September MMT: Headwinds Present but Earning Growth a Major Positive

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What’s in Today’s Report:

  • September Market Multiple Table (MMT): Headwinds Present but Earnings Growth a Major Positive

Futures are modestly lower as the U.S. and Iran again exchanged reciprocal strikes overnight, sending oil prices higher.

Brent crude rose above $100/bbl for the first time since May after the U.S. and Iran traded strikes on oil tankers and naval vessels, further diminishing any near term hopes for ceasefire progress.

Economically, the only notable report was Chinese CPI which beat expectations (0.8% y/y vs. (E) 0.4% y/y).

Today there are no notable economic reports (the key reports this week come Thursday/Friday via PPI/CPI) so focus will stay on geopolitics and the story remains the same:  Any hint of the U.S. or Iran seeking a ceasefire will push oil lower and help stocks rebound, while more reciprocal strikes will only further boost oil prices and pressure stocks.

Beyond oil, we need to watch treasury yields.  So far this week they haven’t rallied despite higher oil prices (the looming CPI is likely keeping them stable) but if that changes and yields start to rise on higher oil prices, the downward pressure on stocks will increase.

 

Recipe for a Rally (Three Ingredients)

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What’s in Today’s Report:

  • Recipe for a Rally (Three Ingredients)
  • Weekly Market Preview: Yields Remain Key (Geopolitics and Inflation in Focus)
  • Weekly Economic Cheat Sheet: CPI (Friday) is the Key Report This Week

Futures are modestly lower on higher oil prices as geopolitical risks rose over the long weekend.

Oil prices hit multi-month highs and that’s directly weighing on global stocks as Iran launched an unsuccessful attack on a U.S. Naval vessel and the U.S. sunk three Iranian tankers in response, keeping tensions elevated and the prospect of a near term ceasefire low.

In Russia, there was no progress on a Russia/Ukraine ceasefire despite U.S./Russian meetings over the weekend.

Today there are no notable economic reports nor any major Fed speakers so focus will remain on geopolitical headlines, oil and Treasury yields.  As has been the case for the past few weeks, any headlines that push oil and yields lower will help stocks rally (and if oil and yields keep rising, stocks will continue their decline).

 

Fintech Spotlight: What is Tokenization

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What’s in Today’s Report:

  • Jobs Day
  • Fintech Spotlight: What is Tokenization (And Is It a Growth Opportunity?)

Futures are mixed as bond yields retreat ahead of today’s August jobs report.

There were no major geopolitical or macro developments overnight.

Economic data was mixed as EU retail sales fell 0.6% m/m vs. (E) 0.3%, while German Factory Orders rose 2.5% m/m vs. (E) 0.3%.

Today focus will be on the jobs report and estimates are as follows: 55K Job-Adds, 4.2% Unemployment Rate and 3.0% Wage Growth. A Goldilocks report would be supportive for stocks and help keep bond yields contained.

There are no Fed speakers or notable earnings reports scheduled today, leaving the jobs report and resulting Treasury market reaction as the primary focus for stocks.

 

Jobs Report Preview: “Too Hot” Definitely Worse Than “Too Cold”

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What’s in Today’s Report:

  • Jobs Report Preview: “Too Hot” Definitely Worse Than “Too Cold”

Futures are mixed as higher oil prices and renewed U.S.-Iran hostilities pressure stocks.

Geopolitically, Iran launched missile and drone strikes against U.S. bases in Kuwait as tensions surrounding the Strait of Hormuz remain elevated.

Economically, EU PPI rose 1.6% vs. (E) 1.2% m/m, adding to inflation concerns.

Today, focus will be on Jobless Claims (E: 205K) and the ISM Services Index (E: 54.1). An in-line claims print and stable services activity should help ease concerns about the economy while keeping pressure off Treasury yields.

Finally, Waller (8:30 a.m. ET) and Hammack (3:00 p.m. ET) are scheduled to speak today while earnings include CIEN ($1.46), ZS ($0.06), IOT ($0.02), and LULU ($1.79).

 

Alpha Report: Is It Time to Rethink Long-Term Bonds?

Long-term bonds have become one of the most disliked areas of the market—and it’s not hard to understand why. Persistent inflation, massive Treasury issuance, large fiscal deficits and higher oil prices have all reinforced the case for staying short duration.

But when virtually everyone agrees on an investment thesis, it’s worth asking what could make that consensus wrong.

That’s exactly what we examined in Tuesday’s Sevens Report Alpha.

Long-term yields remain near two-decade highs, sentiment is deeply negative, and several macro developments could begin easing the pressures that have punished the long end of the Treasury market. Importantly, investors don’t need every concern to disappear for the risk/reward to improve.

Could long-term bonds be emerging as one of today’s better contrarian opportunities? (Click here to find out.)

 

Why Stocks Dropped on Tuesday

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What’s in Today’s Report:

  • Why Stocks Dropped on Tuesday
  • Why Are Agricultural Commodities Hitting New Highs Too?

Futures are modestly lower despite solid tech earnings, as the 10-year yield and oil continued to drift higher overnight.

There were no new strikes between the U.S. and Iran overnight but tensions remain elevated and oil and the 10-year yield are up slightly as a result.

DELL earnings beat estimates and the stock is up 8% pre-market as AI related earnings remain very strong.

Today focus will remain primarily on geopolitics and any positive headlines about ceasefire progress should pressure oil and yields and help lift stocks.

On the economic front, there are two notable reports today: ADP Employment Report (E: 48K) and Fed Beige Book (2:0 p.m. ET).  Solid (but not great) numbers from ADP and generally supportive commentary of economic growth from the Beige Book should underscore a solid economy but not raise rate hike concerns (that’d be the best case for stocks).

 

How to Talk to Clients About the Wars (From a Market Standpoint)

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What’s in Today’s Report:

  • How to Talk to Clients About the Wars (From a Market Standpoint)

Futures are moderately weaker as higher oil prices and rising global bond yields pressure stocks.

Global bond yields extended Monday’s gains overnight as the 10-year Japanese Government Bond yield hit 3.00% for the first time since 1996.

Economic data was solid as EU and UK manufacturing PMIs were in-line, while EU Core HICP (their CPI) beat estimates.

Focus today will remain on bond yields and the higher they go, the lower stocks will go.  The events that will influence yields today include 1) Any geopolitical headlines (any reports of ceasefire progress will pressure yields) and 2)  Economic data. Important reports today include the ISM Manufacturing PMI (E: 55.2) and JOLTS (E: 7.35 million) and the closer to in-line they are, the better for yields.  There is also one Fed speaker, Barr (9:05 a.m. ET), but he shouldn’t move markets.

Finally, on the earnings front we do get several important tech/AI earnings results after the close, including DELL ($4.72), PANW ($0.51) and MDB ($1.61).

 

Why A Hawkish Fed Isn’t Necessarily Bad for Markets

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What’s in Today’s Report:

  • Why A Hawkish Fed Isn’t Necessarily Bad for Markets
  • Weekly Market Preview: Is Economic Growth Stable? (It Needs to Be)
  • Weekly Economic Cheat Sheet: The “Big Three” Monthly Reports This Week (including the Jobs Report)

Futures are marginally lower after the U.S. and Iran traded attacks for the first time in weeks.

The U.S. and Iran traded strikes over the weekend in the first military exchange in weeks and oil prices are 3% higher in response, although markets still do not expect material escalation (which is why futures aren’t down more).

Economically, Chinese data was mixed as the manufacturing PMI beat estimates (49.8 vs. (E) 49.5) while non-manufacturing was slightly weak (49 vs. (E) 49.4).

Today there are no notable economic reports or Fed speak so focus will remain on geopolitics.  Markets still strongly assume there won’t be any material military escalation between Iran and the U.S. but if the headlines turn negative on that front, it’ll introduce a new headwind on the market.

 

What Does “40 Trillion” Mean for Stocks?

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What’s in Today’s Report:

  • What Does “40 Trillion” Mean for Stocks?

Futures are little changed following generally “fine” tech earnings overnight and as markets await Fed Chair Warsh’s speech.

Tech earnings (MRVL, WDAY) were solid but the tech sector is seeing some profit taking following Thursday’s big NVDA driven rally.

Economically, French Core HICP (their CPI) rose 2.7% vs. (E) 2.4% y/y, further solidifying ECB rate hike expectations.

Today focus will be on Fed Chair Warsh’s commentary (10:00 a.m. ET) and markets will want to hear 1) A firm commitment to get inflation back to 2% but also 2) No hints of a sustained rate hike cycle (a one and done rate hike in September won’t hurt markets).  The key to indicator to watch through the speech is the 10 year Treasury yield, if it rises during or after the speech that will be a negative for markets.

 

Is the Debasement Trade Back?

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What’s in Today’s Report:

  • Is the Debasement Trade Back?

Futures are moderately higher following stronger than expected tech earnings and guidance overnight.

Nvidia earnings were generally in-line but guidance was much stronger than expected (70% revenue growth next year) and that’s boosting tech and futures.

Economically, German GfK Consumer Climate was better than expected (-26.6 vs. (E) -29.2).

Today we do get one economic report, Jobless Claims (E: 208K), but the real focus will be on earnings as there are several notable reports including, in order of importance:  MRVL ($0.65), WDAY ($1.26), ULTA ($6.20), AFRM ($0.33), BBY ($1.37), DG ($2.00) and DLTR ($1.12). Strong earnings (and solid guidance) will help stocks extend this early rally.

 

New ETFs for Your Watchlist (July Launches)

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What’s in Today’s Report:

  • New ETFs for Your Watchlist (July Launches)
  • Chart – Home Sales Fall Amid Elevated Prices

Futures are slightly lower on weak software company guidance ahead of key inflation data and NVDA earnings today.

INTU beat earnings and revenue estimates, but forward guidance fell short of lofty expectations which is dragging software stocks and the broader tech complex lower ahead of the bell.

Today, focus will be on economic data early with the Fed’s preferred measure of inflation, the Core PCE Price Index (E: 0.2% m/m, 3.3% y/y) due to be released before the open. Additionally, Durable Goods Orders (E: 0.5%) and Q2 GDP (E: 1.5%) will be released this morning, shedding light on the health of U.S. growth and demand metrics.

Later in the day, the Treasury will hold a 4-Month Bill auction (11:30 a.m. ET) and a 5-Yr Note auction (1:00 p.m. ET) and the Fed’s Barkin will speak leading into the lunch hour (11:45 a.m. ET).

Finally, focus will shift to one of the seasons most important earnings releases due after the close with NVDA ($2.09) results looming large. Other names reporting today include: KSS ($0.55), WSM ($2.05), CRM ($2.35), CRWD ($0.05), OKTA ($0.44), and HPQ ($0.66), but again NVDA will be the key report to watch.