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Why The Fed Was More Bullish Than It Seems

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What’s in Today’s Report:

  • Why The Fed Meeting Was More Bullish Than It Seems
  • Why the UK Election Matters to You (Good/Bad/Ugly Preview)
  • EIA Update – Where Will Oil Go?

Futures are slightly higher following a generally quiet night as markets digest yesterday’s Fed meeting and wait on important trade news and the results of the UK election.

Today is a big day in the U.S./China trade as Trump is meeting with senior advisors to decide the fate of the 12/15 tariff increases.  It’s widely expected they will be delayed and if they are not, that will be a negative shock for markets.

Economic data was again mixed as Euro Zone IP missed (-0.5% vs. (E) -0.3%) while German CPI met expectations.

Today will be a busy day.  First, regarding the trade meeting, it’s unclear if a formal announcement will be made on the decision, but it could come at any time so markets will be watching the tape closely.  Additionally, there is also an ECB Meeting this morning and it’s new ECB President Lagarde’s first press conference.  Finally, we should know the results of the UK election by this evening, and the key number for the Torys is 335 seats.  Stocks will like any result above that number.

On the economic front, the only notable report is Jobless Claims (E: 213K).

Did the Fed Just Restart QE?

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What’s in Today’s Report:

  • Did the Fed Just Restart QE?

Stock futures declined overnight after China said it would take countermeasures to the passage of a pro-Hong Kong bill by the U.S. House, further complicating the U.S.-China trade relationship while hopes for a Brexit deal faded.

There were no market-moving economic reports overnight.

Today, there is one key economic report to watch: Retail Sales (E: 0.3%) and two second tiered reports due to be released: Business Inventories (0.3%) and the Housing Market Index (E: 68). There are also two Fed officials scheduled to speak: Evans (9:00 a.m. ET) and Brainard (3:00 p.m. ET) that could potentially move markets.

Investors will also be looking for any further developments on the latest escalation in tensions between the U.S. and China as the trade war remains a major influence on stocks and broader risk assets.

Shifting from macro to micro, the start of earnings season will continue today with BAC ($0.68), PNC ($2.80), ALLY ($0.98), USB ($1.11), and BK ($0.99) all reporting ahead of the bell while NFLX ($1.05), IBM ($2.64) and CSX ($1.01) will release results after the close.

Tom Essaye Quoted in CCN

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The Sevens Report founder Tom Essaye said:

“The drama is centered on just how strongly the Fed will signal that it’s going to cut rates again by the end of 2019. It’ll be the ‘dots’ and statement that determine whether the Fed meets market expectations…” Click here to read the full article.

New York traders

Tom Essaye Quoted in Invezz on September 18, 2019

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“The drama is centred on just how strongly the Fed will signal that it’s going to cut rates again by the end of 2019. It’ll be the ‘dots’ and statement that determine whether the Fed meets market expectations…” said Tom Essaye, founder of the Sevens Report in a note, as quoted by CNBC. Click here to read the full article.

Tom Essaye Quoted in CNBC on September 17, 2019

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“The drama is centered on just how strongly the Fed will signal that it’s going to cut rates again by the end of 2019…” Tom Essaye, founder of The Sevens Report, said in a note. Click here to read the full article.

NY Traders

Fed Meeting Preview and Saudi Oil Update

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What’s in Today’s Report:

  • FOMC Preview
  • Two Sectors that Will Benefit from the Saudi Oil Attacks
  • What the Attacks on Saudi Oil Infrastructure Mean for Oil

Futures are suffering mild losses this morning while international markets were little changed overnight as oil prices are stabilizing, economic data was mixed, and investor focus is shifting to the Fed.

Economically, the German ZEW Survey showed the Current Conditions index fell to –19.9 vs. (E) -15.0 but the Business Expectations figure was encouragingly –22.5 vs. (E) -38.0, easing concerns about the future outlook for the EU economy.

The PBOC left rates unchanged overnight, disappointing some investors looking for a cut after a recent string of soft economic data which weighed on Asian markets.

Looking into today’s session, there are two economic reports to watch: Industrial Production (E: 0.1%) and the Housing Market Index (E: 66) but a sense of “Fed paralysis” is already falling over the markets as focus turns to tomorrow’s announcement and press conference.

Lastly, after oil’s huge moves yesterday, the energy complex will continue to get attention and with the geopolitical situation still very fluid, oil prices and U.S.-Iran tensions could affect trading in stocks today.

Updated Market Multiple Table

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What’s in Today’s Report:

  • Updated Market Multiple Table
  • Contrarian Play: Bullish Breakouts in the Energy Patch

U.S. stock futures are suffering mild losses this morning as investors digest yesterday’s more pronounced sector-rotation money flows amid mixed economic data with focus turning to central bank events over the next week.

Chinese CPI and PPI were slightly firmer than expected in August, while French and Italian Industrial Production figures were underwhelming.

In the U.S., the NFIB Small Business Optimism Index was a mild disappointment at 103.1 vs. (E) 103.5 mostly due to declining growth expectations.

The mixed economic data, however, was not enough to materially affect investor sentiment and therefore is only having a modest impact on price action this morning.

Today, there is just one economic report to watch: July JOLTS (E: 7.311M) and there are no Fed officials speaking as they are in their “blackout period” ahead of next week’s FOMC meeting.

That will leave investors focused on the recently emerging “rotation trade,” and due to the heavyweight that tech stocks carry in the major indexes, if big tech names remain under pressure today, that will likely be a drag on the broader market.

Tom Essaye Quoted in CNBC on September 3, 2019

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“Going forward, the dollar will have a hard time declining unless the Fed gets aggressively dovish, simply because global growth remains lackluster and global central banks are easing policy…” said Tom Essaye, founder of the Sevens Report. Click here to read the full article.

Man holding $100 bills

Tyler Richey Quoted in Bloomberg on July 4, 2019

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“From a demand standpoint, the question is will the Fed save the day” or “are we too far gone?” said Tyler Richey, co-editor at Sevens Report Research in Florida. Click here to read the full article.

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Mind the Fed Funds Gap

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What’s in Today’s Report:

  • Mind the Fed Funds Gap

S&P futures are slightly lower as this week’s dovish rally to new all-time highs is digested amid further escalations between the U.S. and Iran while economic data was mixed.

The U.S. reportedly called off a retaliatory strike against Iran “at the last minute” overnight which is weighing on investor sentiment but supporting oil prices (Brent +1.60%).

Flash PMIs were mixed o/n with Asian data slightly underwhelming while European data slightly beat expectations. But none of the releases were too far from estimates so the data is not materially affecting markets this morning as investors remain focused on this week’s dovish shift in central bank policies and look ahead to the G20.

Today, there are two economic releases to watch: Flash Composite PMI (E: 50.9) and Existing Home Sales (E: 5.28M). It will be important for the former to remain soft to keep the “Fed Put” alive, but not so bad that the data stokes fears that the Fed is “too far behind the curve.”

Speaking of the Fed, Brainard and Mester speak on a panel together at 12:00 p.m. ET and Daly is scheduled to speak at 12:30 p.m. ET. Given the market’s significant dovish shift in policy expectations this week, investors will be watching closely for any further clues as to when the Fed plans to cut (July?) or by how much (25 or 50 bp?).