Rate Hike Preview

/in /by

What’s in Today’s Report:

  • FOMC Preview (Key Word: Accommodative)
  • Chart: Brent Crude Hits Multiyear High

US stock futures are pointing to a modest rebound this morning after yesterday’s pullback in the major indexes as US—China trade tensions linger.

On a positive note, the US did sign a revised trade deal with South Korea overnight which slightly improved sentiment towards global trade.

Overseas, markets were mixed but mostly little changed after a quiet night of news as a sense of “Fed Paralysis” takes hold ahead of tomorrow’s FOMC Announcement, Forecasts and Press Conference.

Today’s session is not likely to be a very exciting one with the Fed looming tomorrow but there are some housing market reports due out before the bell: S&P Corelogic Case-Shiller HPI (E: 0.1%), FHFA House Price Index (E: 0.3%) and Consumer Confidence (E: 131.7) will print at 10:00 a.m. ET.

Although it will be quiet, any new trade developments or material political headlines still have the potential to move the market intraday as investors remain very sensitive to those two issues.

Let Sevens Report help you stay on top of the market. Get daily market analysis straight to your inbox at 7am. Sign-up for a two-week risk-free trial today. Go Here

S&P 500 At 3000? (Not So Fast)

/in /by

What’s in Today’s Report:

  • One of Two S&P 500 3000 Conditions Met
  • Why the Dollar and Bond Yields Have Decoupled

Futures are little changed following a night of no new trade news and slightly underwhelming economic data.

Global markets all rallied on momentum from the Thursday gains in the U.S., but nothing new occurred on trade overnight.

Economic data was slightly disappointing as EU Composite PMI (54.2 vs. (E) 54.3) slightly missed estimates while EU Manufacturing PMI (53.3 vs. (E) 54.2) badly missed.

Today focus will be on the U.S. September PMI Composite Flash (E: 55.1), and as always we’ll be looking for stability in the economic data to imply this strong economy isn’t losing momentum.  Additionally,  today is quadruple witching options expiration, so don’t be surprised by big volumes and an uptick in volatility into the close.

Get updates like these daily and stay on top of the markets with Sevens Report. Go Here to sign up for a two-week free trial and see it for yourself.

Yield Curve Update (Positive)

/in /by

What’s in Today’s Report:

  • Bank Update – Positive Catalyst Looming?
  • 10’s-2’s Curve Update (Positive)
  • Weekly EIA and Oil Outlook

Futures are very slightly higher following a quiet night of news.

There was no trade news overnight so cautiously optimistic sentiment towards trade remained in place – and all eyes remain on next week’s U.S./China summit which, for now, is still on.

British Retail Sales was the only notable economic report, and it beat estimates at 0.3% vs. (E) 0.1%, continuing a recent run of good British data.

Today focus will be, of course, on any trade headlines, especially pertaining to next week’s U.S./China trade summit.  Beyond that, we get some notable economic data, starting with Philadelphia Fed Business Outlook Survey (E: 19.2).  We also get Jobless Claims (E: 210K) and Existing Home Sales (E: 5.360M) although neither should move markets.

To get daily updates like this emailed to you directly, sign-up for a two-week free trial. Go Here.

Mind the Gap: US vs. EM

/in /by

What’s in Today’s Report:

  • Mind the Gap: US vs. EM
  • Tariff Update

Futures are drifting mildly lower as investors digest yesterday’s gains while Asian shares played catch up o/n to the not-as-bad-as-feared trade developments that spurred yesterday’s US rally. Otherwise it was a very quiet night.

Economically, British inflation data was firmer than expected as CPI rose to 2.7% vs. (E) 2.4% Y/Y boosting UK yields and the pound, and slightly weighing on the FTSE.

Oil is down modestly after the API showed a +1.2M bbl build late Tuesday vs. (E) -2.1M for the EIA report today.

Today, there will be a few moving pieces in focus including one economic release early: Housing Starts (E: 1.240M), trade talks with Canada (although China remains the main focus), and Emerging Market price action (there is a rate decision in Brazil today).

Some retracement to yesterday’s solid US rally should not be shocking, but as long as tech shares hold up, sentiment towards the trade war doesn’t deteriorate, and volatility in EM doesn’t spike, the general positive trend back towards all-time highs in US stocks should continue in the near term.

To read the full report, sign-up for a free trial today. Click here to proceed.

Tariffs and Valuation

/in /by

What’s in Today’s Report:

  • Tariffs and Valuation

US futures are modestly higher and most overseas markets were little changed to higher overnight as the latest announcement of tariffs on China were largely shrugged off.

Late yesterday, the Trump Administration released the details of the next wave of tariffs on China: 10% on $200B worth of imports going into effect on 9/24/18 increasing to 25% at year-end.

The tariffs go into effect sooner than expected but the 10% rate into year-end leaves plenty of room/time for constructive negotiations which is why global shares are trading “ok” today.

Today, the market focus will be dominated by the new tariffs and what’s next in the trade war. As far as other catalysts go, there is just one economic report: Housing Market Index (E: 67.0) and no Fed officials are scheduled to speak.

To get daily market updates, sign-up for a two-week free trial to Sevens Report today. Click Here to proceed.

Tariff Update (It Was an Important Weekend)

/in /by

What’s in Today’s Report:

  • Tariff Update (Bottom Line from the Headlines This Weekend)
  • Weekly Market Preview
  • Weekly Economic Cheat Sheet

Futures are modestly lower following mixed trade headlines over the weekend.

The WSJ had two important trade articles over the weekend.  The first stated the Trump administration will implement 10% (vs. (E) 25%) tariffs on Chinese exports, while the second said if that happened, China would cancel the next round of trade talks.  Asian markets dropped 1% on the combined stories, but European and U.S. markets are taking a “wait and see” approach and are down only marginally.

Economically, the only notable number was EU Core HICP, which met estimates at 1.0% year over year.

Today focus will be on whether the new tariffs are formally announced, and whether that ends up in the cancellation of next week’s U.S./China trade negotiations.  Economically, there’s only one report, Empire State Manufacturing (E: 23.0).

Sign-up for you two-week free trial today and get daily market analysis emailed to you every morning. Click Here to proceed.

Emerging Market Update (Positive Risk/Reward)

/in /by

What’s in Today’s Report:

  • Emerging Market Update (Finally A Positive Risk/Reward?)
  • A Path to Higher Bond Yields?

Futures are slightly higher as Chinese economic data was mixed but didn’t contain any negative surprises.

Chinese Fixed Asset Investment (5.3% vs. (E) 5.5%) and Industrial Production (6.0% vs. (E) 6.1%) missed estimates while Retail Sales (9.0% vs. (E) 8.8%) beat expectations.  So, while results were mixed, the data wasn’t weak enough to offset the positive EM news yesterday so momentum remains positive.

Today focus will be on economic data, and specifically the Retail Sales report (E: 0.4%), as strong consumer spending remains a critical part of U.S. economic growth.  We also get Industrial Production (E: 0.4%) and Consumer Sentiment (E: 97.0) and there is one Fed speaker, Evans (9:00 a.m. ET).

To read the full report, sign-up for your two-week free trial today, Go Here

An Interview That’s Worth A Listen

/in /by

What’s in Today’s Report:

  • Why is Inflation So Low?
  • An Interview That’s Worth a Listen

Futures are slightly higher as China confirmed new U.S./China trade talks.

That confirmation caused a 1%-2% a rally in Asia & emerging markets, but not in U.S. futures as it’s already priced in.

Economically, Japanese Machine Orders beat estimates (11% vs. (E) 5.5%), while German CPI met estimates.

Today the most important event is the Turkish Central Bank (TCB) decision, which will hit right about when you get the report (7 a.m. EST).  This meeting matters because if the TCB doesn’t show it’s serious about stopping inflation by raising rates, then the Lira will decline further and the chances of a full on emerging market currency crisis will rise (and that’s not good for U.S. stocks).

Expectations for the TCB meeting are a rate hike between 2.50% and 3.25%.  Anything below 2.5% will cause the Lira to drop sharply and undo some of the overnight emerging market rally.  A rate hike within the range likely is an “ok” outcome that may or may not result in a mild Lira decline, but something in the range shouldn’t be a negative for U.S. stocks.  Finally, a hike above 3.25% would be a positive surprise and emerging market ETFs would likely surge today.

Bottom line, U.S./China trade relations is more important than Turkey’s growing currency crisis, but Turkey can still cause a global pullback between now and year end, so we need to watch it.  Going forward, the key level I’m watching in 7.  If the Lira weakens past 7 vs. the dollar (currently 6.44) that’s a bad sign and likely a broad macro negative.

Away from emerging markets, today we get a BOE Meeting and an ECB Meeting but both should be relative non-events.  The key economic report will be CPI (E: 0.3%) and that needs to stay firm, while we also get Jobless Claims (E: 210K) and two Fed speakers:  Quarles (10:00 a.m. ET), Bostic (12:30 p.m. ET).

Read the full analysis here.

Question on Banks

/in /by

What’s in Today’s Report:

  • Subscriber Question on Banks
  • EIA’s Short Term Energy Outlook Analysis
  • Dollar Technical Update

Despite a handful of headlines regarding trade and emerging markets overnight there were no material macro developments leaving US futures, the dollar, and global shares little changed overnight.

The EU’s Juncker jawboned about trade o/n (but no policy change) and the Turkish Central Bank are set to raise rates tomorrow, but neither was a surprise or moved markets materially.

Economically, Eurozone Industrial Production fell -0.8% vs. (E) -0.5% in July pointing to a disappointing slowdown in Q3 manufacturing growth.

In the face of the recent dollar strength, investors were hoping to see better economic data in Europe rally the euro and pressure the dollar, but that is unfortunately not playing out so far in Q3.

Looking ahead to today’s Wall Street session, there is one inflation metric to watch: PPI (E: 0.2%), but unless it is a big surprise, it will likely be shrugged off ahead of the CPI report tomorrow. Additionally, there is one Fed speaker today: Brainard (12:45 p.m. ET).

With a lack of any notable, scheduled catalysts, focus will likely remain on US tech shares and any trade developments (and their subsequent influence on the dollar). As long as tech trades ok and the dollar doesn’t materially rally, stocks broadly should be able to continue to drift higher this week.

Read the detailed analysis here.

Another Breaker Tripped

/in /by

What’s in Today’s Report:

  • Another Breaker Tripped (Now There Are Three – September Update)

Futures are modestly lower and international markets were mixed overnight as focus largely remains on global trade relations in an otherwise quiet trading environment.

The German ZEW Survey for September was solid overnight with a headline of 76.0 vs. (E) 72.0 suggesting the EU economy may be picking up some momentum in H2’18.

The NFIB Small Business Optimism Index was the more notable print however as the headline rose to a record high of 108.8 vs. (E) 108.1 in August.

Today will be quiet from an economic standpoint as there is just one report due out: July JOLTS (E: 6.670M) and there are no Fed officials scheduled to speak today.

With tech shares showing signs of stabilizing so far this week, focus will remain on trade, emerging market currencies, and the dollar today. And as long as sentiment towards those influences does not deteriorate materially, the S&P 500 should be able to hold recent support between 2850 and 2870.

Read the full report here.