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December Economic Breaker Panel

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What’s in Today’s Report:

  • December Economic Breaker Panel – Are Economic Clouds Gathering on the Horizon?

Futures are little changed following a quiet night as investors digest the recent volatility and look ahead to the holiday at the end of the week.

Economic data was sparse overnight and the only notable report was UK GDP which slightly missed estimates (1.1% vs. (E ) 1.3%) although that’s not moving markets.

The Omicron outlook remained unchanged, as cases continued to surge but hospitalizations remain low, and as long as that’s the case market fallout will be limited.

Today we get three economic reports including Final Q3 GDP (E: 2.1%), Consumer Confidence (E: 110.7) and Existing Home Sales (E: 6.510M) but unless they provide a major surprise they won’t move markets. So, with the holiday quickly approaching and tomorrow’s Core PCE Price Index the only remaining “big” report of the week, and we’d expect both liquidity and activity to begin to decline into the weekend starting today.

 

Annual Discounts on Sevens Report, Alpha and Quarterly Letter

We’ve continued to be contacted by advisor subscribers who want to use the remainder of their 2021 pre-tax research budgets to extend their current subscriptions, upgrade to an annual (and get a month free), or add a new product (Alpha or Quarterly Letter).

If you have unused pre-tax research dollars, we offer month-free discounts on all our products. If you want to extend current subscriptions or save money by upgrading to an annual subscription (across any Sevens Report product), please email:  info@sevensreport.com.

Why Stocks Have Dropped

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What’s in Today’s Report:

  • Why Are Stocks Dropping?
  • Nasdaq Composite Chart: Below the 100 Day Moving Average

U.S. futures are rebounding with global shares after the U.K. decided against new lockdown measures due to Omicron while there is renewed hope for Biden’s spending bill.

Reports of a late Sunday call between Biden and Manchin, after Manchin announced that he would not support the bill on live TV, have revived hopes for the potential passage of Build Back Better in the weeks ahead.

The German GfK Consumer Climate Index fell to -6.8 vs. (E) -2.5 for January which points to a further deterioration in consumers’ outlook for income and spending in Europe’s largest economy.

There are no economic reports and no Fed officials speak today which will leave traders focused on the political drama surrounding Build Back Better and any new developments about Omicron and subsequent economic lockdown measures.

The one potential catalyst on the calendar is a 20-Yr Treasury Bond auction at 1:00 p.m. ET. A weak auction could send yields higher which could add renewed pressure on high multiple tech names and cause the major indexes to roll over.

Tom Essaye Interviewed on TD Ameritrade Network on December 15, 2021

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FOMC Takeaways | Fed Focusing On Inflation

The Fed is focused on stopping inflation and stocks can still rally as long as they don’t raise so much that it inverts the…says Tom Essaye of The Sevens Report. Click here to watch the full interview.

What the Fed Decision Means for Markets

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What’s in Today’s Report:

  • What the Fed Decision Means for Markets
  • EIA and Oil Market Update

Futures are sharply higher mostly on momentum from yesterday’s strong close and despite soft economic data.

EU and UK flash PMIs missed estimates thanks to drops in the service sector and that implies Omicron is a headwind on global growth in Europe.

But, for now that concern isn’t enough to stop a year-end Santa rally as the Fed was hawkish, but not too hawkish.

Looking forward, today will be a busy day.  First, we get two important central bank decisions (Bank of England at 7:00 a.m. and ECB at 7:45 a.m), and while neither are expected to change policy if they are hawkish in a tone that could partially offset the current Fed rally.

Meanwhile, we also get a lot of economic data including, in order of importance: December Composite Flash PMI (E: 58.4), Philly Fed (E: 28.8), Jobless Claims (E: 200K), Housing Starts (E: 1.563M) and Industrial Production (E: 0.7%).  Bottom line, the market will want to see stability in the data especially given the looming rate hikes in 2022, and the last thing the market will want to see is a material weakness in the data given the Fed’s new hawkishness.

Will Politics Force a Fed Policy Error?

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What’s in Today’s Report:

  • Will Politics Force a Fed Policy Error?
  • PPI Takeaways: Inflation Still Rising

U.S. equity futures are flat and global markets were mixed overnight as investors digest another hotter-than-expected inflation print and soft growth data ahead of the Fed.

U.K. CPI rose 5.1% vs. (E) 4.7% in November while Chinese growth data missed expectations across the board, rekindling stagflation fears ahead of the slew of central bank meetings in the back half of the week.

There are multiple economic reports due out this morning including: Retail Sales (E: 0.8%), Empire State Manufacturing Index (E: 25.5), Import & Export Prices (E: 0.7%, 0.7%) and the Housing Market Index (E: 84). But once again, unless there are any material surprises, the market impact should be limited ahead of the Fed this afternoon.

The FOMC Announcement will hit at 2:00 p.m. ET and Fed Chair Powell’s Press Conference begins at 2:30 p.m. ET. Bottom line, the biggest risk to equities remains a more hawkish shift in tone with a faster than anticipated acceleration in tapering of QE and any hints at more than two rate hikes next year.

Tom Essaye Quoted in Nasdaq.com on December 10, 2021

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History Proves That Rate Hikes Don’t Have to Dent Stocks

While the market will likely remain volatile near term, there’s no reason yet to think that stocks can’t….says Essaye of the Sevens Report. Click here to read the full article.

Fed Meeting Preview

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What’s in Today’s Report:

  • FOMC Preview

U.S. futures are trading lower with most global equity markets after some negative Omicron headlines while investor focus shifts ahead to this week’s central bank meetings.

Initial studies in South Africa show the PFE vaccine has a lower efficacy rate against Omicron, rekindling concerns about the strain potentially leading to new restrictions or lockdown measures around the globe.

Economically, EU Industrial Production grew 1.1% vs. (E) 1.2% in October and the U.S. NFIB Small Business Optimism Index came in at 98.4 vs. (E) 98.3 but neither release materially changed the outlook for central bank policy.

Looking into today’s session, there is one inflation data point due ahead of the bell: PPI (E: 0.5%) but unless it is a material surprise against expectations, it should not move markets with the December FOMC meeting getting underway.

Bottom line, the focus has largely turned to this week’s central bank meetings, most importantly the FOMC, so it is likely that we see a form of “Fed paralysis” grip the markets between now and tomorrow afternoon’s meeting announcement, barring any unforeseen surprises regarding Omicron.

Two Key Inflation Reports Today

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What’s in Today’s Report:

  • Future Headwinds on Gold?

Futures are modestly higher following a generally quiet night as markets await the latest readings on inflation via today’s CPI and inflation expectations index in Consumer sentiment.

Economic data slightly underwhelmed as UK Industrial Production (1.3% vs. (E) 1.4%) and UK GDP (0.9% vs. (E) 1.0%) both missed expectations.

There were no notable Omicron updates overnight.

Today the focus will be on inflations via the  Consumer Price Index (E: 0.7% m/m, 6.8% y/y) and the inflation expectations index in the Consumer Sentiment report (E: 67.0).  Markets are already expecting the Fed to materially accelerate the pace of tapering of QE next week, but if these inflation readings come in much hotter than expected, that likely will be a headwind on stocks as it will only encourage the Fed to get even more aggressive in tapering QE.

Tom Essaye Quoted in Unseen Opportunity on December 6, 2021

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No “Santa Rally” for Stocks?

Super-cap tech has been well bid on the expectation of ‘forever’ low rates and support…said Sevens Report founder Tom Essaye. Click here to read the full article.

Tom Essaye Quoted in Aljazeera on December 6, 2021

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Stocks surge as Omicron worries abate following volatile week

That’s a set up where stocks can continue to rally, although I think we all need…wrote Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter. Click here to read the full article.