Posts

Three Keys to a Bottom (Updated)

/in , /by

What’s in Today’s Report:

  • Three Keys to a Bottom Updated (Some Progress But Not There Yet)
  • Economic Takeaways – Goldilocks Trends Emerging
  • Weekly Economic Cheat Sheet

There is a tentative risk-on tone to trading this morning as U.S. equity futures track global shares higher thanks to new stimulus measures in China and easing natural gas prices in Europe.

The PBOC announced new measures to help stabilize the yuan and bolster the economy in the face of renewed Covid lockdowns and recent signs of slowing growth which was welcomed by markets overnight.

In Europe, German Manufacturers Orders fell -1.1% vs. (E) -0.4% but that is helping dial back some of the recently more hawkish policy expectations ahead of this week’s ECB meeting.

Looking into today’s session, there is one economic report to watch: ISM Services Index (E: 55.4), and no Fed officials are scheduled to speak.

That should leave the focus on currency and bond markets in the U.S. if both the dollar and short-duration yields can stabilize, and not move materially higher, then stocks should be able to make an attempt to stabilize after Friday’s late session reversal lower.

Additionally, if we see natural gas prices in Europe continue to pull back from Friday and yesterday’s rise, that should help the risk-on mood in markets persist as the Nord Stream 1 halt was the main catalyst for stocks rolling over on Friday.

A History of Fed Warnings

/in , /by

What’s in Today’s Report:

  • A History of Fed Warnings
  • Chart: 10-Year Yield in a ”Broadening Triangle” Pattern

Stock futures are enjoying a solid oversold bounce this morning with both Treasury yields and the dollar index pulling back from their recent highs as Powell’s hawkish comments from Jackson Hole continue to be digested.

Eurozone Economic Sentiment dipped to 97.6 vs. (E) 97.7 this month, a 1.5 year low, but the soft survey data is seeing investors dial back some recent hawkish money flows.

Looking into today’s session, it will be a busy morning with two housing market data points due out before the bell: Case-Shiller Home Price Index (E: 1.1%) and FHFA House Price Index (E: 0.9%) before focus will shift to Consumer Confidence (E: 97.4) and JOLTS (10.4M) data at the top of the 10 a.m. hour ET.

Additionally, there are two Fed speakers to watch: Barkin (8:00 a.m. ET) and Williams (11:00 a.m. ET).

Bottom line, stocks became near-term oversold between Friday and yesterday and as long as the dollar and yields remain steady today, and economic data and Fed chatter doesn’t shift policy expectations any more hawkish than they have already repriced, stocks should be able to enjoy a bounce as traders begin to position into the end of the month.

On the charts, the 4,020 area will be a critical support level to watch in the S&P 500 today as a material break below would open the door to a swift drop into the low-to-mid 3,900s.

Powell Speech Preview

/in , /by

What’s in Today’s Report:

  • Powell Speech Preview

Futures are modestly lower following a mostly quiet night ahead of Powell’s speech at 10:00 a.m. this morning.

Economic data was slightly underwhelmed as the German Gfk Consumer Climate declined to –36.5 vs. (E) -31.

The UK increased the electricity price cap for households by 80%, underscoring the impact of surging natural gas prices.

Today focus will be on the Powell speech at 10:00 a.m. and the market will be looking for Powell to tacitly endorse the “Fed Pivot” theory that’s helped stocks rally.  Away from Powell, we also get two notable inflation readings via the Core PCE Price Index (E: 0.3% m/m, 4.7% y/y) and Consumer Sentiment (E: 55.1), but it will take a material surprise from either report to move markets today.

What’s Changed With the Fed

/in , /by

What’s in Today’s Report:

  • What’s Changed with the Fed (and What Hasn’t)
  • Technical Update

Futures are moderately lower following mixed economic data and after a WSJ article warned the market was underestimating Fed conviction on rate hikes.

Economically, German PPI surged 37.2% vs. (E) 30.9% y/y on exploding electricity costs while UK Retail Sales fell –3.4% vs. (E) -3.3%.  Both numbers highlight the economic challenges facing the EU and UK.

A WSJ article warned of a “reckoning” for stocks as markets think the Fed is bluffing about further hikes and that’s weighing on sentiment this morning.

Today there are no notable economic reports but there is one Fed speaker, Barkin at 9:00 a.m. ET, and if he echoes this disconnect between Fed intentions and market expectations for rates, that will further pressure stocks today.

What Could Send Stocks Higher from Here (Three Factors)

/in , /by

What’s in Today’s Report:

  • What Could Send Stocks Higher from Here (Three Factors)

Futures are slightly higher as comments by San Francisco Fed President Daly are being interpreted as slightly dovish. San Francisco Fed President Daly spoke after the close Thursday and said that Wednesday’s CPI was a “welcome sign” that could lead to a “slowing” in the pace of rate hikes (to 50 bps in September, not 75 bps).

Economic data was better than expected as both UK and EU Industrial Production slightly beat estimates.

Today focus will be on the University of Michigan 5-Year Inflation Expectations (E: 2.9%) as that’s the first inflation reading in August, and if it drops below expectations we should see a continued tailwind on stocks.

Tom Essaye Quoted in Bolly Inside on August 9th, 2022

/in , /by

US Futures Fall, Asia Stocks Face Dovish Open: Markets Roundup

The economy still has to digest all this tightening, and that will materially slow things, wrote Tom Essaye, a former Merrill Lynch trader who founded The Sevens Report newsletter. Click here to read the full article.

Tom Essaye Quoted in Barron’s on August 5th, 2022

/in , /by

Dow Wavered After Jobs Report, Virgin Galactic Slides—and What Else Happened in the Stock Market Today

That could be because traders are “holding out hope that the consumer price index report is going to be good,” Tom Essaye, founder of Sevens Report Research, said on Friday. Click here to read the full article.

Tom Essaye Quoted in Barron’s on August 4th, 2022

/in , /by

The Dow Wavered, Alibaba Gained—and What Else Happened in the Stock Market Today

I think that as we are on the precipice of this jobs report, really what we’re seeing today is a bit of digestion of that of the recent of the two days gains,” Tom Essaye, founder of Sevens Report Research, told Barron’s on Thursday. Click here to read the full article.

 

What Can Take Stocks Sustainably Higher?

/in , /by

What’s in Today’s Report:

  • What Can Take Stocks Sustainably Higher?
  • Weekly Market Preview:  Does Fed Commentary Get Less Hawkish?
  • Weekly Economic Cheat Sheet:  Jobs Report Friday

Futures are slightly lower as markets digest last week’s big rally and following generally disappointing European economic data.

Data from Europe underwhelmed as German Retail Sales plunged –9.8% vs. (E) 7.5%, the biggest annual drop in 40 years.

The July EU and UK manufacturing PMIs were in-line with low expectations (Euro Zone manufacturing PMI 49.8 vs. (E) 49.6 and UK manufacturing PMI 52.1 vs. (E) 52.2.)

Today focus will be on the ISM Manufacturing PMI (E: 52.2) and markets will want to see a moderation in the data – a decline to show economic momentum is cooling, but no sudden drop.  Practically speaking, if the ISM PMI drops to or below 50, that might scare markets that the economy is slowing too quickly.

Brace for a Recession on Thursday

/in , /by

What’s in Today’s Report:

  • Brace for a Recession on Thursday
  • Housing Data Points to Slowdown in Real Estate Market
  • Chart: S&P 500 Holds 50-Day Moving Average by One Point

Stock futures are solidly higher this morning as quarterly earnings results from tech giants MSFT and GOOGL were both well received by investors after the close yesterday while investor focus shifts to the Fed today.

This morning, economic data will be in focus early with Durable Goods Orders (E: -0.5%), International Trade in Goods (-$103.2B), and Pending Home Sales (-1.0%) all due out by 10:00 a.m. ET.

From there, expect price action to slow considerably as focus turns to the Fed with the FOMC Meeting Announcement at 2:00 p.m. ET followed by the Fed Chair Press Conference at 2:30 p.m. ET.

Markets have priced in a 75% chance of a 75 basis point hike today while no changes to forward-guidance are expected so any variance from those expectations could result in sizeable moves in the market this afternoon.

Finally, earnings season remains in full swing with SHOP ($0.03), TMUS ($0.41), HLT ($1.06), SHW ($2.81) reporting ahead of the bell and META ($2.51), F ($0.43), and QCOM ($2.86) releasing results after the close. Any of those reports could lead to sector specific volatility despite the Fed today.