Never Fight the Fed

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What’s in Today’s Report:

  • Never Ever Fight the Fed

Stock futures, the dollar, and Treasuries are all little changed this morning while international markets were mixed overnight as investors focus on the Fed today.

There were no market moving economic reports o/n although rising trade tensions between the U.S. and China and several bad earnings reports citing slowing global trade (especially FDX) have become a growing headwind for risk assets since yesterday’s close.

With focus on the Fed this afternoon, it is likely to be a quiet morning with price action dictated by positioning into the announcement. The one release that could move markets this morning is the Weekly EIA Inventory Report which will print at 10:30 a.m. ET (E: +800K bbls).

Turning to the Fed, the FOMC Meeting Announcement and Forecasts will hit at 2:00 p.m. ET and then Fed Chair Powell’s Press Conference is scheduled for 2:30 p.m. ET.

To recap, the two key developments to look for from the Fed are balance sheet reductions and fewer rate hikes in 2019 (the dot plot). The market’s expectations of a very dovish Fed are extremely high right now, so there is not much room for error by the FOMC today and any sort of disappointment could spark a wave of volatility across asset classes.

FOMC Preview

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What’s in Today’s Report:

  • FOMC Preview

U.S. futures are higher this morning as trader focus turns to the Fed meeting while good economic data in Europe helped drive gains in international markets overnight.

U.K. unemployment fell to a multi-decade low of 3.9% in February according to the latest Labour Market report while the Business Expectations component of the German ZEW Survey was –3.6 vs. (E) -11.0 underscoring a less pessimistic outlook on the economy by analysts.

A sense of “Fed paralysis” has already begun to fall over markets this week as the FOMC meeting begins today and trader focus has largely shifted to tomorrow’s announcement and press conference.

As far as catalysts go today, there is one economic report: Factory Orders (E: 0.1%) but the single data point’s influence on the market is likely to be limited with the Fed looming tomorrow.

Tom Essaye Quoted in Barron’s on March 9, 2019

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The Dow Is Set to Drop Because Boeing Is Still a Problem

But for now, there’s nothing, and it just might stay that way. “Unless we get a surprise U.S./China trade headline (and chatter there seems to be…” Click here to read the article.

Tom Essaye Quoted in CNBC on March 15, 2019

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“One of the unique parts about the decade-long bull market is that it’s been driven by a couple different things in its life,…” Click here to read the full article.

Tyler Richey of the Sevens Report Quoted in Heffx on March 18, 2019

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“Domestic crude oil production slipped for the first time this year … meanwhile, net imports remained suppressed,” with U.S. sanctions on Venezuela being the primary driver of the import decline. On Wednesday, the Energy Information Administration reported that U.S. crude supplies unexpectedly…” Click here to read the article.

What Caused Last Week’s Rally (And Can It Continue?)

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What’s in Today’s Report:

  • Justification For Last Week’s Rally?
  • Market Internals – Not As Strong As You’d Think
  • Weekly Market Preview
  • Weekly Economic Cheat Sheet

Futures are only slightly lower despite disappointing U.S./China trade headlines over the weekend and more underwhelming global economic data.

The South China Morning Post reported that a Trump/Xi trade summit (to end the trade war) might not happen until June, later than the current April expectation, as talks on key issues continue to drag out.

Global economic data remained underwhelming as Japanese exports missed expectations, falling –1.2% vs. (E) 0.7%.

Today there is only one economic report, Housing Market Index (E: 63.0), and no Fed speakers (they’re in the blackout period ahead of Wednesday’s meeting) so unless we get a surprise U.S./China trade headline (and chatter there seems to be rising following the weekend) I’d expect digestion of last week’s big rally.

A Glass Half Full Market

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What’s in Today’s Report:

  • Why This Is a Glass Half Full Market (For Now)
  • Why GE and Chinese Economic Data Were Important Yesterday

Our regular editor is out today so my apologies for any uptick in typos.

Futures are modestly higher following more optimistic chatter on U.S./China trade and Chinese economic growth.

Chinese officials again reiterated support for their economy overnight and that, combined with renewed optimism for a U.S./China trade deal, sent futures higher.  But, I do want to point out that nothing materially new happened overnight – it was jus more of the same commentary we’ve seen for the past month or so.

There were no notable economic reports overnight.

Today focus will be on economic data as we get our first look at March activity via the Empire State Manufacturing Survey (E: 10.0) along with Industrial Production (E: 0.4%), Consumer Sentiment E: 95.0) and January JOLTS (E: 7.155M).  Again, the stronger the data, the better for stocks.

Finally, today is “Quadruple Witching” options expiration so don’t be surprised by some volatility, especially into the close.

Why Stocks Have Rallied

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What’s in Today’s Report:

  • Why Stocks Have Rallied (FOMO)
  • An Important Gap Between Stocks and Bonds
  • EIA Analysis and Oil Market Update

Futures are slightly lower following a quiet night as markets digest more mixed economic data following the big three day rally.

Chinese economic data was mixed as Industrial Production missed estimates (5.3% vs. (E) 5.5%) while Fixed Asset Investment slightly beat and Retail Sales met expectations.

Geo-politically it was a quiet night as there were no updates to U.S./China trade.

Today focus will be on economic data via the Jobless Claims (E: 225K), Import Export Prices (E: 0.3%, 0.2%) and New Home Sales (E: 620K), as well as testimony before Congress by Treasury Secretary Mnuchin.  Finally, there’s a GE guidance update later this morning, and if that’s particularly soft, that could hit stocks.

Tom Essaye Appeared on WPTV on March 12, 2019

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“If you think about it from a total cost stand point, eliminating the subsidized loans will hurt borrowers in so much as it will cost them more over the time of the loan,” said Tom Essaye, President of Sevens Report Research. Click here to watch the full interview.

Economic Breaker Panel: March Update

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What’s in Today’s Report:

  • What’s Next for Brexit
  • Economic Breaker Panel – March Update
  • Another (Potentially Bearish) Copper Development

Stock futures are marginally higher this morning after a very quiet night of news while no major international market moved more than 1% overnight.

Asian shares declined modestly after a report that Japanese Machine Orders fell –5.4% in January vs. (E) -1.9%.

In Europe, EU Industrial Production beat expectations (1.4% vs. E: 1.0%) while focus remains on today’s “hard Brexit” vote in the U.K. (which is very unlikely to pass).

Looking into today’s U.S. session, focus will be on economic data early with two reports due ahead of the bell: Durable Goods Orders (E: -0.8%), PPI (E: 0.2%), and one shortly after the open: Construction Spending (E: 0.3%).

There are no Fed officials speaking today so investor focus will shift to the “hard Brexit” vote but it is very unlikely to pass which will result in another vote to delay the Brexit date tomorrow. This scenario is priced in however and should not materially move markets.