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Jobs Report Preview (Too Hot, Too Cold, and Just Right)

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Jobs Report Preview (Too Hot, Too Cold, and Just Right): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Jobs Report Preview: Too Hot, Too Cold, and Just Right Scenarios
  • ISM Services Index Takeaways – A “Warm” Report
  • EIA Data Takeaways and Oil Update

Equity markets are mixed in the pre-market as tech-heavy Nasdaq 100 futures are extending gains to new record highs while small-cap Russell 2000 futures are lower ahead of the ECB decision and more U.S. economic data. NVDA notably rose as much as 2% overnight.

Economically, Taiwan’s May CPI rose from 1.95% to 2.24% while German Manufacturing Orders were down -0.2% vs. (E) +0.5% and EU Retail Sales fell -0.5% vs. (E) -0.2%. The market is “ok” with the soft European data ahead of the widely anticipated ECB rate cut this morning.

Looking into today’s session, trader focus will be on the ECB Decision early (8:15 a.m. ET) and as mentioned, rate cuts to benchmark interest rates are expected which will leave commentary from Lagarde and any forward guidance provided critical to the market’s reaction.

In the U.S., there are no Fed speakers or notable Treasury auctions today so focus will shift to the several U.S. economic reports due to be released including: Jobless Claims (E: 216K), International Trade (E: -$75.2B), and potentially most importantly, Productivity & Costs (E: 0.2%, 4.7%).

Bottom line, any “cold” or stagflationary data has the potential to put this week’s rally on pause ahead of tomorrow’s all important jobs report.

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A Concerning Divergence in Bond Markets

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A Concerning Divergence in Bond Markets: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What Is the Smart Market Telling Us? (Part II)
  • JOLTS Data Takeaways – Normalizing or Rolling Over?
  • Chart: JOLTS Fall Below Pre-Pandemic Trend Path

Futures are tracking European markets higher this morning on the back of “goldilocks” growth and inflation data overnight ahead of more key domestic economic data today.

Economically, China’s May Composite PMI handily beat estimates at 54.1 vs. (E) 52.7 which was a welcomed print as Chinese data has been underwhelming recently.

In Europe, the Eurozone Composite PMI rose to 52.2 vs. (E) 52.3 while April PPI fell -1.0% m/m vs. (E) -0.5%. Stabilizing growth numbers and evidence of further disinflation are exactly what the ECB want to see ahead of their first rate cut as it helps shore up the soft-landing argument.

Looking into today’s session, there are no Fed officials scheduled to speak but two important economic reports on the calendar. First, the May ADP Employment Report (E: 173K) will be released pre-market and second, the ISM Services Index (E: 50.7) is due out a half hour after the opening bell.

Investors will want to see a labor market print that is close to estimates. A number too strong will push back on the recent dovish money flows while a weak number will add to recession worries. With the ISM, a steady number above 50 with cooling price indices would be the best case scenario for risk assets leading into the jobs report Friday.

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Is Bad Economic Data Starting to Pressure Earnings?

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Is Bad Economic Data Starting to Pressure Earnings? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Is Bad Economic Data Starting to Pressure Earnings?
  • EIA Analysis and Oil Market Update

Futures are modestly lower again following more disappointing earnings and another hot global inflation print.

DELL (down 15% pre-market) became the latest non-AI tech company to post disappointing results and that’s weighing on futures.

Economically, the EU flash HICP (their CPI) rose more than expected at 2.9% vs. (E) 2.7% y/y and that’s pushing back on expectations for multiple ECB rate cuts this year.

Today brings the biggest economic report of the week, the Core PCE Price Index (E: 0.2% m/m, 2.8% y/y).  Markets will want to see a number at, or ideally below, expectations to further ease inflation anxiety and pressure Treasury yields. If investors get that number this morning, expect a solid bounce back rally in stocks and bonds.  The other notable number today is the Chicago PMI (E: 40.8) but barring a major surprise that shouldn’t move markets.

Regarding the Trump guilty verdict, as we covered in Thursday’s Report, this could result in some temporary volatility in select sectors (oil and gas, industrials, financials) but we do not view this event as a material influence on markets.

Finally, there is one Fed speaker today, Bostic at 6:15 p.m. ET but he shouldn’t move markets.

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The market just seems like it can’t find the middle

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The market just seems like it can’t find the middle: Sevens Report Editor, Tom Essaye, Quoted in Barron’s

The Stock Market Keeps Going Back and Forth on Interest Rates. How to Play It.

“The market just seems like it can’t find the middle,” Sevens Report Research’s Tom Essaye told Barron’s in a phone interview.

Essaye says he can make the case that the economy is slowing, or not, based on a wide swath of data that’s available. That’s why every individual release has so much sway on the market’s day-to-day. Stocks were mixed on Tuesday, aside from tech, after Minneapolis Fed President Neel Kashkari said the Federal Reserve hasn’t formally taken rate hikes off the table and is prepared to keep rates steady until inflation hits the central bank’s 2% target.

“This is the world we’re in for now, until economic data gives us a clear direction as to where we’re going,” Essaye says. “I think we just sort of have to brace ourselves for this kind of back and forth. I think the net result for investors is that there’s just going to be more elevated volatility.”

Also, click here to view the full Barron’s article published on May 28th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

It’ll be Very Hard for This Market to RallyIf you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

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Investors still view ‘bad data as good for stocks’

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Investors still view ‘bad data as good for stocks’: Sevens Report Editor, Tom Essaye, Quoted in Barron’s

Nvidia Earnings Spark a Rally in Tech Stocks

“For now, investors still view ‘bad data as good for stocks’ as it makes rate cuts more likely so a small miss vs. expectations should extend the early rally,” writes Sevens Report Research’s Tom Essaye.

Also, click here to view the full Barron’s article published on May 23rd, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

It’ll be Very Hard for This Market to RallyIf you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

Explaining This Market to Clients (Summer Edition)

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Explaining This Market to Clients (Summer Edition): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Explaining This Market to Clients (Summer Edition)
  • Weekly Economic Preview – All Eyes on Inflation (Friday)

Futures are modestly higher, led by mega-cap tech, as traders return from the long weekend to mixed headlines.

Economically, an ECB survey showed a favorable dip in medium term (3-year) consumer inflation expectations which was well received by equity traders overnight.

Geopolitically, an Egyptian soldier was killed in a fire fight with Israeli forces at the Rafah border over the weekend while, separately, there were dozens of civilian casualties following an Israeli airstrike just north of Rafah leaving Middle East tensions as high as they’ve been in months (oil is up more than 1%).

Looking into today’s session, there are two economic reports to watch: S&P Case-Shiller Home Price Index (E: 0.3%) and Consumer Confidence (E: 95.3) while several Fed officials are scheduled to speak: Kashkari (9:55 a.m. ET), Cook (1:05 p.m. ET), and Daly (1:00 p.m. ET). The market will want to see more “goldilocks” economic data and preferably less-hawkish Fed chatter.

Additionally, there are two key Treasury auctions, the first for 2-Yr Notes at 11:30 a.m. ET, and the second for 5-Yr Notes at 1:00 p.m. ET. With the total amount being auctioned just shy of $150B, demand for the Notes will be closely watched and weak auction outcomes could push yields higher and weigh on stocks with key inflation data looming later in the week.

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Did the Last 48 Hours Make the Fed More Hawkish?

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Did the Last 48 Hours Make the Fed More Hawkish? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Did the Last 48 Hours Make the Fed More Hawkish?

Futures are modestly higher following a quiet night as markets bounce following Thursday’s high-rate driven declines.

Economically, UK Retail Sales declined –2.3% vs. (E ) -0.1%, although that’s not making a June cut more likely.

Geo-politically, there are reports Putin will seek a cease-fire in Ukraine, although that’s unconfirmed (it would be a surprise positive if true).

Given the looming long weekend we can expect quiet trading today but there are two notable economic reports:   Durable Goods Orders (E: -0.5%) and University of Michigan Inflation Expectations (1-Yr Inflation Expectations: 3.5%, 5-Year Inflation Expectations 3.1%). As yesterday demonstrated, strong data is “bad” for stocks in the near term so markets will want to see in-line readings or slightly soft numbers on both reports to help fuel a rebound from yesterday.

There is also one Fed speaker and it’s an important one, Waller at 9:35 a.m. ET, but it’s unlikely he’ll say anything surprising (he just spoke earlier this week).

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Is Investor Sentiment Getting Too Bullish?

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How Important Is AI to This Market? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Is Investor Sentiment Getting Too Bullish?
  • Why the FOMC Minutes Weren’t Hawkish
  • EIA Analysis and Oil Update

Futures are solidly higher following stronger than expected NVDA earnings and guidance.

NVDA results beat across the board as earnings, revenue and guidance all beat estimates while the company announced a 10:1 stock spilt and increased the dividend.  NVDA is up 6% pre-open and pushing futures higher.

Economically, EU and UK May flash PMIs were mixed but both above 50, importantly signaling economic expansion.

Today focus will switch back to economic data and the key report today will be the May Flash PMI (E: 51.0).  For now, investors still view “bad data as good for stocks” as it makes rate cuts more likely so a small miss vs. expectations should extend the early rally.  We also get the latest Jobless Claims (E: 220K) and again a small miss will be welcomed by investors.  Turning to the Fed, the surge of speakers subsides today as we only have one speaker, Bostic (3:00 p.m. ET) and he shouldn’t move markets.

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If Nvidia’s earnings are soft, you’ll see some weakness in tech

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If Nvidia’s earnings are soft, you’ll see some weakness in tech: Sevens Report Editor, Tom Essaye, Quoted in Barron’s

Why the Stock Market Can Rally, Even if Nvidia Earnings Disappoint

“I think if Nvidia’s earnings are soft, you’ll see some weakness in tech, especially, although I don’t think that a bad Nvidia earnings print carries with it the same danger that it would have seen in February or November,” Sevens Report Research’s Tom Essaye tells Barron’s.

“While a bad Nvidia print will be bad for tech and probably bad for the S&P 500, because tech is such a big weight, for things like the Dow, the Russell 1000, RSP (the equal-weight S&P 500), I don’t think it’s a derailing event,” Essaye says. “I’d probably be looking to buy any dip on that.”

Also, click here to view the full Barron’s article published on May 21st, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

It’ll be Very Hard for This Market to RallyIf you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

How Important Is AI to This Market?

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How Important Is AI to This Market? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • How Important Is AI to This Market?
  • Chart: Key Levels to Watch in NVDA Today
  • Fed’s “SHED” Release Takeaways Support Soft Landing

Futures are mildly lower as UK core inflation data failed to “cool” as much as hoped in April while traders await NVDA earnings after the close today.

Economically, the UK’s Core CPI figure came in at 3.9% vs. (E) 3.7% y/y in April, down from 4.3% in March which was a mild disappointment for broader global disinflation hopes.

Looking into today’s session it is a fairly busy day from a catalyst standpoint as we will get the latest Existing Home Sales report (E: 4.195 million) later this morning while the Fed’s Goolsbee is scheduled to speak at 9:40 a.m. ET.

As we move into the afternoon traders will be watching the results of a 20-Yr Treasury Bond auction (1:00 p.m. ET) before waiting on the release of the latest FOMC meeting minutes (2:00 p.m. ET).

Finally, some late season earnings could move markets with two notable retailers releasing results in the premarket: TGT ($2.05), TJX ($0.87) before all eyes turn the widely anticipated release of NVDA earnings ($5.55) after the close.

Bottom line, with stocks sitting on record highs investors will need to see economic data that remains “goldilocks,” the absence of any hawkish Fed surprises (i.e. consideration of rate hikes), steady yields, good retailer earnings, and solid guidance from AI bellwether NVDA to meaningfully advance beyond current levels.

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