Tom Essaye, founder of Sevens Report Research, said Friday there are at least three warning signs that the rally could be yet another bull trap for investors. Market expectations for Fed rate hikes are now showing a 56% probability of a June rate hike, up from basically 0% just four weeks ago!” he said. Click here to read the full article.
What’s in Today’s Report:
Futures are sharply lower on continued momentum from Thursday’s late day drop and following hot German inflation data and strong UK retail sales.
German CPI didn’t decline as much as hoped, falling –1.0% vs. (E) -1.6% and rising 17.8% vs. (E) 16.0%. UK Retail Sales were also better than expected (0.5% vs. (E) -0.3% and the two reports are combining with yesterday’s hot US PPI to push rate hike expectations higher.
Today focus will remain on data and Fed speak. The two notable economic reports are Import & Export Prices (E: -0.1%, -0.2%) and Leading Indicators (E: -0.3%). The first deals with inflation and the second deals with growth, and if inflation is hot and growth is cool, expect more selling pressure.
There are also two Fed speakers today, Barkin (8:30 a.m. ET) and Bowman (8:45 a.m. ET) and we should expect them to sound hawkish (as most Fed speakers have been this week).
“The spike in the 2-year yield tells us the market is now believing the Fed when it has been saying it’s going to raise rates close to or above 5%, notably, it wasn’t Powell’s commentary that got the market to believe that — it was the economic data from Friday, notably the jobs report and ISM Services PMI,” Essaye said, the founder of Sevens Report Research. Click here to read the full article.
What’s in Today’s Report:
Futures are little changed following a mostly quiet weekend of news as markets look ahead to tomorrow’s CPI report.
The only notable economic report overnight was better than expected growth and inflation updates from the European Commission, who now sees EU growth rising 0.9% this year (up from 0.3%) and inflation at 5.6% (down from the previous 6.1%). These revised estimates are helping to bolster the “No Landing” economic scenario.
Markets should mostly be in a holding pattern today as the CPI report looms tomorrow morning, but there are two notable events on the calendar to watch: New York Fed Inflation Expectations (One Year: 5.0%, Five-Year: 2.4%) and one Fed speaker: Bowman (8:00 a.m. ET). If inflation expectations are higher than before or Bowman is hawkish, that could mildly pressure stocks.
What’s in Today’s Report:
Futures are modestly weaker following a rally in oil prices and a continued rise in bond yields overnight.
Oil rallied 2% after Russia announced it was voluntarily reducing output by 500k bpd while OPEC+ did not signal any intention to increase output to offset the reduction.
Global bond yields moved higher after Nikkei reported Kazuo Ueda will become the next BOJ governor, and not the ultra-dove Masayoshi Amamiya (who was expected).
Today focus will remain on the data and specifically University of Michigan Consumer Sentiment (E: 65.0) and the inflation expectations in the report (any further decline will be positive for stocks). We also get two Fed speakers: Waller (12:30 p.m. ET) and Harker (4:00 p.m. ET) and markets will want to see if they echo the hawkish tone from regional Fed presidents this week.
What’s in Today’s Report:
Futures are enjoying a moderate bounce overnight thanks to slightly better than expected inflation data and earnings.
German CPI rose less than expected (8.7% vs. (E) 9.1%) and that’s helping to slightly calm fears of a bounce back in inflation.
Earnings overnight were also solid as DIS beat estimates and it’s fair to say this earnings season has been not as bad as feared.
Focus will remain on economic data and the only notable report today is Jobless Claims (E: 190K). Holiday effects should be working their way out of these numbers so investors will want to see claims begin to rise over the coming weeks, otherwise it’ll imply the labor market remains much, much too tight (and that means more potential future rate hikes).
Earnings season is winding down but some notable reports today include: PM ($1.29), PYPL ($1.20), LYFT ($0.13).
What’s in Today’s Report:
Futures are moderately lower mostly on follow-through selling from Friday’s hot jobs report.
The Chinese spy balloon drama dominated weekend headlines but it’s unlikely to materially alter U.S./China relations and as such shouldn’t be an influence on markets.
Rate expectations rose over the weekend following Friday’s jobs report, with markets now pricing in a terminal Fed Funds rate of 4.75% and that’s the main reason stocks are lower this morning.
Today there are no notable economic reports and no Fed speakers, so the focus will remain on yields and rate expectations and if they continue to climb, that will weigh on stocks.
What’s in Today’s Report:
Futures are solidly higher on continued momentum from Wednesday’s “not hawkish” post-FOMC rally and following better-than-expected META earnings.
META surged 19% overnight as the company reported better-than-feared earnings driven by gains in artificial intelligence and aggressive cost-cutting.
Today will be a very busy day of micro and macro-economic events as we get major central bank decisions, more important economic data, and key earnings.
First, this morning there are two central bank decisions: BOE Rate Decision (E: 50 bps hike) and ECB Rate Decision (E: 50 bps hit). If either is overtly hawkish (maybe the ECB) it could send global yields higher and take back some of yesterday’s rally.
After those two central bank decisions, we get an update on the labor market via Jobless Claims (E: 193K), inflation via Productivity & Costs (E: 2.4%, 1.5%), and economic growth via Factory Orders (E: 2.2%). Especially in light of Powell’s not hawkish press conference, data that shows stability and declining price pressures will support stocks.
Finally, on earnings, today is likely the single most important day of the earnings season as we get results from three of the most widely held stocks in the market: AAPL ($1.93), AMZN ($0.15), and GOOGL ($1.14).
“Reaching peak hawkishness is one of our three keys to a bottom, and the most important one, so if the Fed has reached peak hawkishness that’s a powerful positive to consider,” Tom Essaye, founder of Sevens Report Research, wrote in a note Monday. Click here to read the full article.
What’s in Today’s Report:
Global markets are rallying on the back of favorable economic data in Europe while large cap tech shares are dragging U.S. futures lower following dismal SNAP earnings (shares of the company are down ~15% in pre-market trading).
Economically, the Eurozone Manufacturing PMI met estimates at 48.8 while the HICP Flash (their CPI) cooled to 8.5% vs. (E) 9.1% which is being received as mildly dovish ahead of this week’s all-important central bank meetings.
Looking into today’s session, we will get our first look at January jobs data with the ADP Employment Report (E: 158K) ahead of the bell while JOLTS (E: 10.2 million) and the ISM Manufacturing Index (E: 48.0) will be released at the top of the 10:00 a.m. hour ET.
From there focus will shift to the Fed with the FOMC Decision at 2:00 p.m. ET (E: +25 bp to 4.50% – 4.75%) followed by Powell’s Press Conference at 2:30 p.m. ET.
There are also a few notable earnings releases to watch today: TMUS ($1.39), META ($2.12), and ALL (-$1.37).
Bottom line, investors will be looking for further moderation in the morning economic data but not a sharp drop off indicating a deep recession looming while an as-expected or dovish Fed decision and press conference would likely see January’s gains extended in the afternoon. Conversely, a hawkish press conference (like the Jackson Hole speech in August) would very likely trigger a surge in volatility into the final hour of the day.
