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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.

Sevens Report Analysts Quoted in The Market Herald on August 5th, 2022

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ASX Today: Cautious start as traders await US jobs report

Demand concerns are now the dominant influence on the global energy market and even though supply worries will persist with the Russia-Ukraine war, we will need to see evidence of demand stabilizing for the oil market to begin to find a near-term bottom,” analysts at Sevens Report Research wrote. Click here to read the full article.

Sevens Report Co-Editor Tyler Richey Quoted in Market Watch on July 19th, 2022

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Oil futures finish higher, with U.S. prices holding above $100 as supply concerns resurface

Biden’s visit to Saudi Arabia last week has “already become old news as traders refocus on the major influences on the oil market right now: the Russia-Ukraine war, OPEC+ policy outlook, and recession concerns linked to high inflation, COVID lockdowns in China, and aggressive central bank policy around the globe…Tyler Richey, co-editor at Sevens Report Research, told MarketWatch. Click here to read the full article.

Sevens Report Co-Editor Tyler Richey Quoted in Market Watch on April 18th, 2022

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Natural-gas prices mark another finish at a nearly 14-year high, while oil prices climb

Unseasonably cold temperatures are driving elevated spring heating demand in the U.S. amid an already bullish fundamental backdrop of subdued inventory levels and no real signs of rising production in the near to medium term…said Tyler Richey, co-editor at Sevens Report Research. Click here to read the full article.

Sevens Report Analyst Quoted in Market Watch on April 14th, 2022

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Gold marks first loss in 6 sessions, but posts a gain for the week

Looking ahead, the outlook for gold is still bullish and “the level to beat for futures to begin a new leg in the current uptrend is the 2022 high close of $2,058” an ounce, analysts at Sevens Report Research wrote in Thursday’s newsletter. Click here to read the full article.