Why Soft Landing Hopes Powered Thursday’s Rally

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What’s in Today’s Report:

  • Why Soft Landing Hopes Powered Thursday’s Rally

Futures are modestly lower following Thursday’s rally as markets digest disappointing earnings and economic data.

AMZN results beat estimates but warned on cloud growth while Capital One (COF) cautioned on rising credit card delinquency rates.

Economically, French CPI came in much hotter than expected at 0.6% m/m vs. (E) 0.3% m/m.

Today focus will be on inflation, and specifically the Core PCE Price Index (E: 0.3% m/m, 4.5% y/y) and the Employment Cost Index (E: 1.0%).  If both numbers come in under expectations and imply disinflation has returned and is gaining momentum, then markets can add to yesterday’s gains.   However, hotter than expected numbers will weigh on markets because at these levels, the S&P 500 is already pricing in ongoing disinflation,

On the earnings front, some reports we’re watching this morning include:   XOM ($2.65), CVX ($3.36), CL ($0.70).

Tom Essaye Quoted in Barron’s on April 25th, 2023

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Stocks Plunge as UPS, First Republic Earnings Shake Investors

The lower than expected deposit levels rekindled worries about the health of the banking system and financials are dragging the broader market lower this morning, writes Tom Essaye, founder of the Sevens Report. Click here to read the full article.

Tom Essaye Interviewed on BNN Bloomberg on April 25th, 2023

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These earnings aren’t enough to push markets materially higher: Sevens Report Research’s president

Tom Essaye, president of Sevens Report Research, joins BNN Bloomberg to run through his take on prominent companies reporting earnings this week. Click here to watch the full interview.

Tom Essaye Quoted in Barron’s on April 21st, 2023

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Stocks Gain on Signs of Economic Distress

“Since April 3, we’ve seen the yield on the 1-month Treasury bill fall from 4.7% to 3.9%, as investors have shunned near-term Treasury bills that might get caught up in the debt ceiling fight. Conversely, the 3-month Treasury bill yield has risen from 4.9% to 5.2% since April 3, as investors have sold that debt as it will be subject to potential increased volatility as the debt ceiling fight comes to a head,” Tom Essaye, founder of the Sevens Report, wrote Friday. Click here to read the full article.

 

What the New Low in FRC Means for Markets

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What’s in Today’s Report:

  • What the New Low in FRC Means for Markets
  • Chart Update:  Possible Head and Shoulders
  • The Most Consistent Market Indicator Right Now (It’s in Bonds)

Futures are modestly higher thanks to more solid tech earnings overnight and some small political progress.

Meta (FB) joined MSFT and GOOGL in posting strong earnings and the stock was up more than 10% overnight.

Politically, House Republicans (barely) passed their debt ceiling bill and now more substantial negotiations can begin with the White House.

Today focus will remain on data and earnings.  Economically, the key report today is Jobless Claims (E: 249K), although the financial media will focus more on Q1 GDP (E: 2.0%).  But, Q1 GDP is a stale number at this point (it covers Jan-Mar) compared to jobless claims, which will tell us if we’re seeing more deterioration in the labor market.  Any move towards, or modestly above, 250k would further hint at labor market deterioration (which would be a mild positive for markets).

Turning to earnings, this remains the busiest week for results and key reports we’re watching today include:  AMZN (E: $0.21), INTC ($0.16), CAT ($3.79), AAL ($0.04), MA ($2.71), MRK ($1.34) and MO ($1.19).

Why Earnings Caused Yesterday’s Selloff

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What’s in Today’s Report:

  • Why Earnings Results Caused Yesterday’s Selloff (The Results Weren’t Actually That Bad)
  • Chart: PKG Dropped Sharply on Cautious Guidance

Strong earnings and guidance from tech giants MSFT (+8%) and GOOGL (+1%) after the close yesterday are supporting gains in U.S. equity futures today while more cautious results in Europe are weighing on overseas markets.

Economically, Australian CPI fell to 7.0% vs. (E) 6.9% y/y in the first quarter, down from 7.8% in Q4, but the inflation reading is still well above target and serves as a reminder that global central banks still have work to do in order to get inflation under control.

Looking into today’s session earnings season slows down somewhat with only a few notable companies reporting, including: BA (-$0.98), and GD ($9.34) before the bell, and META ($1.96) after the close.

That will leave investors focused on economic data early with Durable Goods Orders (E: 0.9%) and International Trade in Goods (E: -$90.0B) set to be released. There are no Fed speakers today but there is a 5-Yr Treasury Note auction at 1:00 p.m. ET that could move yields and impact stocks in afternoon trade.

 

In Case You Missed It: Our Special Technical Market Update for Sevens Report Subscribers Was Delivered Monday Morning

We continue to receive overwhelmingly positive feedback from our subscriber base regarding Monday’s special technical market update.

The report included analysis on all asset classes starting with the major equity indices across various time frames before looking at the latest investment style and sector trends. Additionally, we dove into currency, commodity, and Treasury market technicals to help identify trends that present both risks and opportunities to portfolios in these historically uncertain market conditions.

Hard Landing vs. Soft Landing Scoreboard

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What’s in Today’s Report:

  • Hard Landing vs. Soft Landing Scoreboard (Table Included)

Stock futures are tracking global equity markets lower while bonds rally thanks to disappointing bank earnings.

FRC, which has been in focus since the banking turmoil began in March, is trading lower by more than 20% in the premarket after reporting that deposits fell more than 40% in Q1 to just $104.5B vs. (E) $145B while the bank plans to cut as much as 25% of staff in Q2. The lower than expected deposit levels rekindled worries about the health of the banking system and financials are dragging the broader market lower this morning.

Today, there are a few economic releases to watch: Case-Shiller Home Price Index (E: -0.4%), Consumer Confidence (E: 104.2), and New Home Sales (E: 635K) but unless there are any material surprises, investors will remain focused on earnings as we will begin to get some of the big tech companies’ results after the close today.

On the earnings front we will hear from UPS ($2.19), VZ ($1.19), GM ($1.58), MCD ($2.30), GE ($0.13), PEP $1.37), and MMM ($1.60) before the open, and MSFT ($2.22), GOOGL ($1.07), V ($1.97), and TXN ($1.76) after the close. Investors will be looking for good top and bottom line results but potentially more importantly, solid guidance given the uncertain market backdrop right now.

Tom Essaye Quoted in Blockworks on April 20th, 2023

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Bitcoin, Ether Hover Below Key Levels While Volatility Dips

“The VIX is trading at the lowest levels since the S&P 500 hit its standing all-time high in the early days of 2022,” Tom Essaye, founder of Sevens Report Research, said. “It will be hard to believe the market is poised to casually cruise towards new record highs from here,” he added. “I.e., the bottom of the bear market is not in.” Click here to read the full article.

Special Technical Analysis Report

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What’s in Today’s Technical Report:

  • Near and Medium-Term Trends and Risks in the S&P 500
  • A Look at Current Dynamics in the Major U.S. Equity Indices
  • Dow Theory Update
  • Key Levels to Watch in the Dollar and Commodity Markets
  • Equity Sector Dashboard (Bullish – Bearish – Neutral)
  • Treasury Market Trend Analysis: Have Rates Peaked for the Cycle?
  • What to Watch in the VIX

S&P 500 futures are little changed to start the week this morning. Last week’s pullback paused at a longer standing, multi-week uptrend line leaving the broader equity at a tipping point. How the market trades today will very likely decide if the S&P will continue to bleed lower or break last week’s downtrend and retest the recent highs.

The Nasdaq has been a notable outperformer this year but there are cracks emerging in the rally and we outline key levels to watch this week within the Report.

Among the sectors, we view five sectors as trending higher, four as market neutral, and two as trending lower.

In the currency and bond markets, both the dollar and multiple benchmark Treasury Notes have pulled back to critical price support zones and whether those levels hold or not will have a varying impact on all asset classes.

Commodities as an asset class have been fluctuating in a tight range in 2023 with gold outperforming and oil underperforming, but there are signs that oil is poised to take the lead in the complex and gold may be losing upside momentum.

Finally, the VIX is still deeply under pressure which is confusing many investors but we dive into the specific reasons for the movement in the index and what to look for in the weeks and months ahead as we continue to navigate this historically difficult market backdrop amid very uncertain macroeconomic dynamics.

Sevens Report – Is Conflicting Data Signaling a Shift in the Economy?

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What’s in Today’s Report:

  • Is Conflicting Data Signaling a Shift in the Economy?
  • Weekly Market Preview:  Earnings Take Center Stage (Lots of Key Reports This Week)
  • Weekly Economic Cheat Sheet:  Is Disinflation Continuing? (Key Inflation Stats on Friday)

Futures are sightly lower following a quiet weekend of news as markets look ahead to key earnings reports and economic data this week.

Economically, the only notable report was German IFO Business Expectations, which slightly beat estimates.

Debt ceiling headlines will increase this week as Republicans try to pass a debt ceiling bill, and if it fails to pass that will increase debt ceiling anxiety in the markets.

Today there is only one economic report, Chicago Fed National Activity Index (E: -0.02), and barring a major surprise that shouldn’t move markets.

Focus then will be on earnings, and especially the First Republic results after the close (estimates are $0.72/share).  Markets will want to see stability from what’s viewed as one of the most vulnerable regional banks.  Other notable earnings today also include KO ($0.65) and WHR ($2.44) which will give us insight into consumer spending.

 

Special Technical Market Update Delivered Today

The special technical report will be delivered via email later this morning.

Due to increased demand for more detailed technical insights from our subscribers, we have prepared a separate, special market update that provides detailed analysis of the current technical state of this market, including:

  • Major stock indices
  • Stock sectors
  • Investment styles (growth vs. value) and
  • Major trends in Treasury, commodity, and currency markets.

As the economy (and possibly markets) approach a tipping point and the Fed readies for the likely final rate hike, we can expect more volatility and conflicting fundamental economic data. Having high quality, plain-English technical analysis can help us better navigate this market.

Tyler Richey, Sevens Report CMT, has been the lead analyst on this special report, and we are all excited to deliver this value-add research to subscribers today.