Posts

Is a Soft Landing More Likely Now?

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What’s in Today’s Report:

  • Is a Soft Landing Really More Likely Than Before?
  • Weekly Economic Cheat Sheet – Stagflation or Soft Landing?

Stock futures are lower and bond yields are climbing on the back of strong economic data and hawkish ECB chatter.

Chinese economic data was strong overnight while the German ZEW Survey surprised to the upside and U.K. wage growth rose to a record 6.4% vs. (E) 6.1%.

Meanwhile, the ECB’s Chief Economist, Philip Lane, made hawkish comments about rates rising into restrictive territory overnight which is weighing on recently dovish-leaning investor sentiment.

Today, focus will be on earnings early with: GS ($5.25), MS ($1.25), CFG ($1.30) all reporting ahead of the bell while UAL ($2.07) will release results after the close.

Economically, there is one important report this morning: Empire State Manufacturing Index (E: -7.5) and there is one Fed speaker to watch this afternoon: Williams (3:00 p.m. ET).

What the BOJ “Rate Hike” Means for Markets

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What’s in Today’s Report:

  • What the BOJ “Rate Hike” Means for Markets (Possible a Positive)

Futures are moderately higher following better-than-expected earnings overnight.

Both Nike (NKE up 12% after hours) and FedEx (FDX up 4% after hours) posted better-than-expected earnings overnight and those results are helping to ease rising anxiety about 2023 earnings.

The only notable economic report was German Gfk Consumer Climate and it was in line (–37.8 vs. (E) -37.5).

Today the calendar stays quiet (it picks up tomorrow) but the focus will be on Consumer Confidence (E: 101.0) and Existing Home Sales (E: 4.2M) and the key for data will remain moderation (but not a collapse that implies looming stagflation).

Why Stocks Are Falling (It’s Not Just the Fed)

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What’s in Today’s Report:

  • Why Stocks Are Falling (It’s Not Just the Fed)

Futures are sharply lower on momentum from Thursday’s selling as investors further digest the hawkish ECB decision and yesterday’s lackluster economic data.

Despite weaker stock prices this morning, economic data overnight was mildly encouraging.  EU and UK December flash PMIs both slightly beat estimates while the EU HICP wasn’t any worse than feared at 10.1% y/y.

Today there are two important economic reports, the Flash Manufacturing PMI (E: 47.7) and Flash Services PMI (E: 46.5) and markets will need to see those data points show 1) Resilient activity and 2) Declining price pressures (more dis-inflation) if they are going to help stocks stabilize.  We also get one Fed speaker, Daly (12:00 p.m. ET), but she shouldn’t move markets.

Finally, today is a Quadruple Witching options expiration and it could cause some intense volatility as many traders had been positioned for a year-end rally, and as those hopes are being dashed, some book-squaring is likely in order.  Point being, don’t be surprised by an uptick in volatility this afternoon and into the close.

Was Powell’s Speech That Bullish? No. Here’s Why.

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What’s in Today’s Report:

  • Was Powell’s Speech That Bullish?  No.  Here’s Why
  • Jobs Report Preview
  • EIA Update and Oil Market Analysis

Futures are slightly lower as markets digest yesterday’s post-Powell speech rally and focus on key economic data today (manufacturing PMI) and tomorrow (jobs report).

Global economic data underwhelmed overnight, as the Euro Zone manufacturing PMI missed estimates (47.1 vs. (E) 47.3) while the UK manufacturing PMI remained firmly in contraction territory (46.5 vs. (E) 46.2).

Looking forward to today, there are three important economic reports including (in order of importance):  ISM Manufacturing Index (E: 49.9), Core PCE Price Index (E: 0.3% m/m, 5.0% y/y), and Jobless Claims (E: 235K).  Markets will want to see 1) More evidence of easing price pressures in the ISM Manufacturing PMI and Core PCE Price Index and 2) Further labor market deterioration in jobless claims if the data is to help extend yesterday’s rally.

We also get three Fed speakers today, Logan (9:25 a.m. ET), Bowman (9:30 a.m. ET), and Barr (3:00 p.m. ET), but their commentary should be largely overshadowed by Powell’s less hawkish-than-feared remarks yesterday and I don’t expect them to move markets.

Tom Essaye Quoted in Forbes on November 17th, 2022

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Major Retailers Are Bracing For A Disappointing Holiday Season Due To Inflation

“There’s frankly little doubt that consumers are already 1) Reining in spending and 2) Becoming more value conscious,” Sevens Report analyst Tom Essaye wrote in a Thursday note. Click here to read the full article.

Tom Essaye Quoted in Market Watch on November 25th, 2022

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U.S. bond market holds steady in shortened post-Thanksgiving session

“Looking at the curve, the 10s-2s yield curve spread remained near a multidecade low of nearly minus-80 basis points. That deep of an inversion suggests that the Fed’s current policy and expected path of future policy are far too restrictive for the state of the economy and growth expectations, which will almost certainly end in a recession — and potentially a severe one given the scope of the current inversions across the Treasury yield curve,” said Tom Essaye, editor of Sevens Report Research, in a note. Click here to read the full article. 

Was Bullard That Hawkish? (No)

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What’s in Today’s Report:

  • Was Bullard That Hawkish?  (No).

Futures are moderately higher following more geo-political progress amidst an otherwise quiet night.

Russian officials signaled they are open to high-level talks with the U.S. on strategic stability, which is being taken as another (small) step towards an ultimate cease-fire.

Economically, the only notable number was UK Retail Sales and they were better than expected, rising 0.6% vs. (E) 0.2%.

Today the calendar is sparse with just Existing Home Sales (E: 4.360M) and one Fed speaker, Collins (8:40 a.m. ET) but if she doesn’t provide any hawkish surprises, this early rally can continue as stocks recoup yesterday’s Bullard inspired losses.

Are Corporate Earnings Rolling Over?

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What’s in Today’s Report:

  • Are Corporate Earnings Rolling Over?
  • Another (Small) Sign of Dis-Inflation
  • EIA Update and Oil Market Analysis

Futures are modestly lower as investors digest Wednesday’s earnings disappointments.

CSCO and NVDA reported after the close and both results were better than feared, but that’s not enough to offset growing concerns about future corporate earnings.

On inflation, October EU HICP slightly missed estimates  (10.6% vs. (E) 10.7%) although the monthly reading was in-line at 1.5%, signaling that inflation pressures in the EU aren’t declining.

Today’s focus will again be on inflation so the price indices in the Philly Fed Manufacturing Index (E: -7.0) will be the key reports and any declines in those price indices should prompt at least a small rally.  Outside of Philly Fed, we also get Housing Starts (E: 1.41M) and Jobless Claims (E: 222k), but neither should move markets.

There are also multiple Fed speakers today including Bostic (7:30 a.m. ET), Bowman (9:15 a.m. ET), Mester (9:40 a.m. ET), and Kashkari (10:40 a.m. ET & 1:45 p.m. ET), and we should expect their message to be consistent with recent Fed speak:  The size of rate hikes will shrink, but the Fed still has a long way to go to reach the “Terminal Rate.”

Tom Essayed Interviewed on BNN Bloomberg on November 14th, 2022

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We Could Be Approaching The Death Of The FAANG’s: Tom Essaye

Tom Essaye, founder and president of Sevens Report Research, joins BNN Bloomberg to recap earnings from big tech this week. Click here to watch the full interview.

Is a Dovish Hike the Same as a Fed Pivot? No.

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What’s in Today’s Report:

  • Is a Dovish Hike the same as a Fed Pivot?  No.  Here’s Why.
  • EIA Update and Oil Analysis

Futures are little changed as rising hope of smaller than expected future rate hikes is being offset by ugly tech earnings.

Meta (FB) missed earnings and posted underwhelming guidance and the stock fell nearly 20% after hours, continuing this week’s trend of disappointing tech earnings.

Today will be a busy day of earnings and economic data.  The most important events of the day will come after the close via the AAPL ($1.26), AMZN ($0.22), INTC ($0.34) earnings, and given the disappointing tech earnings so far this week, the market will need solid numbers today.

Outside of those earnings, other key events today include the ECB Rate Decision (E: 75 bps hike), Durable Goods Orders (E: 0.6%), Jobless Claims (E: 223K) and Preliminary Q3 GDP (E: 2.3%) and the market will be looking for “just right” outcomes from each (an ECB that’s not too hawkish, and U.S. economic data that’s not too good or not too bad).