Prospects of aggressive Fed tightening “are most negative for high-growth/high-PE names…said Tom Essaye of the Sevens Report in a note on Monday to clients, CNBC reported. Click here to read the full article.
What’s in Today’s Report:
Stock futures are extending yesterday’s afternoon rally in pre-market trade this morning as investors look ahead to Powell’s renomination hearings.
Overseas, Asian markets declined as new lockdown measures were imposed in parts of China due to rising Omicron cases while EU shares stabilized in sympathy with yesterday’s afternoon rally in U.S. markets.
Economically, the NFIB Small Business Optimism Index edged up to 98.9 vs. (E) 98.8 last month but the release is not materially impacting markets this morning.
There are no additional economic reports today but Esther George is scheduled to speak at 9:30 a.m. ET before Powell’s renomination hearings begin (10:00 a.m. ET). The market will be keenly focused on anything to do with balance sheet reduction plans and if the topic is “downplayed,” expect a further relief rally in equity markets.
Finally, there is a 3-Yr Treasury Note auction at 1:00 p.m. ET and if the results are weak, sending shorter duration yields to new multi-year highs, that could become a headwind for high valuation tech names and weigh on the broader stock market again.
What’s in Today’s Report:
Futures are slightly lower following a generally quiet weekend as investors digest last week’s hawkish surprises ahead of Powell’s testimony tomorrow and CPI on Wednesday.
Economically, the only notable number was Eurozone Unemployment, which met expectations at 7.2%.
Chances of Build Back Better passing fell further over the weekend as according to the Washington Post, Manchin remains against the current framework for the plan.
Today there are no economic reports and just one Fed speaker, Bostic (12:00 p.m. ET), so we’d not be surprised to see markets churn ahead the three major catalysts coming later this week: Powell’s testimony on Tuesday, Wednesday’s CPI Report, and Brainard’s testimony on Thursday. Those three events will determine whether stocks rally of decline this week and any additional hawkish surprises will pressure stocks.
The Fed is already actively discussing shrinking the balance sheet showing they are serious about being hawkish, and stocks dropped…says Tom Essaye of The Sevens Report. Click here to watch the full interview.
What’s in Today’s Report:
Futures are sharply higher mostly on momentum from yesterday’s strong close and despite soft economic data.
EU and UK flash PMIs missed estimates thanks to drops in the service sector and that implies Omicron is a headwind on global growth in Europe.
But, for now that concern isn’t enough to stop a year-end Santa rally as the Fed was hawkish, but not too hawkish.
Looking forward, today will be a busy day. First, we get two important central bank decisions (Bank of England at 7:00 a.m. and ECB at 7:45 a.m), and while neither are expected to change policy if they are hawkish in a tone that could partially offset the current Fed rally.
Meanwhile, we also get a lot of economic data including, in order of importance: December Composite Flash PMI (E: 58.4), Philly Fed (E: 28.8), Jobless Claims (E: 200K), Housing Starts (E: 1.563M) and Industrial Production (E: 0.7%). Bottom line, the market will want to see stability in the data especially given the looming rate hikes in 2022, and the last thing the market will want to see is a material weakness in the data given the Fed’s new hawkishness.
What’s in Today’s Report:
U.S. equity futures are flat and global markets were mixed overnight as investors digest another hotter-than-expected inflation print and soft growth data ahead of the Fed.
U.K. CPI rose 5.1% vs. (E) 4.7% in November while Chinese growth data missed expectations across the board, rekindling stagflation fears ahead of the slew of central bank meetings in the back half of the week.
There are multiple economic reports due out this morning including: Retail Sales (E: 0.8%), Empire State Manufacturing Index (E: 25.5), Import & Export Prices (E: 0.7%, 0.7%) and the Housing Market Index (E: 84). But once again, unless there are any material surprises, the market impact should be limited ahead of the Fed this afternoon.
The FOMC Announcement will hit at 2:00 p.m. ET and Fed Chair Powell’s Press Conference begins at 2:30 p.m. ET. Bottom line, the biggest risk to equities remains a more hawkish shift in tone with a faster than anticipated acceleration in tapering of QE and any hints at more than two rate hikes next year.
What’s in Today’s Report:
U.S. futures are trading lower with most global equity markets after some negative Omicron headlines while investor focus shifts ahead to this week’s central bank meetings.
Initial studies in South Africa show the PFE vaccine has a lower efficacy rate against Omicron, rekindling concerns about the strain potentially leading to new restrictions or lockdown measures around the globe.
Economically, EU Industrial Production grew 1.1% vs. (E) 1.2% in October and the U.S. NFIB Small Business Optimism Index came in at 98.4 vs. (E) 98.3 but neither release materially changed the outlook for central bank policy.
Looking into today’s session, there is one inflation data point due ahead of the bell: PPI (E: 0.5%) but unless it is a material surprise against expectations, it should not move markets with the December FOMC meeting getting underway.
Bottom line, the focus has largely turned to this week’s central bank meetings, most importantly the FOMC, so it is likely that we see a form of “Fed paralysis” grip the markets between now and tomorrow afternoon’s meeting announcement, barring any unforeseen surprises regarding Omicron.
What’s in Today’s Report:
Futures are modestly higher on continued momentum from last week’s rally, following a very quiet weekend of news.
On COVID, the growing consensus is that fully vaccinated people are protected against severe illness while those with boosters are also protected against infection, so it is increasingly unlikely Omicron causes a sustained pullback.
On stimulus, Democrats are still trying to pass the $1.7-ish trillion spending bill before year-end, but Senator Manchin remains an obstacle, and passage of the bill in 2021 (or perhaps at all given high inflation and 2022 is an election year) is becoming increasingly unlikely.
Today there are no economic reports and no Fed speakers so it should be a mostly quiet day, although we could get official vaccine results vs. Omicron from PFE or MRNA any day, and if the data confirms the consensus opinion, that would be a mild tailwind on stocks.
What’s in Today’s Report:
Futures are modestly higher following a generally quiet night as markets await the latest readings on inflation via today’s CPI and inflation expectations index in Consumer sentiment.
Economic data slightly underwhelmed as UK Industrial Production (1.3% vs. (E) 1.4%) and UK GDP (0.9% vs. (E) 1.0%) both missed expectations.
There were no notable Omicron updates overnight.
Today the focus will be on inflations via the Consumer Price Index (E: 0.7% m/m, 6.8% y/y) and the inflation expectations index in the Consumer Sentiment report (E: 67.0). Markets are already expecting the Fed to materially accelerate the pace of tapering of QE next week, but if these inflation readings come in much hotter than expected, that likely will be a headwind on stocks as it will only encourage the Fed to get even more aggressive in tapering QE.
What’s in Today’s Report:
Equity futures are little changed this morning as investors digest the sizeable rally so far this week with concerns about the Chinese property market offsetting more progress by Congress towards raising the debt ceiling.
Kaisa Group, a large Chinese developer, had its shares halted overnight pending a corporate announcement after a debt deadline passed which has rekindled fears about China’s property market.
Today, there is just one economic report to watch: JOLTS (E 10.4M), but it is a lagging report from October so unlikely to move markets and there are no Fed officials scheduled to speak.
In the afternoon, there is a 10-Year Treasury Note auction (1:00 p.m. ET) that could move bonds and subsequently stocks, however, given the quiet calendar today, it would not be surprising to see the markets digest some of this week’s outsized gains now that the S&P 500 is back within reach of all-time highs.