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Brace for a Recession on Thursday

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What’s in Today’s Report:

  • Brace for a Recession on Thursday
  • Housing Data Points to Slowdown in Real Estate Market
  • Chart: S&P 500 Holds 50-Day Moving Average by One Point

Stock futures are solidly higher this morning as quarterly earnings results from tech giants MSFT and GOOGL were both well received by investors after the close yesterday while investor focus shifts to the Fed today.

This morning, economic data will be in focus early with Durable Goods Orders (E: -0.5%), International Trade in Goods (-$103.2B), and Pending Home Sales (-1.0%) all due out by 10:00 a.m. ET.

From there, expect price action to slow considerably as focus turns to the Fed with the FOMC Meeting Announcement at 2:00 p.m. ET followed by the Fed Chair Press Conference at 2:30 p.m. ET.

Markets have priced in a 75% chance of a 75 basis point hike today while no changes to forward-guidance are expected so any variance from those expectations could result in sizeable moves in the market this afternoon.

Finally, earnings season remains in full swing with SHOP ($0.03), TMUS ($0.41), HLT ($1.06), SHW ($2.81) reporting ahead of the bell and META ($2.51), F ($0.43), and QCOM ($2.86) releasing results after the close. Any of those reports could lead to sector specific volatility despite the Fed today.

Is Value Outperformance Ending?

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What’s in Today’s Report:

  • Is Value Outperformance Ending?
  • The S&P 500 Has Reached Another Key Technical Tipping Point

Stock futures are higher this morning despite soft earnings from IBM after the close yesterday as European inflation data was not as bad as feared in June.

Eurozone HICP (their CPI equivalent) met estimates with a rise of 8.6% Y/Y in June up from 8.1% in May, however, the core figure slipped to 3.7% Y/Y from 3.8% in May. The release has prompted new bets for a 50 bp hike from the ECB this week, but that is bolstering hopes that peak inflation will come sooner than later.

Looking into today’s session, there is one economic report to watch: Housing Starts (E: 1.588) and after yesterday’s terrible Housing Market Index print, investors will want to see a number more in line with expectations that does not point to such a rapid deterioration in the real estate market.

There are no Fed speakers or Treasury auctions today which will leave traders largely focused on earnings with: JNJ ($2.57), HAL ($0.45), LMT ($6.29), ALLY ($1.90), and TFC ($1.17) reporting before the bell, and NFLX ($2.90) and JBHT ($2.31) releasing results after the close.

Bottom line, the broader equity market remains at a key tipping point right now as recession fears continue to simmer, but earnings have so far been mostly upbeat suggesting there is still a path to a soft landing. And if earnings news is upbeat today, we could see the S&P 500 breakout through key downtrend resistance near 3,890 and make a run at new multi-week highs.

Tom Essaye Quoted in Market Watch on June 23rd 2022

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Don’t trust the stock-market bounce until S&P 500 is back above 3,800: analysts

Since the beginning of last week, 3,800 has become a new ceiling for the S&P 500 as sellers have repeatedly stepped in and overwhelmed the tentative, weakhanded bids…said Tom Essaye, founder of Sevens Report Research, in a Thursday note. Click here to read the full article.

What Would A Recession Mean for Markets?

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What’s in Today’s Report:

  • What Would A Recession Mean for Markets?

Futures are moderately higher thanks mostly to momentum from Thursday’s close and despite more underwhelming economic data.

Economically, UK Retail Sales met expectations but fell sharply (–4.7% yoy) while the German Ifo Business Expectations Index missed estimates (85.8 vs. (E) 87.3).

Geo-politically, Russia continues to advance in the Donbas as Ukraine has withdrawn from the city of Severodonetsk.

Today focus will be on the inflation expectations in the University of Michigan Consumer Sentiment Index, and if we see a decline below 3.3% that could further the idea that inflation is peaking (and extend the rally in stocks).  Other data today includes New Home Sales (E: 587K) and one Fed speaker, Daly at 4:00 p.m. ET, but they shouldn’t move markets.

Is the Yield Curve Signaling an Imminent Recession?

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What’s in Today’s Report:

  • Is the Yield Curve Clearly Signaling an Imminent Recession?
  • Chart: Oil Testing Critical Support

Stock futures are sharply lower with global shares as much of yesterday’s rally is being given back amid a resurgence in growth concerns ahead of Powell’s testimony today.

U.K. CPI met estimates at 9.1% but Input PPI jumped 22.1% vs. (E) 19.4% stoking fears that central banks will have to be even more aggressive to get inflation under control in the months ahead.

There are no notable economic reports today but there are multiple Fed speakers: Barkin (9:00 a.m. & 12:00 p.m. ET), Powell (9:30 a.m. ET), Evans (12:55 p.m. ET), and Harker (1:30 p.m. ET).

Then in the afternoon, there is a 20-Yr Treasury Bond auction at 1:00 p.m. ET that could move yields and impact equity markets.

Bottom line, the focus will be on Powell’s testimony before the House this morning as there has been a resurgence in concerns about global growth in the face of the latest broad shift to more aggressive central bank policy in response to sticky and elevated inflation pressures globally. And if Powell is seen as getting more hawkish, or the market shows signs of losing confidence in the Fed’s policy plans, we could potentially see stocks test the 2022 lows.

Economic Breaker Panel: June Update

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What’s in Today’s Report:

  • Economic Breaker Panel – June Update
  • Economic Data Takeaways – Further Signs of Slowing Growth

Stock futures are bouncing modestly with European shares and bond markets are stable this morning as inflation data met expectations in the Eurozone and the BOJ decision was viewed as dovish versus expectations.

The BOJ maintained a very easy monetary policy, sending the yen back towards recent lows while Eurozone HICP (their CPI equivalent) came in at 8.1% vs. (E) 8.1% y/y which is helping markets stabilize this morning.

Looking into today’s session, there is one economic report to watch: Industrial Production (E: 0.4%) and the market will be looking for a strong print to ease concerns surrounding this week’s soft survey-based factory data and bolster the outlook for economic growth in the face of an aggressive Fed.

Fed Chair Powell is also set to deliver a speech at 8:45 a.m. ET and any comments on the economy or future policy plans could move markets today.

Finally, today is quadruple witching options expiration so expect very heavy volumes and the potential for momentum to build in either direction as derivatives traders square their books into the end of the quarter. In the S&P 500 3,650, 3700, and 3750 will all be key levels to watch into the afternoon today.

Three Keys to a Bottom Updated (Not Good)

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What’s in Today’s Report:

  • Three Keys to a Bottom Updated (Not Good)
  • Weekly Market Preview: All About the Fed
  • Weekly Economic Cheat Sheet: Survey Data in Focus

Global stocks are trading sharply lower and bond yields rose to new multi-year highs overnight amid fears that the Fed is getting more aggressive into an economic slowdown.

In the wake of Friday’s hot CPI report, rate markets are now pricing in a 75 basis point hike by the Fed in the next three months which saw the 10s-2s spread invert overnight underscoring renewed and growing recession worries.

Looking into today’s session, there are no notable economic reports, and no Fed officials are scheduled to speak.

There are two Treasury Bill auctions at 11:30 a.m. ET (3-Month Bills and 6-Month Bills). And while they are typically lesser followed, the results could shed light on market expectations of Fed policy in the coming months and if we see rates continue to surge higher, especially those with shorter duration, then concerns about a more aggressive stance by the Fed will likely keep pressure on risk assets today.

Are Semiconductors A Buy?

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What’s in Today’s Report:

  • Are Semiconductors A Buy?

Futures are little changed following a quiet night of news.

Economic data was mixed as final May manufacturing PMIs were in-line with expectations for the EU and UK, although German Retail Sales missed estimates (–5.4% vs. (E) -0.1%).

On the Fed front, Bostic said his comments about a “pause” on rate hikes shouldn’t be interpreted that the Fed will help rescue volatile markets.

Today focus will be on economic data and Fed speak via the ISM Manufacturing PMI (E: 54.5), JOLTS (E: 11.40M) and comments by Williams (11:30 a.m. ET) and Bullard (1:00 p.m. ET).  Bottom line, the ideas of slowly moderating (but not collapsing) growth and the possibility for a Fed “pause” in rate hikes in late summer/early fall have helped stocks rally, and as long as today’s data and Fed speak don’t refute those possibilities, stocks can extend the recent rally.

Is the Market Doing the Fed’s Job?

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What’s in Today’s Report:

  • Is the Market Doing the Fed’s Job?
  • Oil Update and EIA Analysis

Futures are moderately higher following a solid night of earnings.

Earnings overnight were better than expected as QCOM posted strong results while FB also beat expectations.

Economic data was sparse, but the Bank of Japan made more dovish comments and the yen is down 2% and hitting fresh multi-decade lows.

Today focus will be on earnings as this is the most important day of the entire earnings season. We get several major companies reporting results including (in order of importance): AAPL ($1.43), AMZN ($8.73), INTC ($0.80), MA ($2.17), TWTR ($0.01), CAT ($2.66) and MCD ($2.18).  Given how oversold the market is on a short-term basis, solid results from these companies could fuel a rally, while disappointing results likely will cause another test of the 2022 lows in the S&P 500.

Economically, numbers today include Advanced Q1 GDP (E: 1.1%) and Jobless Claims (E: 181K) but I don’t expect either to move markets.

Will Inflation Start to Peak This Week?

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What’s in Today’s Report:

  • Updated Market Outlook
  • Weekly Market Preview:  Will Inflation Start to Peak?
  • Weekly Economic Cheat Sheet:  Key Inflation Data This Week

Futures are modestly lower as Chinese inflation stayed high while the Russia/Ukraine war may be intensifying.

Chinese PPI rose 8.3% vs. (E) 8.1% while CPI gained 1.5% vs. (E) 1.4%, underscoring that inflation has not yet peaked in China.

Geo-politically, Russia is poised for a large assault on eastern Ukraine and analysts are anticipating some of the more intense fighting of the war.

Today there are no economic reports but there are several Fed speakers including Bostic (9:30 a.m. ET), Williams (12:00 p.m. ET) and Evans (12:40 p.m. ET) and we expect them to continue the trend of guiding markets towards a 50 bps hike in May and endorsing the idea of 250 basis points of tightening by year-end (but that shouldn’t move markets as that is already well known).