Sevens Report analyst Tom Essaye warned in a Tuesday note that the most recent market gains could be little more than a “head fake rally,” explaining that the Federal Reserve’s actions to protect depositors at Silicon Valley Bank and Signature Bank could actually cause inflation to linger even longer. Click here to read the full article.
What’s in Today’s Report:
Stock futures are cautiously higher and yields are bouncing globally following better than expected economic data overnight and more stable price action in U.S. bank shares while traders continue to unwind hawkish Fed policy bets ahead of today’s CPI report.
Economically, the U.K’s ILO Unemployment Rate came in at 3.7% vs. (E) 3.8% which is pressuring Gilts (down 11 bp) and lifting yields across Europe and the U.S. while the NFIB Small Business Optimism Index rose to 90.9 vs. (E) 89.9.
Looking into today’s session, focus will be on the February Consumer Price Index release before the bell with the headline expected to rise 0.4% m/m (6.0% y/y) while the all-important Core CPI figure is also expected to rise 0.4% m/m (5.5% y/y).
There are no Fed speakers today so if the inflation data comes in hot, expect a rebound in yields that would likely pressure equities as traders reassess the less-hawkish policy expectations that have been priced into rates markets since the SVB debacle began.
Additionally, bank shares (KBE) will remain in focus and if contagion fears persist and financial stocks remain under pressure, it will be hard for the broader equity market to meaningfully stabilize, much less recover some of the recent losses.
“Don’t confuse the market’s ability to withstand last year’s headwind with an invincibility towards what could be this year’s headwind” of slumping economic growth, Sevens Report analyst Tom Essaye wrote in a Monday note. Click here to read the full article.
What’s in Today’s Report:
Stock futures are stable as yesterday’s Powell-driven losses continue to be digested while the yield curve is hitting new cycle lows with the 2-Yr Note holding above 5% for the first time since 2007 while the 10-Yr hovers just below 4%.
Economic focus was on German data o/n as Industrial Production topped estimates while the previous Retail Sales print was revised notably higher, bolstering Bund yields.
Looking into today’s session, focus will be on labor market data early, especially considering Powell’s “data dependent” policy comments from yesterday’s testimony.
The ADP Employment Report (E: 175K) will hit the wires before the bell and then JOLTS (E: 10.6 million) will be released after the open. Investors want to see some deterioration in the jobs market but not an all-out collapse while any indication of declining wages would be well received. International Trade in Goods and Services (E: -$69.0B) will also be released this morning but is less likely to move markets.
From there, Powell’s two-day testimony continues before the House Banking Committee today at 10:00 a.m. ET and investors will continue to listen intently for further clues about policy plans and terminal rate expectations.
Finally, there is a 10-Year Treasury Note auction at 1:00 p.m. ET that could move yields and ultimately impact the bond market, specifically if the auction tails and rates move meaningfully higher.
What’s in Today’s Report:
U.S. equity futures are trading with tentative gains amid a stable bond market following good data out of Europe as focus shifts to Powell’s Congressional testimony today.
The ECB’s latest consumer survey showed a notable drop from 3.0% to 2.5% in three year inflation expectations which is helping bonds stabilize while German Manufacturers Orders came in at 1.0% vs. (E) -0.6%, underscoring a resilient Eurozone economy.
This morning, focus will be exclusively on Powell testimony before the Senate which begins at 10:00 a.m. ET as investors will be looking for any new insight on the pace of future rate hikes (25 or 50 basis point hike this month?) and/or the expected terminal rate (currently priced in near 5.375%). If Powell strikes a hawkish tone, expect volatility in stocks amid a potentially sharp rise in yields.
Looking into the afternoon, there is a 3-Yr Treasury Note auction at 1:00 p.m. ET which should offer some clues to how the bond market digests Powell’s first day of Congressional testimony (a badly tailing auction could further weigh on stocks), while there is one economic report due out late in the day: Consumer Credit (E: $26.4B), but unless the number comes in well above estimates, it should not move markets.
“Optimism surrounding China’s economic recovery are offsetting more hot inflation data in Europe and the U.S.,” which sparked further hawkish money flows early Thursday, said Tyler Richey, co-editor at Sevens Report Research. The Chinese government is “simultaneously raising their growth outlook for 2023, and considerably so,” he told MarketWatch. That’s “being seen as a balancing factor for any economic slowdown the West.” Click here to read the full article.
What’s in Today’s Report:
Futures are modestly higher as a soft EU inflation reading is helping to extend Thursday’s rally.
Euro Zone PPI came in much lower than expectations (15% vs. (E) 17.7% y/y) and that’s helping to slightly offset the hot inflation data from earlier in the week.
Economically, Euro Zone and UK Composite PMIs were generally in-line with expectations.
Today the key report will be the ISM Services PMI (E: 54.5). For stocks and bonds, the best case for this report is that the headline is stable (not much above expectations) while the price indices decline. If that happens, stocks can extend the rally.
We also get several Fed speakers today including Logan (11:00 a.m. ET), Bostic (11:45 a.m. ET), Bowman (3:00 p.m. ET) and Barkin (4:15 p.m. ET). If they echo Bostic’s comments from yesterday about the Fed being done with hikes by mid to late summer, that will be a tailwind on stocks.
What’s in Today’s Report:
Futures are extending Wednesday’s declines and are moderately lower as more global inflation data came in hotter than expected.
Euro Zone HICP rose 8.5% vs. (E) 8.2% y/y and joined French, Spanish and German CPIs as signaling a bounce back in inflation. That’s pushing global yields higher and weighing on futures (just like it weighed on stocks on Wednesday).
Today focus will remain on economic data and the key report is Unit Labor Costs (E: 1.4%). Wages are a major source of inflation the Fed is trying to bring down, so if Unit Labor Costs are lower than expected, that will likely cause a bounce in stocks and bonds. Other notable events today include Jobless Claims (E: 200K) and two Fed speakers, Waller (4:00 p.m. ET) and Kashkari (6:00 p.m. ET), although they shouldn’t move markets.
What’s in Today’s Report:
U.S. stock futures are tracking global shares higher this morning as investors cheer better than expected economic data out of China.
Economically, China’s Manufacturing PMI jumped to 51.6 vs. (E) 49.9 in February, up from 49.2 in January, indicating the recovery process is gaining momentum. The Eurozone Manufacturing PMI, meanwhile, met estimates at 48.5.
Today, investor focus will be on economic data early beginning in Europe with the German CPI release at 8:00 a.m. ET (E: 8.7%). So far this week, European yields have led global yields higher on hot inflation data and if the German print is above estimates, expect that trend to continue and stocks to remain under pressure.
In the U.S. we will get the February ISM Manufacturing Index (E: 48.0) as well as the lesser followed Construction Spending report (E: 0.2%). Investors will want to see improving, but not overly strong growth metrics and fading price pressures to see some of the recent hawkish money flows ease.
Finally, there is one Fed speaker today: Kashkari (E: 9:00 a.m. ET), and as a voting member of the FOMC, his comments will be closely watched for any new hints at the Fed’s policy plans.
What’s in Today’s Report:
Stocks futures are trading with modest gains this morning while Treasury yields are tracking European bond yields higher following stubbornly high inflation data overnight.
Economically, both Spanish and French CPI headlines were hotter than expected, above 6%, which saw European rates markets price in a 4% terminal ECB rate for the first time. Government bond yields across the Eurozone notably rose to multi-year highs.
Looking into today’s session, there are several economic reports to watch including: International Trade (E: -$91.0B), Case-Shiller Home Price Index (-0.5%), FHFA House Price Index (E: -0.3%), and Consumer Confidence (E: 108.5).
Traders will be looking for less signs of stagflation in the data as elevated inflation figures and weakening growth metrics were a headwind for equities last week.
Finally, the Chicago Fed’s Goolsbee (who just succeeded Evans) has his first speaking engagement since taking over the role at 2:30 p.m. ET, and as a voting member of the FOMC, his comments will be closely watched for any new clues about Fed policy plans in the months ahead. A notably hawkish tone, could easily cause another bout of volatility in risk assets this afternoon.