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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).

How Far Could This Relief Rally Run?

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What’s in Today’s Report:

  • Technical Support for a Near Term Bottom and How Far This Relief Rally Could Run
  • Chart: 10-Yr Note Futures Test Trend Resistance
  • Housing Market Update

Stock futures are trading lower this morning as soft tech earnings are overshadowing a continued bounce in bonds.

MSFT and GOOGL both fell roughly 6% overnight after delivering disappointing quarterly results yesterday afternoon which is dragging the broader tech sector lower in premarket trading.

Today, there are two economic reports to watch in the morning: International Trade in Goods (E: -$87.8B) and New Home Sales (E: 585K), while there is a 5-Yr Treasury Note auction in the early afternoon (1:00 p.m. ET).

Earnings will remain in focus today with BA (-$0.01), BMY ($1.83), HLT ($1.25), KHC ($0.55), and HOG ($1.45) reporting before the bell, and META ($1.88), F ($0.31), and CP ($0.77) releasing results after the close.

Bottom line, soft earnings out of mega-cap tech are weighing on the market this morning however stable bond markets are limiting losses. If we see Treasuries roll over today and yields begin to climb again, expect pressure on equities to pick up as both earnings expectations and multiple compression will weigh on stocks broadly.

Economic Breaker Panel

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What’s in Today’s Report:

  • Economic Breaker Panel (October Edition)
  • Oil Update and EIA Analysis

Futures are slightly lower following a night of mixed earnings results and yet another firm inflation report.

TSLA missed on revenue and production targets and the stock fell –5% after hours, although overall earnings reports were more mixed than negative overnight.

German PPI was the latest global inflation indicator to run hotter than estimates (2.3% vs. (E) 1.5%) reinforcing that global inflation is proving “sticky.”

Today’s focus will be on economic data and the key reports are (in order of importance): Philly Fed (-5.0), Jobless Claims (E: 235K), and Existing Home Sales (E: 4.695M).  If we can see a moderation in the data (especially in the price indices in Philly Fed) then stocks can rally.  We also get numerous Fed speakers including: Harker (12:00 p.m. ET), Jefferson (1:30 p.m. ET), Cook (1:45 p.m. ET), and Bowman (2:05 p.m. ET) but none of them should move markets.

Finally, earnings season rolls on although the critically important results really increase next week.  Some reports we’re watching today include:  AAL ($0.54), SNAP ($0.00), and WHR ($5.59).

Market Multiple Table: Headwinds Building

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What’s in Today’s Report:

  • Market Multiple Table: Headwinds Building

Stock futures are higher this morning as Treasury markets are steady despite more turmoil in the Gilts market with the 30-Yr jumping another 20+ bp back towards 5.00%.

Economic data was mixed overnight as U.K. GDP dropped off further than expected in August (-0.3% vs. E: -0.1%) while EU Industrial Production for the same month was solid at 1.5% vs. (E) 0.5%.

Today, there is one inflation data point to watch pre-market: Producer Price Index (E: 0.2%) and if it runs hot, it would likely send yields to new highs and pressure risk assets ahead of the bell.

After the open, the focus will shift to the Fed with two officials speaking through the middle of the day: Kashkari (10:00 a.m. ET) and Barr (1:45 p.m. ET) before the most recent FOMC Meeting Minutes are due to be released at 2:00 p.m. ET.

In the minutes, investors will be looking for any new indication of a timeline for a policy “pivot” or what might result in one as that is still a major catalyst needed in order for stocks to bottom.

Finally, there is a 10-Yr Treasury Note Auction at 1:00 p.m. ET and if the outcome is weak, as was the case with yesterday’s 3-Yr Note auction, and yields begin to rise, that will likely be a renewed headwind on equities in the afternoon.

Bottom line, yields are still the primary driver of the stock market this week and if we see Treasuries remain stable as they are this morning, then stocks could break their multi-day losing streak, however, if yields do rise meaningfully it will be hard for the major indices to hold this week’s lows.

Tom Essaye Quoted in S&P Global Market Intelligence on October 7th, 2022

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US job growth slows in September as labor market cools

“This just reinforces to the Fed that they have to stay the course, there’s nothing in this report that will make the Fed think: ‘Oh gee, we need to alter our plan.” said Tom Essaye, a trader and publisher of The Sevens Report. Click here to read the full article.

Jobs Day

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What’s in Today’s Report:

  • Jobs Day (Abbreviated Jobs Report Preview)
  • Why Price Controls Still Don’t Work

Futures are slightly lower as the looming jobs report helps offset soft economic data and disappointing earnings.

Economically, German Industrial Production, German Retail Sales, and Japanese Household spending all missed estimates.

On earnings, AMD became the latest widely held company to miss earnings, positing a material revenue shortfall.

Today focus will be on the Jobs Report and expectations are as follows: Job Adds: 250K, UE Rate 3.7%, Wages 0.3% m/m, 5.1% y/y.  If the numbers are in the lower end of the “Just Right” range that will spur more hopes of a Fed pivot between now and year-end, and stocks will likely rally.    Away from the jobs report there are also several Fed speakers including:  Williams (10:00 a.m. ET), Kashkari (11:00 a.m. ET) and Bostic (12:00 p.m. ET) but they shouldn’t move markets (expect them to be hawkish in tone but not say anything new).

How Bad Can It Get? (And What Makes It Stop?)

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What’s in Today’s Report:

  • How Bad Could It Get and What Makes It Stop?
  • Weekly Market Preview:  Can the June lows hold?
  • Weekly Economic Cheat Sheet:  Does economic growth stay resilient?

Futures are modestly lower as global bond yields rose further while the British Pound remained extremely volatile.

The British Pound plunged to an all time low vs the dollar earlier this morning before rebounding and the extreme volatility is adding to investor worries.

Economically, the German Ifo Business Expectations Index fell to the lowest level since March 2020 (84.3 vs. (E) 87.1).

Today there are no notable economic reports but there are numerous Fed speakers, including Collins (10:00 a.m. ET), Bostic (12:00 p.m. ET), Logan (12:30 p.m. ET) and Mester (4:00 p.m. ET).  But, they shouldn’t move markets (we already know what the Fed intends to do).

Instead, the Pound and global bond yields (especially 10-year GILT yields) will determine trading today.  Markets need to see the Pound stabilize and 10-year GILT yields stop rising (they’re up nearly 60 bps in two days) to inject some macro-economic stability into the markets.  Don’t be shocked if the Bank of England announces a surprise rate hike today (or in the coming days) and if so, that should help global yields stabilize (which would be positive for sentiment and markets).

Fed Day Technical Take

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What’s in Today’s Report:

  • Pre-Fed Technical Take: a Make-or-Break Tipping Point for Equities

Stock futures are trading with cautious gains this morning as traders shrug off escalating tension between Russia and Ukraine while the BOJ initiated new stimulus overnight as focus turns to today’s Fed meeting.

Geopolitically, Russia is mobilizing 300,000 reservists to bolster military operations in Ukraine and indirectly threatened nuclear options in the latest escalation in the conflict which is driving gains in safe havens ahead of the Fed this morning.

Today, there is one economic report to watch in the morning: Existing Home Sales (E: 4.70M) but the primary market focus will clearly be on the Fed with the FOMC Announcement at 2:00 p.m. ET followed by Fed Chair Powell’s press conference at 2:30 p.m. ET.

Regarding the Fed, a 75 basis point hike and terminal Fed Funds rate near 4.25% is the consensus expectation so anything more hawkish than that will likely spark volatility and potentially even result in a test of the June lows in the S&P while anything more dovish than expectations has the potential to unleash a sizeable relief rally.