Why Stocks Won’t Drop Part II: The Economy

/in , /by

What’s in Today’s Report:

  • Why Won’t Stocks Drop Part II: The Economy
  • VIX Falls to 52-Week Lows – Chart

Hawkish money flows are dominating markets this morning with stock futures falling, yields rising and oil and gold both testing support after hot inflation data overnight.

Economically, U.K. CPI was 10.1% vs. (E) 9.8% y/y in March while the Eurozone Narrow Core HICP reading rose 0.1% to 5.7% meeting estimates. The two inflation prints are causing a hawkish shift in central bank policy expectations this morning, which is in turn rekindling hard landing fears.

Looking into today’s session, there are no notable economic reports today however there is a 20-Yr Treasury Bond auction at 1:00 p.m. ET that could impact both bond and equity markets.

As far as the Fed goes there are two speakers today, but both are after the close: Goolsbee (5:30 p.m. ET) and Williams (7:00 p.m. ET).

That will leave investor focus on earnings early with more big banks and notable consumer financial companies reporting ahead of the bell including: MS ($1.67), CFG ($2.15), SYF ($1.49), ALLY ($0.88), USB ($1.13), and TRV ($3.64), while TSLA ($0.85) and IBM ($1.27) will release results after the close.

Bottom line, the 2-Yr Treasury yield is testing a more than one-month high this morning and stocks are coming for sale broadly which underscores deteriorating sentient among investors with the S&P 500 trading well above 4,100 this week. And if earnings news is not encouraging today, and yields continue to move higher over the course of the session, the selling pressure on equities is likely to continue and liable to accelerate.

Sevens Report Co-Editor Tyler Richey Quoted in MarketWatch on April 17th, 2023

/in , /by

Oil futures finish lower as traders eye prospects for energy demand

Oil futures finished with a loss on Monday, with traders weighing the prospects for energy demand. A “shockingly strong” Empire State Manufacturing Index reading Monday helped to live the odds of an interest-rate hike by the Federal Reserve in May, said Tyler Richey, co-editor at Sevens Report Research. Click here to read the full article.

Why Won’t Stocks Drop?

/in , /by

What’s in Today’s Report:

  • Why Won’t Stocks Drop? It’s Partially Sentiment
  • Empire State Manufacturing Index Takeaways
  • Chart – How Oil Prices Are Influencing the S&P 500 Right Now

Stock futures are higher this morning as Chinese economic data was mostly better than expected while investors await more big bank earnings today.

Economically, Chinese Retail Sales jumped 10.6% y/y vs. (E) 7.0% in March which helped Q1 GDP to rise 4.5% y/y vs. (E) 3.9%. Other metrics including Fixed Asset Investment and Industrial Production were less encouraging, but the strong consumer data was well received by investors overnight.

Meanwhile U.K. wage growth rose 5.9% vs. (E) 5.1% in March which adds some pressure to the BoE to remain aggressive as there is clearly more work to do to get inflation under control.

Looking into today’s session, focus will be on earnings early with BAC ($0.79), GS ($8.14), JNJ ($2.51), and BK ($1.09) reporting quarterly results before the open while NFLX ($2.81) and UAL (-$0.73) report after the close.

After the open, investors will be watching for the only notable economic release today: Housing Starts and Permits (E: 1.400 million, 1.431 million) before there is a 52-Week Treasury Bill auction at 11:30 a.m. ET which may offer some fresh insight into market expectations for Fed policy over the next year.

Finally, the Fed’s Bowman speaks at 1:00 p.m. ET and investors will be looking any further clues about May rate hike plans and longer term policy outlook.

Tom Essaye Joined BNN Bloomberg To Discuss The Markets on April 13th, 2023

/in , /by

If the U.S. Fed doesn’t make good on rate cut expectations, the market rally will be undone: Analyst

Tom Essaye, president of Sevens Report Research, joins BNN Bloomberg to discuss the disparity of the market’s rate cut expectations, and central bank pushback. Click here to watch the full interview.

Sevens Report Co-Editor Tyler Richey Quoted in MarketWatch on April 13th, 2023

/in , /by

U.S. oil futures finish lower, a day after marking their highest finish year to date

“The expectation that consumer demand will firm markedly in China as the economy continues to recover from the impact of strict economic lockdowns is another supporting factor for oil markets this week,” said Richey. Click here to read the full article.

Sevens Report Co-Editor Tyler Richey Quoted in MarketWatch on April 13th, 2023

/in , /by

Oil prices settle lower a day after U.S. benchmark breaks out to nearly 5-month high

What was interesting about Wednesday’s rally was that the U.S. petroleum inventory data, which were largely bearish, were “ignored and traders instead bid up the market on the easing headline CPI figure. To me, that suggests the market has largely priced in the OPEC+ production cut planned for next month and is again focused on the demand outlook, as the cooling price pressures bolstered hopes a hard economic landing can be avoided,” Tyler Richey, co-editor at Sevens Report Research, told MarketWatch. Click here to read the full article.

How Positive is the Restart of Disinflation?

/in , /by

What’s in Today’s Report:

  • How Positive is the Restart of Disinflation?
  • Weekly Market Preview:  Regional Bank Earnings This Week (Do They Ease Contagion Concerns?)
  • Weekly Economic Cheat Sheet:  First Look at April Economic Activity

Futures are little changed following a quiet weekend of news as investors await key regional bank earnings this week.

The only notable economic report this morning was Italian CPI, which fell –0.4% vs. (E) -0.3% and further implied that global disinflation has restarted (which is a positive).

Today we get the first look at April economic activity via the Empire Manufacturing Survey (E: -18.3) and markets will want to see stability (so not a continued steep drop).  We also get the latest look at housing via the Housing Market Index (E: 45).

Additionally, regional bank earnings start and their commentary on deposits and “Held to Maturity” securities will be especially important.  Some reports we’re watching today include: SCHW ($0.90), GNTY ($0.69), MTB ($3.98), JBHT ($2.05).

Why Stocks Rallied on Thursday

/in , /by

What’s in Today’s Report:

  • Why Stocks Rallied on Thursday
  • Policy Spread Update (Rate Cuts Imminent?)

Futures are slightly lower on digestion of Thursday’s rally and as markets await bank earnings this morning.

Fed balance sheet news overnight was mixed, as total usage of the Discount Window and BTFP dropped to $139 bln from $149 bln, but that’s still very elevated and it underscores there’s still stress in the regional banks.

Focus today will be on economic data and earnings, and the key here remains stability in both sets of reports (so no major disappointments).  Important economic reports today include, in order of importance, Retail Sales (E: -0.4%), Industrial Production (E: 0.3%) and Consumer Sentiment (E: 62.7).

Earnings season starts today and key reports we’re watching include: JPM ($3.41), C ($1.66), WFC ($1.15), PNC ($3.60), BLK ($7.73), UNH ($6.24).

Finally, there’s one Fed speaker, Waller at 8:45 a.m. ET but he shouldn’t move markets (the Fed message is very consistent right now).

Tom Essaye Interviewed on Yahoo Finance Live on April 11th, 2023

/in , /by

‘The Fed will be more hawkish than the market is currently expecting,’ Sevens Report Research President says

Sevens Report Research President Tom Essaye joins Yahoo Finance Live to discuss U.S. inflation, Fed policy, economic uncertainty, and the outlook for markets. “I think the Fed will be more hawkish than the market is currently expecting. We have to remember something. If we look at year-end Fed Funds estimates, it’s 4% to 4 and 1/4%. So the market is pricing in numerous rate cuts, not hikes, rate cuts before year end”…said Tom Essaye. Click here to watch the full interview.

Sevens Report – Market Multiple Table Chart

/in , /by

What’s in Today’s Report:

  • Market Multiple Table Chart
  • What CPI Means for Markets
  • EIA Analysis and Oil Update

Futures are slightly higher following better than expected economic data.

Chinese exports handily beat expectations in March rising 14.8% vs. (E) -7.0%, in what is the latest signal that the global economy remains resilient.

On inflation, German CPI met expectations rising 0.8% m/m and 7.4% y/y, numbers that are still too high in aggregate, but won’t make the ECB incrementally hawkish.

Today focus will remain on inflation and the labor market via PPI (E: 0.0% m/m, 3.0% y/y), Core PPI (E: 0.3% m/m, 3.4% y/y) and Jobless Claims (E: 233k).  PPI is expected to show moderation and importantly PPI is viewed as a quasi-leading indicator to CPI, so if numbers come in under expectations that’ll increase hopes inflation is truly easing.  For jobless claims, the higher the better as it implies normalization in the labor market, something the Fed wants to see before it can pause.