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Jobs Day

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Jobs Day: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Jobs Day
  • Why Wednesday’s Weak Economic Data Is Increasing Growth Concerns

Futures are little changed following the U.S. holiday as the last 24 didn’t provide any substantial market surprises while focus turns towards today’s jobs report.

The Labour Party won a landslide election victory in the UK, as expected, but that victory isn’t altering the outlook for growth or inflation (so it’s not impacting markets).

U.S. growth worries are creeping slightly higher following Wednesday’s surprisingly soft economic data.

Today focus will be on the jobs report and expectations are as follows: 189K Job-Adds, 4.0% Unemployment Rate, 0.3% m/m & 3.9% y/y Wage Growth.  Markets are still in a “bad is good” mode for data so the biggest risk to markets today is for a “Too Hot” number.  But, that said, Wednesday’s economic data was outright bad and for those paying attention, there are now a lot of signs that the U.S. economy may be losing more momentum than expected.  So, if there is a surprisingly weak jobs report (possible but unlikely) it will increase growth concerns and that’s a future risk to this rally.

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My biggest concern for this market remains that we get an unexpected economic slowdown

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My biggest concern for this market remains that we get an unexpected economic slowdown: Sevens Report Editor, Tom Essaye, Quoted in Barron’s

The Stock Market Needs a Strong Economy to Keep Rising. The Data Are Getting Worse.

“My biggest concern for this market remains that we get an unexpected economic slowdown because that’s one of the few events that can legitimately cause a material correction in stocks,” writes Sevens Report founder Tom Essaye, noting that his worry ticked up last week due to corporate earnings.

However, Essaye warns, it doesn’t always work so neatly. “Twice in my career I have seen investors cheer a slowdown, and both times the Fed was not able to cut rates at the right time to prevent the slowing from becoming a broader economic contraction,” he wrote. “That doesn’t mean they can’t do it this time, but catching a falling knife doesn’t work in real life, it doesn’t work in stock trading, and I’ve never seen it work in monetary policy.”

Also, click here to view the full Barron’s article published on June 4th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

It’ll be Very Hard for This Market to RallyIf you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

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Will the Trump Verdict Impact Markets?

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Will the Trump Verdict Impact Markets? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Will the Trump Verdict Impact Markets?
  • When Will Higher Yields Pressure Stocks?

Futures are moderately lower again following more disappointing tech earnings and another hot inflation print.

Salesforce (CRM) missed earnings and joined a growing list of non-AI tech companies to post disappointing result (WDAY last week) and that’s weighing on futures.

Economically, Spanish CPI was hotter than expected as it rose 3.8% y/y vs. (E) 3.7%, up from last month’s 3.4%

Today includes some potentially important economic data as we get the Revised Q1 GDP report (E: 1.5%) and focus will be on the headline as well as any revisions to the PCE Price Data (if it’s revised higher, that’s a negative).  Other notable data today includes Jobless Claims (E: 217K) and Pending Home Sales (E: 0.3%) and as has been the case all year, “hot” data will be negative for stocks and bond.

There are also two Fed speakers today, Williams (12:05 p.m. ET) and Logan (5:00 p.m. ET), although unless they talk about rate hikes, they comments shouldn’t move markets.

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Is Gasoline Demand Another Economic Warning Sign?

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Is Gasoline Demand Another Economic Warning Sign? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Is Gasoline Demand Another Economic Warning Sign?
  • Did Earnings Season Change the Market Outlook?

Futures are solidly higher thanks to continued momentum from Thursday’s rally following a quiet night of news.

Economically, UK data was stronger than expected (GDP and Industrial Production beat estimates) but it’s not changing BOE June rate cut assumptions.

Today there is just one notable economic report, the University of Michigan Consumer Sentiment Index (E: 77.0) and the key parts of that release will be the 1-Yr Inflation Expectations (E: 3.2%) and the 5-Yr. Inflation Expectations (E: 3.0%).  If both of those numbers are higher than expected, it’ll be another negative signal on inflation and don’t be surprised if Treasury yields rise in response to them and stocks give back these early gains.

In addition to that one economic report, we also get numerous Fed speakers today including: Bowman (9:00 a.m. ET), Logan (10:00 a.m. ET), Kashkari (10:00 a.m. ET), Goolsbee (12:45 p.m. ET) and Barr (1:30 p.m. ET).  However, unless one of them explicitly advocates for rate hikes, they shouldn’t move markets.

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Hawkish Central Bank Surprises Bolster Recession Fears

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What’s in Today’s Report:

  • Hawkish Central Bank Surprises Bolster Recession Fears
  • Jobless Claims Remain Elevated – Indicate Deteriorating Labor Market
  • EIA Data Takeaways – Consumer Demand Remains Healthy But Recession Fears Grip Futures Market

Stock futures are tracking global equity markets lower this morning while longer duration bonds are rallying after soft PMI data in Europe bolstered recession fears overnight.

Economically, the Eurozone Composite PMI Flash fell to 50.3 vs. (E) 52.5 indicating the EU economy is on the brink contracting.

The Manufacturing PMI was better than feared but the Services PMI dropped to 52.4 vs. (E) 54.7 pointing to a sudden slowdown in the service sector which accounts for the bulk of developed economic growth around the globe.

Looking into today’s session, focus will be on the U.S. PMI Flash data due out shortly after the bell with the Manufacturing PMI Flash expected to come in at 48.5 while the Services PMI Flash is expected at 53.5. If the data meaningfully disappoints, especially in the service sector, expect more risk off money flows amid growing recession worries today.

Finally, there are two Fed officials speaking today: Bostic (7:30 a.m. ET) and Mester (1:40 p.m. ET) but it is unlikely that either materially deviates from the Fed’s narrative from the last week which is continued commitment to reigning in inflation with further policy tightening in H2’23.

A “Make or Break” Week for the Rally

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What’s in Today’s Report:

  • A “Make or Break” Week for the Rally
  • Where the Opportunity is in Stocks Right Now
  • Weekly Market Preview:  Will Data Confirm “Goldilocks” Optimism?
  • Weekly Economic Cheat Sheet:  CPI Tuesday, Fed Wednesday, Key Growth Data Thursday

Futures are slightly higher on momentum from last week’s rally, as it was a very quiet weekend of actual news and investors are looking ahead to multiple important market catalysts this week.

Economically, the only notable number was Japanese PPI which rose 5.1% y/y vs. (E) 5.7% y/y in what is the latest sign of global disinflation.

Oil declined more than 2% overnight on over supply concerns as Russia is largely ignoring its production quota.

Today there are no notable economic reports nor any Fed speakers, so barring any major surprises markets should be relatively calm ahead of tomorrow’s CPI report, Wednesday’s FOMC decision and Thursday’s important economic data.

Tom Essaye Quoted in CNBC on December 7th, 2022

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Bond yields fall as Wall Street worries about higher Fed rates

“Bottom line, the economic outlook is turning for the worse (outside of the labor market) and if that continues, it will support the long end of the curve,” wrote Tom Essaye of the Sevens Report. Click here to read the full article.

Tom Essaye Quoted in CNBC on August 18th, 2022

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Bond yields tick lower, cooling off after Fed’s meeting minutes released

Bottom line, the market continues to view virtually all Fed utterances as implying a less-hawkish pivot and Wednesday wasn’t any exception as the FOMC minutes erased the dollar’s earlier gains and cut the rise in Treasury yields as stocks continue to ignore signals from the currency and bond markets that imply the Fed will not be making this hoped for pivot anytime soon, wrote Tom Essaye of The Sevens Report. Click here to read the full article.

Tom Essaye Quoted in CNBC on August 8th, 2022

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Strong economic data puts ‘Fed pivot’ rally in danger, Essaye says

The market has rallied hard on the idea of a Fed pivot. Friday’s jobs report didn’t support that hope and, if anything, will make the Fed more resolute about rate hikes. So, now inflation needs to clearly show signs of peaking and declining, otherwise we’d expect this market to abandon some of that near-term hope, and for volatility to increase, Essaye wrote. Click here to read the full article.

Tom Essaye Quoted in CNBC on July 12th, 2022

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Bond yields fall with key part of yield curve hits lowest level since 2007

The widening spread between the 2-year and the 10-year is signaling a very clear recession warning, especially if it reaches 15 basis points…wrote Tom Essaye of The Sevens Report. Click here to read the full article.