A Higher Bar for the Bulls in 2025

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A Higher Bar for the Bulls in 2025: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • A Higher Bar for the Bulls in 2025
  • Weekly Market Preview: Focus on Politics (Does Johnson Get Re-elected as Speaker?)
  • Weekly Economic Cheat Sheet: Another Slow Week But Important Reports Thursday and Friday

Futures are slightly weaker following a mostly quiet weekend of news and ahead of another holiday shortened trading week.

Economically, the only notable report was Spanish CPI, which came in hotter than expected at 2.8% y/y vs. (E) 2.6% y/y, reinforcing some fears of sticky inflation.

Politically, the first major event for the new U.S. Congress comes this Friday via the Speaker of the House election (markets will want to see current Speaker Johson re-elected).

Given the mid-week holiday this week is another relatively quiet one on the data front but there are some notable reports to watch today including Chicago PMI (E: 42.7), Pending Home Sales (E: 0.7%).  As is the case for the foreseeable future, anything Goldilocks (so in-line to slightly softer) is the preferred outcome for markets.

 

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Sentiment Update: Bullish Enthusiasm Reduced, But Not Eliminated

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What’s in Today’s Report:

  • Sentiment Update: Bullish Enthusiasm Reduced, But Not Eliminated

Futures are modestly lower, again in quiet trading, on disappointing Chinese economic data.

Chinese industrial profits declined –7.3%, contracting for the fourth consecutive month and reminding investors that while there’s been a lot of stimulus from Chinese officials, it will take time to impact the economy.

In Japan, economic data was better than expected as retail sales and industrial production beat estimates.

Today there are no notable economic reports and trading should be quiet.  That said, the 10-year yield will remain an influence on stocks.  The higher the yield goes, the more it’ll pressure stocks.

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A Likely Quiet Trading Day But With One Important Economic Report

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Futures are modestly lower in quiet trading following the Christmas holiday.

Economically, the only notable event overnight was “not hawkish” commentary by BOJ Governor Ueda, who was vague when speaking about future rate hikes (although markets do expect the BOJ to hike rates in 2025).

Most major global markets were closed for Christmas and will remain closed today, including major European markets and Hong Kong.

Given the numerous global market closures, trading should be quiet today.  That said, there is one notable economic report, Jobless Claims (E: 223K), and investors will want to see an in-line to slightly weak number that does not push back on any 2025 rate cut hopes.

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Hard-Landing/Soft-Landing Scoreboard

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What’s in Today’s Report:

  • Hard-Landing/Soft-Landing Scoreboard
  • Durable Goods Orders Takeaways

Futures are slightly higher with global markets as traders continue to digest last week’s volatile post-Fed selloff amid quiet news wires and low holiday-week trading volumes.

Overnight, Reuters reported that the Chinese government is planning to sell 3 trillion yuan worth of “special bonds” in 2025, up from 1 trillion in 2024, which supported a moderate risk-on rally in Asian markets.

Today should be a relatively quiet day in the markets as there is only one lesser followed Fed survey release: the Richmond Fed Manufacturing Index (E: -8.0) and no Fed officials are scheduled to speak.

There is a 5-Yr Treasury Note auction at 11:30 a.m. ET which could have an impact on the bond markets, and ultimately stocks (higher yields would put renewed pressure on stocks), however with light attendance and already low volumes, a sizeable move today is unlikely.

Finally, today is a holiday shortened session with the NYSE set to close at 1:00 p.m. ET.

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Was Last Week A Preview of 2025?

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What’s in Today’s Report:

  • Was Last Week A Preview of 2025?
  • Weekly Market Preview: Can the Santa Rally Re-start?
  • Weekly Economic Cheat Sheet: A Quiet Week, But Claims Thursday Matter

Futures are slightly weaker following a quiet weekend of news and ahead of the holiday-shortened trading week.

Economically, the only notable number overnight was UK GDP which was slightly weaker than expected, rising 0.9% vs. (E) 1.0%.

Politically, a U.S. government shutdown was averted as Congress passed a bill to fund the government but only through March, which adds complication to Republican plans to pass aggressive pro-growth legislation.

Today the only notable economic report is Consumer Confidence (E: 113.0) and barring a major surprise, it shouldn’t move markets.

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Can the Trump Trade Outperform in 2025?

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What’s in Today’s Report:

  • Can the Trump Trade Outperform in 2025?

Futures are sharply lower following another failed attempt at a short-term government funding agreement.

A Republican plan for a new short-term government funding agreement was soundly defeated in a House vote and a government shutdown starting today is looking likely.

Specifically, futures aren’t down because of the shutdown itself, but instead because this is the type of political chaos markets fear in a second Trump term (that hasn’t even officially started yet).

Today politics will dominate the headlines and any positive news towards a funding agreement will fuel a bounce, while no progress will continue to weigh on stocks.

Beyond Washington, however, there is an important economic report today, the Core PCE Price Index (E: 0.2% m/m, 2.9% y/y).  This is the Fed’s preferred measure of inflation and given the Fed’s hawkish decision on Wednesday, this number needs to come in at or under expectations, otherwise it’ll just add to the selling pressure.

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Did the Fed Decision Weaken the Bull Market?

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What’s in Today’s Report:

  • Four Reasons the Fed Decision Caused Such a Big Selloff
  • Did the Fed Decision Weaken the Bull Market?

Futures are seeing a bounce following yesterday’s steep selloff despite more negative news overnight.

Politically, government shutdown risks spiked on Thursday after support for the stop-gap funding bill collapsed and a government shutdown on Friday is becoming more likely.

On earnings, Micron (MU) posted disappointing guidance and the stock is down –15% pre-open.

Today is another busy day of economic data and policy decisions.   The Bank of England has a rate decision (E: 25 bps cut) while there are numerous U.S. economic reports including, in order of importance,  Jobless Claims (E: 232K), Philly Fed (E: 2.5), Final Q3 GDP (E: 2.8%) and Existing Home Sales (E: 4.05 million).  The market needs Goldilocks data to help it hold this early bounce and any data that’s “Too Hot” (meaning much stronger than expected) will only increase hawkish Fed worries, push yields higher and likely hit stocks, again.

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Why Has the Trump Trade Stalled? (Part One)

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What’s in Today’s Report:

  • Why Has the Trump Trade Stalled? (Part One)
  • Economic Takeaways – November Retail Sales

Stock futures are recovering some of yesterday’s losses as cooler-than-feared inflation data in the EU is driving modestly dovish money flows ahead of the Fed decision.

Economically, inflation data out of Europe was “cooler” than feared with U.K. Core CPI rising to 3.5% vs. (E) 3.6% while Eurozone HICP rose to 2.2% vs. (E) 2.3%. The “cooler” data saw rates traders price in more policy rate cuts from the ECB in 2025.

Today, there is one economic report due to be released mid-morning: Housing Starts and Permits (1.340M & 1.430M) but the primary market focus will be the Fed decision at 2:00 p.m. ET and likely more importantly, Fed Chair Powell’s press conference at 2:30 p.m. ET.

While the Fed will almost certainly be the primary catalyst for markets today, there is some micro-news that could influence sectors and sub-sectors of the equity markets as we will get late season earnings from GIS ($1.22), JBL ($1.88), MU ($1.75), and LEN ($4.18).

Bottom line, investors are looking for the Fed to reiterate their view that the economy is tracking for a soft-landing and that the FOMC is not overly concerned with the latest uptick in inflation data that could signal a sustained “pause” in rate cuts. A hawkish tone in the announcement or Powell’s press conference would likely trigger renewed selling pressure in equity markets and higher bond yields.

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FOMC Preview (All About the Projections)

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What’s in Today’s Report:

  • FOMC Preview – All About the Projections
  • NVDA Chart – Three Negative Technical Developments
  • Economic Data Takeaways – Empire Survey and PMIs “Goldilocks Enough”

Futures are moderately lower as mostly strong international economic data overnight is putting upward pressure on global bond yields as focus turns to this week’s central bank decisions, including the Fed tomorrow.

Economically, Germany’s December Ifo Survey was mixed with Current Conditions edging up to 85.1 vs. (E) 83.8 but Business Expectations declined to 84.4 vs. (E) 87.0 while UK wage growth jumped 5.2% y/y vs. (E) 4.6% which sent Gilt yields higher.

Today, trader focus will be on economic data early with Retail Sales (E: 0.5%), Industrial Production (E: 0.3%) and the Housing Market Index (E: 47) all due to be released.

However, with the FOMC meeting getting underway in Washington, market moves are likely to be limited (barring any material surprises) as a familiar sense of “Fed-Paralysis” is likely to begin gripping the market with tomorrow’s FOMC decision looming.

Finally, there is a 20-Yr Treasury Bond auction at 1:00 p.m. ET that has the potential to move yields and impact equity market trading but odds of that happening ahead of the Fed announcement tomorrow are relatively low.

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What to Expect from Markets in 2025

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What’s in Today’s Report:

  • What to Expect from Markets in 2025
  • Weekly Market Preview:  Does the Fed Keep Cutting and Does Data Stay Goldilocks?
  • Weekly Economic Cheat Sheet:  All Eyes on the Fed Dots

Futures are slightly higher following a mostly quiet weekend of news and despite mixed global economic data.

Chinese Retail Sales (3.0% vs. (E) 4.6%) and Fixed Asset Investment (3.3% vs. (E) 3.5%) both missed estimates, reminding investors that despite promises for more stimulus, Chinese growth remains lackluster.

In Europe, data was better as the flash Composite PMIs for the EU (49.5 vs. (E) 48.0) and the UK (50.5 vs. (E) 50.0) both beat estimates.

Today focus will be on the Empire Manufacturing Survey (6.4) as that’s the first data point for December and investors will want to see in an-line to slightly soft reading to reinforce the Goldilocks narrative.

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