Technical Update (Levels to Watch)

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What’s in Today’s Report:

  • Technical Update – Levels to Watch

Futures are moderately higher on momentum from Thursday’s rebound combined with a drop in industrial metals’ prices, which is helping to ease some anxiety on inflation.

Iron ore prices dropped sharply overnight as Chinese officials stated they would take measures to curb price increases in various industrial metals and that headline is pushing back on the “surging inflation” narrative (although it doesn’t change the inflation outlook).

There was no notable economic data overnight nor any important central bank speak (outside of the China metals news it was a quiet night).

Today we get several notable economic reports including Retail Sales (E: 1.0%), Industrial Production (E: 1.2%), and Consumer Sentiment (E: 90.3).  In general, the stronger the better for these reports but we’ll be watching the inflation expectations component of the Consumer Sentiment Index – if it runs “hot” expect a headwind on stocks.  There’s also one Fed speaker, Kaplan (1:00 p.m. ET), but he shouldn’t move markets.

Was the Strong CPI Report A Bearish Gamechanger?

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What’s in Today’s Report:

  • Was the Strong CPI Report a Bearish Gamechanger?
  • Inflation Hedge Part 2:  Natural Resource Stock ETFs
  • EIA and Oil Market Update

Futures are modestly lower mostly on momentum from Wednesday’s drop following a generally quiet night.

There was no new inflation news overnight, but investors are cautious ahead of the PPI report this morning, which should be similarly strong to yesterday’s CPI report.

Bitcoin and the entire crypto-currency space is getting hit hard after Tesla (TSLA) announced it would no longer accept Bitcoin as a form of payment and that’s weighing on some of the momentum parts of the market.

Looking forward to today, the key number will be PPI.  Expectations for PPI are 0.3% m/m and 5.9% y/y but if the numbers come in much stronger expect that to send yields higher and to hit stocks, at least temporarily.

The other notable number this morning is Jobless Claims (E: 475K) although that will start to fade a bit in importance as the market views the issues in the labor market as supply based (people not choosing to work) rather than demand based (people not being able to work).

There are also three Fed speakers today Barkin (10:00 a.m. ET), Waller (1:00 p.m. ET), Bullard (4:00 p.m. ET), and any commentary on inflation will be closely watched.

Sevens Report Co-Editor Tyler Richey Quoted in MarketWatch on May 11, 2021

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Gold pulls back from a 3-month high to mark first loss in 5 sessions

On the other hand, “the threat of stagflation continues to emerge as an underlying market theme, and that is supportive of gold for one main reason…” analysts at Sevens Report Research, wrote in Tuesday’s newsletter. Click here to read the full article.

Gold Bars

Sevens Report Co-Editor Tyler Richey Quoted in MarketWatch on May 11, 2021

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Oil settles higher as traders eye gasoline demand and Colonial Pipeline developments

If the pipeline isn’t back up and running by the end of the week, “we could see gasoline prices go parabolic in the near term, as there are already reports of…” said Tyler Richey, co-editor at Sevens Report Research. Click here to read the full article.

Colonial Pipeline

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.