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Why Stocks Dropped Last Week (And What It Means for Markets)

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What’s in Today’s Report:

  • Why Stocks Dropped Last Week
  • Weekly Market Preview:  A Key Earnings Week (Results Need to be Good)
  • Weekly Economic Cheat Sheet (Inflation in Focus Again this Week)

Futures are moderately lower on concerns about economic growth as COVID cases rose again in China while hopes for a diplomatic solution in Ukraine have all but faded.

China is continuing with its “zero COVID” policy and with cases rising again markets are fearing more shutdowns, perhaps in Beijing, which is a negative for global growth.

Russian President Putin essentially eliminated a diplomatic solution to the war, ensuring a further drawn-out conflict, which will also be a headwind on global growth.

Today there are no economic reports and no notable Fed speakers, but worries about global growth are the reason stocks dropped last week, so markets need some positive news on growth to stabilize in the near term.

On the earnings front, this is a very important week and while the most important reports don’t come out until later this week, two reports we’ll be watching today are KO ($0.58) and WHR ($4.90).

Are Financial Conditions Tightening? (The Answer Might Surprise You)

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What’s in Today’s Report:

  • Are Financial Conditions Tightening? (The Answer Might Surprise You)

Futures are modestly lower following Thursday’s reversal lower as economic data and earnings were mixed overnight.

April global flash PMIs were mixed as the EU data was solid (55.8 vs. (E) 53.9), but the UK data was soft (57.6 vs. (E) 59.0).  UK retail sales also badly missed (-1.4% vs. (E) -0.3%) and the lackluster data is weighing on European shares.

Earnings overnight were “ok” although SNAP underwhelmed investors (so expect more pressure on tech).

Today focus will be on economic data via the April Flash Composite PMI (E: 57.5) and markets will want to see stability in the data to further ward off stagflation concerns.

On the earnings front, there are only a few notable reports today (and all are in the morning):  VZ ($1.35), AXP ($2.43), SLB ($0.32).

Is Housing Starting to Roll Over?

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What’s in Today’s Report:

  • Is Housing Starting to Roll Over?
  • Oil Update and EIA Analysis

Futures are moderately higher as earnings continue to come in better than expected.

TSLA and UAL both posted better than expected earnings and UAL was very upbeat on travel spending and investors are viewing that as a positive macro-economic signal.

EU HICP (their CPI) slightly missed expectations (7.4% vs. (E ) 7.5% yoy), again hinting that inflation may be peaking.

Today will be a busy day with important Fed speak, economic data and earnings.  The key event (potentially) is Fed Chair Powell speaking this morning and while he’s not likely to drop any surprises, it’s always possible.  Economically, the key report today is the Philly Fed Manufacturing Index (E: 20.5) and markets will want to see stability in the data.  We also get Jobless Claims (E: 175K) and Fed President Bullard (1:00 p.m) but they shouldn’t move markets.

On the earnings front, notable reports today include:  T ($0.78), AAL (-$2.48), FCX ($0.88), PM ($1.48), UNP ($2.55), SNAP ($0.01), PPG ($1.13).

Earnings In Focus

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What’s in Today’s Report:

  • Bottom Line – Earnings In Focus
  • Natural Gas Update

Stock futures are trading lower after another quiet night of news as bond yields hit new multi-year highs overnight while investors look ahead to a fresh set of earnings reports today.

The 10-year Treasury Note yield notably tested 2.90% overnight following hawkish commentary from the Fed’s Bullard, who mentioned the possibility of a 75 basis point hike late yesterday.

Looking into today’s session, there is just one economic report to watch: Housing Starts and Permits (E: 1.75M, 1.83M) but it is not likely to move markets. Then there is one Fed speaker mid-day: Evans (12:05 p.m. ET).

Finally, earnings season continues to pick up today with JNJ ($0.34), LMT ($6.22), TRV ($3.70), and CFG ($0.96) reporting before the open and NFLX ($2.92) and IBM ($1.34) due to report after the closing bell.

Earnings Season Preview

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What’s in Today’s Report:

  • Earnings Season Preview
  • EIA Analysis and Oil Market Update

Futures are little changed following a quiet night of news and ahead of the long weekend.

There were no notable economic reports overnight. Geopolitically, the Russia/Ukraine war raged on as fighting intensifies in eastern Ukraine (as has been expected).

Earnings overnight were net positive as Taiwan Semiconductor (TSM) provided solid guidance and that’s helping to relieve some ongoing semiconductor supply anxiety.

Today will be a busy day, with the first potentially big event being the ECB Decision at 7:45 a.m. ET.  No change is expected to rates or QE, but if Lagarde is hawkish in her commentary it could hit stocks.

Economically, we’ll have multiple reports today including, in order of importance, Retails Sales (E: 0.6%), Consumer Sentiment (E: 58.8), and Jobless Claims (E: 175K).  As has been the case, markets will want to see continued stability in the data.

Finally, we have two Fed speakers, Mester (2:30 p.m. ET) and Harker (6:00 p.m. ET), but they shouldn’t move markets.

Jobs Report Preview

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What’s in Today’s Report:

  • Jobs Report Preview
  • Why Surging EU HICP Matters to Us
  • EIA Analysis and Oil Market Update

Futures are sharply lower following a big earnings miss by Facebook (FB was down 20% after hours).

FB posted disappointing margins and guidance and the steep decline in the stock is pulling futures lower.

EU and UK Composite PMIs were mixed as the EU reading slightly missed while the UK PMI beat estimates, although neither number is moving markets.

Today will be a busy day.  First, we get two central bank announcements (BOE at 7:00 a.m. and ECB at 7:45 a.m.).  The BOE is expected to hike rates 25 basis points and while there’s no change expected to ECB policy if Lagarde is hawkish at her press conference that will add to the earnings-inspired declines.

We also get some notable economic data, including the ISM Services PMI (E: 59.9), Jobless Claims (E: 250K), and Productivity and Costs (E: 2.4%, 1.7%) and as has been the case, markets will crave stability to ward off stagflation fears.

Finally, on the earnings front, AMZN ($3.88) after the close is the big report today.  Of the super cap tech stocks, we’re had some good reports (AAPL/MSFT/GOOGL) and some bad reports (NFLX/FB), and markets need AMZN to land in the former.  Beyond AMZN, some other reports we’ll be watching include: MRK ($1.52), LLY ($2.51), COP ($2.20), HON ($2.08),  SNAP ($0.10), and F ($0.43).

Market Multiple Levels: S&P 500 Chart

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What’s in Today’s Report:

  • Market Multiple Levels: S&P 500 Chart

Futures are solidly higher this morning after more strong tech earnings as investor focus shifts to January jobs data.

Q4 results from GOOGL and AMD handily beat estimates, sending both stocks higher by more than 10% overnight.

Economically, the Eurozone HICP Flash rose to 5.1% vs. (E) 4.3% which is rekindling some global inflation concerns.

Today, there are no Fed speakers on the calendar which will leave the focus on economic data including: the ADP Employment Report (E: 225K) and Motor Vehicle Sales (E: 12.6 million).

On the earnings front, we hear from: ABBV ($3.28), MPC ($0.47), TMO ($5.22), and CHRW ($1.85) before the open and FB ($3.78), QCOM ($3.00) and TMUS ($0.16) after the close.

Fed officials have been talking down the January jobs report so far this week, so if today’s ADP report comes in hot, that could cause another wave of hawkish money flows and equity volatility while the prospect of more upbeat tech earnings could see this week’s relief rally continue.

Tom Essaye Quoted in Barron’s on January 21, 2022

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Netflix Tumbled, Bitcoin Slipped—and What Else Happened in the Stock Market Today

Several companies cited higher costs as impacting profitability, furthering margin concerns…wrote Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

Early Earnings Season Takeaways

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What’s in Today’s Report:

  • Early Earnings Season Takeaways

Futures are modestly higher as China made two surprise interest rate cuts overnight, helping stocks bounce from Wednesday’s late-day declines.

China’s central bank made two small surprise interest rate cuts overnight which helped Asian stocks rally (Hang Seng up 3%) and that’s pushing U.S. futures higher.

Today focus will be on economic data and earnings, and for stocks to extend the early morning rebound we need to see stable data and solid earnings (meaning no extreme cost pressures).  Economically, the key report today is the  Philly Fed Manufacturing Index (E: 19.1).  If it suddenly plunges as Empire did on Tuesday, that will slightly increase anxiety about the economy.  We’ll also be watching Jobless Claims (E: 207K) and Existing Home Sales (E: 6.40M).

On the earnings front, the key report today is NFLX ($0.82) after the close, but we’ll also be watching:  AAL (-$1.54), TRV ($3.86), UNP ($2.60), CSX ($0.41) and PPG ($1.19).  If margins are much weaker than expected, look for more earnings-related volatility.

Why Stocks Dropped Yesterday (It Wasn’t CPI)

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What’s in Today’s Report:

  • Why Stocks Dropped Yesterday (It Wasn’t CPI)
  • EIA Analysis and Oil Market Update

Futures are enjoying a mild bounce following Wednesday’s losses as global yields are stable while U.S. bond markets are closed.

10 year Bund and GILT yields are little changed and that, combined with the bond market closure in the U.S., is allowing stocks to rebound.

Economically, British IP missed estimates (-0.4% vs. (E) 0.1%) while monthly GDP slightly beat (0.6% vs. (E) 0.5%).

Today is Veterans Day and as such, the bond markets are closed and there will be no economic reports and no Fed speakers.  So, GILT and Bund yields will partially dictate trading and as long as they don’t rise, stocks can continue this early rebound from yesterday’s losses.