“Tomorrow’s FOMC decision will likely either further pressure stocks… or offer some relief to markets that the Fed isn’t going to raise rates as much as feared, and in doing so allow markets to bounce,” wrote Sevens Report’s Tom Essaye. Click here to read the full article.
What’s in Today’s Report:
Futures are little changed as markets digested yet another hawkish Fed decision amidst more global rate hikes.
The overnight session was mostly quiet as investors digested the Fed rate hike while other global central banks raised rates (five separate central banks hiked rates overnight, as expected).
The Bank of Japan intervened in the currency markets for the first time since 1998, causing a 1% rally in the yen.
Today focus will be on the Bank of England Rate Decision (E: 50 bps hike) and on weekly Jobless Claims (E: 220K). Fed Chair Powell again highlighted that the labor market is still much too tight, so markets need these jobless claims to start to rise towards 300k to prevent even further Fed tightening in the future. The sooner the labor market returns to better balance, the sooner we get to “peak hawkishness.”
What’s in Today’s Report:
Stock futures are trading with cautious gains this morning as traders shrug off escalating tension between Russia and Ukraine while the BOJ initiated new stimulus overnight as focus turns to today’s Fed meeting.
Geopolitically, Russia is mobilizing 300,000 reservists to bolster military operations in Ukraine and indirectly threatened nuclear options in the latest escalation in the conflict which is driving gains in safe havens ahead of the Fed this morning.
Today, there is one economic report to watch in the morning: Existing Home Sales (E: 4.70M) but the primary market focus will clearly be on the Fed with the FOMC Announcement at 2:00 p.m. ET followed by Fed Chair Powell’s press conference at 2:30 p.m. ET.
Regarding the Fed, a 75 basis point hike and terminal Fed Funds rate near 4.25% is the consensus expectation so anything more hawkish than that will likely spark volatility and potentially even result in a test of the June lows in the S&P while anything more dovish than expectations has the potential to unleash a sizeable relief rally.
What’s in Today’s Report:
Futures are sharply higher on encouraging Chinese inflation data and a drop in the U.S. Dollar.
Chinese PPI (2.3% vs. (E) 2.8% y/y) and CPI (2.3% vs. (E) 3.2% y/y) both declined from last month and came in under expectations, providing more evidence that the global economy has hit “peak inflation.”
The encouraging Chinese inflation data combined with yesterday’s hawkish ECB is pushing the dollar 1% lower.
Today there are no notable economic reports but there are several Fed speakers, including Evans (10:00 a.m. ET), Waller (12:00 p.m. ET) and George (12:00 p.m. ET). If they sound optimistic on inflation, that will help extend this morning’s rally.
What’s in Today’s Report:
Stock futures pulled back from overnight gains and are now trading flat as most international markets are lower following mixed economic data.
Japanese Retail Sales and Industrial Production figures both handily topped estimates but the August HICP Flash in Europe (their CPI equivalent) showed core inflation jumped 4.3% vs. (E) 4.0%, reiterating inflation risks.
Today, the early focus will be on the ADP Employment Report (E: 200K) which will be the first one since they updated the methodology of the report so be prepared for a potentially surprising print.
From a market standpoint, traders will want to see a moderation in the labor market (especially after yesterday’s JOLTS report) to show the Fed’s tightening actions are beginning to cool the labor market which is one of the key steps towards reaching “peak hawkishness.”
There are also a few Fed speakers to watch today: Mester (8:00 a.m. ET), Logan (6:00 p.m. ET), and Bostic (6:30 p.m. ET) and the market would welcome any degree of less hawkish commentary as the more hawkish tone of the last week has been largely responsible for the equity market losses into the end of the month.
If the market responds to Powell in a dovish manner that should send inflation expectations even higher, while the dollar and yields should pull back, which would all result in tailwinds on gold. However, a hawkish and ‘growth-insensitive’ Powell would likely send gold back down towards $1,700, potentially by Friday’s close…analysts at Sevens Report Research said in a note. Click here to read the full article.
What’s in Today’s Report:
Futures are down close to 1% on follow through selling from Friday as hopes of a near term “Fed Pivot” continue to fade in reaction to Powell’s speech last week.
European shares are also sharply lower as tightening expectations for the ECB rose sharply on Friday. Markets are now pricing in a minimum 50 bps hike next week with a 75 bps hike a real possibility.
There were no notable economic reports overnight.
Markets dropped on Friday as Powell dismissed the idea of an imminent “Fed Pivot,” but the ECB also signaled more hawkish intentions on Friday, and it was the two events that combined to cause the ugly declines. Today there are no economic reports but there is an important Fed speaker, Brainard (2:15 p.m. ET) and if she echoes Powell’s comments from Friday, expect more losses in stocks.
What’s in Today’s Report:
Futures are modestly lower following a mostly quiet night ahead of Powell’s speech at 10:00 a.m. this morning.
Economic data was slightly underwhelmed as the German Gfk Consumer Climate declined to –36.5 vs. (E) -31.
The UK increased the electricity price cap for households by 80%, underscoring the impact of surging natural gas prices.
Today focus will be on the Powell speech at 10:00 a.m. and the market will be looking for Powell to tacitly endorse the “Fed Pivot” theory that’s helped stocks rally. Away from Powell, we also get two notable inflation readings via the Core PCE Price Index (E: 0.3% m/m, 4.7% y/y) and Consumer Sentiment (E: 55.1), but it will take a material surprise from either report to move markets today.
What’s in Today’s Report:
Futures are sharply lower as markets price in a greater chance of a hawkish speech from Fed Chair Powell this Friday.
Markets are reversing some of the “Fed Pivot” gains of the past few weeks ahead of Chair Powell’s speech in Jackson Hole on Friday, as investors fear the markets’ expectations for the Fed have become too dovish.
Economically, China cut interest rates again to stimulate the economy, although the rate cuts were small and stocks declined anyway, as the Chinese economy continues to face numerous large challenges (Zero COVID policy, drought, property market decline, etc.).
Today there are no Fed speakers and only one notable economic report, the Chicago Fed National Activity Index (E: -0.19), and as has been the case markets will want to see stability in the date to reinforce that the U.S. economy is not moving closer to stagflation.
The market has rallied hard on the idea of a Fed pivot. Friday’s jobs report didn’t support that hope and, if anything, will make the Fed more resolute about rate hikes. So, now inflation needs to clearly show signs of peaking and declining, otherwise we’d expect this market to abandon some of that near-term hope, and for volatility to increase, Essaye wrote. Click here to read the full article.
