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Market Multiple Levels: S&P 500

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What’s in Today’s Report:

  • What Does a Peace Deal Look Like?
  • Market Multiple Levels: S&P 500

Markets are trading with a clear risk-on tone today as U.S. stock futures track big gains in European shares, while both the dollar and oil decline on potential progress towards an end to the conflict between Russia and Ukraine.

Earlier today, Kremlin Press Secretary, Peskov, noted that sanctions by the West are making Russia “think carefully” about the situation and that Russia will continue with talks with Ukraine, spurring fresh optimism for a peace deal.

Looking into today’s session, there is one economic report to watch in the morning: JOLTS (E: 10.90M), and then a 10-Yr Treasury Note Auction at 1:00 p.m. ET.

The market’s main focus will remain Russia/Ukraine today as this morning’s risk-on money flows are being driven by perceived progress towards a ceasefire deal ahead of tomorrow’s scheduled talks in Turkey. And if news flow about the conflict is generally positive, oil continues to decline on fading geopolitical concerns, and the S&P 500 can top yesterday’s intraday highs, a relief rally could really gain momentum today.

Is the Ukraine Conflict a Threat to Stocks?

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What’s in Today’s Report:

  • Is Russia/Ukraine a Potential Major Bearish Event? (Good, Bad, and Ugly Scenarios)
  • Chart: S&P 500 Tipping Points to Watch

Stock futures are flat and international markets traded mixed through a quiet night of news however Treasury yields notably continued to grind higher overnight.

Economically, the January NFIB Small Business Optimism Index fell to 97.1 vs. (E) 97.5 but the release is not materially moving markets this morning.

Looking into today’s session, there is just one lesser followed economic report due out: International Trade in Goods (E: -$83.0B), which should not have a major impact on trading, while no Fed officials are scheduled to speak.

Earnings season is already beginning to wind down but a few notable releases today include: PFE ($0.85), BP ($1.18), and PTON (-$1.18).

Bottom line, investors are continuing to digest last week’s jobs print and looking ahead to the CPI report on Thursday as the main driver of the market remains central bank policy expectations. There is a 3-Yr Treasury Note auction at 1:00 p.m. ET today and with an otherwise quiet calendar the results could move markets (strong auction = dovish, stocks can rebound; weak auction = hawkish, volatility likely to rise).

Fed Wildcards to Watch

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What’s in Today’s Report:

  • Wildcards to Watch: Tapering Schedule and Balance Sheet Reduction
  • Chart: Inside Day in the S&P Underscores Trader Indecision
  • Technical Breakpoints for the Market Today

Stock futures are firmly higher as trader focus shifts ahead to the Fed while investors digest mostly upbeat earnings.

MSFT initially fell by 7%+ after earnings yesterday but a positive outlook by management during the investor call has helped shares turn positive and rise by more than 4%.

Looking into today’s session, there are two economic reports due out this morning: International Trade in Goods (E: -$95.1B) and New Home Sales (E 760K) but neither should move markets ahead of the FOMC Announcement (2:00 p.m. ET) and Fed Chair Press Conference (2:30 p.m. ET) which will be the main events today.

Earnings today include: BA (-$0.09), T ($0.76), FCX ($0.96), PGR ($0.99), TSLA ($2.26), INTC ($0.90), STX ($2.36), RJF ($1.77).

Bottom line, the market is coiled up after the volatile start to the week and whether the Fed is dovish or hawkish today will decide whether we see a relief rally or break down to new lows.

Fed Meeting Preview

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What’s in Today’s Report:

  • What to Make of Yesterday’s Selloff and Reversal
  • FOMC Preview
  • Chart: S&P 500 Measured Move Reached

Futures are trading off of the overnight lows but still down roughly 1% as yesterday’s volatile session is digested ahead of the Fed while IBM posted strong Q4 earnings yesterday and economic data largely met estimates overnight.

The FOMC meeting begins today which will increasingly capture trader focus ahead of tomorrow’s announcement and press conference.

Economically, we get two reports on the housing market this morning: the Case-Shiller Home Price Index (E: 1.0%) and the FHFA House Price Index (E: 1.0%) but Consumer Confidence (E: 111.9) will be the more important number to watch given the growing uncertainty about the state of the economic recovery. Another bad print like we saw with yesterday’s Composite PMI Flash could send stocks lower.

There is a 5-Yr Treasury Note auction at 1:00 p.m. ET and investors will be looking for strong demand (which would reflect dovish shifting Fed expectations) as we saw with yesterday’s 2-Yr auction which helped stocks bottom and reversed so sharply in intraday trade.

Finally, on the earnings front, we will hear from: JNJ ($2.12), VZ ($1.28), GE ($0.83), MMM ($2.03), and AXP ($1.78) before the open, and then MSFT ($2.29), TXN ($1.95), and COF ($5.14) after the close.

Sectors: Expensive, Cheap, and In Line With the S&P 500

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What’s in Today’s Report:

  • Sectors: Expensive, Cheap, and In-Line With the S&P 500
  • Chart: 10-Year German Bund Yield Turns Positive

U.S. stock futures are bouncing modestly after yesterday’s steep selloff as the surge in bond yields is showing signs of pausing after some mixed inflation data overnight.

German CPI met estimates of 0.5% in December, while U.K. PPI was 0.3% vs. (E) 0.6%, which is helping to ease some inflation concerns today.

Looking into today’s session, there is one economic report to watch: Housing Starts and Permits (E: 1.65M, 1.710M) while no Fed officials are scheduled to speak today.

There is a 20-Yr Treasury Bond auction at 1:00 p.m. ET that could spark another move in yields (a further rise in rates will continue to weigh on high valuation/growth tech stocks and the broader market while a pullback will open the door to a relief rally).

Finally, earnings season is continuing to pick up with BAC ($0.76), MS ($2.00), UNH ($4.30), PG ($1.65), and CFG ($1.61) all reporting ahead of the bell while UAL ($2.23), AA ($2.04), and DFS ($3.61) will release results after the close.

Bottom line, rising yields have been the biggest influence on stocks in recent sessions so it will take a stabilizing bond market and likely an additional positive catalyst or two (such as good earnings/good economic data) to see equity markets find their footing and rally today.

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.