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Two Questions to Start 2022

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What’s in Today’s Report:

  • Two Key Questions To Start 2022
  • Weekly Market Preview:  Omicron, Build Back Better Progress?
  • Weekly Economic Cheat Sheet:  A Busy Start to the Year (Highlighted by the Jobs Report Friday)

Futures are starting the new year with moderate gains driven mostly by momentum/start of year positioning, following a quiet weekend of news.  Many major markets today (London, Japan, Australia, U.S. Bonds) are closed.

Tesla (TSLA) reported better than expected deliveries for the fourth quarter and the stock is up 7% pre-market, and that’s helping markets rally.

There was no new news on Omicron over the weekend as cases skyrocket but hospitalizations remain relatively low.

With so many major markets closed, today will be a mostly quiet day, and barring any surprises tomorrow will be the first “real” trading day of the year.  We do get one notable economic report today, the Markit December Manufacturing PMI (E: 57.8), and markets will want to see a “Goldilocks” number that shows Omicron isn’t a major economic headwind, but at the same time the data isn’t so strong it makes the Fed more aggressive.

 

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Inflation Expectations Update

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What’s in Today’s Report:

  • Inflation Expectations Update
  • Empire State Manufacturing Index Takeaways

Stock futures are slightly lower this morning following a mostly quiet night of news as investors look ahead to several important economic releases in the U.S. today.

Economic data was in-line to slightly better than expected overnight while the Xi-Biden talks, while largely uneventful, did help to modestly improve general market sentiment.

Today, focus will be on economic data early with Retail Sales (E: 1.0%), Import & Export Prices (E: 0.9%, 0.7%), and Industrial Production (E: 0.9%) all due out ahead of the opening bell while the Housing Market Index (E: 80) will be released at the top of the 10:00 a.m. hour (ET).

Additionally, there are several Fed speakers today: Bostic (12:00 p.m. ET), Harker (2:55 p.m. ET), and Daly (3:30 p.m. ET) and the market will continue to look for patient remarks that suggest the pace of the taper will not be accelerated and rate hikes will not be pulled forward from late 2022.

A Warning Sign from One of the Best

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What’s in Today’s Report:

  • A (Kind Of) Warning Sign from One of the Best
  • What to Make of the Wealth Tax Chatter

Stock futures are little changed this morning as investors digest some mildly disappointing earnings from Europe and an uptick in tensions between the U.S. and China.

Asian shares underperformed overnight after the FCC banned China Telecom from doing business in the U.S., raising concerns about the political relationship between the world’s two largest economies.

Looking into today’s session there are two economic reports to watch: Durable Goods Orders (E: -0.9%) and International Trade in Goods (E: -$87.9B), both due out in the morning, while no Fed officials are scheduled to speak.

There is a 5-Yr Treasury auction at 1:00 p.m. ET that could move yields and ultimately impact equities, but bonds have been fairly quiet this week as focus shifts ahead to central bank decisions later this week and next.

Finally, we are in the heart of earnings season and there are several more big names reporting Q3 results today: BA (-$0.17), GM ($0.89), KO ($0.58), MCD ($2.46), HOG ($0.81), BMY ($1.91), F ($0.28), EBAY ($0.89).

Yield Curve Update

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What’s in Today’s Report:

  • Yield Curve Update

Futures are little changed following a night of mixed earnings and economic data.

Earnings overnight were disappointing with SNAP (down 20%) and INTC (down 3%) posting disappointing results, although they aren’t hitting the market broadly.

Economic data was mixed as UK flash PMI beat estimates (56.8 vs. (E ) 54.0) while the Euro Zone PMI slightly missed expectations (54.3 vs. (E ) 55.2).  But, neither number is materially moving markets.

Today the key economic report is the October Flash Manufacturing PMI (E: 60.7) and markets will want to see continued stability in the economic recovery.  We also get two Fed speakers, Daly (10:00 a.m.) and Powell (11:00 a.m.), although we do not expect anything incremental regarding tapering expectations (everyone now expects tapering to start in November).

On the earnings front, three notable reports we’ll be watching today are: AXP ($1.78), HON ($2.01) and SLB ($0.36).

Focus Turns to Earnings and Yields

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What’s in Today’s Report:

  • Focus Turns to Earnings and Yields (And Away from Washington, For Now)
  • Weekly Market Preview:  Will Earnings Results Ease Market Anxiety?
  • Weekly Economic Cheat Sheet:  Key Inflation and Growth Data this Week

Futures are modestly lower on a resumption of the commodity rally following an otherwise quiet weekend.

Energy prices (oil, natural gas, coal) are all rallying again (up 2% – 3%) and that’s increasing global inflation anxiety, which is weighing moderately on futures.

Global bond yields are also rising as two hawkish Bank of England members warned of a possible rate hike this year, although that is not the consensus expectation (although a rate hike from the BOE in early 2022 is looking more likely).

Today is Columbus Day and the U.S. bond markets are closed and there are no economic reports today, although there is one Fed speaker: Evans (6:00 p.m. ET).  So, commodity prices are Treasury yields should drive trading today.  The more they rise, the stronger the headwind on stocks will become.

As Tech Goes, So Goes the SPY (And Tech Is Facing Headwinds)

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What’s in Today’s Report:

  • As Tech Goes, So Goes the SPY (And Tech Is Facing Headwinds)

Futures are enjoying a modest bounce following yesterdays’ declines after a generally quiet night of news.

Economic data was solid overnight as both EU (56.2 vs. (E) 56.1) and UK (54.9 vs. (E) 54.1) September Composite PMIs beat estimates, reflecting stability in the global economic recovery.

On inflation, Euro Zone PPI rose 1.1% vs. (E) 1.3%, implying inflation pressures could be starting to ease.

Today focus will be on economic data and specifically the ISM Services PMI (E: 60.0).  Markets will want to see stability in this number to further confirm the COVID spike in July/August didn’t have a lasting impact on the recovery.  We also get two Fed speakers today, Barkin (10:30 a.m. ET) and Quarles (1:15 p.m. ET), and markets will continue to be on the lookout for any signs of a compromise on the reconciliation/debt ceiling bill (although nothing material is expected today).

Dow Theory Update

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What’s in Today’s Report:

  • Dow Theory Update

Futures are modestly lower to start the fourth quarter as House Democrats failed to pass infrastructure legislation, while economic data was better than expected.

House Democrats remain divided about the size of the infrastructure and reconciliation bills, and the Debt Ceiling can’t be increased until a compromise is found.

EU and UK global final PMIs slightly beat estimates while EU Core HICP (their CPI) was slightly hot (1.9% yoy vs. (E) 1.8% yoy), implying the global recovery remains on track and that inflation pressures are still firm.

Today’s focus will be on important economic reports.  First, the Core PCE Price Index (E: 0.2%, 3.6%) is the Fed’s preferred measure of inflation and if it’s much hotter than expectations, that will push yields higher and be another headwind on stocks.  Also, the ISM Manufacturing PMI (E: 59.8) gets released and markets will want to see stability there.  We also get Consumer Sentiment (E: 71.0) and the inflation expectations component will be closely watched.  Finally, there are two Fed speakers today, Harker (11:00 a.m. ET) and Mester (1:00 p.m. ET) but neither should move markets.

 

Sevens Report Quarterly Letter Delivered Today

Our Q3 ’21 Quarterly Letter will be released today.

We use our strength (writing about the markets) to help you:

  • Save time (an average of 4-6 hours per quarterly letter)
  • Show you’re on top of markets with impressive, compelling market analysis

You can view our Q2 ’21 Quarterly Letter here

To learn more about the product (including price) please click this link.

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Is Stagflation Possible? Yes.

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What’s in Today’s Report:

  • Is Stagflation Possible?  Yes.

Futures are little changed ahead of this morning’s jobs report.

Economic data underwhelmed overnight with Japanese Household Spending falling –3.2% while German Industrial Production missed estimates (-1.3% vs. (E) 0.5%).

On COVID, headlines remain net negative as cases continue to rise and analysts look for any signs of a loss of economic momentum (so far there’s nothing concrete).

Today the focus is on the jobs report and expectations are as follows:  Job Adds:  900K, UE Rate:  5.7% and Wages: 0.3% m/m and 3.8% y/y.  Again, the biggest risk to markets is for a “Too Hot” jobs number that shifts the tapering timeline, and if that occurs we should brace for volatility.

Tom Essaye Quoted in Barron’s on August 4, 2021

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GM Drops, Under Armour Rises, and Stocks Are Falling After Weak Jobs Data

Markets look ahead to key economic data in the…wrote Tom Essaye, founder of Sevens Report Research before the jobs report hit the wires. Click here to read the full article.

Why Economic Data is Stronger Than it Appears

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What’s in Today’s Report:

  • Why Economic Data Is Stronger Than It Appears

Futures are drifting slightly higher following a mostly quiet night of news.

COVID headlines were mixed as Los Angeles reimposed an indoor mask mandate (negative) while President Biden said the U.S. could ease travel restrictions from Europe soon (positive).  Bottom line, concerns about the Delta variant are a market influence (mild headwind) but at this point, it’s not enough to cause a material pullback.

Economic data was minimal as EU HICP met expectations (0.3% m/m and 1.9% y/y).

Today, focus will be on economic data, specifically Retail Sales (E: -0.4%) and the inflation expectations component in Consumer Sentiment (E: 87.0).  As has been the case, markets will want “Goldilocks” results for both retail sales and inflation expectations (so strong, but not too strong).  There is also one Fed speaker, Williams (9:00 a.m. ET), but he shouldn’t move markets.