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What’s Driving Stocks

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What’s in Today’s Report:

  • What’s Driving Stocks
  • Natural Gas Update (New Highs Ahead?)

Futures are slightly higher following a generally quiet night of news as oil declined modestly and there was no further escalation in the Russia/Ukraine war.

Economic data disappointed overnight as UK Retail Sales missed estimates (-.3% vs. (E) 0.7%), while German IFO Business Expectations plunged to 85.1 vs. (E) 92.4, reflecting uncertainty related to the Russia/Ukraine war.

Today’s focus will be on the Consumer Sentiment Report (E: 59.7) and specifically the Inflation Expectations index, and if five-year inflation expectations move meaningfully above 3%, that will put a headwind on stocks.   Pending Home Sales (E: 0.9%) is the other notable report today, but it shouldn’t move markets.

From the Fed we have multiple speakers, including Williams (10:00 a.m. ET), Daly (11:00 a.m. ET), Barkin (11:30 a.m. ET) and Waller (12:00 p.m. ET) but as long as they stick to the current “script” of being open to a 50 bps hike at the May meeting (but not calling for even more) then they shouldn’t move markets.

Is the 10’s-2’s Spread Outdated?

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What’s in Today’s Report:

  • Is the 10’s-2’s Spread Outdated?
  • EIA Analysis and Oil Market Update (Prices Back Near the Recent Highs)

Futures are modestly higher following good economic data and as oil didn’t continue Wednesday’s rally (at least not overnight).

Economic data was solid as both the March EU Flash Composite PMI (54.5 vs. (E) 54.1.) and the UK Flash Composite PMI (59.7 vs. (E) 58.7) beat estimates, implying the Russia/Ukraine war wasn’t materially slowing growth.

Today focus will be on economic data, specifically the March Flash PMIs (E: 56.7).  With inflation still high and the Fed threatening a 50 bps hike in May, the PMIs need to give markets a “goldilocks” number to extend the early rally, as a “Too Hot” number will invite even more Fed tightening, while a “Too Cold” number will increase stagflation risks.  Outside of the PMIs, we also get Jobless Claims (210K) and Durable Goods (E: -0.5%) although they shouldn’t move markets.

From the Fed today we get Kashkari (8:30 a.m. ET), Waller (9:10 a.m. ET) and Bostic (11:00 a.m. ET) and of the three, Waller is the most important (he’s Fed leadership and if he hints at a 50 bp hike expect that to mildly weigh on stocks).

Sevens Report Co-Editor Tyler Richey Quoted in Market Watch on March 17, 2022

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Oil futures finish higher to climb back above $100 a barrel

Upwards of 3 million barrels a day in Russian oil supply could be lost in the coming weeks, and “fading optimism” for a ceasefire deal between Russia and Ukraine drove gains for oil Thursday, said Tyler Richey, co-editor at Sevens Report Research. Click here to read the full article.

The Real Impact of Rising Rates

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What’s in Today’s Report:

  • What’s the Real Impact of Rising Rates?
  • Chart: 5-Year Inflation Expectations Hit New Highs

Stock futures are modestly lower with EU shares this morning as traders digest the strong post-Fed rally amid hawkish Fed speak and still elevated tensions surrounding Ukraine.

Geopolitically, talks of new sanctions on Russia by the West, including on the energy sector, are acting as a mild headwind on risk assets today.

Economically, the latest U.K. inflation data ran hot with CPI jumping to 6.2% vs. (E) 5.9% in February, a fresh 30-year high.

Today, there is one economic report due out: New Home Sales (E: 810K) but it shouldn’t move markets leaving focus on the Fed as Chair Powell is scheduled to speak at 8:00 a.m. ET. Loretta Mester and Mary Daly will also speak at 10:00 a.m. ET and 11:45 a.m. ET, respectively.

Finally, there is a 20-Year Bond auction at 1:00 p.m. ET that could move Treasury yields.

Bottom line, stocks are showing some signs of exhaustion after a strong one-week rally in the wake of the March Fed meeting, and any additionally hawkish Fed speak or negative news flow surrounding the Ukraine war could see the selling pressure pick up as near term traders book profits on recent gains.

Can the Rally Keep Going?

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What’s in Today’s Report:

  • Weekly Market Preview:  Can the Rally Keep Going?
  • Weekly Economic Cheat Sheet:  Flash PMIs Are the Key Number This Week

Futures are slightly lower following a generally quiet weekend as investors digest last week’s gains.

The Russia/Ukraine war continued with no notable progress towards a cease-fire over the weekend and hope for a near-term peace is fading.

Economically, the only notable report was German PPI, which encouragingly missed expectations, rising 1.4% m/m vs. (E) 1.7% m/m.

Today there are no economic reports and just one Fed speaker, Bostic at 8:00 a.m. ET, and he shouldn’t move markets.  So, focus will remain on Russia/Ukraine, and any hints of progress towards a ceasefire will help extend the rally, while any additional escalation will be a headwind on stocks.

What the Fed Decision Means for Markets

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What’s in Today’s Report:

  • Fed Meeting Takeaways
  • What the Fed Meeting Means for Markets

Stock futures are lower and oil is back above $100/barrel this morning amid negative comments from Russia about Ukraine negotiations while the yield curve continues to flatten post-Fed.

This morning, the Kremlin said that reports of progress in talks are “wrong” and Biden saying Putin is a “war criminal” is “unforgivable” which has sparked risk off money flows over the last hour.

Economically, Eurozone HICP rose 5.9% vs. (E) 5.8% Y/Y bolstering concerns about high inflation which has further flattened the yield curve in early trade.

Today, we will get several important economic reports including: Jobless Claims (E: 218K), Housing Starts (E: 1.70M), Philadelphia Fed Manufacturing Index (E: 15.0), and Industrial Production (E: 0.5%). There are no Fed speakers today.

Bottom line, the Fed is continuing to be digested today but focus has largely returned to Russia-Ukraine. And if the odds for a peace deal deteriorate meaningfully, expect at least a portion of yesterday’s big rally to be given back. Additionally, if economic data continues to indicate stagflationary trends emerging, risk assets could trade with a heavy tone.

Economic Breaker Panel: March Update

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What’s in Today’s Report:

  • Economic Breaker Panel – March Update
  • Empire State Manufacturing Index and PPI Takeaways

U.S. stock futures are trading higher by more than 1% amid new stimulus optimism and progress towards a ceasefire in Ukraine ahead of today’s FOMC announcement.

The Hang Seng led Asian markets higher with a 9.1% gain o/n after the Chinese government pledged new stimulus to combat slowing economic growth trends while covid-19 cases showed signs of peaking.

In Europe, both Russian and Ukrainian negotiators have reported progress in talks as the possibility of a “neutrality model” for Ukraine has been introduced.

Looking into today’s session there are a few economic reports to watch early including: Retail Sales (E: 0.4%), Import & Export Prices (E: 1.5%, 1.3%), and the Housing Market Index (E: 81) but none should materially move markets given the geopolitical backdrop and looming rate hike from the Fed.

From there, focus will turn to the conclusion of the Federal Reserve meeting with the FOMC Announcement at 2:00 p.m. ET, and Powell’s Press Conference 2:30 p.m. ET. A 25 basis point hike is fully priced in for today’s meeting however any insight as to the pace of hikes going forward (dot plot) or plans for QT will move markets and the “less-hawkish” the better for equity markets.

FOMC Preview

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What’s in Today’s Report:

  • FOMC Preview

Stock futures are modestly lower this morning as investors continue to monitor the war in Ukraine and rising tensions between the U.S. and China surrounding the conflict.

Geopolitically, a new round of talks is scheduled between Russia and Ukraine today while the U.S. has warned China over providing Russia with military support.

Economically, several Chinese data points handily beat estimates overnight but the data was overshadowed by a sharp rise in Covid-19 cases in various regions of the country while European data came in below estimates this morning. With geopolitics still dominating news wires and the Fed meeting coming into focus, however, none of the data materially moved markets overnight.

Today, there are two economic reports to watch ahead of the bell: PPI (E: 1.0%, 10%) and Empire State Manufacturing Index (E: 8.0), and with the March FOMC meeting getting underway, the inflation data will be closely watched and could cause a dovish/hawkish reaction across asset classes ahead of tomorrow’s announcement.

Bottom line, Ukraine headlines will still move markets today and any progress towards a ceasefire will be well-received however expect a sense of Fed paralysis to increasingly grip the markets as the day goes on and traders position into the first rate hike in years.

Tom Essaye Quoted in Barron’s on March 11, 2022

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The Dow Fell After Putin Cited ‘Positive Shifts.’ Here’s What Else Happened in the Stock Market Today.

Investors took profits on Friday while they could ahead of the weekend…explained Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

 

Updated Near-Term Market Outlook

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What’s in Today’s Report:

  • Updated Near-Term Market Outlook
  • Weekly Economic Cheat Sheet

U.S. stock futures are trading higher with European shares amid renewed hopes of a ceasefire in Ukraine while Asian markets declined overnight on new Covid-19 lockdowns.

Geopolitically, Russia continued with aggressive military attacks against Ukraine over the weekend but diplomatic negotiators noted solid progress in ceasefire discussions which is helping risk assets bounce this morning.

There are no economic reports today and no Fed officials are scheduled to speak.

The Treasury will hold an auction for both 3-month and 6-month Bills at 11:30 a.m. ET today which may shed some light on the market’s current outlook for near-term Fed policy. And if shorter duration rates rise in the wake of the auctions, that could weigh on stocks as the Fed meeting comes into focus.

Bottom line, markets are still very much focused on Russia and Ukraine right now and for stocks to meaningfully bounce today, we will need to see real progress towards a ceasefire. Conversely, a deteriorating situation in Ukraine could see stocks retest multi-month lows to start the week today.