MarketBeat Minute: Recent Episodes
MarketBeat Minute
A daily recap of the stock market news by the MarketBeat editorial staff. Each market day you'll get a one-minute market summary to help you invest wisely.
Equity markets pulled back ahead of the August CPI report due to a rising fear of inflation. The CPI report is expected to show an acceleration at the headline level driven by oil prices. Oil prices continue to trend upward and suggest the acceleration of inflation will persist into the following month, increasing pressure on the economy. In this scenario, the FOMC is set to hike rates again this year, and they could do it more than once.
The question today is, what will the CPI show? If the data is cooler than expected, the market may continue to rally, although it's heading straight into a bull trap. Even with a cooler-than-expected CPI now, the oil price has risen more than 10% in the last 4 weeks and will impact September data. If the data is hotter than expected, the FOMC may be more hawkish than expected at the meeting next week and hike rates unexpectedly.
Equity markets retreated from a new peak last week, confirming resistance at a critical level. The market may move sideways over the next week, but there is a risk for volatility if not a firm move in either direction. The trouble is the CPI report, which is due on Wednesday. The CPI is expected to accelerate on a MoM and YoY basis compared to the previous month and keep the Fed on track to hike rates again this year.
The S&P 500's next move will be important for traders and investors. The summer session is over, and the fall trading season has begun. It is time for market participants to make their bets for the end of the year and next year, and what they do will be telling. A move higher is a sign of confidence, confidence that interest rates are tames and corporate growth can resume. A move lower would be a sign of fear, fear that inflation is not in control and the dreaded recession will finally materialize.
Pressure is building within the equity markets. Another round of better-than-expected data was released on Thursday, reinforcing that 1 or 2 more interest rate hikes are coming this year. The mounting fear has the S&P 500 down another 0.3% for the session and at the lowest levels in over a week. Friday's trading could be critical and determine the next big move, but risk is ahead. The next major catalyst for the market will come out next week, and it could be a big surprise.
The August read of CPI is due midweek and is expected to be hot. The question is how hot it could be, and it could be a more significant number than some wish. The price of oil has risen dramatically over the past 2 months, underpinning an increase in prices for airlines and truckers. That cost increase will be felt by other industries and bleed down to the consumer sooner or later.
Pressure is building within the equity markets. Another round of better-than-expected data was released on Thursday, reinforcing that 1 or 2 more interest rate hikes are coming this year. The mounting fear has the S&P 500 down another 0.3% for the session and at the lowest levels in over a week. Friday's trading could be critical and determine the next big move, but risk is ahead. The next major catalyst for the market will come out next week, and it could be a big surprise.
The August read of CPI is due midweek and is expected to be hot. The question is how hot it could be, and it could be a more significant number than some wish. The price of oil has risen dramatically over the past 2 months, underpinning an increase in prices for airlines and truckers. That cost increase will be felt by other industries and bleed down to the consumer sooner or later.
Equity markets pulled back on Wednesday as fear of rising interest rates came back to a boil. The latest Services and Manufacturing ISM reads suggest that economic momentum remains solid, and prices continue to rise. Prices in both indices showed significant upswings tied to the cost of oil. Oil prices rose to a new high last week and will continue to underpin inflation this year.
This means an increased chance for another 25 basis point rate hike his year. The odds of a hike in September remain low, but there is a 50% chance of 1 in November, which could rise over the next 2 weeks. The CPI data is due next week and will likely show inflation remains hot if not accelerating. An accelerating CPI will just about seal the deal on another rate hike and put a firm cap on the market. As it is, the S&P 500 shows resistance at a critical level and is set up for a fall.
Equity markets began the week on an uncertain footing. Fear of inflation and the FOMC is percolating in the background despite recent signs of cooling. Among the most significant risks to the outlook is the oil price, which broke out to a new high this week. Another risk is the CPI report, which is due out next week. The CPI is expected to show an acceleration from the previous month; the question is how much of 1? Based on the price of oil, it could be substantial.
The S&P 500 index is hovering beneath a critical resistance point. If this point is not crossed soon, the index will correct to firmer support, which could be a large movement. The best target for support is about 5% below the current action, and it may not be sufficient to hold the market. The next target is another 5% lower and may not hold the market if the FOMC strengthens its hawkish tone.
Summer is officially over, and equity markets will look to begin the week on a fresh footing. After rallying all summer, the question is if the S&P 500 can continue to rally this fall. Based on the outlook for oil prices, inflation, and the Fed, the market is heading for a ceiling regardless of how high it is. This week, items of interest on the economic calendar include the Fed's Beige Book and speeches from at least 6 Fed members. Hence, the odds are high that volatility will be present this week whether the market moves higher or lower.
The Vix is the market's preeminent tool for gauging fear. The VIX index fell to the lowest levels since 2020 last week, indicating the market is less fearful than it has been in years. This indicates the stock market could rally but discounts several upcoming catalysts. Among them are the August read on CPI and the September FOMC meeting, about 2 weeks away. Another hot read of inflation could lead the market to believe what the Fed's been hinting at all summer: another rate hike is coming in 2023.
Equity markets advanced in the week ended 9/1, but additional upside may be limited. The move was driven by softening labor market data that led the market to reprice its expectation for interest rates. Softer labor market data is good news, but the takeaway is that labor markets are normalizing at levels once considered strong. In this light, the data gives the FOMC little room to maneuver and may lead them to hike rates given the state of wage inflation. Wage inflation continues to run hot above 4.0%.
A new risk has emerged for the market and the Fed. The oil price rose to a new 1-year high this week, and looks like it will move significantly higher. Oil prices underpin inflation and cause it to remain hot if not accelerate. In this scenario, the FOMC should be expected to hike rates again this year, and they may do it more than once. Regarding the S&P 500, it is trading against critical resistance now. If the market can not move higher over the next few weeks, a 5% to 10% correction is likely.
Equity markets tried to advance for the 5th day on Thursday, but the gains were slim, the index closed virtually flat, and the peak of the move may have been reached. The PCE Price Index for July came in hotter than expected and shows consumer-level inflation is accelerating. The data increased the fear of another Fed rate hike, although the market still believes the committee is already done. The odds of another hike are less than 50/50, as indicated by the CME FedWatch Tool, and softened following the release.
The S&P 500 advanced solidly for the week, and an interesting setup is developing. The market could continue higher but will have to break critical resistance levels. Those levels coincide with the summer peak and, if not broken, may produce a double top of another bearish pattern in the index. In that scenario, the market could fall 5% to 10% from current levels before hitting firm support, and there is additional risk. The next FOMC meeting is less than 3 weeks away, and another inflation report is due before then.
Equity markets moved higher for the 4th consecutive day despite weak labor data. The ADP data shows job growth cooling more than expected in August, suggesting a weak NFP figure on Friday. The news is taken as good news because it shows slowing in the economy, including slowing wage growth, although wage inflation is still running hot. The risk for traders is that the NFP and ADP do not often track in alignment and may provide a different perspective on Friday.
The S&P confirmed a bottom at 4,350 and is now moving higher. The index could move up to retest the recent highs and may surpass that level if this week's data is sufficiently cool. The PCE price index is the wild card; it is due on Thursday and is expected to show core consumer inflation accelerated on a YOY basis compared to last month. If that trend continues, the FOMC should be expected to continue hiking rates regardless of cooling within the labor market.
Equity markets advanced on Tuesday on growing hope for a soft landing despite increasing evidence to the contrary. The S&P 500 gained 1.50% at the height of the session, indicating the summer rally was intact. The risk for the market is that the PCE price index is due out later this week and is expected to show core consumer inflation accelerate from the previous month. Data such as this aligns with the idea the FOMC will hike rates at least once more this year; hot data with the idea of multiple hikes by the end of the year.
Evidence of mounting risk includes the latest news from the FDIC. The FDIC proposes raising debt requirements for regional banks to match that of their larger competitors. The move is intended to bolster balance sheets and protect depositors should an institution collapse. With interest rates set to rise, the FDIC is getting ready for the next banking crisis, and it could begin this fall.
Equity markets started the week on solid footing as traders and investors brace for what could be a volatile period. The market expects 2 critical data points to point the direction for trading this fall. The first is labor data; the monthly data is due out and should confirm ongoing health within the employment arena, including rising wages. The 2nd is the PCE price index. The PCE price index is expected to advance 0.1% at the core level and reinforce the idea the FOMC will hike rates again this year.
The question investors want to have answered is how many more times rates will rise. The Fed has indicated the possibility of several more hikes; a hot PCE index could get the market to believe what the committee is saying. Until then, the market continues to shrug off the threat of FOMC policy, setting it up for a big decline. Investors looking to avoid the volatility but stay invested are urged to consider low-beta, high-yielding, blue chip stocks.
Equity markets advanced on Friday, shrugging off comments from Jerome Powell. Mr. Powell, in his keynote address to the Jackson Hole conference, made it clear the fight against inflation wasn't finished and that there was a long way to go to get the job done. Among the risks is energy, which has been misleading investors. The decline in consumer-level inflation is pegged to the price of oil, which is rising again. WTI gained more than 1.5% following the news to confirm support at the long-term moving average.
The S&P 500 could be ready to rebound, but don't bet on a big move just yet. The index continues to show resistance below the short-term moving average that could push the market lower over the next week. Among the catalysts is the PCE price index, due on Thursday. The index is expected to confirm that inflation remains above target and that the Fed could raise rates at least 1 more time this year.
Equity markets failed to advance despite a blowout report from NVIDIA. The reports cements the company as the leader in AI and led to a sell-off in other AI-related chip stocks. With the world leaning hard into NVIDIA chips to power data centers and AI, the other chip makers stand to lose market share and that caused the S&P 500 to fall more than 1.25% at the session's low.
The bad news for investors is that Thursday's decline confirms significant resistance at the 30-dau moving average. Resistance at the moving average could turn into a market sell-off, given the outlook for inflation and the Fed, and a catalyst is coming up next week. The July reading of the PCE price index is due out and may spook the market. The index doesn't have to be hot, only consistent with persistent inflation, to lead the market into believing what the FOMC is indicating; there will be at least 1 more interest rate hike this year.
Equity markets advanced on Wednesday, led by NVIDIA and hope that AI would drive the company to new highs: those hopes were met. The company's Q2 revenue is 33% better than the company's "jaw-dropping" guidance, and guidance was raised again. The takeaway from the report is that data centers and big tech are shifting away from traditional computing into high-speed computing and AI, and NVIDIA is the foundation of AI.
The news sent shares of NVIDIA up more than 5.0% in premarket trading, and the rally should continue. The guidance will lead the analysts to up their targets for the Q3 and FY results and the longer-term outlook. The question for investors is if it's time to go all-in on AI and if that means chasing NVIDIA shares higher. Given the results, it is possible that NVIDIA shares could gain another high-double-digit advance before the end of the year.
Equity markets tried to build on Monday's gains but fell in Tuesday trading by the end of the session. News from Dick's Sporting Goods is among the reasons why. The Q2 report paints a bleak picture for retail; the stock fell more than 20% at the session's low. According to Dick's, rising inventory shrinkage, or theft, is cutting into the bottom line results and significantly impacting the guidance. This is not a new phenomenon but 1 that has worsened over the last 3 quarters and will continue to worsen.
Tuesday's decline in the S&P 500 is important because it showed resistance at the 30-day moving average. If confirmed, this resistance could send the index down to new lows. The next target for solid support is near the 150-day EMA, which is about 2.7% below Tuesday's close; the next target below is another 2.5% to 5% lower. The market sell-off will gain momentum if good news doesn't emerge soon.
Equity markets see-sawed on Monday, with hope winning out in the end. The S&P 500 gained more than 0.5% at the session's close to potentially end a multi-week losing streak. This week's market risk lies in earnings reports from retailers and the start of the Jackson Hole Summit. The news from the summit is expected to center around inflation and the Fed's long-term trajectory, which is not expected to change. The next reading of inflation data is not for 2 more weeks.
News from the housing market could cap gains this week. The average rate on the 30-year mortgage approached 7.5% again and is expected to dampen demand. At the pace the Fed is expected to hike rates this year, the rate on the 30-year could top 8% by December and effectively close the housing market to most home buyers.
Equity markets pulled back for the 3rd week and may pull back further this week. The ugly specter of recession is back in the picture due to persistent inflation and high odds the FOMC will increase interest rates by at least 1 more 25 basis point hike and possibly several.
The critical element now is oil prices. Oil prices show support at higher levels than over the summer, and the supply/demand balance is tilted in favor of demand. The August PCE report, which reports on price changes in July, may not show a significant upswing in inflation due to its lagging nature, but the data for August will be hot when it is released next month.
The S&P 500 is falling and will likely test support at the 150-day EMA this week. The 150-day EMA is an important target for potential support and 1 that will lead to lower prices if broken. If the S&P 500 moves below the 150-day EMA it could fall 5% or more before the next support level is reached.
Equity markets pulled back on Wednesday, extending the stock decline for another day. The S&P 500 pulled back more than 0.5% at the session's low, setting a new 1-month low and new lows are on the way. The pullback appears to be gaining momentum and was not aided by Wednesday's data or earnings reports. On the earnings front, reports from retailers are mixed and point to weakness in discretionary names in the 2nd half. Winners include TJX Companies, which grew and raised guidance, while Target is losing share to its competitors.
Housing starts and permits data was mixed and tepid on the economic front, with starts coming in as expected and permits below consensus. Permits, the leading indicators, are down compared to last year and suggest the recent pick-up in the housing market is over. Next week, existing and new home sales data may do the same. If so, the market sell-off will continue.
Equity markets pulled back again on Wednesday after the FOMC minutes revealed more risks than previously feared, and the minutes cited tight labor markets and higher-than-acceptable wage inflation, among other risks to inflation. The risks could lead to additional rate hikes not priced into equities. This sets up a situation in which the FOMC outlook darkens and puts additional weight on the market. In this scenario, the top reached by the S&P 500 is the highest level investors will see until later this year or next.
The risk is centered on the FOMC again, but the driver of that risk is oil. Oil prices retreated this week but remain uptrending and are on the verge of breaking out to new highs. The market is tilted in favor of higher prices, although the data has some volatility. The odds are high that oil prices will continue to trend higher through the end of the year and lift consumer-level inflation along with it.
Equity markets pulled back on Tuesday due to a double dose of fear-inducing news. The first is fear of a renewed crisis in the banking sector. Fitch warned it might have to downgrade some banks, including top names like JPMorgan Chase if credit conditions deteriorate much further. The second is new out of China that include weak industrial production. The news raises the fear that economic momentum will quickly fade and impact GDP and S&P 500 earnings.
The S&P 500 fell more than 1% at the sessions low. If the index closes lower for the week, it will market the 3rd straight week of decline. The price pullback marks a top for the market; the question is how deep the pullback will be. The way it looks, the pullback is gaining momentum and could gain additional momentum this week when the FOMC minutes are released. Signs the Fed is still hawkish will weigh heavily on the outlook for economic activity and earnings.
Equity markets were steady on Monday as traders waited on key reports from the retail sector. The July reading of Retail is due today, along with reports from Home Depot and other major retailers. Walmart and Target are also expected to report this week and will indicate what to expect from the consumer in Q3 and Q4. The story so far is that shifting consumer habits are cutting into discretionary spending, but rising inflation continues to sustain solid spending.
The next major hurdle for the market comes on Wednesday when the FOMC releases the minutes from their last meeting. The committee is not expected to indicate a rate hike at the next meeting, but inflation trends suggest the rhetoric will be hawkish. The question is if the market will heed the warning, if any, that additional hikes are coming. As it is, the market is pricing in a low expectation for another hike in 2023.
Equity markets continued to decline last week after inflation data pointed to a high likelihood of additional FOMC interest rates. The steady pace of CPI combined with hotter-than-expected PPI and rising oil prices suggests that inflation could accelerate and drive the FOMC to hike rates not 1 more time but 2 or more. In this scenario, there will be multiple bank failures and a curb on consumer demand unlike any in more than half a century.
The S&P 500 shed about a half percent, moving to a 1-month low for the week. There are no significant targets for solid support above the 150-day EMA, so a larger decline is expected. A move down to that level would be worth another 4.5% for the broad market and open the door to an even deeper decline. This week, the FOMC minutes will give additional clues to the FOMCs next move and could move the market.
The equity market went on a wild ride Thursday after the headline CPI reading was weaker than expected. The news sent a wave of relief through the market as investors looked for clues to the Fed's next move. The relief was short-lived because the data, while cooler than expected, is an acceleration from the previous month, and the core figures are still hot. In this scenario, the FOMC is still expected to increase rates later this year.
The news helped send the oil price down more than 1%. This is good news for the inflation picture, but the downturn may not last long. OPEC+ has the market tilted firmly in favor of higher prices, and that will only change with demand destruction. As it is, demand for oil remains high and underpinned by a healthy labor market. If oil continues to trend higher as it has the last 2 months, inflation will spike again later this year.
Equity markets tread water on Wednesday as traders and investors await today's critical inflation report. The July CPI report is expected to show inflation remains hot and will lead the FOMC to hike rates again later this year. With oil prices breaking out to new 1-year highs, cool data may not matter because inflation will rise again. The price of WTI is moving steadily higher under the force of supply/demand imbalances put in place by OPEC. The way the market is tilted, it is likely that WTI will soon be tickling the $100 region.
The next hurdles for the market will come next week when the major retailers begin reporting. Consumer spending has underpinned the economy for the last 2 years and is expected to sustain steady results, if not growth, in the retail industry. The question is which retailers will come out on top given the shifts in spending habits caused by inflation. Discretionary names may not fare well.
Equity markets fell on Tuesday following a downgrade in the banking sector. Moody's downgraded several mid-sized banks causing the entire market to fall. Investors bought the dip so the rally may not be stalled; the caution is that CPI data due on Thursday could be hotter than expected. Regardless, the CPI is expected to come in relatively flat compared to the prior month, which is not a signal for the FOMC to lower interest rates.
The S&P 500 fell more than 1.0% at the session's low but rebounded to regain more than half the loss by the end of the day. The move shows support at the 30-day moving average, but support may be fleeting given the upcoming CPI report. Inflation is underpinned by oil prices, among other factors, and oil prices are on the rise. WTI had a volatile session on Tuesday but rebounded from its lows to close with a gain. The takeaway is that the FOMC is still a risk, and it will likely raise rates again.
Equity markets started the week on solid footing, but the rebound may be short-lived. Another round of inflation data is due out this week, and it could halt the market in its tracks. The July read of the CPI is due on Thursday, and it is expected to show the deceleration of inflation has slowed. Core inflation is expected to hold relatively steady at 4.7% and well above the Fed's target rate. At this level, the market should assume the Fed will have to hike rates again later this year and maybe more than once. As it is, the market is only offering a 30% chance for another interest rate hike this year.
The earnings season is coming to a close, and the results are not good. More companies than average beat their consensus targets but by a smaller-than-average margin leaving the final growth rate deep in negative territory, and the outlook for the 2nd half deteriorated. The odds that the S&P 500 will post negative earnings growth in Q3 are high, and the odds for Q4 are rising. In this scenario, the market is nearing a tipping point and may soon teeter into another deep correction without a shift in the fundamental outlook for economic growth.
A weaker than expected jobs report lifted the market. The contrarian logic is that weakening employment numbers will give the Federal Reserve room to pause its campaign of raising interest rates.
However, after a strong rally to start the day, stocks closed the week slightly lower. Higher bond yields have been pushing buyers away from stocks.
This week was a net win for the bears. And it sets the stage for economic data coming in next week. Palantir will deliver its quarterly earnings on Monday which is expected to be a market moving report. Investors will also get more information about the direction of inflation when the consumer price index (CPI) and producer price index (PPI) are released.
These reports could point to a continued downward trend. But investors should be cautious, because it?s likely that rising oil prices are not yet priced in.
Markets had a choppy day that ended with all the major indexes posting slight losses. Investors may still be taking profits after Fitch downgraded the United States credit rating.
However, the markets may also be reacting to oil prices which surged to over $81 a barrel as Saudi Arabia announced it would extend its production cut at least through September. That could be adding to concerns about rising inflation. Investors will get the next read on consumer prices and producer prices next week.
But as this week comes to an end, the markets are eagerly awaiting earnings from Apple which will come in after the market closes. That report, along with the jobs report tomorrow will set the tone for the market heading into another week of earnings.
Who said August would be a quiet month? All the major indexes fell 1% with the NASDAQ being the worst performer, tumbling over 2%. The negative sentiment was mostly due to the United States receiving a credit downgrade from Fitch.
This is likely a knee-jerk reaction from investors looking for a reason to sell. But if history means anything, the S&P 500 index dropped 7% the last time the U.S. had its credit rating downgraded in 2011.
While this price action may not be long-lasting, it does put Thursday?s earnings reports from Apple and Amazon in sharper focus. Better-than-expected results will likely recharge stocks, particularly in the technology-rich NASDAQ index. But if the results disappoint, it could take the broader market lower.
And before the opening bell on Friday, investors will get the latest reading on employment when the jobs report for July is released.
Stocks were mixed and mostly unchanged on the first day of August. The Dow posted a slight gain bolstered by a strong earnings report by Caterpillar. The Nasdaq and S&P 500 both finished slightly in the red.
Manufacturing is the latest sector to send the market conflicting signals. Factory orders look to be gradually improving, but factory employment hit a three-year low. Investors will be watching to see if that weakness will extend throughout other sectors when the jobs report comes out on Friday.
Overall, however, the bulls remain in control as we enter into what is typically one of the quieter months of the year. That could change quickly when Apple reports after the market closes on Thursday. The S&P 500 has been flirting with 4,600 for about a month and positive results from the tech giant could send the index to new highs.
Stocks bounced above and below the breakeven point over 100 times before closing with a small gain on Monday. This continued the upward trend that put the three major indexes posting monthly gains of over 3%.
Earnings season is in full swing, but investors will largely be waiting to hear from Apple this week. The tech giant reports after the market closes on Thursday. It?s hard to understate the importance that Apple has on the market. To borrow a phrase, when Apple sneezes, the market catches a cold. At the same time, if Apple delivers strong results, it will likely add fuel for the bulls.
Investors are also waiting on the July jobs report, which will be out on Friday. A hotter reading will support the idea of the Federal Reserve raising interest rates in the fall. On the other hand, a cool reading will stoke concerns about inflation, which is likely to rise with higher oil prices.
Equity markets gained over 1.0% on Friday to close at a new 1-year high. The move was inspired by softer-than-expected PCE price data that suggests the FOMC is near the end of its tightening cycle. The caution for investors is that inflation remains hot at 4.1% core, and the oil price is rising again. Oil prices underpin inflation; with WTI set to move to a multi-month high, inflation will accelerate again.
This week will be another trying 1 for investors. A host of earnings reports is due out this week on top of the monthly labor data. The NFP report is expected to show another solid increase in job creation and rising wages. The risk is two-fold; a hot figure will play into the idea that the FOMC is not through raising interest rates, while a cool 1 may foreshadow the recession that has loomed for the last year.
Equity markets pulled back on Thursday after the reality of the FOMC's latest rate hike was digested. The hike, another 25 basis points, puts the base rate at over 550 basis points and the highest level in over 2 decades. The full effect of the already implemented hikes has yet to be felt, which means that economic headwinds will persist for at least another year. In this scenario, more banks will fail, leading to consolidation within the industry and ever-tightening credit conditions.
The S&P 500 fell more than 0.65% at the session's low and formed a Bearish Attack Pattern. The pattern suggests a top to the market and could lead to a correction. The question is how deep the correction will be; investors should expect to see the market fall 1% to 3% at least before it hits bottom. If today's PCE price index confirms the need for additional interest rate hikes the sell-off could be monumental.
Equity markets wobbled on Wednesday following the Fed's 25 basis point interest rate hike. The hike puts the base rate at 550 basis points and the highest level in over 2 decades. The statement indicated a possible pause at the next meeting but left the door open for another historic interest rate hike later this year. The data-dependent Fed will watch the inflation data for its next cue, and the next release is just around the corner.
The PCE price index is due out tomorrow and may alter the Fed's trajectory. The index is expected to moderate from the previous month, the question is by how much and if the decline will be sustained. As it is, the price of oil is on the rise, and oil underpins the cost of everything. With it on the rise, it is likely that inflation will remain hot, if not accelerate and lead the FOMC to raise rates higher and higher. Regardless, there is little expectation for a rate cut until 2024 if then.
Equity markets advanced on Tuesday on optimism that earnings from tech giants like Microsoft, Apple, and Facebook would impress. Expectations have been driving these stocks higher, so it will take solid results to continue the trend. If the news is less than what the market is looking for, it could spark a correction for the S&P 500. The S&P 500 advanced about 0.50% at the session's high and set a new 1-year high.
The FOMC poses another risk for equities this week. The FOMC is expected to hike interest rates another 25 basis points and could issue a hawkish statement as well. The market wants an indication that the rate hike cycle is over and is unlikely to get 1. The odds are high that inflation will remain hot through the summer, leading to another 25 basis point hike in the fall. Regardless, the economy and market must adjust to the "new normal" and conditions are only getting tighter.
Equity markets moved higher on Monday to put the S&P 500 at its highest closing level in over a year. The move was driven by a lack of news more than anything else as the market takes a breath in wait for what's to come this week. On the earnings front, the market expects reports from nearly 200 S&P 500 companies, making this the busiest week of the reporting cycle. Reports from Microsoft to The Coca-Company are due out and will give more evidence of what to expect from the 2nd half of the year.
On the economic front, the market is waiting for the Fed's next move and the most recent data on inflation. The Fed meets on Tuesday and Wednesday and is expected to hike rates by another 25 basis points. The question is what they do next, and the answer may come on Friday. The PCE price index is due out on Friday and is expected to moderate. If the index is cooler than expected, it could lead the market to new highs. If not, the threat of FOMC rate hikes will linger and weigh on the market.
Equity markets advanced the previous week, but the signs of economic cracking continue to grow. The S&P 500 moved higher for the session and set another new high despite the signs of cracking an expectation for the FOMC to hike rates by another 25 basis points. The move would put the base rate at the highest level in nearly 2 decades, and there is a chance this won't be the last cut. More information will come out on Wednesday with the Fed's policy statement and Friday when the PCE price index is released.
This week is also the busiest week of the Q2 earnings reporting season. Nearly 200 S&P 500 companies will report bringing the total for the season close to 50%. There is a high expectation that the season will end better than expected relative to its start but the outlook continues to decline. In this scenario, there is little reason for the market to sustain a rally and every reason to think a top in the market is near.
Equity markets retreat on Thursday after another bad economic report, and earnings from Netflix and Tesla disappointed the market. On the economic front, the Index of Leading Indicators was negative for the 15th consecutive month and worse than expected at -0.7%. That was compounded by a negative reading of the Philly Fed Survey and earnings reports from Netflix and Tesla. Both companies failed to inspire market rallies and saw their shares fall by high-single to low-double-digits, and deeper declines could be coming.
The S&P 500 fell nearly a full percent at the session's low to confirm resistance at this week's high. The move could lead to a larger decline, given the outlook for earnings has taken a hit. If the market can't regain its footing on Friday, selling could gain momentum on Monday ahead of the FOMC meeting. The FOMC is expected to hike rates by another 25 basis points, putting more pressure on the economy. In this scenario, more banks will fail, and the economy will teeter closer to the recession lurking around the corner for the last 12 months.
Equity markets advanced on Wednesday despite another cooler-than-expected economic report. The housing starts and building permits figures were weaker than expected despite a recent downtick in mortgage rates. The news indicates a slowing within the housing sector and one that could gain momentum as the year progresses. Mortgage rates are back in the 7.5% range for an average 30-year mortgage and will likely rise, given the outlook for FOMC policy. The FOMC meets in less than a week and is expected to hike rates another 25 basis points.
The S&P 500 continues to rise but is heading for a hard ceiling. How it gets is still questionable, but signs are growing that the top could be closer than many market participants realize. The next target for solid resistance is at an all-time high, which will be reached soon. At the pace the market is advancing, the all-time high could be reached by the end of the summer. If the market can't move to a new high, the odds are high that equity markets will remain range bound for the remainder of the year.
Equity markets continue to move higher as earnings season gets into high gear. Reports from names like Lockheed Martin, Bank Of America, and Charles Schwab were better than expected and fueled the idea of a soft economic landing. The news is good enough that it may impact the outlook for the 2nd half earnings, which would be significant. An improvement in the 2nd half outlook would be a catalyst to lift the S&P 500 to a new all-time high.
The risk for the market is complacency. The earnings season and economic outlook are better than expected, but clouds continue to loom. The FOMC is expected to hike rates by at least 25 basis points, which will pressure the economy. More banks will fail in the coming months, credit conditions will tighten, and demand may begin to contract, putting a cap on the market. That could be at an all-time high within the next few weeks; it could be later this year when the S&P 500 begins to give guidance for calendar 2024.
Equity markets advanced on Monday, starting the week on solid footing ahead of key economic data. Top of the list is the Retail Sales figures expected to show gains versus the previous month and last year. The caveat is that retail sales are expected to grow only 0.3% which is only slightly better than inflation. At this pace, underlying demand is barely growing and compounded by higher prices. With the Fed slated to hike rates at least another 25 bps, there is a risk that demand could turn negative and bring the economy down.
The S&P 500 continues its upward march. The index gained over 0.30% at the session's high to hit a new 1-year closing high. The index looks set to retest resistance near 4,660 and could reach that level within weeks. The question is what the market will do then, which could come down to the outlook for earnings. The FOMC is expected to hike rates, but if the outlook for 2nd half earnings improves, the market will continue to rally and set a new high.
Equity markets advanced last week after cooler-than-expected inflation led the market to price in fewer rate hikes. The S&P 500 advanced 2.5% for the week and closed at a new 12-month high. The index is trending higher and may increase to a new all-time high by the end of the summer. The caveat is that inflation remains high relative to the Fed's target, and the committee remains on track for additional rate hikes.
The risk for the market is that inflation will cool and stabilize at a lower level but at a level still too hot for economic stability. In that scenario, the Fed could hike rates again later this year and put the base rate at 550 basis points or higher. That would push mortgage rates above 8.0% and cap demand for goods and services across industries and verticals. So, the market marches higher, but it may be headed for a hard ceiling and another deep correction.
Equity markets rallied on Thursday after another cooler-than-expected inflation report. The PPI came in below expectations and fueled hopes that inflation would soon be a thing of the past. The caveat for traders and investors is that inflation remains hot at the consumer level, and the FOMC is on track to hike rates by at least 25 basis points. The full impact of the hikes done over the past year is still not fully felt; the impact of another could tip the economy into a recession.
The S&P 500 gained nearly a full percent for the session to set a new high. The index is trading at its highest level in over a year and is set to tackle even higher levels. The next hurdle is 4,660; a new all-time high is likely if the market can move above there. The question is where the index ends the year. The expectation is for a year of flat returns. With the index showing gains for the year and moving higher, the outlook implies a correction is coming.
Equity markets advanced on Wednesday following a cooler-than-expected CPI report. The CPI report was cooler than expected on a month-to-month and YOY basis and at the headline and core levels, spurring the index to advance roughly 1.0% at the high of the day. The bad news is that CPI is still hot relative to the Fed's target and did little to alter the outlook for interest rates. The data caused the odds for a 25 basis point hike to increase to near 100%.
The S&P 500 advanced on Wednesday, but resistance has slowed the index's advance. The next target for strong resistance is near 4,600, which might be reached within the next few weeks. The risk for the market is that the July Fed meeting or the Q2 earnings reporting cycle could cap gains. The EPS outlook continues to deteriorate, and additional interest rate hikes will do little to alter the trend.
The S&P 500 moved modestly higher on Tuesday while traders and investors waited for the July CPI report. The report, expected to show cooling inflation, is not expected to alter the trajectory of FOMC interest rate hikes, but that may not matter. The summer market is melting up on AI while most market participants sit on the sidelines in wait-and-see mode. They are waiting to see if the FOMC will cause more banks to fail and spark the recession looming in the last 4 quarters.
The market is melting-up now, but how high it goes depends on the economy. If the economy can withstand another 25 or 50 basis points of interest rates, the S&P 500 could set a new all-time high. The risk is that rising rates will cause more bank failures and other signs of economic distress exist. The pace of layoffs remains robust, suggesting rotation within the labor market as businesses adjusted to the "new normal".
Equity markets tread water on Monday while traders prepared for this week's main event; the CPI report. The CPI is set to be released on Wednesday. The data is expected to be mixed, with monthly gains accelerating and YOY comparisons decelerating from the previous month's data. However, the takeaway will likely be hawkish, with core CPI still hot at 5.0% YOY or hotter. Regardless, the Fed will unlikely sway from its intention to hike rates later this month and put additional pressure on the economy.
The summer stock market melt-up looks set to continue despite Monday's tepid trading and the risk of hot CPI data. The S&P 500 continues consolidating above the 4,300 level in preparation for another higher move. The next significant resistance target is 4,600, which may be reached soon. A move above that will depend on the earnings season, and it does not look like a good 1 now. AI will power results for some companies, but it is not enough to offset the weakness expected across the broad market.
Equity markets wobbled last week in holiday-shortened summertime trading. The move was sparked by caution and amplified by the Fed, which continues to trumpet the need for at least 2 more interest rate hikes. The takeaway from the week's action is that traders and investors continue to misprice the FOMC outlook. The odds of another 25 basis point hike moved up to 95% on the news, but the odds of another after that remain below 50%. In this scenario, the market is heading for a reckoning that may come sooner rather than later.
In other news, the labor data remains hot, but signs of weakening should not be ignored. The pace of layoffs fell monthly but remain up by 24% YOY, and the YTD figure is up nearly 250%. At the same time, the pace of planned hiring fell to a multi-decade low on an ex-COVID basis and suggests an economic slowdown is at hand. Likewise, the yield curve inversion fell to the lowest in several decades and suggests recession is imminent.
Equity markets retreated on Thursday after mixed news from the labor market. The ADP report was the news of the day, and it came in much hotter than expected. The data suggests resiliency within the labor market that will underpin wage inflation and inflation this year. Contrary to the ADP, the JOLTs data contracted more than expected, suggesting tightening conditions within the labor market. The takeaway for investors is that the FOMC should be expected to continue hiking rates as indicated, but the end of the cycle is getting closer. The question that remains is how hard the landing will be. Will the US tip into recession in 2023?
Today's action will be driven by the Non-Farm Payrolls report. If it comes in as hot as the ADP or even close, the S&P 500 will likely continue its decline. If so, the line to watch is at 4,300. The summer rally may continue if the market can sustain that level of support. If not, the next major stock market correction may have just begun.
Equity markets held within a tight range on Wednesday while investors waited on the NFP report and tried to handicap the odds of another FOMC interest rate hike. The minutes of the last meeting were released in the early afternoon and suggest the Fed will continue to hike rates but at a slower pace than before. This is consistent with the idea the Fed will hike rates by more than an additional 25 basis points but only 1 25 basis point hike per meeting if that much. What this means for the economy is more pressure and higher costs that should send consumer demand into retreat.
The NFP report is due out on Friday. It is expected to show job growth decelerate from the previous month but hold strong near 250,000. While the headline figure will be important, the revisions are also important to note, as is the wage data. The average hourly wage gains are expected to cool slightly to 4.3% YOY which is still hot and underpinning general inflation. The takeaway is that the Fed's job is not finished, and it still has a fight on its hands.
Equity markets tread water on a holiday-shortened trading day at the start of a holiday-shortened week. The S&P 500 traded within a very tight range to close relatively unchanged from the prior week as traders prepare for the holiday and a highly-anticipated NFP read at the end of the week. The NFP is expected to show solid job gains and a decline in inflation that will allow the Fed to continue hiking rates. Additionally, wage gains are expected to continue to underpin inflation and lead to additional interest rate hikes.
The Fed's next move will come later this month. The FOMC is expected to hike rates by 25 basis points and put the core rate at the highest level in over 2 decades, ushering in economic conditions not seen since the 1980s. The consensus is that interest rates will still be higher through the end of the year and put a cap on demand. In this scenario, the recession the market has feared for the last 18 months gets closer to reality.
Equity markets advanced last week as the bear market rally gains momentum. The rally was driven by a trio of good news that amounts to news that is not as bad as expected or news that points to additional rate hikes this year. The takeaway is that the economy and the market remain in transition and will likely top out soon. The question is when and how bad the next correction will be. As it is, the S&P 500 could reach new all-time highs by the start of the peak Q2 reporting season.
This week will be a holiday-shortened week, with the 4th of July on Tuesday. The market volume will be light, but action may be volatile, specifically on Friday when the NFP report is released. The labor data should confirm that labor markets remain tight, but other data, such as wage gains and layoffs, may darken the picture.
Equity markets advanced last week as the bear market rally gains momentum. The rally was driven by a trio of good news that amounts to news that is not as bad as expected or news that points to additional rate hikes this year. The takeaway is that the economy and the market remain in transition and will likely top out soon. The question is when and how bad the next correction will be. As it is, the S&P 500 could reach new all-time highs by the start of the peak Q2 reporting season.
This week will be a holiday-shortened week, with the 4th of July on Tuesday. The market volume will be light, but action may be volatile, specifically on Friday when the NFP report is released. The labor data should confirm that labor markets remain tight, but other data, such as wage gains and layoffs, may darken the picture.
Equity markets tread water this week while traders waited for the May PCE price index to be released. The data is expected to be hot, but it may not matter. The market action suggested the rally would continue with or without a cooler read on inflation, opening up additional risk. The Fed suggests that more than 1 and even more than 2 more rate hikes are needed and that there could be 2 back to back hikes this summer.
As always, the earnings outlook will drive the S&P 500 this year. As it is, the market continues to expect a return to growth in the back half. So long as that remains in the picture, the market should be able to claw its way higher. The question is how high it can go. The Fed is on track to tighten the screws again, possibly leading to more bank failures and the recession hovering on the horizon for the last 12 months.
Equity markets treaded water on Wednesday while traders digested Tuesday's gains. The question on everyone's minds is whether the summer rally will continue or not, and it may be answered on Friday. The May read of the PCE price index is due out and is not expected to give the FOMC much reprieve. The risk for investors is that the market won't heed the message given by the FOMC and continue to rally despite hot inflation. In that scenario, the top of the market may be reached when the FOMC hikes rates again later this year.
The earnings news is less than robust. The latest from General Mills echoes news from Walgreens Boots Alliance in that cautious consumer habits are weighing on the outlook. In the case of General Mills, price hikes continue to offset weak volume and produce growth, but that situation can not last forever, and discretionary names are suffering for it. Nike is scheduled to report after the close of trading today and may shed more light on the matter.
Equity markets advanced on Tuesday, snapping more than a week of declines. The move confirms support at the critical 4300 level and should lead the market higher. The caveat is that summer trading conditions, looming interest rate hikes, and a weak report from Walgreens suggests the rally is built on unstable foundations. Walgreens had a mixed quarter and lowered guidance due to shifting consumer trends. If that sentiment turns into a trend among S&P 500 companies, the index will have nowhere to go but lower.
The week's news will come on Friday when the PCE price index is released. The index is expected to show consumer inflation is moderating but not quickly. At 4.6%, investors should expect the FOMC to continue hiking rates until there is an appreciable decline in inflation. The risk is that getting that decline could mean taking the economy into a full recession.
Equity markets began the final week of June on shaky footing. The S&P 500 hovered within a tight range but closed lower for the session. The move is due in part to caution; the PCE price index is due out later this week and should be a market-moving event. The question is which way the market will move, and the bias now is upward. The index is expected to show core inflation moderating to 4.6% YOY, which is good news, but the FOMC will remain hawkish at this level.
The next few weeks will be trying times for the market. The PCE price index is only 1 worry; after that, there is fear the FOMC will hike rates to the point that it will crack the economy more. Fed members, including Jerome Powell, have indicated that 2 or more hikes are still possible; increases will likely cause more bank failures and consolidation within the financial industry. The only good news is that AI is lifting the tech sector and may continue to do so through the end of the summer.
Equity markets pulled back last week as traders prepare for this week's PCE price index. The price index is expected to show another hot increase in consumer-level inflation and keep the Fed on track to hike rates again. The question is if the FOMC will hike by only 25 basis points or if it will hike another 50 or more, as members have indicated. As it is, the market is only pricing in a single interest rate hike, and it may be surprised by the data this week.
The S&P 500 pulled back and snapped a winning streak, but it is still above the key 4,300 level, so the near-term uptrend is intact. The index may pull back to 4,300 before moving higher, but the stage is set for the updraft to continue. Even with hot inflation, the rise of AI and stimulus-related government spending underpin strength in the tech and industrial sectors and will help the market move higher. The question is how high the market will go before the reality of the Fed's new "normal" is realized.
The equity market rebounded on Thursday, breaking a 3-day losing streak. The rebound shows support at a 2-week low and may lead to another rally, given the right news. The risk is that the summer rally is already peaking due to the renewed fear of FOMC rate hikes. The FOMC has come out with strong rhetoric that inflation is not tamed, more work needs to be done, and 2 or more rate hikes could be on the way.
Next week will be another trying week for the market. The May read of the PCE price index is due out on Friday, and it could be another hot one. If so, the market may be unable to shrug it off as it has in the past. The market, the economy, the Fed, and inflation are heading toward a reckoning that may only produce losers. Odds of a recession stand at 65%.
Equity markets pulled back for another day on Wednesday as fear of the FOMC comes back into play. Comments from Fed Chief Jerome Powell that multiple interest rate hikes were coming caught the market off guard. The comments are identical to the FOMC's policy stance at the last meeting, but the market wasn't buying it for some reason. In the eyes of average investors, the FOMC is close to ending the hiking cycle, which is what matters. The risk in that outlook is that rates are high, inflation is still high, and the economy is on a trajectory that could result in disaster.
Thursday could see the market sell-off accelerate. The catalyst could be the index of leading indicators, which is expected to fall again. This will be the 14th consecutive decline in the index and could be a large one. The trend in the data is more telling and has been making successively larger negative peaks suggesting growing weakness in the economy.
Equity markets pulled back on Tuesday to start a holiday-shortened week on uncertain footing. The move comes at the start of a light week regarding data and earnings, which could be a sign that bulls are not as confident as they may appear. The market is moving higher but with little cause other than an expectation that the FOMC will soon be done hiking interest rates. The critical factor is that the FOMC is not finished with hiking rates, and it may cause more bank failures in the coming weeks and months.
The S&P 500 is trending higher and may set another new high. The next target for solid resistance is at the all-time high, which may be reached by the start of Q2 earnings reporting. The peak of the reporting season begins in 3 weeks and may provide fuel for the rally. The risk is that the outlook for Q3 and Q4 will deteriorate and sap upside potential from the market.
Equity markets are melting up on AI. The rise of AI has brought game-changing news from companies like NVIDIA, Advanced Micro Devices, Oracle, and Adobe and promises to be a theme of the Q2 reporting season. The biggest names in tech have still to report and, at the end of the cycle, another report from NVIDIA is due. The company was guided to a level 50% above the prior consensus and could easily raise guidance again. In that scenario, the uptrend in NVIDIA, AI stocks, and the broad market will likely continue.
The wall of worry is still in place. The Fed's last policy announcement was less than dovish and may result in 2 more interest rate hikes by the fall. In that scenario, economic pressure will continue to build and may result in more bank failures and declining consumer demand that puts a cap on the market.
Equity markets advanced last week, with the S&P 500 gaining over 3.0% at the session's high. The market is in melt-up mode despite a hawkish FOMC that indicates 2 more interest rate hikes are on the way. AI and a positive re-valuation of the outlook for AI-related tech drive the melt-up. NVIDIA is leading the charge, but names like Oracle and Adobe are in the mix. The takeaway is that the cloud is booming with AI, and any company involved in the hardware, infrastructure, or services end of the business is booming along with it.
This week will be a test for the market. There are few earnings reports and economic releases to drive the action, so the market may have a hard time moving much higher in the near term. The next significant catalyst is the PCE Price Index which will be released in 2 weeks. Another hot report will seal the deal on a 25 basis point hike and may convince the market that Mr. Powell and the FOMC were serious in saying 2 more hikes were coming.
Equity markets advanced on Thursday, with the S&P 500 gaining roughly 1.5% at the session's high and setting a new 14-month high. The melt-up is driven by the idea that the FOMC is close to ending its rate hiking cycle but will end in disaster. The FOMC is nearing the end of the rate hiking cycle, but interest rates will top out above 5.5%, well above what the market had priced in, and promise to remain high for the foreseeable future. This has ushered in a "new normal" for the market that will not be fully realized for at least another year. What this means for the S&P 500 is a reduced demand that will cut into growth.
What this means for the S&P 500 is a trading range. The top of the range is near all-time highs and will probably be reached by the start of Q2 earnings reporting. Assuming the consensus figures for the 2nd half contract as they have done for the last 8 quarters, the odds are high that the S&P 500 will top out at an all-time high and move sideways within the now-established range. How long that range lasts is anybody's guess, but the charts suggest it could be 5 to 10 years.
Equity markets did an about-face on Wednesday, rising in early trading and then falling after the FOMC announced more interest rate hikes were coming. The FOMC paused in June, holding rates steady, but indicated inflation was not tamed and that 2 more should be expected. The news sent the odds on the CME's FedWatch Tool rocketing higher, indicating a significant outlook shift. The takeaway is that interest rate cuts should not be expected in 2023 without a significant decline in inflation.
Action in the S&P 500 was mixed. The index moved up, down, and sideways during the session while market participants digested the news. The implications for stocks are negative; rising rates are cutting into demand, which is capping the outlook for earnings. The market closed with a small gain for the day, creating a large Doji candle signifying significant uncertainty. The market may move higher from here, but it is climbing a wall of worry and heading toward a ceiling put in place by the Fed.
Equity markets continue to advance despite hot inflation. The headline read of the CPI index came in lower than expected but still hot at 4.0%, double the Fed's target, while core inflation runs hotter at 5.3%. The data increased the odds of another rate hike, a negative for equities, and the CME's FedWatch Tool suggests interest rates could rise another 50 basis points and top out above 5.5%. The real danger is that hot inflation will keep the Fed tighter for longer, which is not fully priced into the market.
Today's FOMC meeting appears to be priced into the market. The CPI data was neither hot nor cool enough to sway them from pausing or indicating a cut, which the market wants. This means that equities could continue to rally into the summer when the Fed is slated to meet again. By then, the Fed will know if the cool-down of inflation is real and whether another interest rate hike is needed.
Equity markets advanced on Tuesday, adding nearly 1.0% to the S&P 500 despite inflation data and the FOMC threat. The move means that hot inflation and a hawkish Fed are priced into the market, but there is a risk. The risk is that market participants are mispricing the outlook, and the news could be bracing. As it is, economists expect core CPI to hold steady on a month-to-month basis and to subside 0.2% to 5.3% YOY, numbers that should keep interest rates high through the end of the year, if not longer.
The S&P is in melt-up mode. The index has moved above the 4,300 level and is on track to retest the all-time highs set during the peak of the stimulus bubble. The move could result in a new all-time high, although there is little reason for 1. However, investors looking to ride this rally should be cautious because the 2nd half may not be as good as expected. The 2nd quarter earnings cycle begins in mid-July and could cap the market if the outlook for Q3 and Q4 deteriorates.
Equity markets were able to advance on Friday after a week of consolidation. The S&P 500 moved up through the 4300 level to set a new 12-month high and it may keep going higher. However, the move is not driven by any fundamental factor that can be pinned down, so the bottom could fall out of the market at any time. This week's risk is multi-faceted and could be the difference between a summer rally and a quick reversal.
Topping the list of market-moving events is the FOMC meeting. The FOMC is not expected to hike rates but may surprise the market with its statement. The CPI is another market-moving event, and it comes out ahead of the FOMC announcement. whatever the market thinks will happen at the meeting could change, given the CPI news. After that, it's the retail sales figure which is due out on Thursday. Retail sales are expected to rise YOY but not enough to offset inflation; the takeaway is that demand is in decline only we're paying more for what we get.
Equity markets continue to consolidate within a tight range while market participants wait on the next FOMC decision. The S&P 500 gained more than half a percent on Thursday but traded within the same range it's been in all week. Given the outlook for interest rates, the market remains below the critical 4,300 level and may not rise above it. The FOMC is unlikely to indicate a reduction in interest rates is coming soon and may give reason to believe another interest rate increase is the more likely scenario.
Next week will be a turning point for the market. Along with the FOMC meeting is another look at the CPI index, retail sales data, and a host of reports on manufacturing conditions across the US. Even if it means higher rates for longer, good data could lift the market and take it above 4,300. In that scenario, the S&P 500 could drift up to retest the all-time high by mid-summer.
Equity markets continue to tread water as investors and traders wait on the next FOMC policy statement. The FOMC is not expected to hike rates next week, but it will remain hawkish and may surprise the market with its rhetoric. The takeaway is that interest rates will most likely remain high for an indefinite amount of time, which will have a bearing on stocks. With rates on treasuries above the S&P 500 dividend average, they pose a headwind to equity prices.
The market may remain in a holding pattern for the summer. If the S&P 500 can not get above the 4,300 level next week, it will be the top of a trading range that could dominate price action for several years. In that scenario, investors must be vigilant and use market dips to build positions in high-quality stocks.
Equity markets traded within a tight range on Tuesday while investors wait for the June FOMC policy announcement. The announcement is scheduled for next Wednesday and will determine the next big move for equities. Given the acceleration of inflation in recent data, the FOMC will likely be hawkish in its stance, but it may not hike rates again. The risk is the CPI data due out the day before the release. The CPI may confirm the acceleration of inflation and lead the FOMC to surprise the market. Either way, the economy is in a new "normal" that will dominate the S&P 500 price action for years.
The key level to watch on the S&P 500 is 4,300. That is the top of a critical resistance zone that capped gains for over 12 months. If the market can rise above this level, it will probably retest the all-time high. Moving up to a new all-time high is another matter and may not happen, given the odds of a recession have risen above 70% and are still rising.
The S&P 500 index retreated from resistance at the 4,300 level on Monday. The move is consistent with expectations and the idea the market would enter a holding pattern ahead of the FOMC meeting. The FOMC meets next week and is expected to keep its interest rate policy unchanged from the 500 to 525 bps target it is set. The committee is also expected to maintain a hawkish posture and may indicate the need for additional rate hikes should the data indicate. Lucky for them and the market, the May read of the CPI index is due the day before the policy announcement. If the index confirms the upswing in inflation indicated by the last PCE price index, it may surprise the market with a hike.
The question for traders is what 4,300 mean to the S&P 500 index. It is a critical point of resistance that might not be crossed. In that situation, it will market the top of a trading range that could dominate the market for years. However, if the S&P 500 can move above it, a trading range is still the most likely scenario; only this time, 4,300 will mark the middle. Either way, the S&P 500 is in a rolling bear market that will impact price action for several years.
The S&P 500 rallied on Friday after news hit the street that a debt ceiling resolution had passed. The next move is for President Biden to sign it into law which is expected to come before the US defaults. The S&P 500 gained more than 1.5% at the high of the session and is on track to break a critical resistance level. That level is the 4,300 level which has capped the market for more than a year.
There isn't much news expected in the coming week. The economic calendar is nearly void of releases and the few earnings reports will not move the market. Because the FOMC meets next week, the market could enter a consolidation while it waits for the new update. The Fed isn't expected to hike rates but it is expected to remain hawkish and indicate the need for rates to remain high.
Equity markets advanced on Thursday after a resolution to the debt ceiling deal emerged. The S&P 500 gained almost 1.0% by the end of the day and is on track to set a new high in the coming week. The caveat for traders and investors is that the index is still below the critical 4,300 mark and may not be able to advance beyond it.
The NFP report will dominate Friday's action. The NFP is expected to moderate job growth, an uptick in unemployment and ongoing wage inflation. The news, as expected, suggests a slowing in the economy but does not give the FOMC much leeway regarding interest rates. With inflation still running hot, the FOMC will have to keep rates higher, which will continue to pressure S&P 500 earnings.
Equity markets pulled back for the second day on Wednesday while a resolution to the debt ceiling debate remains elusive. The move was amplified by weakness in the semiconductor sector, correcting after the previous week's surge. The takeaway for tech is that much of the gains expected from AI have been priced in, and investors should look to the next wave of winners. Among those will be tech services companies and hardware manufacturers to support the new technology.
The labor data added to Wednesday's woes. The JOLTs report showed a surprise surge in job openings that suggests momentum in the economy. That increases the odds of another Fed interest rate hike, and the odds are already high for another 25 bps. Economic pressure will continue to build and more financial institutions will fail.
Equity markets could surge on Tuesday when the stock market reopens from the Memorial Day holiday. Powers in Washington, D.C., have struck a debt-ceiling deal and averted the risk of a US default. While good news, the real risk lies with inflation and interest rates, which are still rising. A rally in the stock market may be short-lived because of it, so investors should beware.
This weeks calendar brings another round of retail earnings and reports from AI-centric tech names like Ambarella. Ambarells is set to report earnings on Tuesday morning and could be the next AI stock to melt up. On the economic front, the monthly labor data is center stage and may move the markets on Friday. Job creation is important, but the bigger data may be the unemployment and wage inflation numbers.
Equity markets could surge on Tuesday when the stock market reopens from the Memorial Day holiday. Powers in Washington, D.C., have struck a debt-ceiling deal and averted the risk of a US default. While good news, the real risk lies with inflation and interest rates, which are still rising. A rally in the stock market may be short-lived because of it, so investors should beware.
This weeks calendar brings another round of retail earnings and reports from AI-centric tech names like Ambarella. Ambarells is set to report earnings on Tuesday morning and could be the next AI stock to melt up. On the economic front, the monthly labor data is center stage and may move the markets on Friday. Job creation is important, but the bigger data may be the unemployment and wage inflation numbers.
Equity markets advanced last week despite a hot read on inflation. The PCE price index was hot and accelerated from the previous month. The data points to another FOMC interest rate hike and contradicts the idea the FOMC may pause or even cut rates soon. The takeaway is that economic pressure will continue to build, and more banks are likely to fail. Additionally, the cost of credit will continue to rise and squeeze consumers.
The hot story in stocks is NVIDIA. The company's results prove the dawning of the AI age and point to solid results from other companies next quarter and this year. While the chip-makers will be at the forefront of the revolution, the companies that stand to gain the most are the traditional tech services companies like Microsoft, Apple, Amazon, and Google.
Equity markets cheered results from NVIDIA, proving the dawn of the AI age is here. The company's results and guidance are mind-boggling and bode well for investors but may not be the signal for an economic boom. The shift to AI is just that, a shift superseding previous technology already in place. In that light, the AI boom is the next phase in tech and not a new industry to drive and sustain growth. Regarding NVIDIA's share price spike, the stock is unlikely to go much higher than it is now without a significant market consolidation or correction.
Tech stocks rallied on the news, but the S&P 500 and NASDAQ Composite remain below critical levels. Broader economic conditions weigh on equities and provide a headwind for the market. This means equities are more likely to move sideways than not in the near to mid-term, and a long-term trading range could also be in play.
Equity markets retreat again on Wednesday as market participants gauge the impact of high-interest rates, high inflation, and the growing chance the US will enter another government shutdown. Debt ceiling negotiations are at the forefront of everyone's mind and are helping to drive the markets, but it is not what will bring the S&P 500 down. A growing number of companies are indicating 2nd quarter or 2nd half weakness that is taking a toll on the earnings outlook. If there is anything that moves the S&P 500, it is the outlook for earnings.
The next 2 days will be a test for the market. The S&P 500 continues to show resistance at the 4,150 level, and the PCE price index is due out on Friday. The index is not expected to give the Fed much reason to pause and may keep equities from moving higher. With the summer fast approaching, the odds of a summer rally are fast diminishing.
Equity markets pulled back on Tuesday as investor confidence erodes. Persistent high inflation, high interest rates, and a lack of debt ceiling resolution have taken their toll, and markets are facing volatility until the issue is resolved. Additionally, there is growing concern discretionary spending will fall sharply this summer and lead to recession.
The next turning point for the market may be at hand. The S&P 500 is within a critical resistance zone with key inflation data due Friday. The PCE price index is expected to remain hot and keep the Fed on its current path.That is still the question to be answered and the market generally doesn't like uncertainty.
Equity markets traded in a tight range on Monday as investors brace for the next PCE inflation report. The report is due on Friday and is not expected to give the Fed or the markets a reprieve. The index may cool at the headline level compared to last year, but the month-to-month figure is expected to accelerate to 0.4% and core inflation will remain steady at 4.6%. This may give the Fed room to pause but does not signal the need for rates to fall.
This week brings another round of earnings from the retail sector. Lowe's kicks it off this morning and may leave the market wanting more. Signals of shifting spending habits have cut into discretionary spending, and competitor Home Depot did not inspire confidence for 2023. As it is, the consensus estimates for 2023 earnings continue to deteriorate, which is a dead weight for the S&P 500.
Equity markets rebounded last week as investors began to embrace the new normal. The new normal is a time of high-interest rates, high inflation and tepid economic growth punctuated by the ups and downs of a rolling bear market. The S&P 500 gained more than 1.65% for the week and broke above the 4,150 level, which is significant. The move could lead to a higher high, possibly as high as 4,300, but a move higher than that is questionable.
The news of the week came out of the retail sector. Retail results are mixed, with consumers shifting toward staples and away from discretionary items and the big box diversified names are the only winners. Foot Locker, a purely discretionary name, not only gave a weak report but guided the entire year lower and that may be echoed this week when the 2nd half of the retail sector issues their reports.
Equity markets advanced on Thursday in hopes the US would reach a debt-ceiling agreement soon. The move led the S&P 500 up nearly a full percentage point to reach the highest level in more than 6 months. The new high may attract new buyers and result in another high, but the market is not out of the woods. The S&P 500 is trading within a tight range that has capped stocks for over a year. A move up to 4,300 is expected, but more than that is just a guess.
Retail earnings are mixed so far. Some are beating expectations, a few are guiding the year higher, but all indicate weakness in the 2nd quarter. The risk for the market is that weakness will linger into the 3rd quarter and results in downward revisions when 2nd quarter results are released. The takeaway is that the S&P 500 is still in a rolling bear market and could hit the next top anytime.
Equity markets rebounded on Wednesday following better-than-expected results from Target. The big box retailer reported strength on the top and bottom lines and maintained its guidance for the year. The caveat is that guidance for the 2nd quarter was reduced due to weakening consumer trends, and the weakness may not be contained to the quarter. If the weakness lingers, and there is no reason to think it won't, Target will reduce its guidance later in the year.
The S&P 500 gained more than 1.0% at the day's high to confirm support at the 30-day moving average. However, the move was capped by resistance at the 4,150 level and may not get any higher. The 4,150 level has been an impossible line for the market to cross for over a year, and nothing in the outlook says that will change now. Even if the index can grind higher, the 4,300 is another line in the sand that will cap gains unless the outlook for the 2nd half begins to improve.
Equity markets pulled back on Tuesday but continue to trade within a narrow range. The move was driven by weaker-than-expected retail sales data and earnings guidance from Home Depot, which suggests further slowing of consumer demand. The news foreshadows what may be a weak reporting season for the retailers, and this week will bring reports from Target and Walmart and others in the industry. The takeaway is that the outlook for earnings in the 2nd half of the year will continue to slide, and the decline may accelerate.
Investors hoping for a summer rally may be disappointed. While the outlook for FOMC interest rate hikes has fallen to near-zero, the outlook for interest rates to stay high is firming. In this scenario, the outlook for S&P 500 earnings will also deteriorate due to declining demand and the deflationary conditions they will create.
Equity markets continue to hover within a tight range below critical resistance. Traders and investors are trying to come to terms with what the new normal will look like, and there is an increasing chance that interest rates will remain high for an indefinite period. Fed president Bostic commented to markets that interest might not come down even with an inflation-killing recession.
The week's action will heat today with earnings reports from big box retailer Home Depot kicking off the retail portion of the earnings cycle. The market expects a mixed report, but the market-moving news will be guidance - the company's parking lots are not as full as last year, which may be a telling indicator. Regardless, the longer it takes for the S&P 500 to move above 4,150, the less chance there is of it doing so.
Equity markets had another tough week and ended the period sourly. The S&P 500 traded in a tight range for the week, but the more telling indication is that resistance persists at the 4,150 level. This level has marked the top for stocks for over a year and is likely to continue to do so. Among other reasons, the yield on Federal debt is paying more than the S&P 500 with less risk and is attracting safe-haven and risk-averse investment dollars.
This week will be another hurdle with economic data and earnings on deck. The data includes retail sales and the Index of Leading Indicators, which are expected to be negative for the 16th consecutive month. On the earnings front, reports from major retailers like Walmart, Home Depot, and Target will tell the tale of the consumer.
Equity markets continue to wrestle with what the "new normal" means for stocks long term. With the rate on the 10-year treasury above 3.0%, it's all too easy to get S&P 500-beating yield with little to no risk. This is a headwind for stocks that may cap gains indefinitely regardless of their performance. This situation is unlikely to change without changing the inflation outlook, which remains hot. The CPI index cooled slightly compared to the previous month but not substantially.
Next week brings another hurdle for the markets. Not only is there a raft of economic data to include retail sales, housing data, and the index of leading indicators but Q1 results are due from the big retailers. The retailers have been struggling with shifting consumer habits, bloating inventory and a tepid outlook for growth; that is not expected to change.
Equity markets tried to move higher on Wednesday following the CPI report. While the headline figure fell a tenth compared to last year and came in below consensus, the rest of the data set overshadows the decline. Headline inflation accelerated compared to last month, and the core figures were as expected and unchanged from last month. This leaves inflation running at more than double the Fed's target and does not allow them to ease back on interest rates. The takeaway for the market is that interest rates may not rise anymore, but they are not going down anytime soon.
The news helped lift tech stocks dependent on debt to fuel growth. The rally lifted the NASDAQ Composite by more than 1% to the highest levels in 6 months and has the index on track to extend the gains. The next target for the tech-heavy index is near 13,000 and it will be a tough line to cross. The S&P 500 is still below critical resistance at 4,150.
Equity markets pulled back for a second day on Tuesday as markets eye Wednesday's CPI report. The report is expected to show consumer prices are still rising at an above-target pace, and there is little hope for cooling. The core PPI reading is expected to accelerate on a month-to-month basis and may lead to a hot YOY reading. Even if the reading cools, with inflation still rising, the Fed can not be expected to ease back on the interest rate throttle.
The S&P 500 is at a critical juncture; the next few days could decide the market's direction over the next 3 months. If the index can get its feet under it and move above 4,150, it could extend the rally to 4,300 or higher. Aside from inflation and the FOMC, the risk is that the outlook for 2nd half earnings growth resumed its slide. The consensus figures are now at the lowest level on record and are weighing heavily on stock market prices.
Equity markets traded in a tight range on Monday, starting the week on an uncertain note. The action was dominated by concern this week's CPI report would confirm the need to keep interest rates higher for longer, if not on the rise. That concern was shaded by the latest Fed Senior Loan Officer Opinion Survey, which shows credit conditions are tightening for businesses and consumers nationwide. The news is evidence that loan officers are growing nervous about the economy's future.
The S&P 500 is at a critical juncture, trading at the 4,150 level. This level marks the bottom of a trading range that has dominated the market for the last 12 months; the next move will be a telling one. If the market can rise above 4,150, lifted by a brightening earnings outlook, it could continue to rise into the summer months. If not, this market will remain range bound with a chance of moving down to retest support at lower levels.
Equity markets ended a turbulent week on solid footing, rising more than 2.0% on Friday. The move was supported by a robust NFP report that shows job and wage gains with unemployment lingering at low levels. The news suggests core economic strength that will help the Fed achieve its soft-landing but other data disagrees. The number of layoffs is rising while job availability declines and consumer products manufacturers brace for a downturn in spending.
Next week will be about inflation with reports on CPI, PPI and import prices. The CPI data is expected to come in flat compared to the previous month, which is hot and contrary to the idea of the Fed pausing. The risk for the market is that inflation will persist at these levels into the summer and force another interest rate hike. In that scenario, more banks will fail, and consumer spending will slow further.
Equity markets fell for a 3rd day as fear of a broader spread financial system crisis grows. While the First Republic Bank chapter of the saga has come to a close, the FOMC is expected to keep rates at high levels for a sustained time and will likely cause more banks to fail. The question is how many and how soon, and the answer may not be known until regulators close the next bank down.
The S&P 500 shed more than 1.0% at the session's low and is testing support at the 4,050 level. Support at this level may be tenuous and lead to another market sell-off. If so, the following targets for support are several percentage points lower. Even if the market can sustain these levels, there is clear resistance at the 4,150 level that is keeping the market from moving higher.
Equity markets tried to move higher after the FOMC meeting, but the takeaways for investors are not bullish. The FOMC raised rates by 25 basis points as expected but left the door open to another hike later this year. The Fed also indicated it thought inflation would remain higher for longer and needed to leave interest rates higher to combat it. The market responded by pushing its expectation for the 1st interest rate cut to September and selling stocks.
The S&P 500 continues to show resistance at the 4,150 level and is unlikely to move above it. This will keep the index range bound in 2023, and there is a chance it will move lower. The increase in interest rates puts more pressure on an already cracking banking system and is sure to cause another failure, and the odds of recession continue to rise.
Equity markets retreated on Tuesday as fear of the Fed gripped the market. The S&P 500 fell more than 1.25% at the session's low and continues to show resistance at the 4,150 level. The odds the FOMC will hike by another 25 basis points is high; the risk for the market is in the policy statement. The FOMC may back off from further interest rate hikes, given the state of inflation and the risk to the banking sector, but it will not roll over and go to sleep. Inflation remains high; the FOMC needs to be sure the market understands it is ready to hike rates again should the data warrant it.
The NFP report will be another market-moving event later this week. The report is expected to show a slowdown in hiring and an uptick in unemployment which was foreshadowed by the JOLTs report on Tuesday. The JOLTs report shows that the number of open job positions has fallen to the lowest level in 2 years as employers cut back on expansion plans. This is the first real sign of economic slowing the market has taken to heart, and it is 1 that could result in recession.
Equity markets tried to advance on Monday following news that First Republic Bank assets had been seized by regulators and sold off to the highest bidder. That bidder turned out to be JPMorgan Chase & Co, which was primarily responsible for the initial bailout. However, the market could not catch a bid due to lingering uncertainty about the financial sector. JPM CEO Jamie Dimon said this part of the crisis is over; in his words, only so many banks were offside, like First Republic. Now that its depositors are cared for, market participants can move on to the next crisis.
This week will be another test for the market. The earnings deluge will continue with reports from big tech, consumer favorites like Starbucks and staples like Kraft Heinz. The takeaway to date is that earnings are better than expected, but most companies continue to deliver weak guidance. The news of the week will come on Wednesday when the FOMC hikes rates by another 25 basis points and adds incremental pressure to the economy.
Equities markets stumbled and bounced from support last week as earnings season rolls on. The week's news is that earnings are better than expected, and core consumer inflation cooled a tenth compared to the previous month. The sad news is that PCE prices fell 0.1% compared to an upwardly revised figure and are hotter than expected. In this light, the FOMC may be unable to ease back on interest rate hikes, although they have indicated the next meeting would be the last hike for 2023.
This week brings another round of earnings reports and key economic data. Topping the list of economic releases is the NFP report on Friday, followed by the ISM reports and construction spending. These data points are expected to confirm the slowing in the economy seen in other data points. Among the most troubling is the Index of Leading Indicators, which has been negative for more than a year and is trending deeper into negative territory.
Equity markets rebounded by 2% on Thursday, hoping the PCE price index would confirm a slowdown in inflation. The index is expected to hold steady at 0.3% compared to last month but fall to 4.5% compared to last year. That is a 0.1% decline in inflation but not enough reason for the market to rally. The market hopes that inflation will fall more than expected and lead the FOMC to begin pausing its interest rate hikes next week.
The risk for the Fed and the market is that pausing will allow the economy to regain traction and sustain inflation. In that scenario, the Fed will have to hike rates again later this year, possibly at a market-surprising pace. With oil prices hovering at levels not sustained in over a decade, it is unlikely inflation will turn negative, and there is a risk that oil prices will rise again. Oil prices are tied to the economic outlook; if the Fed surprises with a pause next week, the outlook will brighten, and oil prices will rise.
Equity markets tried to rebound on Wednesday but couldn't. Solid earnings from tech majors like Google and Microsoft and consumer favorites like Chipotle Mexican Grill were overshadowed by fear of growing bank contagion. The latest news from the First Republic scandal is the bank needs to raise more capital to avoid a government takeover, and the $30 billion deposited by the US largest banks may already be lost. With the FOMC slated to hike rates by another 25 basis points next week, the odds of another bank failure are growing.
Thursday could see another day of decline. The market is cheering the better-than-expected earnings season, but fear of recession is also growing. Reports from companies like UPS and Packaging Corporation of America are contrary to the strength shown by other companies and point to widespread economic slowing. The news of the week will come out tomorrow. The PCE price index is due at 8:30 AM and is a high-probability market-moving event.
Equity markets fell on Tuesday after results from First Republic Bank sent another wave of fear. The bank reported better-than-expected earnings but a 40% decline in deposits, including $30 billion in deposits from major banks like JPMorgan. The news suggests other banks could be susceptible to runs given the catalyst. Because interest rates, the catalyst that put First Republic in its position, are still rising, another bank failure could happen at any time.
The S&P 500 fell more than 1.5% at the session's close and gives further evidence of resistance at the 4,150 level. After-hours reports from names like Google and Microsoft may lift the market on Tuesday, but the long-term outlook continues to sour. Along with First Republic results, reports from UPS and Packaging Corporation of America suggest weakening consumer spending is undermining the US economy and has it on track for a recession later this year.
Equity markets tread water on Monday as investors weighed a fresh round of earnings reports and prepared for another inflation report. On the earnings front, reports continue to come in better than expected, but instead of pointing to a solid rebound in the 2nd half inflationary pressures persist and volume declines are taking a toll on the outlook. If this trend continues, it is likely the S&P 500 will move lower by the end of the reporting session but it is still early in the cycle.
The PCE price index is due out on Friday. This is the last read on inflation before the next FOMC meeting and will set the tone for the upcoming decision. If inflation shows cooling the FOMC may be able to hike once more and then pause to wait and see what happens. If not, the Fed may be forced to hike more than expected and there us still the oil price to consider. The price of oil is expected to move higher due to OPEC's production cuts and that may reinvigorate inflation.
Equity markets ended the week on a down note after a host of earnings reports came in better than expected but left the outlook for the 2nd half in peril. The consensus estimates for 2nd half earnings growth continue to decline and have Q3 on the brink of turning negative. This is on top of a growing certainty that a recession is coming; the only question is when.
The takeaway from last week's economic calendar is that The Index Of Leading Indicators fell to -1.2, nearly double the expectation and an acceleration of recessionary factors. This is the 15th month of negative leading indicators, and the trend is strengthening. This week will bring another read of the PCE price index, and it may not be enough to get the market back into rally mode.
Equity markets continue to tread water beneath significant resistance points as investors weigh the onslaught of earnings reports. While most reports are better than expected, the news is often mixed regarding analysts' expectations, and guidance is more in line with the consensus than not. In the eyes of a market that needs improvements, the news is ok but not enough to spur a sustainable rally.
Next week will be a challenge for the market. Not only does the Q1 reporting season kick into high gear, but the PCE Price Index is due out on Friday. Given the state of inflation and interest rates, this reading may be more important than ever. A hot report, or even one that is only slightly cooler than before, may not be enough to excite investors. With high inflation, the market needs to expect interest rates to remain high and that general demand will continue to decline.
Equity markets held their ground on Wednesday following a round of mixed earnings reports. News from companies like Netflix, Abbott Laboratories, and big banks left the market wanting more. While many are reporting better than expected, the results are offset by uncertainty and have the market in a wait-and-see mode. More reports are due on Thursday that could tip the balance in favor of bulls or bears.
The S&P 500 remains below resistance at critical levels. If the market can not get above 4,150 and stay there, it will risk another significant decline. The true risk is inflation and the Fed, which was highlighted in the Beige Book report. According to the Fed, activity is down in most regions, although inflation remains high and above target. The takeaway is that activity is declining, and the FOMC can be counted on to keep interest rates high until activity slows enough to tame inflation.
Equity markets closed with a gain on Tuesday, but the advance was slim, and the takeaways bearish. The S&P 500 closed with a gain of 0.09% after trading in a tight range that confirms the presence of resistance at the 4,150 level. 4,150 has been a line the bulls can not cross since the middle of 2022, and nothing in the outlook says that will change now.
Some better-than-expected earnings reports and guidance are helping to lift the market, but it may be too little too late. Data in the form of housing starts and building permits suggests the economic contraction everyone expects is getting worse. The data show starts and permits fell more than expected compared to last month and are down 17% and 24%, respectively. Because permits are a leading indicator of starts, the start figure should be expected to decline further.
Equity markets tread water on Monday as participants brace for a busy week. Both the economic and earnings calendars are filled this week and promise to bring market-moving news. The question is whether the news will move the market firmly in one direction or if volatility will reign supreme. On the earnings front, reports from J.B. Hunt, Netflix, Abbott Laboratories and Proctor & Gamble are at the top of the list and promise to give a deeper view into a broad swath of the economy.
On the economic front, the market is waiting for a host of reports on manufacturing, the housing market and the Index of Leading Indicators. The Index of Leading Indicators is of particular concern because it has been negative for over a year and is expected to accelerate its decline this month. This is a signal of recessionary pressures and one that is getting louder as the months go by.
Equity markets rose last week, but bank earnings capped the gains. The banks reported better than expected top and bottom line results due to the rise of interest rates. The news is good for them because they make money when rates are high or low; the bad news is that the rest of the economy is paying more for credit and loans, which impacts demand.
The inflation data helped to lift markets last week, but that lift may be short-lived. Oil prices are rising and will underpin another acceleration of inflation if not capped soon. Based on the IEA's demand outlook and OPEC+ production cuts, oil prices will likely move higher in 2023.
Equity markets cheered on Thursday when the PPI report was softer than expected. The report renewed hope that peak inflation was past and the FOMC would soon reach the peak of interest rates. The risk for the market is that easing fear may lead to an economic acceleration and an acceleration of inflation. In that scenario, the Fed will resume interest rate hikes before the end of the year.
Today's will be all about earnings. The peak of Q1 reporting begins today with reports from most of the big banks and a few other critical names. By the end of the day, the market will have a grasp on what to expect from the rest of the season and the takeaways may not be bullish. The S&P 500 is at a critical level, near 4,150; if it can't move higher tomorrow, the odds are high the index will remain range bound through the end of the season.
Equity markets got a boost from the better-than-expected CPI report, but the strength did not last. The headline CPI figure moderated more than expected, but YOY gains and core inflation remain strong. Also, oil prices are rising and will underpin another acceleration of inflation; the only question is when. The price of WTI gained more than 2.25% for the day to break out of a trading range and confirm the continuation of rebounding. With OPEC+ tilting the balance in favor of supply it is likely oil will rise to $100 per barrel at least.
This week's market risks are not behind us. The March retail sales figures are due out on Friday and are expected to be negative. The risk is that spending will fall more than expected and lead the S&P 500 lower. As it is, the index confirms resistance at a critical level and is more likely to sell off than to rally.
Equity markets started the week quietly. Traders and investors are eyeing the CPI data due on Wednesday. CPI is expected to moderate on a month-to-month basis but remain strong on a YOY basis and possibly accelerate at the core level. The risk now isn't so much the CPI data but the price of oil underpinning inflation. With oil prices on the rise and heading to $100 per barrel, another acceleration of inflation should be expected.
This week is the start of peak earnings reporting season for the Q1 fiscal period. The first reports come out on Thursday and Friday, with the big banks reporting on Friday. The analysts have been lowering their expectations so the bar may be easy to bet. The risk in this quarter is that revenue and earnings will miss the consensus or worse, the guidance will be reduced. Int that scenario, the S&P 500 will have little choice but to move lower.
Equity markets started the week quietly. Traders and investors are eyeing the CPI data due on Wednesday. CPI is expected to moderate on a month-to-month basis but remain strong on a YOY basis and possibly accelerate at the core level. The risk now isn't so much the CPI data but the price of oil underpinning inflation. With oil prices on the rise and heading to $100 per barrel, another acceleration of inflation should be expected.
This week is the start of peak earnings reporting season for the Q1 fiscal period. The first reports come out on Thursday and Friday, with the big banks reporting on Friday. The analysts have been lowering their expectations so the bar may be easy to bet. The risk in this quarter is that revenue and earnings will miss the consensus or worse, the guidance will be reduced. Int that scenario, the S&P 500 will have little choice but to move lower.
Equity investors face a trying week filled with economic data and the start of peak reporting for the Q1 period. The economic calendar includes CPI, PPI and retail sales data that could all point to trouble for the S&P 500. Inflation is expected to accelerate at the core level, given the rise in oil prices and retail sales will be weak. The combination suggests another FOMC rate hike is due, and consumer spending will continue to fall.
On the earnings front, reports from JPMorgan Chase, Citigroup, and Wells Fargo are due on Friday and market the start of the peak reporting season. The banks are expected to post solid increases in business but may give a cautious outlook given recent bank failures and the inflation outlook.
Equity markets moved higher on Thursday to close a holiday-shortened week on a positive note. An improvement in outlook does not drive the move, so it should be viewed cautiously. The data this week has been tepid, to say the least, and is pointing to the recession that has been on the horizon for some time. With the FOMC on track to hike rates by another 25 basis points at least, the odds of a significant recession are high.
Today's news includes the monthly NFP report. It is expected to echo the ADP report and show a slowdown in hiring coupled with an ongoing wage increase. The increase in wages is of concern because it is underpinning inflation. With oil prices rising again and wages still creeping higher, the FOMC may not be able to end its rate-hiking streak with only 1 more increase.
Equity markets pulled back a second day on Wednesday after weaker-than-expected jobs data from ADP. ADP says job gains increased by a net 145,000, about half what the economists expected. The news raises the question of recession and what the Fed's interest rate policy is doing to the economy. A weak NFP report on Friday will cement fears into place and will weigh heavily on the market.
A key report for investors will be the Challenger, Gray & Christmas report on layoffs. The February data showed a surprising surge in layoffs that may have accelerated over the last month. As an indicator, labor data is often lagging behind the broader economy so a downturn in hiring and an uptick in layoffs may signal the US is already in a recession.
Equity markets pulled back on Tuesday after posting a small gain in the preceding session. The move was driven by concerns sparked by the spike in oil prices caused by OPEC. The rise in oil prices should bring another round of windfall profits to the oil industry and inflation. When inflation reaccelerates, the FOMC can be counted on to increase interest rates to match, which might break the economy.
Labor data will be a driving force in the markets this week. The JOLTs report showed a surprise fall in job openings that may be echoed by weakness in the ADP and NFP reports. The key metric, however, may be the wage gains running in the high single-digit range.
Equity markets moved modestly higher on Monday after OPEC+ announced a surprise production cut. Starting in May, the cut is worth more than 1 million barrels per day and will tilt the supply-demand balance firmly in favor of higher prices. The news sent the price of WTI up by more than 6%, which was sustained through the end of the session. Analysts are already discussing $100 oil, which could be a cautious estimate given the coming travel season.
The real takeaway from the oil news is inflation. Another spike in oil prices will be felt at all levels of the economy and spark another round of negative feedback loops. In this scenario, inflation will not only accelerate but could also reach new highs. This will leave the FOMC no choice but to continue hiking interest rates and adding pressure to an economy already showing signs of distress.
Equity markets rebounded last week, and the rally may continue this week. A combination of easing fear, easing inflation and better-than-expected earnings reports is why. The S&P 500 gained over 3.25% for the week in a high-conviction move that could reach the 4,200 level soon. The risk for traders is that resistance at the 4,200 will cap gains until later in the year.
This week will be driven primarily by the economic data. There are few earnings reports on the calendar but multiple economic events. Most of those are centered on the labor market and could point the way toward the Fed's next move. If the labor market shows signs of weakness or deterioration, the committee may have no choice but to hold back on the next interest rate hike. Until then, inflation remains hot despite the cooling indicated in last week's data.
Equity markets moved on Thursday, but it may be another top in a frothy market. The latest rally is driven by hopes the banking crisis is already behind us despite the fact the FOMC is on track to hike rates 1 more time this year. The risk for traders is that PCE data release will be hot or hotter than expected and keep the Fed hiking until later in the year.
If the market can not move higher today, it will confirm resistance for the 3rd time this year. Such a move would keep the S&P 500 rage bound until the 2nd half, when there is an expectation for earnings growth. Until then, investors should stick to their investment plans and use market dips to load up on their favorite stocks.
Equity markets rebounded strongly on Wednesday as fear of the Fed was overcome by optimism for earnings growth later in the year. The move was led by tech stocks like Apple and Amazon which gained 2% and 3%, respectively. The S&P 500 advanced about 1.5% at the day's high, closing near the highs and shy of a 2-week high. If the market can advance again and set a new high, it will open the door for a more significant move.
The risk is that resistance for the broad market is not far above. The 4,100 level has been significant resistance multiple times, and there is reason to believe it will again. The PCE Price Index is due out on Friday and it is expected to confirm the Fed's stance. This means investors should expect at least one more interest rate hike, and for economic pressure to mount.
Equities tread water for a 2nd day as traders brace for what could be a monumental PCE report. The report is expected to show moderating albeit hot inflation and give the FOMC a chance to pause and take pressure off the economy. The risk is that consumer-level inflation will be hotter than expected or accelerate in the coming months. For the FOMC, whose task is to tamp down inflation, being "certain" may be more important than giving the market what it wants.
A rise in the ten-year treasury suggests that some in the market expect a hot PCE figure, which may be wise. If not for the SVB crisis, the market would still expect such news and a 50 basis point hike from the FOMC. The only thing that has changed is a bank failure that has little to do with inflation. The real takeaway is that businesses are tightening across sectors and industries, which will be felt and seen in the 2nd half results.
Equity markets started the weak on stable footing but could not post substantial gains on Monday. The move is partly due to easing fear of a banking crisis compounded by uncertainty about the PCE data on Friday. The analysts expect core PCE to moderate to 0.4% month-to-month but remain hot at 4.7% YOY. At this level, the FOMC may need to hike interest rates beyond the recently intended target, and there is a risk it will come in hotter than expected.
With only 2 weeks until the start of the Q2 peak earnings reporting cycle, the market is bracing for what could be a very bad season. The consensus target for Q1 earnings is below -6.0% and it could be worse by the end of the season. The details that will more the market are the guidance and outlook for the 2nd half of the year, if those take another hit this market will move one step closer to another major sell-off.
Equity markets went on a topsy-turvy ride last week due to rising fear of a banking crisis and the FOMC. The FOMC went ahead and hiked another 25 basis points, indicating another hike is on the way. The risk for the market is that PCE data is due out next week and may not give the Fed much choice on the future of interest rates. The S&P 500 closed higher for the week but showed resistance at the 150-day moving average.
This will be another trying week for the market. Investors and trades will be on edge, waiting for the next bank to fail, and there will be little in the way of economic data or earnings to sustain action in the interim. The S&P 500 may be able to move higher on the lack of news, but a sustained rally is far from likely.
Equity markets tried to rebound on Thursday following Wednesday's Fed-induced rebound but the takeaway for investors is failure. The S&P 500 advanced more than 1% at the high of the day only to meet with resistance and give up the gains by the end of the day. The index closed with gains, but the candle formed is black and confirms resistance at the short-term moving average. If the index cannot close above the short-term moving average today, it could lead to intensified selling next week.
Next week could be another tough one for investors. The economic calendar is light but includes the PCE Price Index on Friday. The latest CPI index showed a cooling of inflation but not a decline, which may be repeated in the PCE data. The caveat is that PCE data is expected to be hot and confirm the need for high interest rates if not higher interest rates.
Equity markets retreated on Wednesday after remarks from Fed Chief Jerome Powell failed to soothe the market. Mr. Powell says the committee may only hike rates one more time this year but also that inflation is yet to be tamed, and the committee is ready to hike rates again if needed. In addition, Mr. Powell seemed supportive of the financial system but failed to give explicit details of how the system could be backstopped.
The S&P 500 fell more than 1.6% at the end of the day, confirming the latest stock downtrend. The move confirms resistance at the 4,000 level and the 3rd lower consecutive peak since the bear market rally began. This could signify lower lows, but support may be present at 3,800. The only thing certain now is uncertainty, which will not be good for the market. In this light, 3,800 may only be a stopping point on the move to retest last year's lows.
Equity markets advanced on Tuesday in hopes of further backstopping for the ailing bank industry. The news includes a new deal for First Republic Bank and a push from Treasury Secretary Janet Yellen to expand the FDIC insurance program. The S&P 500 gained over 1.25% on the news and regained the upper side of the 30-day moving average, a potentially bearish sign.
The next hurdle for the market is today at 2:15. At 2:15, the FOMC will announce the next policy adjustment, which is expected to be a 25 basis point increase in interest rates. The risk for the market is the rhetoric which is also expected to be firm. Inflation isn't tamed despite the banking crisis, and it may not fall significantly unless the FOMC causes more weak economic links to fail.
Equity markets rebounded on Monday as investors hoped for FOMC leniency. The budding banking crisis is the first sign of economic cracking and, for some, a reason the FOMC should quit hiking rates. The caveat is that inflation is still high, and the latest data supports the Fed's current policy stance. However, the FOMC may only raise by 25 basis points but issue a firm statement that says the committee will act when the data is hot.
A new round of aid for trouble bank First Republic helped soothe fears of contagion. A consortium of banks led by JPMorgan Chase & Co. is seeking ways to raise capital for the bank and shore up its balance sheet. Among the possibilities are dilutive share sales and an outright bank sale. Meanwhile, the banking fallout has investors in the EU on edge, which is another sign that global economic conditions are on the brink of collapse.
Equity markets ended a mixed week on a down note Friday, falling more than 1.0% at the day's low. The S&P 500 enters this week on an uncertain footing with an FOMC meeting on tap. The market is pricing in a 25 basis point interest rate hike, which is likely, but it is also pricing in a lower peak than last week. This is a risk, given the state of inflation and the most recent FOMC commentary. Given the Fed's stance, the new policy statement is more likely to support the idea of higher rates for longer.
Ultimately, the outlook for earnings will keep the market moving in one direction or another. As it is, the consensus figures for the year continue to decline and weigh heavily on the S&P 500. Some stocks are set up to rebound during the spring, but more will remain range bound or fall to new lows.
Equity markets rebounded on Thursday as investors embrace the potential for a financial backstop in the banking sector and hope the FOMC eases back on the rhetoric. The S&P 500 gained nearly 2.0% at the session's high and may continue to rebound, provided good news continues. The risk is that woes in the banking sector will continue to spread and darken the outlook.
Next week will be a pivotal week for the market. The FOMC is slated to announce the latest policy change on Wednesday, which could spook the market again. Signs of cracking in the banking sector are not a reduction of inflation; that is what the FOMC needs to accomplish its goals. Given the strength in this week's CPI report, the FOMC may not ease up all that much. Investor should expect at least a 25 basis point hike and the indication hikes would continue if the data warranted.
Equity markets gave up Tuesday's gains on Wednesday as the banking crisis spreads. The latest news is that Credit Suisse needs capitalization, and its largest shareholder is barred from providing capital for regulatory reasons. The news sparked a 2.0% decline in the S&P 500, although the index closed off the day's lows. The takeaway for investors is the S&P 500 index is fighting to keep its head above water and may succumb to another sell-off within days.
The next shoe to drop will be Wednesday, when the FOMC issues its policy statement. The market has priced in a 25 basis point hike due to the growing bank crisis, but investors should not be shocked if the Fed hikes by 50 basis points. A 50 basis point hike is consistent with recent commentary and the inflation trajectory.
Equity markets rebounded on Tuesday following Monday's plunge after CPI data came in as expected and increased expectations for the Fed to hike rates by only 25 basis points at the next meeting. The CPI data shows cooling, but its quality is dubious as inflation remains hot and core inflation accelerated compared to the previous month. In this light, the FOMC should not be expected to let up on economic pressure, even with signs of distress in the financial sector. It is those signs of distress the FOMC needs to see to know its policies are working. The next FOMC meeting is only a week away.
Retail sales will be the news of the day on Wednesday. Retail sales are expected to fall by -0.4% and may come below expectations. In this scenario, the outlook for retail sales and revenue in the discretionary sector will take another hit and drag the outlook for the S&P 500. As it is, the consensus for Q1 earnings has fallen below -6.0% and trending lower. Assuming analyst consensus estimates trend, as they have for the past 2 years, the S&P 500 will post negative growth for the year as well.
Equity markets plunged to start the week. The move was driven by fear of spreading contagion related to the collapse of Silicon Valley Bank and others in the financial industry. The S&P 500 managed to claw its way back into positive territory on an intraday basis, however, but it was also unable to close at the high of the day. The takeaway for investors and traders alike is the market hit a new low and can be expected to hit more new lows in the coming days.
Today's CPI report could stave off a deeper market correction if it shows inflating is cooling. The risk is that it will show inflation has accelerated as the PCE price index did, which will not be good for equities. In that scenario, the FOMC should be expected to continue hiking rates and put additional pressure on the economy. The question is how much more pressure the economy can take before it cracks in a way the government can't bail out.
It was a game-changing week for equities last week. Fed chief Jerome Powell's commentary walloped the market that inflation was not tamed, rates would continue to rise, and peak interest rates may be higher than the market is forecasting. The news caused the market to sell off more than 200 points and create the largest red candle in months. The signal is that S&P 500 stocks are unlikely to move any higher this year and that downward risk is increasing. The last several candles like this led to further declines from 5% to 10%.
This week will be another hurdle for the market. The CPI data is due out on Tuesday and is expected to be hot. Another hot read of inflation data will keep the Fed on track to raise rates at least another 100 basis points; the next hike could be 50. The Fed needs to get the market's attention; its only weapon is interest rates.
The sell-off in equities gained momentum on Thursday after traders digested the meaning of Fed chief Jerome Powell's latest comments. The takeaway is that FOMC interest rates can be expected to rise past the 5.5% mark and possibly top 6.0% by mid-year. This means another 50 basis point hike is on the table, and another could follow if the data does not warrant it. The next big hurdle regarding data is the CPI index which is due out next week, and it should be expected to confirm the acceleration of inflation indicated by the PCE price index.
The S&P 500 formed a large black candle that again confirms the presence of resistance at the short-term moving average and the 4,000 level. The candle moved down to set a new low which is the most concerning part, and this low may lead to additional lows today and next week. A hot CPI report could be the catalyst that takes this market back down to the 2022 lows.
Equity markets held their ground on Wednesday following the surprise sell-off on Tuesday. The caveat is that Fed chief Jerome Powell's comments will have a rippling impact on the economy, so the sell-off is far from over. The odds of another 50 basis point interest rate hike have gone above 75% and may go higher should the upcoming inflation data be strong. The next round of CPI data is due next week and may confirm the acceleration of consumer-level inflation.
The next move for the S&P 500 will be a critical one. Now that the downward bias is increasing, the index's next stop is likely to be lower, and it could be much lower. Many Wall Street strategists have come out since Mr. Powell's comments and lowered their targets for the S&P 500. The number that rings loudest is 3,200, which puts the index at a new low.
Equity markets received a rude awakening on Tuesday when Fed chief Jerome Powell's prepared remarks to the congress were released to the public. In the remarks, Mr. Powell reveals inflation is not tamed, the FOMC is on track to continue raising rates, another 50 basis point interest rate hike may be necessary, and peak interest rates may be higher than the market expected. The news caused the S&P 500 to retreat more than 1.5% at the day's low, confirming resistance to higher prices at the 30-day moving average.
The risk for the market is definitely tilted toward the downside following this news. Higher rates for longer will have a more profound and longer-lasting impact on the economy, which will be seen first in the earnings outlook. The outlook for S&P 5-- earnings was already declining; an acceleration in the downtrend will add additional pressure to the index and stocks in general.
Equity markets tried to extend last week's rally on Monday, but early gains faded by the afternoon leaving the S&P 500 flat for the day. The move was driven by hopes the economy has seen the worst of inflation and interest rates, offset by the reality that inflation is still hot and the FOMC is still on pace to hike rates. The latest data from the CME suggests another 50 basis point hike will not be coming but that the peak of interest rates could be above 5.5%. This has the average 30-year mortgage rate hovering around 7.4% and near the highest levels in over 20 years. At this level, mortgage demand is in quick retreat and has analysts downgrading the homebuilding sector.
Later this week the NFP report will move the market. The pace of employment is expected to slow to near 200,000 which is still a healthy figure; the questions that need to be answered are about unemployment, wages, and revisions to the previous month. The crucial data will be the wage data; another 4% or greater increase in wage inflation will surely keep the FOMC on track with its plans and weigh on the outlook for S&P 500 earnings.
Equity markets rallied on Friday to end the week higher after rates on the 10-year treasury pulled back from the critical 4.0% level. The move should not be trusted due to the ongoing impacts of inflation and the outlook for FOMC interest rate hikes. The latest data shows inflation is accelerating and the Fed is on track to hike rates well above the 5.0% level. The risk for the market is that next week's NFP data will be vital and coupled with rising wages that will keep the Fed on its current path.
Next week brings another round of earnings reports although the peak of Q4 reporting is long past. Next week's reports include many small and mid-cap names along with Oracle. Oracle is noteworthy because it marks the mid-point between peak earnings season and the start of Q1 reporting. The company is expected to report a significant increase in YOY revenue and earnings that may be hard to match.
The market heaved a sigh of relief after Fed president Raphael Bostic said the committee could probably stick with quarter-point interest rate hikes. The news is contrary to a renewed belief the Fed could increase the pace to 50 bps per meeting, but investors should not be sanguine. The news does not suggest that inflation has been tamed or the Fed was anywhere near through with raising rates.
Regardless of the Fed's next move, the outlook for S&P 500 earnings continues to decline, and that is a weight the market can't bear forever. Sooner or later, the market will give up all hope for earnings growth in 2023 and the market decline will start in earnest. At best, the S&P 500 is range bound but headed toward the bottom of that range. The following week could be trying for the market with little to sustain the rebound regarding economic data or earnings reports.
Equity markets pulled back for Wednesday's 3rd day this week as a growing fear of an economic downturn saps bullish sentiment. The downturn, which has been expected for several quarters, appears to be finally here based on guidance from retailers like Target and Lowe's. In their view, consumer spending will fall double-digit this year, on top of a 30% correction in the housing market?demand for mtg fells to a 28-year low and points to a deepening correction in that sector.
On the bright side, not all is lost in the investing world. While most of the S&P 500 index is under pressure, some sectors, like fast food, are producing growth and guiding for growth in 2023. These stocks offer investors a range of opportunities, including blue chip safety, high yield, and value, depending on where you look.
Equity markets tried to move higher for a 2nd day this week only to have the move reversed by midday. The price action is hopeful but weak in the face of mounting bearishness centered on inflation, interest rates, and their impact on the outlook for earnings. A report from Target confirmed again what everyone fears, the wave of strength brought on by the pandemic is fading quickly, and the pullback in consumer spending is about to begin.
The S&P 500 is at a critical juncture. If the index can not regain firm footing by the end of the week, it is in danger of a more profound decline. The action so far this week shows resistance at the short-term moving average and growing bearishness among short-term traders. In the even the index deepens its decline, the next targets for firm support are near 3,900 and 3,800.
Equity markets started the week strong, but the gains quickly faded under rising inflation, interest rate expectations, and a dwindling outlook for earnings. The latest news from Factset is that estimates for all quarters of 2023 are trending lower and the 1st half will see growth decline by more than 4.0%. In this light, it is incredible the S&P 500 has been able to rebound as it has.
This week brings reports from retailers including Target, Lowe's, and Kroger. So far, the takeaway is that volume sales continue to fade while inflation makes up the difference. Regarding the S&P 500, Monday's candle confirms resistance at the short-term EMA and has the index set up for a more significant decline. The target now is 3,900 with a chance of moving below that level to 3,800.
Equity markets plunged last week after hotter-than-expected inflation data put the fear of higher interest rates back into the market. The January read of the PCE Price Index shows inflation accelerated on a month-to-month basis as expected and accelerated versus last year. This contradicts the belief that inflation is subsiding and may lead the FOMC to hike rates by another 50 basis points at the next meeting. The risk for the market is the FOMC will do something to shock the market, such as a more aggressive than expected interest rate hike or posture at the next FOMC meeting.
The risk for the market this week is all earnings-related. The bulk of S&P 500 companies have already reported, but this week brings several reports from major retailers and a host of small and mid-cap favorites. The takeaway to date is the outlook for 2023 is deteriorating, and that trend may accelerate by the end of the week.
Equity markets rebounded on Thursday on hopes that inflation was subsisting but these hopes are likely misplaced. Today's PCE price index will tell the tale, and it is expected to confirm the acceleration of monthly inflation and that inflation is still running well above the Fed's 2.0% target. The S&P 500 action is also telling; Thursday's market closed with a gain but the candle formed is dark and consistent with consolidation within a bear market. Price action is still below the 30-day EMA, a sign that short-term traders are bearish on the market.
Next week could be another down week for the market. There is not much on the economic calendar, but a raft of earnings reports is due out from the retail sector. So far, the results are better than expected but point to slowing and contraction in 2023. More news of this variety will harm what are already declining estimates for the 2nd half of the year and add additional downward pressure to the S&P 500.
Equity markets tried to hold their ground on Wednesday but minutes from the last Fed meeting were too much to bear. The minutes reveal a Fed committed to fighting inflation and a committee that may have to increase the rate of interest rate hikes at the next meeting. The recent upswing in month-to-month inflation is troubling as it shows sustained systemic inflation that may persist indefinitely without decisive action.
The next trigger for the market will come on Friday with the release of the PCE price index. The consensus is for core consumer prices to have accelerated versus the previous month and for the YOY comparison to be flat. A flat reading is contrary to the belief that inflation is subsiding and will hurt sentiment, a hot read on this data point could send the market reeling.
Equity markets started the week on a sour note with the S&P 500 falling more than 2.0% at the session's close. The move was driven by the reacceleration of inflation, rising interest rates and the new expectation this week's PCE price index will be hotter than before. In this light, the FOMC can be expected to continue raising interest rates and now another 50 basis point hike is back on the table.
Although labor markets indicate economic activity is still vigorous in the US, there is a shift from higher-paying quality work into lower-paying service jobs. This is fueling a contraction in S&P 500 earnings that is only going to get worse as the year progresses. With consensus estimates for S&P 500 earnings trending lower and nearing the 0.0% mark, it is likely the market will continue falling this week.
Equity markets face a tough week with both the PCE Price Index due out on Friday and the outlook for earnings growth in deterioration. The latest word from Factset is the consensus estimates for all 4 quarters are trending lower, the 1st half of the year will see negative growth and the outlook for the back half has accelerated its decline. This is a dead weight for the market and the primary reason why the S&P 500 is unlikely to move higher or even remain as high as it is.
Regarding the PCE Price index? The PCE price index is the Fed's favored tool for measuring consumer-level inflation and will be hot. The CPI data foreshadows not only hot YOY inflation but an acceleration of inflation near-term that has 50 basis point rate hikes back on the table. If the data is even hotter than the CPI suggested the market sell-off could begin this week, it could be sharp and severe.
Equity markets moved lower on Friday to end an uncertain week on a down note. The market is wrestling with the true meaning of the latest inflation data, and the early analysis is not good. The pace of inflation is stabilizing at current levels if not accelerating, which means the FOMC has yet to accomplish its goal. In this light, it may not be if the FOMC causes a recession but when because it may have to in the fight against inflation.
This week will be another tough one for the market. The following PCE Price index report is due out on Friday and it may echo the news in the CPI data. In this scenario, the odds of another 50 basis point interest rate hike will rise and there is still another month of data to go before the next Fed meeting. The takeaway here is that inflation is still a problem, the FOMC is still raising interest rates and the outlook for S&P 500 earnings is still in decline. Not much of a catalyst for the market to rally on.
Equity markets pulled back in late day trading on Thursday as the realities of high inflation set in. The January PPI report confirmed that inflation is not only running hot and well above the Fed's target rate but also accelerating again. In this light, the expectation for FOMC easing later in 2023 is misplaced due to a growing need for ongoing action. The risk now is not that the FOMC may cause a recession but that it now needs to cause a recession to tamp down inflation.
Friday's action could tell the tale, is the S&P 500 in a rally that can continue or is it at the peak and about to correct? As it is, the S&P 500 index is having difficulty getting over resistance at the 4,150 level and bearish indications are firming. Another pullback in the price action, given the decline in outlook for S&P 500 earnings, could easily retest the 2022 market lows and even set a new low.
Equity markets wobbled for a 2nd straight day as investors weigh the impacts of the latest round of economic data. The January retail sales came in hot at up 3.0% despite the pressure of inflation, say some headlines. The real takeaway is that sales jumped 3.0% because of inflation and higher prices. In most cases, S&P 500 companies are reporting a unit volume decline offset by higher pricing. In this scenario, sales can only increase by so much until the consumer is stretched to the limit.
The release of the producer price index will impact Thursday's action. If the producer price index comes in hot and confirms the near-term acceleration of inflation, the market will not take the news well. The S&P 500 is already struggling to maintain its footing at its current level; another indication the FOMC will continue to hike rates and keep them high could spark a "head for the hills" rush for the exits and bring the entire market down with it.
Equity markets wobbled on Tuesday following an unexpectedly hot read on consumer inflation. The January read on the Consumer Price Index showed inflation cooling versus last year but less than expected as near-term inflation reaccelerates. The acceleration in inflation is driven by wage inflation and new troubles within the supply chain. Inventories are on the rise across the S&P 500 universe, driving up the cost of storage.
Wednesday's action could bring more trouble for an already tired market. The January retail sales figures is due out and it could be an alarming number. The consensus is for retail sales to have increased versus the previous month despite the typical post-holiday slowdown and impact of inflation. In this light, the Retail Sales figure might not just be bad, it might be very bad and point to increasing weakness within the economy. The takeaway, as always, is that poor retail sales figures will equate to lower expectations for S&P 500 earnings.
Equity markets advanced on Monday in hopes that the CPI data will confirm the cooling of inflation. The risk for investors is that it will come in hotter than expected and prove the FOMC right to sound so hawkish. Even if the CPI comes in as-expected, it calls for a 5.4% increase in core consumer inflation versus last year, which is no reason to think the FOMC will back off its policy stance soon.
The most significant risk for the market, as always, is the earnings outlook. The S&P 500 earnings growth outlook continues to deteriorate and may soon turn negative for the year. In this scenario, US businesses are already in an earnings recession, which could linger until the end of the year. The good news is that this year's decline will set the market up for a return to growth in 2024, but that assumes the FOMC will start lowering rates by then.
Equity markets tried to rebound on Friday, but the action was more mixed than not. Investors are scooping bargains where they find them, but this will not lead to a sustained uptrend. The outlook for earnings continues to deteriorate, and that is a weight the market can not bear. The risk now is not just that S&P 500 stocks will move down to retest 2022's low but might move lower.
Next week will be a market-mover for sure. Not only is it a big week for earnings, but the CPI data is also due. The CPI is expected to show further cooling but, again, not enough to keep the FOMC from hiking interest rates at least 2 or 3 more times. The risk here is that consumer-level inflation will run flat or even accelerate from the previous month and confirm the need for more aggressive action from the Fed.
Equity markets fell for the 2nd day as traders assessed the latest economic data and FOMC activity. The takeaway is that inflation puts the economy on the brink of an actual recession, and the FOMC is still raising interest rates. The committee wants to ensure inflation is tamed, which will most likely trigger the recession everyone fears. Regardless, the S&P 500 is in the first inning of what could be a prolonged earnings recession that has been sparked by a decline in volume brought on by high prices and high-interest rates.
Friday's action will be critical for the market. The S&P 500 index confirms the presence of resistance at the 41,50 level, which may lead to another big sell-off. The rally may continue if the market can rebound and close even near the week's high. If not, investors should brace for another sell-off that could shave 15% to 20% off of the major indices by the start of spring. January effect or not, the outlook for S&P 500 earnings is moving lower, leading the market lower.
Equity markets beat a hasty retreat after rallying strongly on words from Fed Chief Jerome Powell. The takeaway today is that inflation has peaked but the impacts of FOMC rate hikes are ongoing. In this light, the slowdown in corporate earnings can be expected to worsen and lead to a prolonged earnings recession if not an actual recession. An earnings recession is when S&P 500 earnings decline for 2 or more consecutive quarters despite broader economic growth.
The remainder of the week could be a test for the market. There is not much in the way of economic data due out but there are still many earnings reports to sift through. If the remainder of the reporting season is as poor as the first half has been it is unlikely the S&P 500 will move anywhere but lower.
Equity markets went on a wild ride Wednesday following comments from Fed chief Jerome Powell. Mr. Powell indicated that a deflationary period had begun, but it would be quite a while before it was fully tamed. He went on to say the committee wanted to be certain inflation was under control which should be taken to mean high-interest rates will last well into 2024 if not longer. The takeaway for the market is that high inflation is on the way out, but the downward pressure on economic activity and S&P 500 earnings will remain.
The S&P 500 gained more than 1.25% at the high of the day on Wednesday and closed above 4,150, but it is not out of danger yet. The 4,150 level marks the lower boundary of a zone of resistance that has yet to be broken. If the index can get above 4,300, a more sustained rally may form, if not the index is destined to remain rangebound in 2023.
Equity markets opened lower on Monday and then seesawed in uncertain action as traders and investors weighed the impact of the latest FOMC decision. The Fed hiked rates by only 25 basis points as expected but indicated a pressing need to fight inflation with higher rates. The takeaway is that the committee is not done raising interest rates, and the peak of rates could be well above what the market expects. The latest inflation data shows a peak in inflation, but there is yet to be a sign of sustained cooling the FOMC can count on.
This week will be tough for the market because it will be all about earnings. In this case, the news will mostly be bad as average S&P 500 companies are underperforming their EPS expectations and lowering the outlook for the rest of the year. In this scenario, the S&P 500 has a dead weight hanging around its neck. The most likely outcome is another sharp decline in index prices that may not cease until the bottom is in for the worsening earnings recession.
Friday's market action is a classic example of when good news is really bad news for stocks. The January Non-farm payrolls report showed a gain of more than 500,000 new jobs despite ongoing layoffs in the tech sector. This is on top of upward revisions to the already strong figures in the previous 2 months and drove another big wage increase. Wages jumped $0.21 from last month's reported figure for a more than 4.0% YOY gain. This is down from the peak but well within the range set over the last 2 years. With the NFP as strong as it is, it doesn't look like wage inflation is going anywhere but sideways anytime soon.
The market will get a reprieve from economic data this week, but the earnings onslaught continues. Another 100+ S&P 500 earnings reports are expected, and they are sure to confirm what we already know; the Q4 earnings season is worse than expected, and the outlook for 2023 is falling fast. At the current pace, the consensus estimate for 2023 S&P 500 earnings growth will hit negative territory by the end of this reporting season, which is not a catalyst for higher prices.
Equity markets surged on better-than-expected results from Facebook parent Meta Platforms. The news sent the stock up more than 20% and the NASDAQ more than 3.0%, but both closed well off of their highs. The takeaway from the report is that business has bottomed, but there are still hurdles ahead, so investors should be wary of the surge in prices.
The S&P 500 gained more than 1.25% on Wednesday and broke above 4,150. This is a potentially bullish move for the market, but risk is still ahead. The 4,300 level marks the top of a significant resistance range and needs to be broken for the rally to continue. If not, this market may peak soon and begin to move lower. The forward outlook for earnings continues to weaken, and that is what will drive the market into the end of Q1 and start of Q2 2023.
Equity markets cheered a 25 basis point interest rate hike from the FOMC on Wednesday and drove the S&P 500 up more than 1.0% on the news. However, the takeaway from the statement is that the FOMC will continue to hike rates for the foreseeable future. In this light, the good news is bad because the FOMC still pressures the economy. The bad news is that economic pressure is cutting into S&P 500 earnings, which will bring the index and market down.
The caveat for traders is the S&P 500 failed to cross above resistance. The index moved up to but did not cross the 4,150 level and then closed off of the day's high. This is evidence of resistance at a key level and a potential peak for the market. However, a move above 4,150 would not get the market in the clear because another key level of resistance is just above the 4,300 level.
Equity markets reversed course on Tuesday and closed higher for the day ending January on an up note. The S&P 500 gained almost 1.5% at the end of the day on signs the earnings season is better than expected. The caveat is that market action is still below significant resistance and the outlook for earnings is deteriorating. In this light, the next big move in the market is more likely to be down than up and there are more risks than one to be wary of.
Today brings another FOMC policy statement and it could be one for the history books. The market is expecting the FOMC to slow the pace of hikes and indicate the peak of inflation has passed but it might be disappointed. The latest inflation data confirm a peak was hit but give little indication that inflation is truly subsiding in a way that is sustainable. What this means is the FOMC needs to make the market believe interest rates will stay high enough for long enough to ensure that happens.
Equity markets began the week in retreat as investors brace for a big week of earnings, economic data and the FOMC. This is the first hectic week of the earnings season and should see more than 100 reports from S&P 500 companies cross the wire. The takeaway for the season so far is that earnings are weak, and the outlook is souring. The economic data may not help; it should show continued strength in the labor market and rising wages to underpin inflation.
The FOMC meeting is the big news of the week. The Fed will release its policy statement on Wednesday and will most likely shock the market. The committee isn't likely to raise rates faster than 25 bps, but it will most likely give a hawkish statement that leaves little room to doubt their seriousness. Anything less will give the market and the economic reason to accelerate, which could drive inflation to new heights.
Equity markets advanced on Friday and for the week on signs that inflation is cooling. The takeaway from the data is that inflation has cooled versus last year but remains hot in the present and trending above the Fed's target rate. In this light, the PCE price index news is questionable and ultimately not good news for the market. With inflation still hot and FOMC interest rates rising, the outlook for S&P 500 earnings continues to decline.
This week will be another pivotal week for the market, with reports from over 100 S&P 500 companies on deck and the NFP report on Friday. The NFP report is expected to confirm strength in the labor market and wage inflation, which should keep the FOMC on its toes. In regard to the NFP, the news of the week will come on Wednesday when the committed issues its next policy adjustment. The market is expecting a 25 bps hike but could be surprised by a hawkish commentary, if not another 50 basis point interest rate hike.
Equity markets after a round of stronger-than-expected economic data. The Q4 GDP came in at 2.9% and a tenth hotter than expected on strong labor conditions and consumer health. The takeaway is that the underlying strength in the economy is supporting activity among S&P 500 companies but also inflation. The recent downtick in inflation is good news but may not be sustainable given the economic strength. In this light, the market's expectation for only a 25 basis rate hike at the next FOMC meeting may be misplaced.
The entire outlook could change today upon the release of the December PCE price index. The index is expected to confirm the downtick in consumer-level inflation but the data will most likely be mixed. While YOY comparisons will cool, inflation is expected to have accelerated on a month-to-month basis and may come in hot. In this scenario, the odds of a 25 basis point hike will crater and the S&P 500 could fall with it.
Equity markets are bracing for what could be disappointing economic news in the face of rising optimism that inflation has peaked. The data includes the 1st read of Q4 GDP on Thursday and the PCE price index on Friday. Both are expected to reveal underlying economic strength and could come hotter than expected. In this scenario, the fear of rising interest rates would peak again and likely bring the S&P 500 down. If not, the market may be able to extend the rally that began on the 1st of the year and end January on an up note.
The S&P 500 is at a critical juncture. It is above a key channel but below a pivotal resistance level that could continue to cap gains if no other catalysts emerge. The risk that seems to be ignored by many market watchers is that the outlook for S&P 500 earnings is in decline. In this light, the index may move higher in the near term, but any gains are subject to quick reversal as the market bias is still bearish.
Equity markets are showing signs of caution if not topping in the face of a declining outlook for Q4 2022 and 2023 earnings for the S&P 500. The action on Tuesday had the market up from the open but moving sideways from Monday's action with resistance just above the 4,000 level. The caution is due to a raft of economic data that is due out Wednesday through Friday that culminates with the PCE price index on Friday. The index is expected to accelerate on a sequential basis but to decelerate versus last year which is a mixed signal indeed. A slowdown in YOY inflation is good but it doesn't mean much with inflation still running at more than double the Fed's 2.0% target and accelerating in the near term.
News that didn't get much attention on Monday is the Index of Leading Indicators. The Index of Leading Indicators fell by -1.0% and 0.3% faster than expected. This is just shy of the worst reading in the last few years which was last month and points to increasingly weak conditions within the US economy.
Equity markets started the week strong and pushed the S&P 500 up more than 1.0% at the day's high. The takeaway for investors is that gains were capped just above last week's highs and at a level that could be expected to provide stiff resistance. The candle formed has a visible upper shadow confirming the presence of resistance and the possibility this is as high as the index will move for now.
The rally was driven by easing fear of inflation. The decline in the pace of inflation is good news, but conditions are still pressuring the outlook for S&P 500 earnings. With the outlook for S&P 500 earnings in decline, it is almost certain the index will fall. This week is the first real weak of peak earnings reporting season for the 4th quarter, so this outlook could change; the risk is that it won't and may worsen.
Equity markets rallied on Friday but don't read too much into that news. The market rallied, but it failed to reclaim the 4,000 level after confirming resistance earlier in the week. This move is consistent with consolidation within a downtrend and is not unexpected with Q4 earnings season about to crash upon the market. The news so far is that Q4 was better than expected, but the outlook for the 1st half of 2023 is still in decline.
Next week will be a key week for the S&P 500, with economic data and earnings as possible catalysts. On the earnings front, reports from at least 2 dozen S&P 500 companies are on tap, while the economic calendar includes the 1st look at Q4 GDP, the Index of Leading Indicators and the PCE Price Index. Of the 3, the PCE Price Index is the most important, but the takeaway for the week will be what the outlook for 1st half earnings looks like relative to today.
The sell-off in equities deepened on Thursday, helping to confirm a top in the index, but all is not lost. The S&P 500 is still showing support at the short-term 30-day moving average, where it may be able to stage a comeback. The catalyst that could do it is earnings and economic data due next week. The Q4 earnings reporting season hits high gear next week and brings reports from Microsoft, Verizon and Johnson & Johnson, all bellwethers for their respective industries.
The economic calendar is also full next week, but the only report that matters comes out on Friday, and that is the PCE price index. The index should confirm a peak in inflation, and it may fall more than expected. The risk for the market is that inflation may subside but not brighten the outlook for 2023 and cap any gains that may form. The takeaway is the consensus figures for forward S&P 500 figures are more important than ever.
Equity markets went wild on Wednesday as investors cheered the economic data and then realized its true meaning. The surprise decline in producer-level inflation is good news for those concerned about inflation, but the retail sales figure suggests the damage is already done to the economy. Retail sales are up YOY but fell more than 1.0% monthly as higher prices and rising interest rates cut into consumer spending. The takeaway from the data is that S&P 500 pricing power may be headed out the window as input costs fall and demand for finished goods declines.
The data that investors truly need to watch is the consensus figures for S&P 500 earnings. The consensus figures are in decline for the 1st half of 2023 and are a dead weight for the market to bear. Now that index price action has reconfirmed resistance at the 4,000 level and the top of a downward-sloping channel, it looks like January will end with the market flat to down which is not a good sign for the rest of the year will bring.
Equity markets seesawed on Tuesday as investors and traders brace for what could be a very bad Retail Sales figure. That figure is due out today and could show that retail sales are down -1.0% or more compared to last year. This is big news for the market because it means price hikes no longer offset a decline in volume that began early in 2022. In this light, the recession has begun, and it will most likely get worse before it gets better.
The takeaway is that earnings growth is off the table for most S&P 500 companies in the first half of 2023. The question is how bad the decline will be and how the outlook for the 2nd half will unfold. Last year, there was supposed to be an improvement in the 2nd half that never fully materialized and was offset by inflation and interest rates. That situation may unfold again this year and leave the S&P 500 index at or below 3,500 at year-end.
Equity investors face a tough decision in the weeks ahead. The FOMC is about to hike interest rates by another 50 basis points, and the S&P 500 is on the brink of what could be an abysmal earnings reporting season. The first reports from the banking sector were better than expected but resulted in a downtick in the outlook for Q1 and Q2 earnings, sure to bring the index down with it. The latest news is that analysts expect earnings to decline by at least 0.5% in the first half of 2023, and the estimates are still trending lower.
This week could be pivotal for the S&P 500. The latest read on retail sales is due on Wednesday, which could be weaker than expected. The consensus of economists is for sales to have fallen by at least 1.0%, including the impact of inflation which is up 6.0% versus last year. The takeaway is that economic activity in the retail sector is in contraction on both a volume and a dollar basis and will drag S&P 500 earnings power down with it.
Equity markets had a strong week and finished on a high note, but the S&P 500 is not out of the woods. While bank earnings were better than expected, the outlook for activity in the year's first half is still in decline. The banks revealed increases in credit reserves and credit losses, which will weigh on earnings if an economic recession takes hold.
This week will be another test for the market, both with economic data and earnings. There are several reports, including the monthly retail sales figure, which is among the most important. Retail sales underpin the US economy, and Macy's report highlights cracks in the sector. Peak shopping periods were better than expected in Q4 but offset by weaker-than-expected off-peak times, and we are heading into an off-peak time of year for the consumer.
Equity markets seesawed on Thursday following an as-expected CPI report. The report was as expected and shows inflation declined by 0.1% from the previous month, but the YOY comparisons remain hot. In this scenario, the FOMC can be counted on to hike interest rates by at least 75 basis points before stopping, if not more. The real takeaway is that pressure on the economy will not let up any time soon.
Today's news will be centered around the Big Banks. The US largest banks are reporting earnings today, and the results and outlook will have a bearing on the direction of the S&P 500 this year. As it is, the outlook for earnings continues to sour; if the banks add to this trend, the S&P 500 will likely move lower by the end of the reporting season.
Equity markets advanced on Wednesday and drove the S&P 500 up more than 1.0% at the day's high. The move was driven by an expectation today's CPI figures would confirm a cool-down in inflation, but there is risk in complacency. The FOMC is indicating that interest rates have yet to do their work and is hinting very strongly that peak rates will be higher than the market is pricing and remain that way for longer than expected. A hot number, a hotter-than-expected number, may sway market sentiment again and spark another downdraft in equities.
The next FOMC meeting is less than 3 weeks away and will be a market-moving event. In this case, the FOMC confirms the market's expectations the S&P 500 could regain the 4,200 level within a matter of weeks. The CME FedWatch Tool is pricing at least another 25 basis point interest rate hike with a chance of another 50. The risk for the market is that the statement will confirm the idea that interest rates will continue to move higher despite a cool-down in the CPI data should it come.
Equity markets tried to regain their footing on Tuesday, but the outlook continues to sour, so do not read too much into the move. The FOMC chief Jerome Powell made remarks on Tuesday that point to more rate hikes than the market currently has priced in. If the committee follows through on this hint, interest rates could peak above 5.0% and remain above 5.0% until 2024, provided there is no recession in the interim.
The next big hurdle for the market will come on Friday with the twin releases of the CPI index and bank earnings. The index is expected to show cooling at the monthly and YOY levels but to remain hot relative to the FOMC's target of 2.0%. In this light, the market might expect the FOMC to possibly reduce the pace of interest rate hikes to a 25 basis point pace but to extend the timeframe for hiking into the second half of the year.
Equity markets tried to extend the rebound on Monday but were cut short late in the day. The S&P 500 advanced more than 1.0% in early trading only to reverse course in the afternoon and close closer to breaking even than not. This move is a sign of hopefulness from the market but also of indecision, and that is right, given the news due out later this week. Not only is this the first week of peak earnings season for the Q4 reporting period, but the December CPI is also due out.
The CPI is due on Thursday and is expected to give a mixed signal. The headline figure is forecast to fall while the core rises, leading to hot YOY figures. The YOY figures are expected to cool, but there is risk in this outlook. Even with a cool down, CPI is running above 5% at the headline and core level and almost 3X the FOMC's target rate. In this scenario, the FOMC will continue to hike rates and keep them at elevated levels well into 2023.
Equity markets surged on Friday after the NFP report showed wage growth slowed. The S&P 500 gained more than 2.5% on the news, but traders are warned to caution. The wage growth has slowed, but the remainder of the labor data remains hot, including the JOLTs report on job openings. At the current levels, job openings will continue to spur upward mobility for many Americans and wage inflation simultaneously.
This week could be a big one for the market. Not only does the Q4 earnings season kick off on Friday, but the CPI report is due that day too. It may confirm a peak in inflation, but it will probably not show a sustained downtrend until later this year. The risk is that it will be hotter than expected and leave the FOMC with little choice but to keep raising interest rates. In this scenario, the outlook for S&P 500 earnings will take another hit, and the index may fall along with it.
Equity markets tried to rebound on Wednesday but were cut short by the FOMC minutes. The minutes, released late in the day, confirmed the market's expectation that interest rates would remain elevated for some time. As it is, the estimates have FOMC policy peaking above 5% in 2023 and ending the year at or above 4.5%.
The takeaway is the FOMC could begin to ease back on policy by the end of the year, but there are risks in that outlook. If inflation is not tamped down before they begin to ease, the economic acceleration that follows will drive another round of high prices.
The next hurdle this week is on Friday with the release of the NFP report. The NFP should show another month of strong job gains and wage increases, both good and bad for the economy. A weaker-than-expected report might be good news as it would show current FOMC policy is affecting the inflation situation.
Equity markets tried to rebound on Wednesday but were cut short by the FOMC minutes. The minutes, released late in the day, confirmed the market's expectation that interest rates would remain elevated for some time. As it is, the estimates have FOMC policy peaking above 5% in 2023 and ending the year at or above 4.5%.
The takeaway is the FOMC could begin to ease back on policy by the end of the year, but there are risks in that outlook. If inflation is not tamped down before they begin to ease, the economic acceleration that follows will drive another round of high prices.
The next hurdle this week is on Friday with the release of the NFP report. The NFP should show another month of strong job gains and wage increases, both good and bad for the economy. A weaker-than-expected report might be good news as it would show current FOMC policy is affecting the inflation situation.
Equity markets are bracing for what could be a very frosty winter for the stock market. The lingering rise in inflation coupled with the rise of FOMC interest rates has the outlook for S&P 500 earnings in decline and that is the single most important factor to lead the stock market. In this light, the S&P 500 could be expected to fall back to previous lows near 3,500 sometime early in the New Year. The question is when it will be hit and how low the bottom will be when the market gets there. If the outlook for earnings continues to deteriorate the S&P 500 could easily slip below support at the 3,500 level and continue its plunge deeper into correction territory.
The risk for the market this week is almost entirely in the economic data. There are several important reports due out this week including the ADP and NFP reports on employment. The takeaways will be the level of employment and the pace of wage inflation. If either holds true to trends that include steady job gains and mid-single-digit levels of wage inflation the market will not take the news well.
Equity markets are bracing for what could be a very frosty winter for the stock market. The lingering rise in inflation coupled with the rise of FOMC interest rates has the outlook for S&P 500 earnings in decline and that is the single most important factor to lead the stock market. In this light, the S&P 500 could be expected to fall back to previous lows near 3,500 sometime early in the New Year. The question is when it will be hit and how low the bottom will be when the market gets there. If the outlook for earnings continues to deteriorate the S&P 500 could easily slip below support at the 3,500 level and continue its plunge deeper into correction territory.
The risk for the market this week is almost entirely in the economic data. There are several important reports due out this week including the ADP and NFP reports on employment. The takeaways will be the level of employment and the pace of wage inflation. If either holds true to trends that include steady job gains and mid-single-digit levels of wage inflation the market will not take the news well.
Equity markets ended the week, month and year on a sour note falling more than 1.0% at the low of the day on Friday to cap off a year of selling in the stock market. The S&P 500 shed more than 25% at the depths of the correction and may reach those levels again in 2023. The risk for the market this year is not only a worsening outlook for corporate earnings but a growing possibility for a deep recession.
This week may be another week of listless trading but the action will heat up soon enough. The calendar Q4 2022 earnings reporting season begins with releases from JPMorgan and other major banks along with key reports from other sectors. As it is, the market is expecting to see S&P 500 earnings fall by roughly 3.0% on average which will be the first decline in earnings since the depths of the pandemic in Q3 of 2020.
Equity markets rebounded strongly on Thursday but investors should not read too much into the move. The gains were driven by holiday trading and not any news or change to the fundamental outlook. As good as the near 2.0% gain is for the S&P 500, it left the index far short of key levels needed to signal truly bullish behavior.
The outlook for 2023 is as mixed as it has ever been. While the economic data continues to show underlying strength, the rise of inflation and FOMC interest rates remains a shadow that will weight on sentiment for the foreseeable future. If the market's fears are realized and there is a deep recession the S&P 500 will likely move much lower before the end of 2023.
Equity markets started to slip on Wednesday due to a lack of buyable news. This week is not only the Holiday trading week but it is also the depths of the earnings mid-cycle which means very little corporate news is available. What there is, isn't hopeful as many CEOs and CFOs are bracing for what could be a deep recession in 2023.
The caveat for investors is that even the downturn on Wednesday is suspect due to the holiday week. With trading volume so low and so little in the way of catalysts no market movement should be taken seriously. It won't be until next week when the market comes back to work and starts the new year that tradable signals will begin to appear. Until then, prepare for the worst and expect the best.
Equity markets started the holiday week on uncertain footing falling about 0.40% at the low of the day. Investors hoping for a Santa Claus Rally to end the year may be disappointed. At best, any upswing in prices will be suspect due to the nature of holiday trading, including light volumes and a tendency for knee-jerk reactions.
The next big hurdle for the market will come next week with the release of the monthly NFP report. If the labor market continues to show strength and in particular high levels of wage inflation, it will reinforce the idea the FOMC is not finished with its round of interest rate hikes. The risk for the market is that wage inflation will be above expectation which could lead the FOMC to keep rates higher for longer. The takeaway is that January will not likely be a good month for investors and the rest of the year could be worse.
Equity markets are hoping for a Santa Claus Rally and may not get one. The Holiday was as cheery as ever but fraught with icy weather, travel delays, canceled airline flights and what looks to be a tepid spending season. The first look at post-holiday shopping has stores mostly empty as consumers cut back on spending in the face of rising inflation.
There will not be many catalysts for the market this week so investors should be prepared for the possibility of volatility and big moves depending on what news comes out. The next major hurdles won't come until the first week of the New Year when the next round of labor data is due. Also on tap for next week is the start of the Q4 earnings reporting season although it will still be another week before the season's peak gets underway.
The selloff in equities resumed on Thursday as traders brace for what could be an historic PCE price index. Although the index is expected to decelerate on a YOY basis it is expected to remain high and at a level that confirms the latest twist in the FOMC outlook. The twist is that the FOMC slowed the rate hike pace but upped its expectations for both inflation and peak interest rates.
Thursday?s candle is a warning to the market. Investors hoping for a Santa Claus Rally should be cautious. The market may rise next week simply because of a lack of volume and the "underlying bid". In this scenario, any upswing in prices will likely be met by selling that drives the index down to a new low
The selloff in equities resumed on Thursday as traders brace for what could be an historic PCE price index. Although the index is expected to decelerate on a YOY basis it is expected to remain high and at a level that confirms the latest twist in the FOMC outlook. The twist is that the FOMC slowed the rate hike pace but upped its expectations for both inflation and peak interest rates.
Thursday?s candle is a warning to the market. Investors hoping for a Santa Claus Rally should be cautious. The market may rise next week simply because of a lack of volume and the "underlying bid". In this scenario, any upswing in prices will likely be met by selling that drives the index down to a new low
Equity markets rebounded on Wednesday to add about 1.5% to the S&P 500. The driver was better than expected earnings from Nike that have enriched hopes that Q4 earnings reporting season won't be as bad as feared. As it is, the market is expecting about a 2.5% decline in S&P 500 earnings and the consensus is falling. The takeaway for investors is that results may be enough to keep the bulls interested and the S&P 500 bobbing sideways within its current range.
The big news this week will come out tomorrow with the PCE price index. The index is expected to subside on a YOY basis at the core level which is what the market needs to see. If the index confirms expectations there is a very good chance Santa Clause will bring a rally next week.
Equity markets held their ground on Tuesday following the 5th consecutive day of decline. The move is promising but not a sign of bottoming so investors are cautioned not to read into it too much. At best, the S&P 500 is making a brief pause on its way back to retest recent lows and those lows could be reached very soon. The risk for investors is the S&P 500 will move below the 3,550 level and open the door to an even bigger decline.
The next major hurdle for the market will be the Q4 earnings reporting season which will begin in mid-January. As it is, analysts are expecting to see S&P 500 earnings shrink more than 2.5% versus last year and the consensus estimate is falling. the risk is that outlook for Q1 and Q2 2023 will take a hit as well and that will bring the S&P 500 down with it.
Equities started the week on shaky footing and it looks like there will be no Santa Rally this year. The S&P 500 shed more than 1.0% at the low of the da making this the 5th consecutive day of selling and putting the index at the lowest level in over a month. Simply based on the chart action, it looks like the market made a quick about-face when it reached the 4,100 level in early December and now the selling is gaining momentum.
The driver of the move is inflation, the FOMC and the belief a recession is on the way. the takeaway for investors is the FOMC will have to curb economic activity in order to stop the growth of inflation and that can only lead to recession. In this light, the S&P 500 may not only retest the lows near 3,600 but continue downward well into next year and eventually retest the pandemic-induced lows of 2020.
Equities extended the rally to new heights last week but beat a hasty retreat following the FOMC policy announcement. The policy change was as expected but came with a more hawkish-than-expected tone that could lead to core interest rates above 5.0% next year. At that level, mortgage rates will top 10% and have a resounding impact on housing and the economy.
The market will get no reprieve this week. There is a host of data due out to include housing data, the Index of Leading Indicators, and the PCE price index. The PCE price index may confirm cooling inflation, but the others will most likely point to economic contraction. The question is whether YOY inflation is falling or is still running hot. If PCE prices are still running hot in the YOY comparison, the market needs to brace for further tightening and the possibility of a significant recession in 2023.
Equity markets continued to pull back falling for the 3rd day as fear of the FOMC intensifies. The CPI was cooler than expected and the FOMC gave the market what it wanted but it came with a string attached. That string was an expectation for inflation to remain hot in 2023 and for the peak of interest rates to be above 5.0% and for it to stay at the peak until 2024. This news means the pressure that is currently weighing on the economy will not only increase but it will remain in place for at least the next 13 months.
The takeaway is that a recession is closing in on the US economy and the S&P 500. Even without an actual economic recession the S&P 500 is about to enter an earnings recession that could last all of next year. In this light, the odds are high the S&P 500 will resume its downtrend and retest the lows near 3,500. If there is no improvement to the outlook by then the index could fall to a new low.
Equities started Wednesday on solid footing rising more than 1.0% ahead of the FOMC meeting. The weaker-than-expected CPI gave the market some hope the Fed would give some relief and those hopes were dashed. While the Fed hiked rates by only 50 basis points the new statement indicated the peak of interest rates will likely be over 5.0% and remain at that level into 2023. This news caused the market to reverse course and the S&P 500 shed 0.60% at the close of the session.
The next hurdle for the market is the PCE price index which comes out next Friday. If the index confirms a downtrend in the pace of inflation it could send the market soaring and usher in the Santa Claus Rally. If not, the market could be in for a rough holiday as traders and investors begin to position for what could be a very bad year for stocks.
Equities started the day off strongly following a cooler-than-expected CPI report. The CPI shows consumer level inflation cooled more than expected at the core and headline levels and on a YOY basis but remains hot nonetheless. The reality of the inflation situation and its impact on the FOMC and the S&P 500 earnings outlook capped gains and caused the market to move lower and close near the low of the day. The takeaway for investors is that resistance to higher prices is still strong and keep the index from breaking out of its current range.
Today is the next potential catalyst for the market. The FOMC is expected to hike interest rates but a slower pace than before and it may confirm the idea that inflation has peaked. In this scenario, the S&P 500 could surge again and this time break above the 4,100 level and extend the rebound to a multi-month high.
Equity markets started the week on solid footing and lifted the S&P 500 more than 1.3% at the high of the session. The move is driven by optimism the FOMC will slow the pace of interest rate hikes at the meeting on Wednesday but the hope may be misplaced. While the Fed may slow the pace of hikes at this meeting it is still on pace to hike rates above 5.0% by the middle of next year and there is risk in the outlook.
The biggest risk for the market this week other than the FOMC is the CPI index for November. The index is expected to show a slight moderation in headline inflation but the core is expected to hold steady at 0.3% month-to-month. At this pace, there is a chance the FOMC will not slow the pace of interest rate hikes because easing back on the pressure may allow the economy to accelerate. The labor market is also still strong so, assuming the CPI is strong as well, there is every reason to believe the Fed will keep the pressure on.
Equities retreat ahead of the December FOMC meeting because of a growing fear of inflation. The last few consumer inflation reports suggested inflation had peaked but that was belied by the PPI index on Friday. The PPI came in hot on all counts and points to ongoing systemic inflation that will lead to higher consumer prices down the road. The takeaway is that the Fed may slow the pace of interest rate hikes but the duration and peak rate will be more than the market is expecting.
Other than the FOMC meeting and PPI there is little for the market to pay attention to other than economic data and there is a lot of that on the Calendar. Reads on Empire Manufacturing, Philly Fed MBOS and Retail Sales top the list of reports and they are expected to show a mixed picture of the economy which will do little to cheer investors ahead of the holidays. A Santa Claus Rally may be coming but it's not here yet.
Equities rebounded on Thursday and may move higher but it all depends on today's read of the PPI index. The index is expected to support the idea of ongoing FOMC interest rate hikes so may not be a catalyst for buying. The caveat is that producer prices may come in on the weak side which is a catalyst for higher index prices albeit a dubious one. A single month of weak inflation data is not a trend nor does it signal the end of FOMC policy tightening.
Next week will bring another read of the CPI index as well and this time it will come before the FOMC meeting. The CPI is much more important than the PPI and may send another jolt through the market.
The takeaway is that the FOMC is going to keep hiking rates and will do so by at least 50 basis points next week. This will add additional pressure to the earnings outlook and may bring the S&P 500 down with it. The risk is the Fed will either increase the hawkish tone of the statement or the CPI will put another 75 basis point hike on the table.
Equity markets tread water on Wednesday ahead of the PPI report on Friday. The report could reinvigorate fear of inflation and the FOMC and spark another decline in the stock market. The S&P 500 is sitting on key support in the form of the 30-day EMA, a move below that could bring on more selling and drive the index down to the October lows.
The PPI report is not expected to show a decline in inflation and that is bad news. At current levels, PPI is supporting consumer-level inflation and may force the FOMC to hike rates by another 75 basis points at the meeting next week. As it is, the CME FedWatch Tool is pricing in a 75% chance the next hike will only be 50 basis points which is bad enough for the economy by itself.
Equities pulled back for another day on Wall Street as fear of recession in 2023 grips the market once again. While nothing has changed fundamentally, the number of CEOs calling or preparing for a recession is growing. The risk for investors now is that economic contraction won't happen and the S&P 500 will continue to rally well into next year.
The next hurdles for the market are at hand. Friday will bring the PPI index and next week is the December FOMC meeting. The PPI is not expected to show much change versus the previous month which is bad news, high and steadily rising producer prices can only mean higher prices for consumers down the road. As for the FOMC, the committee is expected to raise rates by 50 basis points at the next meeting but the tone of the statement could change. The latest news from that direction is that interest rates move higher than currently expected and remain that way for longer.
Equity markets began the week in retreat after stronger-than-expected economic data renewed fear of the FOMC. The data included and hotter than expected reads on ISM services and Factory Orders that suggest underlying economic momentum is still strong. the risk now is the FOMC will slow the pace of interest rate hikes but raise the end target and extend the duration of higher rates. In this light, investors should expect to see core FOMC interest rates top 5.25% in 2023, a mortgage to top 10%, and for these conditions to linger well into 2024.
The market may get another shock later in the week. The producer price index is due out on Friday and may be hotter than expected. The takeaway here is that any increase in producer prices will lead to additional increases in consumer inflation down the road. As for the S&P 500, the index fell more than 2.0% at the low of the day, closed near the low of the session and appears to be confirming a new downtrend in stocks.
Equities closed the week higher but on shaky footing following a pivot from the FOMC. Fed Chief Jerome Powell indicated the committee could slow the pace of interest rate hikes as soon as the next meeting which was what the market wanted to hear. The bad news is that inflation, labor and wage data does not support the idea that inflation is under control or that the Fed can ease off on its policy. While the committee may slow to a 50 basis point pace it should also be expected to continue hiking at that pace until inflation is indeed at 2.0%.
This week could be dicey for traders due to a lack of data on both economics and earnings. There are few notable reports due out but they are interesting on an individual basis only and unlikely to alter the big picture in any way. The takeaway is that conditions are still changing an not for the better. While labor markets remain strong and underpinned by rising wages the impact on consumer spending is getting worse at the same time. The risk is that, at some point, the scale will tip and consumer spending will contract in a meaningful way and bring the economy down with it.
Equity markets tread water on Thursday following a cooler-than-expected read on inflation. The October PCE price index came in at 0.2% for the month, cooler than the 0.3% expected and down from the previous month's 0.5%. The news, while good, is dubious in nature because YOY inflation is still running at a greater than 5.0% pace. At this level, the market should expect the pace of interest rate hikes to remain high if not at the 75 basis point clip it has been rising.
Friday's market will be driven by the NFP report. The NFP is expected to show a slowdown in hiring but the key data will be the wage gains. If wages continue to rise at the 5.0% pace they have set investors should expect core PCE prices to continue rising at an above 2.0% pace well into 2023 and cut deeply into S&P 500 earnings.
Equities ended the month of November on solid footing boosted by remarks by Fed chief Jerome Powell. Mr. Powell signaled the FOMC may shift its stance as soon as the next meeting and slow the pace of interest rate hikes. While the market cheered the news the takeaway is that inflation is still running hot and underpinned by rising wages. In this light, the pace of hikes may have slowed but it is not going to end any sooner than previously indicated. The risk now is that inflation will only subside moderately and prolong the time it takes for the FOMC to do its job.
Today's news may alter the entire FOMC outlook once again so don't be surprised if the market makes an about face. The PCE price index is expected to cool from the previous month but may not have cooled as much as expected. Regardless, the index is expected to support the current outlook for interest rate hikes which is having a negative impact on the outlook for S&P 500 earnings. While this dynamic is overshadowing the market no rally should be trusted.
Equity markets tread water on Tuesday ahead of remarks expected from Fed Chief Jerome Powell. Mr. Powell is expected to comment on inflation and could give insight into when and how high inflation will peak. There is a growing expectation on Wall Street the Fed Chief will both raise the target for peak inflation and extend the duration that it lasts. If this is the case the S&P 500 will most likely begin correction once again.
Also on tap this week, the PCE price index. The PCE price index is expected to cool on a month-to-month basis but should remain high and in-line with current FOMC expectations. The risk is the PCE will affirm the expectation for higher inflation that lasts longer, an event that will seal the deal on the S&P 500's next move.
Equity markets pulled back on Monday as geopolitical unrest in China compounded tepid holiday retail spending. The news from China is that protesters are unhappy with COVID-19 lockdowns and the unrest is spreading. The news will be felt hardest by those whose business is dependent on China such as the tech industry and manufacturing and may cause another supply chain disruption. The takeaway for investors today is that another reason to expect weak earnings in Q4 and the 1st half of 2023 has emerged and it will weigh on the index moving forward.
Traders are also bracing for another round of key economic data. This week's calendar will bring the monthly NFP and other labor news along with key reads on manufacturing, the housing market, and inflation. The PCE price index will be the big report of the week and may show a downtick in inflation to match the CPI. Even so, investors should expect another 125 to 150 basis points of interest rate hikes by late winter 2023.
Equity markets ended the week on solid footing but there is a risk on the horizon. This week brings the 1st of December and the next round of important economic data. Not only is the market looking for the NFP and other labor data but the November read of the PCE price index is due out as well. The index is expected to show an increase in inflation but at a slower rate than before which will be taken as good news by the market. Looking forward, the pace of inflation is still high enough to warrant additional FOMC interest rate hikes and that is having an impact on the outlook for earnings.
It is the outlook for earnings that will keep the S&P 500 inside of its new range if not moving lower. The consensus estimate for Q4 2022 is already in negative territory and the outlook for the 1st half of 2022 is not far behind it. At the rate the estimates are falling, the market should expect to see Q4 earnings growth in the range of -4% or less by the time the next reporting season is done.
Equity markets advanced on the Wednesday before Thanksgiving as investors bet on a Santa Claus rally in December. The sentiment was bolstered by the FOMC minutes which supported the idea that interest rate hikes would slow. The CME Fed Watch tool is pricing in a total of 6 25 basis point increases or a 50 bps rate hikes at the next three meetings. This outlook could change if the next round of inflation is still hot but the market is looking beyond that at this time.
The next big hurdle for the market will come next week in the form of economic data. It is the first week of the new month which means a round of key labor data as well as some other major reports. Topping the list is the PCE price index on Friday which will be a market mover. If the data is hot the market will likely fall back to the recent lows but if it confirms a slowdown in the pace of inflation the market rally could gain momentum.
Equity markets extended the rebound in stocks to near the recent high on Tuesday but traders and investors alike are cautioned not to read too much into the move. Not only was the move driven by an absence of news but it occurred during a holiday-shortened trading week. The takeaway is that Tuesday's action appears bullish but may not lead to much without a true catalyst to induce the market to buy stocks.
Wednesday's action will be more of the same. The question is if the market will end the day up or down and the difference will be telling. A down market suggests traders are fearful of what might happen over the extended holiday weekend while an up market is the opposite. Next week the market will get back in gear as investors start to prep for the final days of the year and what could be a lackluster holiday shopping season.
Equity markets extended the rebound in stocks to near the recent high on Tuesday but traders and investors alike are cautioned not to read too much into the move. Not only was the move driven by an absence of news but it occurred during a holiday-shortened trading week. The takeaway is that Tuesday's action appears bullish but may not lead to much without a true catalyst to induce the market to buy stocks.
Wednesday's action will be more of the same. The question is if the market will end the day up or down and the difference will be telling. A down market suggests traders are fearful of what might happen over the extended holiday weekend while an up market is the opposite. Next week the market will get back in gear as investors start to prep for the final days of the year and what could be a lackluster holiday shopping season.
The equity market started the week on a cautious footing with the S&P 500 falling about 0.4% at the end of the day. There is a renewed fear of inflation and the FOMC following last week's commentary and economic data and, more importantly, the outlook for earnings continues to decline. The consensus for the Q4 period is now firmly in negative territory and the outlook for the 1st half of 2023 is not far behind.
The biggest risks for the market this week are the FOMC minutes on Wednesday afternoon and whatever news may come out. The FOMC minutes, at least, should reinforce the idea that the Fed is not yet done hiking interest rates. The takeaway here is that mortgage rates are going to be pushing 10% in 2023 and will have a deep and resounding impact on the broader economy.
Equity markets were flat last week as fear of inflation was refreshed. Not only did the Fed's outlook for short and long-term inflation get increased but several members came out with commentary to the effect that inflation is yet to be tamed, interest rates are still rising and there is a risk to the economy. Adding to the downward pressure was weaker than expected earnings from the retail sector and a weak read on the index of leading indicators.
In regard to retail earnings, the major retailers are indicating much of this year's strength has been seen and that Q4 could be disappointing. In regard to the index of leading indicators, it retreated by -0.8 points versus the expected -0.4 and came with a downward revision to the previous month's negative reading. The take here is that economic activity has been showing signs of contraction for many months and those signs are getting stronger and stronger.
Equity markets retreat on Thursday as fears of slowing earnings and recession took hold of the market again. The fear was driven by a rebound in the 10-year Treasury yield and weaker-than-expected results from a number of retailers. While the Q3 period was generally better than expected, the outlook for Q4 and 2023 has dimmed and brought the consensus figures for the entire S&P 500 down with them.
Economic data added to the doom and gloom on Wall Street. The Philly Fed's MBOS came in at -19 and much weaker than expected showing a deep contraction within one of the Northeast's busiest manufacturing centers. When added to the bulk of data the Philly Fed news points to a worsening outlook for 2023 and one that could bring a sustained economic contraction for the US and the S&P 500.
Equity markets pulled back on Wednesday following weaker-than-expected results from Target. Target not only reported weak but warned about a potentially weak quarter in Q4 along with rising inventories. The news sent the stock down more than 15% at the low of the day and took the S&P 500 index down nearly a full percentage point along with it. The move has the S&P 500 confirming resistance at the 4,000 level where it has been present before. If the index can't overcome this hurdle the odds are high that it will retest the 3,800 level or lower.
Wednesday's move comes despite a stronger-than-expected retail sales figure that has sales up more than 1.0% from the previous month. While good news, the gains are due in large part to inflation which is still raging and a sign the FOMC has more work to do. The next FOMC meeting is in less than 1 month and should bring at least another 50 basis points interest rate increase.
The equities markets extended the rebound for another day on Tuesday but the action was mixed. The S&P 500 opened with a gain, moved higher intraday but closed below the open to form a dark spinning top candle. This candle is a sign of resistance and indecision within the market and could lead to more sideways action in the days to come. While the reports from Walmart and Home Depot were good news for the retail sector in Q3 the outlook for Q4 and next year remains questionable.
The economic data was also mixed on Tuesday. While the Producer Price Index came in cooler than expected surprisingly strong manufacturing data suggest inflation may not be gone long. The worst of the news was a large 7% surge in household debt during Q3 that has it at the highest levels in over a decade. While consumers are spending, they are also racking up new debt at higher interest rates and that will put a ceiling on spending sooner rather than later.
Equity markets were mostly flat on Monday but pulled back nearly 1.0% last in the day as traders brace for another round of economic data. The list kicks off today with a read of the PPi and it should be another hot one at 0.4% month to month. If so, it will underpin the idea that consumer-level inflation is yet to cool off despite the recently weakened CPI report. Also on tap, this week is Retail Sales and the Index of Leading Indicators, which the market often overlooks.
In other news, the New York Fed's inflation gauge shows the expectations for short and long-running inflation have increased. This could lead the FOMC to act aggressively at the next meeting although some members have indicated it may be appropriate to slow the pace of hikes soon. The takeaway is that inflation is still hot, the data is still iffy, and the FOMC is on track to hike rates above 5.0% by early 2023. With interest rates on the rise and the outlook for earnings in decline, the rally in the S&P 500 may not get far if it's not already over.
Equity markets rebounded strongly last week after a better-than-expected CPI report. The report shows inflation slowed more than expected but it is still high and in line with an outlook for continued FOMC interest rate hikes. The news sent the S&P 500 up more than 6.5% in two days and has it on track to retest the 4,100 level but the market is not out of the woods. The weak CPI data lead to a weaker dollar and that has oil prices moving higher which is a spur for inflation.
This week, the market will be focused on a full slate of economic data that includes several key reads on the housing market, manufacturing data, and the index of leading indicators. The index of leading indicators has been negative for the last 5 months and is expected to contract again. The takeaway is that, even with light CPI data, the damage to the economy may have already been done.
Equity markets surged on Thursday following a better-than-expected CPI report. The CPI cooled versus the previous month with month-to-month and YOY gains weaker than expected. The S&P 500 gained about 5.5% on the news but the euphoria may be misplaced. While inflation has cooled it remains hot at 7.7% YOY and 6.3% YOY at the core level. At these paces, the market might expect the FOMC to slow the pace of interest rate hikes but not to stop the entirely. This means interest rates will continue to rise and put pressure on the economy which is already showing signs of strain.
Next week, eyes will be on the Producer Price Index, retail sales and the index of leading indicators. If producer prices continue to rise, retail sales show signs of flagging and the leading indicators are negative this week's rally is sure to fade. In that light, Thursday's surge in prices may be best used to position for the next downturn in prices than as a trigger for buying stocks. The outlook for earnings continues to deteriorate and that is what's driving the market.
Equity markets fell hard on Tuesday, shedding more than 2.0% by the end of the day. The move may be a referendum on the election results, but there is more to the story as well. Not only were there a number of bad earnings reports from names like Disney, but the CPI index is due out today. The expectation for the CPI wasn't good, and there is a chance that it could come in hot and accelerate at a quicker pace than the market has priced in. Regardless, the data will be consistent with the Fed's outlook unless it falls by an unexpectedly sharp amount.
With earnings season winding down and the CPI behind us, the market will have nothing but economic data and day-to-day news to drive it, and that is a recipe for volatility. The next major economic reports are due out next week and include retail sales, the home builders index, key reads on manufacturing, and the Index of Leading Indicators. As it is, good news for the economy is bad news for inflation and interest rate hikes and may cap gains in the market.
Equity markets advanced about 0.5% in mixed trading on Tuesday as traders await the results of the midterm elections. The polls were mixed at midnight so it could be anybody's game with the final vote tallied. The real driver of action, however, was a rise in the energy sector that put the Energy Sector ETF XLE at the highest levels in about 8 years. The move suggests a bullish tone to the energy market which has been reporting windfall profits and announcing dividend increases and share repurchases.
The risk this week is in the CPI index which is due out tomorrow. The analysts have been shifting their estimates and the net result is an increased expectation for consumer-level inflation versus earlier in the week. As it is now, economists are expecting core consumer inflation to run flat at 6.6% YOY which is a record-setting level of inflation. The takeaway is the FOMC is not done with interest rate hikes and they could maintain their 75 bps pace into the end of the year or longer.
The major indices jumped more than 1.0% as investors looked to the midterm elections and the changes they may bring. By the end of the day today, certainly by the opening of trading on Wednesday, the market will know if Republicans have taken control of Capital Hill or if the Democrats and the Biden Agenda have won out. Either way, the news will move markets on Wednesday and could impact the market's direction well into 2023.
The biggest risk this week is, however, the CPI reading which is due out on Thursday. The consumer level inflation is expected to remain hot on all levels but may show some slowing in the YOY comparisons if not enough to alter the Fed's stance on interest rates. The question that needs to be answered, however, is if the FOMC will hike by another 75 bps in December or if this data will give them the room to start slowing the pace of interest rate increases.
Equity markets confirmed the downtrend last week forming a Dark Cloud Cover on the weekly charts of most major indices. The Dark Cloud Cover is an ominous signal akin to an Outside Day and it points to lower prices for the S&P 500. The fact this signal occurs below key resistances such as the 150-day moving average, the top of a channel, and at a previous low only makes it stronger. The index may hover at current levels for the next week or two but, without a change in the economic winds, a move lower is all but assured.
There are two major hurdles for the market this week and the first is election day. The election will bring a change to the outlook, for better or worse, and it could alter the trajectory of the stock market. The other hurdle is the CPI reading for October. This is the 1st of 4 major inflation readings before the next FOMC meeting and will absolutely have an impact on the outlook for inflation, interest rate hikes, and the odds of a major recession in 2023.
Equity markets pulled back for a 2nd day following the Fed's latest 75 basis point interest rate hike. The takeaway from the meeting is that interest rate hikes will continue until inflation gets back into line although the pace may slacken if the data warrants. What this means for the market is that another 75 basis point hike could be coming in December if the inflation data stays hot.
Today's action will be impacted by the NFP report which is expected to show a moderately strong job increase of 200,000. If the data comes in strong like the ADP figure on Wednesday it will reinforce the idea that another 75 bps interest rate increase is on the way. More important, however, are the wage gains which should show another strong 5.0% YOY increase which is underpinning overall inflation and the Fed's need to continue raising rates. The bottom line is that economic conditions have not gotten any better and they may actually be getting worse.
Equity markets got what they wanted from the Fed but it was a two-edged sword that left the S&P 500 more than 2.5% at the end of the day Wednesday. The FOMC raised rates by 765 basis points as generally expected and gave a policy statement that sounded dovish at first read. The takeaway from the statement, however, is the FOMC is prepared to keep hiking rates at the current 75 basis point clip or near-to until the data changes and the data is not good.
Not only was the latest PCE price index hotter than expected and accelerating but this week's labor data suggest economic activity isn't slowing appreciably. The ADP report came in hotter than expected and included a 7.7% increase in wages that is underpinning inflation. Add to that another upswing in oil prices and it looks like the FOMC will hit its 4.5% to 4.75% core interest rate sooner rather than later. And the S&P 500? It's still in a downtrend and heading down to retest its lows.
Equity markets pulled back on Tuesday as traders brace for the FOMC meeting and policy statement on Wednesday. The FOMC is expected to raise rates by 75 basis points and there is hope they will tone down their stance although there is risk in that outlook. The latest PCE price index showed inflation was still accelerating which is no reason for the Fed to slow the pace of interest rate hikes. At best, the FOMC will hike by 75 basis points and maintain its current outlook.
Also on tap this week is the NFP report. The NFP is expected to come in near 200,000 which would be a dramatic slowdown from the pace of late. In this scenario, the FOMC may be allowed to slow the pace of hikes at the upcoming meeting but more data is needed. The next big inflation report is due out in two weeks with the CPI and it could be news to move the market.
Equity markets pulled back on Monday after a weaker-than-expected reading of the Chicago PMI. The Chicago PMI came in at 45.2 which is not only contractionary but a decline from the previous month versus the expected improvement. The takeaway from the data is that general business conditions in the US have entered a contraction despite what the latest GDP data indicated. This, along with the index of leading indicators, suggests a worsening economic backdrop and not one that is improving. Later this week, the market may also be impacted by the NFP report as well as another large interest rate hike from the FOMC.
The market is pricing in a near 100% chance for another 75 basis point interest rate hike on Wednesday but the news may be in the statement. After the last PCE price index reading, it looks like the FOMC will have to get more aggressive and possibly keep policy tighter for longer than has already been indicated. The good news is that the S&P 500 and Dow Jones Industrial Average have had the best October in decades. If this action continues into November it could be a November to remember.
The rebound in equities picked up steam on Friday following better-than-expected news. Better than expected is all that can be said about the news, however, because the PCE price index accelerated on a YOY basis at the headline and core levels. The news is a dead weight for S&P 500 earnings and points to another aggressive 75 basis point interest rate hike from the FOMC in the coming week.
The news that no one is talking about is the outlook for earnings. While the earnings reports last week were better than expected the margin of outperformance was very tepid and the forecast for the next quarter got worse. The consensus figure for Q4 2022 earnings growth for the S&P 500 is hovering near 0.5% and on track to fall below 0.0% before the start of the reporting season. Worse, the consensus figures for next year are in the same decline and suggest there will be little to no earnings growth in calendar 2023.
Equities pulled back from the recent high on Thursday as the market braces for another hot PCE price index reading. The move confirms resistance below the 3,900 level and sets the S&P 500 up for another test of the recent lows should the market not like the PCE data. As it is, the market is expecting the index to accelerate on a YOY basis from the previous month and to come in just shy of a recent record. At these levels, the index will be at the highest reading in several decades and pointing to another aggressive FOMC interest rate hike.
The next FOMC meeting is less than a week away. The November Fed meeting begins on Tuesday and will culminate with a policy statement and press conference on Wednesday afternoon. The market is pricing in a near 100% chance for a 75 basis point hike and it could come with hawkish commentary, too, if the PCE index is hotter than expected. The takeaway is that inflation is still the driving force of the market and it is still a growing problem.
Market action was mixed on Wednesday and left the S&P 500 down almost a full percent at the end of the day. Reports from names like Kraft Heinz and Chipotle Mexican Grill beat their consensus estimates while those from big tech, Microsoft and Google among them, did not. The news has Wall Street on edge with not only the PCE pride index but the next FOMC decision only days away. The takeaway from the earnings reports is that economic conditions are having an impact on the consumer and businesses.
The analysts have been revising their expectations for inflation and are now expecting to see the PCE price index accelerate on a YOY basis. The new figure has core PCE rising to 5.2% YOY from the previous 4.9% and puts consumer-level inflation just shy of the hottest levels in decades. At this pace, the market should expect the FOMC to issue another 75 basis point interest rate hike and a hawkish statement, possibly more hawkish than what they've stated so far.
Equities rallied again on Tuesday and broke some key technical levels but the breakout may already be over. Reports from key names in tech like Google parent Alphabet and Microsoft may cap gains in Wednesday's session. Both companies showed some weaknesses that could easily carry into the rest of the sector and the economy at large. If this trend continues the S&P 500 will most likely reverse course over the next few days.
The next big test for the market will be on Friday with the release of the PCE price index. The index is expected to moderate on a month-to-month basis but could easily come in hot. Word from companies like Kraft Heinz and General Mills suggests consumer-level inflation is still on the rise and could remain hot well into 2023. If the PCE spooks the market it could add downward pressure to stocks and the next FOMC meeting is just one week away.
Equities markets tried to come out of the gates strong this week with the S&P 500 up on Monday. The move is driven by anticipation of better-than-expected earnings as the peak of Q3 reporting gets underway. This week is the busiest week of the reporting cycle and should bring well over 125 reports from S&P 500 companies. The takeaway is that by the end of the week there will be little doubt as to the health of the S&P 500s earnings power.
Also on tap this week? The PCE price index will be released on Friday and it is expected to cool considerably from the previous month. The risk is that another round of hot data will force the FOMC into another 75 basis point interest rate hike and push the US closer to recession.
Equities experienced some volatility in the prior week as hopeful traders and investors cling to the good news while the pessimistic ones cling to the bad. The good news is that Q3 earnings season is a little bit better than expected, the bad news is the outlook for the future continues to deteriorate and that is weighing on the market.
This week, the market faces an onslaught of earnings reports as well as economic data. Among the earnings reports are several FAANG names which are foundational to the market. Better-than-expected reports from them could provide some relief for investors but the outlook remains dim. On the economic front, the PCE price index tops the list and is expected to come in hot once again. The takeaway will be that the FOMC is on track to continue hiking rates to the 5.0% level regardless of the pace, which is bad news for consumers and businesses alike.
Equities went on a wild ride Thursday first rebounding only to peak out midday on comments from the Fed. Fed President Harker made comments to the effect that inflation was not under control, the FOMC was still hiking rates, and that additional rate increases could be large. The market made an abrupt about-face on the news, confirming resistance at the short-term 30-day moving average for the 3rd day in a row. If the market can not break this trend the odds of a pullback to 3,500 will grow to a near certainty.
The next FOMC meeting is less than two weeks away and the CME FedWatch Tool is pricing in a near 100% chance for another historic 75 basis point interest rate hike. Between then and now, the PCE price index for September will be released and it is likely to be a hot one. The takeaway now is that 75 basis point rate hikes could be on the table until inflation comes down to a manageable level.
The rebound in equities appears to be over as quickly as it began. The S&P 500 fell about 1.0% at the low of Wednesday's session confirming resistance at the short-term 30-day EMA. The move may gain momentum on Thursday and could be driven by earnings as well economic data. On the earnings front, reports from AT&T, Tractor Supply Company, Phillip Morris, and Genuine Parts Company will give a broad look at the earnings situation which has been in a general decline. On the economic front, reports from the housing sector, the manufacturing sector, and the Index of Leading Indicators will point to what the market should expect from the Q4 season when it rolls around.
Next week could be trying for the market. The next big test will be a double-shot in the form of Peak Earnings and the PCE price index. Peak Earnings will bring over 100 S&P earnings reports including some of the FAANG names including Google, Amazon, and Microsoft. If they report better than expected or give good guidance the market could regain traction and begin putting in a real bottom. The risk is the PCE price index, if it comes in hot on Friday the earnings may not matter.
Equities rebounded for another day on Tuesday but eager investors are warned to be cautious. The market opened with a big gain near2.0% which were also near the highs of the session. The highs were consistent with the 30-day EMA which provided resistance and capped gains for the day. At the low, the index was up only fractions of a percent and showing a dark candle confirming the downtrend that began in mid-August. If the market follows through on this signal the S&P 500 will retest the 3,500 level and possibly move even lower.
Tuesday was also marked by mixed economic data. The industrial production and capacity utilization figures came in better than expected but were offset by a new low in the home builders index. The NAHB home builders sentiment index hit 38 which is the lowest level since 2012. The gauge contracted on new traffic and the outlook for sales which hit 25 and 35 respectively. With this trend in place, the contraction in housing markets is gaining momentum and may drag the rest of the economy down with it.
Equity markets came out of the gate strong on Monday but the move may be short-lived. The rally peaked out below the prior week's high and the 3,700 resistance target despite better-than-expected results from many of the nation's largest banks. The move suggests upward momentum could build but there are headwinds to overcome. If the market can not get above 3,700 by the end of the week the odds of another sell-off in equities will grow. As it is, the downtrend is intact.
This week's market action will be driven by earnings and economic data. Reports from names like Netflix, JB Hunt, Abbot Laboratories, and Tractor Supply Company top the list. On the economic front, reports from the manufacturing and housing sectors will be accompanied by the Leading Indicators and the Fed's Beige Book. The first report of the week, the Philly Fed MBOS, was negative and much worse than expected so hope for good news may be misplaced.
Equities fell to a new low last week, rebounded strongly, hit resistance, and fell again to end the week down ahead of the first busy week of the Q3 earnings season. The move was driven by a hotter-than-expected CPI report that led to a technical bounce from key support. The takeaway is the market is unsure of what to make of the news although the downtrend is still intact. This week, investors should brace for another test of the 3,500 level, and if it is broken another 5% to 10% decline in the index.
Earnings reports will be front and center this week but so too will be the economic data. The data ranges from housing to manufacturing, to the Fed's Beige Book and the Index of Leading Indicators which is expected to be negative for the 6th consecutive month. The takeaway is the market downturn is not over and this week could bring renewed volatility.
Equity markets plunged on Thursday following hot inflation data. The September read of the Consumer Price Index came in hotter than expected at the headline and core levels as the cost of housing and wages continue to rise. The data seals the deal in regard to the Fed's next move which will be another 100 basis point interest rate hike according to the CMEs FedWatch Tool. If the next PCE Price Index reading is hot as well the FOMC could be forced to become even more aggressive. Technically speaking, the move hit a key support target at 3,500 which sparked a massive rebound that left the index up for the day.
Earnings season gets into high gear today with reports from the Big Banks. The banks are expected to show the benefit of rising interest rates but may scare the market if consumer and business banking results are weaker than expected. Rising interest rates help the spread upon which the banks make their money but also cut into economic activity.
Equity markets wavered on Wednesday following some stronger-than-expected inflation data and hawkish commentary from the FOMC. On the inflation front, the PPI index advanced at a 0.4% month-over-month pace to double the expectations and leave the YOY figure up 8.5% from last year and at record levels. In regard to the FOMC, the Fed released the minutes from the last meeting and reinforced the idea that interest rates will move higher and stay higher for the foreseeable future.
Today's big news will be the CPI index which is expected to cool a bit from last month. The takeaway from the PPI report, however, is that producer-level inflation is still running hot and underpinning gains in consumer-level inflation. In this scenario, the CPI may cool versus last month but it should be expected to remain high and/or accelerate over the next few months to half a year.
Equities markets went on a wild ride Tuesday first falling more than 1.0% to set a new low and then later rebounding to hit the +1% market at the high of the day and then close with a loss. The move was driven in part by the rising fear of the FOMC and recession and in part by bottom-seekers and value-hunters who stepped in to take advantage of the low prices. The move may indicate a bottom in the market but it is a near-term bottom at best and one that may not last long. The PPI is due out today and the CPI tomorrow and both figures could be hot. The real takeaway from the reports, however, will be the impact on the Fed outlook and that will be minimal without a major slowdown in consumer inflation which is not expected.
This week also marks the start of the peak Q3 earnings reporting season. Reports from most of the US ten largest financial institutions are due out by the end of the week and they could move the market. The banks are expected to post revenue gains but the outlook for earnings is mixed. If the bank's margins shrink or are forced to hold back more in capital reserves than is expected it could send the market lower.
Equities sold off again on Monday as fears of a major recession grow. Not only was there hawkish Fed commentary to move the market but JPMorgan CEO Jamie Dimon is once again predicting a recession. He says the US will fall into recession within 6 to 9 months and that it could take the S&P 500 down another 20% or more. On the flip side, Fed president Lael Brainard thinks there are already signs of improvement within the economy and those comments helped the S&P 500 close off the lows of the session.
This week's hurdle for the market is still to come, however, with the PPI and CPI both due out later this week. The market is expecting to see core consumer inflation cool on a month-to-month and YOY basis and it may be disappointed. The last read on PCE prices showed a surprise increase and there are still indications of rising prices from within the S&P 500 itself. A hot number would be bad for the market and could lead it to set a new low by the end of the week.
Equities rebounded last week but the move did not get far. The S&P 500 hit resistance at the 3,800 level giving another technical confirmation that this sell-off is not over. Not only is the outlook for earnings in decline but the inflationary pressures and systemic challenges causing them are still present as well. This has the FOMC on track to continue raising rates and possibly spark a major recession in the economy.
This week's news will be twofold. On the one hand, we will be getting another read on CPI and it should be a hot one. On the other hand, the earnings season is about to get underway and there are many risks for the market. The banks should do well because they can make money from rising interest rates, the risk is that other S&P 500 sectors will fare less well and so far the indications are pointing in that direction. A weaker-than-expected season will help bring the S&P 500 down to a new low, possibly as low as 3,200.
As traders brace for another round of key economic data, equity markets pulled back again on Thursday. The round begins today with the release of the NFP report, which is expected to show steady and stable job gains, if not robust, job increases. This news will be compounded by several reports next week, including the CPI, which is expected to be hot. The takeaway for investors is the news should confirm the need for another aggressive FOMC interest rate hike which will not be good news for the market. If the index can not get above the current levels by the end of next week, the odds are high for another big drop in stock market prices.
Next week also brings the onset of peak reporting season for the Q3 period. The bulk of reports are expected to be tepid and could also include margin compression and weak guidance. The takeaway here is that estimates have been falling for the last two months, so the average S&P 500 company should be able to beat the consensus easily. The question is by how much and if it will be enough to get the market back into rally mode. With inflation and interest rates still on the rise, however, a major rally does not appear to be in the cards.
Equity markets slipped in early trading on Wednesday but regained the lost ground by the end of the day. The move was driven by a renewed fear of the FOMC offset by some better-than-expected economic data. The ADP employment report and the ISM services index both came in better than expected and point to solid activity within some parts of the economy. The bad news is that strong data will reinforce the Fed's need to raise interest rates. There is still a high probability for a 75 basis point interest rate hike in November and there are still two key reads on inflation before then.
The chart of the S&P 500 shows price action is rebounding and it may continue to rebound but there are risks to be aware of. Wednesday's index action is showing resistance at key levels that could keep it from moving much higher. This resistance is consistent with the June/July bottom and below the 30-day moving average and the top of a downward channel. In this light, traders are better served waiting for the next sell signal than trying to chase the market higher.
The rebound in equities continued for a second day on Tuesday with the S&P 500 gaining more than 3% at the high of the day. The move is a relief rally driven by less-than-impressive news in the face of rising inflation and the FOMC interest rate policy. The move in equities could continue over the next few days but there are key technical hurdles ahead that include the 30-day EMA and the top of a channel that has been dominating the action since late last year.
Wednesday's action may be driven by economic data although the ADP report is not expected to be strong. A Goldilocks number for the market would be in the 100,000 to 200,000 range where job gains are still present but not so strong as to move the Fed. The true market mover, however, will be the NFP report on Friday. The NFP report is expected to show a moderately strong gain of 275,000 which would be sufficient to keep the Fed on its current course.
Equities started October and the 4th quarter on solid footing following a week of significant decline. The S&P 500 advanced more than 3.0% at the high of the day and it may move higher in the near term. Good news from GM and the oil patch are helping to support the action and could lift spirits as the peak of Q3 reporting approaches. GM announced it sold 25% more cars this year than last as supply chain issues eased while oil prices rose more than 3.5% on news OPEC+ would cut production by a million barrels this month.
The news from OPEC+ carried through to the oil industry and the XLE which led the market throughout the day. The XLE advanced more than 5.0% on the idea that higher oil and gas prices will translate into strong earnings for the energy sector. The takeaway for the market should be, however, that any improvement to the earnings outlook will be because of oil and energy stocks and not an improvement in the broad economy.
The S&P 500 moved down to set a new low last week confirming a near-term downtrend within a larger long-term market reversal. The move was driven by the rising fear of inflation, the FOMC, and earnings power for S&P 500 companies in the face of slowing economic activity. The data is still iffy on the recession front but much of it speaks of peaking within the US economy and peaking could lead to contraction if the Fed acts too hastily.
The biggest risk for the market is inflation. The PCE index not only showed acceleration from the previous month, which was expected, but it came in hotter than expectations and point to another aggressive move by the FOMC. As it is, the market is pricing in a solid chance for another 75 basis point rate hike in early November and a near certainty rates will rise another 150 basis points by the end of the year.
Bearish momentum is building on Wall Street. Wednesday's market rebound was nothing more than a blip on the radar, possibly driven by short-covering, as traders and investors continue to move to cash. The move comes just a day before the fresh read of the PCE price index and put the S&P 500 at a new 22-month low. Assuming the PCE index comes out as expected, the sell-off could easily gain momentum and take the market down to the 3,500 level or lower.
The PCE index is expected to come in at 0.5% MoM and 4.7% YOY, which are both an acceleration from the previous month and a new high for the YOY comparison. The takeaway is the market is expecting the worst, and the data could be hotter than predicted. Regardless, the data is in support of the Hawkish FOMC, so investors should be prepared for at least another 50 basis points of interest rate hikes at the next meeting if not another 75.
The equity market rebound on Wednesday, with the S&P 500 gaining more than 2.0% at the peak of the session. The move was sparked by good news in the bond markets that may be misplaced. The Bank of England says it will purchase bonds in whatever scale is necessary to stabilize the currency, which is good news for England. The risk for US investors is the FOMC will not be buying bonds anytime soon, and US interest rates are still on the rise.
Another driver of market action on Wednesday was a surprise draw in US crude and gasoline stockpiles ahead of Hurricane Ian. Ian has about 11% of the US production shut down, which will have an appreciable effect on supply and prices going forward. The takeaway is the decline in fuel prices that began in early June may be over. If oil prices begin to rise again, investors and consumers should brace for another systemic increase in inflation.
Equity markets extended their slide on Tuesday falling not only to the lowest levels for 2022 but to the lowest levels in nearly two years as the market begins to accept the fact the FOMC is causing the US to fall into a deepening recession. The S&P 500 index fell more than 0.75% at the low of the day to break the key 3636 level and put the index on track to retest the lows set during the peak of the pandemic fear.
The next few days will be of utmost importance for the market. With the index set to make a technical retreat and the PCE price index due out on Friday the odds are high that the sell-off could begin to gain momentum. In this scenario, the S&P 500 could retreat as far as the 3,200 level before the peak of the Q3 earnings reporting season. If the report is better than expected, however, the market could stage another significant relief rally.
Equities began the week on solid footing but early gains on Monday quickly evaporated. The S&P 500 closed with a loss for the day and just above the summer lows which is the key level to watch this week. If the index slips below this level the market could begin to pick up momentum on its slide to new lows. In that scenario, the S&P 500 could fall to the 3,500 level or lower.
One catalyst that could lead to such a move is the PCE price index on Friday. The index is expected to accelerate on a core basis in both the month-to-month and YOY comparisons. This data would support the need for another aggressive FOMC interest rate hike and it could come in hotter than expected. While gas prices have come down from their peak the rise in fuel prices and other commodities is still working its way through the economy and is underpinning core consumer-level inflation.
The equity market sold off hard last week on mounting fear of the FOMC. Not only did the Fed raise rates by the expected 75 basis points, but it indicated a minimum of 160 basis points more were coming. The news sent the yield on the ten-year treasure through the roof and the S&P 500 desperately seeking support. The index shed more than 5% for the week, putting it deeper into the bear market territory and on the verge of another 20% decline.
The next hurdle for the market will come on Friday with the PCE price index. The index is expected to moderate on a month-to-month basis but still come in hot versus last year. The risk is that consumer-level inflation will come in hotter than expected or worse, accelerate again, and raise the stakes in regard to the Fed, interest rate hikes, and the odds of a recession.
Equity markets retreat for the third day running and momentum is building in the wake of the FOMC statement. The FOMC hiked rates by an historic 75 basis points on Tuesday and aims to hike by another 150 to 175 basis points by next summer. The move has the rate on the 30-year mortgage up to 7.0% and rising which is sure to cut even deeper into home building activity. Reports from Lennar and KB Home show demand is still strong but starting to fall off under the pressure of rising prices and higher rates. At the pace the FOMC is going, the housing industry is facing a contraction in revenue and earnings that could begin early next year and lead to a deepening recession in America.
The S&P 500 fell about 0.85% extending the downdraft that began two weeks ago. The move is driven by inflation, the FOMC, and their impact on the outlook for earnings which is in decline. The technical signals are clear, the S&P 500 is in a major correction and it could be another 2 to 3 quarters before the selling is over.
Equity markets went on a wild ride on Wednesday moving both upwards and downwards multiple times during the session driven by expectations for and then actions from the FOMC. The FOMC raised interest rates by the expected 75 basis points but gave some commentary that is more hawkish than expected. The Fed's chief Jerome Powell says the committee will hike rates by at least another 160 basis points before they are through and the takeaway is that rates could move even higher if inflation is not tamed. The S&P 500 closed down more than 1.50% on the news and appears to be headed for the June lows.
The fear for the market now is earnings focused. With inflation still out of control and FOMC on track to cause a major recession the expectation for earnings growth is in decline. At the pace estimates are falling, the Q4 reporting period could very well see earnings decline rather than grow. In that scenario, a move to the June lows may be the least the market should expect from the S&P 500.
Equity markets gave up their Monday gains and more on Tuesday following mixed news from the housing sector. The latest data on new home starts and permits showed a surprisingly large increase in starts coupled with a larger than expected decline in permits. The news suggests buyers with contracts are in a hurry to front-run interest rates while those earlier in the home-building process are leaving the market. The takeaway is that FOMC interest rate hikes are having an effect on the economy albeit with a lagging effect on inflation.
The FOMC is expected to hike rates by another historic 75 basis points on Wednesday and could spook the market with its statement. The latest inflation data was far from good and suggests consumer level inflation is still accelerating so a hawkish tone should be expected. Regardless, net activity is slowing on a global basis and bringing the world economy closer to recession.
Equities began the week on stable footing despite the previous week's large decline and the upcoming FOMC announcement on Wednesday. The Fed is expected to raise interest rates by 75 basis points on Wednesday and provide an outlook for the future of Fed policy. It is largely believed the Fed will continue to raise rates into the beginning of 2023 but at a much slower pace than what it has set so far. The risk is that inflation data will continue to accelerate as it has and push the Fed into ramping its posture once again.
On the economic front, the NAHB home builders survey declined to a new low as demand and traffic dry up. The news is only the latest in a string of poor housing data that points to a major contraction in the industry and one that will have rippling effects throughout the economy. Also on tap this week is a read on building permits and housing starts as well as existing home sales and the Index of Leading Indicators.
The sell-off on Wall Street picked up momentum last week following the hotter-than-expected CPI data. The data showed an unexpected acceleration in consumer level inflation that has the FOMC on track to hike rates by another 75 basis points this week at least. The risk now is the FOMC will try to front-run the inflation because it is so far behind the curve and that would mean even more aggressive actions and possibly a 100 basis points interest rate hike. The takeaway for investors is that economic conditions are changing rapidly and soft-landing may be impossible to orchestrate.
Also on tap this week is a raft of housing data including the NAHB index, permits, starts, and existing home sales. More importantly, we'll get a read on the index of leading indicators and it is expected to be negative. If so, this would be the 5th consecutive month of negative readings and may indicate the contraction in economic activity caused by inflation and the Fed is getting worse.
Equities slipped again on Thursday with the S&P 500 falling more than 1.0% at the close of the session. The move is driven by a growing fear the US economy has been broken and will result in a serious recession over the next year or so. The day's move took the S&P to the lowest level in two weeks and has it on track to move even lower over the coming days.
Next week the market will be on high alert for housing data in the form of Housing Starts and Permits and Existing Home Sales as well as the Index of Leading Indicators. The latest housing data suggests a 30% YOY decline in housing activity and there is a chance the figure could grow with the August data. As far as the leading indicators go, that index has been running negative for four consecutive months and is expected to show another decline in US economic activity.
The equities market slipped again on Wednesday, although the move was muted in relation to the prior session. The S&P 500 shed about 0.25% at the low of the session but closed with a small gain following a mixed PPI report. The PPI data fell slightly on a month-to-month basis but remains very hot on a core and YOY basis and points to additional price increases for consumers down the road. The news was not-as-bad as feared but bad enough and should help seal the deal on a 75 basis point rate hike at the next FOMC meeting in just 7 days.
With the CPI and PPI still running hot and the FOMC on track to raise rates another 150 bps by the end of the year the odds of a major recession have grown very high. The first glimmers of that recession can be seen in the housing market, which is seeing a high double-digit decline in the pace of mortgage apps and new and existing home sales.
Equities plummeted on Tuesday following a much hotter than expected reading of the CPI. The CPI came in hotter than expected in all comparisons belying the idea that consumer inflation had peaked which puts increased pressure on the FOMC to act. The news not only points to hot inflation but an acceleration at the consumer level that may not be finished. The FOMC is meeting next week and has been indicating a willingness to fight inflation that could lead to another 75 basis point hike or more. The odds of a 75 basis point hike hit 100% following the CPI news and the CMEs FedWatch Tool is pricing in a 35% chance for an historically high 100 basis point interest rate hike.
The takeaway from the news is far-reaching and ends with the earnings outlook for the S&P 500. Inflation is cutting into the bottom line for most companies and FOMC interest rate hikes are going to cap business and other economic activities which means lower revenues and lower earnings. The bottom line is the hurricane predicted by Jamie Dimon last spring is now upon us and it looks like it's a bad one.
Equities extended their rebound on Monday taking the S&P 500 up a full percent at the height of the day. The rally, a relief rally, is driven by an expectation for economic improvement that is likely misplaced given the consensus figure for the CPI data. The analysts are expecting CPI to hold flat versus last month but the core and YOY figures will be hot. Core inflation is expected to rise by 0.3% which is the same as the prior month and it will drive an acceleration in the YOY figure as well. Core consumer inflation is expected to accelerate to 6.0% from last month's high of 5.9% and push the Fed to act aggressively at next week's FOMC meeting.
It is near given the FOMC will raise rates by another 75 basis points next week so the most important news will be the tone of the statement and the outlook for future hikes. The FOMC is already in uncharted territory so it is possible, however unlikely, that a 4th 75 basis point hike could be on the table.
Equity markets rebounded last week but investors are cautioned not to read too much between the lines. The move was not supported by any kind of good news so is nothing more than a relief rally within the greater bear market. The news that did come out was not positive for the index as it all points to an overly aggressive Fed and the prospect of another 75 basis point interest rate hike at the FOMC meeting next week.
This week will be another challenge for the market. The CPI and retail sales data are due out and either could move the market. The takeaway is that weak CPI points to weakening economics and recession while a strong retail sales figure would support the idea of aggressive Fed action so the market may be in a no-win situation.
The S&P 500 wobbled on Thursday but managed to end the day higher despite hawkish commentary from the FOMC. The FOMC Chief Jerome Powell reiterated once again the committee's commitment to fighting inflation and bringing it back down to the 2.0% range. Based on the recent string of inflation data, this means a high probability for another 75 basis point hike making this the most aggressive FOMC on record.
Next week, the market will face its final hurdle before the September FOMC meeting. The CPI report is due out on Wednesday and may show a month-to-month decline in inflation due to lower gas prices but the core YOY figures are expected to remain hot. This data will support another rate hike if not a 75 basis point hike so there is a chance for market volatility. Weak data (better than expected) or strong data (worse than expected) will move the market.
Equity markets rebounded 2.0% on Wednesday despite a souring outlook for economic growth. The Fed's Beige Book was released at 2 PM and confirmed economic activity was little changed from the prior reading and the outlook for growth was dim. The news comes in contrast to the ISM services index release on Monday which suggests an acceleration in the services sector at least. The takeaway from the two reports, however, is that conditions are still in favor of aggressive FOMC policy action and that is seen in the Fed Funds Futures data as well. The odds for another 75 basis point rate hike rose to 75% according to the CMEs FedWatch Tool and it will likely trend higher following next week's read of the CPI. Consumer Level Inflation may have tamed on a month-to-month basis but is still expected to have run at a high mid-single-digit rate versus last year.
The biggest risk for the market for the remainder of the week is Fedspeak. There are a number of Fed members slated to make public remarks and they may all include hawkish commentary. The bottom line for traders, the Wednesday rebound is nothing more than a relief rally within the latest downdraft and it is not one that is expected to last long.
Equity markets started a holiday-shortened week on a cautious note. The S&P 500 fell 0.40% at the close of the session following a stronger-than-expected ISM Services Figure. The ISM came in not only better than expected but it advanced from the previous month suggesting economic activity accelerated in the services sector. The takeaway from the report, however, is that economic activity is strongly and inflationary and thereby supports the idea of aggressive FOMC interest rate actions. In regard to the outlook for interest rate hikes; the CMEs FedWath Tool strengthened to show a 75% chance for a 75 basis point hike at the next meeting in two weeks.
The remainder of the week could be iffy for the market due to a lack of news on both the economic and earnings front. This is a bad situation for an edgy market and could lead to increased volatility if not an outright selloff. As it is, the S&P 500 is poised for another drop and could easily retest the 3,660 level by the end of the month.
The S&P 500 fell for another week shedding more than 1.5% at the low of the day on Friday alone making this the 3rd consecutive week of declines. The S&P 500 is down more than 10% from the recent high and heading lower if the recent signals are to be believed. The next target for support for the S&P 500 is near the 3,650 level and it may not be strong enough to keep the market from setting a new low. A move below the 3,650 level would open the door to 3,525 and the potential for a bigger move down to 2,800.
The hurdle for the market this week will be the Fed's Beige Book on Wednesday. The Beige Book is not expected to give any insight into the psyche of the Fed but it will give a broad view of economic conditions. The takeaway is likely to be tight labor markets, tight supply chains, and rising inflation which will all underpin the outlook for FOMC policy tightening.
The S&P 500 fell for another week shedding more than 1.5% at the low of the day on Friday alone making this the 3rd consecutive week of declines. The S&P 500 is down more than 10% from the recent high and heading lower if the recent signals are to be believed. The next target for support for the S&P 500 is near the 3,650 level and it may not be strong enough to keep the market from setting a new low. A move below the 3,650 level would open the door to 3,525 and the potential for a bigger move down to 2,800.
The hurdle for the market this week will be the Fed's Beige Book on Wednesday. The Beige Book is not expected to give any insight into the psyche of the Fed but it will give a broad view of economic conditions. The takeaway is likely to be tight labor markets, tight supply chains, and rising inflation which will all underpin the outlook for FOMC policy tightening.
Equities sold off for a 5th straight day extending the downdraft to nearly 9.0% from the recent peak. The upshot is the market bounced off the low to close with a gain of 0.3%. The latest round of selling is being driven by the growing acceptance that inflation is not coming down appreciably and the FOMC is about to spark a major recession. The FOMC, through its many mouthpieces, has indicated an aggressive pace of interest hikes will continue until inflation is down and that could mean as many as 8 more 25 basis point hikes before the hiking cycle is over.
With the S&P 500 moving lower and firing off strong sell signals the odds the index will retest the 3,600 level are very strong. The risk now is the index will move below the 3,600 level and extend the sell-off to a new low in the range of 3,500 or lower. If the market can't get its feet back under by then, the selling could continue until the index reaches its long-term secular trend line near the 2,800 level.
The S&P 500 extended its decline on Wednesday falling a little more than 0.70% at the low of the day after a late day downdraft. The move was small but sparked by a weak ADP employment figure and has the index below a key technical level. The index price action has fallen back into a downward sloping price channel that has been in place since late 2021. At this level, bearish traders may begin to pile back into the market and drive the index down to retest the recent lows near 3,650.
The next hurdle will come on Friday with the NFP report. The NFP report is expected to echo the ADP report and show weaker and weakening trends within the employment sector. The risk is that wage inflation won't subside, however, and add extra pressure on the Fed to raise interest rates.
Equity traders resumed their selling on Tuesday bringing the downtrend to three weeks and the market to a five-week low. The selling intensified under mounting fear the FOMC will not quit hiking interest rates until inflation is in control and that it could mean a very deep recession. The S&P 500 shed about 1.5% at the low of the day and it looks like it will retest the 3,700 level sooner rather than later.
Market fear was stocked by a hotter-than-expected JOLTs figure. The number of job openings surged to 11.2 million and just shy of record highs despite an expectation for openings to fall to 10. million. The figures suggest economic activity is still hot enough to underpin wage inflation if not broader inflation and support the idea of another aggressive FOMC rate hike. The odds of a third 75 basis point hike rose above 70% following the news and the next FOMC meeting is only 3 weeks away.
Equities slipped on Monday extending the prior week's decline and putting the S&P 500 on track to move lower later in the week. The index is now below key resistance levels where the bears are likely to increase their selling and add momentum to the move. All the market needs is a catalyst for lower prices and that could come in the form of economic data. There is a long list of economic reports due out this week including construction spending, the ISM Manufacturing Index, and the August read of the non-farm payrolls report. The report is expected to show a cool down in both hiring and wage gains which takes some pressure off of the Fed. Even so, labor conditions remain tight and wages are rising and underpinning broader inflation.
In stock news, the market is gearing up for Apple's next product event. The iconic company is expected to launch several new iPhone models among other products and drive another upgrade cycle for the business. The question the market will want to have answered is how expensive are the new phones and how many, exactly, does the company think it will sell?
The selloff in the equity markets intensified last week following a bearish technical signal, high inflation, and remarks from Fed chief Jerome Powell. Mr. Powell said inflation was a problem the Fed would fight forcefully adding that businesses and families would feel some pain in the process. The need to fight inflation means higher interest rates meant to cut back on hiring and activity which means fewer business and work opportunities over the next year or two. The S&P 500 fell more than 3.0% at the low of the day and looks like it will fall further in the coming days. The move not only confirms a reversal of long-term proportion but shows a high conviction within the market as well.
This week is another hurdle for the market. The NFP data is due out on Friday and is expected to show a slowdown in hiring as well as an increase in wages which is bad news for the market. In that scenario, labor and consumer markets are already feeling pain but not enough to correct the pace of inflation or stave off aggressive FOMC action.
Equity markets rebounded on Thursday after an upward revision to the 2nd quarter GDP. While the revision is good news, the 2nd quarter GDP was still negative and ultimately worse than expected. The S&P 500 gained about 1.0% on the news at the high of the day and may move higher on Friday.
Friday's action will be driven by both the PCE price index and FOMC Chief Jerome Powell's speech at the Jackson Hole Symposium. The market is hoping Mr. Powell will give some indication the pace of interest rate hikes will ease but it may be disappointed. Even if the pace of inflation comes down, it is expected to remain high for a sustained period of time and is begging for the Fed to act. As it is, the CME's Fedwatch Tool is pricing in a 60% chance for another 75 basis point increase in September and there could be another in November if inflation still hasn't subsided.
The selloff in equity markets took a pause on Wednesday but investors are still cautious ahead of the Q2 GDP revision and PCE price index which is due out on Friday. The revision to the GDP is expected to be an improvement but that could be overly optimistic given the decline in the Index of Leading Indicators. The Index of Leading Indicators declined for the 4th consecutive month suggesting economic contraction continued into the 3rd quarter as well.
The news of the week will be the PCE price index, however, when it is released on Friday. The economists are expecting the pace of consumer level inflation to abate but there is risk in the outlook. Even so, the annualized pace of inflation is expected to remain high, near record levels, and well above the FOMC's target rate of 2.0%. In this scenario, it will take a much-better-than-expected figure to take interest rate hikes off the table and that is unlikely to happen. Investors should be prepared for at least a 50 basis point rate hike at the next FOMC meeting.
Equity markets held their ground on Tuesday despite renewed signals of economic contraction. The flash reading for both the Services and Manufacturing sector PMIs came in below expectation and with the services sector deep in contractionary territory. The reading of 44 is the fifth month of decline and the lowest reading since May of 2020 at the height of the pandemic lockdowns. The news may be a one-off but is compounded by a trend in data that suggests the economic slowdown that began in Q1 is still present in Q2. The Atlanta Federal Reserve's GDPNow tracking tool is still showing Q3 GDP above 0% but it has taken a noticeable downturn in recent weeks.
With the market in retreat, the economic data weak, and the PCE price index due out on Friday the odds of another major sell-off are high. The S&P 500 is still above the 30-day EMA but not by much and it won't take much to spark the move. Once the index is below 4,115 investors should expect to see downward momentum build and the index fall to 4,000 or lower.
Equity markets fell hard on Monday to not only confirm resistance at the S&P 500 level of 4,300 but to break through potential support at the 4,150 level as well. The move also confirms a much larger Head & Shoulders pattern that has been in play all year. This pattern has not only a long-term but a deep implication that could lead the S&P 500 down to the 2,700 level and keep it trending at low levels for an extended period of time. The major culprit for the move is slowing economic activity and the possibility of a deepening recession.
This week, the biggest risk for the market will come on Friday with the release of the PCE Price Index. The index is expected to show a slowdown in the monthly advance of consumer level inflation but for core consumer inflation to remain at record levels on a YOY basis. A better-than-expected figure could send the market higher but a worse-than-expected number will most defiantly send it lower on an increased expectation for another aggressive FOMC interest rate increase.
Equity markets peaked out last week following a round of mixed reports from the retail sector. The takeaway from the reports is that inventory is bloating across the sector and driving an intensifying need for discounting. The news is good for consumers looking for a bargain but bad for businesses hoping to maintain margin and profitability. The result is resulting in downward revisions to the earnings outlook and that is what capped gains in the stock market.
This week earnings will fall to the wayside in favor of economic data and the FOMC outlook. There are few economic reports on the calendar but the list includes the PCE price index. The index is expected to track lower alongside the CPI but is also expected to remain well above the Fed's 2.0% target rate and support the idea of aggressive Fed action at the next meeting.
Equities hovered near break even on Thursday following another decline in the Index of Leading Indicators. The index fell-0.4% in the Month of July making it the 4th straight month of decline but there is some good news. The -0.4% is a better read than the -0.5% indicated by the consensus estimate and an improvement from the prior months -0.7%. If this turns into a trend economic expansion could be back on the table by the end of the quarter but it is too soon to tell.
Next week could be a tough one for the market. There are very few earnings reports on the schedule but at least one major economic report that could move the market. The PCE price index is due out on Friday and will give the latest read on consumer inflation. A better-than-expected report will send the market higher.
The S&P 500 pulled back on Wednesday due to an increasingly tepid outlook put forth by the retail sector. The latest report to weigh on the market comes from Target which missed estimates on the top and bottom lines, the bottom line by a very wide margin. The report highlights a growing problem in the retail sector in the form of bloating inventories that spells bad news for earnings and good news for consumers. With inventories at unusually high levels, retailers may be forced to follow in Target's footsteps and enter a new age of deep discounting to move merchandise.
The decline in stocks was curbed, however, by the FOMC minutes. The minutes indicate the Fed is ready to hike rates until inflation comes down substantially from its current high levels but gave no indication of the pace or timing of hikes. The market is pricing in a 50 basis point hike at the next meeting but there are still several inflation reports due out before then.
Equity markets began the week in the green and moved up in Monday trading. The S&P 500 gained about a half of a percent at the high of the day and will probably move higher in the near term. The move is driven by the weaker than expected CPI data last week but investors are warned not to put too much faith in the rally. The rally is still a bear market rally and one that will result in another sell-off in the not too distant future. The question that needs to be answered is if the next sell-off will result in a clear Buy Signal that is confirmed by economic data and the outlook for earnings, or if the market will move down to another new low.
The big news this week is going to be the Retail Sales figures on Wednesday. The Economists are expecting a gain of only 0.1% versus the prior month which is tepid at best and optimistic at worst. A weak figure may not send the market into a tailspin but it will help set up the next decline. A series of weak economic reports could put an end to the market's optimism and there are other reports due out this week. Other reports of interest include several reads out of the housing market and the Index of Leader Indicators.
Equity markets began the week in the green and moved up in Monday trading. The S&P 500 gained about a half of a percent at the high of the day and will probably move higher in the near term. The move is driven by the weaker than expected CPI data last week but investors are warned not to put too much faith in the rally. The rally is still a bear market rally and one that will result in another sell-off in the not too distant future. The question that needs to be answered is if the next sell-off will result in a clear Buy Signal that is confirmed by economic data and the outlook for earnings, or if the market will move down to another new low.
The big news this week is going to be the Retail Sales figures on Wednesday. The Economists are expecting a gain of only 0.1% versus the prior month which is tepid at best and optimistic at worst. A weak figure may not send the market into a tailspin but it will help set up the next decline. A series of weak economic reports could put an end to the market's optimism and there are other reports due out this week. Other reports of interest include several reads out of the housing market and the Index of Leader Indicators.
The bear market rally extended itself to a new high last week and it may continue higher in the near term. the rally is driven by news that is not-as-bad-as-expected but the fact inflation is still very high and cutting into economic activity remains. Last week's CPI is the latest culprit coming in cooler than expected but still a hot 5.9% YOY at the core level. At this pace, the market should be expecting the FOMC to continue hiking at an aggressive pace until inflation is at more manageable levels.
This week the market will be faced with another full slate of economic data and reports from a large portion of the retail sector. On the economic front, retail sales top the list but there are several reads coming out of the housing sector and the Index of Leading Indicators as well. The Leading Indicators have been negative for the last three months and could come in negative again.
Equities tried to advance for a second day following the better-than-expected CPI data but the move was without momentum and left the index relatively flat at the end of the day. The move gives evidence the rally in stocks is nothing more than a bear market rally but leaves another question unanswered. Assuming the market is in a bear-market rally the question is how long it will last and what will put an end to it. The best answer is a few more weeks to a month or so.
The market still has faith in the "peak inflation" theory and will be tested during that time. Not only will there be another read on the CPI index but two more reads of the PCE Price Index and all three should confirm lingering high levels of inflation. The takeaway is the FOMC is going to hike rates by at an aggressive pace in September and it could be another hot 75 basis point increase. Next week, a read on Retail Sales will be the focus for traders.
Equity markets cheered a weaker than expected CPI report and advanced the S&P 500 by more than 2.0% at the high of the day because of it. While good news, investors are cautioned not to become overly bullish in light of the trend in inflation. The CPI data was weaker than expected but still hot at nearly 6.0% YOY at the core level. At this rate, the FOMC can be expected to hike rates by at least 50 basis points at the next meeting and the peak of inflation is yet to be official. At best, inflation has been trending at the current levels for a few months now and points to ongoing pain at the register for consumers of all types.
Next week we'll get a fresh read on consumer spending in the form of retail sales. The takeaway from the news, however, is likely to support the idea that volume sales are in decline and the difference in growth is due to higher prices and inflation. The message to investors is that activity is slowing on a currency-neutral basis and the decline could accelerate given the expectation for FOMC interest rate hikes.
Equities started the week with a push to new highs but the move was short-lived. The S&P 500 index moved up above the 4,150 level within the first few minutes of trading but quickly fell back to break even under the weight of caution. The PCE price index is due out this week and may send the market into another tailspin. The index is expected to retreat from last month's high of 9.1% but the risk of a hotter number is very high. While the price of oil has come down in recent weeks it is still high relative to the recovery and underpinning higher prices. The risk for the economy, however, is ongoing systemic increases in prices that point to compounded inflation for consumers later in the year.
In business news, a warning from Nvidia that demand is slowing added downward pressure to stocks. The company says weakness in the gaming industry is leading to weaker than expected Q2 results. The risk for the market is that weakness will bleed over into other chip maker results and other industries.
The rebound in equities hit a roadblock in the form of resistance at the 4,150 level last week and may have a hard time moving higher. The move was capped with a lackluster day on Friday that was sparked by hotter-than-expected employment numbers. The NFP report shows employment and wage gains both accelerated on a month-to-month basis and put added pressure on the Fed to hike rates.
This week's big news will be the CPI report on Wednesday. The report may show inflation coming down from the previous month but there is risk in that outlook. Not only was the PCE price index hotter than expected but indications from the bulk of S&P 500 companies is for systemic inflation to continue into the 4th quarter.
The rebound in equities hit a roadblock in the form of resistance at the 4,150 level last week and may have a hard time moving higher. The move was capped with a lackluster day on Friday that was sparked by hotter-than-expected employment numbers. The NFP report shows employment and wage gains both accelerated on a month-to-month basis and put added pressure on the Fed to hike rates.
This week's big news will be the CPI report on Wednesday. The report may show inflation coming down from the previous month but there is risk in that outlook. Not only was the PCE price index hotter than expected but indications from the bulk of S&P 500 companies is for systemic inflation to continue into the 4th quarter.
The rally on Wall Street hit another roadblock on Thursday despite better-than-expected economic data. The data included ISM services and factory orders which both came in better than expected. The news sent the S&P 500 up in early trading but resistance capped the gains at the key 4,150 level. If the market can not get above this level soon another round of selling could follow and there is a catalyst due out on Friday.
The NFP report is expected to show a slowdown in hiring that is also foreshadowed by the jobless claims data. The number of initial and total claims for unemployment continues to rise and suggests a topping in the labor markets. Topping in the labor market is good news for inflation but bad news for the economy because it will undercut consumer spending growth and weigh on the outlook for economic activity and corporate earnings.
Equity markets reversed two days of losses to advance to a new high on Wednesday following better-than-expected economic data. Investors cheered hot ISM services and Factory Orders data suggesting both aspects of the US economy are regaining momentum. If true, investors should also expect another uptick in inflation as demand puts added pressure on the economy.
In other news, oil prices continue to slide and fall below key support at the $96 level following a slight increase in production from OPEC. This move may trigger additional selling, but the worse news is the implication for the economy. Oil prices are not expected to contract without a major slow down in activity, and we've yet to see one. In this light, the decline in oil prices is either a precursor to a deeper economic recession or a whipsaw move and buying opportunity.
Equity markets held steady at near-term highs for a second day despite signs of weakening in the economy. The little-watched JOLTs report, a measure of job availability within the economy, contracted in June by the second fasted pace on record and to the lowest level in nearly a year as businesses reel in their spending plans. The news is only the latest in a string of reports that suggests peaking within the economy and the onset of lingering stagnation, if not deepening, recession. Later this week, a report from the ISM and the Non-Farm Payrolls figure could move the market as well.
The market is expecting job gains to slow on a month-to-month basis, and the figure could come in weaker than expected, which might be good news in the long run. A slowdown in hiring could help ease inflationary pressures in wages and consumer spending and get the economy back on the right track. If not, the JOLTs report could be the first signal of a worsening economic crisis caused by rampant inflation.
Equities started August on uncertain footing, trading in a very tight range just below July's closing level. The move smacks of indecision and now wonder; with the PCE index rising to the highest level in 30 years, the outlook for the FOMC has only gotten darker. The committee indicated a slowdown in the pace of interest rate hikes just a few days earlier, and now the odds are growing for another 75 basis point hike in September.
This week, all eyes will be on earnings and the NFP report on Friday. On the earnings front, the revisions to the outlook for Q3, Q4, and next year are in near-freefall, and more bad news is expected. On the economic front, the NFP is expected to show a slowdown in the pace of hiring and another month of low-single-digit increases in wages.
Equity markets rebounded last week following better-than-expected commentary from Fed Chief Jerome Powell. The FOMC hiked interest rates by only 75 basis points and indicated the pace of interest rate hikes could slow over the next two meetings. The bad news is the PCE index belied that sentiment by rising to the highest level in 30 years as the pace of consumer level inflation accelerates. The takeaway is that near-term headwinds are priced into the market but long-term headwinds are still present and getting stronger.
Next week will be another hurdle for the market in regard to both the economic data and the earnings. The economic data include several key reads but topping the list is the Non-Farm Payroll report. The NFP report is expected to show a slowdown in the pace of hiring and wages which is mixed news indeed. As for earnings, reports from another 20% to 30% of the S&P 500 are expected over the next 5 days.
The updraft in equity markets took the S&P higher on Thursday despite confirmation that we are, in fact, in a recession. The first estimate for 2Q GDP came in at -0.9% and more than 100 basis points shy of the expected 0.6% predicted by analysts. This reading marks the 2nd quarter in a row of negative GDP which is the textbook definition of recession. The question that needs to be answered is how deep and how long the recession will last and it could go on for some time. The FOMC is set to increase interest rates by at least another 100 basis points by the end of the year and that is having an impact on activity at all levels.
Next week, the market will be bracing for another round of important economic data and earnings reports. The economic data includes Construction spending and the Non-farm payrolls report, a report that is expected to show steady job creation and rising wages. On the earnings front, reports from more than 20% of the S&P 500 are expected.
The rebound on Wall Street extended on Wednesday following a policy announcement from the FOMC. The FOMC hiked its key rate by 75 basis points as expected and downgraded its assessment of the economy which is less than the whisper numbers. The committee also said additional hikes would be appropriate at the next few meetings which put interest rates on track to hit 3.0% or higher by the end of the year and the odds are tilted in favor of higher. The takeaway for the market is the pace of hikes may slow over the next two meetings.
While many of the pundits think we are seeing the peak of inflation and FOMC interest action that outlook is far from assured. The PCE price index, due out on Friday, is expected to accelerate by 20 basis month over month at the core level and it could come in higher. Worse, the outlook given by the bulk of S&P 500 companies including defensive Consumer Staples companies is more price hikes and higher inflation are on the way. The key takeaway from all this is that corporate margins will continue to be under pressure and the cost of doing business and making large purchases is on the rise.
Fearful equity markets pulled back more than 1.0% on Tuesday following dire news from Walmart. Walmart missed its earnings estimates and cut its guidance, citing the impact of inflation on consumer spending. While sales of food and other staple items continue to be strong, sales of discretionary items are flagging under the weight of inflation. The news was taken as a sign of weakness in the broader economy and had the market shedding discretionary and other inflation-sensitive names with the FOMC and key inflation just due out this week.
The FOMC is expected to hike rates by at least 75 basis points today and may go for a full 100 basis points in an effort to outrun inflation. Regardless, the economy is already in a recession, and it looks like inflation and Fed action are going to make it deeper. The PCE index is due on Friday and is expected to show an acceleration from the previous month.
Equity markets were quiet on Monday as traders and investors brace for what could be a monumental FOMC announcement. The FOMC meets on Tuesday and Wednesday and could increase interest rates by a full 100 basis points in an effort to front run inflation. The risk if they don't is that inflation will continue to accelerate and the next read on the PCE index is just two days later. Based on the last CPI index, the pace of inflation accelerated in June and that can be seen in the estimates as well. The consensus for core PCE is a gain of 0.6% or twice the monthly gain set in May. At this pace, the YOY gain is expected to be at least flat from the prior month and we think it could be much hotter.
In other news, this is the busiest week of the Q2 earnings reporting cycle and it could be a volatile one. Reports from Facebook (Meta) and Google (Alphabet) are only two potential market movers and there are hot names reporting from every sector. If the reports give the market some hope, the rebound could continue but, if not, we see new lows lurking around the corner.
The rebound in equity markets hit a roadblock on Friday as traders and investors brace for next week's round of earnings and economic reports. Not only is it the first of the two busiest weeks of the Q2 earnings reporting cycle but the FOMC is expected to hike interest rates by at least 75 basis points. On the earnings front, the reports are expected to be OK enough but the guidance will usher the S&P 500 into its next move. If the guidance continues to weaken the S&P 500 will have little choice other than to move lower.
Also on tap for this week? The first read of the Q2 GDP. Based on the last three months of Leading Indicators, we expect to see the figure not only come in negative but to accelerate the decline that began in the 1st quarter. The question of if we're in a recession has already been answered, yes we are. The question about how deep and how long the contraction will be is what needs to be answered next.
Equities extended their rally on Thursday with the S&P 500 moving up about 1.0% at the high of the day. While the near-term trend is up there is still risk in the market so investors should beware. On a technical basis, the S&P 500 is still within a downtrending channel that has dominated prices for the last several months. So long as the index is inside this channel any rebound in equity prices should be viewed as a selling opportunity.
Aside from earnings, the next big hurdle for the market will be the FOMC meeting next Wednesday. The meeting is the day before the June PCE data and will be a trying time for the Fed governors. As it is, it looks like the committee is on track for a 100 basis point interest hike at the July meeting but they may hesitate in favor of the data. The risk for the market is twofold, on the one hand, the FOMC could unleash a large interest rate hike on the economy while on the other, inflation may continue to run rampant.
The rebound in equities extended to a fifth day on Wednesday and took the S&P 500 to a 1-month high. The move, while bullish, appears to be losing steam however under the deluge of earnings reports. The earnings reports have been coming better than expected but much of the guidance has been weak. There is a chance the index has bottomed but it looks to us like a retest of the recent lows is brewing.
The latest read on Existing Home sales is another negative for the economy. The pace of existing home sales contracted on a month-to-month basis as prices and interest rates leave prospective buyers out of luck. Today's read of the Index of Leading Indicators may paint a different picture but it looks like the economic contraction that began in the 1st quarter is gaining momentum.
Equity markets reversed Monday's decline and moved up to set a new multi-week high on Tuesday despite a round of lackluster earnings reports. While the bulk of S&P 500 companies that have reported are beating their estimates the margin of outperformance is the lowest it's been since well before the pandemic began and the guidance is weak. Names like Johnson & Johnson with heavy exposure to international markets are reporting dollar-related headwinds on top of ongoing supply-chain and inflationary issues. The takeaway is the outlook for earnings in Q3 and Q4 is in decline and will most likely bring the market down with it.
On the economic front, the Housing Starts and Permits data was mixed and points to a slowdown in activity. While the starts figure was better than expected Housing Starts declined from the previous month and permits were weak suggesting the impact of rising rates is already being felt.
Equity markets pulled back more than 1%to start the week as traders and investors brace for the peak of earnings season. There are 73 S&P 500 companies reporting this week including 7 Dow components so the impact on the market could be tremendous. The general expectation is for earnings to beat the consensus but by the smallest margin in years and for the guidance to be weak, a trend that will weigh on the market moving forward. In regard to the outlook for earnings, the outlook for Q2 results ticked up a hair over the past week but consensus estimates for Q3, Q4, the full year 2022, and full year 2023 are all moving lower.
On the economic front, the next big hurdle for the market is the July FOMC meeting. The meeting isn't for two more weeks, however, but it comes before the next read on inflation. After the latest CPI and PPI data, the market should be ready for a 100 basis point rate hike or at least the indication a 100 bps hike is on the way. Between then and now, the most important data point on the calendar is the Index of Leading Indicators and we expect to see a third consecutive month of negative growth.
It?s a rally. The markets are all finished in the green to close the week. The only thing that changed is that an increasing number of experts are beginning to believe that the Federal Reserve will not raise interest rates more than 75 basis points at their next meeting. And in a week that brought a lot of bad news regarding inflation, investors had to cheer the news that the long-term inflation outlook is at its lowest level in a year.
However, we would caution investors on getting complacent. The market is going to continue to be volatile. Next week, earnings season will begin in earnest. There are still expectations for a profits recession. Several companies have pre-emptively lowered their already lowered guidance.
Some like it hot. But the markets do not. That?s the sentiment of investors after the June PPI number came in at 11.1%. That was hotter than expected. Leading the charge was a 10% increase in energy costs. And that wasn?t the only piece of bad news that investors received. Unemployment claims were at their highest level in eight months.
The issue of the moment is what investors believe about inflation. There is some evidence that ?core? CPI is going down. That could mean producer prices are beginning to ease. On the other hand, consumers are still feeling inflation every time they fill up their cars or shop for groceries.
That sent the market down for the fourth straight day. And that will be the longest losing streak in a month for U.S. stocks. Gold and oil were also down today.
Now that the S&P 500 index is below 3,800, investors will eye the 3,600 level. It?s fair to ask if that?s where the bulls make a stand. If they do, it will despite a lift from the big banks. Earnings from JPMorgan Chase and Morgan Stanley both disappointed.
The June CPI data was worse than investors expected. The year-over-year increase of 9.1% means inflation continues to be at 40-year highs. That number cements expectations for a 75 basis point hike in interest rates later this month. And some analysts now speculate that the Federal Reserve will raise interest rates by 100 basis points when it meets later this month.
f investors didn?t have enough to worry about, they are also looking at the yield curve inversion. This confirms the economy is heading for, or already in, a recession. As you would expect, the market, went deep into the red on all this bad news.
However, as the trading day ended, the markets were well off session lows. The tech-heavy NASDAQ index in particular was showing some strength.
This is because many analysts believe the markets are already pricing in the hot CPI reading. And others believe that after months of head fakes, the economy may finally be seeing peak inflation. Investors will get more information when the June PPI data comes in tomorrow before the market opens.
And now we wait. The markets had a choppy day. But not even Pepsi?s bubbly guidance was enough to keep stocks in positive territory.
Oil was down as concerns over another Covid lockdown in China gain steam. And the yield on the 10-year continues to fall as many investors fly to the relative safety of government bonds. All of this could have to do with the strength of the U.S. dollar. The greenback is having itself a month which is good news if you?re planning a European vacation.
The only thing that seems clear is that investors are bracing for the June CPI data. That comes out on Wednesday before the market opens. The White House and many analysts seem to be conceding that the number will come in hotter than expected. And if it does, a 75 basis point hike by the Federal Reserve later this month will be the least of investor?s concerns.
But what if it the number is in-line with prior expectations? The stock market is already pricing in high inflation. Anything resembling ?less bad? news may be just the tonic the market needs.
It was fun while it lasted. The relief rally that lifted investors? spirits in the shortened trade week ran into a wall of worry. Equities were down with the tech sector seeing the largest declines. But this was an equal opportunity sell-off. Oil, gold, and Bitcoin all were lower as was the yield on the 10-year Treasury note.
It?s likely that investors are expressing their opinion on what they expect from the June CPI and PPI readings. These reports come in the pre-market on Wednesday and Thursday respectively. The consensus is for the CPI to show an 8.8% year-over-year increase with core CPI coming in at 5.8%. Even though those numbers would show the worst may be over in terms of price hikes, tell that to consumers who still lack confidence in this market.
Investors are also anticipating the start of the earnings season.
Many of the major banks will report later this week. And many analysts are already adjusting their price targets to reflect what they expect to be lower guidance.
Equities rebounded last week and closed near the high of the period after the NFP report came in better than expected. The NFP shows job gains were stronger than expected and dispelled some fear of recession but not all. The hourly wages also increased faster than expected and suggest inflation is yet to be tamed.
This week will be a challenging week for the market. On the economic front is the CPI, PPI, and Retail Sales data while on the earnings front reports from the Big Banks and key consumer staples like Pepsico and Conagra Brands. The takeaway from them all will be the outlook for the second half and how inflation will impact earnings growth. We're expecting the guidance to be weak, spark a round of downward revisions to earnings, and bring the S&P 500 down to a new low but we could be wrong. If the guidance for 2nd half earnings begins to brighten, the S&P 500 could begin to put in a real bottom.
Equity markets rebounded for another day on Thursday as traders gear up for the Q2 earnings reporting season. The peak of the season begins next week with reports from the big banks and the news is expected to be dismal. At best, the banks will report tepid growth with a high likelihood of earnings contraction. The contraction will be due in large part to increased credit reserves in the face of an oncoming recession, the question is how big will the build-up be?
Friday action will be dominated by the NFP report which is expected to show a slowdown in job gains. The question here regards wages and how fast earnings are growing? While good for the average new job taker the persistent increase in labor costs is bad news for businesses and consumers. Next week, investors will have a wave of economic data to wade through including the CPI for June and Retail Sales.
Equity markets held steady for a third-straight trading day despite the release of the FOMC minutes. In the minutes, the FOMC indicated both the potential for a "more restrictive" policy and the negative impacts of the same. The takeaway is that, if the pace of inflation does not subside appreciably, the FOMC could enact another or possibly two more 75 basis point interest rate hikes before the end of the year.
The next week of trading days will be tough for the market. Between economic data and the onset of the Q2 earnings reporting season, there are a handful of catalysts capable of moving the market lower. The first and possibly least important is the NFP data due on Friday. That will be compounded the next week, however, with both the CPI and PPI reports as well as the Retail Sales figures. In our view, investors should expect CPI and PPI to trend at or near their current levels and retail sales to fall on a YOY basis, and possibly at a faster pace than last month.
Equity markets took a small tumble on Monday falling nearly 2.0% at the low of the day but the S&P 500 managed to claw back the loss by the end of the session. The move was sparked by a growing fear of recession that spilled over into the energy markets. The price of oil fell more than 10% on fear the demand for energy would plummet in the wake of economic contraction and caused a similar decline in oil stocks. Oil stocks led the selling on Wall Street and fell about 6% for the session despite the fact that supply and demand imbalances remain skewed in favor of higher prices.
The impact of high oil prices on consumer spending, profit margin, and corporate earnings will soon be known. The peak of the Q2 earnings reporting season begins next week and could reinvigorate bearish sentiment. The expectation is for margin to contract relative to last year and for earnings growth to be tepid. The risk for the market, however, lay in the guidance due to an expectation for economic improvement in the 2nd half. If the guidance points to ongoing issues the S&P 500 will most likely fall to a new low.
The equities markets hit a bottom at the end of last week and may move higher this week but investors are urged to caution. The rebound, if one develops, will be the result of light trading volume during a holiday week and may set the market up for a big fall next week. Next week is the first of the Q2 peak earnings reporting season and it may bring bad news. The first important reports will come from the banking sector which should give insights into the health of the consumer. If consumer trends within the financial sector weaken we can only expect the same elsewhere in the economy.
The hurdle for the market this week will come on Friday with the June non-farm payroll report. The report is expected to show a slow-down in hiring coupled with another strong increase in wages that will up the ante in regard to the FOMC. The FOMC is expected to hike rates at an economy-crushing rate over the next two meetings and their pace could be increased if the inflation data continues to come in strong.
The rebound in equities came to an end last week when the market hit a key resistance point at the 30-day moving average. The action confirms short-term traders are still bearish and in control of a market gearing up for bad news. The bad news could begin this week with the NFP report but the real risk is in the earnings outlook. The peak of the Q2 earnings reporting season begins next week and will likely result in a massive downgrade to the 2nd half outlook. In this scenario, we are expecting the S&P 500 to move down to 3,400 or lower.
What the market fears is a recession and the odds of a major recession shot to new highs last week. The Atlanta Fed's GDPNow tracking tool fell to -1.0% and predicts the US is already in a mild recession. Based on the fact the Q1 figures were also revised lower last week we think the 2nd quarter GDP could be below 2.0%.
Equities slipped on Wednesday following a mad dash for the exits on Tuesday. The S&P 500 fell about 0.25% at the low of the day on fears of slowing economic activity and an earnings recession that could begin as soon as the current quarter. While several reports have come in better than expected the strength is isolated and the signs of economic headwinds are growing. If this trend continues it could lead to a significant revision to the 2nd half outlook that drives the market even lower and that is not the only risk. The PCE price index is expected to come in hot and increase the odds not only of aggressive FOMC action but a major recession as well.
In regards to stocks, the defensive Consumer Staples stock General Mills was among the market's leaders on Wednesday. The stock represents not only a value to investors but a high yield that is backed upped by results. General Mills' 2nd quarter earnings were better than expected and came with an increase in guidance that we think will be echoed across the sector.
Equities slipped on Wednesday following a mad dash for the exits on Tuesday. The S&P 500 fell about 0.25% at the low of the day on fears of slowing economic activity and an earnings recession that could begin as soon as the current quarter. While several reports have come in better than expected the strength is isolated and the signs of economic headwinds are growing. If this trend continues it could lead to a significant revision to the 2nd half outlook that drives the market even lower and that is not the only risk. The PCE price index is expected to come in hot and increase the odds not only of aggressive FOMC action but a major recession as well.
In regards to stocks, the defensive Consumer Staples stock General Mills was among the market's leaders on Wednesday. The stock represents not only a value to investors but a high yield that is backed upped by results. General Mills' 2nd quarter earnings were better than expected and came with an increase in guidance that we think will be echoed across the sector.
The rebound in equity markets reversed course on Tuesday with the S&P 500 falling more than 2.0% at the low of the session. The move comes on growing fears of margin compression in Q2 and beyond that will result in downward revisions to earnings. Looking at the market from the perspective of earnings, the S&P 500 is valued on the expectation of future earnings power which means a downtrend in EPS outlook will result in a downtrending market. In that light, Tuesday's decline looks like a trend following movement and one that could result in a new low very soon.
The next catalyst for the market, other than unexpected news, will be the PCE price index on Thursday. Even if the index were to cool or even decline the outlook for inflation remains robust. Without some change to the fundamental outlook, the FOMC should be expected to hike rates by 75 basis points at both of the next two meetings.
The rebound in equities faltered on Monday and for good reasons. Not only is there a key read on inflation due out at the end of the week but the price of oil is rebounding. The price for WTI gained more than 2.5% at the height of the session to top $111.75 on its way back to the short-term moving average at $113.37. If the market gets above that level we see the price of WTI moving up to retest and possibly set a new all-time high and drive inflation to new levels. In regards to inflation, the PCE price index is due out on Thursday and it is expected to be hot. The core PCE is expected to accelerate a tenth to 0.4% on a month-to-month basis and drive the YOY gain to over 5.0% to put even more pressure on the FOMC to act.
The latest read on the FOMC is that a 75 basis point interest rate hike will come in July and another one is likely in August. This will put rates at 3.0% to 3.25% by the middle of summer versus the end of the year as was predicted just a month ago. If the PCE data is hotter than expected it is likely the FOMC will increases rates at an even more aggressive pace and potentially throw the economy into a lengthy recession.
The equities markets began to rebound last week but investors are urged not to read too much into the move. The move is due more to a lack of news than a change in fundamentals and will likely result in another selling opportunity as the Q2 earnings reporting season draws near. The first major reports of the season are already in but the peak of the cycle won't come for two more weeks when the Big Banks report. Between now and then, however, is a major economic hurdle in the form of the PCE price index and it is expected to be a hot one. If the market can not rationalize the data the major indices could easily reverse last week's gains.
Turning to the chart, the S&P 500 closed the week below a major resistance target near 3,950. This target is coincident with the short-term EMA and the mid-point of a downsloping channel and it could easily cap gains in the near to short-term. If the market can not get above this level, it may not matter how cool the PCE price index or hot the earnings turn out to be.
The rally in equities began to fizzle out on Thursday following another day of commentary from the Fed. Fed Chair Jerome Powell completed the second day of testimony on Capitol Hill, raising the fear of recession once again. In his comments, he says a recession is possible although the evidence suggests a recession is already underway. The textbook definition of a recession is two consecutive quarters of tepid or negative GDP growth and we've already logged one negative quarter this year. Based on the latest reading of the Leading Indicators, the 2nd quarter GDP will most likely be negative as well.
The next big hurdle for the market will come next week with the PCE price index. The index should moderate on a month-to-month and YOY basis but there is no guarantee it will. The most likely scenario is that month-to-month inflation moderated slightly but YOY gains are still robust and will cement the need for aggressive 75 basis point rate hikes from the FOMC.
The rebound in equities continued on Wednesday but this is still not a buyable bottom for stocks. The move came despite some hawkish commentary from Fed Chief Jerome Powell who says the committee is committed to taming inflation. In his view, price stability is of the utmost importance to the economy which should be translated as "aggressive interest rate hikes are on the way". The scariest part of the commentary was his opinion a recession was possible. Given the lagging nature of the Fed's stance, we take this to mean a recession is already underway and it may be a bad one.
Thursday could be a wild ride for the market. Comments are due from at least four Fed members and any one of them could up the stakes for the economy. As it stands now, the odds of a recession are very high, the only question is how long deep will it be and how long will it last?
Equities rebounded on Tuesday, the first trading day of the week, but we urge investors not to read too much into the move. the rally comes in the wake of new lows for the S&P 500 and is not likely to gain much momentum. The S&P 500 broke out of a downward slanting channel in the previous week which suggests the downtrend will gain momentum and not the other way around. This week, there will be few economic or earnings reports to move the market so inflationary concerns, fear of recession, and Fedspeak will likely take the fore.
The next big hurdle for the market will be the 2nd quarter earnings reporting season. The peak of the season begins in about three weeks with reports from JPMorgan Chase and other big banks and the news may not be good. Rising inflation and dwindling savings could put a cap on consumer spending which is the backbone of the American economy.
Equities broke out of a downtrending channel to the downside last week in evidence of mounting fear about the economy. The FOMC was forced to hike rates by 75 basis points in what some would call a surprise move. Others, however, would say the FOMC is still behind the curve and that at least one more if not two more 75 basis point hikes were needed. Regardless of the pace, the takeaway for the market is that inflation is still out of control and aggressive rate hikes are making the cost of business more expensive. In this scenario, economic activity can be expected to contract and there is evidence of that already. The Index of Leading Indicators fell for the second month by -0.4% suggesting an economic recession is already in play.
This week will be a hurdle for the market because of how little new information is set to be released. On the economic front, there are only two data points due out and both are from the housing sector. On the earnings front, there are only a handful of confirmed reports and very few from companies other than home builders.
Equities broke out of a downtrending channel to the downside last week in evidence of mounting fear about the economy. The FOMC was forced to hike rates by 75 basis points in what some would call a surprise move. Others, however, would say the FOMC is still behind the curve and that at least one more if not two more 75 basis point hikes were needed. Regardless of the pace, the takeaway for the market is that inflation is still out of control and aggressive rate hikes are making the cost of business more expensive. In this scenario, economic activity can be expected to contract and there is evidence of that already. The Index of Leading Indicators fell for the second month by -0.4% suggesting an economic recession is already in play.
This week will be a hurdle for the market because of how little new information is set to be released. On the economic front, there are only two data points due out and both are from the housing sector. On the earnings front, there are only a handful of confirmed reports and very few from companies other than home builders.
Equities reversed course on Thursday giving up all of their post-FOMC gains and more. The S&P 500 fell more than 3.5% at the low of the day to not only set a new low but indicate rising conviction within the market of an earnings recession if not an actual recession. With the FOMC on pace to raise rates to above 3.0% by the end of the year the odds of both an earnings recession and actual recession are on the rise.
In regards to GDP growth and actual recession, the Atlanta Fed's GDPNow tool fell to 0.0% for the 2nd quarter and is on track to hit negative territory.
If this turns into reality and 2nd quarter GDP is negative the economy is already in a recession and that makes the risk worse. In this scenario, it's not a recession that is the worry but how deep and how long it will be, and how hard will the landing be.
Equities wobbled on Wednesday and showed some resilience in the face of aggressive FOMC policy action. The FOMC hiked rates by 75 basis points despite a pledge to keep the pace of hikes at 50 basis points per meeting. The move is only the latest in a string of evidence that suggests inflation is out of control. Based on the latest data and talk from the Fed we think it safe to assume there will be another 75 basis point hike in July.
In other news, the pace of retail sales fell by 0.30% in May, worse than expected. The decline is due in large part to rapidly rising prices and the high cost of fuel, neither of which are expected to decline over the summer. The takeaway is that an economic recession is already in the works and investors should expect the worst from the Q2 reporting season.
The selloff on Wall Street gained momentum on Tuesday following a surprise report the FOMC was going to hike rates by 75 basis points. The news, which should not have been unexpected, is only the latest indication the Fed's stance toward inflation is getting more hawkish. The risk for the market now is that a single 75 basis point hike will not be enough to clamp down on inflation and another large hike will come in July. If so, the FOMC target rate would hit 2.25% fully two years sooner than the market expected as recently as last summer. This marks a major change in fundamental conditions and will have an impact on economic activity. Looking at the housing market alone, at this pace, the rate on a 30-year mortgage could hit 10% by the end of the year.
After the Fed, earnings will be the next big hurdle for the market and it is only a few weeks until the next peak season. So far, the early reports have been better than expected but we've only seen a few disparate sectors and industries. If the season comes in better than expected the S&P 500 could hit a bottom this summer. If not, we think the S&P 500 could continue to fall into the end of the year.
The sell-off in equities took on a new dimension on Monday with the S&P 500 falling nearly 4.0% by the end of the day. The move not only confirms the greater market reversal that is in play but the lowest targets for the bottom which are near the 2,800 level. With the sell-off gaining momentum and no changes to fundamentals in sight, investors should view any upward movement in price action as an opportunity to sell.
The next big moves may come later in the week after the FOMC announces the next policy change. The committee is expected to hike rates by at least 50 basis points and there is a growing risk it could be more. Even if the Fed only raises rates by 50 basis points this month, there is a near certainty a 75 basis point interest rate hike will come in July. The takeaway for equities is the cost of borrowing money is on the rise in the face of rising input costs and both are squeezing margins.
The May CPI data confirmed our worst fears. The FOMC has lost complete control of inflation and is on track to bring on an economic winter. The May CPI not only came in hot from the previous month but accelerated versus the expectation inflation has peaked. The data puts the idea of Peak Inflation to rest and we don't think this is the end of the story. WTI is on the rise and driving systemic inflation throughout the system. If anything, consumers should expect to see prices continue to rise at a high-single-digit rate well into the end of the year.
Last week, the S&P 500 confirmed a full reversal in the market. The index fell from the key resistance level of 4,100 and sed more than 6.5% for the period. The next target for support is 4,900, if this level does not hold up there is a very high probability the S&P 500 will see the 2,800 level before it sets a new all-time high.
Equities face an important hurdle today in the form of the Consumer Price Index. The CPI data is expected to moderate from the previous month but remain high and in favor of aggressive FOMC action. The obvious risk for the market is the data will be hotter than expected, the real risk is that CPI data no longer matters. It is clear to the market that inflation is out of control and will continue to rise over the next several quarters at a very robust pace. In this light, the FOMC can be expected to hike rates for an open-ended amount of time and alter the face of the economic world for the next decade or longer. In this scenario, the market is set up for a fall and will most likely retest 3,900 on the S&P 500 within the next week.
Next week, the risk for the market will be the FOMC meeting. The FOMC meeting should bring a 50-basis point interest rate hike with the possibility the timeline for follow on rate hikes will be accelerated. The takeaway is that without some major change to the economic fundamentals (and we don't see one coming) the S&P 500 will spend the next few years recovering from the pandemic and nearly 15 years of easy money policy.
Equities continue to hover in the range of 4,100 to 4,200 and below a key resistance target. The market is having a hard time gaining traction following the previous week's rally and the risk is to the downside. The S&P 500 is well into a major reversal that could easily take it back to the 3,000 level or lower. The reversal is caused by the rapid end to over a decade of easy money policy that was capped off by trillions in COVID-related stimulus that has inflation running at record levels. With inflation at record levels, stimulus no longer juicing the economy, and aggressive FOMC rate hikes on the table, the S&P 500 are in for a tough haul over the next few quarters to two years.
If the real estate market is a leading indicator of the economy it gave the market another reason to fret on Tuesday. Applications for mortgages fell to the lowest level in 22 years and point to a contraction in the housing market. The bad news is that this will amplify the negative effects of higher rates and inflation, the good news is the real estate market should normalize during the correction as homebuilders increase inventory.
Equities steadied on Tuesday but don't read too much into the news. The S&P 500 gained about 1% at the high of the day but is still trading below an important resistance target. The move is just another in a series of lackluster movements that suggest a wait-and-see attitude in the market. The wait-and-see attitude is due to an expected economic release and the FOMC, either of which could send the market reeling. The economic release is the CPI data on Friday which is the last inflation report before the FOMC meeting next week. The data is expected to be hot and will most likely intensify the expectation for FOMC action.
In other news, Target warned the market about record-high inventory levels and the need for aggressive actions of its own. The news should come as a warning for the entire S&P 500 because they've all been working hard to alleviate supply chain disruptions this year and that could result in oversupply at all levels.
Equity markets tried to claw their way higher on Monday but the gains didn't hold. The S&P 500 closed the day up slightly but well off of the highs and once again confirmed the presence of resistance near the 4,100 level. This resistance may cap gains for the foreseeable future given the amount of uncertainty in the market and there is downside risk as well. The PCE Price index is due out on Friday and may send the market into another tailspin. While headline inflation is expected to accelerate under the forces of higher energy prices, core inflation is expected to moderate but both are forecast to be very high on a YOY basis.
The takeaway is that inflation is running more than double the Fed's target rate and has been for a year. At this pace, prices are rising at a double-digit clip in the two-year comparison and eroding consumer spending power every minute. The FOMC has promised to act, albeit late, and will raise interest rates by at least 50 basis points at their meeting next week.
Equities finished a volatile week on a down note last week with the S&P 500 down more than 1.5% at the low of the Friday session. The move was small but no less important because it confirms the presence of resistance at a key level between 4,100 and 4,200 on the S&P 500. If the market can not get back above that level this week it most likely won't until later in the summer.
This week, the market will be focusing on the CPI data due on Friday and it could be a hot number. Not only are commodity prices still firm but oil and wages are still on the rise. The best-case scenario is that consumer-level inflation moderated slightly on a month-to-month basis but at that level is still very high. The risk for the market is a hotter than expected figure and increased expectation for aggressive FOMC actions this year.
Wild swings continued on Wall Street on Thursday. TheS&P 500 reversed an early loss to gain more than 1.85% at the high of the day. The move came despite a round of mixed economic data that suggest weaker than expected job creation on the heels of the largest increase in wage inflation ever recorded in the US. US wages rose 12.6% in Q1 to drive a similarly large contraction in productivity. The takeaway from the data is that economic activity is contracting due to the rise in inflation, specifically wage inflation, and the data will most likely get worse before it gets better.
Next week, the market will be on high alert for the Consumer Price Index. The index is expected to make a sharp slowdown from previous months due to the overlap with last year's data. The risk for the market is that inflation will not cool appreciably and add pressure on the Fed. This will be the last inflation data before the next FOMC meeting, the FOMC is expected to hike rates by 50 basis points with a near 100% certainty.
Equities reversed course to fall about 0.75% on the first trading day of June. The move was driven by a rising fear of economic catastrophe that was brought into sharp focus by JPMorgan Chase CEO Jamie Dimon. Dimon says the US should get ready for an economic hurricane caused by the Fed and fallout from the Russian invasion of Ukraine. In his view, oil could hit $150 per barrel and drive inflation to new heights.
The chart of the S&P 500 is beginning to show signs of weakness in the rebound. The index hit resistance at the key 4,100 level and right now that resistance is confirmed. If the market can not get over this level the least of what we expect is a retest of support at the 3,900 level. If price action moves below there, and there is no reason now why it won't, we think the broad market could fall another 5% to 10% before hitting the next support zone.
Equities started the holiday-shortened week on shaky footing hovering around break-even for most of the day. The move is a sign of a cautious market and one that is waiting for the next shoe to drop. This week, that shoe may come in the form of economic data and specifically the nonfarm payroll report. The report is expected to show another month of robust job gains and wage increases and the risk in the data is to the upside. With the summer season, fast approaching employers are scrambling to fill positions. The takeaway for the market is that stagflationary conditions will remain in force for the summer despite the Fed's promise to raise interest rates.
It's two weeks until the next FOMC meeting and the expectations for aggressive action are easing. The FOMC is still expected to hike rates by 50 basis points but the odds of 75 are falling toward zero. The risk in this outlook is the data, there are still two major releases of inflation data that could shift sentiment before the next meeting.
Equities began to rebound last week but we wouldn't call it a rally just yet. The S&P 500 moved up off of the recent low and closed above the 4,100 level but there is still risk ahead. The takeaway for the market is that, with a cloudy outlook for Q2 and 2nd half earnings and the summer season fast approaching, the adage of Sell In May and go away may be the best advice for investors. Any upswing in prices will most likely be met by selling that will cap gains and keep the S&P 500 range-bound until the fall.
The hurdle for the market next week will be the economic data. There is a raft of data including PMI, ISM, Factory Orders, and the Fed's Beige Book on top of the monthly labor data. As a whole, the data should indicate slowing and sluggish economic activity in the face of tight labor markets and rising inflation, otherwise known as stagflation.
Equities began to rebound last week but we wouldn't call it a rally just yet. The S&P 500 moved up off of the recent low and closed above the 4,100 level but there is still risk ahead. The takeaway for the market is that, with a cloudy outlook for Q2 and 2nd half earnings and the summer season fast approaching, the adage of Sell In May and go away may be the best advice for investors. Any upswing in prices will most likely be met by selling that will cap gains and keep the S&P 500 range-bound until the fall.
The hurdle for the market next week will be the economic data. There is a raft of data including PMI, ISM, Factory Orders, and the Fed's Beige Book on top of the monthly labor data. As a whole, the data should indicate slowing and sluggish economic activity in the face of tight labor markets and rising inflation, otherwise known as stagflation.
The rebound in equities gained momentum on Thursday after a series of better than expected earnings from some key retailers. The news highlights the differences in company operations more so than a divide in customer habits as those with resonating brands and omnichannel business models have been outperforming the rest of the retail sector. The caveat for investors is that the news from the retail sector highlights a trend within the broader market as well, that of rotation. The FOMC is on track to raise rates to restrictive levels and that is driving rotation from underperforming names into those well-positioned for the new operating environment.
The risk for the market today is the PCE price index. If the market can get past that we may see a test of resistance at the 4,100 level. If the S&P 500 can get above that level a move back up and into the 4,300 to 4,500 should follow. Next week, the market will be on the lookout for another round of key economic data including the Fed's Beige Book, construction spending, and nonfarm payrolls.
Equities rebounded on Wednesday despite signals the Fed will act more aggressively than the market is pricing in. The minutes indicate the FOMC is prepared to go beyond "tightening" to "restrictive" policy in order to tame inflation but is worried about risks to the system. The S&P 500 moved up to the highest level in over a week on the news and may move higher on Thursday but the index is not out of the woods. The market is still trading well below a key resistance target and there is a very important data point due out on Friday.
The PCE price index is due out tomorrow and could shock the market. The market is expecting signs of cooling and peaking but there is risk in that outlook. The bulk of CEOs reported rising inflation in their earnings reports this cycle and that does not suggest peaking or cooling for the consumer. A hot number will seal the deal on a "restrictive" policy change and heighten the risk of recession.
Equities resumed their decline on Tuesday after results from Snap and the New Home Sales data amplified fears of a recession. Snap, a fast-growing social media company, shocked the market with its results and weak outlook while the New Home Sales shows a sharp contraction in housing activity. The contraction in housing activity is directly related to skyrocketing prices and rising interest rates that have many would-be homeowners sitting on the sidelines if not already priced out of the market. If this month's data turns into a trend it could mean a recession is already happening.
Today's big news will be the FOMC minutes. The minutes are expected to shed light on the Fed's stance on inflation and it is hawkish. Inflation is rising at record rates and the Fed's job is taming it. The next data comes out on Friday and may put added pressure on the Fed. If, however, the PCE shows signs of peaking or receding the equity market will probably rally in response.
Equities began the week on solid footing with the S&P 500 rising more than 1.85% at the high of the day. Investors are warned not to read too much into the move, however, because there are at least two major catalysts this week that could drive the market lower. The first is the release of the FOMC minutes on Wednesday, minutes that could reveal a very hawkish Federal Reserve, and the second is the PCE price index on Friday.
The PCE price index is not expected to subside substantially from the previous month and could even come in hotter than expected. A hot figure will seal the deal on a series of 50 basis point rate hikes and could even lead to a 75 basis point hike at the June meeting. The takeaway for investors is that there are many risks on the horizon and that selling in May and going away until the fall could be the best strategy for the summer.
Equities fell for an 8th week last week and are heading lower. The S&P 500 confirmed a major reversal in price action when it dropped below 4,100 and then moved on to set a new low at the end of the week. The next catalyst for index movement will come on Wednesday with the release of the FOMC minutes which are expected to reveal a very hawkish Fed. Later in the week, the PCE price index will come into focus and we expect it to be a hot one. Based on the latest comments from Fed chief Jerome Powell, we think the number could increase the odds of a larger 75 basis point interest rate hike at the June meeting.
With the index in freefall, it seems the market has taken the adage "sell in May and go away" to heart. This means the summer season could be volatile and any movements should be viewed with skepticism, especially upward movements. The next major signal for the market won't likely come until the end of the summer when the institutional money and professional traders come back from vacation.
Equities slipped again on Thursday and are in danger of falling further. While the S&P 500 was able to claw its way upward from a freshly set low, the index is still below what is now a key resistance target. The 4,100 level was confirmed as resistance this week and will be a major hurdle for the index going forward. the longer it takes for the market to get back above that level, the harder it will be to cross above it and we are not hopeful of a rebound next week.
Next week will be a critical time for the broad market. The technical picture is lending strength to the argument "sell in May and go away" and there are no catalysts for buying on the horizon. The catalyst that is on the horizon is the PCE Price index and we do not expect it to be a pleasing figure. If the market falls to a new low, a low below 3,860, the S&P 500 is likely to fall another 100 points or more before finding the next level of price support.
Equity markets resumed their selling on Wednesday after comments from Fed chief Jerome Powell and weak earnings from the retail sector put the fear of recession back into the market. Jerome Powell says the FOMC will continue to raise rates until inflation subsides, a stance the committee has not held for many, many years. What this means for investors is that 50 basis point interest rate hikes should be expected through the end of the year and it should be no surprise if inflation lingers into 2023.
Next week, the market may get another shock with the monthly PCE Price Index. The index is the Fed's favored tool for measuring consumer inflation and it is expected to be hot. Regardless of the number, it would take a sustained period of declining and low inflation to get the Fed off the hook in regards to rate hikes.
Equities rebounded for a fourth day as investors scoop up newly found bargains. The move may gain momentum now that retail sales data and earnings from the major retailers is in, but investors should be cautious in the near term. While bullish, the action of late is driven in large part by short selling and short-covering so should not be viewed as true buying. The S&P 500 may continue to move upward in the near term but there is a chance for resistance at the 4,100 to 4,200 range. If resistance is present at that range the index could fall back to the newly set low and possibly lower.
The next big hurdle for the week will come next Friday in the form of the PCE price index. The PCE price index is the Fed's favored tool for measuring consumer-level inflation and it has been running very hot over the past year. Another month of record-level inflation with no sign of it relenting could seal the fate of the Fed's ability to provide a soft landing in regard to the economy. With inflation running rampant, the FOMC may have no choice but to intentionally induce a recession.
Equities wobbled at the start of the week as traders prepare for a round of important data and earnings reports. Data in the form of Retail Sales will dominate the news on Tuesday and is expected to show the impacts of inflation. The economists are expecting retail sales to accelerate on a sequential basis but at a tepid 1.1% rate. At this pace, the volume of sales is falling quickly on a YOY basis and price increases are only barely keeping up. Eventually, the balance will tip and retail activity will enter a recession.
On the earnings front, reports from a number of retailers like Walmart, Target, Home Depot, and Lowes are on deck and could alter the market outlook. These are the four horsemen of pandemic spending and have been market leaders up to now. If their results show weakness or a weakened outlook the broader market is likely to fall along with them.
Equities closed below a key level last week despite a strong rebound on Friday. The move was driven by the belief the FOMC has lost control of the economy and that inflation will continue to run rampant. The S&P 500 broke through the 4,100 level in anticipation of the CPI and PPI data and then accelerated to below the 4,000 mark in their wake. If the market is not able to regain support at that level this week, the odds of a much deeper decline in equity prices will grow.
This week could be a tough one for the markets with earnings reports from a number of important retailers including Walmart, Target, Home Depot, and Lowes. Together, they are the market leaders in regard to consumer spending and will be a telling indication of the state of the consumer. If they give poor reports or worse, poor guidance, the market selloff is sure to worsen.
Equities wobbled on Thursday after opening at a new low. The action was driven by a hot PPI report that shows producer level inflation is still on the rise and accelerating on a YOY basis. The takeaway for investors is that, with producer prices still on the rise, consumer prices are going to rise as well and that is bad news for the economy. Inflation has been above the Fed's 2.0% target for over a year now and accelerating which is a situation that will force them to act and possibly more aggressively than they've been indicating. Because there is still more than a month before the next meeting and a full round of economic data, we think the market is in for more volatility if nothing else.
Next week, the market will have little to move it other than economic data. The earnings season is all but over and what's left is mostly consumer and retail names. The risk for the market is that consumer spending may flag in the face of rising prices and send the market into an earnings recession.
Equities extended their selloff on Wednesday with the S&P 500 falling more than 1.50% to the lowest level in over a year. The move was driven by a hotter than expected CPI read and took the index firmly below the 4,000 level. The CPI came in at 8.3% YOY or up 0.2% from the previous month putting an end to the idea that inflation had peaked. The next big hurdle for the market will come today in the form of the PPI index. The PPI index is also expected to subside on a month-to-month basis but may come in much hotter than expected.
With inflation on the rise, the FOMC will come under even more pressure to act. Although the Fed has said it won't hike rates by 75 basis points we feel it is on the table now. The risk for the market is not pricing in a recession because it looks like one is on the way.
Equities wobbled on Tuesday as investors prepare for what could be a game-changing CPI read for the FOMC. Today's read laps the onset of high inflation for the first time and is expected to rise another 8% YOY. At this pace, the FOMC almost has no choice but to raise interest rates aggressively and possibly by 75 basis point increments. The next FOMC isn't until June but there is a high expectation for another 50 basis point hike and a slim chance for a larger 75 basis point hike. The next hurdle for the market after the CPI will be the PPI data on Thursday and it, too, is expected to be hot.
The takeaway is that inflation is still on the rise and cutting into corporate profits. S&P 500 companies have been able to maintain their margins so far via price hikes but consumer push-back has begun. With earnings coming under increasing pressure and the FOMC in danger of stalling the economy, there is a real danger for corporate earnings growth to stagnate and the S&P 500 to enter a deeper correction.
The sell-off on Wall Street gained momentum on Monday with the S&P 500 falling roughly 3.5% at the low of the session and setting a new low below 4,100. This is the lowest level the index has traded in over a year and has the market set up for a much deeper fall. Now that the 4,100-4,200 support level has been breached there is a risk that traders and investors who had been buying at that level will become sellers. In that scenario, the 4,100 will become strong resistance that could keep the market from moving higher over the next few quarters.
The next big hurdle for the market will come tomorrow with the release of the CPI index. The Consumer Price Index is expected to advance as much as 0.5% from the previous month and drive another 8.0% or greater increase in YOY inflation on top of last year's mid-single-digit increase. the takeaway is that CPI data will raise the stakes for the Fed and may lead them to go back on their word and bring a 75 basis point interest rate hike to the table.
Equity markets fell to new lows last week despite the Fed's assurances a 75 basis point interest rate hike was not on the table. The S&P 500 fell to the lowest levels in months and could move lower in the coming week is the CPI data comes in hot again. There is an expectation for consumer-level inflation to cool in April for no other reason than tough comps to the prior year, the risk is that inflation rose at a hotter rate than the market is pricing in and will up the stakes in terms of the FOMC.
The FOMC has been incrementally increasing its outlook for inflation and rate hikes over the past two quarters, we will not be surprised to see it happen again following the CPI release. In other news, the non-farm payroll report came in as expected and points to ongoing health in the labor market. The bad news is a decline in the participation rate suggests unemployed workers have quit looking for jobs and wages continue to put upward pressure on inflation.
Equity markets reversed course on Thursday giving up all of the gains from the prior day. The relief rally sparked by the FOMC was met by another round of selling driven by fear the Fed isn't acting fast enough and that inflation will continue to be a problem. The S&P 500 fell more than 4% at the low of the day led by the tech sector. The tech-heavy NASDAQ Composite fell more than 5% at the low of the day and will likely fall farther on Friday due to fear of next week's CPI data.
The CPI should moderate versus last year due to the YOY comparison. The risk for the market is that it won't and there are signs it will be hot regardless of the comparison. What this means for the market is that FOMC members may bring a 75 basis point hike back to the table and it could come as soon as June. Until then, the outlook for 2nd half economic activity and earnings growth is very cloudy with mounting risks.
Equity markets got a dose of good news on Wednesday when the FOMC hiked interest rates by 50 basis points. The increase was expected and came with a tame outlook compared to what the market was fearing. Fed Chief Jerome Powell indicated an aggressive 75 basis point increase was off the table for now and that a series of 50 basis point hikes should be expected. The risk for the market now is that inflation will continue to rise despite the onset of interest rate hikes and force the FOMC to up its game once again. If history is any indication, the Fed will have to spark a recession to get inflation under control.
The S&P 500 surged more than 3.0% on the news confirming support at the key 4200 level. So long as this level continues to show support the index will remain range-bound or possibly move to a new high. While there are many risks ahead, the outlook for the 2nd half continues to expect supply chain improvements that should drive revenue and earnings for the S&P 500.
Equities rebounded from Monday's low on Tuesday but investors shouldn't read too much into the news. The FOMC is slated to raise interest rates today and could be more aggressive than the market expects. Even if today's rate hike is only as expected at 50 basis points the outlook for the pace of future hikes is a risk for the market. As it is now, the market is pricing in as many as 6 interest rate hikes by July and that could be 1 or more too few. Based on history, the FOMC will have to quash economic growth to get inflation under control, the question is if they will provide a hard or a soft landing and we are leaning toward the hard landing scenario.
As if the FOMC isn't enough to keep the market occupied, the NFP is due out on Friday and could shock the market as well. There are already some signs that inflation is curbing activity, if signs of slowing show up in the labor data fears of a full-blown recession will increase and the market may move lower because of it.
Equities slipped to start the new month and may fall further if the FOMC spooks the market on Wednesday. The FOMC is expected to hike interest rates by at least 50 basis points and could go for 75. Even if this interest rate hike is only 50 basis points the market should expect a hawkish statement from the Fed and a high likelihood for aggressive policy adjustments this year. As it is now, the market is pricing in at least 12 25 basis point hikes by the end of the year which is enough to put the base rate at the highest levels since before the Housing Bubble Burst.
Also on tap this week is the NFP report. The economists are expecting another strong month of job gains with net job creation topping 400,000. The risk for the market is that wages will continue to rise and accelerate, driving inflation throughout the economy.
Selling on Wall Street gained new intensity last week after the PCE price index proved the FOMC was out of time. The market, hopeful that year-over-year comps in consumer inflation would tame, was disappointed with another acceleration of the same. The news sent the S&P 500 down to the lowest levels in weeks and leaves it in danger of breaking through key support this week.
This week there are several market-moving catalysts to be aware of including the non-farm payrolls report on Friday and the FOMC policy announcement on Wednesday. The FOMC announcement will be the biggest news of the week, however, and may shock the market despite months of foreshadowing by FOMC members. The market is pricing in a 100% chance for a 50 basis point rate increase and the committee could go as high as 75. Regardless, the FOMC is expected to raise rates incrementally at each of the meetings this year and some meetings will bring more than 25 basis points.
Equities rebounded strongly on Thursday despite a much weaker than expected GDP figure. The first read on Q1 2022 GDP came in at -1.4% versus the expected gain of 1.0%. The news was largely shrugged off by the market but it is not a data point to be complacent about. With the economy already contracting versus last year there is a real chance the FOMC could and will throw the U.S. economy into a recession when it begins raising rates.
The question that needs to be answered is if it will be a hard or soft landing and the evidence is mounting for a hard landing. The real risk for the market is today's read on the PCE price index. If PCE prices continue to rise at the pace they have been or hotter the Fed will have no choice but to act quickly and aggressively to fight inflation and we don't think the market is pricing that into stocks yet.
Equities rebounded on Wednesday but it is too soon to call a bottom in the market. While the S&P 500 is moving up from the key 4,200 level the move is ahead of an important data point that could change the market's outlook. That data point is the PCE price index on Friday. The PCE Price index is expected to moderate on a sequential basis but still come in at a strong up .03% for the month and 5.3% from last year.
The risk for the market is that inflation will not moderate and there is no real reason to think it will. Not only is energy at the highest levels in a decade and driving input costs higher throughout the economy but producers and retailers are still trying to catch up with the last 12 months of inflation. If anything, the market should be prepared for a hot number and a chance the S&P 500 could break through support at 4,200 and make a move toward the 2,700 level.
Equities resumed their downward trend on Tuesday reversing Monday's rebound on renewed fear of the FOMC. The tech-heavy NASDAQ Composite led the move with a loss close to 4% at the low of the session. The NASDAQ Composite is a growth-oriented index and those stocks, particularly those that rely on debt to fuel their growth, are sensitive to interest rates and the FOMC.
Later this week, the selling may pick up momentum after the PCE Price Index is released. The index is expected to show another strong gain in YOY inflation and will start the 2nd year of above-target consumer inflation gains. Regardless of the PCE data, the FOMC is on track to raise rates when it meets in April. Weaker than expected data may reduce the urgency and pace at which they raise rates but will not remove the need for higher rates. The takeaway, the cost of business is going to go up when the Fed raises interest rates and that may send the economy into a recession and the market into a tailspin.
Equities fell hard to start the week with the S&P 500 down more than 1.5% at the low of the session. The move was driven by increasing angst over inflation, the FOMC, and earnings with both a key round of earnings and a key report on inflation due out this week. On the earnings front, there are reports from 175 S&P 500 companies and nearly half of the Dow components on tap. by the end of the week all questions about what to expect this reporting season should be laid to rest. On the inflation front, the April read of the PCE Price Index is due out and it is expected to be another hot one.
Core PCE prices are expected to moderate from up 5.4% in February to up 5.3% YOY in March but nowhere near enough to get the FOMc off the hook for interest rate hikes. At this pace, inflation is up nearly 10% versus 2020 with no signs of it slowing. An as expected or cooler than expected report may keep the market from selling off but, if the figures are hotter than consensus as we expect, the selloff could enter a new phase.
The sell-off in equities extended for a third week with the S&P 500 shedding about 2% for the session. The move was driven by increasing fear of FOMC aggression and could easily take the index back down to the 4,200 level. The risk for the market now is that 4,200 will not hold and a much deeper decline is on the way. That decline could be sparked by the Fed when it begins hiking rates because there is a real risk of recession. The CME Fedwatch Tool has the market pricing in 8 to 10 quarter-point hikes by July which would be the fasted pace in living memory.
Next week's action will be all about earnings and inflation. The peak of Q1 reporting begins next week and should bring upwards of 100 earnings reports from S&P 500 companies. On the inflation front, the PCE Price Index is slated for release on Friday and could mark the end of any pretense of bullishness in the market. This will be the 13th report since inflation began to spike and there is every indication it will be another hot report.
Equities started the day in the green on Thursday but reversed course midday. Remarks from Fed chairman Jerome Powell put the fear of inflation back on the front burner. In his remarks, Mr. Powell said taming inflation was absolutely necessary and that a 50 basis point rate hike was on the table for May. The news caused a sell-off in the ten-year treasury that sent rates to the highest level since December 2018. At the current rate of gain, the rate on the ten-year treasury note will exceed 3.25% by the end of the year. At those levels, bonds become a more attractive investment than the average S&P 500 stock and may become a headwind for equities.
Next week, the market will be fully focused on earnings as well as inflation. Next week is the first really busy week of the reporting season and should bring more than 100 reports from S&P 500 companies. On the inflation front, the PCE price index is slated for release on Friday and should be another hot one despite lapping last year's 3.5% increase.
Equities tried to rebound for a second day on Wednesday with the S&P 500 gaining a little more than 0.35% at the height of the session. The move comes despite a much weaker than expected report from Netflix that points to a major change at the world's largest video streamer. Netflix will not only begin cracking down on password sharing but is also considering the launch of a lower-priced ad-supported model that is contrary to the original concept. Shares of Netflix fell more than 35% on the news and may head lower. The news also sapped sentiment for tech in general and sparked a near-1% decline in the NASDAQ 100.
Thursday's trading will be impacted by reports from Tesla, Alcoa, and AT&T. The market will be looking for signs of organic growth above the consensus figures and margin health as well, if either are missing this market could reverse course once again and move back below the 30-day EMA. Regardless, volatility remains elevated and will lead to extreme day-to-day market action driven by the latest headlines.
Equity traders breathed a sigh of relief on Tuesday after a round of better than expected earnings. Reports from Johnson & Johnson and Hasbro helped lift the broader market as did reports from a number of mid-sized and specialty finance companies. The S&P 500 gained more than 1.70% at the high of the day and may move higher in the near term but investors are urged not to become complacent. While there seems to be a bottom in stocks the trend is sideways and not up. In this scenario, the S&P 500 will probably hit a top near 4,800 which will keep prices contained.
Better than expected economic data helped to lift stocks as well. The April read on Building Permits and Housing Starts were both above the consensus and pointed to ongoing strength in the housing market. While construction has been constrained by labor and materials shortages demand remains vibrant and ready to build. The market-moving event on Wednesday will be the Fed's Beige Book.
Equities started the week on uncertain footing rising early in Monday's session and then falling later in the day. The move comes on the eve of the busiest period of the Q1 earnings reporting season and may foreshadow a lackluster season at best. On a technical basis, Monday's move in the S&P 500 confirms the near-term downtrend and sets the index up for a retest of the 4200 level. That test could come this week after reports from companies like Johnson & Johnson, Abbot Laboratories, Tesla Motors, and PPG Industries.
The risk for the earnings season is the guidance. The market is expecting to see supply chain improvements and margin expansion in the back half of the year and they may not materialize. Not only is the war in Ukraine straining the supply chain but widespread lockdowns in China may bring global manufacturing to a standstill. Regardless, if the outlook for improvement sours the market could be in for a deeper correction than it has so far produced.
Volatility continued on Wall Street Thursday with the major indices reversing the previous day's gains after another indication of inflation hit the market. Import prices rose at a 2.6% month-over-month clip exceeding the analyst's estimates and almost doubling from the previous month. The data, as a leading indicator of the economy, points to higher prices for consumers despite the expectation of aggressive FOMC policy action.
The risk for the market this week will be earnings. The banks kicked off the earnings season this week and so far the news is lackluster at best. If the market cannot renew the bullish spirit by the end of the week it could spell doom for the market. As it stands, the next target for the index is lower and not higher and it could move below the recent lows if the earnings news worsens.
Equities rebounded on Wednesday despite another round of bearish news that included the PPI data and earnings from JPMorgan Chase. The PPI data shows producer prices accelerating more than expected to the fastest pace on record. This data is sure to lead to another increase in the CPI data next month or later in the year which brings us to the JPMorgan Chase report. The company says it is bracing for increased economic risks and we think it is a wise decision.
The impacts of Russia's invasion of Ukraine are only beginning to show up in the data and results and those impacts are not good. Rising fuel costs and disruptions to trade are only the tip of the iceberg and threaten to throw the global economy into a recession. The next hurdle for the market will come today with an earnings report from at least half a dozen of the world's largest financial institutions. If they report more of what JPMorgan Chase reported the market sell-off could resume with increased vigor.
Equities rebounded on Wednesday despite another round of bearish news that included the PPI data and earnings from JPMorgan Chase. The PPI data shows producer prices accelerating more than expected to the fastest pace on record. This data is sure to lead to another increase in the CPI data next month or later in the year which brings us to the JPMorgan Chase report. The company says it is bracing for increased economic risks and we think it is a wise decision.
The impacts of Russia's invasion of Ukraine are only beginning to show up in the data and results and those impacts are not good. Rising fuel costs and disruptions to trade are only the tip of the iceberg and threaten to throw the global economy into a recession. The next hurdle for the market will come today with an earnings report from at least half a dozen of the world's largest financial institutions. If they report more of what JPMorgan Chase reported the market sell-off could resume with increased vigor.
Equities tried to rebound from Monday's selloff on Tuesday after the CPI data came in only as expected but the threat of rising inflation outweighed any relief felt by the market. The takeaway from the CPI report is that inflation is still on the rise, rising at a record, and accelerating with no sign of letting up. In this paradigm, the FOMC is expected to aggressively hike interest rates and that is being seen in the Fed Funds Futures data. According to the CME data, the FOMC will raise rates by at least 100 basis points over the next two meetings and there is a chance for 125 basis points.
The risk for the market on Wednesday is the PPI data. The PPI is a leading indicator for CPI and it is expected to accelerate on a month over month and year over year basis. Later this week, earnings season will kick off with reports from JPMorgan Chase on Thursday and a handful of other big banks on Friday.
Equities pulled back on Monday on the combination of inflation fear and falling oil prices. The price of WTI fell more than 3.75% intraday to drive a similar decline in the energy sector. With the energy sector expected to post the largest increase in YOY earnings the move in oil prices and the XLE could alter the outlook for the entire reporting season. As for inflation, the March read of the Consumer Price Index is due on Tuesday and it is expected to be historic.
The pace of consumer inflation is expected to hold steady at 0.5% month to month and it could easily top those expectations. the risk for the market is in the YOY comparisons which are expected to accelerate as well. With consumer-level inflation expected to top 6.5% at the core level, the expectations for aggressive FOMC interest rate hikes are going to go through the roof.
Equities tumbled last week on growing fear of overly aggressive interest rate hikes from the FOMC. The minutes from the last meeting reveal the committee is looking at a series of large interest rate hikes as well as the beginning of the balance sheet runoff. The CME's Fedwatch Tool is pricing in 3 consecutive 50 basis point hikes with a chance of 10 more 25 basis point bumps this year. At this pace, interest rates will be well above their pre-pandemic level and their effects will be felt throughout the economy.
The risk for the market this week is twofold. On the one hand, we'll be getting both the CPI and PPI data for March and we expect the data to be hot. On the other, the peak of the earnings season begins with reports from the big banks and they are expected to see earnings decline versus last year.
Equities wobbled on Thursday after comments from several Fed members and the FOMC meeting minutes pointed to a series of aggressive interest rate hikes. The move put the S&P 500 at the lowest level in three weeks and the selling may not be over even with Thursday's bounce. There are growing indications that economic headwinds worsened in Q1 and will worsen again in Q2. That situation is having a negative impact on guidance and the outlook for earnings growth which is the primary driver of stock market action. while the consensus estimate for Q1 earnings growth continues to rise, it is due entirely to the high price of oil and should be looked at with caution.
The risk for the market next week will be earnings and the economy. Not only is it the start of peak earnings reporting season but the CPI for March is due out as well as retail sales. The CPI is expected to rise from the previous month, the question is by how much and how will it affect the outlook for interest rate hikes?
Equities deepened their sell-off on Wednesday both in anticipation and because of the FOMC meeting minutes released Wednesday afternoon. The minutes confirmed what the market was expecting which is the committee is considering a series of 50 basis point interest rate increases as well as the onset of balance sheet reduction. The committee sees a $95 billion per month reduction which would shrink the balance sheet by about $1 trillion within the first 12 months. The news is a bit weaker than expected but, with the pace of inflation what it is, the pace is likely to accelerate over the next few meetings.
The S&P 500 fell more than 1.0% on the news but found support at the short-term moving average. If this level is able to hold the index is likely to make a move up to retest the all-time highs for resistance. If not, this market will most likely head down to retest support at the recent lows near 4,150.
Equities retreated on Tuesday on fears the FOMC will get even more aggressive with policy change and interest rate hikes. The move came just a day before the minutes from the latest FOMC are due to be released and may foreshadow what's to come. With inflation rising at the fastest pace in decades the Fed is being forced into actions that may stall the economy. The S&P 500 fell more than 1.25% at the low of the day, led by a 2.0% decline in the interest rate heavy NASDAQ Composite.
Earnings are also coming into focus with JPMorgan Chase set to release its calendar Q1 report next week. The big banks are expected to post sequential increases in revenue and the impacts of rising costs. Banks are positioned to benefit from rising interest rates but the impacts of inflation are offsetting the outlook. Higher rates will help profitability but a stalled economy will cut into the top and bottom lines.
The melt-up in equities continued on Monday with the S&P 500 gaining more than 0.75% at the high of the day. The move was driven in large part by the energy sector, however, as oil prices gained nearly 4.0% to trade above the $104 level. With oil prices trending near record levels, the energy sector is expected to post windfall earnings this reporting season. The rest of the index may not fare so well, 7 of the 11 sectors have a declining consensus estimate for earnings while 4 are expected to post an outright earnings decline.
The risk for the market is that earnings will be worse than expected and guidance will be lowered. In that scenario, the bear market will enter a new phase in which recent lows will be tested and possibly exceeded. The test for the market this week, however, will be the minutes from the last FOMC meeting which are due for release on Wednesday. Investors should be prepared for a very hawkish FOMC and at least 50 basis points of interest rate increase at the next meeting.
Equity markets started the 2nd quarter on shaky footing with the S&P 500 hovering near break-even on Friday. The move was driven by weaker than expected labor data amplified by the ever-rising threat of inflation. Job creation topped 400,000 for March but fell short of the consensus while wages rose at the fastest YOY pace since the first months of the pandemic. The data points to both tightening labor conditions and accelerating inflation that more than suggest Fed action is needed.
This week will be a quiet week for the market with little on either the economic or earnings calendar. The biggest news of the week, other than geopolitical, will be the FOMC minutes on Wednesday. The minutes will most likely reveal a more hawkish than previously expected FOMC and up the stakes in regards to interest rate hikes. At this point, the FOMC is expected to raise rates by 50 basis points at the next two meetings and that could extend to three meetings if there is no real deceleration in consumer-level price increases.
Equities began to pull back again on Thursday ending what was otherwise a good March for stocks. The S&P 500 shed more than 1.5% at the low of the day and closed near the low of the session after the PCE price index came in at a new high. While the pace of acceleration cooled off on a month-to-month basis the YOY data shows both headline and core inflation have accelerated to new highs and the highest levels in four decades. With oil prices hovering above $100, it doesn't look like inflation is going to be tamed any time soon and the FOMC will need to be aggressive. The next FOMC meeting is only a month away and the market is pricing in a 50 basis point interest rate increase then and at the next meeting.
In other news, the non-farm payroll report is due out today and could drive market action. The report is expected to show a strong 490,000 new jobs in March and an uptick in wage growth. The risk for the market lay in the wage growth and a hot number could intensify fears of FOMC intervention.
The rebound in equities took a breather on the last trading day of the quarter with the S&P 500 pulling back about 1.0% at the low of the session. The move is not unexpected after the violent updraft the market has seen over the past two weeks but there are some signs of danger in it as well. The candle signal is bearish and could signal a deeper pullback in stocks and it comes the day before the dreaded PCE price index. The PCE price index is the Fed's favored tool for measuring consumer inflation and it is expected to be a hot one. Core consumer prices are expected to accelerate to 5.5% YOY and come in above expectations. Even if the figures are cooler than expected, inflation is still running hot and aggressive rate actions are expected over the next two meetings.
The rebound in equities continued on Tuesday with the S&P 500 moving about a half of a percent to the highest level in over 6 weeks. The move was driven by another round of economic data that shows rising home prices, rising consumer confidence, and near-record levels of job openings. The caveat for investors, however, is that the week's key economic reports are still due out and the price action on Tuesday was dubious at best.
On the economic front, the monthly labor data is due out this week starting with today's release of the ADP report. the report should show another month of strong job creation which is a two-edged sword for the economy. Improved employment is a definite benefit to the economy but is ultimately driving wage inflation and there is inflation data due out this week as well. The PCE price index is expected to show another acceleration in YOY inflation and we will not be surprised to see it come in hotter than the analysts are expecting.
Equities began the week on shaky footing but managed to rise by the end of Monday's session leaving the S&P 500 at the highest levels in over a month. The move comes on the back of a near 10% decline in oil prices but investors should not be complacent. This week the market will get another read on consumer-level inflation and it is not expected to be a good one. The PCE Price Index will be released on Thursday and is expected to accelerate to 5.5% YOY at the core level. If correct, this will be the hottest level of consumer inflation in over 3 decades and the 11th month inflation has accelerated above the FOMC's 2.0% target.
Other risks for the market are emerging as well. Manufacturing closings in China's key hub of Shanghai are spreading and threaten to bring the global supply chain to its knees. Even if the closings are limited and short-lived they will have a far-reaching effect when it comes to product availability and the impact on the supply chain.
Equities extended their rebound last week but the move already appears to be losing momentum. The S&P 500 index topped out just above 4500 and with MACD and stochastic indicating overbought conditions. Without a new catalyst, and with much of last week's action-driven by short-covering, it doesn't look like the index can move much higher. The next target for resistance is at 4,600 and it may be reached this week.
This week the market will be bracing for another round of important economic data including the PCE price index and the NFP report on Friday. The PCE price index is expected to produce another hot figure if not an acceleration from the previous month. In either case, the data is expected to increase the odds of a 50 basis interest rate hike at the next FOMC meeting. The NFP report will be important as well, but more so for the wage data and how it impacts the overall inflation picture.
Equities rebounded again on Thursday but there is a growing list of companies giving reasons why the rally shouldn't be trusted. The key takeaways from earnings reports this weak are that near-term headwinds are growing because of the Ukrainian conflict and they may worsen as the war wears on. Not only is the conflict causing a spike in energy prices but it is also putting a strain on an already struggling supply chain. What this means for S&P 500 companies is a negative impact to the top and bottom line, declining expectations for revenue and earnings, and lower prices for the S&P 500 index.
Friday's market action will be driven by geopolitical sentiment and Fedspeak. There are at least 4 Fed members on the schedule to make remarks and each will be closely watched for clues about interest rates. Fed chief Jerome Powell surprised the market earlier in the week when he gave a more hawkish opinion of the inflation outlook than what was expected and now the market is pricing in a 50 basis point hike at the next FOMC meeting.
Equities pulled back on Wednesday as geopolitical tension and rising oil prices sapped sentiment. The price of WTI rose more than 5.0% intraday to well over $115 and is well on its way to retesting the recent highs near $130. On the geopolitical front, NATO is stepping up its message to Putin including a show of troop strength that could trigger an armed response. Based on the geopolitical outlook and skew in the energy market, we are expecting to see the price of WTI move well above $130 before it peaks out for good.
In business news, headwinds are emerging for businesses that may cut into the outlook for 2022. With supply chain easing and economic acceleration expected in the 2nd half, this is not good news at all. The consensus estimate for S&P 500 earnings growth was already on the verge of decline, if these headwinds grow they could completely alter the outlook for the year and bring the S&P 500 crashing down.
Equities extended their rally on Tuesday with the S&P 500 gaining more than 1.25% at the high of the day and moving above the 4,500 level for the first time in over a month. The move is being met with growing pessimism, however, due to a rising expectation for S&P 500 earnings targets to be lowered. Not only is there an impact from Russian sanctions to worry about but rising oil prices and inflation are playing a role as well. While an economic acceleration is expected in the second half of the year it seems as if 2022's darkest days are still ahead.
Trading on Wednesday will be impacted by Fedspeak. Three FOMC members including chief Jerome Powell are slated to make remarks before a variety of organizations. While no policy talk is expected, the market is sure to hang on every word. After Powell's comments on Monday, the CME's FedWatch tool is now pricing in a 50 basis point hike at the next meeting as greater than 60% and that figure is likely to rise over the next month.
Equities started the week on solid footing but slipped late in the day on Monday following comments from Fed Chief Jerome Powell. Mr. Powell says inflation is way too high and the Fed will take steps to address it including a 50 basis point hike that could come at the next meeting. As welcome as the news is to inflation watchers it's confusing what exactly changed in the five days since the last FOMC meeting. Regardless, the takeaway is the FOMC is going to act more aggressively than the market is expecting and could spark a recession before inflation comes back into control.
This week could be a tough one for the market. There are few economic or earnings releases of importance and plenty of geopolitical and inflation risk in the air. The price of West Texas Intermediate, for example, shot up by 7% on Monday to over $112 per barrel and looks like it will head back up to the $130 level and possibly set a new high.
Equities ended last week higher after staging the strongest rally in several months. The move is good news for the bulls but investors are cautioned not to read too much into it. Not only was last week quadruple witching options expiration but there was quite a bit of short-covering in the market as well. This means most of the action was driven by the unwinding of derivative positions and not true buying. In other words, last week's rally was a relief rally within a bear market and investors should remain cautious.
The next hurdle for the market will be resistance at the 4,500 level and it may be reached this week. If no more bad news emerges the market could surpass this level and make a move to retest the all-time highs. A move above 4,500 may be difficult however because there are few catalysts to spur buying on the calendar this week.
Equities continued to rebound on Thursday with the S&P 500 up nearly 1.25% at the high of the day. The index appears to be headed back up to the recent all-time highs but there are risks ahead. Not only is there a chance for strong resistance at the 4,500 that will need to be broken. If the market can not get above that level it will likely remain range-bound with 4,150 as the floor.
The risk for investors is that the market tide may have already turned in favor of the bears. The rally in stocks is driven in large part by short-covering and not by real buying. If the market can not build some true buying momentum a break above 4,500 seems unlikely. Looking to next week, the risk for the market will be geopolitical in nature as there are very few economic or earnings reports on the calendar.
Equities went on a wild ride on Wednesday first moving higher, then lower, and then higher again as the FOMC initiates the first interest rate hike in four years. The FOMC raised the benchmark rate by 25 basis points despite calls for a much larger hike. The news that spooked the market is the outlook for rate hikes and inflation, an outlook that now includes as many as seven more interest rate hikes this year and for inflation to remain hot well into 2023. What this means for consumers is higher prices, what it means for businesses is tighter margins and slowly eroding business as prices creep higher.
The risk for the market now is twofold. On the one hand the FOMC is still behind the curve in regards to inflation. This mean's inflation will remain a risk for S&P 500 earnings and will likely cut into the earnings growth outlook for the year. On the other hand, a mere 25 basis points will do nothing to slow inflation and will only spur it to new heights in the near term. IF the FOMC were to actually tackle inflation in a meaningful way they'd be forced to spur a recession in the economy.
Equity markets rebounded on Tuesday after some better than expected inflation data but don't read too much into the move. The PPI data was better than expected at the headline level but still up 0.8% from last month and 10% from last year. With input prices still on the rise and oil trading near $100, producer prices and consumer prices are still going higher and there is the FOMC to consider as well. The FOMC will release the March policy statement Wednesday afternoon and is virtually guaranteed to hike rates by at least 25 basis points.
The biggest risk for the market is the first hike will be larger than expected and/or come with a more hawkish than expected outlook. In that scenario, the odds of stalling the economy will rise because higher interest rates could lead to higher inflation in the near term at least. A stalled economy could easily turn into a recession.
Equities fell to start the week confirming the downtrend that has been place for the last two and half months. The S&P 500 fell about 0.75% at the close of the session and below the 4,200 level with lower levels in sight. A move below Monday's close would be bearish and could easily take the market down another several percentage points.
The risk for the market this week is the FOMC although there are other issues at hand. The FOMC is expected to hike interest rates for the first time since the pandemic began and the committee could shock the market. The CME Fedwatch Tool shows the market is pricing in only a single 25 basis point hike but there is a real risk the committee could hike by 50 basis points and/or issue a more hawkish than expected statement. Also, a spike in COVID cases in China has sparked another round of business closures in the key Shenzen manufacturing hub and could cause another massive disruption to the global supply chain.
Equity markets continued to fall last week in the wake of Russian aggression and the fallout from it. The S&P 500 fell more than 1.0% on Friday alone putting the index in danger of breaking below the 4,200 level for the 3rd time in as many weeks. If this level is broken again it could lead to a capitulation and full reversal in the market. With no reason to buy, the bulls are more likely to pully their cash out of the market than sit around waiting to see what happens.
This is going to be another tough week for the market with or without the war in Ukraine. Not only is the PPI data due on Tuesday but the FOMC is slated to issue its first interest rate hike since the pandemic started on Wednesday afternoon. The market is pricing in a 25 basis point hike but a hot PPI figure could lead them to a more aggressive posture.
Equities tried to rebound in a volatile session on Thursday but the move was without much strength. The S&P 500 ended the day in the red if above the opening level and well off the lows of the day. The market is trying hard to build a base of support at the 4,200 level but it will likely be short-lived. The S&P 500 is about to experience a massive earnings-based re-evaluation that could take it down another 20% or more if conditions don't improve.
Among the driving factors for today's market is inflation. The CPI index came in well above expectation for February and points to not only mounting headwinds for the consumer but increasing pressure on corporate margins. The FOMC is expected to act to curb inflation at the March meeting but any move now carries as much risk for harming the economy as saving it. What this means for the market is still unclear but one thing is certain; the FOMC is going to hike interest rates in March and they may surprise the market with a bigger hike than is currently priced in.
Equity markets rebounded on Wednesday but it is far too soon to call the bottom. The move comes in tandem with a top in oil prices but it is far too soon to call it the end of higher prices as well. The key takeaway for traders is that WTI is still trading well above the $100 level and will be a driving force for inflation while the S&P 500 are trading below a key resistance point. The S&P 500 broke through the 4,300 level on Monday and there is still evidence of downward pressure in the charts.
The next test for the market could come as soon as Thursday in the form of the CPI. The CPI is expected to accelerate at the headline and core levels and to levels not seen in decades. The news will put added pressure on the FOMC in the face of rising wages and higher oil prices that are sure to drive inflation as soon as the present quarter.
Equity markets tried to stage a rebound on Tuesday despite rising oil prices and fear Putin will escalate the Ukrainian invasion to another level. By the end of the day however, the move had turned into a dead cat bounce leaving the index down for the session and at the lowest closing level in over 6 months.
In oil news, the price of West Texas Intermediate rose more than 5% intraday to peak above $130 per barrel. The price is rising because Russian capacity is getting priced out of the market and there is no indication yet where the shortfalls will be made up. For consumers, this means a summer of record-high gas prices and another year of near-double-digit inflation. In regards to inflation, the CPI data is due out on Thursday and is not expected to soothe fears. The market has backtracked on its expectations for FOMC rate hikes and now sees the possibility for no hike at the next meeting, we think the CPI data will put those hopes to rest.
Equities started the weak falling nearly 3.0% to the lowest levels in over two weeks as fighting in Ukraine intensifies. While Ukrainian forces are putting up a solid fight, the Russian advance is largely unchecked and moving forward step by step. With fighting expected to enter population centers at any time, the odds of a Ukrainian collapse grow daily. The economic fallout from Russia's offensive also grows on a daily basis with the price of gold and oil rising in the face of a strengthening dollar. The price of WTI rose more than 6% intraday on Monday to hit the $130 level and we think it will move even higher.
The biggest risk this week, however, is on Thursday with the CPI data. The CPI is expected to accelerate to 0.7% month-over-month and to 7.8% YOY and there is a risk both figures could be hotter than expected. Regardless, with oil prices near record highs, there is no reason to think inflation will slow, and every reason to believe an economic slowdown is at hand.
Equities wobbled last week and well off the recent lows but it looks like those lows will be tested again. The markets ended the week on a down note and at the low of the period after an escalation in the fighting over Ukrainian sovereignty. The key takeaway from the fighting is that Putin is bent on taking Kyiv and the Ukrainians aren't giving it up easily. What this means for the markets is for geopolitical tensions and oil prices to remain high. With Russian capacity off the market and OPEC sticking to its plans there is no top in sight for oil prices.
This week the market will be focused on the fallout from the fighting in Ukraine. While Russia is not a major economic power it is the tenth-largest nation by GDP and its exclusion from global financial systems will have far-reaching effects. In market news, traders and investors will be on high alert with the CPI due out on Friday. It is our expectation consumer-level inflation accelerated for the 11th month and will put added pressure on the FOMC.
Equity markets wavered on Thursday following several days of upward action. The S&P 500, however, remains below its 30-day EMA and in a downward trend driven by an increasingly cloudy near-term outlook for earnings growth. While there is increasing chatter about improvement in the economy in the back half of the year there is an equal amount cautioning the current quarter and 2nd quarter of 2022 could be disappointing. Not only are inflationary pressures cutting into earnings but supply chain headwinds persist and are impeding top-line growth as well.
Also on tap is the February Non-farm payrolls report. The report is expected to show upward of 400,000 new jobs added and could easily top that number with revisions. The biggest risk for the market, however, is in the wage data. Wage growth is expected to accelerate to 6.0% or higher and points to rising costs for businesses.
Equities rebounded again on Wednesday gaining about 2.0% at the height of the session. The move was driven by better than expected data on the labor front as well as some less-hawkish than expected comments from Jerome Powell. On the labor front, the ADP employment report showed the addition of more than 1.0 million new jobs to the economy when adjusted for revisions. The data is more than double the expectations and points to even tighter labor market conditions than previously thought. The NFP is due out on Friday and could reveal the same information. The risk with the NFP is that wage gains are expected to top 6.0% on a YOY basis and drive consumer-level inflation this year.
Elsewhere in the markets, the price of West Texas Intermediate surged more than 3.0% on Wednesday to above $113 per barrel. This is the highest level for WTI in over a decade and prices are expected to keep rising. Based on the technical outlook, the price of WTI will move above $120 very soon and will be another driving force of inflation this year.
Equities plummetted again on Tuesday following another escalation of fighting in Ukraine. A convoy of Russian military equipment is bearing down on Kyiv and threatens to topple the embattled country. The news helped to send the price of West Texas Intermediate up by 10% and to a new high, breaking the price action out of a bullish pattern and putting it on track to set a new all-time high within a matter of weeks. The S&P 500 shed nearly 2.0% on the news and is threatening to fall back below the important 4,300 level once again.
Trading today will be impacted by geopolitical news as well as economic data. The ADP report is due out and could alter the tone of the market. Last month, the ADP came in well below expectations and pointed to topping if not contraction within the economy. If that story is repeated with this month's data it will be another weight for the market to bear and the market is already buckling.
Equities rebounded on Monday in a volatile session. The growing conflict in Ukraine and the threat of global fallout, on top of the threat of accelerating inflation and FOMC interest rate hikes, has the market wondering which way to go next. The market has backed off on its expectations for interest rate hikes but is still expecting at least one 25 basis point increase in March. Based on the last read of the PCE Price Index, market participants should expect aggressively rate hikes this year even if the first is only 25 basis points. The CME's Fedwatch Tool is pricing in at least at least 4 hikes by June and there is yet to be any sign that inflation is taming.
Also on tap this week? Another report on job creation and this month could be a real market mover. The consensus is for gains in the range of 440,000 following last month's stronger than expected numbers. The risk this month is that job creation will be weaker than expected as indicated by the tepid jobless claims reports.
The major indices fell to new lows last week but buyers stepped in on Thursday and Friday to buy the dip. The S&P 500 ended the week well off of its lows and above the key 4,300 level. The move confirms support at the bottom of a trading range and may lead to higher prices this week but there is still risk ahead. Not only is the threat of war in Russia still present but the earnings outlook is dimming and there is the NFP report on Friday to think about.
If the S&P 500 can continue to rally this week it will need to get above the short-term 30-day moving average which is near 4,450 to be in the clear. Even so, there is the risk of resistance at the December lows near 4,500 so it is no time for investors to be complacent. If the market can not get above the combined resistance of the short-term moving average and the 4,500 level investors should brace for a retest of the recent lows.
Equities tumbled in the wake of what has become an official Russian invasion of Ukraine. The S&P 500 fell more than 2.0% at the low of the day but closed well off of those lows. While there are signs the sell-off is overextending the real test for the market comes Today with the PCE price index. The trouble in Europe is the news that sparked the selloff but it is inflation that set the stage. If the PCE comes in hot as it is expected to do it should seal the deal on whether or not the FOMC hikes rates by 50 basis points or 25 basis points at its next meeting.
Next week's market action may be just as volatile due to geopolitical events and the release of important economic data. Next week will bring the 1st of March and the monthly NFP read on Friday. The data is expected to be strong but could give further evidence of peaking within the economy.
The major indices fell for a fourth day on Wednesday setting new lows in the process. The S&P 500 closed near the low of the session with a decline of 1.84% and below the key 4,300 level. With the index at this new low, the odds of a much deeper decline have risen. The next key line in the sand is at the low of Wednesday's session and, if broken, investors can look forward to another 200 point decline in the broad market.
The next key test for the market will come on Friday with the release of the PCE price index. The index is the Fed's favored tool for measuring consumer-level inflation and it is expected to be hot. The takeaway here is the fundamental conditions on which the market rally is based are about to be changed at a more aggressive rate than anyone thought possible. The risk for the market is tremendous.
Equities began the week with a retreat driven by rising tensions between Russia and Ukraine. Russia is slowly encroaching on Ukrainian territory and has Europe on the brink of war. The S&P 500 shed about 2.0% at the low of the session and may move lower by the end of the week. The key level for investors to watch is 4,300, a break of this level could send the index down another 10% or more.
Trading this week will be driven by the PCE price index more than anything else. The PCE price index is due out on Friday and is expected to show an acceleration of consumer-level inflation to new multi-decade highs. With the FOMC already set to raise rates in March, a hot number will only increase the odds of a 50 basis point hike to start the cycle. The CME's Fedwatch tool shows the market is pricing in only a 36% chance of 50 basis points in March so there is risk in the data.
The markets face a tough challenge this week that could set the tone of trading for the remainder of the year. The S&P 500 is facing a test of the key support level at 4,300 and buying may not be strong enough to keep the market above that level. If so, the door will be opened for a decline to 4,000 or lower. In that event, value and dividends will become even more important than ever.
On tap for the market this week? The monthly read of core consumer inflation in the form of the PCE price index. The one thing evident in the forecast is that analysts are slow to make predictions given the pace of increase seen in the January CPI. As it stands, consumer-level inflation is close to the 10% range and could easily top that in the coming months. The takeaway for the market is to expect aggressive interest rate increases from the Fed and for S&P 500 margins to continue to compress.
Equities retreat for another week last week bringing the major indices down to multi-month low levels. The S&P 500, specifically, is now trading just above a key support level that could lead the index to another 10% decline if broken. At face value, it is the tensions in Russia and Ukraine that are driving the market lower but there is a deeper story. The unexpected acceleration of inflation and the growing expectation for aggressive FOMC rate hikes is what's really driving the market. The Fed is expected to hike rates at least 4 times by June and there is a real chance the committee could surprise with a 50 basis point hike at the March meeting. The Fed will continue to be in focus this week with the PCE price index due out on Friday. The PCE index is the Fed's favored tool for measuring consumer-level inflation and it is going to be another hot one.
Also on tap this week, are earnings from the retail sector led by a report from Home Depot. Home Depot is expected to show sustained YOY growth and there is upside risk in the top-line figure. The risk for the market is that inflation and supply chain headwinds will cut into the bottom line and dampen the outlook for Q1 and Q2 results.
Equities reversed course again on Thursday as geopolitical tensions came back to a simmer. The crisis in Ukraine is at the heart of events and it could boil over at any time. Conflicting reports have each side shooting at the other and nothing confirmed. The takeaway for the market is that this crisis is not going away and that it will likely impact market action over the next week if not longer.
In economic news, jobless claims rose more than expected and counter to seasonal expectations while on the housing front, permits and starts were a mixed bag showing the impact of high demand and tight supply. Friday's market action will likely be driven by the index of leading indicators which is expected to show cooling from the previous month. The S&P 500 is down about 8.3% from its all-time high and within striking distance of setting a new low. If the index falls below 4,300 it could easily shed another 500 points within days.
Markets were mixed on Wednesday, moving first lower on fears of inflation and then higher after the FOMC minutes showed the committee ready to raise interest rates and begin shrinking its balance soon. What the minutes did not show was the possibility of two 25 basis point hikes at the March meeting as the most recent data has suggested. While the market reacted favorably to the news, traders and investors are warned not to read too much into the minutes or the market's reaction because the stock market correction is not yet over.
In other news, the Retail Sales figures for January were much better than expected and show sales up more than 3.0% over last year. The takeaway, however, is that consumer-level inflation is running at a near 10% pace YOY which means the gains in sales are nothing more than price increases. The good news is that inflation is expected to tame in the second half and that should take some of the pressure off of the consumer.
Equities rebounded on Tuesday after Russian President Vladimir Putin withdrew some of his troops from the Ukrainian border. The news was met with relief tensions seemed to be subsiding but the risk remains high in the region. It is doubtful Putin has given up on his hopes for taking Ukraine, we shall see.
The move in equities also comes despite some much hotter than expected inflation data. The Producer Price Index rose 1.0% in January, twice the expectation, with YOY gains approaching 10.0%. The news adds to the expectation of aggressive FOMC interest rate action but was shrugged off by the market. While the inflation data points at aggressive Fed action it also points to a hot economy and one not likely slowed by a few 25 basis points rate hikes. The risk for the economy now is that rising rates are going to add to inflationary pressures.
Equities retreated on Monday, extending the sell-off that began last week in the wake of the CPI report. The selling is driven in part by fears of rising inflation, in part by fears of FOMC activity after so long without, and in part by geopolitical fear centered on Russia and Ukraine. The threat of war could destabilize the already overstrained global supply chain but it looks like the powers-that-be will continue to talk, for now, while Putin slowly builds his forces along the border.
This week, the PPI data will be in sharp focus as it is expected to accelerate on a month-to-month basis. The consensus is for producer level prices to rise 0.5% on top of the previous month's 0.2% and put YOY increases even closer to double-digits. The risk for the market is that PPI will come in above consensus and increase the expectations for a 50 basis point interest rate hike at the March FOMC meeting.
The market correction took on a new tone last week after a much hotter than expected CPI report. The consumer price index rose by 0.6% from last month and 7.5% from last year to set the fastest pace of price increases in four decades. The news compounds other data that point to aggressive interest rate hikes from the FOMC. The odds of at least two 25 basis point hikes have risen to near 75% for the March meeting, up significantly from an expectation of no rate hikes in March just a month or two ago.
This week will bring a raft of economic data including retail sales and the PPI. Retail sales are expected to increase on a YOY basis but much if not all of the increase will be due to inflation. The risk is that consumer activity is on the decline due to rising prices and may come in short of expectations. If the PPI data is hot as well it will only increase the outlook for inflation, FOMC interest rate hikes, and worsen the outlook for corporation earnings power.
The rebound in equities reversed course on Thursday following some hotter than expected inflation data. The CPI reading for January shows prices advanced 0.6% for the month on a headline and core basis, or 0.2% hotter than expected on both counts. The month-to-month gains were accompanied by acceleration on a YOY basis as well with core CPI up 6.0% from last year. This marks the 10th month of hot and rising inflation and puts increased pressure on the FOMC to act and act quickly. Fed President James Bullard came out with comments in the wake of data saying he favored 100 basis points of interest rate increases by June including a 50 basis point increase to start.
The SPX fell on the news, confirming resistance at the short-term moving average and the most recent peak in prices, putting the market in danger of a retest of the recent lows. If the market is not able to hold those lows a much deeper correction, perhaps as much as 10% more, could come within weeks.
The rebound in equities accelerated again on Wednesday but traders are cautioned not to become complacent. The move is on the heels of better than expected earnings from some key S&P 500 companies but the specter of inflation is still looming. The CPI data is due out today and it is expected to be positive if not an acceleration from the previous month. The risk for the market is the data will not be consistent with the FOMC's idea that inflation is peaking and will up the ante in terms of interest rate hikes. The odds of at least one 25 basis point hike at the next FOMC are above 100% and the odds for two 25 basis point hikes are growing.
In stock news, tech stocks led the rally on Wednesday with names like Meta, Shopify, and Etsy leading the charge. Rebound plays were also in favor and should help lift the market back up to the recently set all-time high. If the market can set a new all-time high it will likely rally into the spring and early summer barring other developments in the economy.
Equities tread water on Tuesday with the S&P 500 holding within a tight range consistent with the previous trading session. The move is on the back of better than expected earnings and positive economic data but the market is cautious. With the CPI data due out on Thursday there is a risk for another inflation-driven sell-off. The CPI is expected to moderate on a month-to-month basis but accelerate on a YOY basis and the data could be hot.
The danger that no one seems to be talking about is the outlook for earnings. There are signs of easing within the supply chain but they are localized and not seen across the broad market. This means earnings growth in the 1st quarter of 2022 will be impaired by rising costs for freight and systemic shortages and that is weighing on the outlook for earnings growth. If there is one thing that can guarantee a market correction is it's a downtrend in the outlook for forward earnings growth.
Equities rebounded last week and looks like they might keep moving higher. The move was aided by expansionary economic data and earnings but there are still risks for the market. The NFP report was surprisingly strong and coupled with robust wage increases that should give additional impetus to the FOMC. The chatter now is to expect a 50 basis point rate hike in March and even more aggressive rate hikes later in the year.
This week will be all about the CPI data. The earnings season is still underway but there will be few surprises now, with more than 50% of the S&P 500 having already reported. The CPI is expected to expand but at a slower rate than the previous month but there is risk the YOY figures could be hot and provide even more reason for the Fed to hike rates. In that scenario, an overly aggressive Fed could cause the economy to stall.
Equities rebounded last week and looks like they might keep moving higher. The move was aided by expansionary economic data and earnings but there are still risks for the market. The NFP report was surprisingly strong and coupled with robust wage increases that should give additional impetus to the FOMC. The chatter now is to expect a 50 basis point rate hike in March and even more aggressive rate hikes later in the year.
This week will be all about the CPI data. The earnings season is still underway but there will be few surprises now, with more than 50% of the S&P 500 having already reported. The CPI is expected to expand but at a slower rate than the previous month but there is risk the YOY figures could be hot and provide even more reason for the Fed to hike rates. In that scenario, an overly aggressive Fed could cause the economy to stall.
Equities resumed their decline on Thursday following weaker than expected results from FAANG stocks Facebook and Amazon. Facebook led the fall with a 20% plunge that puts the stock deep into correction territory. The biggest takeaway from the reports is that COVID-19 induced tailwinds are no longer blowing. The S&P 500 fell nearly 2.5% at the end of the session with the NASDAQ Composite down 3.75%.
Friday's trading will be all about the Non-Farm Payroll report. The report is expected to be much weaker than first speculated due to the weak ADP report on Wednesday. If the report confirms the market's fears the selloff could deepen. The best-case scenario is a retest of the recent lows followed by another rebound. The Worst-case is that support will fail and the market will enter a prolonged contraction that could wipe another 20% of value off the books.
Equities climbed again on Wednesday with the S&P 500 gaining roughly 1.0% at the high of the session. The move comes despite a much weaker than expected labor market report from ADP that shows a loss of 300,000 jobs in January versus the expected gain of 150,000 new jobs and raises serious questions about the economy. Labor markets are strong and demand for employees is high but if those jobs aren't filled the U.S. economy will have little hope of producing true economic expansion. As it is now, what expansion we have is more to do with inflation than anything else.
Now, all eyes are on the NFP report due out on Friday. The report was expected to show a slowdown in hiring before the ADP report came out, now the analysts are rethinking their estimates with the expectation job creation will be slower than first thought. A weak figure will not set a trend but it will create another brick for the wall of worry.
Equities continued their rebound on Tuesday with the S&P 500 up about three-quarters of one percent by the end of the day. The rebound may be losing steam, however, because the move was small relative to the prior two sessions and faces stiff resistance at the short-term moving average. If the S&P 500 index can not get back above the 30-day moving average within the next few days to a week the market could be in for a retest of the recent lows. That retest may be caused by earnings, this week more than 20% of the index reports for the Q4 period, and so far the reports have not been inspiring. At best, consensus estimates are being beaten but the outlook for Q1 and Q2 2022 earnings growth is dimming.
The economic data is not helping with the earnings picture. The data is expansionary but the bulk of Tuesday's report revealed ongoing labor shortages and rising labor costs which are underpinning inflation. The non-farm jobs report is due out on Friday and is expected to show more of the same. The consensus estimate is a mere 166,000 net new jobs and a dramatic slow down from the previous few months.
Equities ended a sour January on an up note with the S&P 500 rising more than 1.75% at the highs of the session. The move was led by a resurgence in tech sentiment led by Apple. Apple's better-than-expected earnings report and comments on the supply chain have given the market a second wind despite the rising threat of inflation. The odds of a rate hike in March are at 100% with a rising chance of two hikes by April. Assuming this week's NFP data is at least consistent with recent trends, the market needs to brace for a 50 basis point hike in March and maybe another one in April.
This week will be all about earings despite the NFP on Friday. This is the busiest week of the Q4 reporting season to date and promises to bring reports from more than 20% of the index and more than enough to cause no small amount of volatility. If the reports continue to come in as they have, the market should brace for another spike in volatility if not a downturn in market prices. While Q4 earnings are better than expected the outlook for Q1 2022 is dimming.
The market sell-off deepened last week and may worsen in the weeks to come if the outlook for earnings doesn't improve. While the Q4 season is unfolding with better than expected earnings for most S&P 500 companies the margin of outperformance is the smallest it's been in two years and getting smaller. By all accounts, inflation is still on the rise and will cut into earnings in the calendar and fiscal 2022 despite higher realized prices for most end-products. What this means for the market is a reset of value and a shift from growth to dividends.
This week will bring the monthly NFP report as well as some key reads on manufacturing and housing. The bulk of the data is expected to support ongoing economic expansion but at a slower pace than in previous months. If the data is weaker than expected or shows a growing impact from inflation, it could help drive equity prices lower.
The slide continued on Wall Street Thursday with the major indices reversing early gains and posting losses for the day. The move was driven by better than expected GDP numbers early in the session but fear of rising inflation capped the gains and caused the late-day selling. As good as the GDP figures were they are rear-looking and ultimately underpin the need for aggressive FOMC rate hikes. The S&P finished the session near the lows of the day and poised to move lower should the PCE Price Index come in hot today.
Next week brings another round of earnings, the busiest of the reporting season so far, and the monthly read of the NFP data. The NFP should show another substantial increase in employment, a downtick in unemployment, and rising wages which also point to the need for a rate hike from the FOMC. The market is still expecting a single hike in March but there is risk of two or more hikes with inflation running as hot as it is.
Equities tried to rebound on Wednesday ahead of the Fed meeting but the move didn't get very far. The gains were capped by the FOMC statement and press conference in which Fed Chief Jerome Powell indicated rate hikes would begin very soon. The market took the news to mean the first rate hike will come in March and that it might be larger than previously estimated. The CME's Fedwatch Tool shows a 100% chance of rate hike in March with a growing chance of two 25 basis point hikes at once.
Turning to the indices, the S&P 500 fell almost a full percentage point at the low of the session after climbing the same amount earlier in the day. The move confirms resistance at the key 200-day moving average and at a lower level than previous support. This is evidence of increasing bearish momentum and could lead the market down another 5% to 10% with ease.
Volatility continues to rule on Wall Street with the S&P 500 reversing course again on Tuesday and heading lower. The broad market index fell more than 2.0% at the low of the session as traders brace for the FOMC statement due out later today. The statement is not expected to bring a change of policy but could further strengthen the hawkish stance taken by the FOMC in recent months.
The risk for the market now is the FOMC will try to catch up with the economy and front-run inflation. With the PCE price index coming out on Friday, the risk for them is they won?t sound hawkish enough with inflation still on the rise and accelerating on a year-over-year basis. The takeaway for investors is the economy is still hot, as long as the Fed doesn?t stall it out the outlook for interest rates hikes spans years. Between now and then any pullback in stock market prices is going to be a buying opportunity.
The Wall Street sell-off intensified on Monday with the S&P 500 down more than 3.5% at the low of the day. The move was driven by the rising fear of inflation and economic slowing in the face of growing numbers of COVID-19 cases worldwide. High growth tech stocks led the decline, pushing the NASDAQ deeper into correction territory and the S&P 500 below the -10% mark.
The risk for the market now is a much deeper correction. With the S&P 500 down more than 10% and testing support at the October 2021 lows, there is a risk the move could go to a full 20%. In that scenario, the S&P 500 would still be well above the long-term trend and at risk of falling even further. At best, investors should brace for a rocky and possibly a range-bound year of trading in 2022.
The selling intensified on Wall Street last week as earnings come into sharp focus. While the bulk of S&P 500 companies are reporting better than expected the outlook is weakening under the strain of inflation and supply chain hurdles. With the index down more than 7.0% from its recent high, it looks like the broad market is in for at least a 10% correction if not more. The tech-heavy NASDAQ Composite is already down more than 10% and heading lower.
This week could seal the deal on a major market correction. Not only is the FOMC expected to be hawkish with its statements but there are key reads on consumer confidence, housing, business spending, GDP, and consumer level inflation as well as dozens of earnings reports from S&P 500 companies.
Equities tried to bounce back on Thursday but investors shouldn?t read too much into the news. The S&P 500 gave up the gains in the final hour of trading and closed with a loss of 1.1%. The best the market can hope for now is for a sideways movement to begin as we enter the peak of the Q4 earnings cycle but we are not hopeful. While reports are coming in better than expected the outperformance has been marginal and reflects the two-edged sword of inflation: Inflation is boosting revenue is hurting profitability.
Next week will be a make-or-break moment for the S&P 500. If the index can maintain support above 4,500 the odds of a major correction will diminish greatly. As it is, the index is on track to put in at least a 5% correction and as much as a 6% correction before finding support. If the market falls below 4,500 however, a move down to the 4,300 level becomes very likely.
The broad S&P 500 fell again on Wednesday shedding more than 1% at the low of the day. On the one hand, the earnings season is a little better than expected in its first full week of the reporting season but on the other, the reports so far haven?t been much more than the market wanted and the outlook isn?t as good as it could be. Inflation and supply chain hurdles are still omnipresent and are having a deep impact on the economy.
Thursday?s trading will be focused on the economic data. After a weak Empire State Manufacturing Survey the Philadelphia MBOS will be more important than ever. The Empire State Survey showed a contraction of activity that could lead to a recession for the sector. In that scenario, we see the S&P 500 contraction getting deeper.
Equity traders came back from the Martin Luther King, Jr. Holiday in selling mode, and for good reason. The yield on the 10-year treasury spiked nearly 500 basis points to its highest level since December of 2019. The worst part, for the equities market at least, is that the price action confirms an uptrend that began in the wake of the pandemic and points to much higher rates ahead. With the FOMC tapering and on track to not only hike rates but to run-off its balance sheet as well we see the rates on the 10-year Treasury moving up above the 2.0% level soon and reaching as high as 2.5% by the end of the year.
A much-weaker than expected read of the Empire State Manufacturing index can be blamed for Tuesday?s weakness as well. The index fell to -0.7 versus the 25.5 expected by the market and points not only to slowing but contraction with the economy.
Equity markets are ready for a busy earnings season and whatever it may bring. The start of the season came without much excitement due to the rising threat of inflation on bank earnings. While banks are well-positioned to benefit from the rising interest environment that is developing, they are also susceptible to the same inflationary pressures that are impacting the rest of the economy. This week will be another lackluster week for earnings, the peak of peak season begins the week after.
The biggest threat to the market right now is COVID. The rising number of positive cases threatens to keep America home sick, if nothing else and that is a threat to the economy, corporate earnings, the stock market. With the global supply chain already strained another hiccup could have long-lasting and far-reaching repercussions.
Earnings season started with a bang only it wasn?t a rally that was started. The first reports out of the financial sector were largely better than expected but reveal the rising threat of inflation. The outlook for earnings is tepid despite the onset of rising interest rates and may sap investor sentiment for the near term. The S&P 500 gave up about 1.0% at the low of the day to close at the lowest levels in three weeks. Based on the technical setup, it looks like the index could keep falling in the near term at least.
This week is the start of peak earnings season but even so, there aren?t too many reports on tap. The majority of the action will be in the financial sector although there are some other S&P 500 sectors with companies reporting. The most important report of the week may come on Thursday evening when Netflix reports. Netflix is important to both the NASDAQ Composite and S&P 500 so could easily move the market.
The tug of war between bulls and bears continued on Thursday with the bears winning out. The rising tide of fear that is driven by inflation and the FOMC?s rapidly accelerating timeline for interest rate hikes has the market on edge. While rising interest rates are a sign of economic expansion and it is very, very early in the rate hiking cycle, there are those who think the FOMC is behind the curve and will raise rates and a much faster pace than seen before.
The latest look at the CME FedWatch Tool shows the market is pricing in at least a 50% chance for 4 interest rate hikes by the end of the year. Based on this week?s CPI and PPI data, we think the first hike will be at least 50 basis points or worth half of the 4 hike outlook. As for the S&P 500, it looks like the market could head lower but earnings season begins today and that could change the entire mood on Wall Street.
Equities moved higher on Wednesday despite a hot reading of the CPI. The CPI came in at 0.5% for the month or up a tenth hotter than expected with similar strength at the core and YOY levels. The takeaway is that inflation continues to rise and is leaving the FOMC no choice but to raise rates. Based on Jerome Powell?s testimony to Congress it looks like the Fed will be raising rates at a much quicker pace than ever indicated. According to the CME?s FedWath Tool, a rate hike is all but assured at the March FOMC meeting.
Today?s action will be driven by the PPI. The Producer Price Index is expected to subside from the previous month but could easily come in hotter than expected. Even so, with CPI already at record levels, a cool read on the PPI will do little to alter the outlook. The question is how will the market react?
Equities went on a bit of a wild ride on Tuesday first falling and then moving higher later in the day. The NASDAQ Composite led the day with a gain greater than 10% as tech bounces back. The caveat is that interest rates are still going to rise so the threat posed to the tech sector remains. In other news, FOMC Cheif Jerome Powell indicated to congress his commitment to raising interest rates in order to combat inflation.
The CPI data comes out today and will be the driving force of the market. The market already expects to see consumer inflation accelerate on a YOY basis, the only question is by how much. If the data comes in much hotter than expected it will accelerate the market?s timeline for rate hikes if not the FOMC?s.
Equities fell hard on Monday with the S&P 500 down nearly 2.0% at the low of the day. The move was driven by the rising fear of inflation and the specter of higher interest rates for business. The good news is that markets bottomed by midday and regained most of their losses by the close of the session. Technically speaking, the S&P 500 formed a stong doji candle confirming support at the 4,600 level and the uptrend that began in October 2021.
This week?s focus is going to be on inflation once again. With the FOMC indicating a faster pace of taper and rate hikes than previously indicated, and JP Morgan Chase CEO Jami Dimon predicting more than 4 rate hikes this year, the CPI and PPI data will be more important than ever. The economists are expecting the pace of inflation to cool on a month-to-month basis but for consumer-level inflation to accelerate to a new high.
The equities market began to pull back last week and might be headed lower. The reason is rising interest rates and a Hawkish Fed that keeps upping the timeline for interest rate hikes. The FOMC minutes revealed the first hike could come by March and there are indications the pace of hikes could be aggressive. This week, investors will be on the lookout for the CPI, PPI, and Beige Book data that are all expected to reinforce the need for aggressive rate hiking.
The most important data this week may come out on Friday, however, in the form of the Retail Sales figures. The numbers are expected to be positive, the question is how strong will they be in relation to inflation. With inflation running at a high-single-digit rate the Retail Sales figure will need to come in near 10% for there to be any real growth of activity.
Equities steadied on Thursday following Wednesday?s FOMC-induced plunge. The action was bolstered by better than expected ISM data but may not be an end to the selling. The Fed?s new stance on inflation is hawkish and points to an aggressive round of rate hikes that has the yield on the ten-year treasury spiking. The yield jumped again on Thursday and threatens to break the bond market out to a new high. If the TNX moves up to set a new high above 1.750% it will open the door to a move up to 3.0% or higher.
Today?s action will be driven by the NFP however. The NFP is expected to be strong after the robust ADP report on Wednesday. A strong report coupled with lower unemployment and accelerating wage growth would seal the deal on interest rates and virtually guarantee a hike within the next 2 to 3 FOMC meetings.
Stocks pulled back on Wednesday despite a much better than expected ADP report. The ADP report says more than 800,000 new jobs were created in December which is more than double the consensus estimate. The news is great for the economy as it means much-needed positions are getting filled and log-jams in the supply chain will begin to ease but it also means hiring. Wages are on the rise as well and expected to accelerate in this month?s NFP report. The buzz on Wall Street is that wage inflation will run in the mid-teens this year.
The reason for the pullback was the FOMC minutes which revealed a much-more hawkish Fed than the market was looking for. The FOMC minutes indicate the committee could hike rates for the first time by March and begin trimming the balance sheet soon after. The yield on the ten-year treasury advanced to an 8-month high on the news while the NASDAQ Composite shed more than 2.75% at the low of the day.
Equities wobbled again on Tuesday but the S&P 500 managed to set a new high in the process. The action was driven by the threat of rising interest rates which are driving a wedge in the market. High-growth company?s that rely on debt to fuel their growth are falling out of favor and are being replaced by blue-chips, dividend payers, and those with the resources to fund their own expansions. The blue-chip Dow Jones Industrial Average, for example, gained more than 0.70% at the high of the session while the tech-heavy NASDAQ Composite fell more than 1.5%.
The focus of the week is still the NFP, however, which is scheduled for release on Friday. The consensus is for job growth near 420,000 with a slight downtick in unemployment. The ADP report, released today, is expected to show a similar 375,000 new jobs added for the month and may impact the outlook for the NFP.
Equities wobbled on the first trading day of 2022 but managed to hold near the closing highs of 2021. Whatever the reason, it looks like the January effect is in effect this year and will push stocks higher in the first month of the year. The question, however, is what comes next? If the market closes higher in January it is likely to close higher for the year but that doesn?t mean it goes straight up. With Omicron on the rise, inflation running unchecked, and the global supply chain still in trouble there is a real chance for a major stock market correction in the first half of the year.
This week traders will be focused on the monthly NFP report. The consensus is for job gains in the range of 400,000 with a downtick in unemployment and acceleration of wage gains. Regardless of the numbers, the data shows employment conditions are tight and nearing full employment if not already there.
Equities pulled back a little at the end of the last week of 2021 but left the S&P 500 trading at a new all-time for the year. The move caps off another year of outsized gains for the index, gains that were driven in large part by stimulus spending and inflation. With stimulus spending a thing of the past and inflation still a concern there is a risk earnings growth will come to a standstill in 2022.
The biggest news this week will come from the economic front and includes the FOMC minutes as well as the monthly NFP reading. The minutes will be important for clues to the FOMC?s plans on rate hikes while the NFP data will tell us how many new jobs were created in December. Also on tap this week are readings on ISM, PMI, construction spending, and factory orders so there will be plenty for the market to chew on.
The equities market held firm for the 4th day with the S&P 500 maintaining the fresh all-time highs set earlier in the week. The action is on light volume and may go nowhere but bears the hallmarks of a larger move to come. If the market breaks out to the upside on the first trading day of the New Year the S&P 500 could add rise another 275 points before hitting the next major resistance point.
The New Year will bring more than just a bullish market with the monthly NFP data on tap. The report will likely show another gain in overall employment, the question is how much? The Leading Indicators suggested an acceleration of activity in December so the number could be an improvement over the previous month.
Equities held steady near fresh highs for a second day in thin holiday trading. The S&P 500 hovered around break-even while trading in a tight range near Monday?s high. The move was without strength but consistent with a strengthening market and could lead to the additional upside when the holiday is over. Inflation has been a problem but economic expansion is underway.
Thursday?s trading may be more of the same unless some new news comes across the wires. There will be very few earnings reports or economic releases to move the market. The next big market-moving events will come next week when normal trading conditions resume to include the onset of the Q4 earnings reporting season and the monthly release of NFP data.
Equities held their ground on Tuesday following Monday?s climb to new highs. The move is as much about digesting the new gains, however, as it is about the threat of COVID-19 and the impact of the Omicron variant. While the spread of COVID-19 remains a threat the Omicron variant is far less a problem than first thought. The latest news, in fact, suggests Omicron may help fight against the more virulent Delta variant.
The real question traders want to be answered is what will happen to the market in January? Will we see the typical January effect or will there be a sell-off to take the market back down to firmer support? Like they say as it goes in January, so goes the rest of the year.
Santa Claus brought the market exactly what it wanted for Christmas, a new all-time high. The S&P 500 advanced more than 1.0% on Monday to close near the high of the session and set a definitive new all-time high. This high breaks the market out of its recent consolidation and could add another 100 points or more to the index before the next level of major resistance is reached.
This week?s action could be a bit volatile due to low volume and engagement. The biggest news of the week will come on Thursday when they release the Chicago PMI. The PMI is expected to advance from the previous month, the question is by how much? Regardless, the data will not likely move the market unless it is wildly out of synch with the consensus estimates. The market will be closed on Friday in observance of the New Year Holiday.
Santa Claus experienced a bit of turbulence in the week leading up to the Christmas holiday but he was able to guide the market up to a new all-time high. The broad market S&P 500 was able to creep up and set a new high on Friday despite weakness in both the blue-chip Dow Jones Industrials and tech-heavy NASDAQ Composite.?
The biggest news investors missed last week was the monthly reading of income and spending data. The data shows spending and incomes are on the rise but also a much-hotter than expected increase in inflation. Core inflation accelerated more than expected in November leaving the PCE Price index at the highest level in decades. With the FOMC already moving the timeline for rate hikes forward this news will surely force the committee to do so again.
Despite some volatility, the Santa Claus Rally appears to be on track to lift the market into year-end. The S&P 500 extended its holiday-week rebound on Wednesday putting the index within an arm?s reach of the current all-time high. The question that needs to be asked, though, is what will the New Year bring?
The only certainty for the New Year is inflation. Inflation is running rampant through the economy and threatens to dampen consumption on many levels. The caveat for investors is that, until the market gives the signal for reversal, the trend in the market is up. If the S&P 500 can break out to a new high, we see it continuing upward at least until the Q4 earnings cycle gets underway.
Despite some volatility, the Santa Claus Rally appears to be on track to lift the market into year-end. The S&P 500 extended its holiday-week rebound on Wednesday putting the index within an arm?s reach of the current all-time high. The question that needs to be asked, though, is what will the New Year bring?
The only certainty for the New Year is inflation. Inflation is running rampant through the economy and threatens to dampen consumption on many levels. The caveat for investors is that, until the market gives the signal for reversal, the trend in the market is up. If the S&P 500 can break out to a new high, we see it continuing upward at least until the Q4 earnings cycle gets underway.
Equities clawed back some of their recent losses on Tuesday with the major indices up more than 1.5% at the high of the session. The tech-heavy NASDAQ Composite led the move with a gain of more than 2.25% as fear of the Omicron variant subside. The risk of Omicron remains but any impact it may have on the economy may be getting priced into the market. The technical outlook for the S&P 500 remains bullish although volatility is expected to remain high.
Thursday will be the busiest day of trading for the week with more than a dozen economic reports due out before the Christmas Holiday. The key reading of the day will be the monthly income and spending data to include the PCE Price Index. The PCE Price Index is expected to accelerate on a MOM to and YOY basis and may come in hotter than the consensus estimate.
The market selloff gained momentum on Monday with the S&P 500 falling below the 30-day EMA and approaching the lowest levels in over two weeks. If the index continues to fall and breaks below the 4,500 level, a move down to 4,300 is the most likely scenario.
The selling is due to the combined impacts of COVID-19 and Joe Biden?s agenda falling apart. On the one hand, the Omicron variant threatens to bring the global supply chain to a standstill while on the other, Biden?s failure in getting his agenda through Congress is weighing on the GDP outlook. In both cases, the growth of S&P 500 earnings is in question and that is never a good thing for the stock market. If the market is forced to re-evaluate the outlook for S&P 500 earnings growth and lower the estimates the index could fall well below the 4,300 level as well.
Inflation is the dominant theme on Wall Street today. While COVID-19 issues linger, it is inflation that poses the most risk to the market. Last week, the PPI figure came in much hotter than expected at the headline, core, and YOY levels pointing to another increase in CPI down the road. With CPI already running well above 2.0% for going on 10 months, it is no wonder the FOMC finally decided to act. The risk for the market now is that inflation will continue to run hot for the next 2 - 3 months and force the FOMC to accelerate its timeline again.
This week will be all about the Santa Claus Rally and whether or not it will come. Traditionally the time between Christmas and New Year, the Santa Claus rally is never a foregone conclusion. What traders need to remember this week is that it is a holiday week, trading volume will be very light, and any move the market makes is subject to reversal at the drop of a hat.
Equities gave up some of their gains on Thursday with the tech-heavy NASDAQ Composite leading the way. The NASDAQ index fell more than 2.5% at the low of the day as investors weigh the impact of an accelerated FOMC rate-hike timeline on a sector laden with debt. The S&P 500 fell a smaller 1.0% at the low of the day while the blue-chip Dow Jones Industrial Average tried to post a small gain.
In regards to the FOMC and the timing of interest rate hikes, the Fed did not comment on how long after the taper ends it will wait to raise rates. If the Fed waits until May like the market is expecting that will mean 13 months of rising inflation and inflation well above the 2.0% mark. If the inflation trends don?t change and the Fed does wait until May we expect the first hike to be worth 2 to 3 0.25 increases.
Stocks got a boost from the Federal Reserve on Wednesday when it released its policy statement. In the
statement, the FOMC says it will aggressively dial back its bond purchasing program because its dual mandate
of employment and inflation have been met. The FOMC is indicating three interest rate hikes by the end of 2022
which is in line with the market?s expectations. The risk now is that inflation won?t respond to the policy shift
and the FOMC will be forced to act even more aggressively than it is now indicating.?
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On the economic front, the November retail sales figures came in much weaker than expected and reflect the
rising problem of inflation. Retail sales came in at up 0.3% versus an expectation of up 0.5% but the data does
not account for the impacts of inflation. With CPI up 6.8% for the year, the volume of sales is actually down
with the difference in the Retail Sales data made up by higher prices.
Equities pulled back again on Tuesday following another round of hotter than expected inflation data. The PPI came in at 0.8% for the month, up 0.2% from October and 0.3% hotter than forecast. The figure is coupled with high core readings and the hottest YOY increases on record.
If there was any doubt the FOMC would be raising interest rates sooner than expected this news should lay those doubts to rest. The CME Fedwatch tool is pricing in a near 60% chance the first hike will come by May and a 70% chance for two .25% interest rate hikes by June so today?s FOMC meeting is more important than ever. The Fed is expected to accelerate the taper and move the timeline for rate hikes forward.
Equities pulled back on Monday on the combined fear of COVID-19 and the FOMC. On the COVID front, the UK confirmed its first death from the Omicron variant raising the stakes in terms of how badly the new strain may impact the global economy. On the FOMC front, traders are trying to handicap when the first interest rate hike will come and we think the right answer is sooner rather than later.
As it stands, there is a better than 50% chance the first hike will come by May. If the pace of inflation doesn?t slow over the next month or so the first hike could come as early as March. Trading on Tuesday will be greatly influenced by the Producer Price Index which is expected to moderate on a month-to-month basis but to remain high versus last year and well above the Fed?s 2.0% target.
The equities market, the fickle beast that it is, told us that weaker than expected job gains and higher than expected inflation are no deterrent to higher stock market prices. The S&P 500 jumped more than 3.0% by the end of the last week and it looks like the market will keep moving higher in the near term at least. The setup suggests, in fact, a fairly strong Santa Claus Rally is brewing and it will take the S&P 500 index up to new all-time highs if it comes.
This week traders will be on alert for a slew of economic reports that include the FOMC meeting on Wednesday. The FOMC is expecting to accelerate the taper and more the timeline for interest rate hikes forward. The current expectation is for the first interest rate hike to come by May, the risk for the market is that it may come even sooner than that. Regardless, May is only five months away.
Equities pulled back a little on Thursday as traders and investors braced for what could be a very hot CPI reading. The index is released today and is expected to show another year-over-year increase in consumer-level inflation that is well above the 2.0% mark. The data will influence the FOMC at their meeting next week and could result in a much faster than expected taper. More importantly, the data will shed new light on when the first FOMC rate hike will come and we think that will be in early Spring at the latest.
Next week we?ll get a slew of data including housing, retail sales, and the Producer Price Index which is also expected to show hot inflation. With earnings on the back burner, the inflation data and FOMC meeting are what will influence trading for the week.
Equities rallied for a third day on Wednesday as fears of the Omicron variant wane. Pfizer reported that three doses of its vaccine were enough to neutralize the virus and that was enough to neutralize the fear as well. The S&P 500 crept up about 0.25% by the end of the day, not enough to set a new all-time high but very very close.
On the economic front, the JOLTs report showed a surprising increase in job openings. The number of job opening moved up to 11 million and just short of a new record despite and expectation for a flat reading. Later in the week the CPI data is released and it may be the biggest news of the week. Inflation is expected to run hot again and will more than likely up the stakes in terms of when the first FOMC rate hike will come.
Equities continued to bounce back on Tuesday as traders and investors reassess the risk of the Omicron variant. While still a concern, it looks like the variant produces a less severe case of COVID and may not cause much damage to the economy. The S&P 500 advanced more than 2.0% at the high of the day and came close to setting a new all-time high.
Tech stocks were among the big winners with chip stocks and Apple moving up 4% and 3% respectively but all 13 S&P sectors were higher. Traders are cautioned, however, that key economic data is due out later this week and could cap gains. The monthly reading of the CPI is due out on Friday and it is expected to be hot. The question is how hot and how will the market react. Hot inflation is ultimately a bad thing for the economy but could sustain the market rally until consumption begins to wane.
The major indices rebound strongly on Monday regaining all of the prior week?s losses in a single session. The caveat is that price action met resistance at the short-term moving average and it may cap gains in the near term. If the index can not make a firm move above the 4,605 level another sell may be inevitable regardless of this week?s economic data. With earnings season wrapped up and the peak of Q4 reporting still a month away all eyes will be on the data.
This week?s data is topped by the November read of CPI which is due out on Friday. The release is expected to show the 9th month of rising inflation and inflation above 2.0%. Regardless of the read, it is expected to reinforce the idea of accelerated Fed tapering, the question is by how much? A hot figure could advance the timeline for rate hikes and put the first increase firmly in May versus June as currently expected.
Equity markets cratered again on Friday to end a down week on a sour note. The reason is the Omicron variant on top of a Wall of Worry built on supply chain disruption and mounting inflation. The S&P 500 is down about 4.5% from its recent high and looks like it could easily make it a full 5%. The question now is if a 5% correction is all we?re in for or if the selloff will worsen?
This week?s attention will turn to the Q4 earnings cycle and CPI report on Friday. We?re still a month away from the peak of the Q4 reporting season but there are some reports to be aware of. On the economic front, CPI data for November is due out on Friday and could move the market as well. Consumer-level inflation has been running hot and is expected to do so again this week.
U.S. equities continued their volatile streak on Thursday with indices rebounding more than 1.5% but the near-term trend is still down. The rise of the Omicron variant is gaining traction and could derail the global recovery. With the S&P 500 still down about 2.5% from the recent high investors should expect volatility to continue in the near term at least.
Friday?s trading will be impacted by the NFP report as well as COVID-related fears. The NFP report is expected to show upward of 500K new jobs created last month and there is risk in the number. A weaker-than-expected figure would be bad for economic growth while a hotter figure would put extra pressure on the FOMC to taper and hike rates. In either case, if the market closes lower today you can expect it to move even lower next week.
Equities continued their back-and-forth action on Wednesday with the markets rebounding more than 1.5% at the high of the day. The bad news is that those highs failed to hold and price action was ultimately bearish. The rise of the new OMICRON COVID variant has thrown a new twist into the earnings outlook and it is not a good one. With supply chains already struggling from the last series of economic shutdowns, any disruption could be the one to bring the entire system to a halt.
On the economic front, the ADP Employment report came in better than expected but was offset by a downward revision to the previous month. Regardless, the ADP figure is in line with the expectation for Friday?s NFP report and a welcome sign of strength. The market may correct but, if it does, it will be a buying opportunity for long-term investors.
Equities fell again on Tuesday on the combined influence of the Omicron COVID variant and remarks from Jerome Powell. Mr. Powell, FOMC Chairman, says the committee will begin talking about an accelerated taper despite the rising threat of the new COVID variant. The news is not altogether surprising given the state of inflation but was unexpected in the face of the new threat. Ultimately, if the Omicron variant does cause disruptions in the global economy, it would likely result in higher inflation due to tightening supply in the face of high demand.
Today?s trading will be focused on the ADP report and the NFP report that is due on Friday. The ADP and NFP are expected to show upwards of half a million new jobs created in November and the figure could be much hotter. Regardless, employment and labor conditions are another cause for inflation and that situation isn?t expected to change significantly.
Equities bounced back strongly on Monday nearly reversing all of the loss posted on Friday. The move was driven more by a return to normal trading after the holiday than anything else but comments from President Biden helped calm nerves. President Biden says renewed lockdowns aren?t needed despite the new Omicron variant of COVID-19 which is good news indeed. Another round of lockdowns, however short, could throw an already overtaxed supply chain into full collapse.
This week?s trading will be dominated by economic data. There is a full slate of data to be released including the monthly non-farm payrolls report or NFP. The NFP is expected to show an increase of nearly 600,000 net new jobs in the last month and could easily exceed that figure. The latest JOLTs report indicated upwards of 10 million open jobs.
Equity markets woke up to bad news on Friday that sent the major indices down more than 2.0% at the low of the day. In the news, a new variant of COVID 19 has sprung up in South Africa and is giving authorities some concern. The new variant, on top of a rebound in case counts and widening restrictions in Europe, threaten to put a damper on the global economic recovery. Another widespread shutdown could put the already overstrained global supply chain into deeper trouble.
This week, traders will be on high alert for a number of key economic reports including the Fed?s Beige Book on Wednesday and the NFP report on Friday. The NFP report should show a positive change in net jobs while the Beige Book may be the more important release. If conditions within the Fed?s 12 reporting districts are deteriorating it could send the indices down to new lows.
Investors continue to bet on growth despite the rising specter of inflation. The S&P 500 reversed early losses on Wednesday to close with a small gain going into the holiday weekend. The move is the 15th day of trading within a near-term consolidation range that is fast becoming a bullish-looking flag pattern. If the market breaks out to the upside and confirms this pattern within the next week or so it should rally well into the end of the year.
In economic news, the PCE Price Index was released on Wednesday coming in largely as expected. The rub is that ?as expected? included a 0.20% month-to-month increase and the fastest pace of YOY gains for several decades. At this pace, the market should expect the first interest rate hikes to come well before the middle of next year.
Investors continue to bet on growth despite the rising specter of inflation. The S&P 500 reversed early losses on Wednesday to close with a small gain going into the holiday weekend. The move is the 15th day of trading within a near-term consolidation range that is fast becoming a bullish-looking flag pattern. If the market breaks out to the upside and confirms this pattern within the next week or so it should rally well into the end of the year.
In economic news, the PCE Price Index was released on Wednesday coming in largely as expected. The rub is that ?as expected? included a 0.20% month-to-month increase and the fastest pace of YOY gains for several decades. At this pace, the market should expect the first interest rate hikes to come well before the middle of next year.
The S&P 500 regained its footing on Wednesday after a quick pull back in prices. The move is due in part to weaker than expected PMI numbers that suggest economic activity slowed in the month of November. Although Tuesday's action was bullish, the markets could continue to fall on Wednesday simply because of a lack of trading volume. The markets are closed on Thursday for the Thanksgiving holiday and will not resume normal trading until Friday.
Today's market action will be driven by a raft of economic data including the GDP revision and Personal Income and Spending data. The PCE Price index, the Fed?s favored tool for measuring consumer-level inflation will be the release of the week. It is expected to accelerate on a month-over-month basis and rise 4.1% versus last year. A hotter than expected number would be bad for the market.
Equities got a boost from good news on Monday that sent the S&P 500 up to a new all-time high. The news? President Biden nominated Jerome Powell for another term as head of the Federal Open Market Committee. As head of the committee, he will be tasked with monitoring the U.S. monetary policy and keeping tabs on inflation.
With inflation running hotter than expected, it is expected the FOMC will be raising rates next year, the question is by how much? The CME?s Fedwatch Tool, an indication of market sentiment regarding interest rate hikes, has seen the average expectation creep higher in recent weeks with most participants expecting at least one hike by June and many believing the first will come much sooner than the June meeting.
Equities were mixed to end the last week but left the NASDAQ Composite and S&P 500 trading at new all-time highs. The move was driven by better than expected economic data as well as the passage of President Biden?s infrastructure package. The package, if nothing else, promises to unleash trillions in spending over the next few years and that is stimulus enough for the stock market.
Earnings from the retail sector are also to blame for last week?s performance. The sector reported largely better than expected numbers but gave a mixed view of the holiday season. While inventories should remain robust through the end of the year there are some concerns products arriving from Asia will be in short supply come January.
Equities were able to hold their ground again on Thursday marking the 10th consecutive trading day at current price levels. If the index can maintain this level into the close of action today it could lead to a big rally next week. The technical outlook for the S&P 500 suggests another 400 points worth of rally is still ahead or 8.5%. Needless to say, that would make another all-time high in 2021 but there is a risk.
With the Thanksgiving Holiday upon us holiday trading conditions are ruling the market. This means lighter than average volumes and the possibility of increased volume. Next week the market will have a raft of economic data to process. The first read on Q3 GDP is due out on Wednesday and includes several key pieces of economic data.
The markets gave up some of their gains on Wednesday but investors shouldn?t worry too much about the move. Bad news for Visa is cause for most of the day?s decline and was offset by another round of much better than expected news from the retail sector. Retailers from Target to TJ Maxx beat their consensus estimates and guided the market higher citing robust trends and the expectation for fully-stocked shelves this holiday season.
On the economic front, the housing data was a mixed bag with Building Permits rising more than expected and Housing Starts falling versus an expectation for gains. The data underscore a worsening problem in the housing market, that of rising demand and stalling activity due to supply and labor shortages. If the bottlenecks are corrected soon housing prices could sustain their meteoric climb.
The S&P 500 moved up to set a new all-time closing high on Tuesday after several better than expected economic reports were released. Topping the list is retail sales which advanced 1.7% at the headline and core levels, both 0.2% above consensus. Elsewhere in the economy, business inventories rose more than expected as did the NAHB Homebuilder?s index which both suggest supply chain disruptions are easing.
The caveat is that, with the retail sales figures at least, all of the gains are due to inflation. With retail sales rising 1.7% and inflation up 6.2% economic activity is not expanding. Today traders will be on alert for reads on Building Permits and Housing Starts as well as an earnings report from major retailer Target.
Equities were mostly flat on Monday with traders on alert for this week?s round of economic data. Top of the list is the Retail Sales figure due out today but there are several reports of interest. Retail sales are expected to accelerate to 1.5% from last month?s 0.7% but still trail the 6.2% increase in consumer prices as indicated by the CPI data.
Later this week, traders will be on the watch for reads on housing starts and building permits as well as the Index of Leading Indicators. All three data points are expected to accelerate from the previous month as well and could move the market. The risk for traders is that supply chain hurdles and lack of materials could cut into economic activity. If so, the outlook for earnings in the 4th quarter could begin to deteriorate.
Equities finished the week strong last week but still down from the all-time set the week before. This week, if the economic data fails to impress, the decline could deepen. The key report of the week will be the retail sales figures on Tuesday but there are several reports that could move the market. Retail sales grew in the previous month but were offset by a much larger than expected increase in inflation and that is expected to be true this month.
The question investors need to have answered is how big of an impact are higher prices having on retail sales and what does it mean for America?s consumer economy. If prices continue to rise unchecked the next recession could be just around the corner.