Finding Attractive Risk/Reward in This Market

/in /by

What’s in Today’s Report:

  • Why Powell Was Dovish
  • Where Can We Find Attractive Risk/Reward?  Emerging Market Bonds
  • Energy Outlook (Slightly Positive)

Futures are marginally higher thanks to continued momentum from yesterday’s dovish rally.

Economic data was sparse overnight as the only notable number was German CPI, which met expectations at 1.6% yoy.

Today will be a busy day.  First, we get the 2nd half of Powell’s testimony in front of the Senate Banking Committee at 10:00 a.m. ET, but that shouldn’t yield any surprises as it’s mostly a repeat of yesterday.

The ECB Minutes will be released at 7:30 a.m. ET and if they hint at a re-start of QE (which they probably will) then we might see an extensions of this “dovish” rally.

On the data front, CPI (E: 0.0%) and Jobless Claims (E: 216K) both get released later this morning but given the flood of dovishness inundating markets right now from global central banks, it’d take a very strong CPI and very high jobless claims to hit stocks.

Finally, there are multiple Fed speakers today besides Powell, but they are all generally overshadowed by the comments yesterday so the market should largely ignore their speeches.  Today’s roster includes: Williams (11:00 a.m., 1:30 p.m. ET), Quarles (1:30 p.m. ET), Kashkari (5:00 p.m. ET).

Powell Preview

/in /by

What’s in Today’s Report:

  • Powell Testimony Preview
  • “This Week’s Sign the Apocalypse is Upon Us”
  • NFIB Small Business Optimism Index Analysis

Futures are lower with most international markets as investors look ahead to Powell’s testimony while another EU company, PageGroup, issued a profit warning overnight.

Economically, Chinese June CPI was inline but PPI dropped from 0.6% to 0.0% vs. (E) 0.2% which rekindled deflationary concerns and underscored pressures on the Chinese manufacturing sector.

Today, there are no economic reports but even if there were, focus would be primarily on the Fed anyway.

Powell’s Testimony before Congress is clearly the main event as investors look for further clues on the future of monetary policy. His written comments are due out at 8:30 a.m. ET before he begins to speak at 10:00 a.m. ET.

Bullard also speaks at 1:30 p.m. ET today and the June FOMC Meeting Minutes will hit the wires at 2:00 p.m. ET.

Lastly, there is a 10 Year T-Note Auction at 1:00 p.m. ET and depending on the results (demand metrics and yields) a reactive move in the bond market could influence stock trading in the midst of all the Fed events.

Tyler Richey Quoted in MarketWatch on June 9, 2019

/in /by

“Geopolitics, and more specifically the threat of more military activity between the U.S. and Iran, is one of the only remaining bullish factors supporting the…” said Tyler Richey, co-editor of Sevens Report Research. Click here to read the full article.

Oil Rig

Do Lower Rates Mean Better Stock Returns?

/in /by

What’s in Today’s Report:

  • Do Lower Rates Mean Better Stock Returns?
  • Another Bad Signal from the Yield Curve

Stock futures are moderately lower this morning as the less-dovish money flows in the wake of the June jobs report continue while multiple companies, notably BASF, have issued profit warnings so far this week.

Economically, the NFIB Small Business Optimism Index fell to 103.3 vs. (E) 104.5 in June as survey responses showed broad weakness in earnings and sales expectations which is further weighing on investor sentiment ahead of earnings season.

Today, there is just one economic report to watch: JOLTS (E: 7.40M) however there are multiple Fed officials scheduled to speak: Bullard (10:00 a.m. ET), Bostic (1:00 p.m. ET), and Quarles (2:00 p.m. ET).

With focus already largely shifting to Powell’s testimony before congress tomorrow and Thursday, investors will be watching today’s Fed speakers closely for any further clues on future policy following Friday’s strong jobs headline.

Tom Essaye Quoted in MarketWatch on July 8, 2019

/in /by

The price action, “confirms that last week’s rally was driven by falling yields and growing dovish hopes,” rather than faith in the ongoing strength of the U.S. economy, wrote Tom Essaye. Click here to read the full article.

Goalie

Tyler Richey Quoted in Bloomberg on July 4, 2019

/in /by

“From a demand standpoint, the question is will the Fed save the day” or “are we too far gone?” said Tyler Richey, co-editor at Sevens Report Research in Florida. Click here to read the full article.

Graph

What the Strong Jobs Report Means for Markets

/in /by

What’s in Today’s Report:

  • What Friday’s Jobs Report Means for the Markets
  • Weekly Market Preview (Powell’s testimony is the big event this week)
  • Weekly Economic Cheat Sheet (Fed Minuets and CPI)

Futures are slightly lower this morning following a quiet weekend of news, as markets digest what Friday’s jobs report means for future Fed rate cuts.

Following the jobs report, investors still expect a rate cut this month, but what’s now in doubt is whether we see additional cuts after that, something the market is assuming and has already priced in.  Doubts over the number of future cuts is why stocks dipped Friday and are marginally lower this morning.

Economic data was again underwhelming as Japanese Machine Orders (-7.3% vs. (E) -3.0%) and German Industrial Production (-3.7% vs. (E) -3.2%) missed estimates, while German exports were slightly better (-1.1% vs. (E) -0.9%).

The important events this week come Wednesday via Fed Chair Powell’s testimony before Congress (will he telegraph a rate cut?), the FOMC Minutes (also out Wednesday – is there consensus for a cut?) and CPI (out Thursday).  So, today should be generally quiet as there are no economic reports or notable Fed speakers, although U.S.-China trade negotiations will re-start, so we’ll have to watch for any headlines from there.

Tyler Richey Quoted in Bloomberg on June 24, 2019

/in /by

“Oil squeezed higher last week on tensions in the Middle East, but with so much uncertainty regarding the trade war…”said Tyler Richey, co-editor at Sevens Report Research. Click here to read the full article.

Oil Rig

Jobs Day

/in /by

What’s in Today’s Report:

  • Why Collapsing Bond Yields Are Boosting Stocks (For Now)
  • Oil Market Update/EIA Analysis

Futures are marginally lower as markets digest Wednesday’s new highs ahead of the jobs report.

Trading Thursday was quiet globally as there was no notable news, and most foreign indices were little changed.

Economic data continued to disappoint, as German Factory Orders became the latest manufacturing reading to badly miss estimates (-2.2% vs. (E) 0.2%).

Today focus will be on the Employment Situation Report and estimates are as follows: Jobs (E): 165k, Unemployment Rate (E): 3.6%, Wages (E): 3.2%.  As we saw on Wednesday (and really all week) slightly disappointing or better than expected data will likely result in the S&P 500 trading above 3000, while a very strong or very weak number will likely hit stocks.

For now, markets are convinced collapsing global bond yields are just reflective of impending dovish central bank policies, and until data gets bad enough to cause worries about the economy, those lower yields will be a short term tailwind on stocks (but longer term problem, according to history).

Jobs Report Preview

/in /by

What’s in Today’s Report:

  • Jobs Report Preview
  • What the OPEC+ Charter Means for Oil

Futures are rising with EU shares this morning as investors welcome news that Christine Lagarde (largely viewed as a dove) will likely succeed Mario Draghi as ECB President.

In the bond market, global yields hit new lows overnight (the 10-Yr touched 1.94%) on the dovish Lagarde news, but also as China’s June Composite PMI fell to 50.6 from 51.5 in May. The EU data was slightly better than expected, however, which has helped yields stabilize this morning.

Gold is also notably higher by 1.43% today and futures tested recently established multi-year highs overnight thanks to the dovish money flows.

Markets close at 1:00 p.m. today however there are multiple economic reports due out in the U.S. that warrant watching as they have the potential to move markets: ADP Employment Report (E: 140K), International Trade (E: -$53.4B), Jobless Claims (E: 220K), Factory Orders (E: -0.5%), and the ISM Non-Manufacturing Index (E: 55.8).