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Is the Market Doing the Fed’s Job?

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What’s in Today’s Report:

  • Is the Market Doing the Fed’s Job?
  • Oil Update and EIA Analysis

Futures are moderately higher following a solid night of earnings.

Earnings overnight were better than expected as QCOM posted strong results while FB also beat expectations.

Economic data was sparse, but the Bank of Japan made more dovish comments and the yen is down 2% and hitting fresh multi-decade lows.

Today focus will be on earnings as this is the most important day of the entire earnings season. We get several major companies reporting results including (in order of importance): AAPL ($1.43), AMZN ($8.73), INTC ($0.80), MA ($2.17), TWTR ($0.01), CAT ($2.66) and MCD ($2.18).  Given how oversold the market is on a short-term basis, solid results from these companies could fuel a rally, while disappointing results likely will cause another test of the 2022 lows in the S&P 500.

Economically, numbers today include Advanced Q1 GDP (E: 1.1%) and Jobless Claims (E: 181K) but I don’t expect either to move markets.

Technical Update

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What’s in Today’s Report:

  • Technical Update – Bearish Price Patterns and Dow Theory Threatens to Turn Bearish

Futures are modestly lower this morning after a quiet night of news as yesterday’s big intraday reversal higher is being digested.

Today is lining up to be a busy one with a slew of economic data due to be released, in order of importance: Durable Goods (E: 1.0%), Consumer Confidence (E: 106.8), Case-Shiller Home Price Index (E: 1.5%), FHFA House Price Index (E: 1.6%), and New Home Sales (E: 772K). Investors will want to see solid data that contradicts the growing fear that the Fed is getting more aggressive with policy into an economic slowdown.

There are no Fed speakers today but there is a 2-Yr Treasury Note auction at 1:00 p.m. ET that could move the bond market and ultimately impact stocks in the early afternoon.

The market’s main focus today will be on earnings with: UPS ($2.87), PEP ($1.24), GE ($0.20), MMM ($2.33), and JBLU (-$0.85) reporting ahead of the bell while MSFT ($2.18), GOOGL ($25.63), GM ($1.57), V ($1.65), and COF ($5.39) are all scheduled to release results after the close.

Bottom line, for yesterday’s late day reversal higher in equity markets to continue today, we need to see good economic data, steady or falling bond yields, and most importantly favorable earnings, especially out of big tech names like GOOGL and MSFT.

Tom Essaye Quoted in Market Watch on April 22, 2022

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2-year Treasury yield ends week at December 2018 high as Fed officials move toward more quickly tightening policy

Treasury yields surged again on the idea of even more rate hikes, specifically that the Fed could hike 50 bps (basis points) in May, June, and July…said Tom Essaye, founder of Sevens Report Research, in a note. Click here to read the full article.

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).