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PPI and Jobless Claims Strengthen the “Goldilocks” Narrative

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What’s in Today’s Report:

  • PPI and Jobless Claims Strengthen the “Goldilocks” Narrative

Futures are little changed following a quiet night of news as markets digest the Wed/Thurs rally and focus turns to the start of the Q2 earnings season.

Economically, there was more evidence of global disinflation (or deflation) as German Wholesale Prices (think their PPI) declined –2.9% y/y vs. (-1.2%) y/y.

Today focus will be on earnings, as we get several major bank earnings results:  JPM ($5.92), C ($1.31), WFC ($1.15), and BLK ($8.47) as well as UNH ($5.92).  These large cap companies usually don’t provide too many surprises in their earnings reports, but markets will want to hear positive commentary on the overall environment to further support this latest rally in stocks.

There are also two notable inflation linked economic reports today, Import & Export Prices (E: -0.2%, -0.4%), Consumer Sentiment (E: 65.0), but barring any major surprises they shouldn’t move markets.

CPI Preview: Good, Bad, and Ugly

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What’s in Today’s Report:

  • CPI Preview – Good, Bad, & Ugly
  • Chart: Is Disinflation Accelerating?

U.S. stock futures are extending this week’s gains ahead of the all-important CPI report this morning following a mostly quiet night of news.

There were no economic reports overnight but the Reserve Bank of New Zealand did notably pause their rate hiking cycle leaving their policy rate unchanged at 5.50% (however this was expected and did not meaningfully move markets).

Looking into today’s session the big catalyst is the CPI report due out before the open. On the headline, CPI is expected to come in at 0.3% m/m and 3.1% y/y while the Core figure is seen rising 0.3% m/m and 5.0% y/y.

From there, focus will turn to Fed speakers with Kashkari speaking shortly after the open (9:45 a.m. ET) and Mester at the close (4:00 p.m. ET).

Finally, there is a 10-Yr Treasury Note auction at 1:00 p.m. ET and the outcome could shed light on the bond market’s outlook for the economy and Fed policy expectations in the wake of the CPI data release, so there is potential this auction moves markets in the early afternoon.

Explaining Current Market Risks to Clients (And Prospects)

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What’s in Today’s Report:

  • How to Explain Risks in This Market to Clients/Prospects
  • Mannheim Used Vehicle Value Index Takeaways (Chart)

Futures are slightly higher while most international markets rallied overnight thanks to news of more Chinese government support for the property sector and steady EU inflation data.

German CPI met estimates of 0.3% m/m and 6.4% y/y in June, both unchanged from May, while the ZEW Survey was inline with expectations on the headline but Economic Sentiment deteriorated to -14.7 vs. (E) -10.2.

Domestically, the NFIB Small Business Optimism Index came in at 91.0 vs. (E) 89.8 in June which is helping bolster investor sentiment in the premarket.

There are no additional economic reports today and just one Fed speaker on the calendar: Bullard (9:00 a.m. ET) which will leave investors looking ahead to tomorrow’s critical CPI report.

Jobs Day

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What’s in Today’s Report:

  • How the Two-Year Yield Caused Yesterday’s Drop in Stocks
  • EIA Analysis and Oil Market Update

Futures are slightly lower following a mostly quiet night of news as investors wait for this morning’s jobs report.

Economic data underwhelmed as Japanese Household Spending (-1.1% vs. (E) 0.5%) and German Industrial Production (-0.2% vs. (E) -0.1%) both missed expectations.

Taiwan exports also fell more than expected, down 23.4%, and that’s adding to general anxiety about future global growth.

Today the only major event is the June jobs report and expectations are as follows:  213K job adds, 3.7% UE Rate, 0.3% wage increase m/m and 4.2% y/y.  As we saw from yesterday’s ADP report, a “Too Hot” number will spike yields and further pressure stocks, as the rise in yields is now getting high enough to be a headwind on the market.  Conversely, a “Too Cold” number will increase stagflation worries.

A job adds number in the 100k range coupled with an increase in the unemployment rate and a drop in wages remains the best outcome for stocks, and if we get that number don’t be surprised if the S&P 500 recoups all of yesterday’s losses.

Sevens Report Co-Editor, Tyler Richey, Quoted in Morningstar on June 29th, 2023

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Oil futures finish higher, contributing to the month’s gain

Oil stabilized at support near the 2023 lows following Wednesday’s weekly Energy Information Administration report, which showed a “massive draw” in commercial crude-oil stockpiles, said Tyler Richey, co-editor at Sevens Report Research. Click here to read the full article.

Tom Essaye Quote in Barron’s on June 30th, 2023

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U.S. Stock Futures Rise Ahead of Key PCE Inflation Data

Futures are moderately higher mostly on momentum and end of quarter/half positioning, as economic data overnight was mixed but not bad enough to interrupt the rally, said Tom Essaye, founder at Sevens Report Research. Click here to read the full article.

Tom Essaye Quoted in Barron’s on June 30th, 2023

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Bank Stocks Are Higher After Passing Fed’s Stress Test

The 23 largest banks in the U.S. passed the Fed’s annual stress tests, and while none were expected to fail, the fact that there were no negative surprises is a general positive for the banking sector and financials, Tom Essaye, founder of research firm Sevens Reports, wrote Thursday. Click here to read the full article.

Why Economic Data Will Decide if the Rally Continues in 2H ’23

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What’s in Today’s Report:

  • Why Economic Data Will Decide if the Rally Continues in 2H ‘23
  • Weekly Market Preview:  Does Economic Data This Week Reinforce “No Landing” Expectations?
  • Weekly Economic Cheat Sheet:  Jobs Report Friday, ISM PMIs Monday and Thursday.

Futures are flat to start the second half of 2023 following a quiet weekend of news.

Economic data was mixed overnight as the EU Manufacturing PMI slightly missed estimates (43.4 vs. (E) 43.6) while the UK reading slightly beat expectations (46.5 vs. (E) 46.2), but neither number is moving markets.

Saudi Arabia and Russia made separate announcements about further reducing oil supply in the coming months, although they aren’t causing a material rally.

Today focus will be on the ISM Manufacturing PMI (E: 47.2) and at this point, and with yields this high, markets need to see solid data and that means the ISM Manufacturing PMI moving closer towards 50 and beating expectations.

As a reminder, the stock market will close at 1:00 p.m. today ahead of the July 4th holiday.

 

Sevens Report Quarterly Letter Delivered Today

Our Q2 ’23 Quarterly Letter will be released today.

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If you’re interested in subscribing, please email info@sevensreport.com.

Tom Essaye Quoted in Barron’s on June 23rd, 2023

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S&P 500 Opens Lower, Heads for First Losing Week in More Than a Month

If the data meaningfully disappoints, especially in the service sector, expect more risk off money flows amid growing recession worries today, wrote Tom Essaye, president of Sevens Report Research. Click here to read the full article.

What Russian Political Turmoil Means for Markets

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What’s in Today’s Report:

  • What Russian Political Turmoil Means for Markets
  • More Signs the Market is Starting to Believe the Fed
  • Weekly Economic Cheat Sheet:  Core PCE Price Index and Jobless Claims are the Key Reports this Week
  • Weekly Market Preview:  Will Hard Landing Fears Keep Rising?

Futures are slightly lower as markets digest the political volatility in Russia and underwhelming economic data.

A short-lived rebellion by the Wagner private army against the Russian government dominated headlines this weekend, but from a market standpoint this only matters via its impact on oil prices, and they are little changed.

Economically, German IFO Business Expectations fell to 83.6 vs. (E) 88.0, which is the second weak German economic number in the past two trading days.

Today focus will remain on the Russian political situation, so watch oil to cut through the headline noise.  If oil rises sharply, the situation is deteriorating and that would weigh on markets.