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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.

Sevens Report Co-Editor Tyler Richey Quoted in Market Watch on November 16th, 2022

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U.S. oil prices settle at a 3-week low after missile strike in Poland, as global supply risks ease

Tuesday’s “geopolitical fear bid, related to the initially unidentified missiles hitting Poland, is unwinding as details emerge that suggest the projectiles did not actually originate in Russia after all,” Tyler Richey, co-editor at Sevens Report Research, told MarketWatch. Click here to read the full article.

Sevens Report Co-Editor Quoted Tyler Richey on November 17th, 2022

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U.S. oil prices drop by nearly 5% to end at their lowest since late September

“Stagflationary economic data, rising COVID cases in China, and hawkish [Federal Reserve] chatter have all been added headwinds on the oil market today,” said Tyler Richey, co-editor at Sevens Report Research. Click here to read the full article.

When to Brace for More Volatility

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What’s in Today’s Report:

  • Revisiting the VIX – When to Brace for More Volatility
  • Familiar Holiday Volatility Courtesy of OPEC & Russia

U.S. equity futures are slightly higher and the dollar is pulling back modestly after a mostly quiet night of news as traders eye a stabilizing oil market.

After a volatile session yesterday, WTI crude oil is trading comfortably above $80/barrel this morning, fueling a rally in energy companies which is buoying index futures in pre-market trading.

Today, there is only one lesser-followed economic report due out: Richmond Fed Manufacturing Index (E: -1.0) and two Fed officials are scheduled to speak: Mester (11:00 a.m. ET) and George (2:15 p.m. ET).

Additionally, there is a 7-Yr Treasury Note auction at 1:00 p.m. ET that could move markets but the tape has been very quiet this week as attendance is light and volumes are down given the Thanksgiving holiday schedule. So more choppy and rangebound trading between 3,900 and 4,000 in the S&P is likely.

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.”

Sevens Report Analysts Quoted in ZeroHedge on November 8th, 2022

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WTI Extends Losses After API Reports Large Unexpected Crude Build

“The lack of a concrete timeline or any real details about plans to reopen the Chinese economy and move away from the still very strict and economically crippling restrictions weighed on the energy market into the afternoon,” wrote analysts at Sevens Report Research. Click here to read the full article.

Sevens Report Analysts Quoted in Market Watch on November 8th, 2022

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Oil prices log back-to-back losses as investors assess China demand outlook

“The lack of a concrete timeline or any real details about plans to reopen the Chinese economy and move away from the still very strict and economically crippling restrictions weighed on the energy market into the afternoon,” wrote analysts at Sevens Report Research. Click here to read the full article.

What the Fed Decision Means for Markets (Not a Bearish Gamechanger)

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What’s in Today’s Report:

  • What the Fed Decision Means for Markets (Not a Bearish Gamechanger)
  • EIA Analysis and Oil Update

Futures are lower on underwhelming earnings and further digestions of Powell’s hawkish press conference.

Earnings results have turned more negative this week and that included last night as ATUS and CF both posted disappointing results (among others).

Today’s focus will be on the Bank of England Rate Decision (E: 75 bps hike) and economic data, as we get Jobless Claims (E: 222K), Unit Labor Costs (E: 4.0%) and the ISM Services Index (E: 55.4).  Especially in light of Powell’s comments, markets will want to see data that shows resilient economic activity and falling inflation/deteriorating labor markets.

On the earnings front, the season largely wraps up at the end of the week but there are still some important reports to watch today including:  COP ($3.41), RCL ($0.23), MAR ($1.69), PYPL ($0.96) and SBUX ($0.73).

FOMC Meeting Preview

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What’s in Today’s Report:

  • FOMC Preview
  • Chart: 3,900 Is a Key Level For the S&P 500

U.S. futures and global stocks are rallying today amid reports that China is forming a “reopening committee” as part of a new push to ease Covid restrictions (however China’s foreign ministry has denied the rumors).

The RBA raised rates by 25 bp overnight, meeting estimates while the U.K.’s Manufacturing PMI was slightly better than feared at 46.2 vs. (E) 45.8.

Today, the focus will be on economic data early with the ISM Manufacturing Index (E: 50.0) and JOLTS (E: 9.875M) both due out shortly after the opening bell. But market reactions to the data are likely to be limited as the November FOMC meeting gets underway.

Earnings will remain in focus today with UBER (-$0.17), PFE ($1.47), BP ($1.94), and SYY ($0.99) reporting ahead of the bell, while AMD ($0.55) and ABNB ($1.46) will release results after the bell.

Bottom line, the combination of mostly favorable market news flow this morning, the calendar, and trader positioning into the Fed are all contributing to this morning’s pre-market gains, however, “Fed paralysis” is likely to set in today and into tomorrow’s morning session as investors await the latest Fed decision.