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CPI Preview: Good, Bad & Ugly

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CPI Preview: Good, Bad & Ugly: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • CPI Preview:  Good, Bad & Ugly
  • Weekly Market Preview:  Will Market Catalysts This Week Support A Further Rally?
  • Weekly Economic Cheat Sheet:  CPI Tomorrow, Key Growth Data the Rest of the Week

Futures are slightly lower as markets digest two slightly negative events from the weekend and look ahead to a week filled with possible market moving catalysts.

Moody’s downgraded the U.S. credit outlook to negative but importantly did not change the rating and as such it’s not significantly impacting markets.

Geo-politically, U.S. forces struck more targets in Syria over the weekend, escalating regional tensons but so far markets are not reacting (oil isn’t rallying off the news).

Looking forward, this is a potentially important week, but it starts slowly as there are no notable economic reports today nor any Fed speakers.

Beyond today, though, in addition to the economic catalysts this week, risk of another U.S. government shutdown is rising as there needs to be a short-term spending deal by Friday to avoid a shutdown.  So, any progress on that front today will help markets, while any negative headlines will likely provide a small headwind.

CPI Preview:  Good, Bad & Ugly

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Why Did Stocks Drop? (Familiar Reasons)

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Why Did Stocks Drop? S&P 500: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Did Stocks Drop? (Familiar Reasons)
  • What A Seven Month High In Continuing Jobless Claims Means for Markets

Futures are little changed following a quiet night of news. Markets digest Thursday’s two “hawkish” events (poor Treasury auction and Powell comments), the rebound in Treasury yields and stock pullback.

Economic data was mixed overnight as UK manufacturing slightly disappointed (0.1% vs. (E) 0.3%). While monthly GDP slightly beat (-0.2% vs. (E) -0.1%) but overall, the data isn’t moving markets.

Treasury yields will likely remain in control of this market and if they continue to rise, expect more declines in stocks.  From a data standpoint, the numbers that could move Treasury yields today are Consumer Sentiment (E: 64.5) and the Five-Year Inflation Expectations (E: 3.0%).  Markets will want to see in-line readings for both (or lower in the case of inflation expectations) to pressure yields.

We also have two Fed speakers today, Logan (7:30 a.m. ET) and Bostic (9:00 a.m. ET) but they shouldn’t move markets (Logan will likely be slightly hawkish and Bostic slightly dovish).

Why Did Stocks Drop?

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Tighter Financial Conditions

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Tighter Financial Conditions: Tyler Richey Quoted in MarketWatch on MSN

Oil prices finish lower with concerns of an economic slowdown raising prospects for a supply surplus

The initial drop in oil upon the release of the Fed decision “seemed to be in reaction to the addition of the phrase ‘tighter financial conditions’ for households and businesses,” Tyler Richey, co-editor at Sevens Report Research told MarketWatch. The added wording “implies demand is likely to suffer in the near-to-medium term.”
“With longer-term demand expectations fading with the latest string of disappointing global economic reports we received this week, there is growing concern the physical markets will tip into a surplus in the months or quarter ahead,” said Richey.

Also, click here to view the full article published by MSN on November 2nd, 2023. However, to see the Sevens Report’s full comments on the current market environment sign up here.

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Was Last Week’s Rally Legitimate?

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Was Last Week’s Rally Legitimate? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Was Last Week’s Rally Legitimate?
  • Weekly Market Preview:  Do Falling Treasury Yields Fuel More Upside in Stocks?
  • Weekly Economic Cheat Sheet:  Is the “Growth Scare” Starting to Appear?

Futures are modestly higher on momentum from last week’s big rally, following a mostly quiet weekend of news.

Economically, Euro Zone Composite PMI met expectations (46.5) while German Manufacturers’ Orders beat (0.2% vs. (E ) -1.1%) but there was a negative revision and overall, the data isn’t moving markets.

Geo-politically, Israeli forces are moving further into Gaza but so far risks of a broadening conflict remain relatively low.

Today there are no notable economic reports and just one Fed speaker, Cook (11:00 a.m. ET), so look for Treasury yields to continue to drive short term trading.  If the 10-year yield continues to decline then the S&P 500 can extend last week’s rally.

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Israel Moved Forces Into Gaza

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Israel Moved Forces Into Gaza: Tom Essaye Quoted in Barron’s

Stocks Bounce Back From Dreadful Week

“Geo-politically, Israel moved forces into Gaza over the weekend but the operation is not as large as feared (yet) and that’s helping to slightly reduce geopolitical anxiety,” writes Sevens Report Research’s Tom Essaye.

Aside from a stacked slate of earnings reports headlined by Apple (ticker: AAPL) this week, traders will be watching developments in the Israel-Hamas war and Wednesday’s interest-rate decision from the Federal Reserve.

Also, click here to view the full Barron’s article by Connor Smith published on October 30th, 2023. However, to see the Sevens Report’s full comments on the current market environment sign up here.

It’ll be Very Hard for This Market to Rally

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Key Levels to Watch on Fed Day (Technical Tear-Sheet)

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Key Levels to Watch on Fed Day: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Key Levels to Watch on Fed Day (Printable/Shareable Tear-Sheet)
  • Economic Data Takeaways – Employment Cost Index, Eurozone CPI, Case-Shiller HPI

Futures are slightly lower as traders digest more weak economic data overseas ahead of today’s Fed decision.

Economically, Manufacturing PMIs in China and the U.K. both disappointed. Both came in under the 50 threshold indicating contraction in the sector in both countries. This is weighing modestly on stocks this morning ahead of the Fed.

Looking into today’s session, focus will be on economic data early. The October ADP Employment Report (E: 150K), JOLTS (E: 9.375 million), and ISM Manufacturing Index (E: 49.0) are all due to be released this morning.

From there, attention will turn to the Fed with the FOMC Meeting Announcement at 2:00 p.m. ET followed by Fed Chair Powell’s press conference at 2:30 p.m. ET. Investors are hoping for a dovish message from the Fed, and if they deliver, a continued relief rally is likely this afternoon.

Lastly, outside of the policy decision and economic data, there are some notable earnings releases today. With: CVS ($2.13) and W ($2.98) releasing results before the open, and PYPL ($1.23), QCOM ($1.80), ABNB ($2.08), MET ($1.99) and AIG ($1.55) reporting after the close.

Key Levels to Watch on Fed Day

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Is Another Crash Imminent?

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Is Another Crash Imminent? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Is Another Crash Imminent?
  • Chart – M2 Money Supply Still Up Massively Despite QT
  • The Recent Gold Rally and Inflation Expectations

Stock futures are rebounding modestly this morning amid further stabilization in the Treasury market as big tech earnings come into focus while economic data overseas disappointed overnight.

The Eurozone PMI Composite Flash came in at 46.5. vs. (E) 47.4 with a softer than expected Services sub-index which added to existing recession worries in the EU overnight. And that soft data is contributing to the steady bond market this morning.

Looking into the U.S. session, there is one economic report to watch: PMI Composite Flash (E: 49.4), and as has been the case, a release that supports a soft-landing scenario (easing growth and falling price measures) will support stocks while a “hot” report that sends yields back higher will be a negative.

There are no Fed speakers today but there is a “policy-sensitive” 2-Yr Treasury Note auction at 1:00 p.m. ET.  If demand is weak, that could put upward pressure on yields and reintroduce a headwind on equities and other risk assets as big tech earnings come into focus this week.

Earnings Update

Earnings season continues to ramp up this week with: KO ($0.69), VZ ($1.17), GE ($0.56), MMM ($2.34), and SYF ($1.44) reporting before the bell. While MSFT ($2.65), GOOGL ($1.45), and V ($2.23) will release results after the close.

Investors will want to see some better than expected results from the big tech names as they have been responsible for most of the 2023 stock market gains. Any disappointment will almost certainly mean new lows in the major indices this week.

Is Another Crash Imminent

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It’ll be Very Hard for This Market to Rally

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It’ll be Very Hard for This Market to Rally: Tom Essaye Quoted in Barron’s

Dow Falls Nearly 250 Points. 10-Year Nears 5%.

Stocks tumbled and bond yields rose Thursday after Federal Reserve Chair Jerome Powell paved the way for keeping rates steady.

“Treasury yields are doing exactly what we’d expect given Powell essentially said rates won’t go any higher, but they will stay higher for longer and the economy is strong,” Sevens Report Research’s Tom Essaye told Barron’s.

 “It’ll be very hard for this market to meaningfully rally with yields this high. But, barring a major geo-political positive surprise or great earnings season.”

Also, click here to view the full Barron’s article published on October 19th, 2023. However, to see the Sevens Report’s full comments on the current market environment sign up here.

It’ll be Very Hard for This Market to Rally

If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

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Why Did Stocks Rally After the Jobs Report?

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Why Did Stocks Rally After the Jobs Report? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Did Stocks Rally After the Jobs Report?
  • What to Make of This Market (Updated Near and Medium-Term Outlook)
  • Weekly Economic Cheat Sheet:  Inflation in Focus This Week (CPI Thursday is Very Important)
  • Weekly Market Preview:  Will Rising Oil Prices Become Another Headwind?

Futures are moderately lower on rising geo-political tensions following the Hamas attack on Israel over the weekend.

The human tragedy and geo-political implications aside, from a market standpoint the attack matters because rising geo-political tensions mean higher oil prices (up 3% currently) and the higher oil goes, the stronger the additional headwind on stocks and bonds.

Today there are no notable economic reports but there are several Fed speakers, including Logan, Barr, and Jefferson, although they shouldn’t move markets.  So, oil will likely be the driver of asset prices today and the higher oil goes, the stronger the headwind on stocks.

Why Did Stocks Rally After the Jobs Report?

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Why Are Yields Rising?

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Why Are Yields Rising? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Are Yields Rising?
  • What the Removal of Speaker McCarthy Means for Markets (We Didn’t Need This Right Now)
  • JOLTS Data Takeaways
  • OPEC+ (JMMC) Meeting Preview

U.S. stock futures are rebounding from overnight losses as European markets turn positive following mixed economic data while yields are stabilizing after this week’s rapid rise.

Markets are continuing to digest the implications of the removal of McCarthy as Speaker of the House. Yields were initially higher overnight, likely on worries of a more pronounced threat of a government shutdown next month. They have since stabilized and are only little changed in morning trade, helping support steady stock futures in the pre-market.

Economically, the September EU Composite PMI came in at 48.7 vs. (E) 48.4, while Retail Sales fell -1.2% vs. (E) -0.2% in August and PPI fell a steep -11.5% vs. (E) -11.7%. On balance, the data was not a reason for the ECB to become more hawkish. Which is helping global bond markets (and equities) stabilize this morning.

Today, focus will be on economic data early with the ADP Employment Report (E: 150K), ISM Services Index (E: 53.5), and Factory Orders (E: 0.2%). The “hot” JOLTS headline roiled markets yesterday so markets are likely to welcome any cooling labor market indicators and look for easing price measures in the ISM release as those developments could help bonds bounce back and stocks recover some of this week’s losses.

Later, the focus will turn to central bank speak with several Fed officials scheduled to speak including: O’Neill Paese, Schmidt, Bowman, and Goolsbee. A lot of hawkish rhetoric has been digested in recent sessions. So any more dovish-leaning commentary would also be welcomed by stocks and other risk assets.

Why Are Yields Rising

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