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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.

Tom Essaye Quoted in MarketWatch on July 10, 2019

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“Powell has a tough job ahead of him. The market is pricing in a 97% chance of a July rate cut, and a 75% chance of one in September.” says the Seven Report’s Tom Essaye. Click here to read the full MarketWatch article.

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Finding Attractive Risk/Reward in This Market

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What’s in Today’s Report:

  • Why Powell Was Dovish
  • Where Can We Find Attractive Risk/Reward?  Emerging Market Bonds
  • Energy Outlook (Slightly Positive)

Futures are marginally higher thanks to continued momentum from yesterday’s dovish rally.

Economic data was sparse overnight as the only notable number was German CPI, which met expectations at 1.6% yoy.

Today will be a busy day.  First, we get the 2nd half of Powell’s testimony in front of the Senate Banking Committee at 10:00 a.m. ET, but that shouldn’t yield any surprises as it’s mostly a repeat of yesterday.

The ECB Minutes will be released at 7:30 a.m. ET and if they hint at a re-start of QE (which they probably will) then we might see an extensions of this “dovish” rally.

On the data front, CPI (E: 0.0%) and Jobless Claims (E: 216K) both get released later this morning but given the flood of dovishness inundating markets right now from global central banks, it’d take a very strong CPI and very high jobless claims to hit stocks.

Finally, there are multiple Fed speakers today besides Powell, but they are all generally overshadowed by the comments yesterday so the market should largely ignore their speeches.  Today’s roster includes: Williams (11:00 a.m., 1:30 p.m. ET), Quarles (1:30 p.m. ET), Kashkari (5:00 p.m. ET).

Tom Essaye Quoted in MarketWatch on May 2, 2019

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Tom Essaye quoted in MarketWatch on May 2nd 2019. After Powell’s news conference, investors were “left with a market lacking a material, positive catalyst at the moment and one at the top of reasonable valuations…” said Tom. Click here to read the full article.

Fed Takeaways

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What’s in Today’s Report:

  • Fed Decision Takeaways
  • Why the Italian Budget Matters to You

Futures are slightly higher following a generally uneventful night as markets digested the Fed decision.  Importantly, there was no major follow through to Wednesday’s late sell off.

Economic data didn’t contain any surprises as German Gfk Consumer Climate beat estimates (10.6 vs. (E) 10.4).

Today there are multiple economic reports including Durable Goods Orders (E: 2.2%), Final Q2 GDP (E: 4.3%), Jobless Claims (E: 216K) and Pending Home Sales (E: 0.0%) as well as two Fed speakers, Kaplan (2:00 p.m. ET), Powell (4:30 p.m. ET).  But, Powell just spoke at length yesterday so he shouldn’t say anything too surprising.  Meanwhile, unless we get a very disappointing Durable Goods report, the economic data shouldn’t move markets.

Instead, the Italian budget will be the most important event today, and if the budget deficit prints above 2.5%, that likely will weigh on the euro and boost the dollar, which could be a headwind for stocks.

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