Posts

Why Are Yields Rising?

/in , /by

Why Are Yields Rising? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Are Yields Rising?
  • What the Removal of Speaker McCarthy Means for Markets (We Didn’t Need This Right Now)
  • JOLTS Data Takeaways
  • OPEC+ (JMMC) Meeting Preview

U.S. stock futures are rebounding from overnight losses as European markets turn positive following mixed economic data while yields are stabilizing after this week’s rapid rise.

Markets are continuing to digest the implications of the removal of McCarthy as Speaker of the House. Yields were initially higher overnight, likely on worries of a more pronounced threat of a government shutdown next month. They have since stabilized and are only little changed in morning trade, helping support steady stock futures in the pre-market.

Economically, the September EU Composite PMI came in at 48.7 vs. (E) 48.4, while Retail Sales fell -1.2% vs. (E) -0.2% in August and PPI fell a steep -11.5% vs. (E) -11.7%. On balance, the data was not a reason for the ECB to become more hawkish. Which is helping global bond markets (and equities) stabilize this morning.

Today, focus will be on economic data early with the ADP Employment Report (E: 150K), ISM Services Index (E: 53.5), and Factory Orders (E: 0.2%). The “hot” JOLTS headline roiled markets yesterday so markets are likely to welcome any cooling labor market indicators and look for easing price measures in the ISM release as those developments could help bonds bounce back and stocks recover some of this week’s losses.

Later, the focus will turn to central bank speak with several Fed officials scheduled to speak including: O’Neill Paese, Schmidt, Bowman, and Goolsbee. A lot of hawkish rhetoric has been digested in recent sessions. So any more dovish-leaning commentary would also be welcomed by stocks and other risk assets.

Why Are Yields Rising

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. 

Jobs Report Preview

/in , /by

What’s in Today’s Report:

  • Jobs Report Preview
  • Oil Market Update & EIA Analysis

Futures are little changed following a busy night of mixed economic data.

Positively, the August Chinese PMIs were better than feared, rising to 50.3 vs. (E) 50.1 and helping to slightly reduce China recession worries.

Negatively, the EU flash HICP (their version of CPI) was hot on the headline (5.3% vs. (E) 5.1%) but in-line on core (5.3% y/y), underscoring that inflation is sticky in the EU.

Focus today will be on economic data, specifically Jobless Claims (E: 238K) and the Core PCE Price Index (E: 0.2% m/m, 4.2% y/y).  For stocks to extend the week’s gains (and continue to bounce back from the broader pullback) investors won’t want any surprises.  In the case of jobless claims, that means no big jump in claims that hints at economic weakness, nor a further drop that might make the Fed more hawkish.  On the core PCE Price Index, an in-line to slightly below reading would be positive as it’d further pressure Treasury yields and likely lift stocks.

Finally, there is one Fed speaker today, Collins at 9:00 a.m. ET, but she shouldn’t move markets.

Tom Essaye Quoted in Barron’s on August 3rd, 2023

/in , /by

Treasury Yields Keep Climbing

“The stronger-than-expected ADP jobs report pushed the dollar and long-dated Treasury yields higher on Wednesday, as the bond market continues to price in more resilient growth and/or inflation,” Tom Essaye, founder of the Sevens Report, wrote Thursday.

Click here to read the full article.

Tom Essaye Quoted in Barron’s on August 2nd, 2023

/in , /by

Stocks Open Lower Amid Fitch Downgrade

“Looking into today’s session, focus will be on the U.S. credit downgrade as investors digest the potential implications on fixed income markets and re-assess valuations of risk assets,” wrote Tom Essaye, founder of the Sevens Report.

Click here to read the full article.

Jobs Report Preview

/in , /by

What’s in Today’s Report:

  • Jobs Report Preview

Futures are modestly higher after the House of Representatives passed the debt ceiling extension.

The House passed the debt ceiling extension 314-117, effectively ending this drama (passage in the Senate is all but guaranteed).

Economically, EU Core HICP (their core CPI) rose 5.3% vs. (E) 5.5%, hinting at the re-start of disinflation.

Today focus will be on economic data and there are numerous potentially important reports, starting with the ISM Manufacturing PMI (E: 47.0), where markets will want to see stability in the data (so not dramatically above or below the expectation).  On employment, we get two important reports via the ADP Employment Report (E: 160K) and Jobless Claims (E: 235K), and moderation in both reports (so a drop in ADP and rise in claims) will be welcomed by markets.  Finally, on inflation, Unit Labor Costs (E: 6.3%) will give us the latest insight into wages (the lower this number, the better).  Finally, there is also one Fed speaker: Harker (1:00 p.m. ET).

 

What’s Making Stocks So Resilient?

/in , /by

What’s in Today’s Report:

  • What’s Making Stocks So Resilient (And Is It A Bullish Signal?)
  • Weekly Market Preview:  Will Powell be hawkish and will jobs data stay hot?
  • Weekly Economic Cheat Sheet:  All about employment (JOLTS, ADP and Jobs Report on Friday).

Futures are little changed following a quiet weekend and as investors look ahead to an important week of catalysts (Powell speeches and employment reports).

China released updated growth expectations for 2023 of “around 5%” and that’s slightly under estimates and was a mild disappointment.

Economic data was solid overnight as Euro Zone Retail Sales (1.0% vs. (E) 0.3%) and UK Construction PMI (54.6 vs. (E) 49.1) both beat estimates.

Today expect digestion of last week’s rally as there are no material economic reports or Fed speak, as markets look ahead to Powell’s testimony tomorrow.

Jobs Day

/in , /by

What’s in Today’s Report:

  • Jobs Day
  • Why the ADP Report Helped Stocks Rally

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

Economic data from Europe underwhelmed as Euro Zone Services PMI declined to 56.1 vs. (E) 56.3 while Euro-Zone Retail Sales missed estimates, falling –1.3% vs. (E) 0.4%.

Elon Musk made cautious comments saying he had a “super bad” feeling about the economy in a Reuters interview.

Today’s focus will be on the Jobs Report and expectations are as follows: Job Adds (E: 325k), UE Rate (E: 3.5%), Wages (E: 0.4% m/m & 5.3% y/y).  As long as data shows “moderation” in the labor market (so a positive number but in the lower part of the range) then stocks can extend Thursday’s rally.  Other data today includes  ISM Services PMI: 56.3, and we get one Fed speaker:  Brainard (10:30 a.m. ET).

Two Major Market Risks

/in , /by

What’s in Today’s Report:

  • What Could Go (Really) Wrong? Two Candidates
  • Consumer Confidence Takeaways

U.S. equity futures are trading lower with most international markets while bond yields are falling amid growing concerns about the Delta variant of COVID-19.

The Stoxx 600 Travel and Leisure sector is down more than 5% WTD, underscoring market fears of new lockdowns or travel restrictions in Europe due to the Delta variant outbreak.

There was a slew of economic data from China to Europe released overnight however all of it largely met estimates and therefore is not materially moving markets this morning.

Today, focus will be on any new developments regarding the latest uptick in COVID-19 cases, fueled by the Delta variant, as well as the first look at the June jobs data via the ADP Employment Report (E: 533K) due out ahead of the bell.

There is also a report on Pending Home Sales (E: -1.0%) and two Fed speakers: Bostic (8:00 a.m. ET) and Barkin (1:00 p.m. ET), but unless there are any major surprises none of those should materially move markets.