Is Disinflation Still Good for Markets? (The Answer May Surprise You)

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Is Disinflation Still Good for Markets? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Is Disinflation Still Good for Markets? (The Answer May Surprise You)
  • Weekly Market Preview:  Are Hard Landing Chances Rising?
  • Weekly Economic Cheat Sheet:  A holiday-shortened week, but still one with important growth updates.

Futures are slightly lower on mixed Chinese economic data and following a quiet summer weekend of news.

Chinese Fixed Asset Investment (4.0% vs. (E) 4.2%) and Industrial Production (5.6% vs. (E) 6.2%) both missed estimates while Retail Sales beat (3.7% vs. (E) 3.0%) leaving the outlook for Chinese growth still mixed (at best).

There were no notable political or geo-political updates over the weekend.

The focus of the data this week will be on economic growth and today we get the first look as June activity via the June Empire Manufacturing Index (E: -12.50).  Given recent worries about growth, the stronger this number, the better for the broader markets.

We also have three Fed speakers today, Williams (12:00 p.m. ET), Harker (1:0 p.m. ET) and Cook (11:00 p.m. ET) but again, given last week’s Fed meeting, they shouldn’t move markets.

Finally, markets are closed on Wednesday for observance of Juneteenth (this is a recently new Federal holiday so I just want to make sure everyone was aware of the closure).

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Evidence That Investors Are Starting to Worry About Growth

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Evidence That Investors Are Starting to Worry About Growth: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Evidence That Investors Are Starting to Worry About Growth

Futures are moderately lower despite a slightly dovish Bank of Japan decision and more strong tech earnings (ADBE), as growing political anxiety in Europe weighed on markets.

French stocks dropped another 1% (down 5% on the week) on growing political uncertainty and that’s weighing on European markets and U.S. futures.

Today focus will remain on economic data and the notable report is the University of Michigan Consumer Sentiment Index (E: 73.0).  But, more important than the consumer sentiment reading will be the inflation data in that report (1-Year Inflation Expectations E: 3.2%, Five-Year Inflation Expectations E: 3.0%) and markets will want to see stable consumer sentiment and better than expected inflation readings to rally.

We also have two Fed speakers today, Goolsbee (2:00 p.m. ET) and Cook (7:00 p.m. ET)., but they shouldn’t move markets.

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What the Good CPI and Mixed Fed Message Means for Markets

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What the Good CPI and Mixed Fed Message Means for Markets: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What Yesterday’s Good CPI and Mixed Fed Messaging Means for Markets

Futures are little changed despite more positive tech earnings as markets digest Wednesday’s CPI driven rally.

Broadcom (AVGO) became the latest AI-linked tech company (after AAPL and ORCL) to post strong earnings as the stock is up 14% pre-market.

Economically, it was a mostly quiet night as EU Industrial Production slightly missed estimates (-0.1% vs. (E) 0.1%) but that isn’t moving markets.

Today focus will remain on economic data and the two notable reports are Jobless Claims (222k) and PPI (E: 0.1% m/m, 2.5% y/y).  Of the two, PPI is more important and if it is lower than expected that’ll strengthen the belief in disinflation and increase September rate cut expectations, and stocks should extend yesterday’s rally.

Additionally, we do get one Fed speaker today, Williams at 12:00 p.m. ET, and he is part of leadership so his commentary on rate cuts could move markets.

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FOMC Preview (All About the Dots)

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What’s in Today’s Report:

  • FOMC Preview (All About the Dots)

Futures are slightly higher following more solid tech earnings and despite some stagflationary economic data.

ORCL earnings beat estimates and the stock is up 9% pre-market, helping to support stock futures.

Economically, Chinese inflation ran slightly hot while UK Industrial Production badly missed estimates.

Today brings the two key events of the week via CPI and the Fed Decision.  For CPI, estimates are:  E: 0.1% m/m, 3.4% y/y, Core CPI (0.3% m/m, 3.5% y/y).  The key here is that core CPI is flat or declines from last month.  If we see a bounce back above 3.6% that will likely be a material surprise negative.

For the Fed, there is no change expected to rates and focus at 2:00 will be on the dots (and how much they changed since March).  Anything from the Fed (dots or Powell commentary) that makes a September rate cut more likely will help stocks, while anything that makes it less likely will be a headwind.

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Tom Essaye has proposed two unlikely scenarios for Friday’s jobs report

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Two unlikely scenarios for Friday’s jobs report: Tom Essaye Quoted in MarketWatch

Two ‘wildcard’ scenarios for Friday’s jobs report

Tom Essaye, founder of Sevens Report Research, has proposed two unlikely scenarios for Friday’s jobs report that are nevertheless worth considering.

In a report shared with MarketWatch early Friday, Essaye outlined his two “wildcard” scenarios — one where jobs growth surprises to the upside, but wage growth slows, and another that is essentially the inverse.

  • “The first potential wildcard to watch today is a jobs report that supports the case for a “no landing” or already-achieved soft-landing, which would be characterized by an as-expected or better-than-anticipated job adds headline, steady or falling unemployment rate, and significant drop in wage growth to suggest suddenly easing inflation pressures.”
  • “The second wildcard to watch is data that suggests the economy is falling into a rut of stagflation with a sharp slowdown in growth that is on the brink of contraction but with still sticky and elevated inflation pressures. A very underwhelming job adds headline, a spike in the unemployment rate, and an unforeseen jump in wage growth would fit the criteria of a stagflationary release.”

Also, click here to view the full MarketWatch article published on June 7th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

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Prices had sold off with risk assets in the immediate wake of the U.S. jobs data

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Prices had sold off with risk assets: Sevens Report Co-Editor, Tyler Richey, Quoted in MarketWatch

Oil prices fall for a third week in a row

Prices had sold off with risk assets in the immediate wake of the U.S. jobs data for May as they were “perceived as ‘hot’ and hawkish for Fed policy” and “ultimately negative for growth and consumer demand,” said Tyler Richey, co-editor at Sevens Report Research. “But futures have since recovered as the details of the report were not nearly as strong as the headline would suggest.”

“In the near term, an uncertain and potentially fluid OPEC+ backdrop, simmering geopolitical tensions and perceived resilience could support oil prices and even see a retest of $80 [a] barrel” by WTI crude, he said. “But looking at the longer-term setup for oil, it is less than encouraging with all the telltale signs of a looming recession falling into place at a time when OPEC+ is likely maxed out with regard to their willingness to curb production any further than they already have.”

Also, click here to view the full MarketWatch article published on June 7th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

The lack of certainty about future production

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The lack of certainty about future production: Sevens Report Co-Editor, Tyler Richey, Quoted in Morningstar

Oil prices fall for a third consecutive week

“The lack of certainty about future production targets, as soon as this fall, by major producers like Saudi Arabia and Russia prompted a ‘sell-now-ask-questions-later’ reaction” earlier this week, Tyler Richey, co-editor at Sevens Report Research, told MarketWatch.

Also, click here to view the full MarketWatch article published on Morningstar on June 7th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Oil Inventories

Lastly, If you want research that comes with no long-term commitment, yet provides independent, value-added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

CPI Preview: Good, Bad & Ugly

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

What’s in Today’s Report:

  • CPI Preview:  Good, Bad & Ugly

Futures are modestly lower again following a quiet night of news as investors focus on tomorrow’s CPI report and Fed rate decision.

Economically, the UK Labour Market Report showed higher than expected average earnings (5.9% vs. (E) 5.7%) and that’s pushing back slightly on expectations for a rate cut this summer.

European bond yields remained elevated as polling suggests France’s far-right party should win the election.

Today should be another mostly quiet day as investors await the two potentially major catalysts on Wednesday, although we do get one notable economic report today via the NFIB Small Business Optimism Index (E: 89.7).  However, it’d have to be substantially lower or higher than estimates to move markets.

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The fall in gasoline supplied last week suggests a near-term peak in demand

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The fall in gasoline supplied last week suggests a near-term peak in demand: Sevens Report Research Analysts, Quoted in Morningstar

Oil prices post back-to-back gains as worries about economic outlook fade

The fall in gasoline supplied last week below the four-week average suggests a near-term peak in demand, analysts at Sevens Report Research said in a note.

Encouragingly, the four-week average did rise by 37,000 barrels a day to 9.07 million barrels a day, so there’s hope that demand could still be a source of fundamental support, they said, though last week wasn’t a step in that direction, based on the data.

Oil rose Wednesday not so much because of the EIA data, but rather because economic data eased worries about recession, added to expectations the Federal Reserve will cut interest rates in the fall and boosted hopes for a soft economic landing in the U.S., they wrote.

“The stabilization in oil should be considered fragile, however, as the oil market does not like sources of uncertainty like OPEC+ delivered with last weekend’s production policy decision,” the analysts said.

Also, click here to view the full MarketWatch article published on Morningstar on June 6th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Oil Inventories

Lastly, If you want research that comes with no long-term commitment, yet provides independent, value-added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

What’s in Today’s Report: When Does Bad Economic Data Become Bad for Stocks?

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Jobs Day Technical Preview & Wildcards to Watch: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • When Does Bad Economic Data Become Bad for Stocks?
  • Weekly Market Preview:  An Important Week:  Fed Decision (Including the Dots), CPI and AI Updates.
  • Weekly Economic Cheat Sheet:  Do We See Real Movement in Rate Cut Expectations?

Futures are modestly lower as global bond yields rise following surprise political news over the weekend.

Far right political parties outperformed expectations in EU elections while French President Macron called for surprise snap elections.  The results are pushing French and German bond yields higher, which are pulling Treasury yields up in sympathy and weighing slightly on futures.

Outside of the political results, it was a mostly quiet weekend of news as investors look ahead to an important week of AI catalysts, the FOMC decision and the latest CPI report.

This is a busy and important week for markets as it will either confirm current (positive) expectations on Fed rate cuts and inflation or challenge them and increase volatility.  That said, the week starts quietly as there are no notable economic reports today and the key event is likely to be AAPL’s Worldwide Developer Conference keynote announcement, which is focused on AI.  If it’s underwhelming, tech could lag and slightly weigh on markets.

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