Key Levels to Watch on Fed Day (Technical Tear-Sheet)

Key Levels to Watch on Fed Day: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Key Levels to Watch on Fed Day (Printable/Shareable Tear-Sheet)
  • Economic Data Takeaways – Employment Cost Index, Eurozone CPI, Case-Shiller HPI

Futures are slightly lower as traders digest more weak economic data overseas ahead of today’s Fed decision.

Economically, Manufacturing PMIs in China and the U.K. both disappointed. Both came in under the 50 threshold indicating contraction in the sector in both countries. This is weighing modestly on stocks this morning ahead of the Fed.

Looking into today’s session, focus will be on economic data early. The October ADP Employment Report (E: 150K), JOLTS (E: 9.375 million), and ISM Manufacturing Index (E: 49.0) are all due to be released this morning.

From there, attention will turn to the Fed with the FOMC Meeting Announcement at 2:00 p.m. ET followed by Fed Chair Powell’s press conference at 2:30 p.m. ET. Investors are hoping for a dovish message from the Fed, and if they deliver, a continued relief rally is likely this afternoon.

Lastly, outside of the policy decision and economic data, there are some notable earnings releases today. With: CVS ($2.13) and W ($2.98) releasing results before the open, and PYPL ($1.23), QCOM ($1.80), ABNB ($2.08), MET ($1.99) and AIG ($1.55) reporting after the close.

Key Levels to Watch on Fed Day

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here

Tom Essaye Quoted in Barron’s on June 5th, 2023

Global Stocks Drift Higher Amid PMI Data

“Economically, global service PMIs were mixed as the euro zone service PMI missed expectations, while the U.K. and Chinese service PMIs were in-line,” noted Tom Essaye, the founder of Sevens Report Research. Click here to read the full article.

Why Didn’t Stocks Fall on the Ugly PMIs?

What’s in Today’s Report:

  • Why Didn’t the Ugly PMIs Cause a Further Decline in Stocks?
  • August Flash PMI Takeaways
  • Dollar Index Hits New Highs: Chart
  • Is there a New “OPEC+ Put” Under the Oil Market?

Stock futures are flat and international markets were little changed overnight as currency and bond markets continued to stabilize with the focus remaining on the Jackson Hole Economic Symposium later in the week.

There were no notable economic reports overnight.

Today, no Fed officials are scheduled to speak leaving the focus on economic data early with Durable Goods Orders (E: 0.5%) and Pending Home Sales (E -2.5%) both due out early in the day.

Beyond those economic reports, there is a 5-Yr Treasury Note auction at 1:00 p.m. ET, and if it is as soft as yesterday’s 2-Yr Note auction, that could result in rising yields which would in turn weigh on stocks ahead of Jackson Hole. However, barring any meaningful moves in the currency and bond markets today, it should be relatively quiet as traders begin to position into Powell’s speech on Friday morning.

An Important Technical Level to Watch

What’s in Today’s Report:

  • An Important Technical Level to Watch

Futures are slightly higher despite disappointing economic data and a greater than expected rate hike from another foreign central bank.

June flash PMIs were mixed as the EU flash Composite PMI dropped sharply (51.9 vs. (E) 54.0) while the UK flash Composite PMI slightly beat estimates (53.1 vs. (E) 52.7).

The Norges Bank (Central Bank of Norway) became the latest central bank to hike more than expected (50 bps vs. 25 bps).

Today’s focus will be on economic data via the Flash Composite PMI  (E: 56.3) and Jobless Claims (E: 225K), and the market will be looking for moderation in the data (small declines that imply Fed hikes are working, but not drastic declines that imply economic growth is careening off a cliff).  We also get the second half of Powell’s Congressional Testimony before the House Financial Services Committee, but that shouldn’t yield any surprises.

Finally, oil continues to be one of the most important short-term market influences.  If oil can fall further, that will put a tailwind on stocks.

Micro Positives vs. Macro Negatives

What’s in Today’s Report:

  • Micro-Economic Positives vs. Macro-Economic Negatives
  • Weekly Market Preview:  COVID Trends and Economic Data
  • Weekly Economic Cheat Sheet:  Jobs Week

Futures are moderately higher following solid economic data and positive lockdown comments from Dr. Fauchi.

Global July manufacturing PMIs were generally solid, as the EU PMI beat estimates (62.9 vs. (E) 62.6) while the UK PMI was in line (60.4).  The Chinese PMI missed estimates (50.4 vs. (E) 50.8) but remained above 50.  Overall, the PMIs implied the global economic recovery was on going.

Dr. Fauchi stated over the weekend that he did not think the U.S. would reinstitute lockdowns despite rising COVID cases (which is a positive for the economy).

Today the key economic report will be the ISM Manufacturing PMI (E: 60.8) and markets will be looking for a “Goldilocks” number – one that meets or exceeds expectations but is not so strong that it makes the Fed less dovish.  COVID headlines will also potentially move markets but unless there are signs of people changing their behavior (TSA Throughput, consumer surveys) then COVID headlines shouldn’t move markets.

Seven “Ifs” Updated

What’s in Today’s Report: Seven “Ifs” Updated (Post FOMC and PMIs)

Stock futures are moderately higher with bond yields while the dollar is steady this morning as the volatility from late last week continues to be digested by global investors.

U.K. Parliament took control of the Brexit process from Prime Minister May late yesterday but the news is not having a material impact on markets so far today and there were no market moving economic releases overnight.

In the U.S. today, several reports on the housing market are due out this morning: Housing Starts (E: 1.201M), S&P CoreLogic Case-Shiller HPI (E: 0.3%), and FHFA House Price Index (E: 0.3%) while Consumer Confidence (E: 132.5) will hit in the first hour of trading.

Additionally, there are two Fed speakers ahead of the bell: Harker (8:00 a.m. ET) and then Rosengren (8:30 a.m. ET).

While a lot of news will hit this morning between the economic data and Fed chatter, the primary focus of the stock market will be bond yields and the curve. If yields continued to fall and the curve flattens further, stocks will have a very hard time staying in positive territory as growth concerns will continue to weigh on sentiment.

Four Keys to a Bottom (Some Progress Achieved)

What’s in Today’s Report:

  • Four Keys to a Bottom – Some Progress Achieved
  • Weekly Market Preview (Busy Despite the Holiday)
  • Weekly Economic Cheat Sheet (All About Flash PMIs and Housing).

Futures are marginally lower following a very quiet weekend as markets digest the Thursday/Friday rally.

There were no new developments on the Fed or U.S./China trade over the weekend so markets will start this week looking for something to further the recent positive momentum on both topics.

Economically, Japanese exports slightly missed estimates at 8.2% vs. (E) 9.0% but that’s not moving markets.

As mentioned, markets will be looking daily for any comments that reinforce the dovish comments from Fed Vice Chair Clarida on Friday and apparent improvement in U.S./China trade (Trump was positive on this Friday afternoon).  But that said, today should be pretty quiet as there is just on economic report, Housing Market Index (E: 68.00), and one Fed speaker, Williams (9:40 a.m. ET, 10:45 a.m. ET, 3:15 a.m. ET).