Higher rates are restrictive in nature, and likely to become a headwind on consumer spending including that on refined products like gasoline and diesel…said Tyler Richey, co-editor at Sevens Report Research. Click here to read the full article.
Oil prices fell more than 2% as risks of a recession “weighed heavily” on the market, analyst Tom Essaye of the Sevens Report, wrote in a Monday note. Click here to read the full article.
The new lows for gold have shifted our call on gold from neutral to bearish for the medium term. That will remain the case until we reach peak hawkishness with Fed expectations resulting in a top in the dollar and interest rates, both nominal and real, beginning to decline…analysts at Sevens Report Research wrote in Monday’s newsletter. Click here to read the full article.
What’s in Today’s Report:
Stock futures are trading with cautious gains this morning as traders shrug off escalating tension between Russia and Ukraine while the BOJ initiated new stimulus overnight as focus turns to today’s Fed meeting.
Geopolitically, Russia is mobilizing 300,000 reservists to bolster military operations in Ukraine and indirectly threatened nuclear options in the latest escalation in the conflict which is driving gains in safe havens ahead of the Fed this morning.
Today, there is one economic report to watch in the morning: Existing Home Sales (E: 4.70M) but the primary market focus will clearly be on the Fed with the FOMC Announcement at 2:00 p.m. ET followed by Fed Chair Powell’s press conference at 2:30 p.m. ET.
Regarding the Fed, a 75 basis point hike and terminal Fed Funds rate near 4.25% is the consensus expectation so anything more hawkish than that will likely spark volatility and potentially even result in a test of the June lows in the S&P while anything more dovish than expectations has the potential to unleash a sizeable relief rally.
From a Fed standpoint, obviously they cannot even think about stopping until this [inflation] number gets down to something more tenable…said Tom Essaye, a trader and founder of financial research firm The Sevens Report. Click here to read the full article.
What’s in Today’s Report:
Futures are moderately lower mostly on momentum from last week’s declines and following a generally quiet weekend of news.
Geo-politically, Russian President Putin and Ukrainian President Zelensky gave interviews over the weekend and neither implied the war would end anytime soon, which is a mild disappointment for markets.
Chinese authorities ended the lockdowns in Chengdu, but gave no indication the “Zero COVID” policy will change.
Today the calendar is sparse given there’s only one economic report, Housing Market Index (E: 48), and the UK and Japanese markets are closed. So, positioning ahead of Wednesday’s FOMC decision should drive markets, and unless we get some positive corporate commentary to offset the FDX guidance, the path of least resistance into the Fed is lower.
What’s in Today’s Report:
Futures are sharply lower following a very negative earnings pre-announcement from FedEx (FDX).
FedEx (FDX) earnings were terrible as the company reported EPS of $4.37 vs. (E) $5.10 and guidance was even worse with estimates of $2.75 vs. (E) $5.46. The company sited significant macro-economic deterioration and the CEO warned about a “worldwide recession.”
Economically results were mixed as Chinese data beat estimates while UK Retail Sales were soft (–5.4% vs. –3.9%).
Today focus will be on Consumer Sentiment (E: 59.9) and more specifically the five-year inflation expectations. In August they were 2.9% and if they rise back above 3.0% that’ll only compound the damage from Tuesday’s CPI and push stocks lower, while a decline below 2.9% will help offset CPI and help support stocks (although I think it’d take a sharp from below 2.9% for stocks to fully erase these early losses).
The “hot” CPI print also brought a 100 basis point rate hike into play at the September meeting. A more aggressive Fed in the months ahead, “will choke off growth and ultimately weigh on broader consumer demand, including demand for refined products…said Tyler Richey, co-editor of Sevens Report Research. Click here to read the full article.
What’s in Today’s Report:
Futures are slightly lower following a mostly quiet night of news as markets await a deluge of economic data later this morning.
The most notable headline overnight was that negotiators have reached a tentative deal to avoid a U.S. rail strike, although this was never a major concern for markets so the headline isn’t causing a rally.
There were no notable economic reports overnight.
Today the market will be focused on economic data and the key reports will be Jobless Claims (E: 227K), Philadelphia Fed Manufacturing Index (E: 3.5), and the Empire State Manufacturing Index (E: -14.5) as they give us the latest insights into growth and inflation. If the price indices in Empire and Philly drop notably, that’ll help offset some of the concerns on inflation from the CPI report.
Other data today includes Retail Sales (E: 0.0%) and Industrial Production (E: 0.2%) but they’ll have to be material surprises to move markets.
What’s in Today’s Report:
Equity futures are bouncing modestly relative to yesterday’s steep declines as Treasury yields are steady and the dollar is easing back with investors continuing to digest the hotter than expected August CPI report.
Economically, U.K. inflation data came in cooler than feared (PPI unexpectedly declined and CPI undershot estimates) but Eurozone Industrial Production for July badly disappointed at -2.3% vs. (E) -0.8%.
Looking into today’s session, there are no Fed officials scheduled to speak and no potentially market-moving Treasury auctions which will leave the focus on the PPI report due out ahead of the bell(-0.1%, Core: +0.3%).
If the wholesale inflation data comes in “cooler” than expected, leaving yields and the dollar to give back some of yesterday’s gains, stocks should be able to attempt to stabilize, however, another “hot” print would likely mean further losses in the midst of renewed dollar strength and likely rising rates.