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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).

Brace for a Recession on Thursday

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What’s in Today’s Report:

  • Brace for a Recession on Thursday
  • Housing Data Points to Slowdown in Real Estate Market
  • Chart: S&P 500 Holds 50-Day Moving Average by One Point

Stock futures are solidly higher this morning as quarterly earnings results from tech giants MSFT and GOOGL were both well received by investors after the close yesterday while investor focus shifts to the Fed today.

This morning, economic data will be in focus early with Durable Goods Orders (E: -0.5%), International Trade in Goods (-$103.2B), and Pending Home Sales (-1.0%) all due out by 10:00 a.m. ET.

From there, expect price action to slow considerably as focus turns to the Fed with the FOMC Meeting Announcement at 2:00 p.m. ET followed by the Fed Chair Press Conference at 2:30 p.m. ET.

Markets have priced in a 75% chance of a 75 basis point hike today while no changes to forward-guidance are expected so any variance from those expectations could result in sizeable moves in the market this afternoon.

Finally, earnings season remains in full swing with SHOP ($0.03), TMUS ($0.41), HLT ($1.06), SHW ($2.81) reporting ahead of the bell and META ($2.51), F ($0.43), and QCOM ($2.86) releasing results after the close. Any of those reports could lead to sector specific volatility despite the Fed today.

Tom Essaye Quoted in Barron’s on July 22nd, 2022

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The Stock Market Is at a Crossroads. What to Watch Next.

You’ve seen a relief rally, the Fed maybe being slightly less hawkish than you think is the hope…said Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

What Happens After Inflation Peaks?

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What’s in Today’s Report:

  • What Happens After Inflation Peaks?
  • Weekly Market Preview:  Fed Decision Wednesday
  • Weekly Economic Cheat Sheet:  Q2 GDP and Inflation Stats are the Highlights

Futures are modestly higher as markets bounce from Friday’s declines, following a quiet weekend and as investors look forward to numerous important catalysts this week.

Chinese authorities are considering some restrictions on movement in Shanghai as COVID cases rise, but are still resisting broad lockdowns (for now).

Economically, German Ifo Business Expectations declined further (80.3 vs. (E) 83.3).

Today there’s only one notable economic report, the Chicago Fed National Activity Index (E: 0.05), and markets will want to see stability here following last week’s disappointing data.  If this number is surprisingly weak (like the PMIs last Thursday/Friday) then that will likely weigh on stocks as recession fears grow.

Earnings season continues and this will be a very busy and important week for results.  Some earnings we’ll be watching today include:  WHR ($5.22), NXPI ($3.39), and LOGI ($3.39).

Another Factor Fueling the Rally

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What’s in Today’s Report:

  • SPX Breaks Through Several Key Resistance Levels: Chart
  • Another Factor Fueling the Rally

Stock futures are slightly higher this morning as yesterday’s sizeable rally is digested amid news that Russia will resume gas flows through the Nord Stream 1 pipeline this week.

Economically, German PPI came in below expectation but U.K CPI and PPI both came in slightly hot which is offering mixed signals regarding whether we have reached peak inflation not globally.

Looking into today’s session, we will get another report on the housing market: Existing Home Sales (E: 5.400M), and investors will again be looking for a less dismal print than Monday’s Housing Market Index release.

There are no Fed speakers today, but the Treasury will hold a 20-Yr Bond auction at 1:00 p.m. ET that could move yields and impact equity trading (especially if it sends yields meaningfully higher).

Finally, traders will remain focused on earnings with ABT ($1.07) and BIIB ($4.10) releasing results ahead of the bell and TSLA ($1.73), UAL ($1.86), CSX ($0.47), and DFS ($3.74) reporting after the close.

Bottom line, near-term market momentum has taken a decidedly bullish shift, and while we could see a modest pullback as yesterday’s outsized gains are digested further if news flow remains even slightly positive, the path of least resistance is still higher into the end of the week.

Tom Essaye Quoted in Barron’s on June 29th, 2022

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Dow Steadies, NIO Slumps — and What Else Is Happened in the Stock Market Today

Not only did the headline badly miss expectations, falling to a 16-month low, but consumer inflation expectations for the year ahead within the report jumped from an upwardly revised 7.5% to 8.0%, which notably contradicts the…wrote The Sevens Report’s Tom Essaye. Click here to read the full article.

State of Inflation: Hints of a Peak?

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What’s in Today’s Report:

  • State of Inflation:  Hints of a Peak?

Futures are sharply lower following another profit warning from a national retailer and mixed economic data.

Restoration Hardware (RH) cut guidance just a few weeks after reporting earnings, citing a sudden deterioration in demand and increasing worries about corporate earnings.

Economic data was mixed as the Chinese manufacturing PMI rose back above 50, while German unemployment rose more than expected (5.3% vs. (E) 5.0%.

Today focus will be on the Core PCE Price Index (E: 0.4% m/m, 4.8% y/y) and if we get a materially hot number above the 4.8% yoy expectation, we can expect more selling pressure while a drop towards the mid 4% range would be a welcomed surprise (and likely cut the early morning losses).  Today we also get weekly Jobless Claims (E: 226K), although that number shouldn’t move markets.

Why Stocks Dropped Again

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What’s in Today’s Report:

  • Why Stocks Dropped Again
  • Consumer Confidence Takeaways
  • Gold Update: A Soft Landing Is the Worst-Case Scenario

Stock futures are modestly lower thanks to some hawkish Fed chatter and another hot inflation print in Europe.

Economically, Spanish CPI jumped to 10.2% vs. (E) 9.2% in June, up from 8.5% in May suggesting inflation has not yet peaked, at least in parts of Europe.

Domestically, the Fed’s Mester reiterated that a 75 bp hike is likely in July given elevated consumer inflation expectations.

Today, there is one economic report to watch early: Final Q1 GDP (E: -1.4%) and investors would like to see the headline at least hold unchanged from the previous revision (if not get revised higher) before focus turns to several global central bankers speaking at an ECB Forum including Fed Chair Powell at 9:00 a.m. ET.

If the discussion takes on a more hawkish tone or there is any sign the market is losing confidence in the Fed (which would be evident in the bond markets) then yesterday’s selling pressure could continue.

Technical Update: Potential Bottom Forming?

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What’s in Today’s Report:

  • Technical Update: Still Trending Lower But Potential Prospects of a Bottom Forming
  • Charts: S&P 500 Downside Target Reached, VIX in Compressing Range

Stock futures are modestly higher with global shares amid positive news out of China regarding covid policies.

China announced shortened quarantine times for incoming visitors in the latest move to ease covid-restrictions and potentially move away from their zero-Covid policy stance.

Economically, the German GfK Consumer Climate Index for July was no worse than feared at -27.4 vs. (E) -27.9 which is easing concerns about a swift drop-off in global economic growth.

Today, there are several economic reports to watch for: International Trade in Goods (E: -$102.0B), Case-Shiller Home Price Index (E: 1.8%), and most importantly Consumer Confidence (E: 101.0). Investors will want to see a continued slowdown in the data, but not to the degree that would raise concerns about a “hard landing.”

Two Fed officials are also scheduled to speak today: Barkin (8:00 a.m. ET) and Daly (12:30 p.m. ET) and there is a 7-Yr Treasury Note auction at 1:00 p.m. ET that could move yields and influence stock trading.

 

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What Would A Recession Mean for Markets?

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What’s in Today’s Report:

  • What Would A Recession Mean for Markets?

Futures are moderately higher thanks mostly to momentum from Thursday’s close and despite more underwhelming economic data.

Economically, UK Retail Sales met expectations but fell sharply (–4.7% yoy) while the German Ifo Business Expectations Index missed estimates (85.8 vs. (E) 87.3).

Geo-politically, Russia continues to advance in the Donbas as Ukraine has withdrawn from the city of Severodonetsk.

Today focus will be on the inflation expectations in the University of Michigan Consumer Sentiment Index, and if we see a decline below 3.3% that could further the idea that inflation is peaking (and extend the rally in stocks).  Other data today includes New Home Sales (E: 587K) and one Fed speaker, Daly at 4:00 p.m. ET, but they shouldn’t move markets.