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Powell Speech Preview

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What’s in Today’s Report:

  • Powell Speech Preview

Futures are modestly higher as markets bounce back from Thursday’s declines ahead of Powell’s speech.

There were no new developments in Afghanistan overnight as evacuations continued.  The tragedy temporarily hit stocks but it won’t be an ongoing influence on markets.

Expectations for more stimulus from China rose overnight as chatter regarding a Reserve Ration cut grew louder and this, combined with some pre-Powell positioning, are the main reasons futures are higher.

Today the key event is obviously the Powell speech (10:00 a.m. ET) but as a reminder, he won’t announce anything specific regarding tapering (that will come at the Sept 22nd Fed meeting).  Instead, the key will be how much Powell discusses the Delta variant as an economic headwind (the more he mentions it, the more dovish the speech will be taken) and if he reaffirms the Fed is getting close to being able to taper QE (which will mean before year-end).

Outside of Powell, the Core PCE Price Index (E: 0.3% m/m, 3.6% y/y) is the key economic report this morning but as long as it’s much higher than expectations, it won’t move markets.

Using the Yield Curve to Measure Taper Expectations

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What’s in Today’s Report:

  • Using the Yield Curve to Measures Taper Expectations
  • Strong 2-Year Note Auction Implies a Dovish Powell

U.S. stock futures are slightly higher in very quiet trading this morning as investors assess the state of the pandemic against expectations about the Fed’s taper plans ahead of the Jackson Hole Economic Symposium later in the week.

Economically, the German Ifo Survey was slightly soft with the Business Climate headline falling to 99.4 vs. (E) 100.4 and Business Expectations declining to 97.5 vs. (E) 100.0.

Looking into today’s session, there is one economic report ahead of the bell: Durable Goods Orders (E: -0.2%, Core Capital Goods: +0.5%). As has been the case recently, the market will be looking for a report that is good enough to not suggest the recovery is losing momentum but not too strong that it would influence a sooner-than-later taper by the Fed.

As the day goes on, we will hear from one Fed official: Daly who is scheduled to speak at 1:00 p.m. ET however her comments should not move markets will focus already moving ahead to Powell’s speech on Friday.

Finally, there is a 5-Yr Treasury Note auction at 1:00 p.m. ET. If we see strong demand like we saw in yesterday’s 2-Year auction, then that could offer a modest, dovish tailwind to equities as it will suggest expectations for Powell’s speech are shifting more dovish.

Bottom line, there are a few potential market catalysts today, but the odds that the market makes a material move one way or another are low given the sense of Fed paralysis ahead of Powell’s speech on Friday.

Why Negative Headlines Still Aren’t Hurting Stocks

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What’s in Today’s Report:

  • Why Negative Headlines Still Aren’t Hurting Stocks (Three Reasons)
  • Weekly Market Preview:  Can Good Earnings Continue to Offset Negative Macro Headlines?
  • Weekly Market Cheat Sheet:  Flash PMIs and Powell’s speech Friday are the highlights.

Futures are modestly higher on momentum from Friday’s rally and following mixed (but not bad) global PMIs.

Economic data was mixed as the EU August flash composite PMI was solid (59.5 vs. (E ) 59.7) although the UK  PMI (55.3 vs. (E ) 58.4) missed expectations, as did the Japanese and Australian readings.  But, in aggregate, the numbers were good enough to show the global economic recovery is still on going (and that helped stocks rally this morning).

There was improvement on the COVID front as new cases in China continued to plunge with daily new cases falling to zero in many local precincts and that’s raising hopes the current COVID wave in China is subsiding.

Today focus will be on the August Flash Composite PMI (E: 59.5) and markets will want to see solid data (so close to last month’s reading and close to expectations).  If it’s a bad miss, that will likely weigh on stocks.  We also get Existing Home Sales (E: 5.83M) but that shouldn’t move markets.

Tom Essaye Interviewed with TD Ameritrade Network on July 14, 2021

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Consumer Price Index Takeaways / The Fed’s Comments

Tom Essaye, founder of the Sevens Report, discusses the Consumer Price Index takeaways as well as Powell’s comments. Click here to watch the full interview.

Why Powell Wasn’t Dovish (Tapering is Coming)

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What’s in Today’s Report:

  • Why Powell Wasn’t Dovish (Tapering is Coming)
  • Infrastructure Update (Tax Hike Risks)
  • Oil Update, EIA Analysis, and OPEC Outlook (Where is Oil Going?)

Futures are modestly lower following mixed Chinese economic data.

Chinese Fixed Asset Investment, Retail Sales, and Industrial Production all beat estimates, although they were offset by a miss in Q1 GDP (7.9% vs. (E) 8.2%).  But, while GDP got most of the headlines, the bottom line is the rest of the data is more current, and on balance, the outlook for the Chinese economy has improved (which is good for global stocks).

Today there are numerous economic reports to watch including, in order of importance:   Philly Fed Manufacturing Index (E: 28.5), Empire State Manufacturing Index (E: 18.3), Jobless Claims (E: 368K), and Industrial Production (E: 0.7%).  As has been the case “Goldilocks” data with muted pricing indices will help stocks rally (markets won’t want to see data that’s too strong or too weak).

Turning to the Fed, Chair Powell speaks to the Senate at 9:30 a.m. ET but we should expect the same message as Wednesday and his comments shouldn’t move markets.

Finally, earnings season continues to gain momentum and some reports we’ll be watching today include: TSC ($0.89), MS ($1.63), UNH ($4.41), USB ($1.14), BK ($1.01).

CPI Takeaways

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What’s in Today’s Report:

  • CPI Takeaways

Stock futures are little changed as Treasuries recover some of yesterday’s losses ahead of more U.S. inflation data and Congressional testimony from Fed Chair Powell today.

Economically, U.K. CPI was above estimates in June but PPI was unexpectedly soft while Eurozone Industrial Production also disappointed, but none of the data from overnight seems to be having a material impact on markets this morning.

Today, there is one more inflation report in the U.S., PPI (E: 0.6% m/m, 6.8% y/y) at 8:30 a.m. ET and then focus will turn to Fed speak with Chair Powell’s semiannual testimony before Congress beginning at 12:00 p.m. ET and Kashkari also speaking at 1:30 p.m. ET.

The start of Q2 earnings season will also remain in focus with notable reports coming from: WFC ($0.97), BAC ($0.78), C ($1.99), DAL (-$1.37), BLK ($9.24), and PNC ($4.22).

Economic Breaker Panel: June Update

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What’s in Today’s Report:

  • Sevens Report Economic Breaker Panel: June Update

U.S. equity futures are flat this morning after wavering between gains and losses overnight as investors continue to digest the whipsaw moves across asset classes since last week’s Fed meeting and look ahead to more commentary from Chair Powell today.

There were no market-moving economic reports overnight.

Today, there is just one economic report to watch: Existing Home Sales (E: 5.715M) but the release is not likely to materially move markets.

That will leave investors focused on the Fed with several officials speaking today including: Mester (10:30 a.m. ET), Daly (11:00 a.m. ET), and Powell (2:00 p.m. ET). Powell’s testimony before Congress this afternoon will be the main event of the session as he is likely to discuss the Fed’s plans to balance rising inflation with the still fragile economic recovery.

Finally, there is a 2-Yr Treasury Note auction at 1:00 p.m. ET that could offer some insight into the market’s expectations for Fed policy as the short end of the yield curve has moved sharply higher since last week’s FOMC meeting.

Fed Day

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What’s in Today’s Report:

  • PPI – Where Will Inflation Settle?
  • Empire State Manufacturing Survey Misses Estimates
  • Retail Sales – Spending Shift from Goods to Services
  • A Warning Sign from Dr. Copper

Stock futures are flat this morning as a sense of Fed paralysis grips global markets ahead of the FOMC announcement while economic data disappointed overnight.

Chinese Fixed Asset Investment, Industrial Production and Retail Sales data all missed estimates for the month of May which resulted in Asian markets underperforming overnight.

Looking into this morning’s trading session, there are two lesser followed economic reports due to be released: Housing Starts (E: 1.630M) and Import & Export Prices (E: 0.7%, 0.7%) but neither release should move markets with the Fed looming.

The Biden-Putin meeting in Geneva will also get media attention but it is very unlikely to actually impact markets. Treasury Secretary Janet Yellen’s testimony before Congress regarding Biden’s budget (10:00 a.m. ET), however, could move markets as she will likely be discussing taxes and any hint of a material hike in capital gains rates or corporate tax rates could weigh on markets even ahead of the Fed.

Today’s main event for the markets will of course be the conclusion of the June Fed meeting with the FOMC Meeting Announcement at 2:00 p.m. ET and then Fed Chair Powell’s Press Conference at 2:30 p.m. ET. If anything causes tapering expectations to be pulled forward towards September or evidence emerges of plans to raise rates in 2022, that will be viewed as hawkish and cause significant volatility across assets classes. Otherwise, an “as expected” or dovish meeting outcome will likely result in equities continuing to trade at or near all-time highs.

FOMC Preview

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What’s in Today’s Report:

  • FOMC Preview
  • Gold Update: Technical Weakness Ahead of the Fed

Futures are little changed this morning as investors weigh dovish central bank developments against in-line inflation data in Europe as focus turns to U.S. data and the Fed.

The RBA minutes revealed policy makers are open to extending QE beyond the current September deadline while CPI reports in Europe all met estimates.

This morning is lining up to be a busy one from a potential catalyst standpoint with a slew of economic data due to be released including: PPI (E: 0.6%), Retail Sales (E: -0.4%), Empire State Manufacturing Index (E: 22.0), Industrial Production (E: 0.6%), and Housing Market Index (E: 83).

The June FOMC Meeting also begins today which will likely initiate a sense of market paralysis ahead of tomorrow’s announcement and Powell’s press conference however a 20-Year Treasury Bond auction at 1:00 p.m. ET could move Treasuries and ultimately impact stocks in the early afternoon.

Powell Speech Preview

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What’s in Today’s Report:

  • Powell Speech Preview
  • Can Strong Consumer Spending Prevent a Recession?

Futures are marginally higher following a quiet night as trader position ahead of the Powell speech later this morning.

Economic data was sparse overnight although core Japanese CPI met expectations at 0.6% y/y.

There was no trade news overnight although Kudlow (Director of the National Economic Council) said discussions between the U.S. and China were “productive” on Wednesday (although he always says that).

Today the big event is the Powell speech at 10:00 a.m. ET. From a market standpoint, the 10’s-2’s spread will tell us whether the speech is positive or negative for stocks.  If Powell is sufficiently dovish, then 10’s-2’s should widen out towards 5 basis points, and that should help stocks rally.  Conversely, if Powell is not sufficiently dovish, 10s’-2’s will invert, likely notably, and in that case, if could get a bit ugly for stocks in the afternoon.