“Don’t confuse the market’s ability to withstand last year’s headwind with an invincibility towards what could be this year’s headwind” of slumping economic growth, Sevens Report analyst Tom Essaye wrote in a Monday note. Click here to read the full article.
What’s in Today’s Report:
Stock futures are stable as yesterday’s Powell-driven losses continue to be digested while the yield curve is hitting new cycle lows with the 2-Yr Note holding above 5% for the first time since 2007 while the 10-Yr hovers just below 4%.
Economic focus was on German data o/n as Industrial Production topped estimates while the previous Retail Sales print was revised notably higher, bolstering Bund yields.
Looking into today’s session, focus will be on labor market data early, especially considering Powell’s “data dependent” policy comments from yesterday’s testimony.
The ADP Employment Report (E: 175K) will hit the wires before the bell and then JOLTS (E: 10.6 million) will be released after the open. Investors want to see some deterioration in the jobs market but not an all-out collapse while any indication of declining wages would be well received. International Trade in Goods and Services (E: -$69.0B) will also be released this morning but is less likely to move markets.
From there, Powell’s two-day testimony continues before the House Banking Committee today at 10:00 a.m. ET and investors will continue to listen intently for further clues about policy plans and terminal rate expectations.
Finally, there is a 10-Year Treasury Note auction at 1:00 p.m. ET that could move yields and ultimately impact the bond market, specifically if the auction tails and rates move meaningfully higher.
What’s in Today’s Report:
Stocks futures are trading with modest gains this morning while Treasury yields are tracking European bond yields higher following stubbornly high inflation data overnight.
Economically, both Spanish and French CPI headlines were hotter than expected, above 6%, which saw European rates markets price in a 4% terminal ECB rate for the first time. Government bond yields across the Eurozone notably rose to multi-year highs.
Looking into today’s session, there are several economic reports to watch including: International Trade (E: -$91.0B), Case-Shiller Home Price Index (-0.5%), FHFA House Price Index (E: -0.3%), and Consumer Confidence (E: 108.5).
Traders will be looking for less signs of stagflation in the data as elevated inflation figures and weakening growth metrics were a headwind for equities last week.
Finally, the Chicago Fed’s Goolsbee (who just succeeded Evans) has his first speaking engagement since taking over the role at 2:30 p.m. ET, and as a voting member of the FOMC, his comments will be closely watched for any new clues about Fed policy plans in the months ahead. A notably hawkish tone, could easily cause another bout of volatility in risk assets this afternoon.
What’s in Today’s Report:
Futures are modestly higher on solid tech earnings and after another global central bank ended rate hikes.
Nvidia (NVDA) earnings beat estimates and the stock us up 8% pre-market, and that’s helping general tech sentiment.
South Korea’s central bank ended its rate hike campaign and while that’s not a major central bank, it’s another reminder the global hiking cycle is ending.
Focus today will remain on economic data and Fed speak and that includes Jobless Claims (E: 200K) and Revised Q4 GDP (E: 2.9%). Fed speakers include Bostic (10:50 a.m. ET) and Daly (2:00 p.m. ET) and as has been the case for two weeks, any data or comments that increase rate hike expectations will pressure stocks (and vice-versa).
Sevens Report Research Founder and President Tom Essaye to discuss the expectations for the Fed’s upcoming FOMC minutes meeting, the future of Fed policy pathway, why investors should remain on recession watch in 2023, and the outlook for markets. Click here to watch the full discussion.
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.
