What Would Make the Fed Less Dovish?

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What’s in Today’s Report:

  • What Would Make the Fed Less Dovish?

Futures are little changed following mixed economic data that showed higher inflation and underwhelming growth.

Inflation stats could be set to rise as Chinese PPI surged 4.4% vs. (E) 1.7%, and this could be the first of several higher than expected global inflation readings.

Economically, German Industrial Production missed estimates (-1.6% vs. (E) 1.5%)  but the reading isn’t moving markets.

Today the key number is the Core PPI (E: 0.2% m/m, 2.7% y/y).  Markets are expecting an uptick in inflation metrics so a slightly hot number shouldn’t move markets too much, although a much stronger than expected PPI reading will likely send the 10 year yield higher and that would be a headwind on stocks. There is also one Fed speaker, Kaplan (10:00 & 12:00 p.m. ET), but he shouldn’t move markets.

Tom Essaye Interviewed with WPTV Channel 5 on April 6, 2021

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“Normally it’s very hard for homeless and transitional people to get a job. But now the pandemic has made it even worse because unemployment levels…” said Tom Essaye, Sevens Report Research president and financial expert. Click here to watch the full video.

Cyclicals/Value vs. Tech/Growth Positioning Update

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What’s in Today’s Report:

  • Cyclicals/Value vs. Tech/Growth Positioning Update
  • EIA Analysis and Oil Update
  • FOMC Minutes:  Dovish, But We Still Expect Tapering Discussions in the Coming Weeks

Futures are modestly higher following some apparent progress in infrastructure negotiations.

President Biden signaled he is open to a 25% corporate tax (down from the desired 28%) and that reduction increases the chances infrastructure ultimately gets passed.

Economic data was solid as German Manufacturers’ Orders and the UK Construction PMI both beat estimates.

Today the focus will be on economic data, specifically Jobless Claims (E: 680K) and on Fed speak.  Broadly, markets will look for Fed officials to confirm what the minutes showed, that despite recent strong economic data, the Fed isn’t considering tapering yet.  Fed speakers today include, in order or importance,   Powell (12:00 p.m. ET), Bullard (11:00 a.m. ET) and Kashkari (2:00 p.m. ET).

Bottom line, if we get a solid jobless claims number and dovish commentary from Powell, expect a continued grind higher in stocks.

Market Multiple Levels: S&P 500 Chart

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What’s in Today’s Report:

  • Market Multiple Table: S&P 500 Chart

U.S. equity futures are little change this morning while international markets were mixed in mostly quiet trade overnight.

Economically, the Eurozone’s Final PMI Composite Index came in at 53.2 vs. (E) 52.5 in March, the latest sign that economic growth is accelerating globally.

Looking into today’s U.S. session, there is just one economic report to watch: International Trade Balance (E: -$70.4B) ahead of the bell while several Fed officials are scheduled to speak over the course of the day: Evans (9:00 a.m. ET), Kaplan (11:00 a.m. ET), Barkin (12:00 p.m. ET), and Daly (1:00 p.m. ET).

The March FOMC Meeting Minutes will also be released at 2:00 p.m. ET and it will be important that both today’s Fed speakers, as well as the Minutes show the FOMC is acknowledging the recent rise in rates but remains ultra-accommodative. Any hawkish hints could cause yields to spike and stocks to give back some of the week-to-date gains.

Market Multiple Table: April Update

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What’s in Today’s Report:

  • Market Multiple Table: April Update

Stock futures are modestly lower this morning following a quiet night of news as yesterday’s strong rally in U.S. equities is digested while international markets were mostly higher overnight.

Economically, China’s PMI Composite Index rose 1.4 points to 53.1 in March while the Eurozone Unemployment Rate edged up to 8.3% vs. (E) 8.1% in February, however neither report is materially moving markets this morning.

Today, there is just one economic report to watch: February JOLTS (E: 6.850M) and no Fed officials are scheduled to speak.

With limited catalysts on the calendar today, traders are most likely to be focused on coronavirus case trends and lockdown measures (both of which have been quietly on the rise lately) as well as bond markets.

Negative COVID headlines could result in some profit taking following yesterday’s big gains and any signs of another disorderly rise in bond yields given the firming economic growth expectations could also weigh on stocks, namely tech shares.

What Friday’s Jobs Report Means for Markets

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What’s in Today’s Report:

  • What Friday’s Job Report Means for the Rally (Less Dovish Fed?)
  • Weekly Market Preview:  Infrastructure Progress and Fed Outlook
  • Weekly Economic Cheat Sheet: Is a Spike in Inflation Coming?

Futures are modestly higher on momentum from Friday’s strong (but not too strong) jobs report.

Friday’s jobs report handily beat estimates (916k vs. (E) 660k) but the unemployment rate remained above 6% and wages were soft, so the number didn’t spike Treasury yields and  futures rose Friday after the release.

There was no notable economic data or political news over the weekend and many foreign markets are closed for Easter Monday.

Today the key economic report is the ISM Services PMI (E: 58.6) and markets will want to see a strong number showing a continued rebound in the service sector.  With many foreign markets closed, trading should be otherwise quiet but the 10 year yield is still key.  It digested Friday’s strong jobs report well, but if we see a rally today towards 1.80%, that will be a headwind on stocks.

Tom Essaye Quoted in Barrons on March 29, 2021

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“Archegos Capital was unable to make margin calls last week which resulted in losses, and Nomura and Credit Suisse, and that’s causing some mild anxiety about more…” wrote Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

Too Much Stimulus?

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What’s in Today’s Report:

  • Is There Such a Thing As Too Much Stimulus?
  • Is the Market Starting to Price in a Future Less-Dovish Fed?

Stock futures are flat and bond markets are trading in an orderly manner this morning as investors await details on President Biden’s infrastructure plan amid end of month and quarter positioning money flows.

Economic data was mostly positive overnight as China’s CFLP Manufacturing PMI came in at 51.9 vs. (E) 51.0 while German Unemployment met estimates at 6.0% and the Eurozone HICP Flash for March was 1.3% vs. (E) 1.3%.

Today, we will get our first look at March jobs data via the ADP Employment Report (E: 500K) and the market will be looking for a number that is not “too hot” to cause another leg higher in bond yields which would weigh on tech stocks but not too underwhelming to suggest the recovery in the labor market is beginning to lose momentum.

There is one other second tiered economic report: Pending Home Sales Index (E: -3.0%) and one Fed official scheduled to speak: Bostic (10:45 a.m. ET) but neither should move markets.

The main focus of the market today will be Biden’s two-part infrastructure plan which is expected to top $4T total and how the Administration and Congress plan to pay for it (higher taxes). If the plans push yields higher, expect some pressure on equities with tech underperforming however stocks are also susceptible to volatility linked to end of month/quarter positioning today.

Why Contracts for Difference Matter to You

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What’s in Today’s Report:

  • Why Contracts for Difference Matter to Your Clients

Stock futures are mixed as investors continue to digest the Archegos liquidation drama and look ahead to Biden’s infrastructure plans due tomorrow while yields rose overnight.

The 10 year Treasury yield rose by as much as 5 basis points overnight, reaching fresh 52-week highs which is weighing on Nasdaq futures this morning (down 0.40%).

Economic data was mostly positive overnight with Japanese Retail Sales and Eurozone Economic Sentiment both topping estimates which is supporting modest risk-on and reflationary money flows this morning.

Looking into today’s session, there are two reports on the housing market due out before the open: Case-Shiller Home Price Index (E: 1.2%) and FHFA House Price Index (E: 1.0%) and then Consumer Confidence (E: 96.4) after the bell, however none of the releases should materially move markets.

There are also a few Fed officials scheduled to speak: Quarles (9:00 a.m. ET), Bostic (12:00 p.m. ET) and Williams (2:00 p.m. ET) but they are largely expected to stick to the very dovish narrative of recent.

Today, market focus is likely to return to the bond markets given the sizeable move higher in yields overnight which is already pressuring Nasdaq futures. And if the rise in yields continues over the course of the day, expect renewed pressure on tech shares which will likely weigh on the broader stock market.

A Market in Transition

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What’s in Today’s Report:

  • Updated Market Outlook:  A Market in Transition
  • Weekly Economic Cheat Sheet:  Key Reports Thursday and Friday (And They’re Important)
  • Weekly Market Preview:   Can the Rise in Yields Become Orderly?

Futures are modestly lower following a generally quiet weekend as markets reverse Friday’s late day rally amidst concern about forced selling due to a hedge fund failure.

Archegos Capital was unable to make margin calls last week which resulted in losses and Nomura and Credit Suisse, and that’s causing some mild anxiety about more potentially forced selling looming in the equity markets.

There were no notable economic reports overnight.

Today there are no notable economic reports and just one Fed speaker, Waller (11:00 a.m. ET).  So, focus will be on any perceived fallout from the Archegos Capital failure and if there’s any forced selling appearing in certain stocks (if there is, it could weigh temporarily on the entire market).