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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).

Market Multiple Levels: S&P 500 Chart

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What’s in Today’s Report:

  • Market Multiple Levels – S&P 500 Chart
  • VIX Breaks Longstanding Downtrend in Cautious Signal

Futures are modestly lower as persistent concerns about hawkish Fed policy and fading global growth overshadow positive Covid policy news out of China and encouraging EU economic data.

Economically, German Industrial Production was better than feared at -0.1% vs. (E) -0.6% while  Q3 Eurozone GDP topped estimates at 2.3% vs. (E) 2.1% Y/Y suggesting the EU economy may be stabilizing.

China’s NHC issued new guidelines on Covid restrictions overnight that eased certain testing and quarantine requirements and will hold a press conference tomorrow which points to the potential for more progress in moving away from Covid-Zero.

Looking into today session, there is one economic report before the bell: Productivity & Costs (E: 0.4%, 3.3%) and then Consumer Credit (E: 27.3B) will be released in the afternoon. The latter report is not one we typically follow closely but there has been increasing concern about the health of household balance sheets, so a sharp move higher in outstanding credit could raise concerns about defaults in the coming quarters.

Finally, there are no Fed speakers today but stocks have been taking queues from rate markets and the dollar so if either meaningfully move higher, that will add pressure to the broader equity market today.

Current Fed Expectations

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What’s in Today’s Report:

  • Current Fed Expectations (Print This Table/Section)
  • VIX Chart – Getting Closer to a Bearish Signal

Stock futures are rebounding modestly this morning following yesterday’s sharp drop as worries surrounding China’s Covid policies and the subsequent protests ease.

The Hang Seng jumped over 5% and the offshore yuan rallied 1% after the Chinese government announced a renewed push to vaccinate elderly citizens and said excessive restrictions will be avoided, both of which are incremental steps away from “Covid Zero.”

Today, market focus will be on housing data early with the Case-Shiller Home Price Index (E: -1.3%) and FHFA House Price Index (E: -1.2) due out ahead of the bell and then the Consumer Confidence (E: 100.0) report will print shortly after the open.

There are no Fed officials scheduled to speak today so focus will likely remain on the situation in China, and if sentiment towards Covid policy expectations and the latest wide-spread protests improves then stocks will be able to stabilize as that was a major bearish influence on the market yesterday.

Sevens Report Co-Editor Quoted Tyler Richey on November 17th, 2022

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U.S. oil prices drop by nearly 5% to end at their lowest since late September

“Stagflationary economic data, rising COVID cases in China, and hawkish [Federal Reserve] chatter have all been added headwinds on the oil market today,” said Tyler Richey, co-editor at Sevens Report Research. Click here to read the full article.

Economic Breaker Panel: November Update

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What’s in Today’s Report:

  • Economic Breaker Panel – November Update

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.

When to Brace for More Volatility

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What’s in Today’s Report:

  • Revisiting the VIX – When to Brace for More Volatility
  • Familiar Holiday Volatility Courtesy of OPEC & Russia

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.

Was Last Week’s CPI Report A Bullish Gamechanger?

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What’s in Today’s Report:

  • Was Last Week’s CPI A Bullish Gamechanger?
  • Weekly Market Preview:  Can Yields Keep Falling?
  • Weekly Economic Cheat Sheet:  More Key Inflation Readings This Week

Futures are modestly lower following some hawkish Fed comments and as investors digest last week’s big rally.

Fed Governor Waller made comments on Sunday that the Fed still has “a ways to go” before ending rate hikes, which is sapping some of last week’s soft CPI enthusiasm.

Positively, China continued progress towards abandoning “Zero COVID” and announced a stimulus plan for supporting the residential real estate market.

Today there are no notable economic reports and only one Fed speaker, Williams at 6:30 p.m. ET, but that won’t impact today’s trading.  So, we’d expect digestion of last week’s gains.  Politically, the Republican’s are still expected to win the House, but it will be close.  If Democrats look like they may win the House, that will likely weigh on markets as investors want a split government.

Jobs Report Preview

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What’s in Today’s Report:

  • Jobs Report Preview

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.

Three Keys to a Bottom (Updated)

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What’s in Today’s Report:

  • Three Keys to a Bottom Updated (Some Progress But Not There Yet)
  • Economic Takeaways – Goldilocks Trends Emerging
  • Weekly Economic Cheat Sheet

There is a tentative risk-on tone to trading this morning as U.S. equity futures track global shares higher thanks to new stimulus measures in China and easing natural gas prices in Europe.

The PBOC announced new measures to help stabilize the yuan and bolster the economy in the face of renewed Covid lockdowns and recent signs of slowing growth which was welcomed by markets overnight.

In Europe, German Manufacturers Orders fell -1.1% vs. (E) -0.4% but that is helping dial back some of the recently more hawkish policy expectations ahead of this week’s ECB meeting.

Looking into today’s session, there is one economic report to watch: ISM Services Index (E: 55.4), and no Fed officials are scheduled to speak.

That should leave the focus on currency and bond markets in the U.S. if both the dollar and short-duration yields can stabilize, and not move materially higher, then stocks should be able to make an attempt to stabilize after Friday’s late session reversal lower.

Additionally, if we see natural gas prices in Europe continue to pull back from Friday and yesterday’s rise, that should help the risk-on mood in markets persist as the Nord Stream 1 halt was the main catalyst for stocks rolling over on Friday.

Jobs Report Preview

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What’s in Today’s Report:

  • Jobs Report Preview
  • EIA Analysis and Oil Update

Futures are solidly lower as negative China/COVID headlines and lackluster economic data weighed on markets.

Chinese authorities put the city of Chengdu (population 17 million) in a COVID lockdown, reminding markets “Zero COVID” is still in effect.

Economically, global manufacturing PMIs were underwhelming as all major regions (EU, UK and China) posted numbers below 50 (signaling contraction).

Today focus will be on economic data and the most important number is the ISM Manufacturing PMI (E: 52.2).  Markets need to see an in-line reading, because if it’s a very strong number that will increase hawkish concerns about the Fed, and if it’s a very weak number (below 50) that will spike stagflation concerns.  Outside of the PMI we also get Jobless Claims (E: 248K) and Unit Labor Costs (E: 10.7%) and there’s also one Fed speaker, Bostic at 3:30 p.m. ET.