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CPI Preview: Good, Bad, and Ugly

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CPI Preview: Good, Bad, and Ugly – Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • CPI Preview: Good, Bad, & Ugly
  • “Soft Components” of the NFIB Small Business Optimism Index Fall to GFC Lows
  • Chart – Equal-Weighted S&P 500 Index (RSP) Remains in Steep Downtrend, Underscoring Thin Market Breadth

U.S. equity futures are modestly higher this morning despite escalating tensions in the Middle East overnight as investors embrace a continued pullback in global bond yields after steady inflation data in the EU overnight.

Economically, German CPI was unchanged from August, coming in at 4.5% y/y in September, meeting estimates. The inline inflation print is helping bonds continue to stabilize and supporting modest risk-on money flows this morning.

Today, focus will be on economic data early with PPI (E: 0.3% m/m. 1.2% y/y) and Core PPI (E: 0.2% m/m, 2.1% y/y) due out ahead of the bell.

From there focus will turn to the Fed with multiple officials scheduled to speak: Waller, Bostic, Collins. Additionally, the latest FOMC meeting minutes will come at 2:00 p.m. ET.

Bottom line, if PPI is more or less inline with estimates and the FOMC minutes and Fed chatter over the course of the day continue to support the less-hawkish narrative of recent. Then this week’s rally can continue, however and reversal back higher in yields will pressure stocks and other risk assets.

CPI Preview: Good, Bad, & Ugly

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Sevens Report Analysts Quoted in Market Watch on July 18th, 2023

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Oil futures score first gain in 3 sessions

The disappointing Chinese economic data offset an increase in Russia/Ukraine tensions to push commodity prices lower on Monday, analysts at Sevens Report Research wrote in Tuesday’s newsletter. “A Chinese economic slowdown, if it happens, will add to demand concerns” they said. Click here to read the full article.

Sevens Report Analysts Quoted in Morningstar on June 27th, 2023

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Oil prices slump, shaking off Russia mutiny

Looking ahead, the turmoil within Russia is unlikely to have a material impact on oil markets unless we see it affect production or exports of oil. Looking ahead, the turmoil within Russia is unlikely to have a material impact on oil markets unless we see it affect production or exports of oil, said analysts at Sevens Report Research, in a note. Click here to read the full article.

What Russian Political Turmoil Means for Markets

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What’s in Today’s Report:

  • What Russian Political Turmoil Means for Markets
  • More Signs the Market is Starting to Believe the Fed
  • Weekly Economic Cheat Sheet:  Core PCE Price Index and Jobless Claims are the Key Reports this Week
  • Weekly Market Preview:  Will Hard Landing Fears Keep Rising?

Futures are slightly lower as markets digest the political volatility in Russia and underwhelming economic data.

A short-lived rebellion by the Wagner private army against the Russian government dominated headlines this weekend, but from a market standpoint this only matters via its impact on oil prices, and they are little changed.

Economically, German IFO Business Expectations fell to 83.6 vs. (E) 88.0, which is the second weak German economic number in the past two trading days.

Today focus will remain on the Russian political situation, so watch oil to cut through the headline noise.  If oil rises sharply, the situation is deteriorating and that would weigh on markets.

Current Market Assumptions (Why Stocks Remain Resilient)

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What’s in Today’s Report:

  • Current Market Assumptions (Why Stocks Remain Resilient)
  • Why Jobless Claims Jumped Last Week
  • Weekly Economic Cheat Sheet:  Inflation is the Key This Week (CPI on Wed, PPI on Thurs)
  • Weekly Market Preview:  Do Stagflation Risks Rise?

Futures are little changed following a mostly quiet weekend of news as investors digest the “Just Right” jobs report and look ahead to CPI on Wednesday and the start of earnings season on Friday.

Friday’s jobs report was “Just Right” with job adds rising 238k vs. (E) 230k and wages gaining 4.2% vs. (E) 4.3% y/y. The report is helping to slightly ease the hard landing worries from last week.

Today should be a mostly quiet day of trading as European markets are closed for the Easter holiday and there are no notable economic reports and just one Fed speaker, Williams at 4:15 p.m. ET, as investors will look ahead to Wednesday’s critical CPI report and the start of bank earnings on Friday.

 

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What the CPI Data Means for Markets

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What’s in Today’s Report:

  • What the CPI Means for Markets
  • CPI Data Takeaways
  • How Will Russia’s Production Cut and the New SPR Release Impact Oil Markets?

U.S. equity futures are lower despite a stable Treasury market and better-than-feared inflation data overseas as investors continued to assess post-CPI Fed policy expectations.

U.K. CPI fell to 10.1% vs. (E) 10.3% in January down from 10.5% in December which sent the pound lower. Despite the bigger than expected drop, however, inflation remains far too high in the U.K. and more aggressive policy will be warranted to get price pressures back down towards the BOE’s target over time.

Today, focus will be on economic data as there are several important reports due to be released including: Retail Sales (E: 1.7%), Empire State Manufacturing Index (E: -18.5), Industrial Production (E: 0.5%), and the Housing Market Index (E: 37).

As has been the case lately, investors will be looking for signs of moderation in growth metrics (but not an all out collapse) and faster declining price readings to keep the hopes of a soft/no landing alive. Otherwise, it will be difficult for stocks to resume their 2023 advance.

There are no Fed officials scheduled to speak today but there is a 20-Yr Treasury Bond auction at 1:00 p.m. ET and if demand is weak and yields begin to add to yesterday’s upward moves, stocks could come for sale.

Three Keys to a Bottom: Update

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What’s in Today’s Report:

  • Three Keys to a Bottom: Update
  • Weekly Economic Cheat Sheet – Jobs Report in Focus

U.S. equity futures have a tentative bid to start the new year today as tech stocks are outperforming amid a sharp pullback in Treasury yields.

Economically, China’s Manufacturing PMI fell to 49.0 in December from 49.4 in November while the U.K.’s Manufacturing PMI came in at 45.3 vs. (E) 44.7 last month. Both figures remained well below 50, in contraction territory, and that is seeing some of the recent hawkish central bank expectations unwind as we begin the new year.

Looking into today’s session, there are two economic reports to watch in the U.S., the Manufacturing PMI (E: 46.2) and Construction Spending (E: -0.4%).

Investors will be looking for data that points to a continued slowdown in growth but a more pronounced drop in price readings as that should help further ease hawkish policy expectations and allow the early but tentative risk-on money flows to continue.

There are no Fed officials scheduled to speak and no notable Treasury auctions today. That will leave investors focused on Treasuries as a continued drop in yields today should support a continued bid in tech stocks and equities more broadly as traders reposition into the new year.

 

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Why There’s Some Cause for (Cautious) Optimism

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What’s in Today’s Report:

  • Why There’s Some Cause for Cautious Optimism

Futures are slightly lower following a quiet night of news as markets digest Thursday’s rally.

Economically the only notable number was the UK Home Price Index, which like the U.S. readings this week saw smaller than expected declines, falling –0.1% vs. (E) -0.7%.

Geopolitically, Russia continued Thursday’s missile bombardment of Ukraine is a clear signal that fighting will rage on as the New Year begins.

Trading today will be dominated by book squaring and year-end positioning but there is one notable economic report, Chicago PMI (E: 41.0), and if it’s weak it could weigh on markets moderately.

Is the VIX Broken?

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What’s in Today’s Report:

  • Is the VIX Broken?

Futures are modestly higher following in-line inflation readings from China and more gridlock in Washington as markets look ahead to today’s inflation readings.

Chinese CPI met expectations rising 1.6% and that benign reading will keep stimulus coming in that economy.

Politically, Arizona Senator Sinema left the Democrat party and registered as an independent, although the move is unlikely to change her voting patterns.

Today focus will be on inflation data, specifically PPI (E: 0.2% m/m, 7.2% y/y) and the University of Michigan Five Year Inflation Expectations (E: 3.0%).  If those reports come in under expectations and further hint at dis-inflation, it will extend the early rally.

Sevens Report Co-Editor Tyler Richey Quoted in Market Watch on November 16th, 2022

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U.S. oil prices settle at a 3-week low after missile strike in Poland, as global supply risks ease

Tuesday’s “geopolitical fear bid, related to the initially unidentified missiles hitting Poland, is unwinding as details emerge that suggest the projectiles did not actually originate in Russia after all,” Tyler Richey, co-editor at Sevens Report Research, told MarketWatch. Click here to read the full article.