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What the Bank Failures Mean for Markets

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What’s in Today’s Report:

  • What’s Happened with the Bank Failures
  • What the Government Response Means for Markets
  • Is This A Bearish Gamechanger?
  • CPI Preview

Futures are little changed as markets digest the three bank failures last week and the government response.

Silicon Valley Bank (SVB) and Signature Bank of New York (SBNY) both failed over the weekend, making three bank failures last week.  In response to the SVB and SBNY failures, the government announced the creation of a bank lending facility, the Bank Term Funding Program, which is helping to ease concern about a broader bank run (but doesn’t entirely solve the crisis).

Today President Biden will address the nation on the situation this morning, but the key remains stability in the regional banks and in Treasury yields (they need to stop collapsing).  If regional banks (KRE) and yields stabilize, markets can rally.

Tom Essaye Quoted in Forbes on November 28th, 2022

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Credit Suisse Tumbles: Stock Hits New Record Low After Banking Giant Warns Of ‘Substantial’ Losses

“In short, Credit Suisse is starting to act like a bank that’s about to go under,” analyst Tom Essaye of the Sevens Report said in a recent note. Click here to read the full article.

Tom Essaye Quoted in Barron’s on April 14th, 2022

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Tech Stocks Slide, Banks Report Earnings—and What Else Is Happening in the Stock Market Today

Banks only do that when they think that default rates, which are currently low, will start to rise…wrote Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

Tom Essaye Quoted in CNBC on October 8, 2019

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Senator Warren has been a vocal – and frequent – critic of not only banks but large corporations more broadly. Looking at the potential economic impact of a Warren presidency on the broader market, Sevens Report founder Tom Essaye wrote that “it is a very reasonable statement that if Warren were elected…it would be negative for the stock market in the extreme.” Click here to read the full article.

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Tom Essaye Quoted in Yahoo Finance on September 27, 2019

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“The fact that the repos are still ongoing is a bit troubling for me. It makes me think that the Fed somehow or other has misjudged the liquidity needs…” Tom Essaye, who publishes investment newsletter The Sevens Report, told Yahoo Finance’s The First Trade. Click here to read the full article.

Curve Steepening: Buy Banks?

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What’s in Today’s Report:

  • 10’s-2’s Showing Signs of Life – Good for the Banks?

S&P futures are indicating stocks will open at all-time highs today thanks to strong earnings and Fed optimism after President Trump mentioned rate cuts and QE yesterday.

AAPL beat on earnings and revenue in Q1 but also notably revised guidance solidly higher citing improvement in Chinese markets. The company’s shares are trading up roughly 6% in the pre-market.

Most overseas markets are closed for holidays today and the market’s main focus will be the Fed events this afternoon: FOMC Meeting Announcement (2:00 p.m. ET), Fed Chair Press Conference (2:30 p.m. ET).

There are a however a few important economic reports that could move markets this morning: ADP Employment Report (E: 180K), ISM Manufacturing Index (E: 55.0), and Construction Spending (E: 0.2%).

Bottom line, the market is looking for more dovish rhetoric out of the Fed today and if Powell delivers, another set of closing highs in U.S. stock indexes is likely.

Tom Essaye Interviewed with TD Ameritrade on April 16, 2019

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“If this market’s going to continue to rally, it’s going to be led by those cyclical sectors.” Tom talks about the market, the earnings season, banks and more. Watch the full video here.

An Update from Dr. Copper

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What’s in Today’s Report:

  • An Update from Dr. Copper (Mildly Encouraging)

Futures are up modestly, but off the highs as investors digest the latest Brexit drama, Chinese stimulus, and mixed economic data ahead of more key US bank earnings.

Economically, Japanese Machine Orders badly missed expectations in November (0.0% vs. E: 3.3%) pointing to soft capital spending while European inflation data was largely inline with estimates.

Today, the government shutdown is going to start affecting the flow of economic data as the December Retail report will not be released. To that point, concerns are starting to build about the economic headwinds the shutdown will have as it drags on, and eventually those worries will begin to weigh on stocks.

U.S. economic data on Import & Export Prices (E: -1.2%, -0.3%) and the Housing Market Index (E: 57.0) will still be released as scheduled however, and there is one Fed official speaking: Kashkari (1:00 p.m. ET).

On the earnings front, focus will be on financials early with: BAC ($0.63), GS ($5.37), BLK ($6.39), and BK ($0.92) all due to report ahead of the bell while two notably growth-sensitive companies: AA ($0.49) and CSX ($1.00) will report after the close.

What’s Wrong With Bank Stocks?

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What’s in Today’s Report:

  • What’s Wrong With Bank Stocks?
  • Monday’s Economic Data Analysis
  • Natural Gas Fundamental Update

Futures are bouncing modestly this morning after international markets were mixed overnight as the recent volatility continues to be digested and focus turns to earnings.

Economically, Chinese inflation data met expectations overnight however the German ZEW Survey pretty badly missed expectations showing a sharp drop in confidence among financial professionals.

There is no shortage of potential catalysts today between economic data, earnings and politics/trade.

Economic releases to watch: Industrial Production (E: 0.2%), Housing Market Index (E: 67), and August JOLTS data (E: 6.905M) are all due out within 30 mins of the open.

Notable companies releasing earnings today include: GS ($5.42) and MS ($1.00) ahead of the open and later NFLX ($0.68) and IBM ($3.40) after the market close.

Lastly, traders and investors are showing more interest than normal in the US Treasury’s foreign exchange report as it may shed light on Chinese currency policies and if any manipulation violations were discovered which would again elevate tensions between the world’s two largest economies.

Is This the Fed’s Fault?

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What’s in Today’s Report:

  • Selloff Update (Some Positive News Yesterday)
  • If This The Fed’s Fault?
  • Two Economic Canaries in the Coal Mine

Futures are rebounding as global markets bounce following solid economic data and confirmation of the Trump/Xi meeting at the G-20.

Economic data was solid overnight as Chinese exports beat estimates, rising 14.5% vs. (E) 8.2%, while Eurozone Industrial Production rose 1% vs. (E) 0.5%.  Both numbers are helping to improve sentiment.

Today we get bank earnings and JPM already released results and beat estimates, while we wait for WFC (E: $1.17) at 8:00 a.m.    Economically we get Consumer Sentiment (E: 99.5) and there are two Fed speakers, Evans (9:30 a.m. ET) and Bostic (12:30 p.m. ET) but none of that should move markets.

Instead, we can expect markets to continued to digest the recent pullback.  The tech sector showed some hints of stabilization yesterday but it’ll need to rally if we’re going to get a material bounce in stocks today.  Bigger picture, strong earnings from industrial and multi-nationals (which won’t be possible till next week at the earliest) remains the “fix” to this market pullback.