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Market Multiple Table: September Update

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What’s in Today’s Report:

  • Market Multiple Table: September Update
  • Chart: The Yield Curve is Steepening

Stock futures are trading modestly lower while most overseas markets declined overnight amid lingering concerns about the Delta variant’s impact on growth as well as the threat of a hawkish shift in tone from the ECB this week.

Economically, Japanese Q2 GDP was revised up to 1.9% vs. (E) 1.6% y/y which helped the Nikkei buck the trend and rally nearly 1% overnight.

Today, there are a few potential market-moving catalysts beginning with the July JOLTS report (E 10.0M). Then there are two Fed speakers to watch: Williams (1:10 p.m. ET) and Kaplan (6:00 p.m. ET). Finally, there is also a 10-Year Treasury Note Auction at 1:00 p.m. ET.

Bottom line, markets have become more “on edge” this week as the balance between economic growth trends and subsequent Fed policy outlook has become less certain.

So any combination of economic data deteriorating, the outlook for Fed policy getting more hawkish, or interest rates accelerating too quickly will continue to weigh on equities and other risk assets this week.

This Is What Stagflation Looks Like

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What’s in Today’s Report:

  • This is What Stagflation Looks Like
  • Yield Curve Chart: The Steepening Trend Is Stalling

U.S. futures are lower this morning amid new regulatory threats for Chinese tech companies, while Delta variant concerns linger and traders look ahead to fresh U.S. data.

Chinese regulators proposed a new set of rules for internet and technology companies overnight which once again triggered a wave of selling in Chinese markets, specifically in big cap tech names.

Economically, the Eurozone GDP flash met estimates while U.K. wage growth hit a new record in July the latest evidence that stagflation may be an emerging economic trend (more on that in today’s edition of the Report).

Looking into today’s session, there are two notable economic reports due out in the U.S. this morning: Retail Sales (E: -0.2%), and Industrial Production (E: 0.5%).

As has been the case recently, investors will be looking for data that is good enough to suggest we are not falling deeper towards a stagflationary environment but not so strong that it pulls forward expectations for tapering QE (the key to reading the data will be to monitor the reaction in the yield curve; we want to see steepening).

Finally, Fed Chair Powell will speak as part of a virtual town hall event at 1:30 p.m. ET this afternoon and the markets will be looking for any new clues as to the Committee’s taper plans/views of the economic recovery. For now, a continued, slightly dovish stance remains the best case scenario for stocks as another hawkish “tilt” would likely spark a run higher in yields, potentially weighing on broader equity markets.

Inflation Update (Post CPI/PPI)

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What’s in Today’s Report:

  • Inflation Update (Post CPI/PPI)

Futures are again little changed following another generally quiet night of news.

Economic data was minimal as the only notable report was EU exports, which missed expectations falling –0.7% vs. (E) 0.6%, but that’s not moving markets.

On the COVID front, there were mixed headlines.  ABNB said it has seen a small slowdown in bookings because of Delta (a negative), but COVID cases have potentially peaked in China (a positive).  In sum, the headlines were mixed enough that they aren’t moving markets, but we will continue to watch for more evidence that the Delta variant is altering consumer behavior.

Today the key report will be the inflation expectations in Consumer Sentiment (E: 81.4) but as long as that doesn’t spike higher, it shouldn’t move markets.  Instead, COVID headlines will continue to move markets and if there is more evidence the Delta variant is impacting travel/leisure, that will be a headwind on stocks.

Sevens Report Analyst Quoted in Market Watch on July 29, 2021

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Oil prices extend rise to highest finish in over 2 weeks

When we start to see broader delta fears being to subside…we should see that metric ramp back up and underscore…analysts at Sevens Report Research wrote in Thursday’s newsletter. Click here to read the full article.

ECB Preview (Dovish Surprise?)

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What’s in Today’s Report:

  • ECB Preview (Dovish Surprise?)
  • Did Small Caps Just Bottom?

Futures are marginally higher following another night of generally solid earnings and ahead of the ECB decision.

Delta variant fears continued to recede as governments appear to be focusing on re-masking as a policy response, not economic restrictions.

Today focus will be on the ECB Rate Decision & Press Conference (7:45 & 8:30 a.m. ET) and economic data via Jobless Claims (E: 350k) and Existing Home Sales (E: 5.90M).  Markets will want to see a dovish ECB and continued improvement in claims to reinforce that the global recovery is on going, and that central banks will remove accommodation very, very slowly.

On the earnings front, there are several more notable reports today:  T ($0.78), AAL (-$1.70), FCX ($0.73), TWTR ($0.07), INTC ($1.06).

Four Pillars of the Rally Updated (Still Intact)

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What’s in Today’s Report:

  • Four Pillars of the Rally Updated (Still Intact)
  • Weekly Market Preview:  Does Delta Cause a Pullback?  Can Earnings Impress Investors?
  • Weekly Economic Cheatsheet:  Flash PMIs Friday are the Key Report.

Futures are moderately lower as more governments implement restrictions in reaction to the Delta COVID variant.

More cities in California reinstituted indoor mask mandates, Australia implemented more lockdowns and select countries in Europe upped restrictions as Delta COVID cases continue to rise, causing concern among investors that the economic recovery might lose momentum.

On infrastructure, the bi-partisan $1 trillion deal is in danger of collapsing as early as this week, which would increase the chances of tax hike headlines over the next month.

There’s only one notable economic report today, the Housing Market Index (E: 82.0), and just two notable earnings reports, AN ($2.65), TSCO ($2.94), so the tenor of COVID headline and infrastructure will drive markets, and if there are more restrictions announced or the bipartisan infrastructure bill dies, expect more weakness in stocks.

Two Major Market Risks

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What’s in Today’s Report:

  • What Could Go (Really) Wrong? Two Candidates
  • Consumer Confidence Takeaways

U.S. equity futures are trading lower with most international markets while bond yields are falling amid growing concerns about the Delta variant of COVID-19.

The Stoxx 600 Travel and Leisure sector is down more than 5% WTD, underscoring market fears of new lockdowns or travel restrictions in Europe due to the Delta variant outbreak.

There was a slew of economic data from China to Europe released overnight however all of it largely met estimates and therefore is not materially moving markets this morning.

Today, focus will be on any new developments regarding the latest uptick in COVID-19 cases, fueled by the Delta variant, as well as the first look at the June jobs data via the ADP Employment Report (E: 533K) due out ahead of the bell.

There is also a report on Pending Home Sales (E: -1.0%) and two Fed speakers: Bostic (8:00 a.m. ET) and Barkin (1:00 p.m. ET), but unless there are any major surprises none of those should materially move markets.

Sevens Report Co-Editor Tyler Richey Quoted in Market Watch on June 28, 2021

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Oil prices end at a more than a 1-week low on demand concerns, OPEC+ output uncertainty

There’s a resurgence in COVID-19 fears as case counts are rising sharply in parts of Asia, while the ‘Delta variant’ of the virus is…said Tyler Richey, co-editor at Sevens Report Research. Click here to read the full article.

What’s the State of Infrastructure?

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What’s in Today’s Report:

  • What’s the State of Infrastructure?

Stock futures are little changed near all-time highs in quiet trading this morning as concerns about the “Delta” variant of COVID-19 linger while investors look ahead to fresh economic data in the U.S.

Economically, Japanese Unemployment edged up to 3.0% in May from 2.8% in April but Retail Sales topped estimates while Eurozone June Economic Sentiment met expectations.

Looking into today’s session, there are two reports on real estate prices due this morning: Case-Shiller Home Price Index (E: 1.2%) and FHFA House Price Index (E: 1.0%), before the more important release on Consumer Confidence (E: 118.8) is due out shortly after the bell.

There is also one Fed officials scheduled to speak: Barkin (9:00 a.m. ET) but as long as there is not a notable hawkish shift in tone, the commentary should not impact stocks.

That will leave investors focused on any news or developments regarding the “Delta” variant of COVID-19, specifically if any government imposes new lockdowns as a result and infrastructure negotiations.