Posts

What to Make of Yesterday’s Drop & Jobs Report Preview

/in , /by

What’s in Today’s Report:

  • What to Make of Yesterday’s Drop
  • Jobs Report Preview
  • Natural Gas Update

Futures are slightly lower as markets digest the whiplash of the past two trading days following a mostly quiet night.

German economic data again badly missed estimates as German Industrial Production fell –3.9% vs. (E) -1.0% and fears of outright stagflation in the EU are rising quickly.

Today focus will be on the Jobs Report and estimates are as follows:  Job Adds: 400K, UE Rate: 3.6%, Wages: 0.4% m/m, 5.5% y/y.  This market needs a “Goldilocks” report that’s subdued on wages and with job adds modestly below the estimate of 400k.  If markets get that Goldilocks jobs report it should help stocks stabilize.  If the report ends up “Too Hot” though, especially on wages, brace for more selling.

There are also numerous Fed speakers today including: Williams (9:15 a.m. ET), Kashkari (11:00 a.m. ET), Bostic (3:20 p.m. ET), Waller and Bullard (7:15 p.m. ET) and Daly (8:00 p.m. ET).  Don’t be surprised if they all sound more hawkish than Powell did on Wednesday.  Remember, it appears the Fed’s tactic is to “Talk Tough” on looming rate hikes and inflation, yet be more measured on actual rate hikes than rhetoric would suggest.  Regardless, if there’s a consistent chorus of hawkish commentary, that will likely weigh on stocks, at least partially.

Is the Fed’s Bark Worse than Its Bite?

/in , /by

What’s in Today’s Report:

  • What the FOMC Decision Means for Markets (Is the Fed’s Bark Worse than Its Bite?)
  • EIA Analysis and Oil Outlook Update

Futures are moderately lower as markets digest Wednesday’s big post-Fed rally following a night of underwhelming economic data.

The April Chinese services PMI plunged to 36.2 vs. (E) 41.1, reflecting the economic damage from lockdowns.  In Europe, data was mixed as German Manufacturers’ Orders missed estimates while UK Services PMI beat expectations.

There are multiple Fed speakers today on financial media outlets (there are no official speeches scheduled) and don’t be surprised if they sound hawkish and push back on the post FOMC rally yesterday (this is especially true for Bullard, whose doing interviews today).

Today’s focus will be on the aforementioned Fed speakers, and again don’t be shocked if they sound “hawkish” and that causes some giveback from yesterday’s rally (but a hawkish tone won’t undo the positives from Powell’s press conference, either).

Economically, there is a BOE Rate decision and they are expected to hike 25 bps.  Domestically, the key report today is Unit Labor Costs (E: 6.8%) as that will give us a good look at total wage inflation (and if it’s higher than estimates that will be a negative).  We also get Jobless Claims (E: 178K) but that shouldn’t move markets.

Fed Meeting Preview

/in , /by

What’s in Today’s Report:

  • FOMC Preview
  • Q&A: Technical Resistance and Downside Targets for the S&P
  • ISM Manufacturing Index Takeaways

Stock futures are little changed as yesterday’s late-session rally is being digested following more hot inflation data and a slightly hawkish RBA hike (25 bp vs. E: 15 bp) overnight.

Economic data on growth was better than feared overnight but Eurozone PPI was hotter than expected with a staggering annual rise of 36.8% vs. (E) 36.2% in March.

Looking into today’s session, there are a few economic reports to watch including March JOLTS (E: 11.27M) and Factory Orders (E: 1.1%), however, with the May FOMC Meeting beginning this morning, a sense of Fed paralysis is likely to begin to grip markets ahead of tomorrow’s announcement.

Finally, earnings season does continue with a few notables reporting today: PFE ($1.66), BP ($1.41), HLT ($0.59), AMD ($0.90), and SBUX ($0.60) which could have an impact on sector trading but is not likely to move the broader markets given the focus-shift to the Fed.

Powell Speech Takeaways

/in , /by

What’s in Today’s Report:

  • Powell’s Comments Takeaway: It’s Not About 50 Basis Points, It’s About Certainty
  • Chart: 2-Year Yield surges beyond 2%

Stock futures are cautiously higher this morning after a mostly quiet night of news as traders continue to digest Powell’s more hawkish tone from yesterday and monitor a lack of progress towards a ceasefire in Ukraine.

Bond yields are continuing to rise today with the 2-year up another 4 basis points which is pressuring the yield curve. The 10s-2s is down to just 16 basis points this morning.

There was no market-moving economic data overnight and no notable reports are due out today. There is one Fed speaker: Williams (10:30 a.m. ET) and the Treasury will hold a 52-Week Bill auction at 1:00 p.m. ET.

Bottom line, equities have shown resilience in the face of the surge in yields since last week’s Fed meeting, however, if we see yields accelerate higher again today like we did yesterday, it will be increasingly difficult for stocks to extend their recent rally. Any concrete, positive news out of Ukraine could help stocks overcome higher yields in the near term and move higher though.

Ukraine Update and Why Future are Down

/in , /by

What’s in Today’s Report:

  • Ukraine Update and Why Futures Are Down
  • Switching Focus Back to the Fed
  • Weekly Market Preview:  Powell Testimony Wed/Thurs
  • Weekly Economic Cheat Sheet:  Jobs Week

Futures are sharply lower as markets react to additional sanctions against Russia, including removing select Russian banks from the SWIFT system. The additional sanctions and historic isolation of Russia by the global community are increasing economic uncertainty.

Positively, Ukraine and Russia are having peace talks today, and hopefully, that leads to a ceasefire sooner than later.

There were no notable economic reports overnight and no material economic reports today, so Russia/Ukraine headlines will drive trading, and any reports of a cease-fire will be a positive for markets.

Tom Essaye Quoted by Big News Network on January 28, 2022

/in , /by

Yesterday’s FOMC decision and Powell’s presser was both positive and negative for markets, but in the end, it mostly reinforced what we know: The Fed is serious about raising rates, that’s going to continue to…Tom Essaye, founder of Sevens Report, said in a note to clients Thursday, as reported by CNBC. Click here to read the full article.

 

Tom Essaye Quoted by CNBC on January 26, 2022

/in , /by

S&P 500 closes lower, gives up earlier gains as volatility continues

Yesterday’s FOMC decision and Powell’s presser was both positive and negative for markets, but in the end, it mostly reinforced what we know: The Fed is serious about raising rates, that’s going to continue to…Tom Essaye, founder of Sevens Report, said in a note. Click here to read the full article.

Powell’s Testimony Takeaways

/in , /by

What’s in Today’s Report:

  • Powell’s Testimony Takeaways
  • NFIB Small Business Survey Signals Cautious Outlook

Markets are trading with a risk-on tone this morning as U.S. equity futures track global shares higher after Powell’s testimony helped stabilize bond markets yesterday while investors look ahead to today’s CPI report.

Chinese inflation data was cooler than feared o/n with CPI dipping to 1.5% vs. (E) 1.8% and PPI falling to 10.3% vs. (E) 11.3% Y/Y which is helping ease inflation concerns today.

Looking into today’s session, the December CPI report (E: 0.4%, 7.1%) will be the main focus of markets early with the annual figures expected to hit a fresh multi-decade high. But as long as the headline and core figures are not materially “hotter” than feared, this week’s relief rally, led by tech shares, should be able to continue amid further stabilization in bond markets.

Outside of the early inflation data, there is one Fed speaker to watch: Kashkari (1:00 p.m. ET) as well as a 10-Year Treasury Note auction at 1:00 p.m. ET. And as long as Kashkari does not contradict any of Powell’s comments from yesterday regarding the balance sheet runoff coming “later in the year,” and the auction doesn’t spark a new move higher in yields, then risk-on money flows should be able to continue.

Where Is the Fed Put?

/in , /by

What’s in Today’s Report:

  • Bottom Line: Powell Renomination Hearings and the Fed Put
  • Chart: S&P 500 “Current Situation” Support Holds

Stock futures are extending yesterday’s afternoon rally in pre-market trade this morning as investors look ahead to Powell’s renomination hearings.

Overseas, Asian markets declined as new lockdown measures were imposed in parts of China due to rising Omicron cases while EU shares stabilized in sympathy with yesterday’s afternoon rally in U.S. markets.

Economically, the NFIB Small Business Optimism Index edged up to 98.9 vs. (E) 98.8 last month but the release is not materially impacting markets this morning.

There are no additional economic reports today but Esther George is scheduled to speak at 9:30 a.m. ET before Powell’s renomination hearings begin (10:00 a.m. ET). The market will be keenly focused on anything to do with balance sheet reduction plans and if the topic is “downplayed,” expect a further relief rally in equity markets.

Finally, there is a 3-Yr Treasury Note auction at 1:00 p.m. ET and if the results are weak, sending shorter duration yields to new multi-year highs, that could become a headwind for high valuation tech names and weigh on the broader stock market again.

How Should We React to Fed Hawkishness?

/in , /by

What’s in Today’s Report:

  • How Should We React to Fed Hawkishness?
  • Weekly Market Preview:  All About the Fed (Powell testifies Tuesday, Brainard testifies on Thursday).
  • Weekly Economic Cheat Sheet:  All About Inflation (CPI Wednesday is the Key Report).

Futures are slightly lower following a generally quiet weekend as investors digest last week’s hawkish surprises ahead of Powell’s testimony tomorrow and CPI on Wednesday.

Economically, the only notable number was Eurozone Unemployment, which met expectations at 7.2%.

Chances of Build Back Better passing fell further over the weekend as according to the Washington Post, Manchin remains against the current framework for the plan.

Today there are no economic reports and just one Fed speaker, Bostic (12:00 p.m. ET), so we’d not be surprised to see markets churn ahead the three major catalysts coming later this week:  Powell’s testimony on Tuesday, Wednesday’s CPI Report, and Brainard’s testimony on Thursday.  Those three events will determine whether stocks rally of decline this week and any additional hawkish surprises will pressure stocks.