Five Market Questions That Need to be Answered in 2023

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What’s in Today’s Report:

  • Five Market Questions That Need to be Answered in 2023 (And Which Answers are Positive or Negative)

Futures were volatile overnight but are now little changed following the Bank of Japan’s shock announcement of an effective interest rate increase.

The BOJ announced that it is widening the trading band on the 10 year Japanese Government Bond to 0.00% – 0.50% from the previous 0.0% – 0.25%.  This amounts to a 25 basis point rate hike.

Economic data was positive as German PPI fell more than expected (-3.9% m/m vs. (E) -2.2%) in what is another sign of global dis-inflation.

Today there is one economic number, Housing Starts (E: 1.4M), but that won’t move markets.

Instead, focus will be on the fallout from the BOJ surprise “ rate hike.”  Bottom line, markets dropped late last week and yesterday in part on higher global bond yields (following the hawkish ECB announcement) so this rate hike by the BOJ is another headwind and I’d not be surprised to see stock decline modestly on this news today, barring any positive surprises.

The Key Influence on Markets as We Approach 2023

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What’s in Today’s Report:

  • The Key Influence on Markets as We Approach 2023
  • Weekly Market Preview:  Can Economic Data Help Stop the Selling?
  • Weekly Economic Cheat Sheet:  Core PCE Friday the Key Report

Futures are slightly higher on a mild oversold bounce following last weeks’ losses and a quiet weekend of news.

China announced the closing of schools in Shanghai on Monday in response to surging COVID cases, but the broader economic reopening remains on track.

Economically, the German IFO Business Expectations Survey was higher than expected (83.2 vs. (E) 82.0) as was UK Industrial Trends (-6% vs. (E) -9%) but neither number is moving markets.

Today the only notable economic report is the Housing Market Index (E: 34) and markets will want to see continued moderation in the data (housing remains a major contributor to high CPI so more progress on that front will be a mild positive).

Why Stocks Are Falling (It’s Not Just the Fed)

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What’s in Today’s Report:

  • Why Stocks Are Falling (It’s Not Just the Fed)

Futures are sharply lower on momentum from Thursday’s selling as investors further digest the hawkish ECB decision and yesterday’s lackluster economic data.

Despite weaker stock prices this morning, economic data overnight was mildly encouraging.  EU and UK December flash PMIs both slightly beat estimates while the EU HICP wasn’t any worse than feared at 10.1% y/y.

Today there are two important economic reports, the Flash Manufacturing PMI (E: 47.7) and Flash Services PMI (E: 46.5) and markets will need to see those data points show 1) Resilient activity and 2) Declining price pressures (more dis-inflation) if they are going to help stocks stabilize.  We also get one Fed speaker, Daly (12:00 p.m. ET), but she shouldn’t move markets.

Finally, today is a Quadruple Witching options expiration and it could cause some intense volatility as many traders had been positioned for a year-end rally, and as those hopes are being dashed, some book-squaring is likely in order.  Point being, don’t be surprised by an uptick in volatility this afternoon and into the close.

What the Fed Decision Means for Markets

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What’s in Today’s Report:

  • What the Fed Decision Means for Markets
  • Why Stocks Didn’t Fall More Yesterday Despite the Hawkish Fed (Important)
  • EIA Analysis and Oil Market Update

Futures are sharply lower as markets digest yesterday’s Fed decision and a deluge of global central bank rate hikes.

By the time stocks open today, seven separate global central banks (including the Fed, ECB, BOE and Swiss National Bank) will have hiked rates over the last 24 hours and while it was all expected, it’s still weighing on sentiment.

Today will be a very busy day of central bank decisions and economic data.  First, we get the BOE Rate Decision (E: 50 bps hike) and ECB Rate Decision (E: 50 bps hike) and the keys there will be the commentary (do either central bank hint that they’re close to the end of tightening).

On the economic front, the key reports today are (in order of importance): Philly Fed Manufacturing Index (E: -9.9), Empire State Manufacturing Index (E: -0.4), Jobless Claims (E: 230K), Retail Sales (E: -0.2%) and Industrial Production (E: 0.1%).  If the data can show moderation and easing price pressures (especially in Empire and Philly) that’ll be a positive for stocks.

Sevens Report Analysts Quoted in Market Watch on December 12th, 2022

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Oil ends higher as a major pipeline shutdown and improving Chinese demand outlook feed supply worries

Oil traded lower into the weekend, but the pace of declines “slowed as WTI approached technical support between $70 and $72,” said analysts at Sevens Report Research in Monday’s newsletter. Click here to read the full article.

Tom Essaye Quoted in Blockworks on December 9th, 2022

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Volatility Index Paints a Gloomy Picture for Bitcoin, Equities

“We remain in a liquidation phase of the market cycle during which more sophisticated, institutional investors are selling their long-term equity holdings,” Tom Essaye, founder of Sevens Report Research said. Click here to read the full article.

Sevens Report Co-Editor Tyler Richey Quoted in Market Watch on December 8th, 2022

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Oil prices down 5 sessions in a row, at their lowest in nearly a year

The report “pointed to some further deterioration in consumer demand as we approach the end of the year,” Tyler Richey, co-editor at Sevens Report Research wrote in Thursday’s newsletter. Click here to read the full article.

CPI Takeaways and Updated FOMC Preview

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What’s in Today’s Report:

  • What Does the CPI Report Mean for Markets?
  • FOMC Preview: Post CPI Report (Encore Edition)
  • Fibonacci Retracement Levels Remain Pivotal for the S&P 500 – Chart

S&P 500 futures are little changed, notably hovering within a few points of their pre-CPI levels from yesterday as traders await the December Fed decision.

Economically, U.K. CPI favorably dropped sharply from 2.0% in October to 0.4% in November, below estimates of 0.6% in the latest sign of easing global inflation pressures.

China is moving forward with economic/Covid policy meetings this week after previously saying they would be postponed pointing to a potential reopening occurring sooner than later.

Today, there is just one economic report due early in the day: Import & Export Prices (E: -0.5%, -0.6%) but unless there is a huge surprise the numbers are not likely to have an impact on equities with the Fed looming.

Turning to the Fed, the FOMC Announcement will hit the wires at 2:00 p.m. ET with markets pricing in a high likelihood of a 50 bp hike while the market will be focused on the “dot plot.” A terminal rate of 5% or above will be viewed as hawkish and likely weigh on stocks.

Finally, Fed Chair Powell’s Press Conference is at 2:30 p.m. ET and his tone could very well decide the final direction of stocks into the close today (a stubbornly hawkish stance remains a threat to equities and other risk assets right now).

CPI Day and FOMC Preview

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What’s in Today’s Report:

  • FOMC Preview
  • CPI Preview (Abbreviated Version)
  • Chart – NY Fed Survey Inflation Expectations Fall Sharply

Stock futures are extending yesterday’s gains as traders await today’s CPI report amid mixed news from overnight.

In China, a $143B stimulus package aimed at the semiconductor industry helped offset the delay of an economic/Covid policy meeting due to a surge in Covid cases.

Economic data was mixed overnight but there were no surprises material enough to derail the tentative pre-CPI rally this morning.

Today, traders will be keenly focused on the November CPI report at 8:30 a.m. ET with the headline expected to come in at 0.3% M/M and 7.3% Y/Y while the Core figure is expected to be 0.4% M/M and 6.1% Y/Y. Bottom line, a print below 7.3% on the headline and below 6.1% in the core figure will be well received by investors but an upside miss in either could trigger a sharp reversal of this most recent move higher in the broader stock market.

Once markets digest the CPI report, money flows are likely to take on a positioning tone with tomorrow’s Fed decision looming and a limited list of catalysts for the remainder of the day. There is a 30-Yr Treasury Bond auction at 1:00 p.m. ET that could move rates and have a mild impact on stocks.

Sevens Report Analysts Quoted in MarketWatch on December 7th, 2022

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Gold futures up a second straight session, but hold below $1,800 an ounce

The technical outlook remains bullish for gold near term, but “if we see rates and the dollar begin to rise, we are likely to see much of the November rally retraced in the weeks ahead,” analysts at Sevens Report Research wrote in Wednesday’s newsletter. Click here to read the full article.