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What the Fed Decision Means for Markets (Near Term vs. Longer Term)

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What the Fed Decision Means for Markets (Near Term vs. Longer Term): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What the Fed Decision Means for Markets (Near Term vs. Longer Term)

Futures are sharply higher (up nearly 2%) as the Fed’s rate cut sparked a large global stock market rally (most major global indices are 1% – 2% higher).

Economically, there were no notable reports overnight.

Geopolitically, concerns are rising about a direct Israel/Hezbollah war, although investors are ignoring those increased risks, for now.

Today will be another busy day as there are two prominent central bank meetings and important economic data.  First, there is a BOE Rate Decision (E: No change) this morning but, more importantly, there’s a Bank of Japan rate decision late tonight.  The BOJ isn’t expected to raise rates but if they do (like in July) that could inject volatility into the markets (like it did in July).

Economically, there are two especially notable reports today, Jobless Claims (E: 230K) and Philly Fed (E: 2.0), while we also get Existing Home Sales (E: 3.90 million) and Leading Indicators (E: -0.3%).  With the Fed now having cut 50 bps, the stronger the data, the better, as it’ll increase soft landing expectations.

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The major question for tomorrow’s meeting is what do the dots say?

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The major question for tomorrow’s meeting: two or three rate hikes? Tom Essaye Quoted in Barron’s

Dow Turns Higher. Tech Stocks Pull Back.

“I think what we’re seeing today is just a little bit of hedging by investors,” Sevens Report Research’s Essaye told Barron’s in a phone interview.

Essaye says that ahead of the Fed meeting, traders may be looking at defensive stocks on the chance that the Federal Open Market Committee’s March meeting sends stocks lower or pushes yields lower.

“The major question for tomorrow’s meeting is what do the dots say: two or three rate hikes?” Essaye says. “That’s really gonna determine how the market reacts to this meeting.”

“AI enthusiasm has been a major factor in this rally, and as long as nothing else is particularly negative, AI enthusiasm can continue to push markets higher,” Essaye says. “That’s what happened yesterday. Today, we don’t have that sort of new shiny object in AI to focus on, and we have the Fed decision tomorrow.”

Also, click here to view the full Barron’s article published on March 19th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

It’ll be Very Hard for This Market to RallyIf you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

What the Fed Decision Means for Markets

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What the Fed Decision Means for Markets: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What the Fed Decision Means for Markets
  • EIA Analysis and Oil Market Update

Futures are moderately higher on momentum from Wednesday’s post-Fed rally while earnings and data were solid overnight.

Economically, Euro Zone Manufacturing PMI was slightly better than expected (43.1 vs. (E ) 43.0).

On earnings, reports were good overnight with solid reports from ALL, CLX, PYPL, QCOM and others.

Today focus will be on economic data and a big earnings report after the close.  Economically, the two notable reports are Jobless Claims (E: 213K) and Unit Labor Costs (E: 0.7%).  Of the two, Unit Labor Costs are the more important number and markets will want to see an in-line or lower reading to imply receding inflation risks.

On the earnings front, there are a lot of reports today, but the highlight is clearly AAPL ($1.39) which reports after the close.  Other notable earnings include SQ ($0.47) and SBUX ($0.97).

Bottom line, if the market gets more Goldilocks data and solid earnings, this relief rally can continue. But if yields start to rise, don’t be shocked if there’s a reversal.

What the Fed Decision Means for Markets

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Economic Data & Inflation: Tom Essaye Quoted in Barron’s

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Economic Data & Inflation: Tom Essaye Quoted in Barron’s

Stock Markets Pause Ahead of Next Week’s Fed Decision

Firstly, “Today focus will be on economic data and if data is ‘Goldilocks’ like we saw on Thursday, expect a continuation of yesterday’s rally.” “Conversely, if the data shows inflation hot or growth slowing, don’t be surprised if markets give back most of yesterday’s rally,” writes Sevens Report Research’s Tom Essaye.

The United Auto Workers also began a partial strike on Friday. Uncertainty surrounding the impact of the strike could weigh on markets.

Also, click here to view the full Barron’s article published on September 15th, 2023. However, to see Tom’s full comments on economic data & inflation sign up here.

Economic data

If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

Fed Takeaways

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What’s in Today’s Report:

  • Is the More-Dovish-Than-Expected Fed Decision a Bullish Gamechanger? No. Here’s Why
  • Fed Decision Takeaways
  • EIA Data Takeaways and Oil Update

U.S. equity futures are rebounding modestly this morning but the price action is tentative as yesterday’s volatile reaction to the Fed decision and Yellen’s push back on “blanket” deposit guarantees are digested.

Looking overseas, the Swiss National Bank moved forward with a 50 bp rate hike overnight which showed policy makers’ increased confidence in the global banking system and continued commitment to reign in inflation pressures.

Looking into today’s session, there are a few economic reports to watch including: Jobless Claims (E: 195K) and New Home Sales (E: 645K).

There are no Fed officials scheduled to speak today but there is a 10-Yr TIPS auction at 1:00 p.m. ET which could offer some insight to the market’s view of long term inflation trends.

Bottom line, the late day selloff in equities yesterday was once again led by bank stocks after Treasury Secretary Yellen pushed back on the idea of expanded deposit insurance levels and today, that means bank stocks will again be in focus. If banks are able to stabilize, stocks broadly should be able to as well, but if we see more selling pressure, expect more volatility over the course of the day.

What Does The Fed Decision Mean for the Rally?

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What’s in Today’s Report:

  • What Does the Fed Decision Mean for the Rally?
  • The Key Takeaway from Yesterday’s Fed Decision (It Wasn’t Positive)
  • EIA Analysis and Oil Update

Futures are sharply lower on follow through from the modest declines following yesterday’s FOMC decision.

If there’s a “reason” for the pullback it’s two-fold:  First, digestion of Powell’s depressing outlook on future growth and second, a potential rebound in coronavirus cases.

Regarding coronavirus, the number of new cases is not spiking, but it is accelerating, as it’s done for over a week.  Point being, there hasn’t been a recent spike in new cases over the past few days, the rise in cases has been occurring for over a week.  But, the news cycle is turning again and renewed media focus on the virus is weighing on sentiment.

Looking forward to today, the key number is Jobless Claims (E: 1.500M) and again we need to see this number 1) Continue to decline and 2) Beat expectations, especially in light of Powell’s caution on the economy.  Also, Continuing Claims needs to decline.  If jobless claims disappoint markets, the selling today will likely intensify.

What Yesterday’s Fed Decision Means for Markets

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What’s in Today’s Report:

  • FOMC Takeaways:  The Fed Put Is Alive And Well
  • How Bad Was Q1 GDP?
  • Oil Update & Inventory Analysis

Futures are little changed as strong tech earnings are helping markets digest yesterday’s big rally.

Economically, the Chinese manufacturing PMIs were “ok.”  The government number was again above 50 (50.4) while the research firm Ciaxin’s manufacturing PMI was a slight disappointment at 49.4 vs. (E) 50.1.  Bigger picture, while it would have been nice to see a stronger recovery this month, it is still encouraging to see activity returning to “normal” just a few months after the height of the outbreak.

Facebook and MSFT earnings were strong after hours and commentary was cautiously positive (activity is stabilizing in April after sharp declines in March).

Today the key report is again Jobless Claims (E: 3.5MM) and as has been the case, any significant decline from the previous week will a marginal positive despite the absolute numbers still being historically high.

Other events today include the Fed’s preferred measure of inflation, the Core PCE Price Index (E: -0.1%) and an ECB Rate Decision (7:45 a.m. ET).  The ECB may increase its QE program, but that is already expected at some point this year, so even if they do later today it shouldn’t move markets too much.