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Jobs Day

What’s in Today’s Report:

  • Jobs Day (Abbreviated Jobs Report Preview)
  • Why Price Controls Still Don’t Work

Futures are slightly lower as the looming jobs report helps offset soft economic data and disappointing earnings.

Economically, German Industrial Production, German Retail Sales, and Japanese Household spending all missed estimates.

On earnings, AMD became the latest widely held company to miss earnings, positing a material revenue shortfall.

Today focus will be on the Jobs Report and expectations are as follows: Job Adds: 250K, UE Rate 3.7%, Wages 0.3% m/m, 5.1% y/y.  If the numbers are in the lower end of the “Just Right” range that will spur more hopes of a Fed pivot between now and year-end, and stocks will likely rally.    Away from the jobs report there are also several Fed speakers including:  Williams (10:00 a.m. ET), Kashkari (11:00 a.m. ET) and Bostic (12:00 p.m. ET) but they shouldn’t move markets (expect them to be hawkish in tone but not say anything new).

Is Credit Suisse Going the Way of Lehman?

What’s in Today’s Report:

  • Is Credit Suisse Going the Way of Lehman?
  • Chart: 10-Yr Yield Breaks Critical Uptrend
  • ISM Manufacturing Takeaways

U.S. stock futures and European equities are solidly higher this morning while bond yields continue to pull back with the dollar amid renewed hopes of a “less-hawkish pivot” by global central banks.

The RBA was seen as dovish overnight, raising their policy rate by 25 basis points vs. (E) 50 bp which is helping pressure global bond yields and support continued risk-on money flows this morning.

Economically, EU PPI rose to 5.0% vs. (E) 4.9% in August but the fact that the print was not a “hotter” surprise is also adding a tailwind to global equities this morning.

Today, there are two economic reports to watch: Factory Orders (E: 0.2%) and JOLTS (11.150M) and multiple Fed officials speaking: Williams (9:00 a.m. ET), Logan (9:00 a.m. ET), Mester (9:15 a.m. ET), Jefferson (11:45 a.m. ET), and Daly (1:00 p.m. ET).

As long as the pullback in bond yields and the dollar continue over the course of the day, stocks should be able to extend yesterday’s gains however the pace of the early quarter rebound has approached an unsustainable level and at some point, we will need to see some consolidation across asset classes.

How Bad Can It Get? (And What Makes It Stop?)

What’s in Today’s Report:

  • How Bad Could It Get and What Makes It Stop?
  • Weekly Market Preview:  Can the June lows hold?
  • Weekly Economic Cheat Sheet:  Does economic growth stay resilient?

Futures are modestly lower as global bond yields rose further while the British Pound remained extremely volatile.

The British Pound plunged to an all time low vs the dollar earlier this morning before rebounding and the extreme volatility is adding to investor worries.

Economically, the German Ifo Business Expectations Index fell to the lowest level since March 2020 (84.3 vs. (E) 87.1).

Today there are no notable economic reports but there are numerous Fed speakers, including Collins (10:00 a.m. ET), Bostic (12:00 p.m. ET), Logan (12:30 p.m. ET) and Mester (4:00 p.m. ET).  But, they shouldn’t move markets (we already know what the Fed intends to do).

Instead, the Pound and global bond yields (especially 10-year GILT yields) will determine trading today.  Markets need to see the Pound stabilize and 10-year GILT yields stop rising (they’re up nearly 60 bps in two days) to inject some macro-economic stability into the markets.  Don’t be shocked if the Bank of England announces a surprise rate hike today (or in the coming days) and if so, that should help global yields stabilize (which would be positive for sentiment and markets).

Sevens Report Analysts Quoted in Market Watch on September 20th, 2022

Oil prices settle at a nearly 2-week low as an expected Fed rate hike may hurt energy demand

“We continue to believe that the oil market is in the process of finding its footing, However, a hawkish Fed this week could further stoke fears of a hard landing and spur a continued rally in the dollar, which would surely see the recent lows near $80/barrel tested into the weekend,” said analysts at Sevens Report Research, in a Tuesday newsletter. Click here to read the full article.

Three Reasons the June Lows Could Hold

What’s in Today’s Report:

  • Three Reasons the June Lows Could Hold
  • Understanding Japan’s Currency Intervention

Futures are sharply lower as global yields continued to climb while economic data was largely disappointing.

September flash PMIs showed contraction in the EU (48.2) and the UK (48.4) as signs of a global slowdown grow.

The UK government announced a fiscal stimulus package but the news is spiking UK bond yields and pressuring the Pound as markets view it as inflationary.

Today we get speeches from Powell (2:00 p.m. ET) and Brainard, but don’t expect their message to be any different then what was just said at Wednesday’s FOMC meeting.  Beyond the Fed speak, the key economic report today is the September Flash Composite PMI (E: 47.0) and this data points needs to largely meet expectations, because a strong number will push yields higher, while a weak number will increase stagflation concerns.

Another Hawkish Surprise: What the Fed Decision Means for Markets

What’s in Today’s Report:

  • Another Hawkish Surprise: What the Fed Decision Means for Markets

Futures are little changed as markets digested yet another hawkish Fed decision amidst more global rate hikes.

The overnight session was mostly quiet as investors digested the Fed rate hike while other global central banks raised rates (five separate central banks hiked rates overnight, as expected).

The Bank of Japan intervened in the currency markets for the first time since 1998, causing a 1% rally in the yen.

Today focus will be on the Bank of England Rate Decision (E: 50 bps hike) and on weekly Jobless Claims (E: 220K).  Fed Chair Powell again highlighted that the labor market is still much too tight, so markets need these jobless claims to start to rise towards 300k to prevent even further Fed tightening in the future.  The sooner the labor market returns to better balance, the sooner we get to “peak hawkishness.”

Fed Day Technical Take

What’s in Today’s Report:

  • Pre-Fed Technical Take: a Make-or-Break Tipping Point for Equities

Stock futures are trading with cautious gains this morning as traders shrug off escalating tension between Russia and Ukraine while the BOJ initiated new stimulus overnight as focus turns to today’s Fed meeting.

Geopolitically, Russia is mobilizing 300,000 reservists to bolster military operations in Ukraine and indirectly threatened nuclear options in the latest escalation in the conflict which is driving gains in safe havens ahead of the Fed this morning.

Today, there is one economic report to watch in the morning: Existing Home Sales (E: 4.70M) but the primary market focus will clearly be on the Fed with the FOMC Announcement at 2:00 p.m. ET followed by Fed Chair Powell’s press conference at 2:30 p.m. ET.

Regarding the Fed, a 75 basis point hike and terminal Fed Funds rate near 4.25% is the consensus expectation so anything more hawkish than that will likely spark volatility and potentially even result in a test of the June lows in the S&P while anything more dovish than expectations has the potential to unleash a sizeable relief rally.

Tom Essaye Quoted in S&P Global on September 19th, 2022

Persistent inflation to push Fed to tighten more, delay rate peak

From a Fed standpoint, obviously they cannot even think about stopping until this [inflation] number gets down to something more tenable…said Tom Essaye, a trader and founder of financial research firm The Sevens Report. Click here to read the full article.

FOMC Preview

What’s in Today’s Report:

  • FOMC Preview

Futures reversed from overnight gains and are now tracking EU markets lower following more very hot inflation data and an aggressive policy hike by the Riksbank.

In Europe, German PPI surged 7.9% vs. (E) 1.5% in August (45.8% vs. E: 37.2% y/y) while Sweden’s Riksbank raised rates by 100 bp vs. (E) 75 bp. Both developments are driving hawkish, risk-off money flows ahead of the Fed.

Today, focus will begin to shift to the Fed as the September FOMC Meeting begins however there is one report on the housing market that will get some attention when it is released mid-morning: Housing Starts (E: 1.440M) and Permits (E: 1.621M).

Beyond that one report, there is a 20-Yr Treasury Bond auction at 1:00 p.m. ET. The auction may not move markets today with the Fed looming but it will be worth watching because if it is weak like last week’s 3-Yr and 10-Yr auctions ahead of the CPI report, it could be forecasting a more hawkish than expected Fed decision Wednesday.

Market Setup into the Fed Decision

What’s in Today’s Report:

  • Market Setup into the Fed Decision
  • Weekly Market Preview:  All About the Terminal Rate
  • Weekly Economic Cheat Sheet:  Flash PMIs Friday

Futures are moderately lower mostly on momentum from last week’s declines and following a generally quiet weekend of news.

Geo-politically, Russian President Putin and Ukrainian President Zelensky gave interviews over the weekend and neither implied the war would end anytime soon, which is a mild disappointment for markets.

Chinese authorities ended the lockdowns in Chengdu, but gave no indication the “Zero COVID” policy will change.

Today the calendar is sparse given there’s only one economic report, Housing Market Index (E: 48), and the UK and Japanese markets are closed.  So, positioning ahead of Wednesday’s FOMC decision should drive markets, and unless we get some positive corporate commentary to offset the FDX guidance, the path of least resistance into the Fed is lower.