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What to Make of Yesterday’s Drop & Jobs Report Preview

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What’s in Today’s Report:

  • What to Make of Yesterday’s Drop
  • Jobs Report Preview
  • Natural Gas Update

Futures are slightly lower as markets digest the whiplash of the past two trading days following a mostly quiet night.

German economic data again badly missed estimates as German Industrial Production fell –3.9% vs. (E) -1.0% and fears of outright stagflation in the EU are rising quickly.

Today focus will be on the Jobs Report and estimates are as follows:  Job Adds: 400K, UE Rate: 3.6%, Wages: 0.4% m/m, 5.5% y/y.  This market needs a “Goldilocks” report that’s subdued on wages and with job adds modestly below the estimate of 400k.  If markets get that Goldilocks jobs report it should help stocks stabilize.  If the report ends up “Too Hot” though, especially on wages, brace for more selling.

There are also numerous Fed speakers today including: Williams (9:15 a.m. ET), Kashkari (11:00 a.m. ET), Bostic (3:20 p.m. ET), Waller and Bullard (7:15 p.m. ET) and Daly (8:00 p.m. ET).  Don’t be surprised if they all sound more hawkish than Powell did on Wednesday.  Remember, it appears the Fed’s tactic is to “Talk Tough” on looming rate hikes and inflation, yet be more measured on actual rate hikes than rhetoric would suggest.  Regardless, if there’s a consistent chorus of hawkish commentary, that will likely weigh on stocks, at least partially.

Is the Fed’s Bark Worse than Its Bite?

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What’s in Today’s Report:

  • What the FOMC Decision Means for Markets (Is the Fed’s Bark Worse than Its Bite?)
  • EIA Analysis and Oil Outlook Update

Futures are moderately lower as markets digest Wednesday’s big post-Fed rally following a night of underwhelming economic data.

The April Chinese services PMI plunged to 36.2 vs. (E) 41.1, reflecting the economic damage from lockdowns.  In Europe, data was mixed as German Manufacturers’ Orders missed estimates while UK Services PMI beat expectations.

There are multiple Fed speakers today on financial media outlets (there are no official speeches scheduled) and don’t be surprised if they sound hawkish and push back on the post FOMC rally yesterday (this is especially true for Bullard, whose doing interviews today).

Today’s focus will be on the aforementioned Fed speakers, and again don’t be shocked if they sound “hawkish” and that causes some giveback from yesterday’s rally (but a hawkish tone won’t undo the positives from Powell’s press conference, either).

Economically, there is a BOE Rate decision and they are expected to hike 25 bps.  Domestically, the key report today is Unit Labor Costs (E: 6.8%) as that will give us a good look at total wage inflation (and if it’s higher than estimates that will be a negative).  We also get Jobless Claims (E: 178K) but that shouldn’t move markets.

Economic Breaker Panel: May Update

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What’s in Today’s Report:

  • Economic Breaker Panel – May Update
  • Chart: Copper Breakdown

Stock futures are trading cautiously higher this morning ahead of the Fed while oil prices are spiking after the EU announced plans for a full Russian oil embargo that will be phased in over the next 6 months.

Economic data was mostly in-line with estimates overnight with Composite PMI reports notably holding up better than the recently released manufacturing PMIs which is a modest tailwind for risk assets this morning.

Looking into today’s session, focus will be on economic data early with the ADP Employment Report (E: 398K) due out ahead of the open while the ISM Services Index (E: 58.9) will be released shortly after the bell. The market will want to see firm data that helps contradict the idea that the Fed is beginning to accelerate the pace of rate hikes into an economic slowdown.

From there, price action should begin to slow as the Fed comes into focus with the FOMC Announcement (2:00 p.m. ET) and Fed Chair Press Conference (2:30 p.m. ET) in the afternoon. A more hawkish than expected Fed could send stocks back down to test Monday’s lows while a not-as-hawkish-as-feared announcement/press conference would open the door to a relief rally back towards 4,300.

On the earnings front, there are a few notables today including: MRNA ($5.18), CVS ($2.14), MAR ($0.94), YUM ($1.07), UBER (-$0.28), and EBAY ($1.03).

Fed Meeting Preview

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What’s in Today’s Report:

  • FOMC Preview
  • Q&A: Technical Resistance and Downside Targets for the S&P
  • ISM Manufacturing Index Takeaways

Stock futures are little changed as yesterday’s late-session rally is being digested following more hot inflation data and a slightly hawkish RBA hike (25 bp vs. E: 15 bp) overnight.

Economic data on growth was better than feared overnight but Eurozone PPI was hotter than expected with a staggering annual rise of 36.8% vs. (E) 36.2% in March.

Looking into today’s session, there are a few economic reports to watch including March JOLTS (E: 11.27M) and Factory Orders (E: 1.1%), however, with the May FOMC Meeting beginning this morning, a sense of Fed paralysis is likely to begin to grip markets ahead of tomorrow’s announcement.

Finally, earnings season does continue with a few notables reporting today: PFE ($1.66), BP ($1.41), HLT ($0.59), AMD ($0.90), and SBUX ($0.60) which could have an impact on sector trading but is not likely to move the broader markets given the focus-shift to the Fed.

Is the Outlook Really This Bad?

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What’s in Today’s Report:

  • Is the Outlook Really This Bad?
  • Weekly Market Preview:  FOMC Decision Wednesday (Will It Be More Hawkish Than Feared?)
  • Weekly Economic Cheat Sheet:  A Busy and Important Week (ISM Manufacturing PMI today, FOMC Decision Wednesday, Jobs Report Friday)

Futures are enjoying a modest oversold bounce following Friday’s selloff, but there was no improvement over the weekend on the three headwinds pressuring stocks:  Chinese growth worries, Ukraine war and hawkish Fed.

Economic data was mixed as the April Chinese manufacturing PMI dropped further (to 47.4 from 49.5) while the EU PMI slightly beat estimates (55.5 vs. (E) 55.3) and German Retail Sales underwhelmed (-0.1% vs. (E) 0.3%).

Today focus will be on the ISM Manufacturing PMI (E: 58.0) and markets need to see a solid number to push back on stagflation concerns.  If we get a weak number, expect the selling to resume and stagflation fears to grow.

Earnings season will begin to wind down this week but there are still some important results coming and some we’re watching today include:  NXPI ($3,17), CAR ($3.54) and MGM ($-0.09).

General Technical Take for Equities

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What’s in Today’s Report:

  • What the FOMC Minute Mean for Markets (Hawkish)
  • General Technical Take for Equities
  • EIA Analysis and Oil Market Update

Futures are bouncing slightly following a quiet night as markets digest the declines of the past two days.

Economic data was mixed overnight as German Industrial Production missed estimates while Euro Zone Retail Sales beat expectations, but neither number is moving markets.

Geopolitically there was no new news on Russia/Ukraine as the conflict continues with little signs of any progress towards a cease fire.

Today we get one notable economic report, Jobless Claims (E: 202K) but three Fed speakers:  Bullard (9:00 a.m. ET), Evans (2:00 p.m. ET) and Williams (4:05 p.m.).  We expect each of them to further hammer the point that rates are rising by 50 bps in May, with balance sheet reduction beginning in the same month.  But, as long as they don’t say anything “hawkishly new” then stocks should be able to look past the commentary.

FOMC Preview

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What’s in Today’s Report:

  • FOMC Preview

Stock futures are modestly lower this morning as investors continue to monitor the war in Ukraine and rising tensions between the U.S. and China surrounding the conflict.

Geopolitically, a new round of talks is scheduled between Russia and Ukraine today while the U.S. has warned China over providing Russia with military support.

Economically, several Chinese data points handily beat estimates overnight but the data was overshadowed by a sharp rise in Covid-19 cases in various regions of the country while European data came in below estimates this morning. With geopolitics still dominating news wires and the Fed meeting coming into focus, however, none of the data materially moved markets overnight.

Today, there are two economic reports to watch ahead of the bell: PPI (E: 1.0%, 10%) and Empire State Manufacturing Index (E: 8.0), and with the March FOMC meeting getting underway, the inflation data will be closely watched and could cause a dovish/hawkish reaction across asset classes ahead of tomorrow’s announcement.

Bottom line, Ukraine headlines will still move markets today and any progress towards a ceasefire will be well-received however expect a sense of Fed paralysis to increasingly grip the markets as the day goes on and traders position into the first rate hike in years.

Why We Could See a Short Term Rally (But We Wouldn’t Chase It)

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What’s in Today’s Report:

  • Why We Could See a Short-Term Rally
  • What the FOMC Minutes Meant for Markets (Not as Hawkish as Feared, But Not Dovish, Either)
  • EIA and Oil Market Update

Futures are modestly weaker as negative headlines on Russia/Ukraine weighed on sentiment.

Russia accused Ukraine of attacking Russian-back separatists in the Dontesk region of Ukraine, and analysts fear this could be the pretext for a larger military conflict if Russia moves to annex Dontesk, (this would be a replay of what happened with Crimea in 2014).

Russia/Ukraine headlines are driving short term trading and that will remain the case today, with any headlines implying diplomacy causing a rally, and any headlines implying conflict causing a sell off.

Beyond geopolitics, however, we get several pieces of economic data, including Jobless Claims (E: 224K), Housing Starts (E: 1.708M) and the Philadelphia Fed Manufacturing Index (E: 19.7) and as has been the case the market will be looking for stability in the data.

Finally, we also get two Fed speakers, Bullard (again) at 11:00 a.m. ET and Mester at 5:00 p.m. ET.

FOMC Minutes Preview

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What’s in Today’s Report:

  • FOMC Minutes Preview
  • PPI Remains Hot (Chart)
  • Empire State Manufacturing Index Takeaways

Stock futures are slightly lower while most global markets rallied overnight as traders continue to monitor the situation in Ukraine and look ahead to the Fed minutes release.

Geopolitically, there were no major developments regarding Ukraine o/n but U.S. officials continue to warn that an invasion is possible at anytime, leaving markets on edge.

Economically, Chinese inflation data came in below estimates while U.K. PPI ran hot but neither release materially moved markets overnight.

Today is lining up to be a fairly busy day from a catalyst standpoint as there are several notable economic reports due out including: Retail Sales (E: 2.0%), Import & Export Prices (E: 1.3%, 0.7%), Industrial Production (E: 0.4%), and Housing Market Index (E: 83).

From there, focus will shift to a 20-Yr Treasury Bond auction at 1:00 p.m. ET and then likely the most important catalyst of the day, the FOMC Minutes will be released at 2:00 p.m. ET.

The market has been very indecisive in recent sessions and that is likely to continue today, however, if the geopolitical backdrop remains largely calm, economic data is favorable, and the FOMC minutes are not interpreted as overly hawkish, we may finally see the market break back to test the February highs.

Why Not Much Changed in Markets Last Week (Despite the Declines)

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What’s in Today’s Report:

  • Bottom Line:  Why Not Much Changed In The Markets Last Week (Despite the Declines)
  • Weekly Economic Cheat Sheet:  FOMC Minutes (Wed) is the Key Report this Week.
  • Weekly Market Preview:  Will Investors Get Ukraine and Fed Clarity?

Futures are moderately lower following a quiet weekend of actual news, as futures are being pulled lower by international markets as there was no progress on the Russia/Ukraine standoff.

The Russia/Ukraine situation was unchanged over the weekend and a Russian invasion could occur at any moment and that is acting as a short term headwind on markets.

There was no notable economic or inflation data overnight.

Today Ukraine headlines will drive trading and any headlines that imply the start of a conflict will be a headwind, while any that imply a delay in hostilities will be a tailwind.  We also get one Fed speaker, Bullard (8:30 a.m. ET on CNBC) and he obviously moved markets last week with this 50 bps March hike and 100 bps of tightening by June calls, so we’ll be watching closely to see if he further clarifies or doubles down on those comments (any dovish clarification would provide a small tailwind for stocks).