What the Fed Decision Means for Markets

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What’s in Today’s Report:

  • What the FOMC Decision Means for Markets
  • FOMC Takeaways
  • EIA Data Analysis and Oil Update

Stock futures are under pressure this morning (Nasdaq futures down over 1%) as the 10 year Treasury yield approached a new 52-week high of 1.75% overnight amid further digestion of yesterday’s Fed decision and lingering inflation concerns.

There were no notable economic reports or market moving headlines overnight.

Today, there are two important economic releases to watch ahead of the bell: Jobless Claims (E: 700K) and the Philadelphia Fed Manufacturing Index (E: 24.0) as investors will be looking for continued improvement in these two current month data points.

There are no Fed officials speaking today however the Treasury will hold a 10-Yr TIPS auction at 1:00 p.m. ET and if the outcome triggers a further spike in the 10 year yield, expect selling pressure on tech shares to weigh on the broader equity markets as the Fed decision continues to be digested.

Fed Day: Key Levels to Watch

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What’s in Today’s Report:

  • Key Levels to Watch in the Wake of the Fed
  • Retail Sales Report Takeaways: Not as Bad as It Looked

Stock futures are little changed this morning following a mostly quiet night of news as global markets collectively look ahead to the Fed today.

Economically, Eurozone HICP (their CPI equivalent) met estimates of 0.2% in February which did not cause much movement in markets this morning.

Today, there is one economic report due to be released before the bell: Housing Starts and Permits (E: 1.579M, 1.725M) but the release is unlikely to materially move markets as investors are already largely focused on the Fed.

The FOMC Meeting Announcement and Economic Projections will hit at 2:00 p.m. ET and Chair Powell’s Press Conference will begin around 2:30 p.m. ET.

As discussed in yesterday’s full FOMC Preview, the market wants to see acknowledgment of the recent rise in yields and some degree of a pledge to act with new policies to combat that rise. If Powell fails to deliver such a confidence boost, expect a volatile market reaction across asset classes.

FOMC Preview

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What’s in Today’s Report:

  • FOMC Preview

U.S. equity futures are little changed this morning as yesterday’s late day sprint to fresh records is digested ahead of the Fed meeting while bond markets remain calm.

Economically, Germany’s March ZEW Survey came in slightly better than expected which is supporting modest risk on money flows in both European and U.S. markets.

From a potential catalyst standpoint, it is lining up to be a busy morning with several notable economic reports due to be released including: Retail Sales (E: -0.5%), Import & Export Prices (E: 1.0%, 1.0%) and Industrial Production (E: 0.5%).

However with the FOMC meeting beginning today, there will likely be some degree of “Fed paralysis” that limits the market’s reaction to any of this morning’s data points.

One thing that could move markets despite focus already shifting to the Fed is the 20-Yr Treasury Bond Auction at 1:00 p.m. ET today as a disappointing auction could trigger another spike in yields which would in turn weigh on stocks, particularly the tech sector.

Tom Essaye Quoted in Courthouse News Service on March 12, 2021

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“The macro forces that have caused this rotation from growth/tech to value/cyclicals haven’t abated, at all. If anything, they’ve gotten stronger…” Tom Essaye of the Sevens Report wrote earlier in the week. Click here to read the full article.

Tom Essaye Quoted in Bloomberg on March 12, 2021

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“You have a bunch of momentum and speculative buyers that have come…” said Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter, which tracks daily gyrations in the market. Click here to read the full article.

Tom Essaye Quoted in Barron’s on March 11, 2021

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At least gold still hasn’t breached a key lower level. It is “comfortably above increasingly…” Tom Essaye, founder and president of Sevens Report Research, wrote in a note—if $20 can be considered comfortable. Click here to read the full article.

An Important Week for the Markets

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What’s in Today’s Report:

  • Weekly Market Preview: An Important Week for the Markets
  • Weekly Economic Cheat Sheet: Focus on the Fed

U.S. equity futures are tracking international shares higher this morning as investors digest mostly positive economic data and a stable bond market while the market focus is already turning ahead to this week’s Fed meeting.

Economically, Chinese Industrial Output and Retail Sales both beat expectations in the first two months of the year with the headlines jumping 35.1% and 33.8%, respectively, however, the unemployment rate edged up 0.1% to 5.5%.

Looking into today’s session, there is just one economic report due out ahead of the bell: Empire State Manufacturing Index (E: 14.8). Investors will be looking for a good number but if the report is too strong and causes the 10-year yield to extend Friday’s rise, that would likely weigh on stocks.

There are no other major catalysts on the calendar today and markets will begin to look ahead to this week’s Fed meeting (which begins tomorrow) however the 10-year yield will remain a key influence on equities as a continued move higher will act as a strengthening headwind for equities, especially for tech stocks.

Tom Essaye Quoted in SPGlobal on March 10, 2021

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The Federal Reserve Bank of Atlanta on March 8 estimated real GDP will grow 8.4% in the first quarter. Adding the new stimulus package is likely to push economic growth close to record levels in 2021, said Tom Essaye, president of Sevens Report Research, in an interview. Click here to read the full article.

Tom Essaye Interviewed with BNN on March 10, 2021

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Sevens Report Research Founder and President, Tom Essaye, says the forces that have been causing the sector rotation in trading haven’t abated, they’ve become stronger. He says this signals future…Click here to watch the full interview.

A Stimulus Driven Rebound for Brick and Mortar Retail?

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What’s in Today’s Report:

  • A Stimulus Driven Rebound for Brick and Mortar Retail?
  • EIA and Oil Update

Futures are moderately higher on general optimism for several upcoming events.  There was no notable news overnight to cause the rally in futures, however.

Politically, Biden is expected to sign the stimulus bill on Friday and now the focus is on infrastructure and trade.

On trade, Nasdaq futures are sharply higher on the potential for a U.S./China semiconductor trade group (which would potentially ease semiconductor supply issues) and on general optimism ahead of the U.S./China meetings in Alaska this weekend (relaxing of trade tensions is a potential additional tailwind on stocks, especially tech and industrials).

Today the focus will remain on rates and that makes the ECB Rate Decision (E: No Change) the most important event today.  Markets fully expect ECB President Lagarde to say something specific or actually do something to show the ECB will not allow rates to rise too quickly.  If that does happen look for the 10 year Treasury yield to fall further below 1.50% and for stocks to extend the rally.  But, if Lagarde disappoints markets, expect rates to rise in response, and stocks to decline.

Other notable events today include Jobless Claims (E: 725K), 30-Yr Treasury Bond Auction at 1:00 p.m. and if both are solid, they will help support the rally.