If the dollar and Treasury yields continue to trend higher, it is only a matter of time before gold retests the 2022 lows…analysts at Sevens Report Research wrote in Monday’s newsletter. Click here to read the full article.
What’s in Today’s Report:
Futures are down close to 1% on follow through selling from Friday as hopes of a near term “Fed Pivot” continue to fade in reaction to Powell’s speech last week.
European shares are also sharply lower as tightening expectations for the ECB rose sharply on Friday. Markets are now pricing in a minimum 50 bps hike next week with a 75 bps hike a real possibility.
There were no notable economic reports overnight.
Markets dropped on Friday as Powell dismissed the idea of an imminent “Fed Pivot,” but the ECB also signaled more hawkish intentions on Friday, and it was the two events that combined to cause the ugly declines. Today there are no economic reports but there is an important Fed speaker, Brainard (2:15 p.m. ET) and if she echoes Powell’s comments from Friday, expect more losses in stocks.
What’s in Today’s Report:
Futures are modestly lower following a mostly quiet night ahead of Powell’s speech at 10:00 a.m. this morning.
Economic data was slightly underwhelmed as the German Gfk Consumer Climate declined to –36.5 vs. (E) -31.
The UK increased the electricity price cap for households by 80%, underscoring the impact of surging natural gas prices.
Today focus will be on the Powell speech at 10:00 a.m. and the market will be looking for Powell to tacitly endorse the “Fed Pivot” theory that’s helped stocks rally. Away from Powell, we also get two notable inflation readings via the Core PCE Price Index (E: 0.3% m/m, 4.7% y/y) and Consumer Sentiment (E: 55.1), but it will take a material surprise from either report to move markets today.
What’s in Today’s Report:
Futures are solidly higher following better-than-expected economic data and as markets continue to recoup Monday’s declines ahead of the Powell speech tomorrow.
Economic data was better than expected overnight as German GDP beat estimates (1.8% vs. (E) 1.4%) as did the IFO Business Expectations survey (80.3 vs. (E) 78.8).
On the Fed front, Bostic said the September rate hike was a 50/50 proposition between 50 bps or 75 bps, and that’s largely in line with market expectations.
Today’s focus will be on economic data via Jobless Claims (E: 255k) and Revised Q2 GDP (E: -0.9%) and markets will want to see a continued slow rise in jobless claims and a stable GDP report (so not materially worse than expected).
Additionally, while the official Fed speaker calendar doesn’t have any events today, we should prepare for a deluge of Fed commentary via the financial media (CNBC, FT, WSJ, Marketwatch, etc.) as the Jackson Hole conference begins. Barring any major surprise commentary, though, markets should look past Fed speak today and focus on Powell’s speech tomorrow.
What’s in Today’s Report:
Stock futures are flat and international markets were little changed overnight as currency and bond markets continued to stabilize with the focus remaining on the Jackson Hole Economic Symposium later in the week.
There were no notable economic reports overnight.
Today, no Fed officials are scheduled to speak leaving the focus on economic data early with Durable Goods Orders (E: 0.5%) and Pending Home Sales (E -2.5%) both due out early in the day.
Beyond those economic reports, there is a 5-Yr Treasury Note auction at 1:00 p.m. ET, and if it is as soft as yesterday’s 2-Yr Note auction, that could result in rising yields which would in turn weigh on stocks ahead of Jackson Hole. However, barring any meaningful moves in the currency and bond markets today, it should be relatively quiet as traders begin to position into Powell’s speech on Friday morning.
Bottom line, the market continues to view virtually all Fed utterances as implying a less-hawkish pivot and Wednesday wasn’t any exception as the FOMC minutes erased the dollar’s earlier gains and cut the rise in Treasury yields as stocks continue to ignore signals from the currency and bond markets that imply the Fed will not be making this hoped for pivot anytime soon, wrote Tom Essaye of The Sevens Report. Click here to read the full article.
What’s in Today’s Report:
Futures are moderately lower following mixed economic data and after a WSJ article warned the market was underestimating Fed conviction on rate hikes.
Economically, German PPI surged 37.2% vs. (E) 30.9% y/y on exploding electricity costs while UK Retail Sales fell –3.4% vs. (E) -3.3%. Both numbers highlight the economic challenges facing the EU and UK.
A WSJ article warned of a “reckoning” for stocks as markets think the Fed is bluffing about further hikes and that’s weighing on sentiment this morning.
Today there are no notable economic reports but there is one Fed speaker, Barkin at 9:00 a.m. ET, and if he echoes this disconnect between Fed intentions and market expectations for rates, that will further pressure stocks today.
What’s in Today’s Report:
Futures are modestly lower this morning as investors digest more downbeat economic data and disappointing earnings out of HD ahead of the Fed Minutes tomorrow.
The German ZEW Survey’s Economic Sentiment reading was -55.2 vs. (E) -52.7, underscoring ongoing concerns about the outlook for growth in the months ahead.
Looking to today’s session, there are two economic reports to watch: Housing Starts and Permits (1.540M, 1.650M) and Industrial Production (E: 0.3%). Data has been disappointing so far this week so any positivity in the releases could help buoy equities in what has been so far a pretty quiet trading week.
There are no Fed officials scheduled to speak today but WMT ($1.60) will report earnings in the pre-market and investors will be looking for the massive retailer to reiterate guidance and meet or beat estimates to provide evidence that the consumer remains resilient in the face of extremely high inflation. Any disappointment in the quarterly results could spur volatility given the most recent leg higher in stocks leaving the market overbought.
Data released this week suggests that inflation may have peaked, allowing the Federal Reserve to be less aggressive when boosting interest rates…Tom Essaye, founder of Sevens Report Research said Friday that the S&P 500’s current level reflects that growing sentiment. Click here to read the full article.
What’s in Today’s Report:
Futures are modestly lower after Chinese economic data missed estimates and the Chinese central bank cut rates in response.
Chinese economic data was soft as Industrial Production (3.8% vs. (E) 4.3%) and Retail Sales (2.7% vs. (E) 4.9%) both missed estimates. In response, China’s central bank announced a surprise 10 bps rate cut, a move that signals economic concern but also doesn’t offer a lot of help (a 10 bps cut won’t make a difference as long as “Zero COVID” is an in-force policy).
Focus today will be on the August Empire Manufacturing Survey (E: 5.0) and specifically the price index within the report. The sharp drop in that price index kicked off the “peak inflation” rally of the last month, so markets will be looking for continued signals that growth is stable (so a solid headline reading) and inflation is falling (another drop in the price index).
We also get the July Housing Market Index (E: 55.0) and we have one Fed speaker, Waller (10:50 a.m. ET), but they shouldn’t move markets.