Tom Essaye Quoted in Barron’s on August 16, 2021

Dow, S&P 500 Notch Records, Overcoming Earlier Slide

A political negative for Biden which could hurt the chances any infrastructure bill is passed…wrote The Seven Report’s Tom Essaye. Click here to read the full article.

The Delta Variant and Markets

What’s in Today’s Report:

  • Is the Delta Variant Impacting the Markets?
  • Retail Sales and Industrial Production Takeaways
  • Chart: Value Outperforming Growth In August

Stock futures are slightly lower as investors digest dovish central bank developments, mixed inflation data out of Europe and look ahead to the release of the Fed minutes.

The Reserve Bank of New Zealand unexpectedly left rates unchanged at 0.25% (E: 0.50%) citing COVID-19 uncertainties which crashed the kiwi to a fresh 9-month low overnight.

Economically, Eurozone HICP met estimates however U.K. PPI ran slightly hot versus expectations while revisions were to the upside which is keeping inflation concerns elevated for now.

Looking into today’s session, it should be a fairly slow morning as far as news flow goes with just one economic report to watch: Housing Starts (E: 1.61M) and no Fed officials scheduled to speak.

Then in the afternoon investors will be watching a 20 Year T-Note auction at 1:00 p.m. ET before the FOMC Meeting Minutes are released at 2:00 p.m. ET. Yesterday, there was a reversal higher in yields from overnight lows in the wake of the not-as-bad-as-feared Retail Sales report so the risk appears to be to the upside for yields which could weigh on big-cap growth names and drag major indexes lower if a rise in yields gains momentum.

This Is What Stagflation Looks Like

What’s in Today’s Report:

  • This is What Stagflation Looks Like
  • Yield Curve Chart: The Steepening Trend Is Stalling

U.S. futures are lower this morning amid new regulatory threats for Chinese tech companies, while Delta variant concerns linger and traders look ahead to fresh U.S. data.

Chinese regulators proposed a new set of rules for internet and technology companies overnight which once again triggered a wave of selling in Chinese markets, specifically in big cap tech names.

Economically, the Eurozone GDP flash met estimates while U.K. wage growth hit a new record in July the latest evidence that stagflation may be an emerging economic trend (more on that in today’s edition of the Report).

Looking into today’s session, there are two notable economic reports due out in the U.S. this morning: Retail Sales (E: -0.2%), and Industrial Production (E: 0.5%).

As has been the case recently, investors will be looking for data that is good enough to suggest we are not falling deeper towards a stagflationary environment but not so strong that it pulls forward expectations for tapering QE (the key to reading the data will be to monitor the reaction in the yield curve; we want to see steepening).

Finally, Fed Chair Powell will speak as part of a virtual town hall event at 1:30 p.m. ET this afternoon and the markets will be looking for any new clues as to the Committee’s taper plans/views of the economic recovery. For now, a continued, slightly dovish stance remains the best case scenario for stocks as another hawkish “tilt” would likely spark a run higher in yields, potentially weighing on broader equity markets.

Tom Essaye Quoted in Yahoo Finance on August 12, 2021

3 Things That Could Send The S&P 500 Down 20%

The consensus expectations for the Federal Reserve monthly asset purchasing is that the Fed will announce a plan for tapering sometime in…Essaye said. Click here to read the full article.

Tom Essaye Quoted in Yahoo Finance on August 14, 2021

Where Does Wall Street Think Oil Is Heading?

When the July WTI contract managed to close Monday above the July low at $66.41/bbl, it marked that level as…Tom Essaye of the Sevens Report has told MarketWatch. Click here to read the full article.

 

How is the Market Ignoring the COVID Spike?

What’s in Today’s Report:

  • How is the Market Ignoring the COVID Spike?
  • Weekly Market Preview:  Is the Recovery Losing Any Momentum?
  • Weekly Economic Cheat Sheet:  Key Growth Data Throughout This Week

Futures are modestly lower following underwhelming Chinese economic data and on a mild decrease in geo-political stability.

Chinese Retail Sales, Industrial Production, and Fixed Asset Investment all rose, but missed expectations and that’s weighing modestly on global stocks.

Geo-politically, the Taliban taking control of Afghanistan doesn’t have any direct market implications, but it is a political negative for Biden which could hurt the chances any infrastructure bill is passed.

Today the only notable economic report is the Empire Manufacturing Index (E: 30.0), and that’s more important than usual as markets will want to see if the Delta variant slowed economic activity in August.  If this number badly misses expectations, it will likely be a headwind on stocks today.

Tom Essaye Interviewed by Yahoo Finance on August 12, 2021

‘There is political pressure building on the Fed’: Sevens Report Research Founder

Well, I think that the 5-year tips over treasuries breakeven is heavily influenced by…Tom Essaye from Sevens Report Research. Click here to see the full interview.

Tom Essaye Quoted in Benzinga on August 12, 2021

3 Things That Could Send The S&P 500 Down 20%

The consensus expectations for the Federal Reserve monthly asset purchasing is that the Fed…Essaye said. Click here to read the full article.

 

Inflation Update (Post CPI/PPI)

What’s in Today’s Report:

  • Inflation Update (Post CPI/PPI)

Futures are again little changed following another generally quiet night of news.

Economic data was minimal as the only notable report was EU exports, which missed expectations falling –0.7% vs. (E) 0.6%, but that’s not moving markets.

On the COVID front, there were mixed headlines.  ABNB said it has seen a small slowdown in bookings because of Delta (a negative), but COVID cases have potentially peaked in China (a positive).  In sum, the headlines were mixed enough that they aren’t moving markets, but we will continue to watch for more evidence that the Delta variant is altering consumer behavior.

Today the key report will be the inflation expectations in Consumer Sentiment (E: 81.4) but as long as that doesn’t spike higher, it shouldn’t move markets.  Instead, COVID headlines will continue to move markets and if there is more evidence the Delta variant is impacting travel/leisure, that will be a headwind on stocks.

Yield Curve Update (Reflation vs. Stagflation)

What’s in Today’s Report:

  • Yield Curve Update (Reflation vs. Stagflation)
  • EIA and Oil Market Update

Futures are little changed following a generally quiet night of news.

Economic data was slightly underwhelming as UK Industrial Production (-0.7% vs. (E) 0.3%) and Euro Zone IP (-0.3% vs. (E) -0.2%) both missed estimates, although neither is weighing materially on markets.

Covid headlines remained largely unchanged, although Hawaii is reimposing restrictions on social gatherings.  But, that headline isn’t enough to weigh on markets broadly, as the broad response to rising cases remains mask mandates and increased vaccinations (which aren’t material headwinds on the recovery yet).

Today focus will be on Jobless Claims (E: 378K) and markets will want to see the number continue to gradually decline (but not drop so fast that it makes the Fed taper more quickly).  We also get Final PPI (E: 0.6% m/m, 7.3% y/y) but given yesterday’s CPI wasn’t hotter than expected, PPI shouldn’t move markets.