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Technical Update: Headwinds Building?

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What’s in Today’s Report:

  • Technical Update:  Headwinds Building?

Futures are modestly lower following mixed Chinese economic data as markets digest Thursday’s rebound.

Chinese economic data was mixed but not worse than feared, as Industrial Production beat estimates (3.9% vs. (E) 1.5%) while Retail Sales and Fixed Asset Investment both declined sharply (-7.5% and –3.8% respectively) but no worse than expected.  In sum the data was “good enough” to keep hope alive that the U.S. economy can see a substantial economic rebound in the coming months, assuming no “second wave” of virus infections.

Today will be an important day for economic data, and the reports we’re watching today (in order of importance) are: Empire State Manufacturing Survey (E: -65.0), Retail Sales (E: -11.2%), Consumer Sentiment (E: 66.0), Industrial Production (E: -11.5%), and JOLTS (E: 5.900MM).

Empire Manufacturing Report and Consumer Sentiment are May reports, so markets will want to see hints of improvement to confirm the economic “worst” will soon be behind us.  If that happens, stocks can hold Thursday’s gains.

Don’t Fight the Fed (Still)?

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What’s in Today’s Report:

  • Should We Buy LQD Now that the Fed Is Buying It Too?

Futures are staging a rebound this morning after yesterday’s late day plunge in stocks as tensions between the U.S. and China simmer while investors weigh the risk-reward dynamics of reopening global economies.

Economic data remained fairly dismal overnight but not as bad as feared with U.K. Monthly GDP dropping -5.8% vs. (E) -7.0% while EU Industrial Production fell -11.3% in March vs. (E) -12.0%. Despite the data topping estimates British 2-Yr yields notably fell to a record low of –0.045%.

Today there is just one economic report due out ahead of the open: PPI (E: -0.5%) and it shouldn’t materially move markets especially with investors primarily focused on Fed Chair Powell’s virtual participation in a webcast at 9:00 a.m. ET that will include a Q&A session at the end.

The only other catalyst on the calendar is a 30-Yr. Bond auction by the Treasury at 1:00 p.m. ET. As we saw yesterday, the very strong demand for 10 Yr. Notes pressured yields and weighed on stocks in the early afternoon and we could potentially see a repeat of that today.

Are Negative Rates Coming to the U.S.?

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What’s in Today’s Report:

  • What Negative Rates Could Mean for Markets
  • Jobs Day

Futures are modestly higher following positive headlines regarding U.S./China trade discussions.

The U.S. and China held a trade call Thursday night and stated that “good progress” was being made towards implementing phase one of the trade deal, and that headline is helping to improve sentiment towards recent coronavirus related U.S./China tension.

Economic data was light and did not moving markets as focus is on this morning’s jobs report.

Today focus will be on the jobs report and the expectations are as follows: Jobs: -21.25MM, UE Rate:  16.3%, Wages:  0.3%).  As long as the numbers are close to those estimates, stocks will be able to look past the historically awful jobs report and continue the rally.

Tom Essaye Quoted in Yahoo Finance on April 27, 2020

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“All the data is horrific. But it’s getting less bad than it was say a couple weeks ago and that’s especially true with…” said Sevens Report Research founder Tom Essaye on Yahoo Finance’s The First Trade. Click here to read the full article.

Why Are Markets Ignoring Bad Economic Data?

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What’s in Today’s Report:

  • Why Are Markets Ignoring Bad Economic Data?
  • Important Context For Jobless Claims (Chart)

Futures are moderately higher following a quiet night of news.

Economic data was disappointing, again, as British Retail Sales dropped –5.1% vs. (E) -3.5%, while German Ifo Business Expectations declined to 69.4 vs. (E) 75.0.  But, once again markets are looking past current data and instead focusing on hope that the worst is behind us.

There was no notable coronavirus news overnight.

Today focus will be on economic data, specifically Consumer Sentiment (E: 68.1) as it offers us a more “real-time” gauge of economic activity.  Durable Goods (E: -11.4%) will also be closely watched, although it’s a March report so it won’t reflect the depths of the slowdown in business spending.

How to Recognize a Blow Off Top

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Good Morning,

 

Today’s Report is attached as a PDF.

What’s in Today’s Report:

  • How To Recognize a Blow Off Top
  • Don’t Sleep on Inflation?  (PPI Just Hit a Multi-Year High)

Futures are slightly lower as markets digest yesterday’s rally following a mostly quiet night of news.

News on COVID-19 was mixed as China did another “diagnostic change” and the number of COVID 19 cases fell, while in South Korea the number of infections rose.  But, markets still view the transmission rate of the disease  as peaking (and this assumption is what’s driving markets higher – and it’s also the greatest source of near term risk for stocks if the situation changes).

Economic data was sparse but German GfK Consumer Climate and British Retail Sales both beat estimates, although neither is moving markets.

Today there are two notable economic reports, Jobless Claims (E: 211K) and Philly Fed (E: 12.0), and as remains the case, the stronger the data, the better (markets will especially be looking for confirmation of the strong Empire report from Philly Fed).   There is also one Fed speaker, Barkin at 1:20 p.m. ET, but he shouldn’t move markets.

Please email info@sevensreport.com if you have any trouble downloading today’s Report.

Market Multiple Update: As Good As It Gets?

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What’s in Today’s Report:

  • Market Multiple Update: As Good As It Gets?
  • Economic Data Recap

It is another slow morning in the markets as stock futures are tracking the modest gains of overseas equities amid good economic data but underwhelming earnings news.

FDX shares are down 7% in pre-market trading after the company missed on earnings and lowered 2020 guidance.

The German Ifo Survey showed improving economic sentiment in Europe’s largest economy with both Current Conditions and Business Expectations figures topping estimates which is helping EU stocks edge higher this morning.

Looking into today’s session, it is lining up to be another quiet day as there are no economic reports and only one Fed official is scheduled to speak: Evans (12:40 p.m. ET).

Deteriorating Economic Data

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What’s in Today’s Report:

  • Economic Breaker Panel – Deterioration in June

S&P futures are down roughly 10 points as the recent melt-up rally continues to be digested ahead of key inflation data in the U.S. while trade headlines were negative overnight.

Trade sentiment deteriorated over the last 12 hours as expectations of a G20 deal are fading while protests in Hong Kong over an extradition bill pressured the Hang Seng to fall nearly 2%.

Economically, Chinese CPI and PPI met estimates overnight while Japanese Machine Orders rose 5.2% vs. (E) 0.5% helping the Nikkei outperform with a loss of just 0.35%.

Today’s focus will be on inflation data due out ahead of the bell: CPI (E: 0.1%). There are no other notable reports due to be released and no Fed officials are scheduled to speak today.

The digestive tone will likely continue as the blistering rally of the last week was overdone however the “pain trade” remains higher and if the CPI print is soft, we could see another run back to and potentially through 2900 in the S&P today.

Trade War Update (After Tariff Increases)

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What’s in Today’s Report:

  • Tariff/Trade War Update

Futures are marginally weaker as the U.S. increased tariffs on Chinese imports, as expected.

Positively, the trade talks will continue today, and the consensus market outlook remains that a deal does get done, likely in the next few weeks.

Away from trade, economic data was solid.  Japanese Household Spending, British GDP and UK Industrial Production all beat estimates.

Today most of us will spend the day watching for any trade related headlines, and there are likely to be plenty.  But, barring a total breakdown in negotiations, trade shouldn’t be too big of a negative on markets today.

Away from trade, we also get the most important economic data point of the week:  CPI (E: 0.4%).  PPI was more firm than it seemed, and if CPI is also firm then that will reduce the possibility of a preventative Fed rate cut, which will be another headwind on stocks.  Finally, there are multiple Fed speakers today: Brainard (8:30 a.m. ET), Bostic (9:05 a.m. ET), Williams (10:00 a.m. ET) but none should move markets.

Tom Essaye Quoted in Barron’s on April 3, 2019

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The Dow Rose 39 Points After a Late Comeback

Economic data clearly remain soft on an absolute level, wrote Tom Essaye of Sevens Report on Wednesday. “There is now a laundry list of economic indicators that are flashing their worst readings since 2016…” Click here to read the full article.