Tom Essaye Quoted in Barron’s on April 9th, 2024.

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Sevens Report Research’s Tom Essaye told Barron’s that with not much on the calendar Tuesday

Dow Closes Flat Ahead of CPI Report

Sevens Report Research’s Tom Essaye told Barron’s that with not much on the calendar Tuesday, traders were looking ahead to Wednesday’s consumer price index report, as well as updates on producer prices and the start of earnings season on Thursday and Friday, respectively.

“The Wednesday-Thursday-Friday of this week has the potential to provide some surprises or, conversely, reinforce what everybody hopes is going to happen,” Essaye says. “I think that what we’re seeing today is people just sort of biding their time, doing a little bit of positioning, making sure their risk tolerance is appropriate as we head into tomorrow’s 8:30 a.m. CPI release.”

Also, click here to view the full Barron’s article published on April 9th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

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A Return to Reasonable Valuations? April MMT Chart

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What’s in Today’s Report:

  • A Return to Reasonable Valuations? April MMT Chart
  • Dip-Buying Becomes Riskier in Late-Cycle Environments
  • Housings Starts Plunge in March – Chart

Futures are higher this morning as the geopolitical situation in the Middle East is tense but stable, inflation data was largely as-expected, and good consumer-focused earnings are helping offset soft sales from chip-maker ASML.

Economically, EU Core CPI met estimates at 2.9% while the U.K.’s Core CPI figure was “warm” at 4.2% vs. (E) 4.1% but neither report is materially impacting the general “higher for longer” central bank policy stance in place right now.

There are no notable economic reports today and just two late-day Fed speakers: Mester (5:30 p.m. ET), Bowman (7:15 p.m. ET).

That will leave trader focus on the Treasury’s 20-Yr Bond auction at 1:00 p.m. ET as weak demand would add upward pressure on yields and pressure stocks.

Additionally, earnings season continues with TRV ($4.75), CFG ($0.75), CSX ($0.45), and DFS ($2.98) reporting today, however, none of those names should have a significant impact on the broader market unless there is a glaring disappointment or upside surprise.

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Market Multiple Table: April Update

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What’s in Today’s Report:

  • Market Multiple Table – April Update
  • Retail Sales Takeaways
  • Empire State Manufacturing Index Disappoints

Futures are slightly lower amid Chinese growth worries, hawkish Fed expectations and simmering geopolitical risks.

Economically, Chinese GDP was solid (5.3% vs. E: 4.9%) but Retail Sales were soft at 3.1% vs. (E) 5.0% and Home Prices dropped 2.2% y/y which weighed on Asian markets overnight.

Looking into today’s session, there are two economic reports to watch: Housing Starts (E: 1.48 million) and Industrial Production (E: 0.4%). Markets are looking for slowing growth in the economic data so anything “too hot” or “too cold” in today’s releases will further weigh on stocks.

There are also several Fed speakers today. In chronological order they are: Jefferson (9:00 a.m. ET), Williams (12:30 p.m. ET), Barkin (1:00 p.m. ET), and most importantly, Powell (1:15 p.m. ET). Any commentary supporting “higher for longer” Fed policy rates will be negative while a dovish surprise could spark a sharp short-covering rally given near-term oversold conditions in equity markets.

Earnings season also continues today with BAC ($0.77), MS ($1.69), UNH ($6.65), and JNJ ($2.64) reporting ahead of the bell while UAL (-$0.53) and JBHT ($1.53) will release results after the close.

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How Bad Was Last Week for the Rally?

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What’s in Today’s Report:

  • Initial Thoughts on the Iranian Strikes on Israel
  • How Bad Was Last Week for the Rally
  • Weekly Economic Cheat Sheet – Growth Metrics in Focus

Stock futures are rebounding modestly from Friday’s steep selloff as geopolitical developments from the weekend were not as bad as feared leaving focus on the start to Q1 earnings season and key economic data this week.

Geopolitically, Iran attacked Israel with a series of well-telegraphed drone and missile strikes over the weekend, but most were intercepted. There were limited casualties and little damage so the situation is seen as “contained” for now, however, a retaliatory strike by Israel would be a negative development for risk assets.

Looking into today’s session, there are two important investment bank earnings reports due out ahead of the bell: GS ($8.54) and SCHW ($0.73). following Friday’s disappointing results from other major banks including JPM, investors will want to see good numbers.

Economically, we get several important data points today including the Empire State Manufacturing Index (E: -5.1), Retail Sales (E: 0.4%), and the Housing Market Index (E: 51). Data needs to come in Goldilocks, especially, Retail Sales as the last two reports missed estimates and have raised concerns about the health of the consumer. Otherwise selling pressure is likely to pick up again today.

Finally, there are two Fed officials speaking today: Williams (8:30 a.m. ET) and Daly (8:00 p.m. ET). Any less hawkish tone will be welcomed while “higher for longer” commentary will be negative for stocks and bonds (yields higher).

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Understanding Why the Decline in Inflation Has Stalled

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What’s in Today’s Report:

  • Understanding Why the Decline in Inflation Has Stalled

Futures are slightly lower following more disappointing Chinese economic data and as geo-political concerns rise.

Chinese exports fell –7.5% vs. (E) -1.9% underscoring that growth remains a major concern in the Chinese economy.

Oil and gold are sharply higher on a WSJ article stating Iran could directly retaliate against Israel this weekend (a direct attack on Israel by Iran would be a substantial escalation).

Today there is one notable economic report, Consumer Sentiment (E: 79.0), but barring major surprise that shouldn’t move markets.    Instead, focus will be on Fed Speak and earnings.

Starting with the Fed, we have several speakers today including Schmid (1:00 p.m.), Bostic (2:30 p.m.) and Daly (3:30 p.m.) and if they echo Thursday’s commentary that rate cuts aren’t coming soon, expect mild pressure on stocks.

On earnings, today is the start of the Q1 earnings season and several big banks report including: JPM ($4.18), BLK ($4.92), WFC ($1.09) and C ($1.29).  Focus will be on the results and on consumer commentary and the stronger the commentary, the more of a tailwind earnings will provide to stocks.

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What Does the Hot CPI Report Mean for Markets

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What’s in Today’s Report:

  • What Does the Hot CPI Report Mean for Markets?
  • EIA Analysis and Oil Market Update

Futures are modestly lower and extending yesterdays’ declines ahead of more inflation readings and following disappointing Chinese economic data.

China’s CPI rose less than expected (0.1% vs. (E) 0.5%) and in China that’s a negative as deflation remains a major risk in that slow-growth economy.

Geopolitically, U.S. officials have warned about an imminent Iranian retaliation against Israel either directly or via proxy groups.

Today will be another busy day of events and following the hot CPI, today’s PPI (E: 0.3% m/m, 2.3% y/y) will be in focus. If it rises more than expected, look for higher yields and lower stock prices.  Conversely, if PPI is lower than expected it should deliver a bit of relief and potentially cause a bounce in stocks (and decline in yields).  Other notable events today include the ECB Rate Decision (E: No Change) and Jobless Claims (E: 215k).

Finally, there three Fed speakers today:  Williams (8:45 a.m.), Barkin (10:00 a.m.), Bostic (1:30 p.m.).  If they push back on rate cut hopes following yesterday’s CPI expect more pressure on stocks and if they are partially dismissive of it, expect a rebound.

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Geopolitical factors remain the primary influence on the oil market

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Geopolitical factors remain the primary influence on the oil market: Tyler Richey, Sevens Report Co-Editor, Quoted in MarketWatch on MSN

Oil prices fall, but settle above lows, as traders monitor Middle East risks

Geopolitical factors remain the “primary influence on the oil market,” and news that Israel was withdrawing some troops from parts of Gaza was seen as a step toward de-escalation in its military conflict with Hamas, Tyler Richey, co-editor at Sevens Report Research, told MarketWatch.

Also, Israeli Prime Minister Benjamin Netanyahu reportedly announced that a date has been set for an invasion of Rafah, which has been a “hotly contested issue in the ongoing talks between Israel and Hamas,” said Richey.

“The initial perception of improving geopolitical dynamics between Israel and Hamas initially weighed on oil prices [Monday], but renewed uncertainties about the potential for the military conflict to intensify” saw much of the early losses recovered before the close, Richey noted.

Also, click here to view the full MarketWatch article published by MSN on April 9th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

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The market has likely reached a “tipping point”

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The market has likely reached a “tipping point”: Sevens Report Co-Editor, Tyler Richey, Quoted in Morningstar

Stock-market rally has likely reached a ‘tipping point’ following spike in Wall Street’s ‘fear gauge’

A rising Vix coupled with a pickup in demand for bearish put options are signs that the market has likely reached a “tipping point” and could continue to soften in the weeks ahead, according to Tyler Richey, co-editor of Sevens Report Research, in a report shared with MarketWatch on Monday.

Richey suggested a repeat of the selloff that sent the S&P 500 down 10% between late July and late October of last year appears to be the most likely scenario for markets.

Also, click here to view the full MarketWatch article published on Morningstar on April 9th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Oil Inventories

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The Fed is going to cut at some point—but nobody knows when

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The Fed is going to cut at some point—but nobody knows when: Tom Essaye Quoted in Barron’s

Dow Drops 300 Points as Indexes Turn Down

Traders were looking ahead to Wednesday’s consumer price index. Sevens Report Research’s Tom Essaye says traders seem to be biding their time, making sure their risk tolerance is appropriate heading into the 8:30 a.m. CPI release, especially with not much in the way of economic data or earnings in the meantime.

“We’re at this point where we all know the Fed is going to cut at some point—but nobody knows when—and it’s all going to be up to the data,” he says. “And there’s really not a lot else to focus on. So we’re all just sort of lurched from one data point to the other in this market right now. This is the way it gets when you get to long drawn out transitions in policy.”

Also, click here to view the full Barron’s article published on April 9th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

It’ll be Very Hard for This Market to RallyIf 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.

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The Most Important Long-Term Market Indicator

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What’s in Today’s Report:

  • The Most Important Long-Term Indicator for Markets
  • Remaining Catalysts This Week
  • Chart: 2-Yr Yield Quietly Breaks Out to New 2024 Highs

S&P futures are flat while Treasury yields are slightly lower and the dollar is little changed following a quiet night of news ahead of today’s critical U.S. CPI report.

In corporate news, TSM reported the fastest revenue growth since 2022, renewing some AI optimism in global markets.

The biggest catalyst of the day will hit before the bell with CPI (E: 0.3% m/m, 3.5% y/y) and Core CPI (E: 0.3% m/m, 3.7% y/y) being reported at 8:30 a.m. ET. Simply put, a “hot” print will be hawkish and bad for stocks; a “cool” print will be “risk-on.”

There are no other economic reports on the calendar, however, there is a 10-Yr Treasury Note auction at 1:00 p.m. ET and the monthly Treasury Statement (-$340B) will hit the wires at 2:00 p.m. ET. Both could move yields and impact stocks (higher yields will pressure equities).

Regarding the Fed, there are two speakers on the schedule today, Bowman right after CPI (8:45 a.m. ET), and Goolsbee mid-day (12:45 p.m. ET) before the March FOMC Meeting Minutes are released mid-afternoon (2:00 p.m. ET).

Any hawkishness in the speakers’ tone or language that points to “higher for longer” policy will be negative for stocks. Conversely, if a summer cut and three total 2024 rate cuts are reinforced that will support risk assets and rally stocks broadly.

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