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Evidence of Some Deterioration in the Fundamentals

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Deterioration in the Fundamentals: Strengthen your market knowledge with a free trial of The Sevens Report.

What’s in Today’s Report:

  • Market Multiple Table:  Evidence of Some Deterioration in the Fundamentals

Futures are modestly lower on another negative AAPL article and more mixed economic data.

AAPL shares fell another 3% pre-market as Bloomberg also reported certain Chinese government agencies would be banned from using foreign made phones.

Economically, Chinese exports were no worse than feared (-8.8%). However, German Industrial Production missed estimates (-0.8% vs. (E) -0.2%) as global recession fears crept higher.

Today focus will be on economic data and Fed speak.  The two key reports to watch are Jobless Claims (E: 238K) and Unit Labor Costs (E: 1.7%).  Markets will want to see the former rise more than expected (but not too much more) and the later be less than expectations.  The opposite (low claims and high Unit Labor Costs) will push Treasuries higher and weigh further on stocks.

Turning to the Fed, New York Fed President Williams speaks at 3:30 ET. Since he’s part of Fed leadership, we’ll pay attention and markets will hope he hints that rate hikes are done.  Bostic also speaks at 3:45 ET but his message will likely be predictably dovish, and as such it won’t move markets.

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Could A Recession Just Be Delayed (And Not Avoided?)

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What’s in Today’s Report:

  • Could A Recession Just Be Delayed? (And Not Avoided)
  • Weekly Market Preview:  Fed/ECB/BOE Decisions This Week and Key Earnings Reports
  • Weekly Economic Cheat Sheet:  Fed Decisions and Inflation Readings In Focus This Week

Futures are modestly higher despite underwhelming economic data as markets look ahead to a busy week of central bank decisions, earnings and economic data.

Economically, data was not Goldilocks as the Euro Zone and UK flash PMIs missed estimates, falling to 48.9 vs. (E) 49.6 and 50.7 vs. (E) 52.2 respectively, and they reminded investors rate hikes can still slow growth.

Today focus will be on the July Flash Composite PMI (E: 53.1), as this is the first “big” number of July, and markets will want to see stability in the data to keep the Goldilocks rally going.

The major earnings reports occur later in the week but results we’ll be watching today include:  DPZ ($3.04), NXPI ($3.29), WHT ($3.80), LOGI ($0.45) and we’ll be looking for any signs of margin compression due to on going disinflation.

Tom Essaye Quoted in Barron’s on April 25th, 2023

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Stocks Plunge as UPS, First Republic Earnings Shake Investors

The lower than expected deposit levels rekindled worries about the health of the banking system and financials are dragging the broader market lower this morning, writes Tom Essaye, founder of the Sevens Report. Click here to read the full article.

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.

Tom Essaye Interviewed on BNN Bloomberg

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In a scared market, fundamental valuations don’t matter: Tom Essaye

Tom Essaye, president of Sevens Report Research, joins BNN Bloomberg to discuss what’s going on in the markets. Essaye says that the focuses this week are bank stability and inflation, and that he prefers defensive sectors right now such as consumer staples and healthcare. Click here to watch the full interview.

 

Tom Essaye Quoted in Barron’s on March 29th, 2023

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Markets Pop as Banking Fears Ease, Tech Stocks Rally

“The UBS move is easing some of the angst surrounding the recent turmoil in the banking sector,” wrote Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

Bull Case vs. Bear Case Part II (Tactical Ideas and My Opinion)

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What’s in Today’s Report:

  • Bull Case vs. the Bear Case Part II (Tactical Ideas and My Opinion)

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.

Tom Essaye Quoted in Barron’s on March 24th, 2023

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Stocks Gain as Volatile Week Ends

“Bottom line, banks have reemerged as the primary influence on markets in the back half of the week and if the weakness in the sector continues today, stocks will have a very hard time extending yesterday’s modest bounce,” says Tom Essaye, the founder of Sevens Report Research. Click here to read the full article.

The True Indicator of Banking Stress

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What’s in Today’s Report:

  • The True Indicator of Banking Stress
  • Case Shiller Home Price Index and Consumer Confidence: Charts

Stock futures are trading solidly higher with overseas markets following some positive bank headlines out of Europe and strong price action in Asian tech shares.

BABA announced a corporate restructuring plan that sent shares higher by 14% overnight, boosting sentiment across Asian equity markets and buoying U.S. equity futures with tech leading the way higher.

In Europe, it was reported that UBS has brought back former CEO Sergio Ermotti to oversee the CS takeover which is further easing some of the angst surrounding the recent turmoil in the banking sector.

Looking into today’s session, there is one more housing data release to watch: Pending Home Sales (E: 1.0%) before Fed Vice Chair Barr continues with his Congressional testimony regarding recent bank failures at 10:00 a.m. ET. There is also a 7-Yr Treasury Note auction at 1:00 p.m. ET.

Bottom line, equity markets appear to be stabilizing but the tape does remain thin and tentative with the “pain trade” to the upside. One materially negative headline out of the banking sector or regarding Fed policy, however, could reignite the volatility of recent weeks.

Progress on the Banks?

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What’s in Today’s Report:

  • Weekly Market Preview:  Do the Banks Stabilize?
  • Weekly Economic Cheat Sheet:  Key Inflation Data on Friday

Futures are modestly higher following the successful merger of Silicon Valley Bank over the weekend.

First Citizens agreed to buy much of Silicon Valley Bank’s assets, and that resolution combined with larger deposit insurance chatter is helping stocks to rally this morning.

Economically, the only notable report overnight was the German Ifo Business Expectations and it was better than expected at 91.2 vs. (E) 88.0.

Today focus will remain on the banks and as has been the case, Frist Republic is the key – resolution for that bank remains the next step towards broader stability in the banking sector.  Economically, today we get the Dallas Fed Manufacturing Index (E: -13.5) and have one Fed speaker, Jefferson at 5:00 p.m. ET, but neither should move markets.