Fed Wildcards to Watch

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What’s in Today’s Report:

  • Wildcards to Watch: Tapering Schedule and Balance Sheet Reduction
  • Chart: Inside Day in the S&P Underscores Trader Indecision
  • Technical Breakpoints for the Market Today

Stock futures are firmly higher as trader focus shifts ahead to the Fed while investors digest mostly upbeat earnings.

MSFT initially fell by 7%+ after earnings yesterday but a positive outlook by management during the investor call has helped shares turn positive and rise by more than 4%.

Looking into today’s session, there are two economic reports due out this morning: International Trade in Goods (E: -$95.1B) and New Home Sales (E 760K) but neither should move markets ahead of the FOMC Announcement (2:00 p.m. ET) and Fed Chair Press Conference (2:30 p.m. ET) which will be the main events today.

Earnings today include: BA (-$0.09), T ($0.76), FCX ($0.96), PGR ($0.99), TSLA ($2.26), INTC ($0.90), STX ($2.36), RJF ($1.77).

Bottom line, the market is coiled up after the volatile start to the week and whether the Fed is dovish or hawkish today will decide whether we see a relief rally or break down to new lows.

Fed Meeting Preview

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What’s in Today’s Report:

  • What to Make of Yesterday’s Selloff and Reversal
  • FOMC Preview
  • Chart: S&P 500 Measured Move Reached

Futures are trading off of the overnight lows but still down roughly 1% as yesterday’s volatile session is digested ahead of the Fed while IBM posted strong Q4 earnings yesterday and economic data largely met estimates overnight.

The FOMC meeting begins today which will increasingly capture trader focus ahead of tomorrow’s announcement and press conference.

Economically, we get two reports on the housing market this morning: the Case-Shiller Home Price Index (E: 1.0%) and the FHFA House Price Index (E: 1.0%) but Consumer Confidence (E: 111.9) will be the more important number to watch given the growing uncertainty about the state of the economic recovery. Another bad print like we saw with yesterday’s Composite PMI Flash could send stocks lower.

There is a 5-Yr Treasury Note auction at 1:00 p.m. ET and investors will be looking for strong demand (which would reflect dovish shifting Fed expectations) as we saw with yesterday’s 2-Yr auction which helped stocks bottom and reversed so sharply in intraday trade.

Finally, on the earnings front, we will hear from: JNJ ($2.12), VZ ($1.28), GE ($0.83), MMM ($2.03), and AXP ($1.78) before the open, and then MSFT ($2.29), TXN ($1.95), and COF ($5.14) after the close.

Sevens Report Co-Editor Tyler Richey Quoted in MarketWatch on January 21, 2022

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Oil prices finish lower, but tally a 5th straight weekly gain

A surge in risk-off money flows in the back half of the week have caused oil futures to give back the bulk of this week’s gains…said Tyler Richey, co-editor at Sevens Report Research. Click here to read the full article.

Tom Essaye Quoted in Barron’s on January 21, 2022

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Netflix Tumbled, Bitcoin Slipped—and What Else Happened in the Stock Market Today

Several companies cited higher costs as impacting profitability, furthering margin concerns…wrote Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

It’s a Tightening Tantrum, Not a Taper Tantrum

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What’s in Today’s Report:

  • It’s a Tightening Tantrum, Not a Taper Tantrum
  • Weekly Market Preview:  Will the Fed Ease Hawkish Concerns, and Will Earnings Improve?
  • Weekly Economic Cheat Sheet:  FOMC Decision Wednesday, Key Inflation Data

Futures are modestly lower as escalating Russia/NATO tensions erased early solid gains.

Tensions between Russia and NATO increased over the weekend as the US and UK reduced embassy personnel, implying a military conflict could be imminent.

Economically, the EU flash manufacturing PMI beat estimates at 59.0 vs. (E) 57.9, but the UK number slightly missed (56.9 vs. (E) 57.3).

Today’s focus will be on the U.S. Flash January Composite PMI (E: 56.7) and markets will want to see stable data to ensure the economy is solid heading into future Fed rate hikes.  On the earnings front, there are three notable reports today, HAL ($0.34), IBM ($3.39), and LOGI ($1.22), but the really important reports won’t come until later this week.

On the geopolitical front, headlines have turned more ominous regarding a conflict in Ukraine, but as long as it’s limited and there isn’t imminent risk of a larger Russia/NATO conflict, then markets should largely look past the issue as it won’t impact economic growth or Fed policy.

Sevens Report Co-Editor Tyler Richey Quoted in MarketWatch on January 10, 2022

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Oil ends lower as traders weigh supply disruptions and omicron’s threat to energy demand

Supply concerns continue to linger after production and pipeline outages overseas buoyed prices last week…Tyler Richey, co-editor at Sevens Report Research, told MarketWatch. Click here to read the full article.

 

Sevens Report Co-Editor Tyler Richey Quoted in MarketWatch on January 10, 2022

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Oil prices settle lower as traders weigh risks to supply and demand

The various conflicts and threats across eastern Europe and the Middle East will remain supportive for energy in the near term, but it already appears that some of the supply and production disruptions are being…said Tyler Richey, co-editor at Sevens Report Research. Click here to read the full article.

 

Why Did Stocks Drop Again?

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What’s in Today’s Report:

  • Why Did Stocks Drop Again?
  • Technical Analysis Follow Up to Sector Valuations
  • EIA Analysis and Oil Market Update

Futures are modestly lower but that’s not that bad considering Thursday’s ugly close and the soft NFLX earnings overnight.

Earnings were generally underwhelming, highlighted by the soft NFLX guidance which sent the stock down 20% after hours.  But, PPG and CSX also cited higher costs as impacting profitability, furthering margin concerns.

UK Retail Sales was the only notable economic number, and it missed estimates (-0.9% vs. (E) 3.4%).

Today there are no economic reports and just two notable earnings announcements, SLB ($ $0.39) and ALLY ($2.01), but they shouldn’t move markets.  Instead, it’s all about tech.  If tech can stabilize today, then markets can bounce (possibly into the Fed meeting next week).

Early Earnings Season Takeaways

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What’s in Today’s Report:

  • Early Earnings Season Takeaways

Futures are modestly higher as China made two surprise interest rate cuts overnight, helping stocks bounce from Wednesday’s late-day declines.

China’s central bank made two small surprise interest rate cuts overnight which helped Asian stocks rally (Hang Seng up 3%) and that’s pushing U.S. futures higher.

Today focus will be on economic data and earnings, and for stocks to extend the early morning rebound we need to see stable data and solid earnings (meaning no extreme cost pressures).  Economically, the key report today is the  Philly Fed Manufacturing Index (E: 19.1).  If it suddenly plunges as Empire did on Tuesday, that will slightly increase anxiety about the economy.  We’ll also be watching Jobless Claims (E: 207K) and Existing Home Sales (E: 6.40M).

On the earnings front, the key report today is NFLX ($0.82) after the close, but we’ll also be watching:  AAL (-$1.54), TRV ($3.86), UNP ($2.60), CSX ($0.41) and PPG ($1.19).  If margins are much weaker than expected, look for more earnings-related volatility.

Sectors: Expensive, Cheap, and In Line With the S&P 500

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What’s in Today’s Report:

  • Sectors: Expensive, Cheap, and In-Line With the S&P 500
  • Chart: 10-Year German Bund Yield Turns Positive

U.S. stock futures are bouncing modestly after yesterday’s steep selloff as the surge in bond yields is showing signs of pausing after some mixed inflation data overnight.

German CPI met estimates of 0.5% in December, while U.K. PPI was 0.3% vs. (E) 0.6%, which is helping to ease some inflation concerns today.

Looking into today’s session, there is one economic report to watch: Housing Starts and Permits (E: 1.65M, 1.710M) while no Fed officials are scheduled to speak today.

There is a 20-Yr Treasury Bond auction at 1:00 p.m. ET that could spark another move in yields (a further rise in rates will continue to weigh on high valuation/growth tech stocks and the broader market while a pullback will open the door to a relief rally).

Finally, earnings season is continuing to pick up with BAC ($0.76), MS ($2.00), UNH ($4.30), PG ($1.65), and CFG ($1.61) all reporting ahead of the bell while UAL ($2.23), AA ($2.04), and DFS ($3.61) will release results after the close.

Bottom line, rising yields have been the biggest influence on stocks in recent sessions so it will take a stabilizing bond market and likely an additional positive catalyst or two (such as good earnings/good economic data) to see equity markets find their footing and rally today.