“The lack of a concrete timeline or any real details about plans to reopen the Chinese economy and move away from the still very strict and economically crippling restrictions weighed on the energy market into the afternoon,” wrote analysts at Sevens Report Research. Click here to read the full article.
What’s in Today’s Report:
Futures are lower while bond yields and the dollar are edging higher after Republicans likely took control of the House but disappointed versus expectations in the Senate races. The result is still seen as being some form of a split Congress, however, which is historically favorable for markets.
Economically, Chinese CPI fell to 2.1% vs. (E) 2.4% Y/Y and PPI was -1.3% vs. (E) -1.6% but the data did not move markets overnight as the focus in China is on reopening plans and not inflation pressures.
Looking into today’s session, there are no market-moving economic reports which will leave the focus on the midterm election results, and if Democrats do end up keeping the House (which is possible, but unlikely) expect a mild reversal of the WTD gains.
Outside of the election news, there are two Fed officials speaking today: Barkin (11:00 a.m. ET) and Kashkari (1:00 p.m. ET) and a 10-Yr Treasury Note auction at 1:00 p.m. ET. Any meaningful dovish commentary or a strong auction could support a near-term equity rally but moves should be limited ahead of tomorrow’s CPI report.
What’s in Today’s Report:
Futures are moderately higher on solid economic data and rising hope China could relax its “Zero COVID” policies.
The EU Composite PMI (47.3 vs. (E) 47.1) and UK Construction PMI (53.2 vs. (E) 50.5) both beat estimates, implying economic activity in Europe isn’t collapsing.
In China, an article in the South China Morning Post stated “big and substantive” changes looming for COVID policies.
Today focus will be on the Jobs Report and estimates are as follows: Job Adds: 210K, UE Rate: 3.6%, Wages: 0.3% m/m, 4.7% y/y. If markets can get an underwhelming number (say the low 100’s) that will be the first material sign the labor market is starting to deteriorate, and it could spark a rally in stocks as the Fed needs better balance in the labor market before they can “pivot.”
Away from the jobs report, we also have one Fed speaker, Collins at 10:00 a.m. ET but she shouldn’t move markets.
What’s in Today’s Report:
Futures are higher ahead of today’s Fed announcement amid continued China reopening hopes and good earnings.
AMD is up more than 4% after good earnings yesterday evening which is bolstering tech shares this morning.
Today, the focus will be on economic data early with the ADP Employment Report (E: 200K) due out ahead of the bell. The market will want to see some headline weakness to help offset yesterday’s JOLTS data in order for stocks to rebound into the Fed. Motor Vehicle Sales (E: 14.2M) will also be released over the course of the morning.
Then focus will turn to the Fed with the FOMC Announcement at 2:00 p.m. ET followed by Powell’s Press Conference at 2:30 p.m. ET. A dovish release could trigger a sharp and squeezy rally while a hawkish decision would almost certainly result in investor pain.
Earnings will be on the backburner today but there are still a few notable releases to watch: CVS ($1.99), PGR ($1.48), CHRW ($2.15), QCOM ($3.14), EBAY ($0.93).
What’s in Today’s Report:
U.S. futures and global stocks are rallying today amid reports that China is forming a “reopening committee” as part of a new push to ease Covid restrictions (however China’s foreign ministry has denied the rumors).
The RBA raised rates by 25 bp overnight, meeting estimates while the U.K.’s Manufacturing PMI was slightly better than feared at 46.2 vs. (E) 45.8.
Today, the focus will be on economic data early with the ISM Manufacturing Index (E: 50.0) and JOLTS (E: 9.875M) both due out shortly after the opening bell. But market reactions to the data are likely to be limited as the November FOMC meeting gets underway.
Earnings will remain in focus today with UBER (-$0.17), PFE ($1.47), BP ($1.94), and SYY ($0.99) reporting ahead of the bell, while AMD ($0.55) and ABNB ($1.46) will release results after the bell.
Bottom line, the combination of mostly favorable market news flow this morning, the calendar, and trader positioning into the Fed are all contributing to this morning’s pre-market gains, however, “Fed paralysis” is likely to set in today and into tomorrow’s morning session as investors await the latest Fed decision.
“The negative China headlines and soft U.S. economic data were demand-side negatives for oil. However, hopes for peak-hawkishness bolstered risk assets” analysts at Sevens Report Research wrote in a Tuesday newsletter. Click here to read the full article.
What’s in Today’s Report:
Futures are modestly lower as the Chinese yuan fell to a 14-year low overnight while traders look ahead to big tech earnings.
Economically, the German Ifo Survey was better than feared with Business Expectations up to 75.6 vs. (E) 74.8.
Looking into today’s session, there are several economic reports due to be released: Case-Shiller Home Price Index (E: -0.8%), FHFA House Price Index (E: -0.7%), and Consumer Confidence (E: 106.0). Since Friday’s renewed hopes for peak-hawkishness, the bad news is good news for markets so further softening in the data could keep downward pressure on yields and support a continued rebound in equities today.
There is also a 2-Yr Treasury Note auction at 1:00 p.m. ET that could shed some light on bond traders’ outlook for the terminal rate as a weak outcome could send yields higher and ultimately see the stock market give back some of the Friday/Monday gains.
Finally, earnings season is becoming the market’s primary focus and there are a lot of big names reporting today including: UPS ($2.84), KO ($0.64), GM ($1.89), MMM ($2.61), JBLU ($0.24), and SYF ($1.42) before the bell, while GOOGL ($1.25), MSFT ($2.30), and V ($1.86) are due to report after the close.
What’s in Today’s Report:
Futures are slightly higher as momentum from Friday’s close offset steep losses in Chinese markets.
The Hang Seng fell 6% as Premier Xi emerged from China’s National Conference with an even tighter grip on power, ensuring continued “zero COVID” policies and heightened tensions with the West.
Economically, the Euro Zone and UK flash PMIs missed estimates as both remained below 50 (47.1 and 47.2 respectively).
This week will being a deluge of critical earnings reports but that doesn’t’ start until tomorrow, so focus today will be on the flash PMIs (October Flash Manufacturing PMI (E: 51.2), October Flash Services PMI (E: 49.3)) and if those numbers show solid activity and falling prices, stocks can extend the rally.
What’s in Today’s Report:
Stock futures are trading cautiously higher while yields and the dollar ease from yesterday’s highs after the Fed’s Evans made some less hawkish commentary overnight.
While speaking on “Squawk Box Europe” early this morning, Charles Evans said he was getting nervous about the Fed’s pace of tightening and that if inflation peaks, the FOMC could cut rates as soon as early 2023 which has sparked a relief rally across risk assets amid renewed hopes for “peak hawkishness.”
Economically, Chinese Industrial Profits declined -2.2% in August from -1.1% in July but slowing global growth is largely priced into the market at this point.
Looking into today’s session there are multiple economic reports to watch including: Durable Goods (E: -1.2%), S&P Case-Shiller Home Price Index (E: 0.3%), New Home Sales (E: 498K), and Consumer Confidence (E: 104.3). Investors will be continuing to look for slowing growth, a moderating labor market and most importantly any further signs of easing price pressures as those are all necessary components in getting the Fed to “peak hawkishness.”
Regarding the Fed, there are several officials speaking today: Powell (7:30 a.m. ET), Daly (8:35 a.m. ET), and Bullard (9:55 a.m. ET). And while it is unlikely any of them echo Evans’ dovish tone form earlier this morning, if they do come across as less hawkish, we could see a violent relief rally play out as stocks have become oversold in recent sessions.
What’s in Today’s Report:
Futures are sharply higher on encouraging Chinese inflation data and a drop in the U.S. Dollar.
Chinese PPI (2.3% vs. (E) 2.8% y/y) and CPI (2.3% vs. (E) 3.2% y/y) both declined from last month and came in under expectations, providing more evidence that the global economy has hit “peak inflation.”
The encouraging Chinese inflation data combined with yesterday’s hawkish ECB is pushing the dollar 1% lower.
Today there are no notable economic reports but there are several Fed speakers, including Evans (10:00 a.m. ET), Waller (12:00 p.m. ET) and George (12:00 p.m. ET). If they sound optimistic on inflation, that will help extend this morning’s rally.