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Tom Essaye Quoted in CNBC on May 9th, 2022

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10-year Treasury yield rises to its highest level since November 2018

To start the year, we knew that central bank tightening would make for a challenging market, but that has been compounded by two surprise events: The Russia/Ukraine war (no one expected that in January) and Chinese lock-downs (it’s quasi-shocking the Chinese are still adopting these policies and crushing their economy)…wrote Tom Essaye of The Sevens Report. Click here to read the full article.

Earnings In Focus

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What’s in Today’s Report:

  • Bottom Line – Earnings In Focus
  • Natural Gas Update

Stock futures are trading lower after another quiet night of news as bond yields hit new multi-year highs overnight while investors look ahead to a fresh set of earnings reports today.

The 10-year Treasury Note yield notably tested 2.90% overnight following hawkish commentary from the Fed’s Bullard, who mentioned the possibility of a 75 basis point hike late yesterday.

Looking into today’s session, there is just one economic report to watch: Housing Starts and Permits (E: 1.75M, 1.83M) but it is not likely to move markets. Then there is one Fed speaker mid-day: Evans (12:05 p.m. ET).

Finally, earnings season continues to pick up today with JNJ ($0.34), LMT ($6.22), TRV ($3.70), and CFG ($0.96) reporting before the open and NFLX ($2.92) and IBM ($1.34) due to report after the closing bell.

Are Stock and Bond Markets Starting to Forecast an Economic Slowdown?

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What’s in Today’s Report:

  • Are the Stock and Bond Markets Starting to Forecast An Economic Slowdown?

Futures are slightly higher mostly on momentum from Thursday’s close, following a quiet night of news.

The global trend in central banks turning more hawkish continued overnight as the Reserve Bank of India left rates unchanged (as expected) but warned that inflation was too high.

Geopolitically, a Kremlin spokesman said that Russia hoped to end its “operation” in Ukraine in the coming days or weeks, although analysts are skeptical of the promise.

Today there are no notable economic reports nor any Fed speakers, so between the sparse calendar and the Masters, I’d expect a relatively slow day.  That said, if we get any geo-political headlines from Russia that imply a sooner than expected cease-fire, then stocks can extend Thursday’s rally.

Why the 7% CPI Print Wasn’t Incrementally Hawkish

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What’s in Today’s Report:

  • What the 7% CPI Print Wasn’t Incrementally Hawkish
  • EIA Analysis and Energy Market Update

Futures are little changed following a generally quiet night of news.

Vice-Chair Brainard’s prepared remarks for today’s testimony were released after the close and she said fighting inflation was the Fed’s “most important task” largely echoing Powell’s commentary from Tuesday.

Senator Manchin called the 7% CPI print “very troubling,” further reducing the chances of Build Back Better passing.

Today focus will be on Brainard’s testimony, but as long as she doesn’t imply sooner than expected balance sheet reduction, the market shouldn’t take her comments too hawkishly.  Other potential market events today include, in order of importance:  PPI (E: 0.4%, 9.8%), Jobless Claims (E: 205K) and three Fed speakers:  Harker (8:00 a.m. ET), Barkin (12:00 p.m. ET) and Evans (1:00 p.m. ET).

With stocks not too far from recent highs, they will again be sensitive to more hawkish rhetoric, so if Brainard and her Fed officials are hawkish, and we get a stronger than expected PPI report, don’t be surprised if that puts a mild headwind on stocks today.

Tom Essaye Quoted in Bolly Inside on October 18, 2021

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US stocks rise, bonds fall on inflationary bets

The issues that caused the pullback have quieted over the past…wrote Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter. Click here to read the full article.

Do Bonds Know Something Stocks Don’t?

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What’s in Today’s Report:

  • Do Bonds Know Something Stocks Don’t?
  • Existing Home Sales Data Takeaways

Stock futures are trading slightly higher this morning following mixed economic data overnight and a continued digestion of Powell’s “less-hawkish” testimony yesterday.

Economically, June Flash Composite PMI data was mixed as the Japan report disappointed (47.8 vs. E: 48.8) but the Eurozone print beat estimates (59.2 vs. E: 58.8).

Today, focus will be on economic data early with the U.S. PMI Composite Flash due to be released shortly after the bell (E: 67.9) and then a report on New Home Sales (E: 881K) will print at the top of the 10 a.m. hour.

Additionally, there are several Fed speakers to watch who could move markets today including: Bowman (9:00 a.m. ET), Bostic (11:00 a.m. ET), Rosengren (6:30 p.m. ET).

Finally, there is a 5-Yr Treasury Note auction at 1:00 p.m. ET that could impact bonds and ultimately stocks if yields move on the results.

How to Allocate to Commodities

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What’s in Today’s Report:

  • How to Allocate to Commodities

Stock futures are under pressure for the third day in a row this morning as inflation fears continue to grip global markets ahead of today’s key April CPI report in the U.S.

Economically, Eurozone Industrial Production missed expectations while both the U.K. Monthly GDP and Industrial Production reports handily topped estimates which is helping the FTSE buck the trend and rally today.

Looking into today’s session, all eyes will be on the April CPI report due out at 8:30 a.m. ET (E: 0.2% m/m, 3.6% y/y). A hot print could spook investors and cause a continuation of the early week’s risk-off money flows.

Later in the session, there are multiple Fed speakers including: Clarida (9:00 a.m. ET), Bostic (1:00 p.m. ET), and Harker (1:30 p.m. ET) however Fed speak has remained decidedly dovish and none of today’s speakers should move markets.

Finally, there is a 10-Yr Treasury Note Auction at 1:00 p.m. ET and the outcome could give investors an idea of how bond traders view inflation in the wake of the CPI report.

Ultimately a soft bond auction and a subsequent rise in yields would likely compound this week’s already elevated inflation concerns and cause more volatility in equity markets while a strong auction could ease those concerns and see a relief rally develop.

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Tom Essaye Interviewed with TD Ameritrade Network on November 20, 2019

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Tom Essaye interviewed with Oliver Renick from TD Ameritrade, discussing Bonds vs Equities, trade war, yield curve, reflation and more…Click here to watch the full interview.

Tom Essaye with TD Ameritrade

Is the Tariff Delay Bullish?

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Today’s Report is attached as a PDF.

What’s in Today’s Report:

  • Why Isn’t the Tariff Delay Causing a Bigger Rally?
  • Bond Market Update:  Not Confirming 3000 in the S&P 500

Futures are marginally higher ahead of the ECB decision and following a short tariff delay by President Trump.

Trump announced that the October 1 tariff increases (25% to 30% on 250 bln of imports) will be delayed till October 15th as a gesture of “goodwill.”

Economic data was again soft as German Industrial Production dropped –0.4% vs. (E) -0.1%, continuing the trend of disappointing EU manufacturing data.

Today the key event is the ECB Meeting.  The decision is at 7:45 a.m. and the Press Conference will be held at 8:30 a.m.  For the ECB to meet expectations we need to see 1) A rate cut, 2) More QE and 3) A “Tiered” deposit system.  Outside of the ECB we also get two important economic reports,  CPI (E: 0.1%) and Jobless Claims (E: 215K) and they could move markets if they are surprises (especially is CPI runs hot).

Tom Essaye Quoted in CNBC on August 7, 2019

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“Although gold futures remain near-term overbought, momentum is decidedly higher. Fundamentally, the sharp downtrends in bond yields…” said Tom Essaye, founder of the Sevens Report, in a note.

Weighing Gold