Two Clear Takeaways from the Fed Decision

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What’s in Today’s Report:

  • Two Clear Takeaways from the Fed Decision
  • EIA Analysis and Oil Update

Futures are modestly lower on disappointing earnings and the increased probability of higher corporate taxes.

Earnings from META, QCOM, and others disappointed and that’s reversing some of Wednesday’s tech-driven gains.

Senate Democrats agreed on a smaller Build Back Better bill that includes some corporate tax increases, although it’s still not clear when this becomes law.

Today will be a busy day from a data and earnings standpoint.  Economically, Jobless Claims (E: 249K) is the key report and if it moves considerably above 250k that will signal further deterioration in the labor market.  We also get Preliminary Q2 GDP (E: 0.5%) and as we said yesterday, don’t be shocked if it’s negative and you hear a lot of recession commentary.

On the earnings front, today is an important day and the key reports will be:  PFE ($1.72), MA ($2.36), AAPL ($1.14), AMZN ($0.15), INTC ($0.69).

Brace for a Recession on Thursday

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What’s in Today’s Report:

  • Brace for a Recession on Thursday
  • Housing Data Points to Slowdown in Real Estate Market
  • Chart: S&P 500 Holds 50-Day Moving Average by One Point

Stock futures are solidly higher this morning as quarterly earnings results from tech giants MSFT and GOOGL were both well received by investors after the close yesterday while investor focus shifts to the Fed today.

This morning, economic data will be in focus early with Durable Goods Orders (E: -0.5%), International Trade in Goods (-$103.2B), and Pending Home Sales (-1.0%) all due out by 10:00 a.m. ET.

From there, expect price action to slow considerably as focus turns to the Fed with the FOMC Meeting Announcement at 2:00 p.m. ET followed by the Fed Chair Press Conference at 2:30 p.m. ET.

Markets have priced in a 75% chance of a 75 basis point hike today while no changes to forward-guidance are expected so any variance from those expectations could result in sizeable moves in the market this afternoon.

Finally, earnings season remains in full swing with SHOP ($0.03), TMUS ($0.41), HLT ($1.06), SHW ($2.81) reporting ahead of the bell and META ($2.51), F ($0.43), and QCOM ($2.86) releasing results after the close. Any of those reports could lead to sector specific volatility despite the Fed today.

Fed Meeting Preview

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What’s in Today’s Report:

  • FOMC Preview
  • Market Outlook for Fed Funds at Yearend: Chart

Stock futures are modestly lower on soft retailer earnings from yesterday as focus turns to the July FOMC meeting.

WMT is down 9% in pre-market trading after the retail giant slashed its profit outlook, citing inflation pressures on consumers which is driving risk-off money flows in pre-market trade amid a resurgence in recession fears.

Today, investors will begin to look ahead to tomorrow’s Fed announcement as the FOMC meeting begins this morning however there are also several important economic reports including: Case-Shiller House Price Index (E: 1.6%), Consumer Confidence (E: 96.8), New Home Sales (E: 664K), and the Richmond Fed Manufacturing Index (E: -10).

Earnings season also continues to pick up today with UPS ($3.14), KO ($0.67), GM ($1.40), GE ($0.38), and MCD ($2.46) reporting ahead of the bell while MSFT ($2.28), GOOGL ($1.28), and V ($1.74) will release results after the close.

Tom Essaye Quoted in The Washington Post on July 23rd, 2022

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Big Tech is bracing for a possible recession, spooking other industries

The market looks at that, and basically, the logic is, ‘oh crap, if they’re doing this then what about the ones aren’t as strong?’ And what are they seeing coming that everyone else isn’t…said Tom Essaye, president of Sevens Report Research. Click here to read the full article.

Tom Essaye Quoted in Barron’s on July 22nd, 2022

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The Stock Market Is at a Crossroads. What to Watch Next.

You’ve seen a relief rally, the Fed maybe being slightly less hawkish than you think is the hope…said Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

Sevens Report Analysts Quoted in Seeking Alpha on July 21st, 2022

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Crude oil, energy stocks slide on signs of slowing U.S. fuel demand

Sevens Report Research said gasoline supplied, a measure of implied demand, only bounced by 459K bbl/day to 8.52M bbl/day last week after plunging 1.35M bbl/day in the previous week, which was the largest drop since the initial COVID lockdowns. Click here to read the full article.

Sevens Report Analysts Quoted in Market Watch on July 21st, 2022

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U.S. oil prices settle with a more than 3% loss as weak gasoline demand allows fuel inventories to rise

Additionally, gasoline supplied, a measure of implied demand, only bounced by 459,000 b/d (barrels a day) to 8.52 million b/d last week after the measure plunged 1.35 million b/d the prior week, which was the largest since the initial COVID lockdowns…wrote analysts at Sevens Report Research. Click here to read the full article.

What Happens After Inflation Peaks?

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What’s in Today’s Report:

  • What Happens After Inflation Peaks?
  • Weekly Market Preview:  Fed Decision Wednesday
  • Weekly Economic Cheat Sheet:  Q2 GDP and Inflation Stats are the Highlights

Futures are modestly higher as markets bounce from Friday’s declines, following a quiet weekend and as investors look forward to numerous important catalysts this week.

Chinese authorities are considering some restrictions on movement in Shanghai as COVID cases rise, but are still resisting broad lockdowns (for now).

Economically, German Ifo Business Expectations declined further (80.3 vs. (E) 83.3).

Today there’s only one notable economic report, the Chicago Fed National Activity Index (E: 0.05), and markets will want to see stability here following last week’s disappointing data.  If this number is surprisingly weak (like the PMIs last Thursday/Friday) then that will likely weigh on stocks as recession fears grow.

Earnings season continues and this will be a very busy and important week for results.  Some earnings we’ll be watching today include:  WHR ($5.22), NXPI ($3.39), and LOGI ($3.39).

Why the Transmission Protection Instrument Matters to Markets

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What’s in Today’s Report:

  • Why the Transmission Protection Instrument Matters to Markets
  • ECB Decision Takeaways (Not Hawkish Enough)
  • Another Sign Inflation Has Peaked?

Stocks are resilient this morning as futures are only slightly lower despite disappointing overnight earnings and ugly economic reports from Europe.

Earnings overnight were bad with several ugly reports including SNAP (-30%), COF (-3.5%), and STX (-13%).

Economically, July flash PMIs from the EU were also ugly as the composite PMI fell into contraction territory at 49.6 vs. (E) 51.0.

Hope that inflation has peaked is the reason stocks are resilient lately, so today’s focus will be on the July Flash Manufacturing PMI (E: 51.8) and the July Flash Services PMI (E: 52.3).  If these reports show meaningful drops in the price indices (like we’ve seen in the Empire and Philly Fed surveys) then that will further the idea that inflation is peaking and support stocks (as long as the headline readings aren’t huge misses).

On the earnings front, results to watch today include TWTR (-$0.06), VZ $1.34), and AXP ($2.37).

Technical Update: What Would Make This Bounce Sustainable?

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What’s in Today’s Report:

  • Technical Update:  What Would Make This Bounce Sustainable?
  • EIA Analysis and Oil Update

Futures are slightly lower following a busy night of mixed earnings reports and ahead of today’s ECB decision.

Politically, Italian PM Draghi formally resigned and there will be elections in Italy this fall, which is adding to general macro-economic uncertainty.

Earnings overnight were mixed although TSLA posted solid results and the stock rallied 3% after hours.

Today will be a busy day for economic data and earnings and the key event is the ECB Decision.  A 25 bps hike is expected although a 50 bps hike is very possible.  From a stock standpoint, markets will be hoping for a 50 bps hike because that will boost the euro and weigh on the dollar (the dollar being this high is a problem for U.S. corporate earnings).  Outside of the ECB we also get Jobless Claims (E: 240K) and Philadelphia Fed (E: -3.3).

On the earnings front, results continue to roll in and so far this season they are decidedly mixed (not good, but not materially worse than feared, either).  Some results we’re watching today include:  T ($0.59), FCX ($0.80), UNP ($2.38), COF ($5.09).