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Why Yields Have Risen So Sharply

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What’s in Today’s Report:

  • Understanding Why Longer-Duration Yields Are Rising So Sharply
  • Chart – Dollar Index Hits New Multiyear Highs

Futures declined overnight as NFLX dropped sharply on disappointing earnings (specifically declining subscribers) but a pullback in yields has helped the market stabilize in early morning trade.

Economically, German PPI was the latest hot inflation print as the headline spiked 4.9% vs. (E) 2.3% M/M.

Looking into today’s session, there is a slew of potential catalysts for the market beginning with another report on the housing market: Existing Home Sales (E: 5.86M) and then a busy Fed speaker circuit with: Daly (10:30 a.m. ET), Evans (11:30 a.m. ET), and Bostic (1:00 p.m. ET) all scheduled to speak.

There is also a 20-Yr Treasury Bond auction at 1:00 p.m. ET that could move yields and impact equity markets.

Finally, earnings season continues today with: PG ($1.29) ahead of the bell and TSLA ($2.27), UAL (-$4.15), AA ($2.99), and CSX ($0.38) due to report after the close.

Earnings In Focus

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What’s in Today’s Report:

  • Bottom Line – Earnings In Focus
  • Natural Gas Update

Stock futures are trading lower after another quiet night of news as bond yields hit new multi-year highs overnight while investors look ahead to a fresh set of earnings reports today.

The 10-year Treasury Note yield notably tested 2.90% overnight following hawkish commentary from the Fed’s Bullard, who mentioned the possibility of a 75 basis point hike late yesterday.

Looking into today’s session, there is just one economic report to watch: Housing Starts and Permits (E: 1.75M, 1.83M) but it is not likely to move markets. Then there is one Fed speaker mid-day: Evans (12:05 p.m. ET).

Finally, earnings season continues to pick up today with JNJ ($0.34), LMT ($6.22), TRV ($3.70), and CFG ($0.96) reporting before the open and NFLX ($2.92) and IBM ($1.34) due to report after the closing bell.

Sevens Report Analyst Quoted in Market Watch on April 14th, 2022

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Gold marks first loss in 6 sessions, but posts a gain for the week

Looking ahead, the outlook for gold is still bullish and “the level to beat for futures to begin a new leg in the current uptrend is the 2022 high close of $2,058” an ounce, analysts at Sevens Report Research wrote in Thursday’s newsletter. Click here to read the full article.

 

Tom Essaye Quoted in Barron’s on April 15th, 2022

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Commodities Are Hot Right Now. But the Party May Be Over.

We do see them [commodities] as stretched in the short term… said Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

 

An Important Earnings Season (It Really Starts This Week)

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What’s in Today’s Report:

  • An Important Earnings Season (It Starts This Week)
  • Weekly Market Preview:  Can Solid Earnings Spark a Rally?
  • Weekly Economic Cheat Sheet:  If Housing Finally Starting to Cool?

Futures are modestly lower following a generally quiet weekend of news.

Chinese economic data was better than expected as Q1 GDP rose 4.8% vs. (E) 4.2%, but concerns remain about future economic growth given continued lockdowns (concerns about future Chinese growth is a headwind on global stocks right now).

Geopolitically there was no change in the Russia/Ukraine war as fighting ranges in eastern Ukraine and there is no reason to expect a cease fire anytime soon.

Today the key report is the Housing Market Index (E: 78) and we’ll be looking for any signs that mortgage rates at 10+ year highs are starting to slow the housing market.    We also get one Fed speaker, Bullard (4:00 p.m. ET), and we can expect him to be hawkish (but the market already knows that).

Finally, this is a big week for earnings and some important reports today include: BAC ($0.76), SCHW ($0.85), JBHT ($1.91).

The Yield Curve Is Hitting Resistance

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What’s in Today’s Report:

  • 10s-2s Into Resistance (Chart)
  • U.S. Consumer Price Index Takeaways
  • Chart – WTI Crude Oil Hits Technical Resistance

Stock futures are attempting to stabilize this morning while global shares were mixed overnight as traders assess the latest economic data ahead of today’s unofficial start to Q1 earnings season and another important U.S. inflation print.

Economic data was negative and again pointed to stagflation overnight as Japanese Machine Orders plunged -9.8% vs. (E) -1.5% while U.K. CPI jumped to 7.0% vs. (E) 6.7%.

Today is lining up to be a very busy session from a news flow and catalyst standpoint as we kick off Q1 earnings season with reports from: JPM ($2.73), BLK ($8.92), and DAL (-$1.33) ahead of the bell. Investors will be looking for solid results to confirm the strength and resilience of corporate America.

Then we will get the March PPI report at 8:30 a.m. ET (E: 1.1%, 10.6%), but as long as the headlines are not materially hotter than expected, and the “core figures” are in line with estimates, stocks could mount a relief rally as the market has become near-term oversold.

 

In the afternoon, there is one Fed speaker: Barkin (12:30 p.m. ET) as well as a 30-Yr Treasury Bond auction at 1:00 p.m. ET. And if bond yields hold below the highs from earlier this week, that should be an additional tailwind for stocks today, especially the beaten-down tech sector.

Will Inflation Start to Peak This Week?

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What’s in Today’s Report:

  • Updated Market Outlook
  • Weekly Market Preview:  Will Inflation Start to Peak?
  • Weekly Economic Cheat Sheet:  Key Inflation Data This Week

Futures are modestly lower as Chinese inflation stayed high while the Russia/Ukraine war may be intensifying.

Chinese PPI rose 8.3% vs. (E) 8.1% while CPI gained 1.5% vs. (E) 1.4%, underscoring that inflation has not yet peaked in China.

Geo-politically, Russia is poised for a large assault on eastern Ukraine and analysts are anticipating some of the more intense fighting of the war.

Today there are no economic reports but there are several Fed speakers including Bostic (9:30 a.m. ET), Williams (12:00 p.m. ET) and Evans (12:40 p.m. ET) and we expect them to continue the trend of guiding markets towards a 50 bps hike in May and endorsing the idea of 250 basis points of tightening by year-end (but that shouldn’t move markets as that is already well known).

Are Stock and Bond Markets Starting to Forecast an Economic Slowdown?

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What’s in Today’s Report:

  • Are the Stock and Bond Markets Starting to Forecast An Economic Slowdown?

Futures are slightly higher mostly on momentum from Thursday’s close, following a quiet night of news.

The global trend in central banks turning more hawkish continued overnight as the Reserve Bank of India left rates unchanged (as expected) but warned that inflation was too high.

Geopolitically, a Kremlin spokesman said that Russia hoped to end its “operation” in Ukraine in the coming days or weeks, although analysts are skeptical of the promise.

Today there are no notable economic reports nor any Fed speakers, so between the sparse calendar and the Masters, I’d expect a relatively slow day.  That said, if we get any geo-political headlines from Russia that imply a sooner than expected cease-fire, then stocks can extend Thursday’s rally.

General Technical Take for Equities

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What’s in Today’s Report:

  • What the FOMC Minute Mean for Markets (Hawkish)
  • General Technical Take for Equities
  • EIA Analysis and Oil Market Update

Futures are bouncing slightly following a quiet night as markets digest the declines of the past two days.

Economic data was mixed overnight as German Industrial Production missed estimates while Euro Zone Retail Sales beat expectations, but neither number is moving markets.

Geopolitically there was no new news on Russia/Ukraine as the conflict continues with little signs of any progress towards a cease fire.

Today we get one notable economic report, Jobless Claims (E: 202K) but three Fed speakers:  Bullard (9:00 a.m. ET), Evans (2:00 p.m. ET) and Williams (4:05 p.m.).  We expect each of them to further hammer the point that rates are rising by 50 bps in May, with balance sheet reduction beginning in the same month.  But, as long as they don’t say anything “hawkishly new” then stocks should be able to look past the commentary.

Tom Essaye Quoted in Barron’s on March 28, 2022

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3 Headwinds Could Pummel Stocks. What to Know.

We must acknowledge the challenges ahead, and be ready with a plan to insulate ourselves from volatility and protect portfolios…wrote Tom Essaye, founder of Sevens Report Research. Click here to read the full article.