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What Yesterday’s Rebound Means for Markets

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What’s in Today’s Report:

  • Five Reasons Stocks Rallied Yesterday
  • What the Rebound Means for Markets

Futures are slightly higher as markets digest Thursday’s rebound amidst more positive news from the UK.

Support for the Truss spending/tax cut plan has totally eroded and markets are hopeful the plan will be scrapped entirely, and that’s helping global bond yields fall.

Today there are two notable economic reports, Retail Sales (E: 0.2%) and University of Michigan Consumer Sentiment (E: 58.8), but the key for markets will be the inflation expectations within Consumer Sentiment and if the five-year inflation expectations fall further below 3.0%, that’ll be a positive for markets.  We also get two Fed speakers, George (10:00 a.m. ET) and Cook (10:30 a.m. ET) but we don’t expect them to move markets.

Earnings season also unofficially starts today and key reports to watch include: JPM ($2.97), MS ($1.51), C ($1.55), WFC ($1.09), PNC ($3.66), USB ($1.17) and FRC ($2.19).  If results are better than expected, that can extend Thursday’s rebound.

Market Multiple Table: Headwinds Building

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What’s in Today’s Report:

  • Market Multiple Table: Headwinds Building

Stock futures are higher this morning as Treasury markets are steady despite more turmoil in the Gilts market with the 30-Yr jumping another 20+ bp back towards 5.00%.

Economic data was mixed overnight as U.K. GDP dropped off further than expected in August (-0.3% vs. E: -0.1%) while EU Industrial Production for the same month was solid at 1.5% vs. (E) 0.5%.

Today, there is one inflation data point to watch pre-market: Producer Price Index (E: 0.2%) and if it runs hot, it would likely send yields to new highs and pressure risk assets ahead of the bell.

After the open, the focus will shift to the Fed with two officials speaking through the middle of the day: Kashkari (10:00 a.m. ET) and Barr (1:45 p.m. ET) before the most recent FOMC Meeting Minutes are due to be released at 2:00 p.m. ET.

In the minutes, investors will be looking for any new indication of a timeline for a policy “pivot” or what might result in one as that is still a major catalyst needed in order for stocks to bottom.

Finally, there is a 10-Yr Treasury Note Auction at 1:00 p.m. ET and if the outcome is weak, as was the case with yesterday’s 3-Yr Note auction, and yields begin to rise, that will likely be a renewed headwind on equities in the afternoon.

Bottom line, yields are still the primary driver of the stock market this week and if we see Treasuries remain stable as they are this morning, then stocks could break their multi-day losing streak, however, if yields do rise meaningfully it will be hard for the major indices to hold this week’s lows.

Sevens Report Analysts Quoted in Yahoo on October 6th 2022.

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U.S. Stock Futures Slip as Investors Mull Fed Policy Path

“The key to tomorrow’s jobs report will be whether it keeps the hopes for a Fed pivot alive. If the jobs report is ‘Too Hot’ that kills the idea of a Fed pivot, and we should expect the S&P 500 to drop back towards levels where we ended the third quarter,” Sevens Report analysts said in a note. Click here to read the full article.

How Bad Can It Get? (And What Makes It Stop?)

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What’s in Today’s Report:

  • How Bad Could It Get and What Makes It Stop?
  • Weekly Market Preview:  Can the June lows hold?
  • Weekly Economic Cheat Sheet:  Does economic growth stay resilient?

Futures are modestly lower as global bond yields rose further while the British Pound remained extremely volatile.

The British Pound plunged to an all time low vs the dollar earlier this morning before rebounding and the extreme volatility is adding to investor worries.

Economically, the German Ifo Business Expectations Index fell to the lowest level since March 2020 (84.3 vs. (E) 87.1).

Today there are no notable economic reports but there are numerous Fed speakers, including Collins (10:00 a.m. ET), Bostic (12:00 p.m. ET), Logan (12:30 p.m. ET) and Mester (4:00 p.m. ET).  But, they shouldn’t move markets (we already know what the Fed intends to do).

Instead, the Pound and global bond yields (especially 10-year GILT yields) will determine trading today.  Markets need to see the Pound stabilize and 10-year GILT yields stop rising (they’re up nearly 60 bps in two days) to inject some macro-economic stability into the markets.  Don’t be shocked if the Bank of England announces a surprise rate hike today (or in the coming days) and if so, that should help global yields stabilize (which would be positive for sentiment and markets).

Tom Essaye Quoted in Barron’s on September 20th, 2022

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Stocks Tumbled as Market Continues to Fear the Fed Ahead of Wednesday Meeting

“Tomorrow’s FOMC decision will likely either further pressure stocks… or offer some relief to markets that the Fed isn’t going to raise rates as much as feared, and in doing so allow markets to bounce,” wrote Sevens Report’s Tom Essaye. Click here to read the full article.

Another Hawkish Surprise: What the Fed Decision Means for Markets

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What’s in Today’s Report:

  • Another Hawkish Surprise: What the Fed Decision Means for Markets

Futures are little changed as markets digested yet another hawkish Fed decision amidst more global rate hikes.

The overnight session was mostly quiet as investors digested the Fed rate hike while other global central banks raised rates (five separate central banks hiked rates overnight, as expected).

The Bank of Japan intervened in the currency markets for the first time since 1998, causing a 1% rally in the yen.

Today focus will be on the Bank of England Rate Decision (E: 50 bps hike) and on weekly Jobless Claims (E: 220K).  Fed Chair Powell again highlighted that the labor market is still much too tight, so markets need these jobless claims to start to rise towards 300k to prevent even further Fed tightening in the future.  The sooner the labor market returns to better balance, the sooner we get to “peak hawkishness.”

Fed Day Technical Take

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What’s in Today’s Report:

  • Pre-Fed Technical Take: a Make-or-Break Tipping Point for Equities

Stock futures are trading with cautious gains this morning as traders shrug off escalating tension between Russia and Ukraine while the BOJ initiated new stimulus overnight as focus turns to today’s Fed meeting.

Geopolitically, Russia is mobilizing 300,000 reservists to bolster military operations in Ukraine and indirectly threatened nuclear options in the latest escalation in the conflict which is driving gains in safe havens ahead of the Fed this morning.

Today, there is one economic report to watch in the morning: Existing Home Sales (E: 4.70M) but the primary market focus will clearly be on the Fed with the FOMC Announcement at 2:00 p.m. ET followed by Fed Chair Powell’s press conference at 2:30 p.m. ET.

Regarding the Fed, a 75 basis point hike and terminal Fed Funds rate near 4.25% is the consensus expectation so anything more hawkish than that will likely spark volatility and potentially even result in a test of the June lows in the S&P while anything more dovish than expectations has the potential to unleash a sizeable relief rally.

FOMC Preview

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What’s in Today’s Report:

  • FOMC Preview

Futures reversed from overnight gains and are now tracking EU markets lower following more very hot inflation data and an aggressive policy hike by the Riksbank.

In Europe, German PPI surged 7.9% vs. (E) 1.5% in August (45.8% vs. E: 37.2% y/y) while Sweden’s Riksbank raised rates by 100 bp vs. (E) 75 bp. Both developments are driving hawkish, risk-off money flows ahead of the Fed.

Today, focus will begin to shift to the Fed as the September FOMC Meeting begins however there is one report on the housing market that will get some attention when it is released mid-morning: Housing Starts (E: 1.440M) and Permits (E: 1.621M).

Beyond that one report, there is a 20-Yr Treasury Bond auction at 1:00 p.m. ET. The auction may not move markets today with the Fed looming but it will be worth watching because if it is weak like last week’s 3-Yr and 10-Yr auctions ahead of the CPI report, it could be forecasting a more hawkish than expected Fed decision Wednesday.

Tom Essaye Quoted in Market Watch on September 1st, 2022

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What does Friday’s jobs report mean for the market? ‘Too hot’ and stocks could tumble, says market pro.

The labor market needs to show signs that it’s on the path to returning to a state of relative balance, where job openings are roughly the same as the number of people looking for jobs — and if it does not show that, then concerns about a more hawkish-for-longer Fed will rise, and that’s not good for stocks, wrote Tom Essaye, a former Merrill Lynch trader and the founder of the Sevens Report newsletter. Click here to read the full article.

 

Sevens Report Analysts Quoted in ETF Trends on August 25th, 2022

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Gold ETFs Could Still Find a Place in a Diversified Portfolio

If the market responds to Powell in a dovish manner that should send inflation expectations even higher, while the dollar and yields should pull back, which would all result in tailwinds on gold. However, a hawkish and ‘growth-insensitive’ Powell would likely send gold back down towards $1,700, potentially by Friday’s close…analysts at Sevens Report Research said in a note. Click here to read the full article.