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General Technical Take for Equities

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What’s in Today’s Report:

  • What the FOMC Minute Mean for Markets (Hawkish)
  • General Technical Take for Equities
  • EIA Analysis and Oil Market Update

Futures are bouncing slightly following a quiet night as markets digest the declines of the past two days.

Economic data was mixed overnight as German Industrial Production missed estimates while Euro Zone Retail Sales beat expectations, but neither number is moving markets.

Geopolitically there was no new news on Russia/Ukraine as the conflict continues with little signs of any progress towards a cease fire.

Today we get one notable economic report, Jobless Claims (E: 202K) but three Fed speakers:  Bullard (9:00 a.m. ET), Evans (2:00 p.m. ET) and Williams (4:05 p.m.).  We expect each of them to further hammer the point that rates are rising by 50 bps in May, with balance sheet reduction beginning in the same month.  But, as long as they don’t say anything “hawkishly new” then stocks should be able to look past the commentary.

Ukraine Update

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What’s in Today’s Report:

  • Bottom Line: Real Focus Remains on the Fed and Growth
  • Weekly Economic Cheat Sheet: Rising Threat of Stagflation?

Stock futures are down slightly this morning but well off the overnight lows as traders digest the latest geopolitical developments between Russia and Ukraine.

Russian President Putin recognized the independence of two “breakaway” regions in eastern Ukraine yesterday, but the risk of a full scale invasion of Ukraine still remains low.

Looking into today’s session, there are several economic reports due to be released including: Case-Shiller Home Price Index (E: 1.1%), FHFA House Price Index (E: 1.0%), PMI Composite Flash (E: 51.9), and Consumer Confidence (E: 110.0). There is also one Fed speaker on the schedule: Bostic (3:30 p.m. ET).

Finally, there is a 2-Yr Treasury Note auction at 1:00 p.m. ET and with the underlying market focus still on future Fed policy, a soft outcome (hawkish) could add to the current geopolitically fueled market volatility.

Regarding Ukraine, investors will await the announcement of new sanctions from the west against Russia, and depending on how severe they are, it could add to the selling pressure on stocks today. Additionally, as of now, Blinken and Lavrov are still scheduled to meet this week but if that meeting is canceled that will suggest a more severe conflict is imminent, resulting in more risk-off money flows.

Tom Essaye Quoted in Blockworks on January 31, 2022

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Bitcoin, Stocks Rebound to End Month, But Sell Off May Continue, Analysts Warn

For stocks to stabilize and rebound, they need one, the Fed to stop providing hawkish surprises. Two, inflation data to peak and recede. And three, economic data to remain firm to…said Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

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.

It’s a Tightening Tantrum, Not a Taper Tantrum

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What’s in Today’s Report:

  • It’s a Tightening Tantrum, Not a Taper Tantrum
  • Weekly Market Preview:  Will the Fed Ease Hawkish Concerns, and Will Earnings Improve?
  • Weekly Economic Cheat Sheet:  FOMC Decision Wednesday, Key Inflation Data

Futures are modestly lower as escalating Russia/NATO tensions erased early solid gains.

Tensions between Russia and NATO increased over the weekend as the US and UK reduced embassy personnel, implying a military conflict could be imminent.

Economically, the EU flash manufacturing PMI beat estimates at 59.0 vs. (E) 57.9, but the UK number slightly missed (56.9 vs. (E) 57.3).

Today’s focus will be on the U.S. Flash January Composite PMI (E: 56.7) and markets will want to see stable data to ensure the economy is solid heading into future Fed rate hikes.  On the earnings front, there are three notable reports today, HAL ($0.34), IBM ($3.39), and LOGI ($1.22), but the really important reports won’t come until later this week.

On the geopolitical front, headlines have turned more ominous regarding a conflict in Ukraine, but as long as it’s limited and there isn’t imminent risk of a larger Russia/NATO conflict, then markets should largely look past the issue as it won’t impact economic growth or Fed policy.

Pace Matters

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What’s in Today’s Report:

  • The Fed Rate Hike Rhetoric Needs to Calm Down

Futures are slightly higher as markets bounce following Thursday’s declines after a generally quiet night of news.

Economic data was better than expected overnight as UK Industrial Production (1.0% vs. (E) 0.3%) and monthly GDP (0.9% vs. (E) 0.3%) both beat estimates.

Today focus will be on earnings, some economic data and more Fed speak.  Economically, the key releases today are Retail Sales (E: 0.0%), Industrial Production (E: 0.3%) and Consumer Sentiment (E: 70.4). From the Fed, we have Harker (10:00 a.m. ET) and Williams (11:00 a.m. ET).  The bottom line is that to help markets stabilize, the data and Fed speak need to give the “March rate hike” mantra a rest, so that means in-line economic data and a slightly more relaxed tone from Fed officials.

Finally, today marks the start of earnings season and there are multiple key reports to watch today:  JPM ($ 2.98), WFC ($1.09), BLK ($10.23) and C ($1.89).  Put simply, earnings need to be solid given the recent volatility, otherwise we can expect the declines to accelerate over the coming weeks.

Tom Essaye Quoted in The Moguldom Nation on January 10, 2022

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Inflation And Rate Hikes Hurt High-Growth And Low-Profit Tech Companies The Most: Here’s Why

Prospects of aggressive Fed tightening “are most negative for high-growth/high-PE names…said Tom Essaye of the Sevens Report in a note on Monday to clients, CNBC reported. Click here to read the full article.

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 Interviewed on TD Ameritrade Network The Watch List on January 5, 2022

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Breaking Down The FOMC December Minutes

The Fed is already actively discussing shrinking the balance sheet showing they are serious about being hawkish, and stocks dropped…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.