The initial market reaction to the CPI release was a hawkish one

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Oil prices decline to session lows: Sevens Report Co-Editor, Tyler Richey, Quoted in MarketWatch

Oil futures move up after CPI data, OPEC’s latest forecast for growth in oil demand

The initial market reaction to the CPI release was “a hawkish one, which saw oil prices decline to session lows,” said Tyler Richey, co-editor at Sevens Report Research. “Hawkish central bank policy is bad for the oil market because high interest rates over time act as a steady headwind on global growth and ultimately that weighs on consumer demand expectations.”

Looking at the reaction in the rates markets, “hawkish money flows were only modest, and investors are still pricing in a June rate cut from the Fed, just with a slight dip in confidence,” Richey said.

Also, click here to view the full MarketWatch article published on March 12th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

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How oil futures close out the week today will largely depend on how investors digest today’s jobs data

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Sevens Report Analysts Quoted in MarketWatch

Jobs report could decide how oil closes out the week

“How oil futures close out the week today will largely depend on how investors digest today’s jobs data. If it is more ‘market-friendly’ data that points to slowing inflation (specifically wages) and more loosening in the jobs market, oil is likely to rally past the $80/barrel mark,” analysts at Sevens Report Research said in a note.

“Conversely, a ‘hot’ report would likely send futures back towards support in the mid-$70s,” they wrote.

Also, click here to view the full MarketWatch article published on March 8th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

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.

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The Jobs Report Was Goldilocks

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The jobs report was Goldilocks: Tom Essaye Quoted in Barron’s

Nvidia Sinks, Leading Tech Pullback

Sevens Report Research’s Tom Essaye told Barron’s that although Federal Reserve Chair Jerome Powell’s congressional testimony this week and Friday’s jobs report kept market expectations intact for both a June interest rate cut and generally stable growth, neither event added anything incrementally positive.

“The jobs report was Goldilocks, but it also added to some hints that there may be some weakness forming in the labor market, and that combined with digestion is likely why markets are slightly lower…,” Essaye said.

Also, click here to view the full Barron’s article published on March 8th, 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 Rally

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Tom Essaye’s breakdown of how markets could react to the February jobs data.

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How markets could react to the February jobs data: Tom Essaye Quoted in MarketWatch

How markets might react to Friday’s jobs report: three scenarios.

Tom Essaye, publisher of Sevens Report Research, has provided a breakdown of how markets could react to the February jobs data.

“Just Right” (Expectation for a June Rate Cut Stay Near 90%) 50k-250k Job adds, UE Rate ≥ 3.7%, Wages: ≤ 4.3%. A number in this range would solidify expectations for June rate cuts and the best-case scenario for markets is a slightly underwhelming number, as that will 1) Keep a June rate cut full expected and 2) Not imply the labor market is suddenly losing momentum.

“Too Hot” (A June Rate Cut Probability Drops Below 50%) > 250k Jobs Adds, UE Rate ≤ 3.6%, Wages > 4.4% yoy. 

“Too Cold” (Hard Landing Concerns Grow) <50k Job adds. In the immediate reaction, a very soft number will pressure Treasury yields further and could result in a knee-jerk rally in stocks (i.e. bad data is good for stocks because it makes the Fed more likely to cut). 

Also, click here to view the full MarketWatch article published on March 8th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

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.

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Market Multiple Table Chart: Bullish Momentum vs. Fair Value

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Market Multiple Table Chart: Bullish Momentum vs. Fair Value: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Market Multiple Table Chart:  Bullish Momentum vs. Fair Value
  • EIA Analysis and Oil Market Update

Futures are modestly higher as stocks rebound from Wednesday’s late day dip ahead of key economic data.

Economically, the only notable number was Swedish CPI which rose 2.5% vs. (E) 2.8% and that’s reinforcing summer rate cut expectations.

AI enthusiasm got a small boost overnight as Apple supplier Foxconn posted optimistic guidance on strong AI server demand.

Today focus will be on economic data, especially Jobless Claims (E: 218k) and Retail Sales (E: 0.8% m/m).  Continuing claims (contained in the jobless claims report) and retail sales disappointed recently and if we see that again, it’ll add to growth concerns and could hit stocks.

On inflation, we also get PPI (E: 0.3% m/m, 1.1% y/y) and given CPI ran a touch hot, it wouldn’t be a surprise if PPI did the same.  But, it’ll likely take a much hotter than expected number to hit markets (because they’ve already priced in the slightly hot CPI report).

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Market Multiple Table: March Update

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Market Multiple Table: March Update: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Market Multiple Table – March Update
  • CPI Takeaways – Minimal Impact on Fed Rate Expectations

U.S. equity futures are flat as investors digest yesterday’s tech-led rally to fresh record highs in the S&P 500.

Overseas, Chinese developer Country Garden Holdings missed a yuan-denominated bond payment overnight which weighed on Asian markets.

Economically, U.K. monthly GDP and Industrial Production both largely met estimates, but Eurozone Industrial Production badly missed, falling -6.7% vs. (E) -2.7% in January.

Looking into today’s session, there are no economic reports or Fed speakers on the calendar which will leave traders focused on AI-focused names to see if the tech sector can lead stocks to new highs.

The one notable catalyst on the schedule today is a 30-Yr Treasury Bond auction at 1:00 p.m. ET. A weak outcome could send yields higher which would act as a renewed headwind on stocks while a pullback in yields would be welcomed.

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CPI Preview: Good, Bad, Ugly

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CPI Preview: Good, Bad, Ugly: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Bottom Line – Growth Concerns, Not Fears
  • CPI Preview: Good, Bad, Ugly
  • VIX Chart – A Key Level to Watch Today.

Futures are cautiously higher thanks to market-friendly economic data overnight as traders await the U.S. CPI report.

Economically, German CPI met estimates in February (+0.4% m/m) while the U.K. jobs report showed an uptick in unemployment and easing wage pressures which is incrementally helping ease higher-for-longer policy rate fears.

Domestically, the NFIB Small Business Optimism Index was slightly disappointing as the headline edged down to 89.4 vs. (E: 89.9) but markets are largely overlooking the pre-market release ahead of the CPI data.

Today, all eyes will be on the 8:30 a.m. (ET) release of the February CPI report (E: 0.4% m/m, 3.1% y/y), Core CPI (E: 0.3% m/m, 3.7% y/y). The release has the potential to materially move markets as options data shows traders are bracing for a 1%+ move in either direction today (and it could be even more if the data surprises meaningfully either way).

Beyond the pre-market inflation data, there are no Fed officials scheduled to speak which will likely leave markets digesting the CPI release for much of the morning. In the early afternoon, there is a 10-Treasury Note auction at 1:00 p.m. ET, and the outcome of that auction could move yields and ultimately impact stocks into the close.

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Why Didn’t Stocks Rally Last Week? (Despite Good News)

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What’s in Today’s Report:

  • Why Didn’t Stocks Rally Last Week (Despite Good News)
  • Weekly Market Preview:  Is the Tech Rally Finally Exhausted?
  • Weekly Economic Cheat Sheet:  Focus on Inflation This Week

Futures are slightly lower mostly on momentum from Friday’s declines following a very quiet weekend of news.

Economically, the only notable number over the weekend was Chinese CPI, which rose more than expected (0.7% vs. (E) 0.3%) and that’s being seen as a positive as deflation was a growing risk in the Chinese economy.

Focus this week will remain on economic data (both inflation and growth) and tomorrow’s CPI report is the key report for the week.

Today, however, the calendar is sparse as the only notable economic report is New York Fed Inflation Expectations (E: 3.00%) and barring a major overshoot, this number shouldn’t move markets.

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Jobs Report Preview (Higher “Too Hot” Limits)

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Jobs Report Preview (Higher “Too Hot” Limits): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Jobs Report Preview (Higher “Too Hot” Limits)

Futures are little changed ahead of the jobs report and following a mostly quiet night of news.

Tech earnings were mixed as semi-conductor/AI linked stocks AVGO and MRVL earnings underwhelmed and both stocks are lower pre-market (-2% and -5% respectively).

Economically, ECB member Francois de-Villeroy said a rate cut in April or June is “very likely” further reinforcing expectations for summer rate cuts from global central banks.

Today focus will be on the jobs report and expectations are as follows:  190K Job Adds, 3.7% Unemployment Rate, 0.3%/4.3% Wage Growth.  Powell and other Fed members sound committed to rate cuts barring a bounce back in inflation so for the jobs number to be “Too Hot” we’ll need to see strong job adds, wage gains and low unemployment.  Barring “hot” numbers across those metrics, the jobs report likely won’t materially reduce June rate cut expectations.  If it does, however, expect a real uptick in volatility.

Finally, there’s one Fed speaker today, Williams at 7:00 a.m. ET, but he shouldn’t move markets.

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Jobs Report Preview (Will June Cuts Still Be Expected?)

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What’s in Today’s Report:

  • Jobs Report Preview (Will June Cuts Still Be Expected?)
  • EIA Analysis and Oil Market Update

Futures are slightly higher following a generally quiet night of news as markets look ahead to tomorrow’s jobs report.

Economically, the only notable number overnight was German Manufacturers’ Orders and it badly missed expectations (-11.3% vs. (E ) -6.0%) but it isn’t impacting markets.

Japanese stocks fell sharply (Nikkei down more than 1%) as “chatter” grew louder the BOJ may hike rates in March.

Today is a relatively busy day of events but it’ll take some significant surprises to move markets ahead of tomorrow’s jobs report.

The key events today, in order of importance, are:   ECB Rate Decision (No change is expected but will Lagarde point to June cuts?), Jobless Claims (E: 215K, will they keep rising?), Unit Labor Costs (E: 0.7%), Powell’s Senate testimony (10:00 a.m. ET) and Cleveland Fed President Mester (11:30 a.m. ET).

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