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Gold’s Outlook Following The Federal Reserve’s Decision

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Gold’s Outlook: Sevens Report Analysts Quoted in MarketWatch

Gold gains for a 4th straight session to settle at a more than 2-week high

Gold futures posted a modest gain on Tuesday to mark another settlement at their highest in over two weeks, a day ahead of the Federal Reserve’s decision on interest rates.

“A hawkish decision would be decidedly bearish for gold…while a dovish surprise would support a run beyond $2,000” for gold, said analysts at Sevens Report Research, in Tuesday’s newsletter.

December gold climbed by 30 cents, or less than 0.1%, to settle at $1,953.70 an ounce on Comex.

Also, click here to view the full MarketWatch article published on September 19th, 2023. However, to see the Sevens Report’s full comments on economic data & inflation sign up here.

Gold's Outlook

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What the Hawkish Fed Decision Means for Markets

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Hawkish Fed Decision: Strengthen your market knowledge with a free trial of The Sevens Report.

What’s in Today’s Report:

  • What the Hawkish Fed Decision Means for Markets
  • Key Levels to Watch:  Post-Fed Takeaways
  • EIA Analysis and Oil Market Update

Futures are moderately lower on momentum from Wednesday’s late sell-off. As the Fed’s hawkish statement and projections weighed on global markets overnight.

The Norges Bank (Central Bank of Norway) hiked rates by 25 bps and signaled another hike in December. This wasn’t expected and added to hawkish central bank anxiety.

Economically there were no notable reports overnight.

Today will be another busy day and the first important event is the Bank of England Rate Decision (E: 25 bps hike).  If the BOE hikes 25 bps and strongly signals another hike is coming, that will be incrementally hawkish and likely add to global selling pressure.

Looking at economic data, there are two important reports today: Jobless Claims (E: 225K) and Philly Fed (E: 0.5).  Especially after yesterday’s declines, markets will want to see stable data, because if data is “Too Hot” it’ll push Treasury yields higher and weigh on stocks and if data is suddenly very bad it’ll increase stagflation concerns.  We also get Existing Home Sales (E: 4.10M) but that number shouldn’t move markets.

 

Hawkish Fed

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FOMC Preview: How Long Will Rates Stay High?

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FOMC Preview: Strengthen your market knowledge with a free trial of The Sevens Report.

What’s in Today’s Report:

  • FOMC Preview – How Long Will Rates Stay High?
  • VIX Chart – Is Volatility About to Surge

S&P futures are modestly higher this morning after a favorable dip in EU inflation statistics and upward revisions to global growth forecasts while oil continues to climb towards $100/barrel.

The Eurozone’s Narrow Core HICP (their CPI equivalent) met estimates at 5.3% in August, down from 5.5% in July. The OECD raised their global growth forecast from 2.7% to 3.0%, primarily thanks to strength in the U.S. and Japan while growth estimates for Europe and China were reduced. However, the net increase in the global growth outlook was received as a mild positive this morning.

Looking into the U.S. session, there is just one economic report: Housing Starts and Permits (E: 1.435M, 1.440M). As long as there are no big surprises in the release, markets should fall into a holding pattern as the September FOMC meeting begins in Washington.

However, there is a 20-Yr Treasury Bond auction at 1:00 p.m. ET, and if the outcome moves rates materially, stocks could react amid last-minute positioning ahead of tomorrow’s Fed decision.

Fed Preview

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Tom Essaye Quoted in Barron’s on August 30th, 2023

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U.S. Stock Futures Waver After Rally With More Jobs Data in Focus

“There are no Fed speakers today, so investors will be looking for more evidence that supports a continued pause in the Fed’s rate hiking cycle (or peak rates already being in) and ultimately a soft landing,” said Tom Essaye, founder of Sevens Report Research. “Anything that contradicts that narrative will be a headwind on equities and other risk assets today.”

Click here to read the full article.

Economic Breaker Panel: August Update

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What’s in Today’s Report:

  • Sevens Report Economic Breaker Panel – August Update
  • A Surprising Warning from Macy’s
  • NVDA Earnings Could Trigger a Huge Move In the Stock: Chart

Stock futures are solidly higher this morning ahead of the widely anticipated release of NVDA earnings after the close today while Treasuries yields are retreating on the back of weak economic data overseas.

The Eurozone PMI Composite Flash indicated the economy fell deeper into contraction territory this month (47.0 vs. E: 48.4) led by an unexpected drop off in service sector activity which is weighing on bond yields this morning and easing some concerns about continued aggressive policy by central banks.

This morning, focus will be on economic data with the U.S. PMI Flash data due out just after the open at 9:45 a.m. ET. The Manufacturing Flash is expected to come in at 48.8 while the Services Flash is expected to hold expansion territory at 52.0).

The market is looking for stabilization in the manufacturing sector and moderation, but not contraction, in the service sector. Material weakness in either headline will rekindle worries about a hard-landing while data that is much better than expected would raise Fed rate hike expectations. So, a “Goldilocks” release will be important for both stock and bond markets to stabilize today.

New Home Sales (E: 702K) will also be released at 10:00 a.m. ET but should have a limited impact on markets.

From there, focus will turn to earnings with NVDA reporting after the close (Earnings Estimate: $2.18, Revenue Estimate: $11.09B). Investors have very high hopes for NVDA’s quarterly performance as well as their forward guidance, so any meaningful disappointment is likely to weigh heavily on the stock, the tech complex, and the markets more broadly in after hours trade.

It’s Not How High Rates Go Anymore, It’s How Long They Stay There

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What’s in Today’s Report:

  • It’s Not How High That Matters Anymore, It’s How Long
  • Retail Sales & Empire State Manufacturing Survey Takeaways (Very Mixed Reports)
  • Chart – S&P 500 Violates 50 Day Moving Average for the First Time Since March

Stock futures are little changed this morning as new stimulus efforts by China help offset more negative global economic data and a hawkish leaning RBNZ meeting decision.

Chinese Home Prices fell -0.1% vs. (E) 0.0% prompting a cash injection and stronger currency fix by the PBOC which helped stabilize global risk assets overnight given the recent turmoil in the world’s second largest economy.

In Europe, U.K. Core CPI held steady at 6.9% vs. (E) 6.8% in July solidifying peak rate expectations of 6.0%, however bond yields are retreating modestly from the week’s highs which is helping stocks continue to stabilize today.

Looking into today’s session, we will get two economic reports this morning: Housing Starts (E: 1.455 million), Industrial Production (E: 0.3%) before focus will turn to the release of the July FOMC meeting minutes at 2:00 p.m. ET.

Bottom line, the market wants to see more “Goldilocks” data consistent with a soft economic landing and no evidence in the Fed minutes that suggests a more hawkish policy path than is currently expected (rate cuts beginning H1’24). Otherwise, volatility is likely to remain elevated with equities under pressure.

Could the Yield Curve Be Wrong This Time?

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What’s in Today’s Report:

  • Could the Yield Curve Be Wrong This Time?
  • Chart: 10s-2s Yield Curve Spread Near Multi-Decade Lows

Futures are lower this morning as economic data confirmed weakness in the global manufacturing sector while the RBA unexpectedly paused their rate hiking cycle at the conclusion of their latest meeting overnight.

Economically, China’s Manufacturing PMI fell to a contractionary reading of 49.2 vs. (E) 50.1 while the Eurozone PMI met estimates at a very weak reading of 42.7, underscoring the challenges facing the global manufacturing sector.

Looking into today’s session, there are several economic reports to watch: ISM Manufacturing Index (E: 46.5), Construction Spending (E: 0.6%), and JOLTS (E: 9.650 million). Investors will be looking for better than feared manufacturing data in the U.S. and signs that the domestic labor market is softening but not collapsing.

Earnings season also continues with multiple notable companies reporting quarterly results today including: UBER ($0.00), PFE ($0.57), CAT ($4.51), and JBLU ($0.40) before the open and AMD ($0.57), SBUX ($0.95), and AIG ($1.54) after the close.

FOMC Preview

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What’s in Today’s Report:

  • FOMC Preview
  • Composite Flash PMI Takeaways – Service Sector Growth Falters
  • 10-Yr Note Yield Maintains Long-Term Uptrend (For Now) – Chart

Futures are little changed as mostly upbeat earnings in Europe were offset by a weaker than expected ECB Survey while focus turns to big cap tech earnings and this week’s central bank meetings.

The ECB’s latest Lending Survey revealed that corporate loan demand collapsed to the lowest on record in Q2 underscoring tighter credit conditions and the threat of a further slowdown in growth in the Eurozone.

Today, focus will be on economic data early with the Case-Shiller Home Price Index (E: 0.8%) and Consumer Confidence (E: 111.8) reports both due to be released while the July FOMC meeting gets underway.

There is a 5-Yr Treasury Note auction at 1:00 p.m. ET which could move yields and have an impact on stocks, but a material move in markets ahead of the Fed decision remains unlikely unless it is driven by earnings.

Speaking of which, today will be a busy one for corporate earnings as: VZ ($1.17), GM ($1.65), GE ($0.46), MMM ($1.65) are all scheduled to release results before the bell while tech giants MSFT ($2.54) and GOOGL ($1.32) report after the bell. Additionally, V ($2.11) will release results after the close.

Jobs Report Preview (Will It Reinforce the No Landing Expectation?)

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What’s in Today’s Report:

  • Jobs Report Preview (Will It Reinforce the No Landing Expectation?)
  • FOMC Minutes:  Why They Reinforced the Fed’s Hawkish Tone

Futures are moderately lower on falling expectations for Chinese economic stimulus.

A Nikkei article stated Chinese economic stimulus could be much smaller than expected, and that hit the Hang Seng hard (down 3%) and is weighing on global indices.

Economically, German Manufacturers’ Orders were much stronger than expected, rising 6.4% vs. (E) 2.0%.

Today focus will be on economic data and the key reports, in order of importance, are:  JOLTS (E: 9.9M), Jobless Claims (E: 245K), ISM Services Index (E: 50.8) and ADP Employment Report (E: 235K).  Hopes for a “No Landing” are the reason stocks rallied in late June, so markets will want to see better than expected data across these reports to help support those recent gains.  Also, there is one Fed speaker today, Logan (8:45 a.m. ET), but she shouldn’t move markets.

Why Economic Data Will Decide if the Rally Continues in 2H ’23

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What’s in Today’s Report:

  • Why Economic Data Will Decide if the Rally Continues in 2H ‘23
  • Weekly Market Preview:  Does Economic Data This Week Reinforce “No Landing” Expectations?
  • Weekly Economic Cheat Sheet:  Jobs Report Friday, ISM PMIs Monday and Thursday.

Futures are flat to start the second half of 2023 following a quiet weekend of news.

Economic data was mixed overnight as the EU Manufacturing PMI slightly missed estimates (43.4 vs. (E) 43.6) while the UK reading slightly beat expectations (46.5 vs. (E) 46.2), but neither number is moving markets.

Saudi Arabia and Russia made separate announcements about further reducing oil supply in the coming months, although they aren’t causing a material rally.

Today focus will be on the ISM Manufacturing PMI (E: 47.2) and at this point, and with yields this high, markets need to see solid data and that means the ISM Manufacturing PMI moving closer towards 50 and beating expectations.

As a reminder, the stock market will close at 1:00 p.m. today ahead of the July 4th holiday.

 

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