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Why This Isn’t A Risk-Less Market (Despite The Fed Being Dovish)

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Why This Isn’t A Risk-Less Market: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why This Isn’t A Risk-Less Market (Despite The Fed Being Dovish)
  • Understanding Why the Dollar Is Plunging

Futures are modestly higher following mixed global economic data and as investors continued to digest Wednesday’s dovish Fed decision.

Global data was mixed, but not bad, and as such isn’t increasing global slowdown fears.  In Europe, the EU flash composite PMI missed estimates (47.0 vs. (E) 48.0) while the UK reading beat (51.7 vs. (E )51.0).  In China,

Retail Sales and Industrial Production were better than feared.

Today focus will be on economic data as we get the first look at December activity and for the rally to continue, the data needs to be Goldilocks (so close to expectations).  The key reports today are, in order of importance:    Dec. Flash Manufacturing PMI (E: 49.2), Dec. Flash Service PMI (E: 50.6), Nov. Industrial Production (E: 0.3%), Dec. Empire Manufacturing Index (E: 3.7).

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Why the Bar for the Fed to Be Hawkish Is High

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Why the Bar for the Fed to Be Hawkish Is High: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why the Bar for the Fed to Be Hawkish Is High
  • What the CPI Report Means for Markets

Futures are slightly higher despite soft economic data, as markets await the Fed decision later this afternoon.

Economically, data from the UK and the EU was bad and is slightly increasing growth concerns.   UK monthly GDP  and UK & EU Industrial Production all missed estimates.

Chinese growth concerns also rose as China declared industrial development as the #1 economic priority, potentially signaling less economic stimulus in 2024.

Today focus will be on the FOMC decision (2:00 p.m. ET, No change to rates expected) and the keys are the 2024 dot (does it show 50 bps of cuts?) and whether Powell slams the door on the idea of rate cuts (or leaves it slightly open).  In addition to the Fed, we also get another important inflation reading via PPI (E: 0.1% 1.0%). A further decline will be peripherally positive for markets.

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Catalyst #1 – CPI Preview: Good, Bad & Ugly

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CPI Preview: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • CPI Preview:  Good, Bad & Ugly
  • Weekly Market Preview:  The Last Busy Week of 2023 (Inflation Update, Fed Decision & Growth Reports)
  • Weekly Economic Cheat Sheet:  Inflation Tomorrow, Fed Decision Wednesday, Economic Growth Updates Thurs/Fri

Futures are slightly lower on digestion of the multi-week rally following a quiet weekend and ahead of a the last catalyst-filled week of 2023.

Economically, there was no notable data overnight. Investors are focused on the looming reports this week (CPI tomorrow, Fed Wednesday, growth data Thurs/Fri).

On Japan, a Bloomberg article pushed back on the expectation for rate hikes and Japanese stocks are rallying 1%.

This is the last potentially busy week of 2023 but it starts slowly as the only notable report today is the N.Y. Fed 1 Year Consumer Inflation Expectations (3.6%).  If expectations drop sharply (possibly below 3.0%) that could provide a mild boost to stocks. But with key events looming Tuesday-Friday, the bar to move stocks and bonds today is pretty high.

CPI Preview

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Hard vs. Soft Landing Scoreboard Update

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Hard vs. Soft Landing Scoreboard Update: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Hard vs. Soft Landing Scoreboard Update
  • Continuing Claims Hit 2-Year High: Chart
  • Philly Fed Survey Takeaways – More Signs of Stagflation
  • Industrial Production Confirms Slowdown in Factor Sector

Stock futures are modestly higher this morning as soft U.K. consumer spending data. Combined with an as-expected drop in EU inflation are supporting a continued bid in bond markets.

Economically, U.K. Retail Sales fell -0.3% vs. (E) +0.3%. As the Eurozone HICP (their CPI equivalent) met estimates across the board, falling significantly from 4.3% to 2.9% y/y. Positively the “Narrow Core” figure eased to 4.2% from 4.5%.

Looking into today’s session, there is just one economic report to watch: Housing Starts (E: 1.35 million) and barring a big surprise, the release should not move markets.

There are a handful of Fed officials speaking today with Barr & Collins, Daly, Goolsbee, and Collins again all on the schedule. If the Fed speakers stick to the same narrative (less hawkish) expect more of the same sideways, digestive trading in equities today with the threat of a continued move higher based on bullish market momentum.

Hard vs. Soft Landing Scoreboard Update

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Was the CPI a Bullish Gamechanger?

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Was the CPI a Bullish Gamechanger? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Was the CPI Report a Bullish Gamechanger?
  • CPI Data Analysis and Takeaways

Stock futures are extending the November gains this morning and Treasuries are steady after more cool inflation readings in Europe and stabilizing economic data in China.

Economically, Chinese FAI and Industrial Production figures met estimates while Retail Sales importantly accelerated to 7.6% vs. (E) 7.0% in October up from 5.5% in September.

In Europe, CPI data from the U.K., France, and Italy all met estimates or came in “cooler” than expected. This bolsters the view that global central banks are done with rate hikes, fueling risk-on money flows today.

Today, there are several economic reports to watch early: PPI (E: 0.1% m/m, 2.0% y/y), Empire State Manufacturing Index (E: -3.0), and Retail Sales (E: -0.3%). The market will be looking for more signs of cooling inflation in the PPI release. And no major surprises either way in the Empire and Retail Sales releases as the market is still vulnerable to data that is “too hot” (risks of more Fed tightening) or “too cold” (risks of a “hard landing”).

There are also two Fed speakers today: Barr (9:30 a.m. ET) and Barkin (3:30 p.m. ET) but neither are expected to move markets.

Was the CPI Report a Bullish Gamechanger?

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What to Tell Clients Who Are Worried About U.S. Treasuries

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What to Tell Clients Who Worry About U.S. Treasuries

What’s in Today’s Report:

  • What to Tell Clients Who Are Worry About U.S. Treasuries.
  • Start a free trial of The Sevens Report.

Futures are little changed following a mostly quiet night of news as investors look ahead to today’s CPI report.

Politically, a “Continuing Resolution” to fund the government will be voted on in the House today and if passed, will avert a government shutdown.

Economically, the UK unemployment rate and German ZEW Business Expectations Index both beat expectations (although they aren’t moving markets).

Today focus will be on the CPI report and expectations are as follows:  CPI (E: 0.1% m/m, 3.3% y/y), Core CPI (E: 0.3% m/m, 4.1% y/y).  Generally speaking, numbers that show core CPI is continuing to decline will be welcomed by markets. While readings that imply the decline in inflation is “stuck” or inflation is bouncing back, will likely result in declines in both stocks and bonds.

We also have several Fed speakers today including Barr, Mester, and Goolsbee. We’ll be watching for their reaction to the CPI report. If it makes them more hawkish that’s a negative and more dovish, a positive).

What to Tell Clients

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CPI Preview: Good, Bad & Ugly

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CPI Preview: Good, Bad & Ugly: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • CPI Preview:  Good, Bad & Ugly
  • Weekly Market Preview:  Will Market Catalysts This Week Support A Further Rally?
  • Weekly Economic Cheat Sheet:  CPI Tomorrow, Key Growth Data the Rest of the Week

Futures are slightly lower as markets digest two slightly negative events from the weekend and look ahead to a week filled with possible market moving catalysts.

Moody’s downgraded the U.S. credit outlook to negative but importantly did not change the rating and as such it’s not significantly impacting markets.

Geo-politically, U.S. forces struck more targets in Syria over the weekend, escalating regional tensons but so far markets are not reacting (oil isn’t rallying off the news).

Looking forward, this is a potentially important week, but it starts slowly as there are no notable economic reports today nor any Fed speakers.

Beyond today, though, in addition to the economic catalysts this week, risk of another U.S. government shutdown is rising as there needs to be a short-term spending deal by Friday to avoid a shutdown.  So, any progress on that front today will help markets, while any negative headlines will likely provide a small headwind.

CPI Preview:  Good, Bad & Ugly

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FOMC Preview: Forward Guidance Will Be Critical

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Forward Guidance Will Be Critical: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • FOMC Preview – What’s Expected, Dovish-If, Hawkish-If, Forward Guidance Will Be Critical
  • Chart: 10-Yr Yield Approaches Critical Tipping Point

Futures are cautiously higher thanks to more evidence of disinflation in Europe. While an underwhelming yield curve control policy announcement by the BOJ is digested by global investors.

Economically, Eurozone CPI fell from 4.3% in September to 2.9% in October, well below estimates calling for 3.4% which further supports the narrative that global inflation pressures are easing considerably. Meanwhile, quarterly GDP in the EU disappointed, turning negative at -0.1% vs. (E) 0.0% which is rekindling recession worries in the Eurozone.

Looking into today’s session, there are several economic reports to watch this morning. The Employment Cost Index (E: 1.0%) being the most important for markets. The Case-Shiller Home Price Index (E: 0.7%) and latest Consumer Confidence report will also be released later in the morning (E: 100.0) but are less likely to move markets.

This week’s FOMC meeting gets underway today which will likely mean a familiar sense of Fed paralysis will begin to grip markets ahead of tomorrow’s policy decision, however, there is a 52-Week Treasury Bill auction at 1:00 p.m. ET that could move yields and influence equity market trading in the early afternoon.

Finally, earnings season is winding down but there are a few notable releases today. Starting with CAT ($4.75) and JBLU (-$0.27) reporting ahead of the bell with AMD ($0.68) after the close.

FOMC Preview - Magnifying Glass

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What Can Stop This Selloff?

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What Can Stop This Selloff? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What Can Stop This Selloff?
  • Weekly Market Preview:  A Very Important Week of Earnings, Fed Decision and Economic Data
  • Weekly Economic Cheat Sheet:  A Busy Week (Jobs Report Friday, ISM PMIs Wed/Fri)

Futures are moderately higher on a small reduction in geo-political tensions and better than expected inflation data.

Geo-politically, Israel moved forces into Gaza over the weekend but the operation isn’t as large as feared (yet) and that’s helping to slightly reduce geopolitical anxiety.

On inflation, Spanish CPI rose 3.5% vs. (E) 3.8%, providing another reminder that global inflation is declining.

This week will be a very busy one as we get a Fed decision and important economic/inflation data, as well as the final “big” week of earnings.  But, it starts slowly as there are no economic reports today, so focus will be on earnings and some important reports today include:  MCD ($3.00), WDC ($-1.87), ON ($1.35), SOFI ($-0.07), ANET ($1.58).

What Can Stop This Selloff?

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Hard Landing vs. Soft Landing Scoreboard Update

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Hard Landing vs. Soft Landing Scoreboard Update: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Didn’t Stocks Drop On Yesterday’s Yield Spike?
  • Hard Landing vs. Soft Landing Scoreboard Update

Stock futures are lower and oil is up 3% as tensions in the Middle East remain elevated despite President Biden’s visit to Israel.

Chinese economic data topped estimates across the board overnight. But an imminent default by embattled property developer Country Garden weighed on sentiment in Asian markets.

In Europe, U.K. CPI came in hot as it held steady at 6.7% vs. (E) 6.5% in September.  While the Eurozone HICP “Narrow Core” met estimates at 4.5%.

Looking into today’s session, there will remain considerable focus on the conflict between Israel and Hamas amid Biden’s visit to the region and if no progress is made towards a ceasefire, rising oil prices will continue to act as a headwind on risk assets.

Domestically, there is just one economic report today: Housing Starts (E: 1.394 million) that should not meaningfully move markets. There are aslo multiple Fed officials scheduled to speak: Waller, Williams, Bowman, and Harker.

Earnings season also continues today with: MS ($1.27), ALLY ($0.80), CFG ($0.92), WGO ($1.32), TRV ($2.93), and PG ($1.71) and reporting ahead of the bell, while TSLA ($0.75) and NFLX ($3.46) will release results after the close.Hard Landing vs. Soft Landing

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