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Will Today’s CPI Report Extend the Pullback?

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What’s in Today’s Report:

  • Market Multiple Table Chart (August Update)
  • CPI Preview
  • EIA Analysis and Oil Market Update

Futures are modestly higher as markets bounce back ahead of this morning’s CPI report and following some positive U.S./China geopolitical headlines.

The U.S. unveiled Chinese investment restriction rules that were less intense than feared, while China removed restrictions on group travel to the U.S. (providing small steps towards a more normal U.S./China relationship).

Today focus will be on CPI and estimates are as follows: E: 0.2% m/m, 3.3% y/y, Core CPI E: 0.2% m/m, 4.8% y/y.  As we state in the CPI Preview, the risk for markets is that CPI is more resilient than expected, because at these levels investors are already assuming continued disinflation.

The other notable economic report is Jobless Claims (E: 230K) and markets will want to see that number gradually move higher to reduce the likelihood of one more rate hike. Finally, there’s one Fed speaker today, Harker (4:15 p.m. ET), but he shouldn’t move markets.

What’s Causing the Increased Volatility in Stocks?

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What’s in Today’s Report:

  • What’s Causing the Increased Volatility in Stocks?
  • Weekly Market Preview:  Do the Three Pillars of the Rally Stay Intact?
  • Weekly Economic Cheat Sheet:  Key Inflation Data This Week (CPI on Thursday)

Futures are rebounding modestly from last week’s declines following a quiet weekend of news and ahead of an important week of inflation data.

Economically, the only notable number was German Industrial Production, which fell more than expected (-1.5% vs. (E.) -0.5%) and again underscored growing recession risks in Europe.

Today the key economic report is the Manheim Used Vehicle Value Index (9:00 a.m. ET) as this is viewed as an anecdotal reading on inflation, and markets will want to see a further decline in car prices.

We also get Consumer Credit (E: $13.00B) and there are two Fed speakers, Harker (8:15 a.m. ET) and Bowman (8:30 a.m. ET), and markets will want to see those events reinforce the Goldilocks narrative (solid consumer spending and the Fed basically done with rate hikes).

How to Explain Inflation Base Effects to Clients and Prospects

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What’s in Today’s Report:

  • How to Explain Inflation to Clients and Prospects
  • JOLTS Return to Pre-Covid Trend Path, But Is That Enough for the Fed?
  • ISM Manufacturing Index Takeaways – Another “Goldilocks” Report
  • The Yield Curve Will Return to Zero, How It Gets There is What Matters Most (Chart)

Stock futures are trading lower with global risk assets after a U.S. credit downgrade late yesterday.

Fitch Ratings downgraded the U.S. from its top rating AAA to AA+ yesterday, citing the massive fiscal deficit, but the downgrade should not result in any forced selling of Treasuries and therefore should have a limited near-term impact on yields and markets more broadly.

Looking into today’s session, focus will be on the U.S. credit downgrade as investors digest the potential implications on fixed income markets and re-assess valuations of risk assets, but we also get the first look at July jobs data in the form of the ADP Employment Report (E: 185K) ahead of the bell. If the data comes in “too hot” or “too cold” market volatility may pick up this morning. Motor Vehicle Sales will also be released (E: 15.6 million) but that data should not move markets.

There are no Fed speakers or notable Treasury auctions today, so beyond the early jobs data investors will continue to focus on Q2 earnings season with CVS ($2.12), KHC ($0.74), and PSX ($3.54) releasing results before the open while PYPL ($1.16), QCOM ($1.63) and MET ($1.85) will report after the close.

 

Sevens Report Technicals – Five Recessionary Bear Market Signals to Watch

The biggest risk to equity markets right now is a hard economic landing developing in H2’23 or sometime in 2024. Using modern market history as a guide, stock market rallies following yield curve inversions are typically reversed entirely during subsequent recessions (so all of the 2023 gains are at risk, and then some).

So, in this week’s edition of Sevens Report Technicals we included a list of Five Recessionary Bear Market Signals to Watch, which includes specific levels to monitor in various asset classes that will help us realize the onset of a looming recession in real time.

The feedback on Sevens Report Technicals has been overwhelmingly positive since its launch in May. One subscriber recently wrote in: “Having been in the business for 36 years and retired for 16, I truly believe this is the best report I have ever seen. The way you organize it and the info I glean from it helps my trading. I really look forward to each Monday’s report.”

To access this week’s edition of Sevens Report Technicals, please send an email to info@sevensreport.com to start a risk-free subscription. We offer a 30-day money back guarantee, so you risk nothing to see for yourself how Sevens Report Technicals can help you and your business.

Could the Yield Curve Be Wrong This Time?

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What’s in Today’s Report:

  • Could the Yield Curve Be Wrong This Time?
  • Chart: 10s-2s Yield Curve Spread Near Multi-Decade Lows

Futures are lower this morning as economic data confirmed weakness in the global manufacturing sector while the RBA unexpectedly paused their rate hiking cycle at the conclusion of their latest meeting overnight.

Economically, China’s Manufacturing PMI fell to a contractionary reading of 49.2 vs. (E) 50.1 while the Eurozone PMI met estimates at a very weak reading of 42.7, underscoring the challenges facing the global manufacturing sector.

Looking into today’s session, there are several economic reports to watch: ISM Manufacturing Index (E: 46.5), Construction Spending (E: 0.6%), and JOLTS (E: 9.650 million). Investors will be looking for better than feared manufacturing data in the U.S. and signs that the domestic labor market is softening but not collapsing.

Earnings season also continues with multiple notable companies reporting quarterly results today including: UBER ($0.00), PFE ($0.57), CAT ($4.51), and JBLU ($0.40) before the open and AMD ($0.57), SBUX ($0.95), and AIG ($1.54) after the close.

Current Market Glossary (For Clients & Prospects)

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What’s in Today’s Report:

  • Current Market Glossary (For Clients & Prospects)

Futures are slightly lower following a night of disappointing tech earnings.

NFLX, TSLA and TSM all posted disappointing earnings results (stocks down 3% – 6% pre-market) and that’s weighing on Nasdaq and S&P 500 futures.

There was no notable economic data overnight.

Today will be another busy day of data and earnings results.  On the economic front, the two key reports are Weekly Jobless Claims (E: 250k) and Philly Fed (E: -10.0), and as you can guess (and especially at these stretched valuations) markets will want to see more Goldilocks data (so stable claims and Philly and falling prices).  We also get Existing Home Sales (E: 4.23M) but, barring a big miss, that shouldn’t move markets.

Turning to earnings, focus today is on industrials and consumer/healthcare names, and some important results to watch include:  AAL ($1.58), TSM ($1.07), JNJ ($2.61), PM ($1.48), COF ($3.31), CSX ($0.49), and PPG ($2.14).

Market Multiple Table Chart (July Update)

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What’s in Today’s Report:

  • Market Multiple Table Chart (July Update)
  • Why More Goldilocks Data Sent Stocks Higher Again Tuesday

Futures are little changed ahead of a busy day of earnings and despite more encouraging news on global disinflation.

UK CPI rose less than expected, gaining 0.1% vs. (E) 0.4% m/m and 7.9% vs. (E) 8.2% y/y, providing bullish investors more evidence that inflation is declining globally, although that good news was partially offset by a very slightly higher final look at EU HICP (up 5.5% y/y vs. 5.4%).

Today focus will turn to earnings and the key reports to watch are: TSLA ($ 0.82), NFLX ($2.83) and GS ($3.25), as those results will help set the tone for the start of earnings season (results from companies up to today have been fine, although it’s very, very early).    Other notable earnings include:  ASML ($4.97), USB ($1.13), UAL ($3.99), and IBM ($2.00).

Economically, the only notable number today is Housing Starts (E: 1.48M) but barring a shocking miss, that shouldn’t move the broader markets.

What Pushes Stocks Higher from Here?

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What’s in Today’s Report:

  • What Pushes Stocks Higher from Here?
  • Weekly Market Preview:  Earnings Take Center Stage
  • Weekly Economic Cheat Sheet:  Growth Data in Focus this Week

Futures are slightly lower following mixed Chinese economic data and a potential further escalation of the Russia/Ukraine war.

Chinese economic data was mixed as GDP and Retail Sales both missed estimates, while Industrial Production beat, and the data will keep markets  wanting more stimulus.

Possibility of further escalation of the Russia/Ukraine war increased after Ukraine claimed responsibility for the destruction of a bridge linking Crimea and Russia.

Today focus will be on the first data point for July, the Empire Manufacturing Index (E: -4.3).  Markets will want to see this number be stronger than expectations and ideally turn positive, furthering the “Golidlocks” market narrative of falling inflation but stable growth.

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.

What the CPI Report Means for Markets

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What’s in Today’s Report:

  • What the CPI Report Means for Markets
  • EIA and Oil Market Analysis

It’s “green on the screen” as global indices and U.S. futures extend yesterday’s CPI driven rally.

Economically, UK Industrial Production (IP) was better than feared (down –1.2% vs. (E) -1.5%) while EU IP slightly missed estimates (0.2% vs. (E) 0.5%).

Earnings season officially begins today and the first reports are solid, as PEP and DAL both beat earnings estimates.

Today focus will be on economic data, specifically Jobless Claims (E: 245K) and PPI (E: 0.2% m/m, 0.4% y/y, Core PPI E: 0.2% m/m, 2.8% y/y).  If jobless claims are mostly stable and PPI falls more than expected, markets should extend yesterday’s “Immaculate Disinflation” driven rally. Finally, there is one Fed speaker today, Waller (6:45 p.m. ET), but markets are ignoring hawkish rhetoric right now so he shouldn’t move markets.

CPI Preview: Good, Bad, and Ugly

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What’s in Today’s Report:

  • CPI Preview – Good, Bad, & Ugly
  • Chart: Is Disinflation Accelerating?

U.S. stock futures are extending this week’s gains ahead of the all-important CPI report this morning following a mostly quiet night of news.

There were no economic reports overnight but the Reserve Bank of New Zealand did notably pause their rate hiking cycle leaving their policy rate unchanged at 5.50% (however this was expected and did not meaningfully move markets).

Looking into today’s session the big catalyst is the CPI report due out before the open. On the headline, CPI is expected to come in at 0.3% m/m and 3.1% y/y while the Core figure is seen rising 0.3% m/m and 5.0% y/y.

From there, focus will turn to Fed speakers with Kashkari speaking shortly after the open (9:45 a.m. ET) and Mester at the close (4:00 p.m. ET).

Finally, there is a 10-Yr Treasury Note auction at 1:00 p.m. ET and the outcome could shed light on the bond market’s outlook for the economy and Fed policy expectations in the wake of the CPI data release, so there is potential this auction moves markets in the early afternoon.