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Time to Reduce Commodity Allocations?

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What’s in Today’s Report:

  • Is it Time to Reduce Commodity Allocations?
  • Why Q2 GDP Wasn’t as Bad As It Seemed

Futures are moderately higher following a solid night of earnings.

AAPL (up 2%) and AMZN (up 12%) both beat estimates and that’s helping to extend this week’s rally.

Eurozone inflation came in slightly hotter than expected, as EU HICP rose 8.9% yoy vs. (E ) 8.8% yoy, but stronger than expected earnings are helping the market look past the slightly hot number.

Today the focus will be on inflation as we get three notable inflation readings:  Core PCE Price Index (E: 0.5% m/m, 4.7% y/y), Employment Cost Index (E: 1.1%), and the University of Michigan Five Year Inflation Expectations (E: 2.8%).  Markets have aggressively priced in a near term peak in inflation, and the data needs to start to confirm that, starting today.  If these inflation stats run hot, don’t be surprised to see stocks decline.

On the earnings front, the season is starting to wind down but there are still a few more days of notable results.  Some reports we’re watching today include: XOM ($3.80), CVX ($5.02), PG ($1.23) and CL ($0.71).

Two Clear Takeaways from the Fed Decision

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What’s in Today’s Report:

  • Two Clear Takeaways from the Fed Decision
  • EIA Analysis and Oil Update

Futures are modestly lower on disappointing earnings and the increased probability of higher corporate taxes.

Earnings from META, QCOM, and others disappointed and that’s reversing some of Wednesday’s tech-driven gains.

Senate Democrats agreed on a smaller Build Back Better bill that includes some corporate tax increases, although it’s still not clear when this becomes law.

Today will be a busy day from a data and earnings standpoint.  Economically, Jobless Claims (E: 249K) is the key report and if it moves considerably above 250k that will signal further deterioration in the labor market.  We also get Preliminary Q2 GDP (E: 0.5%) and as we said yesterday, don’t be shocked if it’s negative and you hear a lot of recession commentary.

On the earnings front, today is an important day and the key reports will be:  PFE ($1.72), MA ($2.36), AAPL ($1.14), AMZN ($0.15), INTC ($0.69).

Fed Meeting Preview

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What’s in Today’s Report:

  • FOMC Preview
  • Market Outlook for Fed Funds at Yearend: Chart

Stock futures are modestly lower on soft retailer earnings from yesterday as focus turns to the July FOMC meeting.

WMT is down 9% in pre-market trading after the retail giant slashed its profit outlook, citing inflation pressures on consumers which is driving risk-off money flows in pre-market trade amid a resurgence in recession fears.

Today, investors will begin to look ahead to tomorrow’s Fed announcement as the FOMC meeting begins this morning however there are also several important economic reports including: Case-Shiller House Price Index (E: 1.6%), Consumer Confidence (E: 96.8), New Home Sales (E: 664K), and the Richmond Fed Manufacturing Index (E: -10).

Earnings season also continues to pick up today with UPS ($3.14), KO ($0.67), GM ($1.40), GE ($0.38), and MCD ($2.46) reporting ahead of the bell while MSFT ($2.28), GOOGL ($1.28), and V ($1.74) will release results after the close.

Sevens Report Analysts Quoted in Seeking Alpha on July 21st, 2022

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Crude oil, energy stocks slide on signs of slowing U.S. fuel demand

Sevens Report Research said gasoline supplied, a measure of implied demand, only bounced by 459K bbl/day to 8.52M bbl/day last week after plunging 1.35M bbl/day in the previous week, which was the largest drop since the initial COVID lockdowns. Click here to read the full article.

Sevens Report Analysts Quoted in Market Watch on July 21st, 2022

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U.S. oil prices settle with a more than 3% loss as weak gasoline demand allows fuel inventories to rise

Additionally, gasoline supplied, a measure of implied demand, only bounced by 459,000 b/d (barrels a day) to 8.52 million b/d last week after the measure plunged 1.35 million b/d the prior week, which was the largest since the initial COVID lockdowns…wrote analysts at Sevens Report Research. Click here to read the full article.

Sevens Report Co-Editor, Tyler Richey Quoted in Hellenic Shipping News on July 11th, 2022

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Why crude released from U.S. oil reserves may have ended up being exported overseas

The nation’s refineries simply don’t have the ability to absorb those new barrels of oil suddenly hitting the market and therefore, physical refined product markets remain tight and prices are still elevated…said Tyler Richey, co-editor at Sevens Report Research. Click here to read the full article.

Sevens Report Co-Editor Tyler Richey Quoted in Market Watch on July 7th, 2022

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Why crude released from U.S. oil reserves may have ended up being exported overseas

The nation’s refineries simply don’t have the ability to absorb those new barrels [of oil] suddenly hitting the market and therefore, physical refined product markets remain tight and prices are still elevated…said Tyler Richey, co-editor at Sevens Report Research. Click here to read the full article.

Sevens Report Co-Editor Tyler Richey Quoted in Market Watch on July 7th, 2022

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U.S. oil prices settle back above $100 a barrel; natural-gas futures rise over 14%

The Energy Information Administration data showed a healthy rebound in gasoline demand, easing some recent concerns about demand destruction in gasoline markets…said Tyler Richey, co-editor at Sevens Report Research. Click here to read the full article.

Why Stocks Rallied Yesterday

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What’s in Today’s Report:

  • Why Stocks Rallied
  • Jobs Report Preview (Redux)
  • Is the VIX Fixed? (Chart)
  • Oil Update: Demand Rebound Helps Energy Markets Stabilize

Stock futures are trading modestly lower with EU markets this morning as traders digest yesterday’s gains ahead of today’s June jobs report.

Sadly, former PM of Japan, Shinzo Abe, has died after an assassination attempt at a campaign stop overnight.

Economically, Japanese Household Spending fell -1.9% vs. (E) +1.2%  in May, rekindling concerns about the health of global growth.

Looking into today’s session, the focus will be almost entirely on the June Employment Situation report from the BLS (E: Job Adds 270K, Unemployment Rate 3.6%, Wages 5.0% y/y) which is due out at 8:30 a.m. ET. There is also one Fed official speaking this morning: Williams (8:30 a.m. and 11:00 a.m. ET).

Bottom line, the market will want to see jobs data that meets our “Just Right” scenario from our Jobs Report Preview which would suggest we are seeing slowing growth in the labor market, yet not a full-on collapse, and increase hopes we are close to or beyond “peak hawkishness” from the Fed. That would open the door to a continued relief rally, however, a report that is either too strong or overly disappointing could send stock falling sharply today.

Tom Essaye Quoted in Market Watch on July 6th, 2022

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Why a rally in growth stocks could signal ‘peak’ Fed hawkishness has passed

While it’s too early to declare the value outperformance ‘over,’ we do think the outperformance of tech recently is notable, because if it continues that will be a strong signal that the market is now looking past future rates hikes towards eventual rate cuts in 2023…said Tom Essaye, founder of Sevens Report Research, in a note Wednesday. Click here to read the full article.