Posts

Tom Essaye Quoted in Blockworks on January 12th, 2023

Crypto Miners Log Double-digit Stock Price Gains After CPI Report

Tom Essaye, the founder of Sevens Report Research, said Wednesday before the CPI print that inflation metrics would need to continue falling quickly if the market hopes to sustain a broader rally. Click here to read the full article.

Tom Essaye Quoted in Yahoo on January 11th, 2023

Stocks End on High Note With ‘Risk-On’ CPI Wagers: Markets Wrap

Now the caveat is that if the headline number drops, but core CPI doesn’t, the report won’t be that positive, wrote Tom Essaye, a former Merrill Lynch trader who founded The Sevens Report newsletter. Click here to read the full article.

Fed Speak and Updated Rate Expectations

What’s in Today’s Report:

  • Fed Speak and Updated Rate Expectations
  • CPI Takeaways

Futures are slightly lower following mixed economic data, as markets continue to digest increased hopes for an economic “soft landing.”

Chinese exports declined but fell less than expected (-9.9% vs. (E) -11.1%), offering more “not as bad as feared” news.

Today’s focus will switch to earnings (and that’s true for next week too) and key reports today include:  JPM ($ 3.11), BAC ($ 0.76), C ($ 1.18), UNH ($5.17), WFC ($0.63) and BLK ($ 8.00).  If earnings are better than feared, that should help stocks extend yesterday’s gains.

Economically the focus will stay on inflation with Import & Export Prices (E: -0.9%, -0.7%) and Consumer Sentiment (E: 60.0) while we get another Fed speaker: Harker (10:20 a.m. ET).  As has been the case, anything that implies declining inflation and/or a 25 bps rate hike in February will help stocks rally.

Market Multiple Table Chart

What’s in Today’s Report:

  • Market Multiple Table Chart
  • EIA Analysis and Oil Market Update

Futures are little changed as overnight economic data was in-line with expectations while investors look ahead to this morning’s CPI Report.

Economically, Chinese CPI was the only notable number and it largely met expectations at 1.8% y/y (vs. (E) 1.9%).  That reading will keep Chinese authorities actively stimulating the Chinese economy, which is a positive for the global economy.

Today focus will clearly be on the CPI report (E: 0.0, 6.6%), but remember the Core CPI report is the more important number (E: 0.3%, 5.7%).  Markets need to see continued declines in CPI to underwrite recent gains in stocks and bonds.

Away from CPI, we get the latest Jobless Claims reading (E: 215K) and this number needs to move higher to reflect a better balance in the labor market.  Finally, there are multiple Fed speakers today including Harker (7:30 a.m. ET), Bullard (11:30 a.m. ET), and Barkin (12:40 p.m. ET) and while we should expect typically hawkish rhetoric, they shouldn’t reveal anything new (and as such shouldn’t move markets).

CPI Preview

What’s in Today’s Report:

  • CPI Preview: Focus on the Core Figure
  • Chart – Gold Moving Higher in Well Defined Uptrend

U.S. stock futures are tracking global shares higher in moderate risk-on trading this morning as investors look past Powell’s lack of commentary of monetary policy plans yesterday and await tomorrow’s all-important CPI data.

Economically, Retail Sales reports in both Australia and Italy handily beat expectations overnight, adding to optimism for a global economic soft landing.

There are no market-moving economic reports today and no Fed officials are scheduled to speak.

That leaves just one potential market catalyst today, a 10-Yr Treasury Note auction at 1:00 p.m. ET. And while it is possible a surprise outcome in the auction moves yields and causes some modest moves in equities in the afternoon, the session is likely to be mostly quiet as traders position into the CPI report.

Why Friday’s Data Wasn’t As Positive As the Market Implied

What’s in Today’s Report:

  • Why Friday’s Data Wasn’t As Positive As The Market Implied
  • Weekly Market Preview:  Can Inflation Fall Faster than Growth?
  • Weekly Economic Cheat Sheet:  All About Inflation (CPI the Key Report)

Futures are modestly higher mostly on momentum from Friday’s close, following a quiet weekend of news.

Stocks rallied on Friday thanks to increasing hopes for an economic soft landing, and nothing happened over the weekend to offset that hope.

Economic data met expectations as German Industrial Production and EU Unemployment were both in-line.

Today focus will be on the NY Fed Inflation Expectations (Previous:  4.0% one-year, 3.8% three-year), and if they decline from previous levels that will be positive.  We also get one Fed speaker, Bostic (12:30 p.m. ET).

Technical Outlook for Growth vs. Value

What’s in Today’s Report:

  • Current Technical Outlook for Growth vs. Value
  • Cooler Than Feared German CPI Roils Currency Markets

Markets are trading with a risk-on tone this morning following favorable economic data overnight while traders look ahead to today’s domestic data and the release of the Fed minutes.

Economically, France’s December CPI headline fell to 5.9% vs. (E) 6.3% y/y while Composite PMI headlines across Europe were revised solidly higher from the Flash prints. Those data points indicate a faster drop in inflation and more resilient economic activity which bolsters the prospects of a soft landing.

Looking into today’s session, we get a few notable economic reports this morning including: Motor Vehicle Sales (E: 13.7 million), ISM Manufacturing Index (E: 48.0), and JOLTS (10.1 million) before the focus will turn to the release of the December FOMC Meeting Minutes at 2:00 p.m. ET.

Bottom line, optimism about quickly retreating inflation rates overseas and better-than-feared growth readings are driving risk-on money flows overseas today and if we see more of the same in the U.S. data today, that can continue. Regarding the Fed Minutes, any positive mention about progress on getting inflation under control will be well received and could see the pre-market gains extended into the afternoon.

Three Keys to a Bottom: Update

What’s in Today’s Report:

  • Three Keys to a Bottom: Update
  • Weekly Economic Cheat Sheet – Jobs Report in Focus

U.S. equity futures have a tentative bid to start the new year today as tech stocks are outperforming amid a sharp pullback in Treasury yields.

Economically, China’s Manufacturing PMI fell to 49.0 in December from 49.4 in November while the U.K.’s Manufacturing PMI came in at 45.3 vs. (E) 44.7 last month. Both figures remained well below 50, in contraction territory, and that is seeing some of the recent hawkish central bank expectations unwind as we begin the new year.

Looking into today’s session, there are two economic reports to watch in the U.S., the Manufacturing PMI (E: 46.2) and Construction Spending (E: -0.4%).

Investors will be looking for data that points to a continued slowdown in growth but a more pronounced drop in price readings as that should help further ease hawkish policy expectations and allow the early but tentative risk-on money flows to continue.

There are no Fed officials scheduled to speak and no notable Treasury auctions today. That will leave investors focused on Treasuries as a continued drop in yields today should support a continued bid in tech stocks and equities more broadly as traders reposition into the new year.

 

Sevens Report Quarterly Letter Delivered Today

Our Q4’22 Quarterly Letter will be released today. We use our strength (writing about the markets) to help you:

  • Save time (an average of 4-6 hours per quarterly letter)
  • Show you’re on top of markets with impressive, compelling market analysis

You can view our Q3’22 Quarterly Letter here.

To learn more about the product (including price) please click this link.  If you’re interested in subscribing, please email info@sevensreport.com.

The Key Influence on Markets as We Approach 2023

What’s in Today’s Report:

  • The Key Influence on Markets as We Approach 2023
  • Weekly Market Preview:  Can Economic Data Help Stop the Selling?
  • Weekly Economic Cheat Sheet:  Core PCE Friday the Key Report

Futures are slightly higher on a mild oversold bounce following last weeks’ losses and a quiet weekend of news.

China announced the closing of schools in Shanghai on Monday in response to surging COVID cases, but the broader economic reopening remains on track.

Economically, the German IFO Business Expectations Survey was higher than expected (83.2 vs. (E) 82.0) as was UK Industrial Trends (-6% vs. (E) -9%) but neither number is moving markets.

Today the only notable economic report is the Housing Market Index (E: 34) and markets will want to see continued moderation in the data (housing remains a major contributor to high CPI so more progress on that front will be a mild positive).

What the Fed Decision Means for Markets

What’s in Today’s Report:

  • What the Fed Decision Means for Markets
  • Why Stocks Didn’t Fall More Yesterday Despite the Hawkish Fed (Important)
  • EIA Analysis and Oil Market Update

Futures are sharply lower as markets digest yesterday’s Fed decision and a deluge of global central bank rate hikes.

By the time stocks open today, seven separate global central banks (including the Fed, ECB, BOE and Swiss National Bank) will have hiked rates over the last 24 hours and while it was all expected, it’s still weighing on sentiment.

Today will be a very busy day of central bank decisions and economic data.  First, we get the BOE Rate Decision (E: 50 bps hike) and ECB Rate Decision (E: 50 bps hike) and the keys there will be the commentary (do either central bank hint that they’re close to the end of tightening).

On the economic front, the key reports today are (in order of importance): Philly Fed Manufacturing Index (E: -9.9), Empire State Manufacturing Index (E: -0.4), Jobless Claims (E: 230K), Retail Sales (E: -0.2%) and Industrial Production (E: 0.1%).  If the data can show moderation and easing price pressures (especially in Empire and Philly) that’ll be a positive for stocks.