Is the Tapering Talk Set to Begin?

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What’s in Today’s Report:

  • Is the Tapering Talk Set to Begin?

Futures are little changed following a quiet night as markets wait for the latest reading on inflation via this morning’s CPI report.

Economic data was mixed overnight.  UK Industrial Production was better than feared (-4.2% vs. (E) -5.1%) while the German ZEW Economic Sentiment slightly missed expectations (70.7 vs. (E) 77.0) but neither number is moving markets.

Today there are two notable events and both pertain to Treasury yields.  First, we get Core CPI (E: 0.2% m/m, 1.6% y/y) and later this afternoon there is a 30 year Treasury auction.  If CPI comes in hot and there’s tepid demand at the auction, Treasury yields will likely rise and that should be a headwind on stocks.  Conversely, if CPI is tame and the auction is solid, yields will likely be little changed, and stocks should be able to grind higher.

We also have several Fed speakers today:  George, Daly, Harker, Barkin (12:00 p.m. ET) and Bostic (3:15 p.m. ET) but unless they give us more insight into tapering requirements (like Bullard did yesterday) they shouldn’t move markets.

How Does the S&P 500 Get to 4500?

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What’s in Today’s Report:

  • How Does the S&P 500 Get to 4500?
  • Weekly Market Preview:  Important inflation data, bank earnings, and Treasury auctions.
  • Weekly Economic Cheat Sheet:  Inflation Wednesday, April Data Starts Thursday.

Futures are slightly lower following a “not as dovish as expected” 60 Minutes interview of Fed Chair Powell.

Fed Chair Powell was more optimistic on near-term economic growth during a 60 Minutes interview on Sunday, and while he was by no means “hawkish,” his tone was taken as less dovish than expected and that’s weighing slightly on futures.

Economically, the only notable number was EU Retail Sales which beat expectations, rising 3.0% vs. (E) 1.2%.

Today there are no economic reports and only one Fed speaker, Rosengren (1:00 p.m. ET), so focus will remain on the 10 year yield.  Today there’s a 10 year Treasury auction and tomorrow there’s a 30 year Treasury auction.  If yields can remain stable amidst this stock rally, then the S&P 500 can continue to move higher.  But, if we see a resumption of the rise in yields, expect a headwind on stocks.

Sevens Report Co-Editor Tyler Richey Quoted in MarketWatch on April 8, 2021

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Gold scores the biggest daily gain of the month to end at a 6-week high

The latest string of strong economic data, including the good March U.S. jobs report last Friday and ‘hot’ ISM purchasing managers surveys, have “suggested the economic recovery is accelerating,” said Tyler Richey, co-editor at Sevens Report Research. Subsequently, 5-year…Click here to read the full article.

Tom Essaye Quoted in StreetInsider.com on April 6, 2021

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Penny Stocks, News, Momentum, Oh My!

Additionally, sentiment is positive as vaccinations in the U.S. and around the world continue. On Monday, the Dow closed with an over 374 point gain or 1.13%. Tom Essaye, the founder of Sevens Report Research, stated that “futures are modestly higher on momentum from…” Click here to read the full article.

Tom Essaye

What Would Make the Fed Less Dovish?

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What’s in Today’s Report:

  • What Would Make the Fed Less Dovish?

Futures are little changed following mixed economic data that showed higher inflation and underwhelming growth.

Inflation stats could be set to rise as Chinese PPI surged 4.4% vs. (E) 1.7%, and this could be the first of several higher than expected global inflation readings.

Economically, German Industrial Production missed estimates (-1.6% vs. (E) 1.5%)  but the reading isn’t moving markets.

Today the key number is the Core PPI (E: 0.2% m/m, 2.7% y/y).  Markets are expecting an uptick in inflation metrics so a slightly hot number shouldn’t move markets too much, although a much stronger than expected PPI reading will likely send the 10 year yield higher and that would be a headwind on stocks. There is also one Fed speaker, Kaplan (10:00 & 12:00 p.m. ET), but he shouldn’t move markets.

Tom Essaye Interviewed with WPTV Channel 5 on April 6, 2021

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“Normally it’s very hard for homeless and transitional people to get a job. But now the pandemic has made it even worse because unemployment levels…” said Tom Essaye, Sevens Report Research president and financial expert. Click here to watch the full video.

Cyclicals/Value vs. Tech/Growth Positioning Update

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What’s in Today’s Report:

  • Cyclicals/Value vs. Tech/Growth Positioning Update
  • EIA Analysis and Oil Update
  • FOMC Minutes:  Dovish, But We Still Expect Tapering Discussions in the Coming Weeks

Futures are modestly higher following some apparent progress in infrastructure negotiations.

President Biden signaled he is open to a 25% corporate tax (down from the desired 28%) and that reduction increases the chances infrastructure ultimately gets passed.

Economic data was solid as German Manufacturers’ Orders and the UK Construction PMI both beat estimates.

Today the focus will be on economic data, specifically Jobless Claims (E: 680K) and on Fed speak.  Broadly, markets will look for Fed officials to confirm what the minutes showed, that despite recent strong economic data, the Fed isn’t considering tapering yet.  Fed speakers today include, in order or importance,   Powell (12:00 p.m. ET), Bullard (11:00 a.m. ET) and Kashkari (2:00 p.m. ET).

Bottom line, if we get a solid jobless claims number and dovish commentary from Powell, expect a continued grind higher in stocks.

Market Multiple Levels: S&P 500 Chart

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What’s in Today’s Report:

  • Market Multiple Table: S&P 500 Chart

U.S. equity futures are little change this morning while international markets were mixed in mostly quiet trade overnight.

Economically, the Eurozone’s Final PMI Composite Index came in at 53.2 vs. (E) 52.5 in March, the latest sign that economic growth is accelerating globally.

Looking into today’s U.S. session, there is just one economic report to watch: International Trade Balance (E: -$70.4B) ahead of the bell while several Fed officials are scheduled to speak over the course of the day: Evans (9:00 a.m. ET), Kaplan (11:00 a.m. ET), Barkin (12:00 p.m. ET), and Daly (1:00 p.m. ET).

The March FOMC Meeting Minutes will also be released at 2:00 p.m. ET and it will be important that both today’s Fed speakers, as well as the Minutes show the FOMC is acknowledging the recent rise in rates but remains ultra-accommodative. Any hawkish hints could cause yields to spike and stocks to give back some of the week-to-date gains.

Market Multiple Table: April Update

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What’s in Today’s Report:

  • Market Multiple Table: April Update

Stock futures are modestly lower this morning following a quiet night of news as yesterday’s strong rally in U.S. equities is digested while international markets were mostly higher overnight.

Economically, China’s PMI Composite Index rose 1.4 points to 53.1 in March while the Eurozone Unemployment Rate edged up to 8.3% vs. (E) 8.1% in February, however neither report is materially moving markets this morning.

Today, there is just one economic report to watch: February JOLTS (E: 6.850M) and no Fed officials are scheduled to speak.

With limited catalysts on the calendar today, traders are most likely to be focused on coronavirus case trends and lockdown measures (both of which have been quietly on the rise lately) as well as bond markets.

Negative COVID headlines could result in some profit taking following yesterday’s big gains and any signs of another disorderly rise in bond yields given the firming economic growth expectations could also weigh on stocks, namely tech shares.

What Friday’s Jobs Report Means for Markets

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What’s in Today’s Report:

  • What Friday’s Job Report Means for the Rally (Less Dovish Fed?)
  • Weekly Market Preview:  Infrastructure Progress and Fed Outlook
  • Weekly Economic Cheat Sheet: Is a Spike in Inflation Coming?

Futures are modestly higher on momentum from Friday’s strong (but not too strong) jobs report.

Friday’s jobs report handily beat estimates (916k vs. (E) 660k) but the unemployment rate remained above 6% and wages were soft, so the number didn’t spike Treasury yields and  futures rose Friday after the release.

There was no notable economic data or political news over the weekend and many foreign markets are closed for Easter Monday.

Today the key economic report is the ISM Services PMI (E: 58.6) and markets will want to see a strong number showing a continued rebound in the service sector.  With many foreign markets closed, trading should be otherwise quiet but the 10 year yield is still key.  It digested Friday’s strong jobs report well, but if we see a rally today towards 1.80%, that will be a headwind on stocks.