Four Pillars of the Rally Remain Intact

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What’s in Today’s Report:

  • Bottom Line – Four Pillars of the Rally Remain Intact
  • Weekly Economic Cheat Sheet – Flash PMIs and Core PCE in Focus

Stock futures are trading cautiously higher this morning while international equities were mixed overnight as markets attempt to stabilize following last week’s volatile, Fed-induced declines.

News flow was quiet over the weekend as there were no major economic releases or central bank developments however the yield curve remains in focus as several key spreads have flattened to multi-month lows on hawkish policy expectations and a more cautious growth outlook.

There are no notable economic reports and no Fed officials are scheduled to speak today.

The lack of market catalysts will leave investors to continue to digest last week’s Fed developments and closely monitor the bond markets for further clues on expectations for both monetary policy and the state of the economic recovery.

Tom Essaye Quoted in Barron’s on June 16, 2021

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Dish Network Is Gaining, GM Is Jumping and the Stock Market Has Stalled Ahead of the Fed

Stock futures are flat this morning as a sense of Fed paralysis grips global markets ahead of…writes Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

Why Did Cyclicals Collapse Yesterday?

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What’s in Today’s Report:

  • Why Did Cyclicals Collapse Yesterday? (Reflation vs. No-Flation)

Futures are slightly lower following a generally quiet night of news.

Economic data was mixed overnight as UK Retail Sales missed estimates (-1.4% vs. (E) 1.8%) while both Japanese and German inflation metrics (CPI and PPI) slightly beat estimates.

The Bank of Japan made no change to policy and extended its COVID lending programs by 6 months (as expected).

Today there are no Fed speakers and no notable economic reports so focus will be on the “micro-economic” and whether we see a continuation of the large tech outperformance from yesterday. Also, there is a quadruple witching options expiration today which will cause large volumes (and possibly volatility) into the close.

What the Fed Decision Means for Markets

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What’s in Today’s Report:

  • What the More Hawkish Than Expected Fed Decisions Means for Markets
  • EIA Analysis and Oil Market Update

Futures are modestly lower as markets digest yesterday’s more hawkish than expected FOMC meeting.

The U.S. dollar is surging this morning off the more hawkish than expected Fed and gold is getting hit hard as currency markets re-price for a less dovish Fed.

Economically the only notable number was the Australian Labour Force Survey, which handily beat expectations (115k job adds vs. (E) 30k), reflecting the global nature of the economic recovery.

Today there are two notable economic reports, Jobless Claims (E: 364K) and Philadelphia Fed manufacturing Index (E: 30.8) but unless either number is a substantial surprise, they shouldn’t move markets.  Instead, markets will be watching the dollar and Treasury yields for reaction to the Fed.  If both rally hard throughout the day, that will pressure stocks further as it erodes some of the “dovish Fed” support that’s helped the S&P 500 rally to recent highs.

Tom Essaye Quoted in Investing.com on June 15, 2021

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Macro Fireworks: Stock Market Soars to New ATH While Bitcoin Awaits the Breach of An Important Level

In order for Bitcoin to resume that rally, I think you’re going to need to see more widespread…said Tom Essaye, a former Merrill Lynch trader. Click here to read the full article.

Tom Essaye Quoted in Barron’s on June 15, 2021

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Spirit Airlines Gains, Fastenal Falls, and the Stock Market Is Flat

Ahead of the data, markets will want to see solid numbers but nothing so hot that it implies the economy…Tom Essaye, founder of Sevens Report Research, wrote. Click here to read the full article.

Tom Essaye Quoted in Bloomberg on June 15, 2021

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Stocks Snap Three-Day Rally; Crude Oil Jumps: Markets Wrap

After nearly a year of anti-climactic FOMC meetings, tomorrow’s meeting has the potential to move markets because it…wrote Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter. Click here to read the full article.

Tom Essaye Quoted in Aljazeera on June 14, 2021

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As Bitcoin tops $40,000 again, analysts eye $50,000

Bitcoin is always going to be volatile and the manic run-up we had was never sustainable. The question is…said Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter. Click here to read the full article.

 

Tom Essaye Quoted in Bloomberg on June 14, 2021

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From Copper to Corn, Markets Show Peak Inflation Fear Has Passed

Even though inflation metrics are high, the pressure is starting to come off and that leaves investors to say…said Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter. Click here to read the full article.

Fed Day

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What’s in Today’s Report:

  • PPI – Where Will Inflation Settle?
  • Empire State Manufacturing Survey Misses Estimates
  • Retail Sales – Spending Shift from Goods to Services
  • A Warning Sign from Dr. Copper

Stock futures are flat this morning as a sense of Fed paralysis grips global markets ahead of the FOMC announcement while economic data disappointed overnight.

Chinese Fixed Asset Investment, Industrial Production and Retail Sales data all missed estimates for the month of May which resulted in Asian markets underperforming overnight.

Looking into this morning’s trading session, there are two lesser followed economic reports due to be released: Housing Starts (E: 1.630M) and Import & Export Prices (E: 0.7%, 0.7%) but neither release should move markets with the Fed looming.

The Biden-Putin meeting in Geneva will also get media attention but it is very unlikely to actually impact markets. Treasury Secretary Janet Yellen’s testimony before Congress regarding Biden’s budget (10:00 a.m. ET), however, could move markets as she will likely be discussing taxes and any hint of a material hike in capital gains rates or corporate tax rates could weigh on markets even ahead of the Fed.

Today’s main event for the markets will of course be the conclusion of the June Fed meeting with the FOMC Meeting Announcement at 2:00 p.m. ET and then Fed Chair Powell’s Press Conference at 2:30 p.m. ET. If anything causes tapering expectations to be pulled forward towards September or evidence emerges of plans to raise rates in 2022, that will be viewed as hawkish and cause significant volatility across assets classes. Otherwise, an “as expected” or dovish meeting outcome will likely result in equities continuing to trade at or near all-time highs.