Not only did the headline badly miss expectations, falling to a 16-month low, but consumer inflation expectations for the year ahead within the report jumped from an upwardly revised 7.5% to 8.0%, which notably contradicts the…wrote The Sevens Report’s Tom Essaye. Click here to read the full article.
What’s in Today’s Report:
Futures are sharply lower following another profit warning from a national retailer and mixed economic data.
Restoration Hardware (RH) cut guidance just a few weeks after reporting earnings, citing a sudden deterioration in demand and increasing worries about corporate earnings.
Economic data was mixed as the Chinese manufacturing PMI rose back above 50, while German unemployment rose more than expected (5.3% vs. (E) 5.0%.
Today focus will be on the Core PCE Price Index (E: 0.4% m/m, 4.8% y/y) and if we get a materially hot number above the 4.8% yoy expectation, we can expect more selling pressure while a drop towards the mid 4% range would be a welcomed surprise (and likely cut the early morning losses). Today we also get weekly Jobless Claims (E: 226K), although that number shouldn’t move markets.
What’s in Today’s Report:
Stock futures are modestly lower thanks to some hawkish Fed chatter and another hot inflation print in Europe.
Economically, Spanish CPI jumped to 10.2% vs. (E) 9.2% in June, up from 8.5% in May suggesting inflation has not yet peaked, at least in parts of Europe.
Domestically, the Fed’s Mester reiterated that a 75 bp hike is likely in July given elevated consumer inflation expectations.
Today, there is one economic report to watch early: Final Q1 GDP (E: -1.4%) and investors would like to see the headline at least hold unchanged from the previous revision (if not get revised higher) before focus turns to several global central bankers speaking at an ECB Forum including Fed Chair Powell at 9:00 a.m. ET.
If the discussion takes on a more hawkish tone or there is any sign the market is losing confidence in the Fed (which would be evident in the bond markets) then yesterday’s selling pressure could continue.
What’s in Today’s Report:
Stock futures are modestly higher with global shares amid positive news out of China regarding covid policies.
China announced shortened quarantine times for incoming visitors in the latest move to ease covid-restrictions and potentially move away from their zero-Covid policy stance.
Economically, the German GfK Consumer Climate Index for July was no worse than feared at -27.4 vs. (E) -27.9 which is easing concerns about a swift drop-off in global economic growth.
Today, there are several economic reports to watch for: International Trade in Goods (E: -$102.0B), Case-Shiller Home Price Index (E: 1.8%), and most importantly Consumer Confidence (E: 101.0). Investors will want to see a continued slowdown in the data, but not to the degree that would raise concerns about a “hard landing.”
Two Fed officials are also scheduled to speak today: Barkin (8:00 a.m. ET) and Daly (12:30 p.m. ET) and there is a 7-Yr Treasury Note auction at 1:00 p.m. ET that could move yields and influence stock trading.
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What’s in Today’s Report:
Futures are moderately higher thanks mostly to momentum from Thursday’s close and despite more underwhelming economic data.
Economically, UK Retail Sales met expectations but fell sharply (–4.7% yoy) while the German Ifo Business Expectations Index missed estimates (85.8 vs. (E) 87.3).
Geo-politically, Russia continues to advance in the Donbas as Ukraine has withdrawn from the city of Severodonetsk.
Today focus will be on the inflation expectations in the University of Michigan Consumer Sentiment Index, and if we see a decline below 3.3% that could further the idea that inflation is peaking (and extend the rally in stocks). Other data today includes New Home Sales (E: 587K) and one Fed speaker, Daly at 4:00 p.m. ET, but they shouldn’t move markets.
What’s in Today’s Report:
Stock futures are bouncing modestly with European shares and bond markets are stable this morning as inflation data met expectations in the Eurozone and the BOJ decision was viewed as dovish versus expectations.
The BOJ maintained a very easy monetary policy, sending the yen back towards recent lows while Eurozone HICP (their CPI equivalent) came in at 8.1% vs. (E) 8.1% y/y which is helping markets stabilize this morning.
Looking into today’s session, there is one economic report to watch: Industrial Production (E: 0.4%) and the market will be looking for a strong print to ease concerns surrounding this week’s soft survey-based factory data and bolster the outlook for economic growth in the face of an aggressive Fed.
Fed Chair Powell is also set to deliver a speech at 8:45 a.m. ET and any comments on the economy or future policy plans could move markets today.
Finally, today is quadruple witching options expiration so expect very heavy volumes and the potential for momentum to build in either direction as derivatives traders square their books into the end of the quarter. In the S&P 500 3,650, 3700, and 3750 will all be key levels to watch into the afternoon today.
What’s in Today’s Report:
Stock futures are down more than 2% this morning, tracking global shares lower as investors digest the latest central bank decisions, a rebound in rates and recession fears.
The Swiss National Bank surprised markets with a 50 bp hike overnight which is compounding fears about aggressive central bank policy in the face of slowing growth ahead of this morning’s BOE announcement.
Today, focus will be on the Bank of England announcement early and if we see another hawkish decision, stocks could extend this morning’s decline on a combination of rising rate fears and growing concerns about future economic growth.
From there, focus will turn to economic data in the U.S. with Jobless Claims (E: 220K), Housing Starts and Permits (E: 1.695M), and the Philadelphia Fed Manufacturing Index (E: 5.5) all due to be released this morning. With the Fed set on tackling inflation in the months ahead, the market will want to see strong data to show the economy can weather sharply tightening financial conditions.
Then in the late morning, the Treasury will hold an auction for 4-Week and 8-Week Bills at 11:30 a.m. ET. Bottom line, if we see rates rise materially today, especially on the shorter end of the yield curve, then stocks are likely to extend this morning’s declines on aggressive policy concerns.
What’s in Today’s Report:
Futures are modestly higher as bond yields and the dollar pulls back ahead of the Fed and an emergency ECB meeting that will address fragmentation and the bank’s bond-buying programs sparking risk-on money flows this morning.
Economically, Chinese Fixed Asset Investment, Industrial Output, and Retail Sales were all better than feared overnight which is easing concerns about the health of global growth trends.
Looking into today’s session, there is a slew of economic data due out in the U.S. including: Retail Sales (E: 0.1%), Empire State Manufacturing Index (E: 5.5), Import & Export Prices (E: 1.2%, 1.3%), and the Housing Market Index (68). At this point, the Fed is expected to hike aggressively in the months ahead to tame inflation regardless of the state of economic growth, so the stronger the data, the better for risk assets.
After the flurry of data in the morning, the market focus will shift to the Fed with the FOMC Announcement at 2:00 p.m. ET and the Fed Chair Press Conference 2:30 p.m. ET. As discussed in more detail in today’s report, a 75 basis point hike may not cause further losses in equities as long as investors gain confidence in the Fed’s ability to get inflation under control. That will be the key to how stocks and other markets react to today’s decision.
What’s in Today’s Report:
Stock futures are modestly higher this morning as yesterday’s sharp declines are digested while bond yields pulled back from multi-year highs as focus remains on the Fed.
The 10s-2s spread inverted again overnight after GS and JPM changed their forecasts to reflect a 75 bp hike tomorrow which is in line with rate market expectations. This dynamic is a sharp change in expectations from just the end of last week and largely the reason for the carnage in equities yesterday.
Economic data was slightly better than feared overnight between the German ZEW Survey and the NFIB Small Business Optimism Index, but good data is being seen as hawkish in this aggressive policy environment.
Looking into today’s session, we will get another read on U.S. inflation via the PPI report (E: 0.8% m/m, 11.0% y/y) but the release is not likely to materially shift policy expectations at this point with the June FOMC Meeting getting underway this morning.
Bottom line, the latest declines in stocks have been due to a rapid repricing of Fed rate hike expectations, from 50 basis points as recently as last week to 75 basis points as of yesterday and whether stocks can stabilize here will likely depend on how the bond market (namely Fed Funds futures) trade today and through the conclusion of the Fed meeting tomorrow. New highs in yields and another yield curve inversion will weigh on stocks while stabilization in rates could lead to some degree of a relief rally.
What’s in Today’s Report:
Global stocks are trading sharply lower and bond yields rose to new multi-year highs overnight amid fears that the Fed is getting more aggressive into an economic slowdown.
In the wake of Friday’s hot CPI report, rate markets are now pricing in a 75 basis point hike by the Fed in the next three months which saw the 10s-2s spread invert overnight underscoring renewed and growing recession worries.
Looking into today’s session, there are no notable economic reports, and no Fed officials are scheduled to speak.
There are two Treasury Bill auctions at 11:30 a.m. ET (3-Month Bills and 6-Month Bills). And while they are typically lesser followed, the results could shed light on market expectations of Fed policy in the coming months and if we see rates continue to surge higher, especially those with shorter duration, then concerns about a more aggressive stance by the Fed will likely keep pressure on risk assets today.