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PPI and Jobless Claims Strengthen the “Goldilocks” Narrative

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What’s in Today’s Report:

  • PPI and Jobless Claims Strengthen the “Goldilocks” Narrative

Futures are little changed following a quiet night of news as markets digest the Wed/Thurs rally and focus turns to the start of the Q2 earnings season.

Economically, there was more evidence of global disinflation (or deflation) as German Wholesale Prices (think their PPI) declined –2.9% y/y vs. (-1.2%) y/y.

Today focus will be on earnings, as we get several major bank earnings results:  JPM ($5.92), C ($1.31), WFC ($1.15), and BLK ($8.47) as well as UNH ($5.92).  These large cap companies usually don’t provide too many surprises in their earnings reports, but markets will want to hear positive commentary on the overall environment to further support this latest rally in stocks.

There are also two notable inflation linked economic reports today, Import & Export Prices (E: -0.2%, -0.4%), Consumer Sentiment (E: 65.0), but barring any major surprises they shouldn’t move markets.

Sevens Report Analyst Quoted in MarketWatch on May 31st, 2023

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U.S. oil futures settle at lowest since March

The potential fallout from the U.S. debt-ceiling debacle and rising odds of a June interest-rate hike both “weighed on oil as the former influence would be a broader riskoff market event, while the latter would further reduce already waning optimism for a soft economic landing this year,” analysts at Sevens Report Research wrote in Wednesday’s newsletter. Click here to read the full article.

 

Vaccine Playbook

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What’s in Today’s Report:

  • Vaccine Playbook (Results Hopefully Coming Next Week)
  • September Durable Goods Orders Takeaways
  • Consumer Confidence Miss (Chart)

Stock futures are tracking global shares lower this morning with European markets hitting multi-month lows as coronavirus cases continue to surge and multiple governments, including France and Germany, discuss new lockdowns.

There were no notable economic reports overnight and the only report in the U.S. today is: International Trade in Goods (E: -$85.0B).

There are no Fed speakers scheduled to speak today however the Treasury will hold a 5-Yr Note Auction at 1:00 p.m. ET, and given the fact that the yield curve has come into focus recently with the 10s-2s spread near 2020 highs, any material impact the auction has on the yield curve could impact stocks (new highs would be negative right now)

Finally, earnings season remains in full swing with: BA (-$2.33), UPS ($1.86), GE (-$0.06), and MA ($1.65) reporting ahead of the bell while V ($1.09) and F ($0.22) will release Q3 results after the close.

The recent resurgence in global COVID-19 cases and subsequent moves by multiple major governments to revert to lockdown measures to combat the spread of the virus has taken over as the main influence on risk assets right now, especially with hopes for a pre-election stimulus deal effectively dead at this point.

So today, the market’s main focus will be on the latest outbreak statistics and various governments policy reactions, especially in the U.S. And if we see renewed lockdowns implemented in various hotspots, then stocks could extend this week’s selloff, potentially in a big way.

Why Are Bond Yields At Multi-Month Lows?

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What’s in Today’s Report:

  • Is the Market Already Warning Us On Growth?
  • Why Are Bond Yields Threatening to Breakdown?
  • When the Coronavirus will matter more to stocks

Futures are moderately lower following a generally quiet night of news.

There was no notable economic or geo-political news overnight, and the reason stocks are lower this morning is digestion of this week’s news combined with still worsening coronavirus statistics.

Coronavirus trends remained concerning as the U.S. posted a second straight day of 60k plus new cases, while coronavirus related deaths remain near six week highs, increasing the chances that we see a further pause in the economic reopening, or even the re-imposition of widespread lockdowns.

Today there’s not much scheduled news, as PPI (E: 0.4%) is the only economic report and that won’t move markets.  So, focus will remain on whether we see more economic re-openings pause given the surge in coronavirus cases.  The low on Thursday in the S&P 500 was 3,115, and that’s a level to watch today.  If that’s broken, then we could see selling pressure increase in the near term.

Tom Essaye Quoted in Unseen Opportunity on June 30, 2020

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According to Tom Essaye, founder of The Sevens Report, stocks could be missing a few “key ingredients” necessary for an even more extended rally. “A combination of 1) Stimulus, 2) Positive trends in the virus, 3) Economic reopenings and 4) Hopes for a vaccine drove stocks higher in Q2…” Essaye wrote. Click here to read the full article.

Jerome Powell

Tom Essaye Interviewed with Yahoo Finance on June 30, 2020

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Sevens Report Research Founder Tom Essaye joined Yahoo Finance’s Brian Sozzi and Jared Blikre to discuss how the markets are faring amid volatile news about the coronavirus. Click here to watch the full video.

Tom Essaye Interview

Has There Been A Positive Change?

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What’s in Today’s Report:

  • Has There Been A Positive Change in Markets?
  • Jobs Day

Futures are solidly higher thanks mostly to continued momentum following Wednesday’s rally.

Economic data was sparse overnight, as the only notable report was the Eurozone Unemployment Rate, which slightly beat estimates (7.4% vs. (E) 7.7%).

Coronavirus cases continued to rise in the U.S. and hit a new daily record above 50k.

Today the focus will be on the Employment Situation Report, and the expectations are as follows: Job Adds: 3.000M, UE Rate: 12.4%, Wages: -0.8%).  As long as the number isn’t a major disappointment (say below 2.5MM) it likely won’t interrupt this week’s lift in markets.

We also get Jobless Claims (E: 1.400M) this morning, and while it’ll be overshadowed by the monthly jobs report, claims are actually more important, and if they can continue to decline towards 1MM (and beat expectations) that will be an additional tailwind on stocks.  Conversely, if claims start to move higher, that could offset even a better than expected monthly jobs report.

Risks to the Stimulus Driven Rally

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What’s in Today’s Report:

  • Bottom line: Risks to the Stimulus Driven Rally

Stock futures are slightly lower this morning as investors weigh a continued rise in coronavirus cases and escalating geopolitical tensions against positive economic data.

China’s CFLP Manufacturing PMI rose to 50.9 vs. (E) 50.5 in June indicating an acceleration in the economic recovery.

China’s parliament passed a new national security law for Hong Kong o/n but specific details have yet to be released.

Today, there are two economic reports to watch: S&P Case-Shiller HPI (E: 0.5%) and Consumer Confidence (E: 90.0) as well as a slew of Fed speak to monitor: Williams (7:00 & 11:00 a.m. ET), Powell (12:30 p.m. ET), Bostic (2:00 p.m. ET), and Kashkari (2:00 p.m. ET).

Powell’s testimony before Congress, alongside Treasury Secretary Mnuchin, will be the “main event” today and as long as they reiterate their plans for stimulus measures to continue for the foreseeable future, stocks should be able to end the second quarter in a relatively quiet manner this afternoon.

Tom Essaye Quoted in International Business Times on June 26, 2020

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“Coronavirus cases are spiking and reopenings are being delayed, which at a minimum will impact earnings. The resurgence in coronavirus cases is raising concerns that the rebound may be short-lived as voluntary…” said Tom Essaye, founder of The Sevens Report. Click here to read the full article.

Tom Essaye Quoted in Equities.com on June 27, 2020

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“Coronavirus cases are spiking and reopenings are being delayed, which at a minimum will impact earnings. The resurgence in coronavirus cases is raising concerns that the rebound may be short-lived as voluntary or potentially more…” said Tom Essaye, founder of The Sevens Report. Click here to read the full article.