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Fed Meeting Preview

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What’s in Today’s Report:

  • FOMC Preview

U.S. futures are trading lower with most global equity markets after some negative Omicron headlines while investor focus shifts ahead to this week’s central bank meetings.

Initial studies in South Africa show the PFE vaccine has a lower efficacy rate against Omicron, rekindling concerns about the strain potentially leading to new restrictions or lockdown measures around the globe.

Economically, EU Industrial Production grew 1.1% vs. (E) 1.2% in October and the U.S. NFIB Small Business Optimism Index came in at 98.4 vs. (E) 98.3 but neither release materially changed the outlook for central bank policy.

Looking into today’s session, there is one inflation data point due ahead of the bell: PPI (E: 0.5%) but unless it is a material surprise against expectations, it should not move markets with the December FOMC meeting getting underway.

Bottom line, the focus has largely turned to this week’s central bank meetings, most importantly the FOMC, so it is likely that we see a form of “Fed paralysis” grip the markets between now and tomorrow afternoon’s meeting announcement, barring any unforeseen surprises regarding Omicron.

All Clear for a Santa Rally?

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What’s in Today’s Report:

  • All Clear for a Santa Rally?
  • Weekly Market Preview:  All About the Fed
  • Weekly Economic Cheat Sheet:  First Look at December Data (Is Omicron An Economic Headwind?)

Futures are modestly higher on continued momentum from last week’s rally, following a very quiet weekend of news.

On COVID, the growing consensus is that fully vaccinated people are protected against severe illness while those with boosters are also protected against infection, so it is increasingly unlikely Omicron causes a sustained pullback.

On stimulus, Democrats are still trying to pass the $1.7-ish trillion spending bill before year-end, but Senator Manchin remains an obstacle, and passage of the bill in 2021 (or perhaps at all given high inflation and 2022 is an election year) is becoming increasingly unlikely.

Today there are no economic reports and no Fed speakers so it should be a mostly quiet day, although we could get official vaccine results vs. Omicron from PFE or MRNA any day, and if the data confirms the consensus opinion, that would be a mild tailwind on stocks.

Market Multiple Table Chart

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What’s in Today’s Report:

  • Market Multiple Table Chart
  • EIA Analysis and Oil Update

Futures are modestly lower on a slightly hawkish Reuters article about ECB QE and as markets digest this week’s rally.

According to Reuters, the ECB is considering tapering its QE program in March, which is sooner than markets expected and is another reminder that global central banks will be removing accommodation throughout 2022.

Economic data was sparse overnight as Chinese CPI met expectations rising 0.4%.

Today the only notable economic report is Jobless Claims (E: 223K) and they should show continued improvement in the labor market.  Additionally, markets will remain on the lookout for any official government data or more findings from MRNA/PFE on vaccine effectiveness against Omicron, and anything that implies substantial protection against infection and severe illness will be a tailwind on stocks (although at this point the market doesn’t view Omicron as a material threat so the tailwind won’t be that strong).

 

Annual Discounts on Sevens Report, Alpha and Quarterly Letter

We’ve continued to be contacted by advisor subscribers who want to use the remainder of their 2021 pre-tax research budgets to extend their current subscriptions, upgrade to an annual (and get a month free) or add a new product (Alpha or Quarterly Letter).

If you have unused pre-tax research dollars, we offer month-free discounts on all our products. If you want to extend current subscriptions or save money by upgrading to an annual subscription (across any Sevens Report product), please email: info@sevensreport.com.

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.

Tom Essaye Quoted in Barron’s on December 3, 2021

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The Dow Fell, November’s Jobs Report Missed—and What Else Happened in the Stock Market Today

Initially, the stock market took the jobs report as good news. Any result above 200,000 but not wildly above expectations..wrote Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

Tom Essaye Quoted in CNBC on December 5, 2021

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Dow jumps nearly 650 points, erasing last week’s losses as investors shake off omicron worries

But it was comments from the Fed that unnerved markets late last week, not fears about the…according to Tom Essaye, author of the Sevens Report. Click here to read the full article.

Tom Essaye Quoted in Unseen Opportunity on December 6, 2021

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No “Santa Rally” for Stocks?

Super-cap tech has been well bid on the expectation of ‘forever’ low rates and support…said Sevens Report founder Tom Essaye. Click here to read the full article.

Tom Essaye Quoted in Aljazeera on December 6, 2021

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Stocks surge as Omicron worries abate following volatile week

That’s a set up where stocks can continue to rally, although I think we all need…wrote Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter. Click here to read the full article.

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.

Jobs Day

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What’s in Today’s Report:

  • Omicron Update
  • OPEC Meeting Takeways

Futures are slightly lower as markets digest Thursday’s rally ahead of the jobs report.

In Washington, the Senate passed a bill to avoid a government shutdown, removing a potential risk from markets.

The Omicron variant has been detected in five states now but symptoms so far appear mild.

Economically, EU and UK Composite PMIs generally met expectations.

Today focus will be on the Job Report and expectations are as follows: Job Adds 543K, UE Rate 4.5%, and Wages 5.0% y/y.  As long as the jobs report is around expectations (so not above 700k but still showing solid job additions with wages not spiking) then markets will expect a mild acceleration of tapering and the rally can continue.   We also get the ISM Services PMI (E: 65.0) and markets will be looking for a similarly “Just Right” number to show solid growth but nothing so strong it would encourage the Fed to substantially accelerate tapering of QE.