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What the Fed Pause Means for Markets

What’s in Today’s Report:

  • What the Fed Pause Means for Markets
  • EIA Analysis and Oil Market Update

Futures are slightly lower following more regional bank turmoil and disappointing earnings.

Pac West (PACW) announced overnight that it’s seeking “strategic alternatives” and the stock dropped more than 30% pre-market and is weighing on other regional banks.

On earnings, EL and QCOM both missed estimates and that’s also weighing on sentiment.

Today focus will initially be on the ECB Rate Decision (E: 25 bps hike) and economic data via Jobless Claims (E: 238K) and Unit Labor Costs (E: 3.9%).  Markets will want to see 1) A not too hawkish ECB (so no 50 bps hike), 2) A mild uptick in jobless claims (signaling more balance in the labor market) and 3) A drop in Unit Labor Costs (implying wage pressures are easing).  If we get the opposite of those events, expect more declines today.

After the close we get what’s likely the most important earnings report of the season, AAPL ($1.44), and a solid number there would help sentiment.

Special Technical Report Coming Monday

What’s in Today’s Report:

  • Special Technical Report Coming Monday
  • Why Did the VIX Just Hit 52 Week Lows?
  • EIA Analysis and Oil Market Update
  • Two Notable Observations from a Quiet Trading Day

Futures are moderately weaker following a disappointing night of earnings.

TSLA, NOK, FFIV and TSMC all missed earnings and provided cautious commentary or guidance, and that’s increasing concerns about an economic slowdown.

Today there are numerous potential catalysts including important economic reports, lots of Fed speak and more earnings reports.

Starting with the data, the key report today is Philly Fed (E: -19.4) and markets will want to see if it confirms the rebound we saw in Empire (if it does, expect some stock weakness as Fed expectations become slightly more hawkish).  We also get Jobless Claims (E: 242K) and any move closer to 300k will be welcomed as it signals a slightly more normal labor market.

Turning to the Fed, there are multiple speakers today including Waller (12:00 p.m. ET), Mester (12:20 p.m. ET), Logan (3:00 p.m. ET) and Bostic (5:00 p.m. ET) and it will be notable to see if they all push back on the rate cut expectations in the markets.

Finally, on earnings, results lately have been underwhelming so these reports are becoming more important.  Earnings we’re watching today include: T ($0.58), TSM ($1.21), AXP ($2.63), UNP ($2.57), PPG ($1.55), CSX ($0.43), STX ($0.18).

Sevens Report – Market Multiple Table Chart

What’s in Today’s Report:

  • Market Multiple Table Chart
  • What CPI Means for Markets
  • EIA Analysis and Oil Update

Futures are slightly higher following better than expected economic data.

Chinese exports handily beat expectations in March rising 14.8% vs. (E) -7.0%, in what is the latest signal that the global economy remains resilient.

On inflation, German CPI met expectations rising 0.8% m/m and 7.4% y/y, numbers that are still too high in aggregate, but won’t make the ECB incrementally hawkish.

Today focus will remain on inflation and the labor market via PPI (E: 0.0% m/m, 3.0% y/y), Core PPI (E: 0.3% m/m, 3.4% y/y) and Jobless Claims (E: 233k).  PPI is expected to show moderation and importantly PPI is viewed as a quasi-leading indicator to CPI, so if numbers come in under expectations that’ll increase hopes inflation is truly easing.  For jobless claims, the higher the better as it implies normalization in the labor market, something the Fed wants to see before it can pause.

Jobs Report Preview (Two Sided Risks)

What’s in Today’s Report:

  • Jobs Report Preview:  Two Sided Risks
  • EIA Analysis and Oil Update
  • Why Yesterday’s Service PMI was a Negative for Markets

Futures are little changed following a mostly quiet night of news as markets digest this week’s underwhelming economic data ahead of the jobs report and long weekend.

Economic data overnight was better than expected as the Chinese Composite PMI beat estimates (57.8 vs. (E) 55.0) as did German Industrial Production (2.0% vs. (E) 0.0%).

Regional banks remained stable overnight following WAL’s update on deposit statistics yesterday.

Today focus will be on Jobless Claims (E: 201K) and a speech by Fed president Bullard (10:00 a.m. ET).  Investors will want to see claims move higher, above 200k, to signal some moderation in the labor market, while we can expect Bullard to be hawkish, although keep in mind he does not represent the consensus at the FOMC (and as such his comments shouldn’t move markets, unless they’re a dovish surprise).

Sevens Report Co-Editor, Tyler Richey, Quoted in MarketWatch on March 23rd, 2023

Oil futures settle lower, with U.S. prices back below $70 a barrel

“The banks are the main driver of oil, and really all risk assets today, as fading confidence in the financial system is reigniting fears that another crisis may be looming after we saw some of the biggest bank failures since 2008 in early March,” said Tyler Richey, co-editor at Sevens Report Research. Click here to read the full article.

Sevens Report Co-Editor, Tyler Richey, Quoted in MarketWatch on March 23rd, 2023

Oil futures end lower on recession worries

“However, the banks are the main driver of oil, and really all risk assets, as fading confidence in the financial system is reigniting fears that another crisis may be looming, after we saw some of the biggest bank failures since 2008 in early March,” Tyler Richey, co-editor at Sevens Report Research, told MarketWatch. Click here to read the full article.

The Bull Case vs. the Bear Case

What’s in Today’s Report:

  • The Bull Case vs. the Bear Case
  • Weekly Oil Update and EIA Analysis

Futures are modestly higher and are extending Wednesdays’ gains following better than expected inflation data overnight.

Spanish CPI, which was the first inflation indicator to warn of the stall in disinflation, rose just 3.3% y/y, less than the 3.8% expectation and much lower than the 6% y/y reading last month. That’s offering some initial hope that disinflation has restarted.

Today focus will be on economic data, with Jobless Claims (E: 195K) the key report, although we also get the Final Q4 GDP (E: 2.7%).  There are also two Fed speakers today, including Collins (12:45 p.m. ET) and Barkin (12:45 p.m. ET) and markets will look for additional confirmation that the Fed has finally pivoted.

Jobs Report Preview

What’s in Today’s Report:

  • Jobs Report Preview
  • EIA Analysis and Oil Market Update

Futures are slightly lower following a mostly quiet night of news as markets look ahead to tomorrow’s jobs report.

Chinese inflation data undershot expectations with CPI rising 1.0% vs. (E) 1.9% while PPI fell –1.4% vs. (E) -1.3% and Chinese authorities should continue to add stimulus to their economy (which will be good for global growth).

Politically, focus today will be on President Biden’s budget and the proposed tax increases, but there’s no chance the budget passes and the details of it won’t move markets.

Focus today will stay on the data and the key report will be Jobless Claims (E: 196K).  Claims have remained stubbornly low and any movement above 200k will be welcomed by markets as it’ll hint there’s some deterioration in the labor market.

Core PCE Price Index Preview (Good, Bad & Ugly).

What’s in Today’s Report:

  • What the Core PCE Price Index Will Mean for Markets (Good, Bad & Ugly)
  • EIA and Oil Market Analysis

Futures are moderately lower mostly on positioning ahead of the Core PCE Price Index release but also in reaction to disappointing EU economic data.

German GDP underwhelmed and fell –0.4% vs. (E) -0.2% while Gfk Consumer Climate also slightly missed estimates (-30.5 vs. (E) -30.4).

Today, focus will be on inflation and the key report is the Core PCE Price Index (E: 0.4% m/m, 4.3% y/y).  We have a full Core PCE Price Index preview in the Report, but generally speaking, if the numbers are below expectations, it’ll spark a rally, if they are around expectations that’s mostly priced in, and if Core PCE is higher than last month, prepare for a selloff.

Other data today includes Personal Incomes and Outlays (E: 1.0%, 1.2%), , New Home Sales (E: 617K) and Consumer Sentiment (E: 66.4), but barring a move in five year inflation expectations above 3% none of those reports should move markets.

Finally, we also have two Fed speakers today, Mester (10:15 a.m. ET) and Collins (1:30 p.m. ET).

Technical Update: Is This Another Bull Trap?

What’s in Today’s Report:

  • Technical Update:  Is This Another Bull Trap?
  • EIA Analysis and Oil Market Update

Futures are flat following a quiet night and as solid CSCO earnings are helping stocks hold yesterdays’ gains.

CSCO beat estimates and raised guidance and the stock is up 4% pre-market and that’s helping broader sentiment.

Economically, the only notable number was the Chinese Home Price Index (in-line at –1.5%).

Today focus will remain on economic data and the key reports are (in order of importance):  Philly Fed (E: -7.2), PPI (E: 0.4%m/m, 5.5% y/y), Jobless Claims (E: 200K) and Housing Starts (E: 1.365M).  As has been the case, solid data that implies a “No Landing’ scenario should support stocks, as long as yields don’t spike too much.

We also have several Fed speakers today including Mester (8:45 a.m. ET), Bullard (1:30 p.m. ET) and Cook (4:00 p.m. ET) although they shouldn’t move markets.