Time to Chase This Market?

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What’s in Today’s Report:

  • Time to Chase This Market?
  • Weekly Market Preview:  Do Rate Cut Expectations for March Keep Falling? (It Depends on the Data)
  • Weekly Economic Cheat Sheet:  Important inflation report on Friday and important growth report on Wednesday.

Futures are modestly higher on momentum from Friday’s record highs, following a mostly quiet weekend of news and despite more economic stress in China.

Chinese markets continued to collapse (Hang Seng, Shanghai and Shenzen all down 2%-3%) after there was no cut to the 1/5 year Prime Loan Rates, despite clear signs of deflation and contracting economic growth.

Today there is one notable economic report,  Leading Indicators (E: -0.3%), but barring a major surprise it shouldn’t move markets.

Instead, focus will shift to earnings as the next two weeks will be the most important ones of this earnings season.  Some important reports today include:  PG ($1.70), JNJ ($2.27), VZ ($1.07), MMM ($2.31), UAL ($1.61), LOGI ($1.13), GE ($0.90).

Bullish

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The Reason Stocks & Bonds Are Declining (You’ve Seen It Before)

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What’s in Today’s Report:

  • The Reason Stocks & Bonds Are Declining (You’ve Seen It Before)

Futures are bouncing modestly following solid earnings and positive corporate news overnight.

Earnings overnight were decent as TSMC beat expectations while Bank of American upgraded AAPL.

Economically, however, the Aussie jobs report was soft (- 66k vs. (E) 15k) and that’s increasing global growth worries.

Today focus will stay on economic data as we get two important report, Jobless Claims (E: 206K) and Philly Fed Manufacturing Index (E: -6.7).  The Philly index will be especially watched following the implosion of the Empire Manufacturing survey on Tuesday and if we see a similar number this morning, look for some hard landing concerns to drift higher.

Away from those two reports we also get Housing Starts (1.425 million) and there is one Fed speaker, Bostic (7:30 a.m. and 12:05 p.m. ET), but they are unlikely to move markets.

On earnings, results really ramp up next week but some reports we’re watching today include: TSM ($1.37), PPG ($1.50), JBHT ($1.74).

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Sentiment Update

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What’s in Today’s Report:

  • Sentiment Update
  • Empire State Manufacturing Index Falls to Pandemic Lows

U.S. futures are tracking global shares lower as the ECB’s Lagarde became the latest to push back on overly dovish policy expectations. While Chinese economic data showed consumer weakness (but industrial strength) and inflation reaccelerated in Europe. This is adding to the recent trend of less-dovish/more-hawkish money flows.

Toay is lining up to be a busy session as there are a slew of economic reports due this morning. Including: Retail Sales (E: 0.4%), Import & Export Prices (E: -0.6%, -0.6%), Industrial Production (E: -0.1%), and the Housing Market Index (E: 38).

There are also several Fed officials scheduled to speak over the course of the session: Barr, Bowman, and Williams.

Earnings will also continue to come in today with several more notable financial companies reporting: SCHW ($0.65), CFG ($0.60), and DFS ($2.50).

Bottom line, trading has taken a more cautious tone this week with heavier price action in stocks. In order for that to ease and risk appetites return to the market today, we will need to see data that is consistent with a still healthy and resilient consumer but not to the point where the Fed would be inclined to delay rate cuts or cut less in 2024. Investors will look for less-hawkish Fed commentary and stable earnings as well. If those developments do not occur the risk of an acceleration lower in stocks this week will rise meaningfully.

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Does March vs. May Really Matter?

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What’s in Today’s Report:

  • Does March vs. May Really Matter?
  • Weekly Economic Cheat Sheet – Retail Sales Data in Focus

U.S. futures are tracking European shares lower this morning. This is amid rising bond yields and a stronger dollar following some hawkish central banker commentary this weekend.

Economically, the German ZEW’s Economic Sentiment rose to 15.2 vs. (E) 11.7 in January. Both eased recession concerns but also weighed on the prospects for imminent Fed and ECB rate cuts in the coming months.

This weekend, several ECB officials pushed back on expectations for rate cuts in H1’24. This is resulting in more of the late 2023 dovish money flows being unwound.

Looking into today’s session, there is one economic report to watch: Empire State Manufacturing Index (E: -4.0) and one Fed official scheduled to speak: Waller (11:00 a.m. ET).

Earnings season also continues to pick up with several big banks due to report today: GS ($3.47), MS ($1.07), PNC ($2.99), IBKR ($1.54).

Bottom line, investors will be looking for more Goldilocks economic data in the NY Fed release and a less-hawkish tone from Waller and no bad news out of the banks reporting earnings today in order to stabilize. Otherwise the premarket weakness is likely to continue into the primary session this morning.

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Bitcoin ETF Primer (For Discussions With Clients)

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What’s in Today’s Report:

  • Bitcoin ETF Primer (For Discussions With Clients)
  • Why the Hot CPI Report Didn’t Cause  A Larger Pullback

Futures are modestly lower following an increase in geopolitical tensions and subsequent 4% rally in oil.

The U.S. launched multiple missile strikes against Houthi targets in Yemen in response to the recent attacks on commercial ships in the Red Sea and that’s increasing concerns about a broader conflict in the region.

Today focus will stay on inflation via PPI (E: 0.2% m/m, 1.3% y/y) and Core PPI (E: 0.2% m/m, 2.0% y/y) and if we see hotter than expected numbers, look for some additional pressure on stocks.  We also have one Fed speaker today, Kashkari at 10:00 a.m. ET, although he shouldn’t move markets.

Additionally, today marks the start of earnings season and we get reports from major banks and a healthcare company today.  Reports we’re watching today include:  JPM ($3.73), BAC ($0.69), UNH ($5.98), BLK ($8.84), WFC ($1.16), C ($0.73), BK ($1.12).

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Market Multiple Table Chart

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What’s in Today’s Report:

  • Market Multiple Table Chart
  • EIA and Oil Market Analysis

Futures are slightly higher ahead of this morning’s CPI report after another dovish pivot by a global central bank and despite an potential uptick in geo-political tensions.

South Korea’s central bank made a dovish pivot and added to the idea global central banks are turning dovish.

Geopolitically, expectations are rising for a joint U.S./U.K strike on Houthi’s attacking ships in the Red Sea.

Today focus will be on CPI and expectations are as follows: Headline CPI (0.2% m/m, 3.2% y/y) and Core CPI (E: 0.2% m/m, 3.8% y/y).  The key here is that we see continued declines in at least one of the two metrics as that will likely be enough to keep investors believing in disinflation and March rate cuts.  If both metrics rise from last month, looking for an increase in volatility.

The other notable events today include Jobless Claims (E: 209K) and one Fed speaker, Barkin (12:40 p.m. ET) although they shouldn’t move markets barring a major surprise.

multiple

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What Is The VIX Suggesting?

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What Is The VIX Suggesting?: Tom Essaye Quoted in Morningstar

What this key stock-market gauge is telling investors amid a rough start to 2024

Meanwhile, a break above the December high for the VIX “would suggest more volatility looming ahead. Conversely, a reversal back towards the current 2024 low of 13.10 would suggest volatility is easing and stocks would be in an improving position to stabilize in the weeks ahead and potentially resume the late-2023 rally,” said Tom Essaye, founder of Sevens Report Research, in a Friday note.

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

Oil Inventories

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Gasoline And Distillate Fuel Supplied Fell Off A Cliff

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Gasoline And Distillate Fuel Supplied Fell Off A Cliff: Tyler Richey Quoted in Morningstar

Oil futures settle lower after ‘massive’ weekly rise in U.S. oil-product inventories

Gasoline and distillate fuel supplied, which is typically viewed as an implied measure of consumer demand, “fell off a cliff.”Tyler Richey, Sevens Report Research

The roughly 20 million-barrel surge in refined product stockpiles was “largely the function of the massive drop off in deliveries around Christmas and New Year’s, which is notably typical in late December and early January,” he said.

Also, click here to view the full MarketWatch article published on Morningstar on January 4th, 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, and Ugly

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What’s in Today’s Report:

  • CPI Preview: Good, Bad, & Ugly
  • Chart: S&P 500 in Typical Holding Pattern – Two Levels to Watch
  • NFIB Small Business Optimism Index – Inflation Concerns and Declining Earnings

There is a cautious bid in equity futures today as the 10-Yr yield hovers just under 4%. This is following an importantly steady inflation print in Europe and dovish leaning ECB chatter.

Economically, Norwegian CPI rose 4.8% in December, unchanged from November. Which is just below estimates of 4.9% which is a favorable development following last week’s concerning uptick in German CPI.

ECB Vice President Luis de Guindos was mildly dovish in a speech overnight, citing the possibility that the economy fell into a technical recession in late 2023 which could support the case for a more accommodating policy stance and that is helping keep yields in check this morning.

Looking into today’s session, there are no notable economic reports but one Fed speaker on the schedule who could move markets: Williams (3:15 p.m. ET).

In the early afternoon, three is a 10-Yr Treasury Note auction (1:00 p.m. ET) and investors will want to see more evidence of strong demand as was seen in yesterday’s 3-Yr auction as weak demand could send the benchmark yield up through 4% creating a renewed headwind for equity markets.

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Market Multiple Table: January Update

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What’s in Today’s Report:

  • Market Multiple Table – January Update
  • Manheim Used Vehicle Index Drops 7% in December – Chart

U.S. futures are tracking European shares lower this morning as yesterday’s squeezy, tech-led rally is digested amid a rebound in global bond yields with the 10-Yr above 4%.

Economic data was mixed overnight as German Industrial Production fell -0.7% vs. (E) 0.0% while Eurozone Unemployment fell to 6.4% vs. (E) 6.6%. Domestically, the NFIB Small Business Optimism Index rose to 91.9 vs. (E) 90.6.

Looking into today’s session, there is one more economic report on the calendar: International Trade in Goods (E: -$64.8B) but the release typically does not materially move markets and that is unlikely to change today.

There is one Fed speaker: Barr (12:00 p.m. ET) but the most notable potential catalyst for the session is a 3-Yr Treasury Note auction at 1:00 p.m. ET. If demand metrics are strong, and yields pullback, expect stocks to attempt to hold Monday’s big gains. However, a move further to the upside in yields will further pressure stocks.

 

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