“Bottom line, the economic outlook is turning for the worse (outside of the labor market) and if that continues, it will support the long end of the curve,” wrote Tom Essaye of the Sevens Report. Click here to read the full article.
“Looking at the curve, the 10s-2s yield curve spread remained near a multidecade low of nearly minus-80 basis points. That deep of an inversion suggests that the Fed’s current policy and expected path of future policy are far too restrictive for the state of the economy and growth expectations, which will almost certainly end in a recession — and potentially a severe one given the scope of the current inversions across the Treasury yield curve,” said Tom Essaye, editor of Sevens Report Research, in a note. Click here to read the full article.
What’s in Today’s Report:
Futures are modestly lower following some hawkish Fed comments and as investors digest last week’s big rally.
Fed Governor Waller made comments on Sunday that the Fed still has “a ways to go” before ending rate hikes, which is sapping some of last week’s soft CPI enthusiasm.
Positively, China continued progress towards abandoning “Zero COVID” and announced a stimulus plan for supporting the residential real estate market.
Today there are no notable economic reports and only one Fed speaker, Williams at 6:30 p.m. ET, but that won’t impact today’s trading. So, we’d expect digestion of last week’s gains. Politically, the Republican’s are still expected to win the House, but it will be close. If Democrats look like they may win the House, that will likely weigh on markets as investors want a split government.
What’s in Today’s Report:
U.S. futures and global stocks are rallying today amid reports that China is forming a “reopening committee” as part of a new push to ease Covid restrictions (however China’s foreign ministry has denied the rumors).
The RBA raised rates by 25 bp overnight, meeting estimates while the U.K.’s Manufacturing PMI was slightly better than feared at 46.2 vs. (E) 45.8.
Today, the focus will be on economic data early with the ISM Manufacturing Index (E: 50.0) and JOLTS (E: 9.875M) both due out shortly after the opening bell. But market reactions to the data are likely to be limited as the November FOMC meeting gets underway.
Earnings will remain in focus today with UBER (-$0.17), PFE ($1.47), BP ($1.94), and SYY ($0.99) reporting ahead of the bell, while AMD ($0.55) and ABNB ($1.46) will release results after the bell.
Bottom line, the combination of mostly favorable market news flow this morning, the calendar, and trader positioning into the Fed are all contributing to this morning’s pre-market gains, however, “Fed paralysis” is likely to set in today and into tomorrow’s morning session as investors await the latest Fed decision.
What’s in Today’s Report:
Futures are moderately lower following a disappointing night of earnings.
Thursday night was the first bad night of earnings as SNAP and WHR both posted underwhelming results, while numerous European companies also missed estimates.
Economically, the Japanese CPI ran hot (3.0% vs. (E) 2.9%), like virtually every other inflation indicator this week.
Today there are no economic reports and just one Fed speaker, Williams (9:10 a.m. ET), but he shouldn’t move markets.
Instead, the focus will continue to shift toward earnings and the markets needs some good results to rally today. Reports we’re watching today include: VZ ($1.28), AXP ($2.38), SLB ($0.55), HCA ($3.89).
What’s in Today’s Report:
Futures are slightly lower following a night of mixed earnings results and yet another firm inflation report.
TSLA missed on revenue and production targets and the stock fell –5% after hours, although overall earnings reports were more mixed than negative overnight.
German PPI was the latest global inflation indicator to run hotter than estimates (2.3% vs. (E) 1.5%) reinforcing that global inflation is proving “sticky.”
Today’s focus will be on economic data and the key reports are (in order of importance): Philly Fed (-5.0), Jobless Claims (E: 235K), and Existing Home Sales (E: 4.695M). If we can see a moderation in the data (especially in the price indices in Philly Fed) then stocks can rally. We also get numerous Fed speakers including: Harker (12:00 p.m. ET), Jefferson (1:30 p.m. ET), Cook (1:45 p.m. ET), and Bowman (2:05 p.m. ET) but none of them should move markets.
Finally, earnings season rolls on although the critically important results really increase next week. Some reports we’re watching today include: AAL ($0.54), SNAP ($0.00), and WHR ($5.59).
What’s in Today’s Report:
Futures are moderately higher after new UK Chancellor of the Exchequer Jeremy Hunt abandoned virtually all of the tax cut proposals in PM Truss’s spending/stimulus plan.
Hunt’s announcement of the abandoning of tax cuts and a review in April of the energy subsidies are easing market concerns and pushing the Pound higher and global yields lower.
Outside of the UK fiscal news it was a mostly quiet weekend.
Today focus will be on the Empire Manufacturing Survey (E: -2.5) which is our first look at October data, and markets will want to see moderation in the headline and a continued drop in the price index, and if that occurs stocks can extend the rebound.
On the earnings front, activity ramps up later in the week but some results we’re watching today include: BAC ($0.79), SCHW ($1.05), BK ($1.10).
What’s in Today’s Report:
Stock futures are down roughly 1% this morning as investors digest the sizeable week-to-date gains amid rebounds in Treasury yields and the dollar.
Looking overseas, the Reserve Bank of New Zealand raised rates 50 bps overnight, meeting consensus expectations while the Eurozone Composite PMI came in at 48.1 vs. (E) 48.2.
Today, the focus will be on economic data early with the ADP Employment Report (E: 200K) due out before the bell as well as data on International Trade in Goods and Services (E: -$68.0B), and then the ISM Services Index (E: 56.0).
There is also one Fed official scheduled to speak in the afternoon: Bostic (4:00 p.m. ET).
Bottom line, most of this week’s gains have been a function of renewed “peak-hawkishness” hopes however if economic data comes in stronger than expected and we see yields turn back higher and the dollar resume its rally, then we could see stocks give back some of this week’s rally which has admittedly occurred at an unsustainable pace.
What’s in Today’s Report:
Futures are down close to 1% on digestion of Monday’s bounce and as UK PM Truss defended her spending plan.
UK Prime Minister Truss doubled down on her tax cut and spending package, calling it the “right plan.” The market still disagrees, however, and the Pound is down –0.5% and 10-year GILT yields are up 14 bps on the comments.
Economically the only notable report was EU Economic Sentiment which missed estimates (93.7 vs. (E) 96.0).
Today the key economic report will be weekly Jobless Claims (E: 218K) and as we’ve consistently said, the sooner this number moves towards 300k, the better for markets. We also get the final Q2 GDP (E: -0.6%) and there are two Fed speakers, Mester (1:00 p.m. ET) and Daly (4:45 p.m. ET) but they shouldn’t move markets.
Like the past several days, the British Pound and 10-year GILT yields will drive global markets. If the Pound drops and GILT yields rise further, stocks will fall and could give back most, if not all, of yesterday’s gains.
What’s in Today’s Report:
Stock futures are trading cautiously higher while yields and the dollar ease from yesterday’s highs after the Fed’s Evans made some less hawkish commentary overnight.
While speaking on “Squawk Box Europe” early this morning, Charles Evans said he was getting nervous about the Fed’s pace of tightening and that if inflation peaks, the FOMC could cut rates as soon as early 2023 which has sparked a relief rally across risk assets amid renewed hopes for “peak hawkishness.”
Economically, Chinese Industrial Profits declined -2.2% in August from -1.1% in July but slowing global growth is largely priced into the market at this point.
Looking into today’s session there are multiple economic reports to watch including: Durable Goods (E: -1.2%), S&P Case-Shiller Home Price Index (E: 0.3%), New Home Sales (E: 498K), and Consumer Confidence (E: 104.3). Investors will be continuing to look for slowing growth, a moderating labor market and most importantly any further signs of easing price pressures as those are all necessary components in getting the Fed to “peak hawkishness.”
Regarding the Fed, there are several officials speaking today: Powell (7:30 a.m. ET), Daly (8:35 a.m. ET), and Bullard (9:55 a.m. ET). And while it is unlikely any of them echo Evans’ dovish tone form earlier this morning, if they do come across as less hawkish, we could see a violent relief rally play out as stocks have become oversold in recent sessions.