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Technical Update: Key Levels to Watch

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What’s in Today’s Report:

  • Technical Update:  Key Levels to Watch
  • Value vs. Growth – What Do the Charts Say?

Futures are modestly higher as a soft EU inflation reading is helping to extend Thursday’s rally.

Euro Zone PPI came in much lower than expectations (15% vs. (E) 17.7% y/y) and that’s helping to slightly offset the hot inflation data from earlier in the week.

Economically, Euro Zone and UK Composite PMIs were generally in-line with expectations.

Today the key report will be the ISM Services PMI (E: 54.5).  For stocks and bonds, the best case for this report is that the headline is stable (not much above expectations) while the price indices decline.  If that happens, stocks can extend the rally.

We also get several Fed speakers today including Logan (11:00 a.m. ET), Bostic (11:45 a.m. ET), Bowman (3:00 p.m. ET) and Barkin (4:15 p.m. ET).  If they echo Bostic’s comments from yesterday about the Fed being done with hikes by mid to late summer, that will be a tailwind on stocks.

Economic Breaker Panel: February Update

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What’s in Today’s Report:

  • Sevens Report Economic Breaker Panel – February Update
  • January Durable Goods Orders Takeaways
  • Breakout in Natural Gas Futures

Stocks futures are trading with modest gains this morning while Treasury yields are tracking European bond yields higher following stubbornly high inflation data overnight.

Economically, both Spanish and French CPI headlines were hotter than expected, above 6%, which saw European rates markets price in a 4% terminal ECB rate for the first time. Government bond yields across the Eurozone notably rose to multi-year highs.

Looking into today’s session, there are several economic reports to watch including: International Trade (E: -$91.0B), Case-Shiller Home Price Index (-0.5%), FHFA House Price Index (E: -0.3%), and Consumer Confidence (E: 108.5).

Traders will be looking for less signs of stagflation in the data as elevated inflation figures and weakening growth metrics were a headwind for equities last week.

Finally, the Chicago Fed’s Goolsbee (who just succeeded Evans) has his first speaking engagement since taking over the role at 2:30 p.m. ET, and as a voting member of the FOMC, his comments will be closely watched for any new clues about Fed policy plans in the months ahead. A notably hawkish tone, could easily cause another bout of volatility in risk assets this afternoon.

Core PCE Price Index Preview (Good, Bad & Ugly).

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What’s in Today’s Report:

  • What the Core PCE Price Index Will Mean for Markets (Good, Bad & Ugly)
  • EIA and Oil Market Analysis

Futures are moderately lower mostly on positioning ahead of the Core PCE Price Index release but also in reaction to disappointing EU economic data.

German GDP underwhelmed and fell –0.4% vs. (E) -0.2% while Gfk Consumer Climate also slightly missed estimates (-30.5 vs. (E) -30.4).

Today, focus will be on inflation and the key report is the Core PCE Price Index (E: 0.4% m/m, 4.3% y/y).  We have a full Core PCE Price Index preview in the Report, but generally speaking, if the numbers are below expectations, it’ll spark a rally, if they are around expectations that’s mostly priced in, and if Core PCE is higher than last month, prepare for a selloff.

Other data today includes Personal Incomes and Outlays (E: 1.0%, 1.2%), , New Home Sales (E: 617K) and Consumer Sentiment (E: 66.4), but barring a move in five year inflation expectations above 3% none of those reports should move markets.

Finally, we also have two Fed speakers today, Mester (10:15 a.m. ET) and Collins (1:30 p.m. ET).

Is the Market Pendulum Swinging Back?

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What’s in Today’s Report:

  • Is the Market Pendulum Swinging Back?
  • Weekly Economic Cheat Sheet

Stock futures are lower while the dollar and Treasury yields move higher as part of a continuation of last week’s hawkish money flows, partially thanks to strong data overnight.

Economically, the EU Composite PMI jumped to 52.3 vs. (E) 50.7 due to strength in the service sector, bolstering expectations for increasingly aggressive monetary policy in the months ahead which is weighing on risk assets globally this morning.

Today, economic data will be in focus early with the key report in the U.S. being the PMI Composite Flash (E: 47.2) while Existing Home Sales (E: 4.10M) will also be released. A hot PMI print like we saw in Europe earlier this morning would likely add to the hawkish tone and weigh further on stocks today while a weaker, but not terrible report, could see yields and the dollar ease back and allow for a modest relief rally.

As far as other catalysts go, there are no Fed officials scheduled to speak but there is a 2-Yr Treasury Note auction at 1:00 p.m. ET and if yields continue higher in the wake of the auction, expect more pressure on stocks, especially higher valuation/growth names.

Finally, earning season is winding down but a pre-market release by WMT ($1.52) should shed some light on the health of the consumer and could impact markets as well.

Will the October Lows Hold?

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What’s in Today’s Report:

  • Subscriber Q&A: Will the October Lows Hold and What Is Going On Below the Market’s Surface?
  • The Gap Between the Fed and Markets is Closing
  • Chart: 2-Yr Yield Approaches 2023 Highs

Stock futures are little changed while the dollar and Treasuries are steady following a quiet night of news as traders await Powell’s speech today.

Economically, German Industrial Production fell -3.1% vs. (E) -0.6% in December which is rekindling recession worries this morning and helping support the stabilization in bond markets.

Looking into today’s session focus will be on Powell’s speech at 12: 40 p.m. ET as traders brace for the Fed Chair to potentially push back on the market’s dovish reaction to last week’s FOMC decision, something that happened multiple times in 2022 sparking big waves of volatility across asset classes each time.

Expectations for Powell’s speech have already become more hawkish since the January jobs report, however, so he would need to be explicit and firm about raising rates beyond 5% and not cutting rates in 2023 to cause a meaningfully hawkish reaction.

Beyond Powell, there are two lesser followed economic reports to watch: International Trade in Goods Services (E: -$68.8B) and Consumer Credit (E: $25.0B) although neither should have a material impact on markets while the Fed’s Barr also speaks this afternoon (2:00 p.m. ET).

There is a 3-Yr Treasury Note auction at 1:00 p.m. ET and the outcome will offer some evidence of bond traders’ initial take on Powell’s comments. If the auction tails significantly, expect some hawkish follow-through money flows into the afternoon.

Finally, earnings season continues with a couple of notable reports after the close today: CMG ($8.88) and PRU ($2.57).

FOMC Meeting Preview

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What’s in Today’s Report:

  • FOMC Preview
  • VIX Chart – Is Volatility About to Surge Again?

U.S. stock futures are tracking European markets lower this morning amid a hawkish reaction to strong economic data and disappointing earnings from UBS and Samsung.

Economic data in Europe showed a reversal back higher in French inflation and better than-feared growth in the EU which is resulting in more hawkish money flows ahead of the several key central bank decisions this week and that is ultimately weighing on risk assets this morning.

Looking into today’s session, there are a few economic reports to watch in the U.S. (in order of importance): Q4 Employment Cost Index (E: 1.1%), Consumer Confidence (E: 109.0), Chicago PMI (E: 45.1), and the Case-Shiller Home Price Index (E: -0.5%).

With the FOMC Meeting getting underway, the macro focus will be on rate markets and expectations for the terminal rate as tomorrow’s 25 basis point hike is priced in with nearly 100% confidence. If market-based terminal rate expectations rise today, expect further pressure on risk assets and lower equity prices broadly.

Meanwhile, earnings season continues in full force today with notable releases coming from: UPS ($3.58), GM ($1.65), XOM ($3.32), MCD ($2.45), CAT ($3.95), and AMD ($0.67).

Economic Breaker Panel

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What’s in Today’s Report:

  • December Economic Breaker Panel

Futures are slightly lower following a disappointing earnings report by Micron (MU).

Micron (MU down –3% after hours) reported underwhelming results and guidance and announced layoffs, and that’s reversing some of the earnings-driven gains we saw in stocks on Wednesday.

Economic data remained sparse but UK GDP slightly missed estimates, falling –0.3% vs. (E) -0.2%.

Today’s focus will be on Weekly Jobless Claims (E: 225k) and this number needs to move higher (towards 300k) to show the Fed that the labor market is returning to better balance (something the Fed said is needed before they can think about a pivot).  We also get the Final Q3 GDP (E: 2.9%) but that data is very old now (July-September) and it shouldn’t move markets.

 

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.

Sevens Report Analysts Quoted in Market Watch on September 28th, 2022

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U.S. oil prices settle back above $80 as Hurricane Ian forces production cuts

We have to acknowledge the dominant trend is still lower for the oil market right now but we do continue to look for the market to stabilize soon as we do not believe the combination of over-compliance by OPEC+, tight global physical markets, and the geopolitical uncertainty surrounding the war in Ukraine can be solely offset by concerns about the global economy…wrote analysts at Sevens Report Research, in a note. Click here to read the full article.

Sevens Report Analysts Quoted in Market Watch on August 22nd, 2022

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Gold down a 6th session in a row as a strong dollar weighs on precious metals

If the dollar and Treasury yields continue to trend higher, it is only a matter of time before gold retests the 2022 lows…analysts at Sevens Report Research wrote in Monday’s newsletter. Click here to read the full article.