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Three Catalysts in Focus

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What’s in Today’s Report:

  • What Can Break the S&P 500 Out of the Current Trading Range? Three Candidates
  • ISM Manufacturing Index Takeaways (Fairly “Goldilocks”)
  • OPEC+, Oil Prices, Inflation, the Economy, and Fed Policy – They’re All Tied Together

U.S. stock futures are tracking European markets higher this morning thanks to a cooler-than-expected inflation print in Europe while news flow was otherwise mostly quiet overnight.

Economically, Eurozone PPI for February came in at -0.5% vs. (E) -0.3% m/m but a still lofty 13.2% vs. (E) 13.5% y/y. Despite the still elevated annual figure, the lower than expected print is bolstering risk assets this morning.

Today, there are three economic reports to watch in the U.S. including: Motor Vehicle Sales (E: 14.9 million), Factory Orders (E: -0.4%), and JOLTS (E: 10.4 million). Investors will want to see more evidence of slowing growth and a weakening labor market to reinforce hopes for both a less-hawkish Fed and soft landing in order for the recent stock market resilience to continue.

Finally, there is one Fed speaker to watch late in the day: Mester (6:45 p.m. ET).

Tom Essaye Quoted in Barron’s on March 24th, 2023

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Stocks Gain as Volatile Week Ends

“Bottom line, banks have reemerged as the primary influence on markets in the back half of the week and if the weakness in the sector continues today, stocks will have a very hard time extending yesterday’s modest bounce,” says Tom Essaye, the founder of Sevens Report Research. Click here to read the full article.

Does Dow Theory Outperform? (Yes)

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What’s in Today’s Report:

  • A Good Question on Dow Theory Returns Over the Years

Stock futures are little changed this morning while bond yields are moving higher with the 2-Yr Note yield notably trading above 4% as banking fears continue to ease although markets still remain on edge.

There were no market moving economic reports overnight and news wires were generally quiet.

Looking into today’s session, there are several economic reports due to be released in the U.S. including: International Trade in Goods (E: -$90.0B), Case-Shiller Home Price Index (E: 3.7%), FHFA House Price Index (E: -0.2%), and Consumer Confidence (E: 101.0).

Shortly after the open, the Fed’s Barr will testify before the Senate beginning at 10:00 a.m. ET regarding the recent banking turmoil and state of the financial industry. Any negative comments or developments during the testimony that weighs on bank shares will very likely drag down the broader market.

Looking to the afternoon, there is a 5-Yr Treasury Note auction at 1:00 p.m. ET that could impact the broader bond market and move stocks.

Market Multiple Table Chart

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What’s in Today’s Report:

  • Market Multiple Table Chart
  • Update on Credit Suisse
  • An Important Difference Between Now and 2008

Futures are little changed despite the Swiss National Bank providing Credit Suisse (CS) liquidity, as that news isn’t eliminating general market anxiety.

Credit Suisse is rallying more than 20% pre-open after it was granted a $54 billion credit line from the Swiss National Bank.

Despite the positive CS news, investors remain very nervous and jittery about U.S. regional banks (especially FRC).

Today is an important day as there are numerous potentially market moving events this morning, with the most important being the ECB Decision (E: 50 bps hike). Markets will want to see the ECB “blink” in the face of market turmoil and hike less than 50 bps.  If the ECB sticks to a 50 bps hike, don’t be shocked to see more volatility today.

Economically, the hope that the Fed “blinks” and does not hike 25 bps next week has helped support stock and bond markets this week, so investors will want to see today’s economic data come in soft enough to make no hike more likely next week.  Key reports today are, in order of importance: Philly Fed (E: -15.8), Jobless Claims (E: 205K), Housing Starts (E: 1.315M).

Why Bank Stocks Dropped Sharply Yesterday

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What’s in Today’s Report:

  • What’s Happening with the banks, Silvergate and Silicon Valley Bank

Futures are slightly lower following Thursday’s steep afternoon selloff and as nervous investors look ahead to the jobs report.

Economically  German CPI met expectations (8.7% y/y).

Silicon Valley Bank (SIVB), which is now at the heart of the crypto/VC bank turmoil, fell farther overnight and that stock needs to stabilize for markets to recoup yesterday’s losses.

Today there are two important events to watch.

The first is the jobs report, and expectations are as follows:  E: 215K Job Adds, 3.4% Unemployment Rate, 0.3% m/m/4.7% yoy Wages.  Especially after yesterday’s selloff, markets need a “Just Right” number to reduce rate hike expectations.  Second, markets will be looking for a business update from SIVB about their capital raise and sustainability going forward, and if the bank shored up its finances, that would likely create a solid rally in stocks.

What’s Making Stocks So Resilient?

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What’s in Today’s Report:

  • What’s Making Stocks So Resilient (And Is It A Bullish Signal?)
  • Weekly Market Preview:  Will Powell be hawkish and will jobs data stay hot?
  • Weekly Economic Cheat Sheet:  All about employment (JOLTS, ADP and Jobs Report on Friday).

Futures are little changed following a quiet weekend and as investors look ahead to an important week of catalysts (Powell speeches and employment reports).

China released updated growth expectations for 2023 of “around 5%” and that’s slightly under estimates and was a mild disappointment.

Economic data was solid overnight as Euro Zone Retail Sales (1.0% vs. (E) 0.3%) and UK Construction PMI (54.6 vs. (E) 49.1) both beat estimates.

Today expect digestion of last week’s rally as there are no material economic reports or Fed speak, as markets look ahead to Powell’s testimony tomorrow.

The Three Assumptions Supporting Stocks

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What’s in Today’s Report:

  • The Three Assumptions Supporting Stocks
  • Weekly Economic Cheat Sheet (All About Inflation and Growth This)
  • Weekly Market Preview:  Can Stocks Continue to Ignore Rising Bond Yields?

Futures are little changed following a mostly quiet weekend of news as markets look ahead to tomorrow’s CPI report.

The only notable economic report overnight was better than expected growth and inflation updates from the European Commission, who now sees EU growth rising 0.9% this year (up from 0.3%) and inflation at 5.6% (down from the previous 6.1%).  These revised estimates are helping to bolster the “No Landing” economic scenario.

Markets should mostly be in a holding pattern today as the CPI report looms tomorrow morning, but there are two notable events on the calendar to watch:  New York Fed Inflation Expectations (One Year: 5.0%, Five-Year: 2.4%) and one Fed speaker:  Bowman (8:00 a.m. ET).  If inflation expectations are higher than before or Bowman is hawkish, that could mildly pressure stocks.

Has the Market Priced in Peak Hawkishness?

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What’s in Today’s Report:

  • Has the Market Already Priced in Peak Hawkishness?
  • Weekly Market Preview:  Why This is the Most Important Week of Q1
  • Weekly Economic Cheat Sheet:  Fed on Wed, Jobs on Friday (It’s a busy week!)

Futures are moderately lower following a hotter-than-expected Spanish CPI report and as markets look ahead to a week filled with potential market-moving events.

Spanish CPI rose 5.8% vs. (E) 4.8% y/y and that is challenging the idea that disinflation is accelerating, and stocks are dropping as a result.

Investors are also booking profits ahead of a key week of catalysts including Fed/ECB/BOE rate meetings, critical earnings reports (this is the most important week of earnings), and the monthly jobs report on Friday.

This week is very, very busy from an economic standpoint between the Fed on Wednesday, jobs report on Friday, ISM PMIs and key inflation readings.  But, all the important reports start tomorrow so today’s focus will be on the earnings, and some notable reports today include NXPI ($3.60) and WHR ($3.43) which will give us insight into semi-conductor production (any more shortages?) and consumer demand.

CPI Preview

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What’s in Today’s Report:

  • CPI Preview: Focus on the Core Figure
  • Chart – Gold Moving Higher in Well Defined Uptrend

U.S. stock futures are tracking global shares higher in moderate risk-on trading this morning as investors look past Powell’s lack of commentary of monetary policy plans yesterday and await tomorrow’s all-important CPI data.

Economically, Retail Sales reports in both Australia and Italy handily beat expectations overnight, adding to optimism for a global economic soft landing.

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

That leaves just one potential market catalyst today, a 10-Yr Treasury Note auction at 1:00 p.m. ET. And while it is possible a surprise outcome in the auction moves yields and causes some modest moves in equities in the afternoon, the session is likely to be mostly quiet as traders position into the CPI report.

Jobs Day

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What’s in Today’s Report:

  • Why Yesterday’s Employment Data was Bad for Stocks and Bonds
  • Answering a Question About the Bond Market

Futures are little changed ahead of the jobs report and following mixed European economic data.

EU HICP (their CPI) was disappointing on balance as the headline rose less than expected (9.2% vs. (E) 9.5%) but the more important Core HICP gained 5.2% vs. (E) 5.0%. This report partially refutes the encouraging inflation data from earlier this week.

Today focus will be on the Jobs Report and expectations are as follows:  Job Adds 200K, UE Rate 3.7%, Wages 0.4% m/m, 5.0% y/y.  If we get another solid number above 200k, expect more weakness in stocks and bonds as that will be viewed as “hawkish” data, while a job adds number close to 100k could spark a sharp rally, given yesterday’s declines.

The jobs report isn’t the only important economic report today, however, as the ISM Services Index (E: 55.0) is released later this morning.  Markets will want to see a moderation in both the headline and prices readings.

Finally, there are three Fed speakers today:  Cook (11:15 a.m. ET), Bostic (11:15 a.m. and 3:30 p.m. ET), and Barkin (12:15 p.m. ET).