reinforced market expectations that rate hikes are over, while markets anticipate a dovish hike from the ECB later this morning.

There was no market moving economic data overnight.

Today is a busy day on both the economics and earnings front.  The key event is the ECB Rate Decision (E: 25 bps hike) and markets will want to see if Lagarde implies the next rate hike (likely in September) will be the last one (if so, that’ll be a positive for markets).

Economically, there are several important reports today including, in order of importance: Jobless Claims (E: 235K), Durable Goods (E: 0.5%), Advanced Q2 GDP (E: 1.5% y/y) and Pending Home Sales (E: 0.3%).  As has been the case for much of 2023, the more “Goldilocks” the data, the better for stocks (especially cyclicals).

Finally, on the earnings front, there are numerous notable reports today including: RCL ($1.58), MCD ($2.77), LUV ($1.08), MA ($2.84), HON ($2.20), F ($0.51) and INTC (-$0.04) and investors will remain focused on margins and guidance (they want to see positive commentary on both).

Jobs Report Preview

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What’s in Today’s Report:

  • Jobs Report Preview

Futures are moderately higher ahead of the jobs report thanks to solid earnings overnight.

Earnings overnight were good, highlighted by AAPL and SQ, which both rallied after hours and are helping lift futures.

Economic data underwhelmed as both the Chinese Composite PMI and German Manufacturers’ Orders missed expectations, but the numbers aren’t moving markets.

Today focus will be on the jobs report and expectations are as follows:  178K Job Adds, 3.6% Unemployment Rate and 0.3% m/m,4.2% y/y wages.  As we cover in the Report, risks to this jobs number are two sided, as a “Too Hot” number could reverse the Fed pause expectations, while a “Too Cold” number will spike hard landing fears.  So, the market needs a number at or modestly below the expectation, and if it gets that “Just Right” number, stocks can rally today.

We also get two Fed speakers today, Cook (1:00 p.m. ET) and Bullard (1:00 p.m. ET), but neither should move markets.

What the Fed Pause Means for Markets

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What’s in Today’s Report:

  • What the Fed Pause Means for Markets
  • EIA Analysis and Oil Market Update

Futures are slightly lower following more regional bank turmoil and disappointing earnings.

Pac West (PACW) announced overnight that it’s seeking “strategic alternatives” and the stock dropped more than 30% pre-market and is weighing on other regional banks.

On earnings, EL and QCOM both missed estimates and that’s also weighing on sentiment.

Today focus will initially be on the ECB Rate Decision (E: 25 bps hike) and economic data via Jobless Claims (E: 238K) and Unit Labor Costs (E: 3.9%).  Markets will want to see 1) A not too hawkish ECB (so no 50 bps hike), 2) A mild uptick in jobless claims (signaling more balance in the labor market) and 3) A drop in Unit Labor Costs (implying wage pressures are easing).  If we get the opposite of those events, expect more declines today.

After the close we get what’s likely the most important earnings report of the season, AAPL ($1.44), and a solid number there would help sentiment.

What the BOJ “Rate Hike” Means for Markets

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What’s in Today’s Report:

  • What the BOJ “Rate Hike” Means for Markets (Possible a Positive)

Futures are moderately higher following better-than-expected earnings overnight.

Both Nike (NKE up 12% after hours) and FedEx (FDX up 4% after hours) posted better-than-expected earnings overnight and those results are helping to ease rising anxiety about 2023 earnings.

The only notable economic report was German Gfk Consumer Climate and it was in line (–37.8 vs. (E) -37.5).

Today the calendar stays quiet (it picks up tomorrow) but the focus will be on Consumer Confidence (E: 101.0) and Existing Home Sales (E: 4.2M) and the key for data will remain moderation (but not a collapse that implies looming stagflation).

Market Set Up Into Today’s CPI Report

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What’s in Today’s Report:

  • Market Set Up Into Today’s CPI Report
  • Are Semiconductor Stocks Forecasting the Slowdown?

Futures are slightly higher on mildly positive geo-political news and ahead of the CPI report.

China ended the military exercises around Taiwan and while that was always expected it’s still a mild positive as it reduces the chances of any accidental conflict.

Economically, the Chinese CPI rose 2.7% vs. (E) 2.9% allowing China to continue to actively stimulate its economy.

Today’s focus will be on the CPI report and expectations are as follows: Headline CPI:  0.2% m/m, 8.7% y/y. Core CPI: 0.5% m/m, 6.1% y/y.  Markets remain in a “glass half full” mood on inflation so unless the numbers are solidly above expectations, we’d expect stocks to weather the number with only modest declines (while a soft number will likely spur an additional rally).

We also get two Fed speakers, Evans (11 a.m. ET) and Kashkari (2 p.m. ET) but they shouldn’t move markets.

Jobs Day

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What’s in Today’s Report:

  • Jobs Day
  • Why the BOE Hiked 50 bps Yesterday

Futures are flat ahead of today’s jobs report and following a generally quiet night of news.

The only notable economic report was German Industrial Production and it beat estimates rising 0.4% vs. (E) -0.4%.

Geo-politically, China suspended military, climate, and drug enforcement communications with the U.S in retaliation for the Pelosi visit to Taiwan.  But, unless retaliation from China impacts U.S./China trade or commodities prices, markets will largely ignore it.

Today the focus will be on the jobs report and the key for markets is that it shows easing wage pressures and moderation in the labor market.  So, a mildly underwhelming reports vs expectations (E: 250K job adds, 3.6% UE Rate, 5.0% y/y wage growth) is the best outcome for stocks.

There’s also one Fed speaker today, Barkin at 8:00 a.m. ET, but he shouldn’t move markets.

Two Clear Takeaways from the Fed Decision

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What’s in Today’s Report:

  • Two Clear Takeaways from the Fed Decision
  • EIA Analysis and Oil Update

Futures are modestly lower on disappointing earnings and the increased probability of higher corporate taxes.

Earnings from META, QCOM, and others disappointed and that’s reversing some of Wednesday’s tech-driven gains.

Senate Democrats agreed on a smaller Build Back Better bill that includes some corporate tax increases, although it’s still not clear when this becomes law.

Today will be a busy day from a data and earnings standpoint.  Economically, Jobless Claims (E: 249K) is the key report and if it moves considerably above 250k that will signal further deterioration in the labor market.  We also get Preliminary Q2 GDP (E: 0.5%) and as we said yesterday, don’t be shocked if it’s negative and you hear a lot of recession commentary.

On the earnings front, today is an important day and the key reports will be:  PFE ($1.72), MA ($2.36), AAPL ($1.14), AMZN ($0.15), INTC ($0.69).

Brace for a Recession on Thursday

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What’s in Today’s Report:

  • Brace for a Recession on Thursday
  • Housing Data Points to Slowdown in Real Estate Market
  • Chart: S&P 500 Holds 50-Day Moving Average by One Point

Stock futures are solidly higher this morning as quarterly earnings results from tech giants MSFT and GOOGL were both well received by investors after the close yesterday while investor focus shifts to the Fed today.

This morning, economic data will be in focus early with Durable Goods Orders (E: -0.5%), International Trade in Goods (-$103.2B), and Pending Home Sales (-1.0%) all due out by 10:00 a.m. ET.

From there, expect price action to slow considerably as focus turns to the Fed with the FOMC Meeting Announcement at 2:00 p.m. ET followed by the Fed Chair Press Conference at 2:30 p.m. ET.

Markets have priced in a 75% chance of a 75 basis point hike today while no changes to forward-guidance are expected so any variance from those expectations could result in sizeable moves in the market this afternoon.

Finally, earnings season remains in full swing with SHOP ($0.03), TMUS ($0.41), HLT ($1.06), SHW ($2.81) reporting ahead of the bell and META ($2.51), F ($0.43), and QCOM ($2.86) releasing results after the close. Any of those reports could lead to sector specific volatility despite the Fed today.

Is the Yield Curve Signaling an Imminent Recession?

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What’s in Today’s Report:

  • Is the Yield Curve Clearly Signaling an Imminent Recession?
  • Chart: Oil Testing Critical Support

Stock futures are sharply lower with global shares as much of yesterday’s rally is being given back amid a resurgence in growth concerns ahead of Powell’s testimony today.

U.K. CPI met estimates at 9.1% but Input PPI jumped 22.1% vs. (E) 19.4% stoking fears that central banks will have to be even more aggressive to get inflation under control in the months ahead.

There are no notable economic reports today but there are multiple Fed speakers: Barkin (9:00 a.m. & 12:00 p.m. ET), Powell (9:30 a.m. ET), Evans (12:55 p.m. ET), and Harker (1:30 p.m. ET).

Then in the afternoon, there is a 20-Yr Treasury Bond auction at 1:00 p.m. ET that could move yields and impact equity markets.

Bottom line, the focus will be on Powell’s testimony before the House this morning as there has been a resurgence in concerns about global growth in the face of the latest broad shift to more aggressive central bank policy in response to sticky and elevated inflation pressures globally. And if Powell is seen as getting more hawkish, or the market shows signs of losing confidence in the Fed’s policy plans, we could potentially see stocks test the 2022 lows.