This week will give insight into when the Fed might start tapering, says Tom Essaye, Founder of The Sevens Report. Click here to watch the full interview.
What’s in Today’s Report:
Stock futures are trading higher with global shares this morning as investors cheer the likely deal to extend the debt ceiling while falling energy prices, particularly in Europe, are helping ease broader inflation concerns.
Economically, German Industrial Production for August was very disappointing with a -4.0% headline drop in August (E: -0.4%) however the data is not materially moving markets this morning.
Looking into today’s session, there is just one economic report to watch: Jobless Claims (E: 348K), but a meaningful beat or miss in the headline could cause a hawkish or dovish reaction in markets ahead of tomorrow’s September jobs report.
Additionally, there are a few central bank events that could move markets: ECB Minutes (7:30 a.m. ET) and Cleveland Fed President Loretta Mester speaks (11:45 a.m. ET).
Beyond those potential catalysts, markets will remain focused on the debt ceiling negotiations in Washington and bond yields. And as long as there is not material deterioration in the former or a major resurgence higher in the latter, then stocks should be able to maintain yesterday’s upside momentum.
What’s in Today’s Report:
Stock futures are rebounding from yesterday’s sharp losses this morning as bond yields pullback with the 10-year dipping below 1.50% overnight, easing valuation concerns.
Regarding Evergrande, the company’s stock rallied 15% overnight as the developer announced the partial sale of a regional bank stake that will result in $1.5B in cash.
Looking into today’s session there is one economic report: Pending Home Sales Index (E: 0.9%) but it should not move markets.
That will leave traders focused on a busy day of Fed chatter: Harker (9:00 a.m. ET), Powell (11:45 a.m. ET), Daly (1:00 p.m. ET), Bostic (2:00 p.m. ET), and Williams (5:00 p.m. ET).
Bottom line, the bond market has been a major driver of equity flows this week and if yields continue to pullback as they did overnight, then a rebound in the major stock indexes is likely however a retest of yesterday’s highs would result in another uptick in volatility.
What’s in Today’s Report:
U.S. equity futures are decidedly lower this morning as Treasury yields continue this week’s surge higher. The 10-year note yield topped 1.52% in overnight trading which is weighing heavily on high valuation tech names today.
From a catalyst standpoint, today is lining up to be a busy day with a slew of economic data due to be released: International Trade in Goods (E: -$87.0B), Case-Shiller Home Price Index (E: 1.6%), FHFA Home Price Index (E: 1.5%), and Consumer Confidence (E: 114.8).
Of those releases, the market will be most interested in whether or not Consumer Confidence can stabilize following the disappointing August print.
There is a 7-Year Treasury Note action at 1:00 p.m. ET and given how much bonds are influencing stocks so far this week, the results could impact equity markets (strong demand would help stabilize stocks, weak demand would likely see losses extended).
Finally, there are multiple Fed speakers today including: Evans (9:00 a.m. ET), Powell (10:00 a.m. ET), Bullard (1:40 & 7:00 p.m. ET), and Bostic (3:00 p.m. ET). Focus will clearly be on Powell and any insight he may provide regarding inflation expectations and the Fed’s plans to react.
Bottom line, the stock market is being driven by the bond market this week and if we see bonds continue to drop (yields spike higher) then that will result in further underperformance by growth stocks and drag the broader market lower while stabilization in yields would likely allow for a rebound.
Sevens Report Q3 Quarterly Letter Coming October 1st.
The Q3 2021 Quarterly Letter will be delivered to advisor subscribers on Friday, October 1st.
With Fed tapering, Washington budget battles and possible tax hikes looming, Q4 could be the most volatile of the year. Our quarterly letter will help you set the right expectations for clients so they aren’t blindsided by any market volatility.
It’s now clear that Chinese officials won’t allow a disorderly default, and that’s really all global markets care about…money manager Tom Essaye, president of Sevens Report Research wrote. Click here to read the full article.
What’s in Today’s Report:
Futures are moderately higher as the rally continued overnight as China injected more liquidity into their economy.
Chinese officials injected another 17 billion yuan into the economy to prevent any liquidity issues, as it’s now clear that Chinese officials won’t allow a disorderly default (and that’s really all global markets care about).
Economic data disappointed as both the EZ and UK flash composite PMIs missed expectations (EZ PMIs fell to 56.1 vs. (E) 58.9 while UK PMI dropped to 54.1 vs. (E) 54.7).
Focus today will be on economic data, specifically the Flash Composite PMI (E: 55.5) and Jobless Claims (E: 309K). Markets will want to see both numbers confirm what the Philly Fed and Empire survey implied last week, namely that the surge in COVID cases was a temporary and limited headwind on the economy. If that’s the case the rebound in stocks should continue.
What’s in Today’s Report:
Markets are trading with a risk-on tone this morning after some positive Evergrande developments while focus continues to shift to the conclusion of today’s Fed meeting.
Evergrande announced overnight that the company would not default on a bond payment due tomorrow (but details were vague) while the PBOC injected 120B yuan of liquidity into the system helping ease financial conditions overnight.
Today there is one economic report due out early: Existing Home Sales (E: 5.90M), but the primary market focus will be the FOMC Meeting Announcement (2:00 p.m. ET) followed by the Fed Chair Press Conference (2:30 p.m. ET).
With regard to the Fed, any outcome that meets our “What’s Expected” or “Dovish If” outcomes from yesterday’s FOMC Preview will likely trigger a further relief rally while a “Hawkish If” scenario has the potential to spur another wave of elevated volatility with a high likelihood of stocks testing Monday’s lows.
This [supply constraints] will be a more substantial risk to the rally we’ll need to watch for…wrote Tom Essaye, founder of Sevens Report Research. Click here to read the full article.
I think in a market that’s stretched, that doesn’t have a lot of backing at these fundamental levels, if you get some sort of serious scare, it could take 5% to 10% out of the S&P 500 pretty quick…Essaye said. Click here to read the full article.
What’s in Today’s Report:
Stock futures are trading modestly lower while most overseas markets declined overnight amid lingering concerns about the Delta variant’s impact on growth as well as the threat of a hawkish shift in tone from the ECB this week.
Economically, Japanese Q2 GDP was revised up to 1.9% vs. (E) 1.6% y/y which helped the Nikkei buck the trend and rally nearly 1% overnight.
Today, there are a few potential market-moving catalysts beginning with the July JOLTS report (E 10.0M). Then there are two Fed speakers to watch: Williams (1:10 p.m. ET) and Kaplan (6:00 p.m. ET). Finally, there is also a 10-Year Treasury Note Auction at 1:00 p.m. ET.
Bottom line, markets have become more “on edge” this week as the balance between economic growth trends and subsequent Fed policy outlook has become less certain.
So any combination of economic data deteriorating, the outlook for Fed policy getting more hawkish, or interest rates accelerating too quickly will continue to weigh on equities and other risk assets this week.