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Market Multiple Levels: S&P 500 Chart

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What’s in Today’s Report:

  • Market Multiple Levels: S&P 500 Chart (Unbranded PDF Available)
  • Why Did Small Caps Surge?

Stock futures are little changed in premarket trade indicating this week’s digestive churn sideways could continue today following mixed economic data overnight.

Chinese exports dropped -7.5% vs. (E) +1.0% year-over-year in May adding to worries about the health of the recovery in the world’s second largest economy.

Conversely, in Europe, German Industrial Production jumped 1.8% vs. (E) 1.4% y/y helping ease some worries about the health of the EU economy.

Looking into today’s session, the list of potential catalysts remains light as there are just two economic reports to watch: International Trade in Goods and Services (E: -$76.0B) and Consumer Credit (E: $21.0B) while there are no Fed officials scheduled to speak.

That will leave focus on market internals and whether or not the early June money flows into cyclicals and small cap stocks can continue. If so, the improving breadth in the market with the S&P 500 sitting just under YTD highs will add to the case that the 2023 rally is sustainable.

Sevens Report Analyst Quoted in MarketWatch on May 31st, 2023

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U.S. oil futures settle at lowest since March

The potential fallout from the U.S. debt-ceiling debacle and rising odds of a June interest-rate hike both “weighed on oil as the former influence would be a broader riskoff market event, while the latter would further reduce already waning optimism for a soft economic landing this year,” analysts at Sevens Report Research wrote in Wednesday’s newsletter. Click here to read the full article.

 

What Is Immaculate Disinflation, and Why Did It Cause Last Week’s Rally?

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What’s in Today’s Report:

  • What Is Immaculate Disinflation, and Why Did It Cause Last Week’s Rally?
  • Weekly Market Preview:  Does Economic Data Stay Resilient?
  • Weekly Economic Cheat Sheet:  Service Sector in Focus This Week

Futures are little changed as markets digest the Thursday/Friday rally amidst a mostly quiet weekend of news.

Oil prices are solidly higher (Brent crude up 1.7%) after Saudi Arabia announced a voluntary 1M bpd production cut for the next month, although that’s not seen as a sustainable bullish catalyst.

Economically, global service PMIs were mixed as the Euro Zone Service PMI missed expectations (55.1 vs. (E) 55.9) while the UK and Chinese service PMIs were in-line.

Today focus will be on the ISM Services Index (E: 52.0.) and specifically the price index in this report.  Last week, a sharp drop in the ISM Manufacturing PMI Prices Paid Index ignited the rally, and if we see a similar drop in the services price index, it’ll help extend the rally as markets will get more confident disinflation is accelerating.

Why Have Stocks Hit Multi-Month Highs?

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What’s in Today’s Report:

  • Why Have Stocks Hit Multi-Month Highs?
  • Weekly Market Preview:  Real Debt Ceiling Progress is Needed This Week
  • Weekly Economic Cheat Sheet:  Flash PMIs and Core PCE the Key Reports This Week

Futures are little changed despite a lack of progress on the debt ceiling and an increase in trade tensions between the U.S. and China over the weekend.

There was no progress on the debt ceiling over the weekend although Biden and McCarthy will meet again today to resume negotiations.

China banned the use of Micron (MU) chips in what is yet another escalation in U.S./China trade tensions.

Today focus will be on the debt ceiling and markets will want to hear positive and optimistic commentary from Biden and McCarthy, as the potential “X” date of June 1st is now less than 10 days away.

There are also multiple Fed speakers today, including Bullard (8:30 a.m. ET), Logan (9:00 a.m. ET), Barking & Bostic (10:50 a.m. ET) and Daly (11:05 a.m. ET), but given Powell on Friday reiterated the Fed has likely paused, their comments shouldn’t move markets.

Hard vs. Soft Landing Scoreboard Update

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What’s in Today’s Report:

  • Hard vs. Soft Landing Scoreboard Update

Futures are slightly higher mostly on momentum from Wednesday’s rally and despite more disappointing earnings, this time from Cisco (CSCO).

CSCO orders underwhelmed and that’s weighing on the stock (down 4% after hours) and limiting gains in futures.

There was no new news on the debt ceiling but optimism remains high and a deal is expected before the “X” date.

Focus today will be on economic data, because beyond any short-term debt ceiling drama (or resolution) the bigger issue for this market remains hard vs. soft landing.  Key reports today include (in order of importance):  Jobless Claims (E: 255K), Philly Fed (E: -20.0) and Existing Home Sales (E: 4.295M).  As has been the case, stability remains the key for stocks to extend the rally.

We also have two Fed speakers, Jefferson (9:05 a.m. ET) and Logan (10:00 a.m. ET), but they shouldn’t move markets.

Why Home Depot Earnings Point to a Soft Landing

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What’s in Today’s Report:

  • Why Home Depot Earnings Point to a Soft Landing
  • Retail Sales Data Takeaways
  • Debt Ceiling Barometer: 1-Month T-Bill Yield Steadies

Stock futures are rebounding modestly from yesterday’s declines this morning as traders await more clarity on the debt ceiling negotiations (1-Month yield is down 2 bp to 5.56%) and digest in-line European inflation data.

Economically, Eurozone HICP (their CPI equivalent) met estimates at 7.0% y/y with the Narrow Core reading falling 0.1% to 5.6%, also as expected but still well above target.

There is just one economic report this morning: Housing Starts & Permits (E: 1.405M, 1.430M) and no Fed officials are scheduled to speak.

Retailer earnings continue this morning with TGT ($1.74) reporting ahead of the bell and investors will be looking for more signs of “soft landing” spending trends as we saw with HD yesterday.

As far as other potential catalysts go, there is a 20-Yr. Treasury Bond auction at 1:00 p.m. ET today and any big move in yields could impact stocks (too weak would indicate inflation worries, too strong would underscore growing debt ceiling fears).

Why the “Pain Trade” Remains Higher

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What’s in Today’s Report:

  • Why the “Pain Trade” Remains Higher
  • Bullish Reversal in the Dollar Forming – Chart

Stock futures are slightly lower this morning as traders digest disappointing economic data from overseas and look ahead to today’s debt ceiling negotiations.

Economically, Chinese Fixed Asset Investment slowed in April while Industrial Production came in at just 5.6% vs. (E) 10.7% and Retail Sales rose to 18.4% vs. (E) 22.0%. The underwhelming data is continuing to pour some cold water on hopes that a robust recovery in China will help support broader growth in the global economy this year.

Looking into today’s session there are several economic releases to watch in the U.S. including (in order of importance): Retail Sales (E: 0.7%), Industrial Production (E: 0.0%), and the Housing Market Index (E: 45). Specifically, if Retail Sales is disappointing, that could rekindle hard-landing fears and pressure stocks.

Several Fed officials are also expected to speak today: Mester (8:15 a.m. ET), Bostic (8:55 a.m. ET), Williams (12:15 p.m. ET), and Logan (3:15 p.m. ET). A more cautious tone regarding policy plans would be welcomed while any decidedly hawkish commentary is likely to pressure markets.

Finally, the main focus today will be the debt ceiling talks between the Biden Administration and House Republicans as we are fast approaching the “X date” and prospects of a deal being reached remain very uncertain. Any reported progress on the topic will be well-received today and likely result in a modest relief rally but if concerns about the debt ceiling increase, expect equities to come under pressure.

 

Sevens Report Technicals – Discounted Subscription Offer for Sevens Report Subscribers Ends Today!

Response to our announcement of Sevens Report Technicals has been tremendous, and we have been thrilled with the feedback we have received on the first few issues.

Sevens Report Technicals is similar in look and feel to the special technical report we delivered to subscribers in late April which can be viewed here.

This week’s edition was packed with value-add analysis including a bullish shift in the outlook for the Dollar Index (not good for stocks) and a deep dive into some key measures of market breadth, which remain historically weak right now.

During this launch phase we have offered an additional month free on any quarterly ($75 value) or annual ($150 value) subscription.

With a one-month “grace period” during which you can receive a full refund for any reason, you take no risk trying Sevens Report Technicals to see if it’s a complement to your business or investment process.

To start your risk-free trial subscription, please send an email to info@sevensreport.com.

To learn more about Sevens Report Technicals, click this link.

Market Multiple Chart: S&P 500

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What’s in Today’s Report:

  • Market Multiple Table Chart: S&P 500 (Separate PDF Available on Request)
  • CPI Preview – Will the Data Contradict Fed “Pause” Expectations

Futures are down modestly this morning, tracking global shares lower after soft earnings while focus turns to today’s CPI data.

ABNB shares are down 14% in premarket trade after the company offered disappointing revenue guidance after the close yesterday and that is weighing modestly on equities this morning.

Economically, German CPI was unchanged at 7.2% y/y in April, meeting analysts’ estimates, but importantly, the headline remains very elevated and much beyond policy makers’ 2.0% target which will support further tightening in the months ahead.

Looking into today’s session, U.S. inflation data will be in focus with CPI (E: 0.4% m/m, 5.0% y/y) due at 8:30 a.m. ET, but the more important figure to watch is Core CPI (E: 0.4% m/m, 5.5% y/y) as a print above 5.5% will raise concerns that price pressures are sticky and not declining which will warrant a continued, aggressive stance by the Fed.

There are no Fed officials scheduled to speak today but there is a 10-Yr Treasury Note auction at 1:00 p.m. ET that could move markets, especially in the wake of the CPI data as investors look for insight as to how the “smart market” is digesting the latest look at inflation.

Finally, earnings season is winding down but there are a few notably companies reporting today: TM ($2.83) before the open, and DIS ($0.89) after the close.

Why Did Banks Drop Yesterday?

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What’s in Today’s Report:

  • Why Did Banks Drop Yesterday?
  • Technical Update: Two S&P 500 Charts to Watch

Futures are slightly higher despite more pain in regional bank shares in the pre-market and soft tech earnings from late yesterday as focus shifts to today’s Fed decision.

AMD is down 7%+ after a disappointing sales forecast late yesterday while shares of PACW and WAL (which fell sharply yesterday and weighed on the broader banking complex) are both down 7% to 12% in pre-market trade this morning.

Economically, Australian Retail Sales were better than expected while the Eurozone Unemployment Rate dipped which saw bond yields move off the overnight lows.

Looking into today’s session there are two important economic reports to watch as they could alter Fed policy expectations depending on how they come in. The ADP Employment Report (E: 143K) is due out before the bell while the ISM Services Index (E: 51.7) will be released at the top of the 10:00 a.m. hour ET.

From there focus will turn to the Fed with the FOMC Decision at 2:00 p.m. ET (E: +25 bp) and Fed Chair Powell’s press conference at 2:30 p.m. ET. How the Fed handles forward guidance in the statement and any insights Powell provides in the presser will be the key factors in determining whether stocks extend yesterday’s declines or stabilize and recover to test the YTD highs.

 

Sevens Report Technicals – A New Timely Report Dedicated to Technical Analysis

Response to our announcement of Sevens Report Technicals was tremendous yesterday, and we are very excited to produce the first issue this coming Monday (May 8th) and deliver compelling value!

Sevens Report Technicals will be similar in appearance to last week’s special technical report, which you can view here.

During this launch phase we continue to offer an additional month free on any quarterly (savings of $75 dollars) or annual (savings of $150 dollars) subscription.

With a one month “Grace Period” during which you can receive a full refund for any reason, you take no risk trying Sevens Report Technicals to see if it’s a complement to your business or investment process.

To start your risk-free trial subscription, please send an email to info@sevensreport.com. To learn more about Sevens Report Technicals, click this link.

Hard Landing vs. Soft Landing Scoreboard

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What’s in Today’s Report:

  • Hard Landing vs. Soft Landing Scoreboard (Table Included)

Stock futures are tracking global equity markets lower while bonds rally thanks to disappointing bank earnings.

FRC, which has been in focus since the banking turmoil began in March, is trading lower by more than 20% in the premarket after reporting that deposits fell more than 40% in Q1 to just $104.5B vs. (E) $145B while the bank plans to cut as much as 25% of staff in Q2. The lower than expected deposit levels rekindled worries about the health of the banking system and financials are dragging the broader market lower this morning.

Today, there are a few economic releases to watch: Case-Shiller Home Price Index (E: -0.4%), Consumer Confidence (E: 104.2), and New Home Sales (E: 635K) but unless there are any material surprises, investors will remain focused on earnings as we will begin to get some of the big tech companies’ results after the close today.

On the earnings front we will hear from UPS ($2.19), VZ ($1.19), GM ($1.58), MCD ($2.30), GE ($0.13), PEP $1.37), and MMM ($1.60) before the open, and MSFT ($2.22), GOOGL ($1.07), V ($1.97), and TXN ($1.76) after the close. Investors will be looking for good top and bottom line results but potentially more importantly, solid guidance given the uncertain market backdrop right now.