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Will Politics Force a Fed Policy Error?

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What’s in Today’s Report:

  • Will Politics Force a Fed Policy Error?
  • PPI Takeaways: Inflation Still Rising

U.S. equity futures are flat and global markets were mixed overnight as investors digest another hotter-than-expected inflation print and soft growth data ahead of the Fed.

U.K. CPI rose 5.1% vs. (E) 4.7% in November while Chinese growth data missed expectations across the board, rekindling stagflation fears ahead of the slew of central bank meetings in the back half of the week.

There are multiple economic reports due out this morning including: Retail Sales (E: 0.8%), Empire State Manufacturing Index (E: 25.5), Import & Export Prices (E: 0.7%, 0.7%) and the Housing Market Index (E: 84). But once again, unless there are any material surprises, the market impact should be limited ahead of the Fed this afternoon.

The FOMC Announcement will hit at 2:00 p.m. ET and Fed Chair Powell’s Press Conference begins at 2:30 p.m. ET. Bottom line, the biggest risk to equities remains a more hawkish shift in tone with a faster than anticipated acceleration in tapering of QE and any hints at more than two rate hikes next year.

Two Key Inflation Reports Today

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What’s in Today’s Report:

  • Future Headwinds on Gold?

Futures are modestly higher following a generally quiet night as markets await the latest readings on inflation via today’s CPI and inflation expectations index in Consumer sentiment.

Economic data slightly underwhelmed as UK Industrial Production (1.3% vs. (E) 1.4%) and UK GDP (0.9% vs. (E) 1.0%) both missed expectations.

There were no notable Omicron updates overnight.

Today the focus will be on inflations via the  Consumer Price Index (E: 0.7% m/m, 6.8% y/y) and the inflation expectations index in the Consumer Sentiment report (E: 67.0).  Markets are already expecting the Fed to materially accelerate the pace of tapering of QE next week, but if these inflation readings come in much hotter than expected, that likely will be a headwind on stocks as it will only encourage the Fed to get even more aggressive in tapering QE.

Market Multiple Table: December Update

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What’s in Today’s Report:

  • Market Multiple Update: December Update
  • A Surge in Unit Labor Costs Rekindle Inflation Worries

Equity futures are little changed this morning as investors digest the sizeable rally so far this week with concerns about the Chinese property market offsetting more progress by Congress towards raising the debt ceiling.

Kaisa Group, a large Chinese developer, had its shares halted overnight pending a corporate announcement after a debt deadline passed which has rekindled fears about China’s property market.

Today, there is just one economic report to watch: JOLTS (E 10.4M), but it is a lagging report from October so unlikely to move markets and there are no Fed officials scheduled to speak.

In the afternoon, there is a 10-Year Treasury Note auction (1:00 p.m. ET) that could move bonds and subsequently stocks, however, given the quiet calendar today, it would not be surprising to see the markets digest some of this week’s outsized gains now that the S&P 500 is back within reach of all-time highs.

Why the Fed is Causing the Pullback (Not Omicron)

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What’s in Today’s Report:

  • Why the Fed is Causing the Pullback (Not Omicron)
  • Weekly Economic Cheat Sheet:  All About Inflation (Key Reports Friday)
  • Weekly Market Preview:  Can tech stabilize?

Futures slightly higher following generally positive comments on Omicron over the weekend.

There were multiple articles and commentary from public health officials suggesting the Omicron variant is more contagious but produces mild symptoms. Also, existing vaccines appear to give protection against severe illness, although markets are waiting for official word from both PFE and MRNA.

Economic data was mixed as German Manufacturers Orders fell –6.9% vs. (E) -0.5% while the UK Construction PMI rose to 55.5 vs. (E) 52.0 but the numbers aren’t moving markets.

Today there are no economic reports and no Fed speakers.  Like Friday, how the Nasdaq trades will likely determine the day, as markets want to see the tech sector stabilize after intense weakness late last week.  If Nasdaq can stabilize, the broad market can bounce.

What Powell’s Renomination Means for Markets

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What’s in Today’s Report:

  • What Powell’s Renomination Means for Markets
  • Gold Update: Cooling Inflation Outlook Favors the Bears

U.S. stock futures are trading lower with most overseas equity markets as elevated bond yields continue to weigh on big-cap tech names.

Economically, Composite PMI data in Europe was better than expected with the Eurozone figure hitting 55.8 vs. (E) 53.1 for November however the upbeat data is further supporting bond yields which are weighing on equities.

Looking into today’s session, there is one domestic economic report to watch: PMI Composite Flash (E: 57.8) and if it is as strong as the releases in Europe, that could support a further rise in yields which will keep pressure on equity markets.

There are no Fed officials scheduled to speak today but the Treasury will hold a 7-Yr Note auction at 1:00 p.m. ET that could serve as another catalyst for higher yields. And again, that is a potential negative for stocks as big-cap tech names will almost certainly extend yesterday’s late-day declines if yields continue this week’s rise.

Why Last Week Was More Positive for Stocks Than It Seems

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What’s in Today’s Report:

  • Why Last Week Was More Positive for Markets Than It Seems
  • Weekly Market Preview:  Will COVID Concerns Recede?
  • Weekly Economic Cheat Sheet:  Key Inflation Report on Wednesday

Futures are moderately higher on Powell optimism and as there were no incremental COVID restrictions in Europe.

President Biden was reportedly highly complimentary of Powell in meetings this weekend, leading markets to fully expect he will be reappointed as Fed Chair this week.

There were no new COVID restrictions announced in Europe over the weekend, providing some hope lockdowns won’t be extensive.

There were no notable economic reports overnight.

Today there are no Fed speakers and just one economic report, Existing Home Sales (E: 6.20 M), and that won’t move markets.  So, any news on Powell’s reappointment as Fed Chair and incremental COVID headlines will move markets today (if Powell is reappointed and COVID headlines don’t get worse, stocks can extend the rally).

Another Hot Economic Report

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What’s in Today’s Report:

  • Another Hot Economic Report (Philly Fed)

Futures are modestly lower on negative global COVID headlines.

Austria because the first European country to reimpose a national lockdown due to rising COVID cases and markets fear more countries could follow (especially Germany).

Inflation and economic data again implied a “hot” recovery as German PPI rose 3.8% vs. (E) 1.6% while UK retail sales rose 0.8% vs. (E) 0.5%.

There are no economic reports today although there are two Fed speakers, Waller (10:45 a.m. ET) and Clarida (12:15 p.m. ET).  Clarida’s comments will we watched but he is likely to repeat Powell’s dovish mantra (gradual tapering and no rate hikes until late 2022).  Beyond the Fed, COVID headlines are again driving short term trading, so if we see more restrictions from Europe that will be an increased headwind for stocks.

Dow Theory Update

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What’s in Today’s Report:

  • What the Early-November Squeeze in the Dow Transports Means for the Broader Equity Markets

Stock futures are little changed this morning as a hot U.K. inflation report is digested ahead of more retail earnings.

U.K. CPI rose 4.2% vs. (E) 3.9% year-over-year which is pushing the pound higher against most of its peers as rate hike expectations rise.

Today, there is just one economic report: Housing Starts & Permits (E: 1.587M, 1.630M) but it is another very busy day of Fed speak: Williams (9:10 a.m. ET), Mester (11:20 a.m., 12:40 p.m. ET), Waller (12:40 p.m. ET), Daly (12:40 p.m. ET), Evans (4:05 p.m. ET), and Bostic (4:10 p.m. ET).

There is also a 20-Year Treasury Bond auction at 1:00 p.m. ET that could move yields and investors will be closely watching earnings releases from notable retailers ahead of the open: TGT ($2.87) and TJX ($0.81) as well as NVDA ($1.10) after the close.

Tom Essaye Interviewed by Yahoo Finance on November 15, 2021

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Market Recap: Monday, November 15: Stocks drop as tech leads losses, 10-year yield tops 1.6%

I think what it is, is essentially that the bond market is looking past this transitory spike in inflation…said Tom Essaye, founder of Sevens Report Research. Click here to watch the full interview.

Inflation Expectations Update

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What’s in Today’s Report:

  • Inflation Expectations Update
  • Empire State Manufacturing Index Takeaways

Stock futures are slightly lower this morning following a mostly quiet night of news as investors look ahead to several important economic releases in the U.S. today.

Economic data was in-line to slightly better than expected overnight while the Xi-Biden talks, while largely uneventful, did help to modestly improve general market sentiment.

Today, focus will be on economic data early with Retail Sales (E: 1.0%), Import & Export Prices (E: 0.9%, 0.7%), and Industrial Production (E: 0.9%) all due out ahead of the opening bell while the Housing Market Index (E: 80) will be released at the top of the 10:00 a.m. hour (ET).

Additionally, there are several Fed speakers today: Bostic (12:00 p.m. ET), Harker (2:55 p.m. ET), and Daly (3:30 p.m. ET) and the market will continue to look for patient remarks that suggest the pace of the taper will not be accelerated and rate hikes will not be pulled forward from late 2022.