Tom Essaye Quoted in CNBC on February 11, 2020

“It’s still an opportunity for a surprise, and given an expected perma-dovish Fed is one of the two pillars of this rally, we need to watch Powell’s…” wrote Tom Essaye, editor of the Sevens Report. Click here to read the full article.

Jerome Powell

Commodities Update and Powell Preview

What’s in Today’s Report:

  • Powell Testimony Preview
  • Commodity Bears and a Gold Bull

Stock futures and most international equity markets are higher today as the spread of the coronavirus reportedly slowed to a two week low in China and investors looked ahead to Powell’s testimony before Congress today.

Economically, the NFIB Small Business Optimism Index rose 1.6 points to 104.3 vs. (E) 103.2 in January underscoring continued positive sentiment among U.S. business owners.

Today, there is just one economic report: JOLTS (E: 6.775M) which will leave investors primarily focused on Powell’s Testimony before the House Financial Services Committee at 10:00 a.m. ET and it will be important for the markets that he remains decidedly dovish with his commentary.

In addition to Powell, both Quarles (12:15 p.m. ET) and Bullard (1:30 p.m. ET) will speak in the early afternoon, Wall Street time.

Lastly, there is a 3-Yr Note Auction at 1:00 p.m. today and the results could affect the yield curve (specifically the 10s-2s) and as has been the case over the last 9 months, any significant moves in the curve could impact equity markets.

Tom Essaye Quoted in Barron’s on September 18, 2019

“Bottom line for the Fed, if today’s events turn out to be net-hawkish, that will weigh on risk assets as investors remain overly optimistic about an aggressive easing cycle over the coming…” writes The Sevens Report’s Tom Essaye. Click here to read the full article.

Jerome Powell

Powell Preview

What’s in Today’s Report:

  • Powell Testimony Preview
  • “This Week’s Sign the Apocalypse is Upon Us”
  • NFIB Small Business Optimism Index Analysis

Futures are lower with most international markets as investors look ahead to Powell’s testimony while another EU company, PageGroup, issued a profit warning overnight.

Economically, Chinese June CPI was inline but PPI dropped from 0.6% to 0.0% vs. (E) 0.2% which rekindled deflationary concerns and underscored pressures on the Chinese manufacturing sector.

Today, there are no economic reports but even if there were, focus would be primarily on the Fed anyway.

Powell’s Testimony before Congress is clearly the main event as investors look for further clues on the future of monetary policy. His written comments are due out at 8:30 a.m. ET before he begins to speak at 10:00 a.m. ET.

Bullard also speaks at 1:30 p.m. ET today and the June FOMC Meeting Minutes will hit the wires at 2:00 p.m. ET.

Lastly, there is a 10 Year T-Note Auction at 1:00 p.m. ET and depending on the results (demand metrics and yields) a reactive move in the bond market could influence stock trading in the midst of all the Fed events.

Was Powell’s Speech a Bullish Gamechanger?

What’s in Today’s Report:

  • Was Powell’s Speech a Bullish Gamechanger?  No.
  • Oil Update – Another Bearish Report
  • The Unexpected Winner from Powell’s Speech (Yield Curve)

Futures are modestly lower on digestion of yesterday’s rally combined with worries about potential auto tariffs.

Rhetoric on U.S. auto tariffs continues to get louder and there is a growing fear they will be enacted this year.  That is not the consensus expectation at this point, but it’s not an insignificant (and it would be a new negative for stocks).

Economic data o/n was better than expected as Japanese Retail Sales, German Unemployment and EU Economic Sentiment all beat estimates.

Today focus will be on economic data, and the most important report will be the Core PCE Price Index (E: 1.9%).  That number needs to stick near 2.0% yoy to allow the Fed to continue to tilt dovish.  Other notable data today includes Jobless Claims (E: 219K) and Pending Home Sales Index (E: 0.3%).   There are also three Fed speakers today, (Mester and Evans (2:00 p.m. ET), Kaplan (3:00 p.m. ET)) although none should move markets given the Powell comments.

Finally, we can expect more preview articles about the Trump/Xi meeting but the bottom line is the market expects (and has priced in) a “truce” that sees no new tariffs and a period of intense negotiation.

Fed Wildcard to Watch

What’s in Today’s Report:

  • The FOMC Wildcard to Watch: Powell’s Presser
  • The Oil Rally (And How Long It Can Last)

Stock futures are slightly positive this morning ahead of the Fed today while global markets were largely flat after another quiet night of news.

There were no market moving economic reports overnight.

Oil prices are slightly lower this morning after the API reported a +2.9M bbl build in crude stocks vs. (E) -1.3M bbls draw ahead of this morning’s weekly EIA release.

Today, the main market focus will be the Fed Events: FOMC Announcement and Forecasts (2:00 p.m. ET), Fed Chair Press Conference (2:30 p.m. ET) although, there is also one economic report out in the U.S. this morning: New Home Sales (E: 630K).

Barring any bombshell headlines about trade or to a lesser degree, politics, it is likely to be a quiet session with price action being driven by positioning until the Fed starts up at 2:00 p.m. ET.

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