Would a Ceasefire Be a Bullish Catalyst?

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What’s in Today’s Report:

  • Is a Ceasefire in Ukraine a Bullish Catalyst?
  • Oil Chart: Trend Remains Higher

Stock futures are lower with EU shares amid negative economic forecasts, a deteriorating state of Russia-Ukraine negotiations, and growing concerns about the yield curve.

Geopolitically, the Kremlin stated that the latest talks have not been “promising” and much work still needs to be done which is weighing on risk assets and bolstering oil prices this morning.

Economically, Germany cut its GDP growth forecast to just 1.8% in 2022 from 4.6% previously and an EU economic sentiment survey missed estimates.

Looking into today’s session, focus will be on jobs and growth data early with the ADP Employment Report (E: 438K) and Final Q4 GDP report (E: 7.1%) due out before the bell.

Additionally, there are two Fed speakers: Barkin (9:15 a.m. ET) and George (1:00 p.m. ET) but based on this morning’s price action, geopolitics remain the most notable influence on markets, and sentiment towards the war in Ukraine will likely be the biggest driver of markets again today.

Tom Essaye Quoted in Barron’s on March 28, 2022

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3 Headwinds Could Pummel Stocks. What to Know.

We must acknowledge the challenges ahead, and be ready with a plan to insulate ourselves from volatility and protect portfolios…wrote Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

Yield Curves and Real Rates

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What’s in Today’s Report:

  • Yield Curves and Real Rates

Markets are trading risk-on this morning after reported progress in ceasefire talks between Russia and Ukraine.

Russian officials said that the “primary objectives” of the latest round of peace talks with Ukraine have been completed and a deal may be announced in the coming hours which is driving stocks higher globally.

Looking into today’s session, there are a few economic reports due to be released: Case-Shiller Home Price Index (E: 1.0%), Consumer Confidence (E: 107.0), and JOLTS (E: 11.10M) while several Fed officials are scheduled to speak: Williams (9:00 a.m. ET), Harker (10:45 a.m. ET), and Bostic (6:30 p.m. ET).

There is also a 7-Yr Treasury Note auction at 1:00 p.m. ET that could move yields and more specifically impact the 10s-2s yield curve spread which has compressed down to single digits this morning.

Bottom line, the market’s primary focus is on Russia-Ukraine peace talks today and any meaningful progress towards a ceasefire will continue to support risk-on money flows while investors will watch economic data and Fed speak for any further signs that shift to a more aggressive policy stance is beginning to hurt growth.

 

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Tom Essaye Quoted in Barron’s on March 24, 2022

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The Dow Rose, Uber Climbed—and What Else Happened in the Stock Market Today

Implying the Russia/Ukraine war wasn’t materially slowing growth…wrote Tom Essaye, founder of Sevens Report Research.  Click here to read the full article.

Have the Real Headwinds on Stocks Even Started Yet?

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What’s in Today’s Report:

  • Have the Real Headwinds on Stocks Even Started Yet?
  • Weekly Market Preview:  Is Economic Growth Stable?
  • Weekly Economic Cheat Sheet:  Jobs Report Friday

Futures are little changed following a quiet weekend of news as investors await key economic data later this week.

Geo-politically, in-person peace talks between Russia and Ukraine will resume on Tuesday in Turkey and there remains some cautious optimism for progress towards a cease-fire.

Economically there were no notable reports overnight, although Shanghai is entering a two-phased COVID lockdown that weighed on oil and Chinese shares overnight (as that’s negative for economic growth and oil demand).

Today there are no notable economic reports and no scheduled Fed speakers, so focus will remain on oil (do the early declines continue?) and geo-politics, as any more hints of a cease fire will put a tailwind on stocks.

What’s Driving Stocks

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What’s in Today’s Report:

  • What’s Driving Stocks
  • Natural Gas Update (New Highs Ahead?)

Futures are slightly higher following a generally quiet night of news as oil declined modestly and there was no further escalation in the Russia/Ukraine war.

Economic data disappointed overnight as UK Retail Sales missed estimates (-.3% vs. (E) 0.7%), while German IFO Business Expectations plunged to 85.1 vs. (E) 92.4, reflecting uncertainty related to the Russia/Ukraine war.

Today’s focus will be on the Consumer Sentiment Report (E: 59.7) and specifically the Inflation Expectations index, and if five-year inflation expectations move meaningfully above 3%, that will put a headwind on stocks.   Pending Home Sales (E: 0.9%) is the other notable report today, but it shouldn’t move markets.

From the Fed we have multiple speakers, including Williams (10:00 a.m. ET), Daly (11:00 a.m. ET), Barkin (11:30 a.m. ET) and Waller (12:00 p.m. ET) but as long as they stick to the current “script” of being open to a 50 bps hike at the May meeting (but not calling for even more) then they shouldn’t move markets.

Is the 10’s-2’s Spread Outdated?

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What’s in Today’s Report:

  • Is the 10’s-2’s Spread Outdated?
  • EIA Analysis and Oil Market Update (Prices Back Near the Recent Highs)

Futures are modestly higher following good economic data and as oil didn’t continue Wednesday’s rally (at least not overnight).

Economic data was solid as both the March EU Flash Composite PMI (54.5 vs. (E) 54.1.) and the UK Flash Composite PMI (59.7 vs. (E) 58.7) beat estimates, implying the Russia/Ukraine war wasn’t materially slowing growth.

Today focus will be on economic data, specifically the March Flash PMIs (E: 56.7).  With inflation still high and the Fed threatening a 50 bps hike in May, the PMIs need to give markets a “goldilocks” number to extend the early rally, as a “Too Hot” number will invite even more Fed tightening, while a “Too Cold” number will increase stagflation risks.  Outside of the PMIs, we also get Jobless Claims (210K) and Durable Goods (E: -0.5%) although they shouldn’t move markets.

From the Fed today we get Kashkari (8:30 a.m. ET), Waller (9:10 a.m. ET) and Bostic (11:00 a.m. ET) and of the three, Waller is the most important (he’s Fed leadership and if he hints at a 50 bp hike expect that to mildly weigh on stocks).

Sevens Report Co-Editor Tyler Richey Quoted in Market Watch on March 17, 2022

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Oil futures finish higher to climb back above $100 a barrel

Upwards of 3 million barrels a day in Russian oil supply could be lost in the coming weeks, and “fading optimism” for a ceasefire deal between Russia and Ukraine drove gains for oil Thursday, said Tyler Richey, co-editor at Sevens Report Research. Click here to read the full article.

Tom Essaye Quoted in Market Watch on March 18, 2022

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Two-year Treasury yield has biggest two-week gain since 2008 as investors assess Fed’s rate-hike efforts

The market has, to a degree, called the Fed’s bluff on rate hike plans as rate hike expectations were dialed back in the immediate wake of the dot plot release and economic projections, but the Fed is indeed tightening policy and regardless of the pace of the trend, yields are going higher in the months and quarters ahead, said Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

The Real Impact of Rising Rates

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What’s in Today’s Report:

  • What’s the Real Impact of Rising Rates?
  • Chart: 5-Year Inflation Expectations Hit New Highs

Stock futures are modestly lower with EU shares this morning as traders digest the strong post-Fed rally amid hawkish Fed speak and still elevated tensions surrounding Ukraine.

Geopolitically, talks of new sanctions on Russia by the West, including on the energy sector, are acting as a mild headwind on risk assets today.

Economically, the latest U.K. inflation data ran hot with CPI jumping to 6.2% vs. (E) 5.9% in February, a fresh 30-year high.

Today, there is one economic report due out: New Home Sales (E: 810K) but it shouldn’t move markets leaving focus on the Fed as Chair Powell is scheduled to speak at 8:00 a.m. ET. Loretta Mester and Mary Daly will also speak at 10:00 a.m. ET and 11:45 a.m. ET, respectively.

Finally, there is a 20-Year Bond auction at 1:00 p.m. ET that could move Treasury yields.

Bottom line, stocks are showing some signs of exhaustion after a strong one-week rally in the wake of the March Fed meeting, and any additionally hawkish Fed speak or negative news flow surrounding the Ukraine war could see the selling pressure pick up as near term traders book profits on recent gains.