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Ukraine Update and Why Future are Down

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What’s in Today’s Report:

  • Ukraine Update and Why Futures Are Down
  • Switching Focus Back to the Fed
  • Weekly Market Preview:  Powell Testimony Wed/Thurs
  • Weekly Economic Cheat Sheet:  Jobs Week

Futures are sharply lower as markets react to additional sanctions against Russia, including removing select Russian banks from the SWIFT system. The additional sanctions and historic isolation of Russia by the global community are increasing economic uncertainty.

Positively, Ukraine and Russia are having peace talks today, and hopefully, that leads to a ceasefire sooner than later.

There were no notable economic reports overnight and no material economic reports today, so Russia/Ukraine headlines will drive trading, and any reports of a cease-fire will be a positive for markets.

What the Russian Attack on Ukraine Means for Markets

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What’s in Today’s Report:

  • What the Russian Attack on Ukraine Means for Markets
  • What’s Next in This Situation
  • What We Are Doing Today

Futures are down close to 3% as Russia launched an attack on Ukraine beyond the Donbas region.

Early Thursday morning Russia launched missiles at numerous targets in Ukraine and landed troops throughout the country, dramatically escalating the conflict.

Commodity prices shot higher, including oil, which is up more than 7%

Today focus will obviously be on the Russian attack and how far it goes, along with the severity of the international sanctions against Russia.  Anything that implies a further escalation will weigh further on markets and send commodity prices even higher.

Outside of Russia/Ukraine, there are numerous economic reports and Fed speakers:  Revised Q4 GDP (E: 7.0%), Jobless Claims (E: 230K). Fed Speak: Barkin (9:00 a.m., 12:00 p.m. ET), Bostic (11:10 a.m. ET), Mester (12:00 p.m. ET), Waller (8:00 p.m. ET).

Tom Essaye Quoted in StockXpo.com on February 16, 2022

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Dow falls for a 4th day in 5 as traders assess geopolitical risks, next Fed move

Traders continue to monitor the situation in Ukraine and look ahead to the Fed minutes release…Sevens Report’s Tom Essaye said in a note Wednesday morning. Click here to read the full article.

Tom Essaye Quoted in Yahoo News on February 21, 2022

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Ukraine-Russia crisis: Stock futures tank as situation escalates

The reasons stocks are down on that news is that people fear that is the start of a full-on invasion of Ukraine. And, if that happens, then we can expect a serious test of the January lows… Sevens Report Research founder Tom Essaye told Yahoo Finance. Click here to read the full article.

Ukraine Update

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What’s in Today’s Report:

  • Bottom Line: Real Focus Remains on the Fed and Growth
  • Weekly Economic Cheat Sheet: Rising Threat of Stagflation?

Stock futures are down slightly this morning but well off the overnight lows as traders digest the latest geopolitical developments between Russia and Ukraine.

Russian President Putin recognized the independence of two “breakaway” regions in eastern Ukraine yesterday, but the risk of a full scale invasion of Ukraine still remains low.

Looking into today’s session, there are several economic reports due to be released including: Case-Shiller Home Price Index (E: 1.1%), FHFA House Price Index (E: 1.0%), PMI Composite Flash (E: 51.9), and Consumer Confidence (E: 110.0). There is also one Fed speaker on the schedule: Bostic (3:30 p.m. ET).

Finally, there is a 2-Yr Treasury Note auction at 1:00 p.m. ET and with the underlying market focus still on future Fed policy, a soft outcome (hawkish) could add to the current geopolitically fueled market volatility.

Regarding Ukraine, investors will await the announcement of new sanctions from the west against Russia, and depending on how severe they are, it could add to the selling pressure on stocks today. Additionally, as of now, Blinken and Lavrov are still scheduled to meet this week but if that meeting is canceled that will suggest a more severe conflict is imminent, resulting in more risk-off money flows.

Why We Could See a Short Term Rally (But We Wouldn’t Chase It)

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What’s in Today’s Report:

  • Why We Could See a Short-Term Rally
  • What the FOMC Minutes Meant for Markets (Not as Hawkish as Feared, But Not Dovish, Either)
  • EIA and Oil Market Update

Futures are modestly weaker as negative headlines on Russia/Ukraine weighed on sentiment.

Russia accused Ukraine of attacking Russian-back separatists in the Dontesk region of Ukraine, and analysts fear this could be the pretext for a larger military conflict if Russia moves to annex Dontesk, (this would be a replay of what happened with Crimea in 2014).

Russia/Ukraine headlines are driving short term trading and that will remain the case today, with any headlines implying diplomacy causing a rally, and any headlines implying conflict causing a sell off.

Beyond geopolitics, however, we get several pieces of economic data, including Jobless Claims (E: 224K), Housing Starts (E: 1.708M) and the Philadelphia Fed Manufacturing Index (E: 19.7) and as has been the case the market will be looking for stability in the data.

Finally, we also get two Fed speakers, Bullard (again) at 11:00 a.m. ET and Mester at 5:00 p.m. ET.

Tom Essaye Quoted in Kiplinger on February 9th, 2022

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Stock Market Today: Nasdaq Recovery Continues as Comms, Tech Rebound

Bottom line, inflation remains the single biggest potential influence over Fed policy, and Fed policy will determine whether stocks continue to rally, or decline…said Tom Essaye, founder of the Sevens Report. Click here to read the full article.

Tom Essaye Quoted in Market Watch on February 9, 2022

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Will hot inflation data kill the stock-market bounce? What investors want to see

Inflation has to stop going up. I know that sounds overly simplistic, but the bottom line is that for the past several months, markets and the Fed have seen ‘hints’ of a peak in inflation pressures, yet that wasn’t reality…said Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

FOMC Minutes Preview

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What’s in Today’s Report:

  • FOMC Minutes Preview
  • PPI Remains Hot (Chart)
  • Empire State Manufacturing Index Takeaways

Stock futures are slightly lower while most global markets rallied overnight as traders continue to monitor the situation in Ukraine and look ahead to the Fed minutes release.

Geopolitically, there were no major developments regarding Ukraine o/n but U.S. officials continue to warn that an invasion is possible at anytime, leaving markets on edge.

Economically, Chinese inflation data came in below estimates while U.K. PPI ran hot but neither release materially moved markets overnight.

Today is lining up to be a fairly busy day from a catalyst standpoint as there are several notable economic reports due out including: Retail Sales (E: 2.0%), Import & Export Prices (E: 1.3%, 0.7%), Industrial Production (E: 0.4%), and Housing Market Index (E: 83).

From there, focus will shift to a 20-Yr Treasury Bond auction at 1:00 p.m. ET and then likely the most important catalyst of the day, the FOMC Minutes will be released at 2:00 p.m. ET.

The market has been very indecisive in recent sessions and that is likely to continue today, however, if the geopolitical backdrop remains largely calm, economic data is favorable, and the FOMC minutes are not interpreted as overly hawkish, we may finally see the market break back to test the February highs.

Understanding Fed Hawks vs. Fed Doves

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What’s in Today’s Report:

  • Understanding Fed Hawks vs. Fed Doves (Table)

Easing geopolitical tensions are driving risk on money flows this morning with U.S. stock futures higher by well over 1% while bonds and other safe havens decline.

Multiple news outlets reported overnight that Russian troops completed their drills and were returning to their bases, reducing fears of an imminent invasion of Ukraine.

There were a few economic reports overnight including the U.K. Labour Market report and the German ZEW Survey but both largely met estimates and neither meaningfully moved markets.

Looking into today’s session, there are no Fed speakers or Treasury auctions but there are two notable economic reports to watch: PPI (E: 0.5%, 9.2%) and Empire State Manufacturing Index (E: 10.0).

Bottom line, this is a headline driven market right now and investors will want to see continued de-escalation in the Russia-Ukraine conflict (German Chancellor Scholz meets with Russian President Putin) as well as a PPI print that is not too hot and Empire report that shows growth is not materially slowing for the overnight relief rally to extend higher.