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Where Is the Fed Put?

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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.

Tom Essaye Quoted in Barron’s on October 25, 2021

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S&P 500, Dow Notch Record Highs Ahead of Tech Earnings

Companies have cited margin issues and supply chain disruptions, but so far managements have…wrote Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

Tom Essaye Quoted in News Nation USA on October 8, 2021

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Big Tech’s Stocks Have Bounced Back. But They’re Not Out of The Woods Yet.

If tech is facing headwinds, then the S&P 500 itself will have a hard time rallying since…wrote Tom Essaye of Sevens Report in a note last week. Click here to read the full article.

 

Tom Essaye Quoted in Barron’s on October 20, 2021

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The S&P 500 Makes a Comeback. The Funk Is Coming to an End.

Earnings season has been better than expected so far and that has been the main driver of the…wrote Tom Essaye, founder of Sevens Report Research. Click here to read the full article. 

Market Multiple Levels: S&P 500 Chart

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What’s in Today’s Report:

  • Market Multiple Levels: S&P 500 Chart

U.S. equity futures fell with global stocks overnight amid ongoing stagflation fears but optimism that the House will pass the debt ceiling bill today has helped stocks stabilize.

Economically, the German ZEW Survey slightly missed estimates while the NFIB Small Business Optimism Index was 99.1 vs. (E) 99.5 but neither report is materially moving markets this morning.

Looking into today’s session, there is just one economic report to watch: August JOLTS (E: 11.013M) but it would take a meaningful surprise in the release to impact markets as it is a very dated report.

Meanwhile, there are no Fed officials scheduled to speak but there are two notable Treasury auctions to watch: 3-Yr Note (11:30 a.m. ET) and 10-Yr Note (1:00 p.m. ET).

Outside any potential surprises from Congress regarding the bill to raise the debt limit, if we see rates continue to accelerate higher on inflation worries today, then stocks could remain volatile and potentially test last week’s lows.

Technical Levels to Watch Today

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What’s in Today’s Report:

  • Technical Update: Key Support and Upside Targets for the S&P 500

Markets are trading with a risk-on tone this morning after some positive Evergrande developments while focus continues to shift to the conclusion of today’s Fed meeting.

Evergrande announced overnight that the company would not default on a bond payment due tomorrow (but details were vague) while the PBOC injected 120B yuan of liquidity into the system helping ease financial conditions overnight.

Today there is one economic report due out early: Existing Home Sales (E: 5.90M), but the primary market focus will be the FOMC Meeting Announcement (2:00 p.m. ET) followed by the Fed Chair Press Conference (2:30 p.m. ET).

With regard to the Fed, any outcome that meets our “What’s Expected” or “Dovish If” outcomes from yesterday’s FOMC Preview will likely trigger a further relief rally while a “Hawkish If” scenario has the potential to spur another wave of elevated volatility with a high likelihood of stocks testing Monday’s lows.

Tom Essaye Quoted in Benzinga on September 9, 2021

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Key S&P 500 Levels To Watch As Market Endures 4th Straight Day Of Losses

And though that seems like another big leg higher for the S&P 500, it is only an additional 9% beyond the current record highs, something that is definitely within reason…Tom Essaye said, founder of Sevens Report Research. Click here to read the full article.

Tom Essaye Quoted in Barron’s on August 16, 2021

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Dow, S&P 500 Notch Records, Overcoming Earlier Slide

A political negative for Biden which could hurt the chances any infrastructure bill is passed…wrote The Seven Report’s Tom Essaye. Click here to read the full article.

Tom Essaye Quoted in Yahoo Finance on August 12, 2021

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3 Things That Could Send The S&P 500 Down 20%

The consensus expectations for the Federal Reserve monthly asset purchasing is that the Fed will announce a plan for tapering sometime in…Essaye said. Click here to read the full article.

Market Multiple Levels: S&P 500 Chart

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What’s in Today’s Report:

  • Market Multiple Levels: S&P 500 Chart
  • NFIB Small Business Optimism Index: Labor Market Issues Remain a Headwind

Futures are slightly lower while global shares extended recent gains overnight ahead of key inflation data and more progress on U.S. infrastructure and spending plans.

After passing the bipartisan $1.2T infrastructure bill yesterday, the Senate narrowly passed a $3.5T spending plan aimed at fighting climate change and poverty overnight however neither of the bills is likely to be taken up in the House until after the summer recess in September.

Economically, German CPI met estimates of 0.9% in July which did not have a material impact on markets.

Today, the focus will be on economic data early with the July CPI report due out ahead of the bell (E: 0.5% m/m, 5.5%y/y).

Then after the open, there are a couple of Fed speakers to watch: Bostic (10:30 a.m. ET) and George (12:00 p.m. ET). The narrative has been shifting slightly more hawkish recently so look for a continuation of that trend in the speeches which may cause a further rise in Treasury yields today.

Finally, in the early afternoon, there is a 10-Yr Treasury Note auction at 1:00 p.m. ET. If the outcome is weak (tails) expect a continued move higher in longer maturity yields that will have some degree of hawkish impact across asset classes while a strong auction would likely see yields pull back from their recent gains which would likely offer a boost to growth/tech stocks.