Dow Theory Update

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What’s in Today’s Report:

  • What the Early-November Squeeze in the Dow Transports Means for the Broader Equity Markets

Stock futures are little changed this morning as a hot U.K. inflation report is digested ahead of more retail earnings.

U.K. CPI rose 4.2% vs. (E) 3.9% year-over-year which is pushing the pound higher against most of its peers as rate hike expectations rise.

Today, there is just one economic report: Housing Starts & Permits (E: 1.587M, 1.630M) but it is another very busy day of Fed speak: Williams (9:10 a.m. ET), Mester (11:20 a.m., 12:40 p.m. ET), Waller (12:40 p.m. ET), Daly (12:40 p.m. ET), Evans (4:05 p.m. ET), and Bostic (4:10 p.m. ET).

There is also a 20-Year Treasury Bond auction at 1:00 p.m. ET that could move yields and investors will be closely watching earnings releases from notable retailers ahead of the open: TGT ($2.87) and TJX ($0.81) as well as NVDA ($1.10) after the close.

Tom Essaye Interviewed by Yahoo Finance on November 15, 2021

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Market Recap: Monday, November 15: Stocks drop as tech leads losses, 10-year yield tops 1.6%

I think what it is, is essentially that the bond market is looking past this transitory spike in inflation…said Tom Essaye, founder of Sevens Report Research. Click here to watch the full interview.

Inflation Expectations Update

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What’s in Today’s Report:

  • Inflation Expectations Update
  • Empire State Manufacturing Index Takeaways

Stock futures are slightly lower this morning following a mostly quiet night of news as investors look ahead to several important economic releases in the U.S. today.

Economic data was in-line to slightly better than expected overnight while the Xi-Biden talks, while largely uneventful, did help to modestly improve general market sentiment.

Today, focus will be on economic data early with Retail Sales (E: 1.0%), Import & Export Prices (E: 0.9%, 0.7%), and Industrial Production (E: 0.9%) all due out ahead of the opening bell while the Housing Market Index (E: 80) will be released at the top of the 10:00 a.m. hour (ET).

Additionally, there are several Fed speakers today: Bostic (12:00 p.m. ET), Harker (2:55 p.m. ET), and Daly (3:30 p.m. ET) and the market will continue to look for patient remarks that suggest the pace of the taper will not be accelerated and rate hikes will not be pulled forward from late 2022.

Sector Winners from the Infrastructure Bill

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What’s in Today’s Report:

  • Sector Winners from the Infrastructure Bill

Futures are slightly higher following a generally quiet night of news as global yields are again little changed.

10 year Treasury yields are up two basis points to 1.59% and that small move is helping futures to slightly rally.

Economic data was sparse as the only notable report was Euro Zone Industrial Production which fell –0.2% vs. (E) -0.6% but that number isn’t moving markets.

Focus today will be on economic data, and specifically the inflation expectations component of the Consumer Sentiment report.  If inflation expectations rise above 5% for next year and above 3% for the next five years, that will get the Fed’s attention and likely push yields higher.  The other economic report this morning is JOLTS (E: 10.1M) and we have one Fed speaker, Williams at 12:10 p.m. ET.

Why Stocks Dropped Yesterday (It Wasn’t CPI)

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What’s in Today’s Report:

  • Why Stocks Dropped Yesterday (It Wasn’t CPI)
  • EIA Analysis and Oil Market Update

Futures are enjoying a mild bounce following Wednesday’s losses as global yields are stable while U.S. bond markets are closed.

10 year Bund and GILT yields are little changed and that, combined with the bond market closure in the U.S., is allowing stocks to rebound.

Economically, British IP missed estimates (-0.4% vs. (E) 0.1%) while monthly GDP slightly beat (0.6% vs. (E) 0.5%).

Today is Veterans Day and as such, the bond markets are closed and there will be no economic reports and no Fed speakers.  So, GILT and Bund yields will partially dictate trading and as long as they don’t rise, stocks can continue this early rebound from yesterday’s losses.

Market Multiple Levels: S&P 500 Chart

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What’s in Today’s Report:

  • Market Multiple Levels: S&P 500 Chart

Stock futures are mildly lower and Treasury yields are rising with the dollar this morning after hotter than expected Chinese inflation data is prompting some hawkish money flows ahead of today’s U.S. CPI report.

Economically, Chinese CPI rose slightly more than forecast in October (1.5% vs. E: 1.4%) but PPI surged 13.5% vs. (E) 12.0% which was the highest reading since 1995.

Looking into today’s session there are a few potential catalysts to move markets with the October CPI release (E: 0.5%) being the primary focus but Jobless Claims data (E: 267K) will also warrant attention. Both reports are due out at 8:30 a.m. ET.

After those pre-market releases, the schedule is pretty clear with no Fed officials speaking over the course of the day but there is a 30-Year Treasury Bond auction at 1:00 p.m. ET that could move yields and potentially stocks.

Finally, earnings season is already beginning to wind down however DIS ($0.50) will report quarterly results after the closing bell.

Bottom line, focus is on inflation data and if today’s CPI report runs hot, we could see taper expectations, as well as the market’s rate hike outlook, take a hawkish turn which would spur broad market volatility.

 

Market Multiple Table: November Update

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What’s in Today’s Report:

  • Market Multiple Table: November Update

Stock futures pulled back overnight following the release of the Fed’s Financial Stability Report, which noted stretched asset prices, but markets have since stabilized as new domestic inflation data comes into focus.

Economically, the German ZEW Survey was mixed (Current Conditions missed, Economic Sentiment beat) while the NFIB report was mildly underwhelming however neither report materially moved markets in pre-market trade.

Looking into today’s session, earnings season continues with a lot of smaller cap companies reporting however focus this morning will be on economic data with the October PPI report due before the bell (E: 0.6% M/M, 8.6% Y/Y).

Then the Fed speaker circuit also remains active today with Bullard (7:50 a.m. ET), Powell (9:00 a.m. ET), Kashkari (1:30 p.m. ET) all speaking over the course of the session and the market will be looking for further confirmation that rate hikes will not commence before late 2022 otherwise we could see a hawkish reaction from markets.

Finally, there is a 10-Yr Treasury Note Auction at 1:00 p.m. ET that could move bonds and subsequently trigger a reaction from stocks.

Near-Term Macro Calm (But Risks Building for 2022)

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What’s in Today’s Report:

  • Near Term Macro Calm (But Risks Building for 2022)
  • Weekly Market Preview (Risks of An Accelerated Taper?)
  • Weekly Economic Cheat Sheet (Key Inflation Data This Week)

Futures are little changed following a quiet weekend outside of the passage of the physical infrastructure bill.

On Friday the House passed the physical infrastructure bill but it’s only $550 billion of new spending over 10 years, and that’s not going to have a big impact on the economy.

The broader $1.75 trillion spending bill remains under debate as Democrat infighting continues, but a deal is expected by year-end.

Today there are no economic reports, but there are numerous Fed speakers and the market will be looking for insight into the possibility of an accelerated taper beyond December.  Powell (10:30 a.m.) is the headliner today but he’s only making opening remarks and shouldn’t offer any insights on policy.  Vice Chair Clarida (9:00 a.m.) will speak on policy, so his interview is probably the most important one to watch today.  Other Fed speakers include Montgomery (10:00 a.m.), Harker (12:00 p.m.) and Evans (1:50 p.m.) but they shouldn’t move markets.

Jobs Report Preview

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What’s in Today’s Report:

  • Jobs Report Preview
  • Why the Bank of England Surprise Matters to You
  • OPEC Decision and Oil Market Update

Futures are modestly higher ahead of the jobs report and despite underwhelming European economic data.

German Industrial Production (-1.1% vs. (E) 0.9%) and EU Retail Sales (-0.3% vs. (E) 0.8%) both missed estimates but those reports aren’t moving markets.

House Democrats are expected to pass the bipartisan infrastructure bill later today, while the larger $1.75 trillion stimulus bill remains in negotiations.

Today focus will be on the Jobs Report and expectations are as follows: Job Adds:  400K, UE Rate:   4.7%, Wages: 0.4%/4.8%.  Given the Fed didn’t commit to a $15 billion tapering beyond December, a “Too Hot” number (in either jobs adds or wages) could cause market volatility, but outside of that occurring the jobs report shouldn’t move markets too much.  We also get one Fed Speaker, George at 9:30 a.m. ET.

What Fed Tapering Means for Markets

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What’s in Today’s Report:

  • What Fed Tapering Means for Markets (Short Term Positive, Medium Term Uncertainty)
  • EIA and Oil Market Update

Futures are slightly higher following a generally quiet night of news as markets digest Wednesday’s Fed decision.

Economic data was sparse and the only notable report was German Manufacturers’ Orders which missed estimates, falling –1.8% vs. (E ) –1.3%.

There was no progress on the Democrat’s spending bill overnight as Manchin remains a holdout, but a deal is ultimately expected in the coming days or weeks.

Today focus will be on economic data and we get two notable reports:  Jobless Claims (E: 277K) and Productivity and Costs (E: -1.5%, 5.3%) and one Fed speaker, Quarles at 1:50 p.m. ET.  But, unless there’s a major surprise from the data, focus will turn back to Congress and the fate of the Democrat spending bill, and any headlines that imply quick passage without any material tax hikes will be a short-term tailwind on stocks.