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Economic Data Fueled the Rally

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Why Economic Data Fueled the Rally: Strengthen your market knowledge with a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Yesterday’s Economic Data Fueled the Rally
  • An Important Chart (On Page One)

Futures are slightly higher on more Chinese economic optimism as data was better than expected while Chinese officials announced more stimulus.

Chinese Retail Sales (4.6% vs. (E) 3.9%) and Industrial Production (4.5% vs. (E) 3.9%) beat expectations while authorities injected 120 billion yuan into a lending facility.

Today’s focus will be on economic data and if data is “Goldilocks” like we saw on Thursday, expect a continuation of yesterday’s rally.  Conversely, if the data shows inflation hot or growth slowing, the markets could give back most of yesterday’s rally.

Also, the important reports to watch today include:  Empire State Manufacturing Index (E: -10.0), Import and Export Prices (E: 0.3%, 0.4%), Industrial Production (E: 0.1%), and Consumer Sentiment (E: 69.2).

Finally, today is quadruple witching options expiration so don’t be surprised by big volumes and increased volatility during the final hour of trading.

Economic Data

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Market Multiple Table Chart: September

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Market Multiple Table Chart: Strengthen your market knowledge with a free trial of The Sevens Report.

What’s in Today’s Report:

  • Market Multiple Table Chart (September Update)

Futures are slightly lower following more mixed economic data overnight.

There were no changes to the Market Multiple Table Chart for September, leaving the July/August target levels in place.

Japanese GDP (1.2% vs. (E) 1.3%) and Euro Zone GDP (0.1% vs. (E) 0.3%) both slightly missed expectations and further hinted at a loss of economic momentum.  Meanwhile, German CPI was in line with expectations (0.3% m/m, 6.1% y/y) as inflation in the EU remains sticky.

Today the calendar is mostly quiet, but focus will be on the Manheim Used Vehicle Value Index (Previous 212.0) and markets will want to see that “bell weather” for inflation continue to decline. If the MUVVI falls solidly we could see Treasury yields dip and stocks enjoy a relief rally.  Other notable events today include Consumer Credit (E: $18.0B) and a speech by Fed Governor Barr at 9:00 a.m. ET, but neither event should move markets.

September Market Multiple Table Chart

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Evidence of Some Deterioration in the Fundamentals

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Deterioration in the Fundamentals: Strengthen your market knowledge with a free trial of The Sevens Report.

What’s in Today’s Report:

  • Market Multiple Table:  Evidence of Some Deterioration in the Fundamentals

Futures are modestly lower on another negative AAPL article and more mixed economic data.

AAPL shares fell another 3% pre-market as Bloomberg also reported certain Chinese government agencies would be banned from using foreign made phones.

Economically, Chinese exports were no worse than feared (-8.8%). However, German Industrial Production missed estimates (-0.8% vs. (E) -0.2%) as global recession fears crept higher.

Today focus will be on economic data and Fed speak.  The two key reports to watch are Jobless Claims (E: 238K) and Unit Labor Costs (E: 1.7%).  Markets will want to see the former rise more than expected (but not too much more) and the later be less than expectations.  The opposite (low claims and high Unit Labor Costs) will push Treasuries higher and weigh further on stocks.

Turning to the Fed, New York Fed President Williams speaks at 3:30 ET. Since he’s part of Fed leadership, we’ll pay attention and markets will hope he hints that rate hikes are done.  Bostic also speaks at 3:45 ET but his message will likely be predictably dovish, and as such it won’t move markets.

multiple

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Renewed Global Growth Concerns

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Growth Concerns – Tom Essaye Quoted in Barron’s: Strengthen your market knowledge with a free trial of The Sevens Report.

Stocks Slip as Trading Resumes After the Long Weekend With Renewed Global Growth Concerns Out of China.

“The Dow Jones Industrial Average was down 33 points, or 0.1%. The S&P 500 declined 0.3%, and the Nasdaq Composite was down 0.3%.

Weighing on the markets were “renewed global growth concerns,” said Tom Essaye, founder of The Sevens Report. China’s purchasing-managers’ index (PMI) showed that the country’s services sector expanded at the slowest pace in eight months.

The remainder of the week looks slow on the economic data front, and investors will continue to digest U.S. jobs data from Friday which gave signs to suggest the labor market may be cooling. That’s what the Federal Reserve wants to see as it works to battle historically high inflation through interest-rate hikes.”

Also, click here to view the full Barron’s article published on September 5th, 2023.

China global growth

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Will the Restart of Student Loan Payments Hurt the Economy?

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Will the Restart of Student Loan Payments Hurt the Economy: Strengthen your market knowledge with a free trial of The Sevens Report.

What’s in Today’s Report:

  • Will the Restart of Student Loan Payments Hurt the Economy?

Stock futures are lower with European shares after some hawkish ECB chatter and more bad EU economic data overnight.

The ECB’s Klass Knot noted overnight that a September rate hike is being “underestimated” by markets. This is weighing on risk assets modestly this morning.

Economically, German Manufacturers’ Orders collapsed by -11.7% vs. (E) -4.0% in July while Eurozone Retail Sales in July met estimates with a monthly decline of -0.2%. The data offered fresh evidence that the European economy is threatening to fall into recession despite ongoing calls for a global soft landing.

Today’s focus will be on economic data this morning with International Trade in Goods and Services (E: -$68.0B) and the ISM Services Index (E: 52.4) due to be released. The market is looking for signs of slowing demand but not a sharp downturn in growth.

The ISM will be the more important report to watch.  If we get a number that is “too hot” or “too cold” will likely see yesterday’s stock market declines extended, while a Goldilocks print will help markets stabilize.

There is also one Fed speaker today: Collins (8:30 a.m. ET). If she pushes back on the peak rate narrative or rate cuts in 2024, that will add another headwind to stocks and other risk assets today.

Economy

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Jobs Report Preview

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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.

Is Soft Economic Data a Reason to Buy Stocks?

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What’s in Today’s Report:

  • An Easing of the Labor Market Is a Good Thing, But Be Careful What You Wish For…
  • Jobless Claims vs. the S&P 500 – An Ominous Chart
  • JOLTS Takeaways
  • Consumer Confidence Shows Measurable Deterioration in Current Family Financial Situations: Chart

Futures are slightly lower this morning as yesterday’s sizeable rally in the S&P 500 is digested ahead of more domestic jobs data while global markets were mixed overnight.

In Asia, PBOC officials met with leaders from the private sector regarding stimulus and development, but so far, government efforts have been underwhelming and Chinese markets ended little changed.

In Europe, some regional German inflation statistics came in hot, buoying government bond yields this morning which could weigh on equities if the trend continues into the U.S. session.

Today, focus will be on economic data early with the ADP Employment Report (E: 200K) and GDP report (E: 2.4%) due out ahead of the bell while Pending Home Sales (E: -0.4%) will be released shortly after the open.

There are no Fed speakers today, so investors will be looking for more evidence that supports a continued pause in the Fed’s rate hiking cycle (or peak rates already being in) and ultimately a soft landing. Anything that contradicts that narrative will be a headwind on equities and other risk assets today.

Why Could CPI Be Poised to Drop Further?

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What’s in Today’s Report:

  • Why Could CPI Be Poised to Drop Further?
  • Chart: Zillow Observable Rent Index

U.S. stock futures are slightly higher this morning, tracking modest gains in global shares thanks to news that China is considering deeper rate cuts on deposits and mortgages while important economic data due later in the week remains in focus.

Economically, the German GfK Consumer Climate Index for September fell to -25.5 vs. (E) -24.3 underscoring widely held concerns about the future of the Eurozone economy.

Looking into today’s session, there are three economic reports due out this morning: Case-Shiller Home Price Index (E: 1.1%), Consumer Confidence (E: 116.5), JOLTS (E: 9.559M).

Markets will be looking for easing, but still healthy consumer confidence readings and a declining, but not collapsing JOLTS figure to support the thesis that the economy is slowing at a pace consistent with a soft landing. Data that is too strong or too weak will likely weigh on equities.

Additionally, there is a 3-Yr Treasury Note auction at 1:00 p.m. ET and if the outcome is weak pushing rates higher, that will create a headwind on risk assets.

Finally, there is one Fed official scheduled to speak today: Barr (3:00 p.m. ET). Considered a centrist, his comments will be closely scrutinized for any clues of a shift in policy expectations following Powell’s Jackson Hole speech Friday.

Why Have Markets Become Volatile?

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What’s in Today’s Report:

  • Why Have Markets Become Volatile?
  • Weekly Market Preview:  Are the Three Pillars of the Rally Under Attack?
  • Weekly Economic Cheat Sheet:  Key Growth and Jobs Data This Week

Futures are slightly higher following more small stimulus steps from Chinese authorities, as investors look ahead to an important week of economic data.

Chinese authorities reduced the stamp tax on stock investment, providing a small economic tailwind and boost to Chinese stock prices.

Economically, the only notable number was the EU Money Supply (M3) and the number was bad as M3 declined –0.4% vs. (E) 0.6%.

Today there are no notable economic reports so markets will focus on the tech sector to see if it can continue to stabilize after last Thursday’s ugly reversal.

Another Reason Treasury Yields Are Rising

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What’s in Today’s Report:

  • Another Reason Treasury Yields Are Rising

Futures are modestly lower on more negative real estate news from China while Japanese inflation was hotter than expected.

Chinese real estate firm Evergrande filed for bankruptcy overnight, increasing concerns about the Chinese property market specifically and economy more broadly.

Economically, Japanese CPI was in-line (up 3.3% y/y) but services inflation rose to 2%, a 30 year high, and that’s increasing expectations the BOJ may get more hawkish (and that would put more upward pressure on global bond yields, which would increase the headwind on stocks).

Today there are no notable economic reports nor any Fed speakers so focus will remain on Treasury yields, and the market needs stability in yields for stocks to bounce back.  A sudden drop in yields on growth concerns (which is what we’re seeing this morning) or a sharp rally in yields (on inflation concerns) will only further pressure stocks, so the sooner yields can “calm down” and trade little changed, the better for stocks.