From a Fed standpoint, obviously they cannot even think about stopping until this [inflation] number gets down to something more tenable…said Tom Essaye, a trader and founder of financial research firm The Sevens Report. Click here to read the full article.
What’s in Today’s Report:
Futures are slightly lower following a mostly quiet night of news as markets await a deluge of economic data later this morning.
The most notable headline overnight was that negotiators have reached a tentative deal to avoid a U.S. rail strike, although this was never a major concern for markets so the headline isn’t causing a rally.
There were no notable economic reports overnight.
Today the market will be focused on economic data and the key reports will be Jobless Claims (E: 227K), Philadelphia Fed Manufacturing Index (E: 3.5), and the Empire State Manufacturing Index (E: -14.5) as they give us the latest insights into growth and inflation. If the price indices in Empire and Philly drop notably, that’ll help offset some of the concerns on inflation from the CPI report.
Other data today includes Retail Sales (E: 0.0%) and Industrial Production (E: 0.2%) but they’ll have to be material surprises to move markets.
What’s in Today’s Report:
Stock futures are extending recent gains this morning while the dollar continues to fall ahead of today’s CPI report.
In Europe, German CPI for August was unchanged at 7.9% y/y which met expectations and is being well-received by investors ahead of today’s U.S. inflation data.
Domestically, the NFIB Small Business Optimism Index came in at 91.8 vs. (E) 90.5, underscoring the resilience of the U.S. economy in the face of Fed policy tightening so far.
Today, the main event will be the release of the August CPI data (E: -0.1% m/m, 8.1% y/y) ahead of the open. If the data is inline or below estimates, specifically the core figure, then stocks should be able to extend the recent rally as expectations for the “terminal rate” will likely fade lower however a hot print could send yields and the dollar sharply higher and cause a potentially sharp reversal of the recent gains.
The only other potential catalyst today is a 30-Yr Treasury Bond auction at 1:00 p.m. ET. Yesterday’s 3-Yr and 10-Yr auctions did notably move Treasury markets as yields jumped but stocks shrugged off the soft auction outcomes with focus on today’s CPI. If the 30-Yr auction is weak and yields move higher with the CPI data already released as of this morning, that could act as a strengthening headwind on equities in the afternoon.
What’s in Today’s Report:
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.
Banks only do that when they think that default rates, which are currently low, will start to rise…wrote Tom Essaye, founder of Sevens Report Research. Click here to read the full article.
What’s in Today’s Report:
Futures are slightly higher mostly on momentum from Thursday’s close, following a quiet night of news.
The global trend in central banks turning more hawkish continued overnight as the Reserve Bank of India left rates unchanged (as expected) but warned that inflation was too high.
Geopolitically, a Kremlin spokesman said that Russia hoped to end its “operation” in Ukraine in the coming days or weeks, although analysts are skeptical of the promise.
Today there are no notable economic reports nor any Fed speakers, so between the sparse calendar and the Masters, I’d expect a relatively slow day. That said, if we get any geo-political headlines from Russia that imply a sooner than expected cease-fire, then stocks can extend Thursday’s rally.
We must acknowledge the challenges ahead, and be ready with a plan to insulate ourselves from volatility and protect portfolios…wrote Tom Essaye, founder of Sevens Report Research. Click here to read the full article.
Inflation has to stop going up. I know that sounds overly simplistic, but the bottom line is that for the past several months, markets and the Fed have seen ‘hints’ of a peak in inflation pressures, yet that wasn’t reality…said Tom Essaye, founder of Sevens Report Research. Click here to read the full article.
What’s in Today’s Report:
Futures are slightly lower following Wednesday’s rally and ahead of this morning’s CPI report.
Governments and central banks pushed back a bit overnight on the global hawkish narrative as the European Commission predicted inflation would return to 1.7% yoy in 2023 while the Swedish National Bank was dovish in its commentary (no rate hikes or QT anytime soon).
Economic data was sparse overnight although Chinese money supply did beat estimates, reflecting the continued accommodation in that economy.
Today the key event is the CPI Report (E: 0.5% m/m and 7.3% y/y) and an in-line or smaller than expected increase will likely spur a further rally in stocks as markets try and price in a “not as hawkish as feared” Fed (although we’d be skeptical of that rally – more on that in the Report). We also get Jobless Claims (E: 230K) and one Fed speaker this evening: Barkin at 7:00 p.m. ET.
For stocks to stabilize and rebound, they need one, the Fed to stop providing hawkish surprises. Two, inflation data to peak and recede. And three, economic data to remain firm to…said Tom Essaye, founder of Sevens Report Research. Click here to read the full article.
