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.
What’s in Today’s Report:
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).
What’s in Today’s Report:
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).
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.
What’s in Today’s Report:
Futures are slightly higher following better than expected economic data.
Chinese exports handily beat expectations in March rising 14.8% vs. (E) -7.0%, in what is the latest signal that the global economy remains resilient.
On inflation, German CPI met expectations rising 0.8% m/m and 7.4% y/y, numbers that are still too high in aggregate, but won’t make the ECB incrementally hawkish.
Today focus will remain on inflation and the labor market via PPI (E: 0.0% m/m, 3.0% y/y), Core PPI (E: 0.3% m/m, 3.4% y/y) and Jobless Claims (E: 233k). PPI is expected to show moderation and importantly PPI is viewed as a quasi-leading indicator to CPI, so if numbers come in under expectations that’ll increase hopes inflation is truly easing. For jobless claims, the higher the better as it implies normalization in the labor market, something the Fed wants to see before it can pause.
What’s in Today’s Report:
Equity futures are slightly higher while the policy-sensitive 2-Yr Treasury yield is pushing further beyond 4% in pre-market trade as focus is exclusively on today’s CPI report.
Economically, Japanese PPI came in at 0.0% vs. (E) 0.1% which is adding a slight tailwind to risk assets this morning.
Looking into today’s session, all eyes will be on inflation data ahead of the open: CPI (E: 0.3% m/m, 5.2% y/y), Core CPI (E: 0.4% m/m, 5.6% y/y).
From there, focus will shift to the Fed as Barkin speaks ahead of the bell (9:10 a.m. ET) and Daly speaks mid-day (12:00 p.m. ET), before the latest FOMC meeting minutes will be released at 2:00 p.m. ET. Any hawkish commentary or verbiage within the minutes will likely weigh on stocks and push yields higher.
Bottom line, the CPI data will be the main catalyst today and to recap yesterday’s “CPI Preview” the “good scenario” is a headline below 5.2% with Core below 5.5%, the “bad scenario” is a headline between 5.2% and 6.0% with Core at 5.6%, and the “ugly scenario” is a headline above 6.0% with Core above 5.6%.
What’s in Today’s Report:
Futures are little changed following a mostly quiet weekend of news as investors digest the “Just Right” jobs report and look ahead to CPI on Wednesday and the start of earnings season on Friday.
Friday’s jobs report was “Just Right” with job adds rising 238k vs. (E) 230k and wages gaining 4.2% vs. (E) 4.3% y/y. The report is helping to slightly ease the hard landing worries from last week.
Today should be a mostly quiet day of trading as European markets are closed for the Easter holiday and there are no notable economic reports and just one Fed speaker, Williams at 4:15 p.m. ET, as investors will look ahead to Wednesday’s critical CPI report and the start of bank earnings on Friday.
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What’s in Today’s Report:
Stock futures are modestly lower this morning while short duration yields are on the rise amid some hawkish central bank developments but soft economic data overnight.
Internationally, the Reserve Bank of New Zealand raised rates by 50 bp vs. (E) 25 bp to 5.25% citing inflation that is still too high while RBA Governor Lowe pushed back on hopes that their rate hiking campaign is over. In Europe, the Eurozone Composite PMI fell to 53.7 vs. (E) 54.1.
Today, market focus will remain on economic data with the ADP Employment Report (E: 200K), International Trade in Goods and Services (E: -$68.7B), and ISM Services Index (E: 54.4) all due to be released this morning. Investors will be looking for further signs of moderation in the labor market (but not a collapse) and easing price pressures in the ISM report in order to restore optimism about a soft landing.
Additionally, the Fed’s Mester will speak at 8:30 a.m. ET and her recent comments about Fed funds pushing beyond 5% have contradicted what rates markets are pricing in for this year, so a reiteration of that view could push yields higher and weigh on equities.
Sevens Report Quarterly Letter Is Available Now!
Our Q1 ’23 Quarterly Letter was delivered to subscribers on Monday along with compliance backup and citations, and we’re already getting feedback about how it is saving advisors time and helping them communicate with their clients in this volatile environment!
You can view our Q4 ‘22 Quarterly Letter here.
To learn more about the product (including price) please click this link.
If you’re interested in subscribing, please email info@sevensreport.com.
What’s in Today’s Report:
Futures are little changed as global inflation and regional bank liquidity stress both remain elevated.
The Fed’s balance sheet shrank slightly as discount window borrowing dropped –22 bln. while BTFP lending increased 10.7 bln. as bank liquidity stress didn’t get much worse, but it didn’t get much better, either.
On inflation, EU HICP fell to 6.9% from 8.5% y/y, but core HICP rose to 5.7% from 5.6%, reflecting still sticky inflation.
For the final day of the first quarter focus will be on inflation and specifically the Core PCE Price Index (E: 0.4%, 4.7%) and investors need to see that number at or below expectations to further the “Fed Pivot” idea that’s supporting stocks. We also get Consumer Sentiment (E: 63.4) and the five-year inflation expectations and there’s one Fed speaker Williams (3:05 p.m. ET). As mentioned, if the data and Williams support the “Fed Pivot” idea, stocks can extend the rally. If they refute that idea, stocks could give back some of the recent gains.
