Inflation fears will remain a headwind for stocks until it becomes clear that price pressures are temporary. “Until then, expect a more volatile market, but at this point, strong policy support for…” Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter. Click here for the full article.
What’s in Today’s Report:
Futures are moderately higher as markets ignore more Bitcoin volatility following a generally quiet weekend.
Bitcoin volatility remained elevated, with the cryptocurrency falling more than 10% over the weekend, and then bouncing back more than 5% this morning, but markets are ignoring the volatility so far today.
There were no notable economic reports over the weekend, nor any notable central bank speak.
Today there are multiple Fed speakers but we’ll be watching Brainard (9:00 a.m. ET) and Mester (11:00 a.m. ET) specifically to see if there’s any reference to thinking about tapering (if there is look for a small hawkish response from markets). Bostic (12:00 p.m. ET) and George (5:30 p.m. ET) also speak today but shouldn’t move markets.
What’s in Today’s Report:
Futures are moderately higher on momentum from Thursday’s rebound combined with a drop in industrial metals’ prices, which is helping to ease some anxiety on inflation.
Iron ore prices dropped sharply overnight as Chinese officials stated they would take measures to curb price increases in various industrial metals and that headline is pushing back on the “surging inflation” narrative (although it doesn’t change the inflation outlook).
There was no notable economic data overnight nor any important central bank speak (outside of the China metals news it was a quiet night).
Today we get several notable economic reports including Retail Sales (E: 1.0%), Industrial Production (E: 1.2%), and Consumer Sentiment (E: 90.3). In general, the stronger the better for these reports but we’ll be watching the inflation expectations component of the Consumer Sentiment Index – if it runs “hot” expect a headwind on stocks. There’s also one Fed speaker, Kaplan (1:00 p.m. ET), but he shouldn’t move markets.
What’s in Today’s Report:
Futures are modestly lower mostly on momentum from Wednesday’s drop following a generally quiet night.
There was no new inflation news overnight, but investors are cautious ahead of the PPI report this morning, which should be similarly strong to yesterday’s CPI report.
Bitcoin and the entire crypto-currency space is getting hit hard after Tesla (TSLA) announced it would no longer accept Bitcoin as a form of payment and that’s weighing on some of the momentum parts of the market.
Looking forward to today, the key number will be PPI. Expectations for PPI are 0.3% m/m and 5.9% y/y but if the numbers come in much stronger expect that to send yields higher and to hit stocks, at least temporarily.
The other notable number this morning is Jobless Claims (E: 475K) although that will start to fade a bit in importance as the market views the issues in the labor market as supply based (people not choosing to work) rather than demand based (people not being able to work).
There are also three Fed speakers today Barkin (10:00 a.m. ET), Waller (1:00 p.m. ET), Bullard (4:00 p.m. ET), and any commentary on inflation will be closely watched.
What’s in Today’s Report:
Futures are flat following a mostly quiet weekend of news as markets digested Friday’s jobs report, which was a disappointment but isn’t changing the broad market outlook (more on that in the Report).
Commodity prices continued to surge over the weekend, and that’s going to continue to increase inflation pressures. Iron Ore prices rose 10% as China tightened supply amidst the global recovery. Meanwhile, wholesale gasoline prices rose 2% following a cyber-attack that closed the Colonial Pipeline, although the outage isn’t expected to be long-lasting.
Today there are no notable economic reports and only one Fed speaker, Evans (8:30 a.m. ET, 2:00 p.m. ET). So, unless we learn the Colonial Pipeline outage will be long-lasting (which would send gasoline prices sharply higher), I’d expect relatively quiet trading today.
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What’s in Today’s Report:
Futures are little changed following mixed economic data that showed higher inflation and underwhelming growth.
Inflation stats could be set to rise as Chinese PPI surged 4.4% vs. (E) 1.7%, and this could be the first of several higher than expected global inflation readings.
Economically, German Industrial Production missed estimates (-1.6% vs. (E) 1.5%) but the reading isn’t moving markets.
Today the key number is the Core PPI (E: 0.2% m/m, 2.7% y/y). Markets are expecting an uptick in inflation metrics so a slightly hot number shouldn’t move markets too much, although a much stronger than expected PPI reading will likely send the 10 year yield higher and that would be a headwind on stocks. There is also one Fed speaker, Kaplan (10:00 & 12:00 p.m. ET), but he shouldn’t move markets.
What’s in Today’s Report:
Futures are moderately lower despite stimulus progress over the weekend, as markets digest Friday’s big rally.
The Senate passed the $1.9 trillion stimulus bill and the House will debate it on Tuesday. Biden could sign the bill by the end of the week, meeting market expectations and unleashing more stimulus into the economy as we begin the 2nd quarter.
Economically, Chinese trade numbers signaled an ongoing global recovery as exports exploded 60.6% y/y vs. (E) 40%.
The 10 year Treasury yield is up four basis points on the stimulus news and is again testing 1.60% (this is the main reason futures are lower this morning).
Today there are no economic reports and no Fed speakers, but yields will once again dictate trading in stocks. Markets rallied on Friday because the 10 year Treasury yield failed to meaningfully breakthrough 1.60%. But, if that happens today, look for stocks to drop in response, as rising yields remain the biggest headwind on stocks in the near term.
“Now, over the medium and long term, the Fed’s average inflation target means that when cyclicals start to outperform, and when yields begin to rise, both those rallies will last longer…” writes Tom Essaye of The Sevens Report newsletter. Click here to read the full article.
“What does that mean for us? It usually means remain long stocks in more time-dated accounts, and make confident you…” Sevens Report Study founder Tom Essaye recently spelled out to Yahoo Finance. Click here to read the full article.
What’s in Today’s Report:
Futures are modestly lower following a generally quiet night as markets digest this weeks’ gains ahead of jobless claims and the Powell speech.
On the coronavirus front, news was again positive as Austria and Denmark became the first European countries to begin to lift coronavirus restrictions.
Economic data overnight was better than feared as German exports and British IP both beat estimates.
Today focus will be on Jobless Claims (E: 5 MM) and the Powell speech (10:00 a.m. ET). For claims, it’d be a positive surprise if they declined from last week’s number and that’d add to the good news from this week, while a spike towards 10MM would be a modest negative vs. expectations.
For the Powell speech, markets just want reassurance that the Fed is committed to doing whatever it takes to ensure orderly operation of markets, which is what we should get.