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.
Treasury yields surged again on the idea of even more rate hikes, specifically that the Fed could hike 50 bps (basis points) in May, June, and July…said Tom Essaye, founder of Sevens Report Research, in a note. Click here to read the full article.
What’s in Today’s Report:
Stock futures are sharply lower today as global bond yields surge to multiyear highs on tighter monetary policy expectations.
The 2-Yr T-Note yield topped 1% this morning with a rise of 7 basis points which is weighing on high valuation tech names, sending Nasdaq futures down roughly 2%.
Today, there are two economic reports to watch: Empire State Manufacturing Index (E: 26.0) and the Housing Market Index (E: 84). The market will be looking for decent numbers that don’t imply the recovery is losing momentum but not data that is “too hot” and could cause further rate hike fears. There are no Fed speakers today.
The Treasury will hold auctions for both 3-month and 6-month T-Bills at 11:30 a.m. ET today which typically does not warrant much attention, but given the increasing concerns about rate hikes this morning, the outcomes of the auctions could shed additional light on bond traders’ rate outlook and therefore move markets (soft auctions and a further rise in yields would be a stiffening headwind on tech stocks).
Finally, earning season is continuing to get underway with a few notable companies releasing results: GS ($12.10), PNC ($3.61), JBHT ($1.99).
What’s in Today’s Report:
Stock futures are trading at record highs as investors shrug off surging COVID cases and digest upbeat economic data.
New COVID cases topped 1 million in the U.S. Monday, nearly doubling the previous record, however, hospitalizations and deaths remain low, keeping economic lockdown odds minimal as the Omicron outbreak is increasingly expected to burn itself out in the coming weeks.
China’s Manufacturing PMI rose to 50.9 vs. (E) 50.0 in December further easing global growth concerns.
Today, there are two economic reports to watch: ISM Manufacturing Index (E: 60.5) and JOLTS (E: 11.060M). Investors will be looking for more good data, but not so good that rate hike expectations are brought forward.
There are no Fed speakers today. The January OPEC+ policy meeting will be underway soon (E: +400K b/d production hike in February) and if the group of oil producers disappoint the market, expect a potential spike in volatility that could spill over into both equity and bond markets.
What’s in Today’s Report:
Stock futures are mildly lower and Treasury yields are rising with the dollar this morning after hotter than expected Chinese inflation data is prompting some hawkish money flows ahead of today’s U.S. CPI report.
Economically, Chinese CPI rose slightly more than forecast in October (1.5% vs. E: 1.4%) but PPI surged 13.5% vs. (E) 12.0% which was the highest reading since 1995.
Looking into today’s session there are a few potential catalysts to move markets with the October CPI release (E: 0.5%) being the primary focus but Jobless Claims data (E: 267K) will also warrant attention. Both reports are due out at 8:30 a.m. ET.
After those pre-market releases, the schedule is pretty clear with no Fed officials speaking over the course of the day but there is a 30-Year Treasury Bond auction at 1:00 p.m. ET that could move yields and potentially stocks.
Finally, earnings season is already beginning to wind down however DIS ($0.50) will report quarterly results after the closing bell.
Bottom line, focus is on inflation data and if today’s CPI report runs hot, we could see taper expectations, as well as the market’s rate hike outlook, take a hawkish turn which would spur broad market volatility.
What’s in Today’s Report:
Stock futures are slightly higher this morning while global shares were mixed overnight ahead of fresh U.S. inflation data and the unofficial start to the Q3 earnings season.
Economically, German CPI met expectations while Eurozone Industrial Production beat estimates, which is helping ease recent stagflation concerns this morning.
Looking into today’s session, focus will be on inflation data with the September CPI report due at 8:30 a.m. ET (E: 0.3%, 5.3%) as well as the start of Q3 earnings season with JPM ($3.00) and DAL ($0.15) reporting results before the open.
Then in the afternoon, we will get the FOMC Meeting Minutes (2:00 p.m. ET) and multiple Fed speakers: Brainard (3:30 p.m. ET), Bowman (8:00 p.m. ET).
Finally, there is a 30-Yr Treasury Bond auction at 1:00 p.m. ET that could impact yields and ultimately move equity markets (especially if yields make new highs).
The 10-year is now trading at a key level that could prove to be an inflection point for…according to Tom Essaye of the Sevens Report. Click here to read the full article.
Yields on the 10-year Treasury shot up 3.5 basis points on Tuesday to their…market analyst Tom Essaye, president of Sevens Report Research, said in a note. Click here to read the full article.
What’s in Today’s Report:
U.S. equity futures are decidedly lower this morning as Treasury yields continue this week’s surge higher. The 10-year note yield topped 1.52% in overnight trading which is weighing heavily on high valuation tech names today.
From a catalyst standpoint, today is lining up to be a busy day with a slew of economic data due to be released: International Trade in Goods (E: -$87.0B), Case-Shiller Home Price Index (E: 1.6%), FHFA Home Price Index (E: 1.5%), and Consumer Confidence (E: 114.8).
Of those releases, the market will be most interested in whether or not Consumer Confidence can stabilize following the disappointing August print.
There is a 7-Year Treasury Note action at 1:00 p.m. ET and given how much bonds are influencing stocks so far this week, the results could impact equity markets (strong demand would help stabilize stocks, weak demand would likely see losses extended).
Finally, there are multiple Fed speakers today including: Evans (9:00 a.m. ET), Powell (10:00 a.m. ET), Bullard (1:40 & 7:00 p.m. ET), and Bostic (3:00 p.m. ET). Focus will clearly be on Powell and any insight he may provide regarding inflation expectations and the Fed’s plans to react.
Bottom line, the stock market is being driven by the bond market this week and if we see bonds continue to drop (yields spike higher) then that will result in further underperformance by growth stocks and drag the broader market lower while stabilization in yields would likely allow for a rebound.
Sevens Report Q3 Quarterly Letter Coming October 1st.
The Q3 2021 Quarterly Letter will be delivered to advisor subscribers on Friday, October 1st.
With Fed tapering, Washington budget battles and possible tax hikes looming, Q4 could be the most volatile of the year. Our quarterly letter will help you set the right expectations for clients so they aren’t blindsided by any market volatility.
What’s in Today’s Report:
Futures are slightly higher on some mild infrastructure optimism.
A group of 10 bipartisan Senators reached a compromise on an infrastructure bill worth about $1T total that includes $600 billion of new spending over 5-8 years and contains no corporate tax hikes. But, this compromise is still very unlikely to ever become law, mainly because the spending is paid for via an increase in the gas tax, which Democrats have previously been against.
Economic data underwhelmed as UK Industrial Production (1.3% vs. (E) 1.2%) and UK GDP both missed estimates.
Today focus will be on Consumer Sentiment (E: 84.0) and specifically inflation expectations, and if we see a big rise in the one and five year inflation expectations that could cause a rally in Treasury yields, which would pressure stocks. However, barring that event, the path of least resistance for markets right now is higher.