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Inflation Update

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What’s in Today’s Report:

  • Inflation Update
  • Inflation Expectations Chart

Stock futures are slightly higher this morning while global shares were mixed overnight ahead of fresh U.S. inflation data and the unofficial start to the Q3 earnings season.

Economically, German CPI met expectations while Eurozone Industrial Production beat estimates, which is helping ease recent stagflation concerns this morning.

Looking into today’s session, focus will be on inflation data with the September CPI report due at 8:30 a.m. ET (E: 0.3%, 5.3%) as well as the start of Q3 earnings season with JPM ($3.00) and DAL ($0.15) reporting results before the open.

Then in the afternoon, we will get the FOMC Meeting Minutes (2:00 p.m. ET) and multiple Fed speakers: Brainard (3:30 p.m. ET), Bowman (8:00 p.m. ET).

Finally, there is a 30-Yr Treasury Bond auction at 1:00 p.m. ET that could impact yields and ultimately move equity markets (especially if yields make new highs).

Microeconomics vs. Macroeconomics

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What’s in Today’s Report:

  • Why Market Technicals, Internals, and Derivatives Are Weighing On Stocks Despite Mostly Good Fundamentals
  • The True Driver of This Pullback Remains Microeconomic, not Macroeconomic
  • CPI Takeaways

Futures are bouncing today while most international markets declined overnight amid stagflationary economic data.

Chinese Industrial Production, FAI, and Retail Sales data all missed estimates with the latter underwhelming by the largest margin which weighed on risk assets overnight, sparking renewed concerns about the pace of the global recovery.

Meanwhile, in Europe, CPI in the U.K. jumped from 2.0% to 3.2% in August, the largest monthly increase since 1997 which rekindled concerns about global inflation pressures despite yesterday’s soft CPI print in the U.S.

Today, focus will be on economic data early with the Empire State Manufacturing Index (E: 18.6), Import & Export Prices (E: 0.3%, 0.5%) and Industrial Production (E: 0.5%) all due out by mid-morning.

Investors will be looking for good growth (but not “too hot”) and fading inflation pressures (specifically in the Empire release as it is a September data point). Otherwise, more signs of stagflation, like we saw in the data overnight, could cause further selling across risk assets including stocks today.

Inflation Expectations

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What’s in Today’s Report:

  • Inflation Expectations

Stock futures are trading cautiously higher this morning while international markets were mixed overnight ahead of key U.S. inflation data.

Economically, the NFIB Small Business Optimism Index for August rose to 100.1 vs. (E) 99.0 which is helping U.S. equity markets edge higher in pre-market trade.

Today, there are no Treasury auctions or Fed officials scheduled to speak which will leave markets focused on the one major economic report today: CPI (E: 0.4%, 5.3%).

If the CPI report supports the transitory inflation narrative and suggests that price pressures have already peaked, stocks are likely going to be able to further stabilize after yesterday’s bounce. However, a “hot” print could easily trigger a wave of hawkish money flows and pressure the major indexes back down to fresh multi-week lows today.

Inflation Update (Post CPI/PPI)

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What’s in Today’s Report:

  • Inflation Update (Post CPI/PPI)

Futures are again little changed following another generally quiet night of news.

Economic data was minimal as the only notable report was EU exports, which missed expectations falling –0.7% vs. (E) 0.6%, but that’s not moving markets.

On the COVID front, there were mixed headlines.  ABNB said it has seen a small slowdown in bookings because of Delta (a negative), but COVID cases have potentially peaked in China (a positive).  In sum, the headlines were mixed enough that they aren’t moving markets, but we will continue to watch for more evidence that the Delta variant is altering consumer behavior.

Today the key report will be the inflation expectations in Consumer Sentiment (E: 81.4) but as long as that doesn’t spike higher, it shouldn’t move markets.  Instead, COVID headlines will continue to move markets and if there is more evidence the Delta variant is impacting travel/leisure, that will be a headwind on stocks.

CPI Takeaways

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What’s in Today’s Report:

  • CPI Takeaways

Stock futures are little changed as Treasuries recover some of yesterday’s losses ahead of more U.S. inflation data and Congressional testimony from Fed Chair Powell today.

Economically, U.K. CPI was above estimates in June but PPI was unexpectedly soft while Eurozone Industrial Production also disappointed, but none of the data from overnight seems to be having a material impact on markets this morning.

Today, there is one more inflation report in the U.S., PPI (E: 0.6% m/m, 6.8% y/y) at 8:30 a.m. ET and then focus will turn to Fed speak with Chair Powell’s semiannual testimony before Congress beginning at 12:00 p.m. ET and Kashkari also speaking at 1:30 p.m. ET.

The start of Q2 earnings season will also remain in focus with notable reports coming from: WFC ($0.97), BAC ($0.78), C ($1.99), DAL (-$1.37), BLK ($9.24), and PNC ($4.22).

FOMC Preview

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What’s in Today’s Report:

  • FOMC Preview
  • Gold Update: Technical Weakness Ahead of the Fed

Futures are little changed this morning as investors weigh dovish central bank developments against in-line inflation data in Europe as focus turns to U.S. data and the Fed.

The RBA minutes revealed policy makers are open to extending QE beyond the current September deadline while CPI reports in Europe all met estimates.

This morning is lining up to be a busy one from a potential catalyst standpoint with a slew of economic data due to be released including: PPI (E: 0.6%), Retail Sales (E: -0.4%), Empire State Manufacturing Index (E: 22.0), Industrial Production (E: 0.6%), and Housing Market Index (E: 83).

The June FOMC Meeting also begins today which will likely initiate a sense of market paralysis ahead of tomorrow’s announcement and Powell’s press conference however a 20-Year Treasury Bond auction at 1:00 p.m. ET could move Treasuries and ultimately impact stocks in the early afternoon.

Infrastructure Outlook: Good/Bad/Ugly

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What’s in Today’s Report:

  • Infrastructure Outlook:  Good/Bad/Ugly
  • Oil Update & EIA Analysis (Can the Rally Keep Going?)

Futures are little changed following a quiet night and ahead of the week’s two big events, the ECB decision and U.S. May CPI report.

Economic data was sparse although Japanese PPI rose more than expected at 4.9% vs. (E) 3.8% yoy.  But, investors expect high inflation readings this month so it’s not moving markets.

Today the two key events are the ECB Rate Decision (E: No Change) and U.S. CPI (E: 0.4% m/m, 4.6% y/y).  Generally speaking, if the ECB is specific on tapering and core CPI runs close to 4.0% yoy (expectations are for 3.4% yoy in Core CPI) then we should expect volatility as the data will imply less central bank accommodation and more inflation. Conversely, if the ECB is vague on tapering and inflation largely meets expectations, then stocks can extend the rally.

The other notable event this morning is Jobless Claims (E: 369K) but given the issues with the labor market are supply driven (people not wanting to work) the market isn’t as focused on jobless claims any longer.

Why the JOLTS Report Matters to Markets

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What’s in Today’s Report:

  • Why the JOLTS Report Matters to Markets

Stock futures are little changed this morning while overseas markets were down modestly overnight as a sense of trader paralysis grips global markets ahead of key catalysts due in the back half of the week.

Economically, Chinese PPI hit 9.0% vs. (E) 8.3% in May, the hottest reading since 2008, however, May CPI was 1.3% vs. (E) 1.5%, keeping inflation fears relatively subdued.

There are no market moving economic reports on the calendar for today and no Fed officials are scheduled to speak however the Treasury will hold a 10-Yr Note auction at 1:00 p.m. ET.

The Treasury auction could move markets today but only if there is a big surprise in the results as markets are more likely to continue to churn into tomorrow’s CPI report and ECB Announcement.

Was the Strong CPI Report A Bearish Gamechanger?

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What’s in Today’s Report:

  • Was the Strong CPI Report a Bearish Gamechanger?
  • Inflation Hedge Part 2:  Natural Resource Stock ETFs
  • EIA and Oil Market Update

Futures are modestly lower mostly on momentum from Wednesday’s drop following a generally quiet night.

There was no new inflation news overnight, but investors are cautious ahead of the PPI report this morning, which should be similarly strong to yesterday’s CPI report.

Bitcoin and the entire crypto-currency space is getting hit hard after Tesla (TSLA) announced it would no longer accept Bitcoin as a form of payment and that’s weighing on some of the momentum parts of the market.

Looking forward to today, the key number will be PPI.  Expectations for PPI are 0.3% m/m and 5.9% y/y but if the numbers come in much stronger expect that to send yields higher and to hit stocks, at least temporarily.

The other notable number this morning is Jobless Claims (E: 475K) although that will start to fade a bit in importance as the market views the issues in the labor market as supply based (people not choosing to work) rather than demand based (people not being able to work).

There are also three Fed speakers today Barkin (10:00 a.m. ET), Waller (1:00 p.m. ET), Bullard (4:00 p.m. ET), and any commentary on inflation will be closely watched.

How to Allocate to Commodities

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What’s in Today’s Report:

  • How to Allocate to Commodities

Stock futures are under pressure for the third day in a row this morning as inflation fears continue to grip global markets ahead of today’s key April CPI report in the U.S.

Economically, Eurozone Industrial Production missed expectations while both the U.K. Monthly GDP and Industrial Production reports handily topped estimates which is helping the FTSE buck the trend and rally today.

Looking into today’s session, all eyes will be on the April CPI report due out at 8:30 a.m. ET (E: 0.2% m/m, 3.6% y/y). A hot print could spook investors and cause a continuation of the early week’s risk-off money flows.

Later in the session, there are multiple Fed speakers including: Clarida (9:00 a.m. ET), Bostic (1:00 p.m. ET), and Harker (1:30 p.m. ET) however Fed speak has remained decidedly dovish and none of today’s speakers should move markets.

Finally, there is a 10-Yr Treasury Note Auction at 1:00 p.m. ET and the outcome could give investors an idea of how bond traders view inflation in the wake of the CPI report.

Ultimately a soft bond auction and a subsequent rise in yields would likely compound this week’s already elevated inflation concerns and cause more volatility in equity markets while a strong auction could ease those concerns and see a relief rally develop.

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