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Was Powell’s Speech That Bullish? No. Here’s Why.

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What’s in Today’s Report:

  • Was Powell’s Speech That Bullish?  No.  Here’s Why
  • Jobs Report Preview
  • EIA Update and Oil Market Analysis

Futures are slightly lower as markets digest yesterday’s post-Powell speech rally and focus on key economic data today (manufacturing PMI) and tomorrow (jobs report).

Global economic data underwhelmed overnight, as the Euro Zone manufacturing PMI missed estimates (47.1 vs. (E) 47.3) while the UK manufacturing PMI remained firmly in contraction territory (46.5 vs. (E) 46.2).

Looking forward to today, there are three important economic reports including (in order of importance):  ISM Manufacturing Index (E: 49.9), Core PCE Price Index (E: 0.3% m/m, 5.0% y/y), and Jobless Claims (E: 235K).  Markets will want to see 1) More evidence of easing price pressures in the ISM Manufacturing PMI and Core PCE Price Index and 2) Further labor market deterioration in jobless claims if the data is to help extend yesterday’s rally.

We also get three Fed speakers today, Logan (9:25 a.m. ET), Bowman (9:30 a.m. ET), and Barr (3:00 p.m. ET), but their commentary should be largely overshadowed by Powell’s less hawkish-than-feared remarks yesterday and I don’t expect them to move markets.

Powell Speech Cheat Sheet

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What’s in Today’s Report:

  • Three Topics to Watch During Powell’s Speech Today
  • More Signs of Disinflation
  • Chart – Has the Dollar Bottomed?

Stock futures are cautiously higher as traders look ahead to Powell’s speech today while international markets were mixed following some key economic data overnight.

The Eurozone HICP Flash (their CPI equivalent) fell to 10.0% in November from 10.7% in October (E: 10.6%), offering fresh evidence that inflation may have finally peaked in Europe while China’s Composite PMI was worse than expected. The soft data in China however was shrugged off thanks to continued optimism about easing Covid restrictions by the government.

Today is lining up to be a busy day with markets focusing on economic data early with the ADP Employment Report (E: 200K), GDP (E: 2.7%), International Trade in Goods (E: -$90.6B), JOLTS (E: 10.4M), and Pending Home Sales (E: -5.0%) all due out this morning.

Additionally, there are two Fed speakers through midday: Bowman (8:50 a.m. ET) and Cook (12:35 p.m. ET) before focus will turn to Powell’s speech in the early afternoon (1:30 p.m. ET) which will be the primary potential market catalyst today.

Current Fed Expectations

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What’s in Today’s Report:

  • Current Fed Expectations (Print This Table/Section)
  • VIX Chart – Getting Closer to a Bearish Signal

Stock futures are rebounding modestly this morning following yesterday’s sharp drop as worries surrounding China’s Covid policies and the subsequent protests ease.

The Hang Seng jumped over 5% and the offshore yuan rallied 1% after the Chinese government announced a renewed push to vaccinate elderly citizens and said excessive restrictions will be avoided, both of which are incremental steps away from “Covid Zero.”

Today, market focus will be on housing data early with the Case-Shiller Home Price Index (E: -1.3%) and FHFA House Price Index (E: -1.2) due out ahead of the bell and then the Consumer Confidence (E: 100.0) report will print shortly after the open.

There are no Fed officials scheduled to speak today so focus will likely remain on the situation in China, and if sentiment towards Covid policy expectations and the latest wide-spread protests improves then stocks will be able to stabilize as that was a major bearish influence on the market yesterday.

Tom Essaye Quoted in Forbes on November 17th, 2022

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Major Retailers Are Bracing For A Disappointing Holiday Season Due To Inflation

“There’s frankly little doubt that consumers are already 1) Reining in spending and 2) Becoming more value conscious,” Sevens Report analyst Tom Essaye wrote in a Thursday note. Click here to read the full article.

Tom Essaye Quoted in Market Watch on November 25th, 2022

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U.S. bond market holds steady in shortened post-Thanksgiving session

“Looking at the curve, the 10s-2s yield curve spread remained near a multidecade low of nearly minus-80 basis points. That deep of an inversion suggests that the Fed’s current policy and expected path of future policy are far too restrictive for the state of the economy and growth expectations, which will almost certainly end in a recession — and potentially a severe one given the scope of the current inversions across the Treasury yield curve,” said Tom Essaye, editor of Sevens Report Research, in a note. Click here to read the full article. 

Economic Breaker Panel: November Update

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What’s in Today’s Report:

  • Economic Breaker Panel – November Update

Stock futures are little changed in quiet holiday trading this morning as traders look ahead to the slew of economic data due out in the U.S. today as well as the release of the November Fed meeting minutes.

Economically, the Eurozone Composite PMI Flash came in at 47.8 vs. (E) 47.0 signaling economic contraction in the EU but the better-than-feared headline is helping European shares edge higher today.

This morning is lining up to be a busy one for economic data with Durable Goods Orders (E: 0.3%), Jobless Claims (E: 225K), PMI Composite Flash (E: 48.7), New Home Sales (E: 574K), and Consumer Sentiment (E: 55.0) all due to be released between 8:30 a.m. and 10:00 a.m. ET.

Additionally, the November Fed Meeting Minutes will be released at 2:00 p.m. ET.

Bottom line, with all the recent Fed speak, the Minutes are unlikely to offer any surprises today however data can move markets despite thinning attendance and light volumes. The market wants to see slowing but not collapsing growth measures and a downward acceleration in inflation (today’s inflation expectations within the Consumer Sentiment release will be the key figure to watch). If that materializes, the S&P might be able to break through key near-term technical resistance at 4,007 however high inflation and weaker-than-anticipated growth could send stocks tumbling back toward the lows of the week at 3,900.

All of us at Sevens Report Research are very thankful for your support! Everyone please travel safely, and have a Happy Thanksgiving. We will speak to you again Friday morning.

Three Keys to a Bottom Updated

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What’s in Today’s Report:

  • Three Keys to a Bottom Updated – Some Progress
  • Economic Data Recap – Soft Landing Hopes Fade
  • Weekly Economic Cheat Sheet – Focus on PMI Data (Wednesday)

Stock futures are trading lower with global markets following negative Covid headlines out of China.

China reported a spike in Covid cases this weekend including the first Covid-related death in nearly six months which prompted new restrictions and lockdowns in cities that were previously in the process of reopening. That has triggered risk-off money flows this morning with equities declining globally and the dollar rising nearly 1% in early trade.

Economically, the German PPI for October was actually favorable as it fell a steep -4.2% vs. (E) +0.9%. However, in year-over-year terms, PPI remains up more than 30% which is a major headwind for the German economy.

Looking into today’s session, there are no economic reports and just one Fed speaker: Daly (1:00 p.m. ET) which will likely leave the focus on China and any new Covid-related headlines.

In the fixed income space, the Treasury will hold a 2-Yr Note auction at 11:30 a.m. ET and a 5-Yr Note auction at 1:00 p.m. ET. And if demand is soft and rates begin to move to meaningful new highs, expect selling pressure on the equity market to pick up moderately.

Was Bullard That Hawkish? (No)

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What’s in Today’s Report:

  • Was Bullard That Hawkish?  (No).

Futures are moderately higher following more geo-political progress amidst an otherwise quiet night.

Russian officials signaled they are open to high-level talks with the U.S. on strategic stability, which is being taken as another (small) step towards an ultimate cease-fire.

Economically, the only notable number was UK Retail Sales and they were better than expected, rising 0.6% vs. (E) 0.2%.

Today the calendar is sparse with just Existing Home Sales (E: 4.360M) and one Fed speaker, Collins (8:40 a.m. ET) but if she doesn’t provide any hawkish surprises, this early rally can continue as stocks recoup yesterday’s Bullard inspired losses.

Are Corporate Earnings Rolling Over?

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What’s in Today’s Report:

  • Are Corporate Earnings Rolling Over?
  • Another (Small) Sign of Dis-Inflation
  • EIA Update and Oil Market Analysis

Futures are modestly lower as investors digest Wednesday’s earnings disappointments.

CSCO and NVDA reported after the close and both results were better than feared, but that’s not enough to offset growing concerns about future corporate earnings.

On inflation, October EU HICP slightly missed estimates  (10.6% vs. (E) 10.7%) although the monthly reading was in-line at 1.5%, signaling that inflation pressures in the EU aren’t declining.

Today’s focus will again be on inflation so the price indices in the Philly Fed Manufacturing Index (E: -7.0) will be the key reports and any declines in those price indices should prompt at least a small rally.  Outside of Philly Fed, we also get Housing Starts (E: 1.41M) and Jobless Claims (E: 222k), but neither should move markets.

There are also multiple Fed speakers today including Bostic (7:30 a.m. ET), Bowman (9:15 a.m. ET), Mester (9:40 a.m. ET), and Kashkari (10:40 a.m. ET & 1:45 p.m. ET), and we should expect their message to be consistent with recent Fed speak:  The size of rate hikes will shrink, but the Fed still has a long way to go to reach the “Terminal Rate.”

Tom Essayed Interviewed on BNN Bloomberg on November 14th, 2022

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We Could Be Approaching The Death Of The FAANG’s: Tom Essaye

Tom Essaye, founder and president of Sevens Report Research, joins BNN Bloomberg to recap earnings from big tech this week. Click here to watch the full interview.