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Brace for a Recession on Thursday

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What’s in Today’s Report:

  • Brace for a Recession on Thursday
  • Housing Data Points to Slowdown in Real Estate Market
  • Chart: S&P 500 Holds 50-Day Moving Average by One Point

Stock futures are solidly higher this morning as quarterly earnings results from tech giants MSFT and GOOGL were both well received by investors after the close yesterday while investor focus shifts to the Fed today.

This morning, economic data will be in focus early with Durable Goods Orders (E: -0.5%), International Trade in Goods (-$103.2B), and Pending Home Sales (-1.0%) all due out by 10:00 a.m. ET.

From there, expect price action to slow considerably as focus turns to the Fed with the FOMC Meeting Announcement at 2:00 p.m. ET followed by the Fed Chair Press Conference at 2:30 p.m. ET.

Markets have priced in a 75% chance of a 75 basis point hike today while no changes to forward-guidance are expected so any variance from those expectations could result in sizeable moves in the market this afternoon.

Finally, earnings season remains in full swing with SHOP ($0.03), TMUS ($0.41), HLT ($1.06), SHW ($2.81) reporting ahead of the bell and META ($2.51), F ($0.43), and QCOM ($2.86) releasing results after the close. Any of those reports could lead to sector specific volatility despite the Fed today.

Why Stocks Have Dropped

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What’s in Today’s Report:

  • Why Are Stocks Dropping?
  • Nasdaq Composite Chart: Below the 100 Day Moving Average

U.S. futures are rebounding with global shares after the U.K. decided against new lockdown measures due to Omicron while there is renewed hope for Biden’s spending bill.

Reports of a late Sunday call between Biden and Manchin, after Manchin announced that he would not support the bill on live TV, have revived hopes for the potential passage of Build Back Better in the weeks ahead.

The German GfK Consumer Climate Index fell to -6.8 vs. (E) -2.5 for January which points to a further deterioration in consumers’ outlook for income and spending in Europe’s largest economy.

There are no economic reports and no Fed officials speak today which will leave traders focused on the political drama surrounding Build Back Better and any new developments about Omicron and subsequent economic lockdown measures.

The one potential catalyst on the calendar is a 20-Yr Treasury Bond auction at 1:00 p.m. ET. A weak auction could send yields higher which could add renewed pressure on high multiple tech names and cause the major indexes to roll over.