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What to Tell Clients Who Are Worried About U.S. Treasuries

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What to Tell Clients Who Worry About U.S. Treasuries

What’s in Today’s Report:

  • What to Tell Clients Who Are Worry About U.S. Treasuries.
  • Start a free trial of The Sevens Report.

Futures are little changed following a mostly quiet night of news as investors look ahead to today’s CPI report.

Politically, a “Continuing Resolution” to fund the government will be voted on in the House today and if passed, will avert a government shutdown.

Economically, the UK unemployment rate and German ZEW Business Expectations Index both beat expectations (although they aren’t moving markets).

Today focus will be on the CPI report and expectations are as follows:  CPI (E: 0.1% m/m, 3.3% y/y), Core CPI (E: 0.3% m/m, 4.1% y/y).  Generally speaking, numbers that show core CPI is continuing to decline will be welcomed by markets. While readings that imply the decline in inflation is “stuck” or inflation is bouncing back, will likely result in declines in both stocks and bonds.

We also have several Fed speakers today including Barr, Mester, and Goolsbee. We’ll be watching for their reaction to the CPI report. If it makes them more hawkish that’s a negative and more dovish, a positive).

What to Tell Clients

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CPI Preview: Good, Bad & Ugly

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CPI Preview: Good, Bad & Ugly: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • CPI Preview:  Good, Bad & Ugly
  • Weekly Market Preview:  Will Market Catalysts This Week Support A Further Rally?
  • Weekly Economic Cheat Sheet:  CPI Tomorrow, Key Growth Data the Rest of the Week

Futures are slightly lower as markets digest two slightly negative events from the weekend and look ahead to a week filled with possible market moving catalysts.

Moody’s downgraded the U.S. credit outlook to negative but importantly did not change the rating and as such it’s not significantly impacting markets.

Geo-politically, U.S. forces struck more targets in Syria over the weekend, escalating regional tensons but so far markets are not reacting (oil isn’t rallying off the news).

Looking forward, this is a potentially important week, but it starts slowly as there are no notable economic reports today nor any Fed speakers.

Beyond today, though, in addition to the economic catalysts this week, risk of another U.S. government shutdown is rising as there needs to be a short-term spending deal by Friday to avoid a shutdown.  So, any progress on that front today will help markets, while any negative headlines will likely provide a small headwind.

CPI Preview:  Good, Bad & Ugly

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FOMC Preview: Forward Guidance Will Be Critical

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Forward Guidance Will Be Critical: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • FOMC Preview – What’s Expected, Dovish-If, Hawkish-If, Forward Guidance Will Be Critical
  • Chart: 10-Yr Yield Approaches Critical Tipping Point

Futures are cautiously higher thanks to more evidence of disinflation in Europe. While an underwhelming yield curve control policy announcement by the BOJ is digested by global investors.

Economically, Eurozone CPI fell from 4.3% in September to 2.9% in October, well below estimates calling for 3.4% which further supports the narrative that global inflation pressures are easing considerably. Meanwhile, quarterly GDP in the EU disappointed, turning negative at -0.1% vs. (E) 0.0% which is rekindling recession worries in the Eurozone.

Looking into today’s session, there are several economic reports to watch this morning. The Employment Cost Index (E: 1.0%) being the most important for markets. The Case-Shiller Home Price Index (E: 0.7%) and latest Consumer Confidence report will also be released later in the morning (E: 100.0) but are less likely to move markets.

This week’s FOMC meeting gets underway today which will likely mean a familiar sense of Fed paralysis will begin to grip markets ahead of tomorrow’s policy decision, however, there is a 52-Week Treasury Bill auction at 1:00 p.m. ET that could move yields and influence equity market trading in the early afternoon.

Finally, earnings season is winding down but there are a few notable releases today. Starting with CAT ($4.75) and JBLU (-$0.27) reporting ahead of the bell with AMD ($0.68) after the close.

FOMC Preview - Magnifying Glass

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What Can Stop This Selloff?

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What Can Stop This Selloff? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What Can Stop This Selloff?
  • Weekly Market Preview:  A Very Important Week of Earnings, Fed Decision and Economic Data
  • Weekly Economic Cheat Sheet:  A Busy Week (Jobs Report Friday, ISM PMIs Wed/Fri)

Futures are moderately higher on a small reduction in geo-political tensions and better than expected inflation data.

Geo-politically, Israel moved forces into Gaza over the weekend but the operation isn’t as large as feared (yet) and that’s helping to slightly reduce geopolitical anxiety.

On inflation, Spanish CPI rose 3.5% vs. (E) 3.8%, providing another reminder that global inflation is declining.

This week will be a very busy one as we get a Fed decision and important economic/inflation data, as well as the final “big” week of earnings.  But, it starts slowly as there are no economic reports today, so focus will be on earnings and some important reports today include:  MCD ($3.00), WDC ($-1.87), ON ($1.35), SOFI ($-0.07), ANET ($1.58).

What Can Stop This Selloff?

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Hard Landing vs. Soft Landing Scoreboard Update

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Hard Landing vs. Soft Landing Scoreboard Update: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Didn’t Stocks Drop On Yesterday’s Yield Spike?
  • Hard Landing vs. Soft Landing Scoreboard Update

Stock futures are lower and oil is up 3% as tensions in the Middle East remain elevated despite President Biden’s visit to Israel.

Chinese economic data topped estimates across the board overnight. But an imminent default by embattled property developer Country Garden weighed on sentiment in Asian markets.

In Europe, U.K. CPI came in hot as it held steady at 6.7% vs. (E) 6.5% in September.  While the Eurozone HICP “Narrow Core” met estimates at 4.5%.

Looking into today’s session, there will remain considerable focus on the conflict between Israel and Hamas amid Biden’s visit to the region and if no progress is made towards a ceasefire, rising oil prices will continue to act as a headwind on risk assets.

Domestically, there is just one economic report today: Housing Starts (E: 1.394 million) that should not meaningfully move markets. There are aslo multiple Fed officials scheduled to speak: Waller, Williams, Bowman, and Harker.

Earnings season also continues today with: MS ($1.27), ALLY ($0.80), CFG ($0.92), WGO ($1.32), TRV ($2.93), and PG ($1.71) and reporting ahead of the bell, while TSLA ($0.75) and NFLX ($3.46) will release results after the close.Hard Landing vs. Soft Landing

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How to Explain the Israel-Hamas Conflict to Clients

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How to Explain the Israel-Hamas Conflict to Clients: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • How to Explain the Israel-Hamas Conflict to Clients (How It Matters to Markets)
  • Empire State Manufacturing Index Takeaways (More Goldilocks Data)

Stock futures are modestly lower this morning as Treasury yields are rising back towards cycle highs. This is on news that President Biden will travel to Israel tomorrow to try and ease tensions in the region.

Economic data was largely shrugged off overnight. There were more signs of disinflation as wage pressures eased in the latest U.K. Labour Report. While New Zealand’s latest CPI report undershot estimates at 5.6% vs. (E) 5.9% year-over-year.

Today is lining up to be a busy session news-wise as we get several economic reports in the U.S. including: Retail Sales (E: 0.3%), Industrial Production (E: 0.0%), Business Inventories (E: 0.3%), and the Housing Market Index (E: 45). Investors will want to see more Goldilocks data supporting both peak-Fed-hawkishness and prospects for a soft economic landing in order for stocks to continue to rally.

There are also multiple Fed speakers to watch: Williams, Bowman, Barkin, and Kashkari. Markets will be looking for more commentary that suggests the FOMC is done with rate hikes for the cycle.

Finally, earnings season continues to ramp up with: BAC ($0.80), GS ($5.32), JNJ ($2.52), and LMT ($6.66) reporting results before the bell. While UAL ($3.40) and JBHT ($1.87) will report after the close. A drop-off in earnings is not priced into markets at these levels so investors will be looking for positive quarterly results and upbeat guidance.

How to Explain the Israel-Hamas Conflict to Clients

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Market Multiple Levels Chart (October Edition)

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Market Multiple Levels Chart (October Edition): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Market Multiple Levels Chart (October Edition)

Futures are modestly lower following mixed economic data and as the Israel and Hamas war appeared set to escalate.

Economically, E.U. Industrial Production beat while Chinese CPI was flat y/y, increasing deflation concerns.

Israel warned more than one million residents to evacuate southern Gaza in the next 24 hours as it readies for a potential invasion and oil is rallying 3% as a result.

Earnings season starts today and there are several large banks that are reporting results.  In addition to the earnings, markets will want to hear positive commentary on consumer spending on the earnings calls.  Important reports today include:  JPM ($3.89), UNH ($ 6.33), BLK ($8.52), C ($1.26), WFC ($1.25).

Economically, the only notable report today is Consumer Sentiment (E: 67.5) and it would take a spike in inflation expectations for that to move markets.

Market Multiple Table - October Edition

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Market Multiple Table – October Edition

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Market Multiple Table – October Edition: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Market Multiple Table – October Edition
  • Why Didn’t a Hot PPI Report Weigh on Markets?

Futures are modestly higher on more reports of global disinflation combined with additional Chinese stimulus.

Japanese PPI rose less than expected (2.0% vs. (E) 2.5%). And, that added to the recent list of inflation data points that imply ongoing global disinflation.

China’s sovereign wealth fund bought shares in the nation’s largest banks, boosting Asian markets.

Today the focus will be on the CPI report and expectations are as follows: Headline CPI:  0.3% m/m, 3.6% y/y, Core CPI: 0.3% m/m, 4.1% y/y.  Bottom line, a CPI Report under expectations should pressure yields and fuel a continued rally in stocks while a hot CPI should lift yields and likely weigh on stocks.

Away from the CPI report we also get Jobless Claims (E: 209K) and have multiple Fed speakers: Bostic & Collins.

Market Multiple Table - October Edition

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CPI Preview: Good, Bad, and Ugly

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CPI Preview: Good, Bad, and Ugly – Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • CPI Preview: Good, Bad, & Ugly
  • “Soft Components” of the NFIB Small Business Optimism Index Fall to GFC Lows
  • Chart – Equal-Weighted S&P 500 Index (RSP) Remains in Steep Downtrend, Underscoring Thin Market Breadth

U.S. equity futures are modestly higher this morning despite escalating tensions in the Middle East overnight as investors embrace a continued pullback in global bond yields after steady inflation data in the EU overnight.

Economically, German CPI was unchanged from August, coming in at 4.5% y/y in September, meeting estimates. The inline inflation print is helping bonds continue to stabilize and supporting modest risk-on money flows this morning.

Today, focus will be on economic data early with PPI (E: 0.3% m/m. 1.2% y/y) and Core PPI (E: 0.2% m/m, 2.1% y/y) due out ahead of the bell.

From there focus will turn to the Fed with multiple officials scheduled to speak: Waller, Bostic, Collins. Additionally, the latest FOMC meeting minutes will come at 2:00 p.m. ET.

Bottom line, if PPI is more or less inline with estimates and the FOMC minutes and Fed chatter over the course of the day continue to support the less-hawkish narrative of recent. Then this week’s rally can continue, however and reversal back higher in yields will pressure stocks and other risk assets.

CPI Preview: Good, Bad, & Ugly

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Why Did Stocks Rally After the Jobs Report?

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What’s in Today’s Report:

  • Why Did Stocks Rally After the Jobs Report?
  • What to Make of This Market (Updated Near and Medium-Term Outlook)
  • Weekly Economic Cheat Sheet:  Inflation in Focus This Week (CPI Thursday is Very Important)
  • Weekly Market Preview:  Will Rising Oil Prices Become Another Headwind?

Futures are moderately lower on rising geo-political tensions following the Hamas attack on Israel over the weekend.

The human tragedy and geo-political implications aside, from a market standpoint the attack matters because rising geo-political tensions mean higher oil prices (up 3% currently) and the higher oil goes, the stronger the additional headwind on stocks and bonds.

Today there are no notable economic reports but there are several Fed speakers, including Logan, Barr, and Jefferson, although they shouldn’t move markets.  So, oil will likely be the driver of asset prices today and the higher oil goes, the stronger the headwind on stocks.

Why Did Stocks Rally After the Jobs Report?

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