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The Fed Pivoted, So Now What?

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What’s in Today’s Report:

  • Sevens Report Technicals First Issue Today (Delivered to subscribers later this morning)
  • The Fed Pivoted, So Now What?
  • Weekly Market Preview:  Will there be any debt ceiling progress, and does disinflation resume?
  • Weekly Economic Cheat Sheet:  CPI on Wednesday is the key report this week.

Futures are slightly higher following a mostly quiet weekend of news as markets look ahead to Wednesday’s CPI.

News was slightly positive on the debt ceiling over the weekend, as reports indicate the White House will try to negotiate a short term debt ceiling extension (to the end of September).  However, it remains uncertain if even this short-term deal can get done before the “X” date.

Economically, German Industrial Production missed estimates (-3.4% vs. (E) -1.5%) but that’s not moving markets.

Today there are no notable economic reports but there is a potentially important release at 2:00 p.m. via the Bank Senior Loan Office Survey.  Markets (and the Fed) are nervous the regional bank stress will curtail lending and put a bigger headwind on the economy.  If the loan officer survey reflects that reality (a drop in bank lending) it could cause volatility as that would increase the chances of a potential hard landing.

 

Sevens Report Technicals – First Issue Being Delivered To Trial Period Subscribers This Morning!

We have been thrilled with the response to our new research offering: Sevens Report Technicals and we are very excited to deliver the first official issue later this morning. Sevens Report Technicals will be similar in appearance to the special technical report we sent out two weeks ago, which you can view here.

This new report will offer a “deep dive” into the technical dynamics of all of the asset classes we cover in the daily Sevens Report including:

  • A “Top-Down” Technical View
  • Dow Theory Update
  • Key Levels to Watch Across Asset Classes
  • A Dynamic Equity Sector “Dashboard”
  • A Deep Dive Into Treasury Market Trends
  • Market Volatility Observations and Takeaways

During this launch phase we continue to offer an additional month free on any quarterly ($75 discount) or annual ($150 discount) 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. We are confident that you will find the research a perfect 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.

What the Fed Pause Means for Markets

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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.

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.

Moment of Truth: Does the Fed Signal a Pause?

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What’s in Today’s Report:

  • Moment of Truth:  Does the Fed Signal a Pause?
  • Weekly Market Preview:  Important New Insight into the Hard vs. Soft Landing Debate
  • Weekly Economic Cheat Sheet:  ISM Manufacturing Today, Services Wednesday, Jobs Report Friday (It’s a Very Busy and Important Week)

Futures are little changed as markets digest the FRC seizure and asset sale to JPM and look ahead to this week’s FOMC decision and important economic data.

First Republic (FRC) failed over the weekend and was seized by the FDIC.  Assets were then sold to JPM who will effectively absorb the bank.  FRC’s failure was widely expected, and as such it’s not a new negative on markets.

Economically, the Chinese April manufacturing PMI missed expectations and fell back below 50 (49.2 vs. (E) 51.4.).

Today there is only one notable economic report, the April ISM Manufacturing PMI (E: 46.8), and markets will want to see stability in the data (so no further declines).

On the banks, again FRC’s failure was priced in last week, so it’s not a new negative on markets.  The key now is seeing if any other regional banks with large uninsured deposits come under pressure, so as we said last week, we’ll be watching WAL, CMA and ZION over the coming days.

Why Stocks Won’t Drop Part II: The Economy

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What’s in Today’s Report:

  • Why Won’t Stocks Drop Part II: The Economy
  • VIX Falls to 52-Week Lows – Chart

Hawkish money flows are dominating markets this morning with stock futures falling, yields rising and oil and gold both testing support after hot inflation data overnight.

Economically, U.K. CPI was 10.1% vs. (E) 9.8% y/y in March while the Eurozone Narrow Core HICP reading rose 0.1% to 5.7% meeting estimates. The two inflation prints are causing a hawkish shift in central bank policy expectations this morning, which is in turn rekindling hard landing fears.

Looking into today’s session, there are no notable economic reports today however there is a 20-Yr Treasury Bond auction at 1:00 p.m. ET that could impact both bond and equity markets.

As far as the Fed goes there are two speakers today, but both are after the close: Goolsbee (5:30 p.m. ET) and Williams (7:00 p.m. ET).

That will leave investor focus on earnings early with more big banks and notable consumer financial companies reporting ahead of the bell including: MS ($1.67), CFG ($2.15), SYF ($1.49), ALLY ($0.88), USB ($1.13), and TRV ($3.64), while TSLA ($0.85) and IBM ($1.27) will release results after the close.

Bottom line, the 2-Yr Treasury yield is testing a more than one-month high this morning and stocks are coming for sale broadly which underscores deteriorating sentient among investors with the S&P 500 trading well above 4,100 this week. And if earnings news is not encouraging today, and yields continue to move higher over the course of the session, the selling pressure on equities is likely to continue and liable to accelerate.

Why Won’t Stocks Drop?

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What’s in Today’s Report:

  • Why Won’t Stocks Drop? It’s Partially Sentiment
  • Empire State Manufacturing Index Takeaways
  • Chart – How Oil Prices Are Influencing the S&P 500 Right Now

Stock futures are higher this morning as Chinese economic data was mostly better than expected while investors await more big bank earnings today.

Economically, Chinese Retail Sales jumped 10.6% y/y vs. (E) 7.0% in March which helped Q1 GDP to rise 4.5% y/y vs. (E) 3.9%. Other metrics including Fixed Asset Investment and Industrial Production were less encouraging, but the strong consumer data was well received by investors overnight.

Meanwhile U.K. wage growth rose 5.9% vs. (E) 5.1% in March which adds some pressure to the BoE to remain aggressive as there is clearly more work to do to get inflation under control.

Looking into today’s session, focus will be on earnings early with BAC ($0.79), GS ($8.14), JNJ ($2.51), and BK ($1.09) reporting quarterly results before the open while NFLX ($2.81) and UAL (-$0.73) report after the close.

After the open, investors will be watching for the only notable economic release today: Housing Starts and Permits (E: 1.400 million, 1.431 million) before there is a 52-Week Treasury Bill auction at 11:30 a.m. ET which may offer some fresh insight into market expectations for Fed policy over the next year.

Finally, the Fed’s Bowman speaks at 1:00 p.m. ET and investors will be looking any further clues about May rate hike plans and longer term policy outlook.

Tom Essaye Joined BNN Bloomberg To Discuss The Markets on April 13th, 2023

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If the U.S. Fed doesn’t make good on rate cut expectations, the market rally will be undone: Analyst

Tom Essaye, president of Sevens Report Research, joins BNN Bloomberg to discuss the disparity of the market’s rate cut expectations, and central bank pushback. Click here to watch the full interview.

How Positive is the Restart of Disinflation?

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What’s in Today’s Report:

  • How Positive is the Restart of Disinflation?
  • Weekly Market Preview:  Regional Bank Earnings This Week (Do They Ease Contagion Concerns?)
  • Weekly Economic Cheat Sheet:  First Look at April Economic Activity

Futures are little changed following a quiet weekend of news as investors await key regional bank earnings this week.

The only notable economic report this morning was Italian CPI, which fell –0.4% vs. (E) -0.3% and further implied that global disinflation has restarted (which is a positive).

Today we get the first look at April economic activity via the Empire Manufacturing Survey (E: -18.3) and markets will want to see stability (so not a continued steep drop).  We also get the latest look at housing via the Housing Market Index (E: 45).

Additionally, regional bank earnings start and their commentary on deposits and “Held to Maturity” securities will be especially important.  Some reports we’re watching today include: SCHW ($0.90), GNTY ($0.69), MTB ($3.98), JBHT ($2.05).

Why Stocks Rallied on Thursday

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What’s in Today’s Report:

  • Why Stocks Rallied on Thursday
  • Policy Spread Update (Rate Cuts Imminent?)

Futures are slightly lower on digestion of Thursday’s rally and as markets await bank earnings this morning.

Fed balance sheet news overnight was mixed, as total usage of the Discount Window and BTFP dropped to $139 bln from $149 bln, but that’s still very elevated and it underscores there’s still stress in the regional banks.

Focus today will be on economic data and earnings, and the key here remains stability in both sets of reports (so no major disappointments).  Important economic reports today include, in order of importance, Retail Sales (E: -0.4%), Industrial Production (E: 0.3%) and Consumer Sentiment (E: 62.7).

Earnings season starts today and key reports we’re watching include: JPM ($3.41), C ($1.66), WFC ($1.15), PNC ($3.60), BLK ($7.73), UNH ($6.24).

Finally, there’s one Fed speaker, Waller at 8:45 a.m. ET but he shouldn’t move markets (the Fed message is very consistent right now).

Tom Essaye Interviewed on Yahoo Finance Live on April 11th, 2023

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‘The Fed will be more hawkish than the market is currently expecting,’ Sevens Report Research President says

Sevens Report Research President Tom Essaye joins Yahoo Finance Live to discuss U.S. inflation, Fed policy, economic uncertainty, and the outlook for markets. “I think the Fed will be more hawkish than the market is currently expecting. We have to remember something. If we look at year-end Fed Funds estimates, it’s 4% to 4 and 1/4%. So the market is pricing in numerous rate cuts, not hikes, rate cuts before year end”…said Tom Essaye. Click here to watch the full interview.