“There’s frankly little doubt that consumers are already 1) Reining in spending and 2) Becoming more value conscious,” Sevens Report analyst Tom Essaye wrote in a Thursday note. Click here to read the full article.
“Looking at the curve, the 10s-2s yield curve spread remained near a multidecade low of nearly minus-80 basis points. That deep of an inversion suggests that the Fed’s current policy and expected path of future policy are far too restrictive for the state of the economy and growth expectations, which will almost certainly end in a recession — and potentially a severe one given the scope of the current inversions across the Treasury yield curve,” said Tom Essaye, editor of Sevens Report Research, in a note. Click here to read the full article.
What’s in Today’s Report:
Futures are sharply lower on unrest in China as protests erupted across the country following more COVID restrictions.
Over the weekend Chinese citizens protested in numerous cities following new COVID restrictions, as the Chinese government sticks to it’s “Zero COVID” policy.
Economically the only notable number was EU M3 (money suppled) and that rose 5.8% vs. (E) 6.1%.
Today there are no notable economic reports but there are two Fed speakers, Bullard (12:00 p.m. ET) and Williams (12:00 p.m. ET). Bullard especially has produced some “tape bombs” with his commentary on rates and if he’s again hawkish (talking about 7% Fed Funds) expect that to add to the early losses.
What’s in Today’s Report:
Stock futures are little changed in quiet holiday trading this morning as traders look ahead to the slew of economic data due out in the U.S. today as well as the release of the November Fed meeting minutes.
Economically, the Eurozone Composite PMI Flash came in at 47.8 vs. (E) 47.0 signaling economic contraction in the EU but the better-than-feared headline is helping European shares edge higher today.
This morning is lining up to be a busy one for economic data with Durable Goods Orders (E: 0.3%), Jobless Claims (E: 225K), PMI Composite Flash (E: 48.7), New Home Sales (E: 574K), and Consumer Sentiment (E: 55.0) all due to be released between 8:30 a.m. and 10:00 a.m. ET.
Additionally, the November Fed Meeting Minutes will be released at 2:00 p.m. ET.
Bottom line, with all the recent Fed speak, the Minutes are unlikely to offer any surprises today however data can move markets despite thinning attendance and light volumes. The market wants to see slowing but not collapsing growth measures and a downward acceleration in inflation (today’s inflation expectations within the Consumer Sentiment release will be the key figure to watch). If that materializes, the S&P might be able to break through key near-term technical resistance at 4,007 however high inflation and weaker-than-anticipated growth could send stocks tumbling back toward the lows of the week at 3,900.
All of us at Sevens Report Research are very thankful for your support! Everyone please travel safely, and have a Happy Thanksgiving. We will speak to you again Friday morning.
What’s in Today’s Report:
U.S. equity futures are slightly higher and the dollar is pulling back modestly after a mostly quiet night of news as traders eye a stabilizing oil market.
After a volatile session yesterday, WTI crude oil is trading comfortably above $80/barrel this morning, fueling a rally in energy companies which is buoying index futures in pre-market trading.
Today, there is only one lesser-followed economic report due out: Richmond Fed Manufacturing Index (E: -1.0) and two Fed officials are scheduled to speak: Mester (11:00 a.m. ET) and George (2:15 p.m. ET).
Additionally, there is a 7-Yr Treasury Note auction at 1:00 p.m. ET that could move markets but the tape has been very quiet this week as attendance is light and volumes are down given the Thanksgiving holiday schedule. So more choppy and rangebound trading between 3,900 and 4,000 in the S&P is likely.
What’s in Today’s Report:
Stock futures are trading lower with global markets following negative Covid headlines out of China.
China reported a spike in Covid cases this weekend including the first Covid-related death in nearly six months which prompted new restrictions and lockdowns in cities that were previously in the process of reopening. That has triggered risk-off money flows this morning with equities declining globally and the dollar rising nearly 1% in early trade.
Economically, the German PPI for October was actually favorable as it fell a steep -4.2% vs. (E) +0.9%. However, in year-over-year terms, PPI remains up more than 30% which is a major headwind for the German economy.
Looking into today’s session, there are no economic reports and just one Fed speaker: Daly (1:00 p.m. ET) which will likely leave the focus on China and any new Covid-related headlines.
In the fixed income space, the Treasury will hold a 2-Yr Note auction at 11:30 a.m. ET and a 5-Yr Note auction at 1:00 p.m. ET. And if demand is soft and rates begin to move to meaningful new highs, expect selling pressure on the equity market to pick up moderately.
What’s in Today’s Report:
Futures are moderately higher following more geo-political progress amidst an otherwise quiet night.
Russian officials signaled they are open to high-level talks with the U.S. on strategic stability, which is being taken as another (small) step towards an ultimate cease-fire.
Economically, the only notable number was UK Retail Sales and they were better than expected, rising 0.6% vs. (E) 0.2%.
Today the calendar is sparse with just Existing Home Sales (E: 4.360M) and one Fed speaker, Collins (8:40 a.m. ET) but if she doesn’t provide any hawkish surprises, this early rally can continue as stocks recoup yesterday’s Bullard inspired losses.
What’s in Today’s Report:
Futures are modestly lower as investors digest Wednesday’s earnings disappointments.
CSCO and NVDA reported after the close and both results were better than feared, but that’s not enough to offset growing concerns about future corporate earnings.
On inflation, October EU HICP slightly missed estimates (10.6% vs. (E) 10.7%) although the monthly reading was in-line at 1.5%, signaling that inflation pressures in the EU aren’t declining.
Today’s focus will again be on inflation so the price indices in the Philly Fed Manufacturing Index (E: -7.0) will be the key reports and any declines in those price indices should prompt at least a small rally. Outside of Philly Fed, we also get Housing Starts (E: 1.41M) and Jobless Claims (E: 222k), but neither should move markets.
There are also multiple Fed speakers today including Bostic (7:30 a.m. ET), Bowman (9:15 a.m. ET), Mester (9:40 a.m. ET), and Kashkari (10:40 a.m. ET & 1:45 p.m. ET), and we should expect their message to be consistent with recent Fed speak: The size of rate hikes will shrink, but the Fed still has a long way to go to reach the “Terminal Rate.”
Tom Essaye, founder and president of Sevens Report Research, joins BNN Bloomberg to recap earnings from big tech this week. Click here to watch the full interview.
What’s in Today’s Report:
Futures have stabilized with global shares as easing geopolitical angst offsets more hot inflation data in Europe.
The AP reported the projectile that killed two in Poland on Tuesday originated in Ukraine (by their air defense systems) and not Russia which has eased concerns about NATO being pulled into the war between Russia and Ukraine.
Economically, U.K. CPI rose to 11.1% vs. (E) 10.6% in October, a fresh 41-year high which rekindled some global inflation fears overnight.
Today, the focus will be on the slew of economic data due to be released: Retail Sales (E: 1.0%), Import & Export Prices (E: -0.4%, 4.0%), Industrial Production (E: 0.2%), and the Housing Market Index (E: 36). The market will want to see a continued slowdown in growth metrics but more importantly, a faster slowdown in any price measures within the data as that dynamic would improve the prospects of a soft landing.
Additionally, the Fed speakers circuit remains active with: Williams (9:50 a.m. ET), Barr (10:00 a.m. ET), and Waller (2:35 p.m. ET) all due to speak over the course of the session.
Bottom line, if economic data and geopolitical headlines remain favorable today, the S&P 500 should be able to make another run at critical technical resistance at 4,007 in the S&P 500. A close above that level would open the door to another leg higher in the latest relief rally in the broader stock market.