Tom Essaye, founder of Sevens Report Research, said Friday there are at least three warning signs that the rally could be yet another bull trap for investors. Market expectations for Fed rate hikes are now showing a 56% probability of a June rate hike, up from basically 0% just four weeks ago!” he said. Click here to read the full article.
What’s in Today’s Report:
Futures are moderately lower this morning as investors continue to digest Powell’s commentary from yesterday which was largely viewed as another missed opportunity to push back on recent dovish money flows across markets.
Looking into today’s session there are no notable economic reports but a slew of Fed speakers that could move markets. In chronological order, we will hear from: Williams (9:20 a.m. ET), Cook (9:30 a.m. ET), Bostic (10:00 a.m. ET), Kashkari (12:30 p.m. ET), and finally Waller (1:45 p.m. ET).
Additionally, the Treasury will hold a 10-Yr Note auction at 1:00 p.m. ET and seeing as yesterday’s dismal 3-Yr auction sent the S&P 500 to session lows, the outcome could very well move markets today.
Finally, Q4 earnings season continues today with a few notable companies releasing results: UBER (-$0.21), CVS ($1.92), DIS ($0.80).
What’s in Today’s Report:
S&P 500 futures are trading with modest losses this morning as investors digest positive economic news out of Europe ahead of Powell’s speech today.
In Europe, French Industrial Production rose 2.0% vs. (E) 0.8% in November while GS dropped their Euro-area recession call for 2023 bolstering market hopes for a soft landing.
Domestically, the NFIB Small Business Optimism Index fell to 89.8 vs. (E) 91.3 which is weighing modestly on sentiment in pre-market trading.
There are no additional economic reports in the U.S. today which will leave investors focused on any insight Fed Chair Powell offers on either the economy or monetary policy plans when he speaks in Sweden at a Riksbank symposium beginning at 9:00 a.m. ET.
Hawkish Fed speak out of Daly and Bostic is what caused stocks to reverse early gains and close lower yesterday, so if Powell strikes a hawkish tone and pushes back against the market’s latest optimism for a lower terminal rate (below 5%), that could see stocks extend yesterday’s afternoon selloff and the market give back some or all of Friday’s post-jobs report gains.
Finally, The Treasury will hold a 3-Yr Note auction at 1:00 p.m. ET that could signal the bond markets response to Powell (if he even says anything notable). A weak outcome to the auction and rising yields could amplify any hawkish money flows and result in more broad market volatility.
The company, which has a market cap of $252.3 billion, is simply signaling the headwinds to come. This is really confirming so many other signs that we are headed toward a potentially pretty significant economic slowdown, said Tom Essaye, president of Sevens Report Research. Click here to read the full article.
“The lack of a concrete timeline or any real details about plans to reopen the Chinese economy and move away from the still very strict and economically crippling restrictions weighed on the energy market into the afternoon,” wrote analysts at Sevens Report Research. Click here to read the full article.
What’s in Today’s Report:
Futures are slightly lower following a mostly quiet night of news as markets await a deluge of economic data later this morning.
The most notable headline overnight was that negotiators have reached a tentative deal to avoid a U.S. rail strike, although this was never a major concern for markets so the headline isn’t causing a rally.
There were no notable economic reports overnight.
Today the market will be focused on economic data and the key reports will be Jobless Claims (E: 227K), Philadelphia Fed Manufacturing Index (E: 3.5), and the Empire State Manufacturing Index (E: -14.5) as they give us the latest insights into growth and inflation. If the price indices in Empire and Philly drop notably, that’ll help offset some of the concerns on inflation from the CPI report.
Other data today includes Retail Sales (E: 0.0%) and Industrial Production (E: 0.2%) but they’ll have to be material surprises to move markets.
What’s in Today’s Report:
Futures are sharply lower as markets price in a greater chance of a hawkish speech from Fed Chair Powell this Friday.
Markets are reversing some of the “Fed Pivot” gains of the past few weeks ahead of Chair Powell’s speech in Jackson Hole on Friday, as investors fear the markets’ expectations for the Fed have become too dovish.
Economically, China cut interest rates again to stimulate the economy, although the rate cuts were small and stocks declined anyway, as the Chinese economy continues to face numerous large challenges (Zero COVID policy, drought, property market decline, etc.).
Today there are no Fed speakers and only one notable economic report, the Chicago Fed National Activity Index (E: -0.19), and as has been the case markets will want to see stability in the date to reinforce that the U.S. economy is not moving closer to stagflation.
What’s in Today’s Report:
U.S. futures are tracking European shares lower following disappointing economic data out of the EU ahead of today’s release of the July FOMC meeting minutes.
U.K. CPI jumped to a new multi-decade high of 10.1% vs. (E) 9.8% in July while the Q2 Eurozone GDP Flash dipped to 3.9% vs. (E) 4.0%, rekindling concerns about stagflation.
Looking into today’s session, focus will be on economic data early with Retail Sales (E: 0.1%) due out before the bell as well as more retailer earnings including: TGT ($0.71), LOW ($4.63), and TJX ($0.68).
Then there is one Fed speaker, Bowman, at the open (9:30 a.m. ET) before focus will shift to the July FOMC meeting minutes which will be released at 2:00 p.m. ET.
Bottom line, the market will want to see more good earnings and guidance out of the remaining major retailers due to report quarterly results today as well as a not-as-hawkish-as-feared set of Fed minutes released this afternoon, if this latest leg higher in stocks is going to continue. Otherwise, we could be set up for a pullback into the back half of the week as stocks have become near-term overbought without any new meaningfully positive catalysts.
The economy still has to digest all this tightening, and that will materially slow things…wrote Tom Essaye, a former Merrill Lynch trader who founded The Sevens Report newsletter. Click here to read the full article.
By making borrowing more expensive and thereby tempering demand, rate increases are critical in combating inflation, but “growing fears” that the hikes will spur a recession by undercutting economic growth are the “driving forces” behind recent market weakness, says analyst Tom Essaye of the Sevens Report. Click here to read the full article.
