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FOMC Preview

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What’s in Today’s Report:

  • FOMC Preview
  • What to Make of Monday’s Collapse

Stock futures are extending yesterday’s late session bounce while most overseas markets stabilized overnight amid easing concerns about China’s property sector and positioning into the Fed.

According to Bloomberg, S&P Global Ratings said Evergrande is “on the brink of default” but that a contagion effect impacting other developers is unlikely at this time and that the Chinese government would intervene if necessary which eased some concerns surrounding the issue.

Looking into today’s session, trader focus will be shifting towards the September FOMC meeting, which begins this morning, and that could influence a sense of Fed paralysis if broad market volatility continues to ease.

Economically, there is one report today: Housing Starts and Permits (E: 1.575M, 1.610M) but given all of the other market influences right now, it is not likely to move equities. Finally, there is a 20-Yr Treasury Bond auction at 1:00 p.m. ET which could impact bond yields and potentially influence price action in stocks but again, it is unlikely with the Fed looming tomorrow.

Bottom line, the pieces are falling into place for the market to stabilize today as yesterday’s volatility is digested and focus shifts to the Fed. On the charts, a break above yesterday’s open near 4,400 in the S&P could trigger some follow-through buying while a failure to do so would leave the door open to another surge in volatility in the sessions ahead.

A Critical Six Weeks for Markets

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What’s in Today’s Report:

  • Why the Next Six Weeks Will be Critical for this Market
  • Weekly Market Preview:  Fed Tapering Plans Revealed
  • Weekly Economic Cheat Sheet:  What’s the State of the Global Recovery?

Futures are sharply lower on momentum from Friday’s declines, following a quiet weekend of news.

The reasons for the drop this morning are the same as last week:  China concerns (Evergrande, regulation, COVID), Fed tapering, and possible tax hikes, but nothing new occurred on any of those fronts this weekend to justify this mornings’ declines (meaning this is more about momentum than actual fundamental deterioration).

On taxes, headlines were actually slightly positive as Axios reported Senator Manchin wants to delay any increased spending/tax hikes until 2022.

Today the calendar is quiet as the only economic report is the Housing Market Index (E: 75), so pre-Fed positioning and momentum will drive trading today.  Ideally, we’d like to see stocks open deeply lower and then rally throughout the day (which would be the opposite of what we saw last week and imply a near-term bottom may be in).

What is Evergrande and Why Isn’t It Causing More Problems?

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What’s in Today’s Report:

  • What is Evergrande and Why Isn’t It Causing More Problems?

Futures are modestly lower on more negative China headlines following an otherwise quiet night.

Chinese authorities have extended anti-pollution directives to multiple cities and that’s causing a sharp drop in some industrial commodities (iron ore specifically) which is weighing on resource stocks in Europe.

Economically, UK Retail Sales missed estimates falling –0.9% vs. (E) 0.5% although the report isn’t moving markets.

Focus today will be on Consumer Sentiment (E: 72.0) and specifically inflation expectations, and if they spike higher (as we saw in the Fed survey earlier this week) don’t be surprised if there’s additional downward pressure on stocks.  Also, today is a “Quadruple Witching” options expiration which could mean big volumes and increased volatility into the close.