How to Allocate to Commodities

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What’s in Today’s Report:

  • How to Allocate to Commodities

Stock futures are under pressure for the third day in a row this morning as inflation fears continue to grip global markets ahead of today’s key April CPI report in the U.S.

Economically, Eurozone Industrial Production missed expectations while both the U.K. Monthly GDP and Industrial Production reports handily topped estimates which is helping the FTSE buck the trend and rally today.

Looking into today’s session, all eyes will be on the April CPI report due out at 8:30 a.m. ET (E: 0.2% m/m, 3.6% y/y). A hot print could spook investors and cause a continuation of the early week’s risk-off money flows.

Later in the session, there are multiple Fed speakers including: Clarida (9:00 a.m. ET), Bostic (1:00 p.m. ET), and Harker (1:30 p.m. ET) however Fed speak has remained decidedly dovish and none of today’s speakers should move markets.

Finally, there is a 10-Yr Treasury Note Auction at 1:00 p.m. ET and the outcome could give investors an idea of how bond traders view inflation in the wake of the CPI report.

Ultimately a soft bond auction and a subsequent rise in yields would likely compound this week’s already elevated inflation concerns and cause more volatility in equity markets while a strong auction could ease those concerns and see a relief rally develop.

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The Real State of the Jobs Market

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What’s in Today’s Report:

  • What Is the Real State of the Jobs Market and Why Do We Care?
  • What Is Going On With the Colonial Pipeline?

Futures are down sharply with global shares this morning as positive vaccine headlines were offset by rising stagflation concerns which are weighing heavily on tech names.

PFE was awarded emergency use authorization for its vaccine in 12-15 year-olds, bolstering “re-opening” optimism but also stagflation concerns in the wake of Friday’s weak jobs report.

There were no market-moving economic reports overnight.

Today, there are a lot of moving pieces and potential catalysts. First, there is one economic report: JOLTS (E: 7.455M) as well as a 3-Yr Treasury Note auction at 1:00 p.m. ET. If the labor data shows further signs of weakness and/or the auction is weak, sending yields higher, expect more equity market weakness led by tech.

Additionally, there are multiple Fed speakers: Williams (10:30 a.m. ET), Brainard (12:00 p.m. ET), Daly (1:00 p.m. ET), Bostic (1:15 p.m. ET), and Harker (2:00 p.m. ET). They should not veer too far from the dovish narrative however if any of them do hint at “talking about tapering” or mention inflation becoming a concern, expect more volatility.

What the Disappointing Jobs Report Means for Markets

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What’s in Today’s Report:

  • What the Disappointing Jobs Report Means for Markets
  • Weekly Market Preview:  Can the Goldilocks Setup Continue This Week?
  • Weekly Economic Cheat Sheet:  Key Inflation Data This Week

Futures are flat following a mostly quiet weekend of news as markets digested Friday’s jobs report, which was a disappointment but isn’t changing the broad market outlook (more on that in the Report).

Commodity prices continued to surge over the weekend, and that’s going to continue to increase inflation pressures.  Iron Ore prices rose 10% as China tightened supply amidst the global recovery.   Meanwhile, wholesale gasoline prices rose 2% following a cyber-attack that closed the Colonial Pipeline, although the outage isn’t expected to be long-lasting.

Today there are no notable economic reports and only one Fed speaker, Evans (8:30 a.m. ET, 2:00 p.m. ET).  So, unless we learn the Colonial Pipeline outage will be long-lasting (which would send gasoline prices sharply higher), I’d expect relatively quiet trading today.

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Tom Essaye Quoted in Barrons on May 7, 2021

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Roku Pops, Peloton Jumps, and Tech Is on a Tear

“Today’s focus will be on the Employment…” writes Tom Essaye, founder of Sevens Report, before the jobs report emerged. Click here to read the full article.

Tom Essaye Interviewed with Yahoo Finance on May 6, 2021

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New jobless claims fall to fresh pandemic-era lows

Sevens Report Research Founder & President Tom Essaye joins Yahoo Finance Live to discuss the latest market action following better-than-expected jobless claims. Click here to watch the full interview.

Jobs Report Preview (Too Hot is the Risk)

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What’s in Today’s Report:

  • Jobs Report Preview (Too Hot Is the Risk)
  • EIA Analysis  and Oil Market Update

Futures are modestly higher as markets digest yesterday’s dovish Fed rhetoric while data overnight was solid.

German Manufacturers’ Orders and Euro Zone Retail Sales both beat estimates, again implying the economic recovery in Europe is gaining momentum (this is positive for European stocks).

Fed officials repeated their dovish stance yesterday with Vice Chair Clarida reinforcing it’s not time to think about tapering despite rising inflation and strong growth.

Today focus will be on weekly Jobless Claims (E: 533K) and again markets will want to see them hold the gains of the past few weeks.  We also get numerous Fed speakers including (in order of importance): Williams (9:00 a.m. ET), Mester (1:00 p.m. ET), Bostic (1:00 p.m. ET) and Kaplan (10:00 a.m. ET) but we don’t expect any of them to materially move markets.

Market Multiple Levels: S&P 500 Chart

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What’s in Today’s Report:

  • Market Multiple Levels: S&P 500 Chart
  • What to Make of Yellen’s “Rate Hike” Comments

U.S. stocks futures are recovering some of yesterday’s losses after Treasury Secretary Janey Yellen walked back earlier comments about interest rates after the close yesterday while trader focus shifts to jobs data today.

The Eurozone Composite PMI slightly topped estimates o/n (53.8 vs. E: 53.7) helping EU shares lead global markets higher today.

Looking into today’s session, there are two notable economic reports to watch: the April ADP Employment Report (E: 763K) which will offer the first look at the health of the labor market from last month, and the ISM Services index (E: 64.2). Investors will be looking for a solid ISM Services number today following the disappointing manufacturing print earlier in the week.

There are also three Fed speakers today: Evans (9:30 a.m. & 3:00 p.m. ET), Rosengren (11:00 a.m. ET), and Mester (12:00 p.m. ET) as well as a few notable companies reporting earnings: GM ($1.01), PYPL ($1.01), UBER (-$0.56).

Bottom line, if yesterday’s rate hike/higher interest rate concerns continue to subside this morning, then stocks should be able to stabilize led by a recovery in tech names however any negative surprises in economic data or hawkish comments from any of the Fed speakers could lead to renewed selling pressure today.

Market Multiple Table: May Update

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What’s in Today’s Report:

  • Market Multiple Table: May Update
  • ISM Manufacturing PMI Takeaways
  • Is the Bank of England About to Become the Second Large Central Bank to Taper QE?

Stock futures are modestly lower this morning after a mostly quiet night of news as investors continue to digest the equity market’s latest run to record highs and technology shares lag.

Economically, the U.K.’s Manufacturing PMI was 60.9 vs. (E) 60.7 in April, helping the FTSE outperform this morning.

Today, there are a few economic reports to watch early in the day including: Motor Vehicle Sales (E: 17.5M), International Trade in Goods (E: -$74.0B), and Factory Orders (E: 1.3%) however none of them should materially move markets.

There are no Fed officials scheduled to speak today and no Treasury auctions.

Earnings season is still underway with a few notable companies reporting Q1 results today including: CVS ($1.72), PFE ($0.79), and LYFT (-$0.53).

What’s Going To Move This Market Higher?

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What’s in Today’s Report:

  • What’s Going to Move This Market Higher?
  • Weekly Market Preview:  How Strong is the Global Recovery (The Stronger, the Better)
  • Weekly Economic Cheat Sheet:  What Happens if Friday’s Jobs Report is “Too Hot?”

Futures are modestly higher as markets bounce back from Friday’s decline thanks to solid global economic data.

Economically, German Retail Sales beat estimates, surging 7.7% vs. (E) 3.0% while the final EU manufacturing PMI slightly missed estimates at 62.9 vs. (E) 63.3.  But, that’s still a strong number in an absolute sense and implies the EU economy is rebounding from COVID.

Politically, President Biden signaled support for a bipartisan infrastructure plan, which means it will be smaller than proposed but also more likely to pass and become law.

Today the key number will be the ISM Manufacturing PMI (E: 65.0) and markets will want to see continued strength in the U.S. recovery.  We also get one Fed speaker, Williams at 2:10 p.m. ET, and it will be interesting to see if he acknowledges that it’s time to “talk about, talking about” tapering QE, like Dallas Fed President Kaplan did on Friday.  If so, that could push the 10 year yield slightly higher.

Tom Essaye Quoted in Barron’s on April 30, 2021

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Amazon Rises, Clorox Dips, and Stocks Are Down

“Futures are modestly lower on disappointing economic data…” wrote Tom Essaye, founder of Sevens Report Research in a note. Click here to read the full article.