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What the Stronger Dollar Means for Markets

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What’s in Today’s Report:

  • What the Stronger Dollar Means for Markets

Futures are little changed following a quiet night of news as markets digest Thursday’s extension of the rally and as markets await comments from Fed Chair Powell later this morning.

Economically, the only notable numbers were Japanese CPI (met expectations at 3.5%) and German PPI (slightly hot at 4.1% vs. (E) 4.0%) but neither number changed the outlook for global inflation and, as such, aren’t moving markets.

Today there are no notable economic reports, but there are several important Fed speakers including Chair Powell (11:00 a.m. ET).  So far this week, markets have looked past hawkish commentary from regional Fed Presidents but if Powell hints that the Fed may hike rates in June, we could see some of this week’s rally given back.  Other Fed speakers today include Williams (8:45 a.m. ET) and Bowman (9:00 a.m. ET).

Hard vs. Soft Landing Scoreboard Update

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What’s in Today’s Report:

  • Hard vs. Soft Landing Scoreboard Update

Futures are slightly higher mostly on momentum from Wednesday’s rally and despite more disappointing earnings, this time from Cisco (CSCO).

CSCO orders underwhelmed and that’s weighing on the stock (down 4% after hours) and limiting gains in futures.

There was no new news on the debt ceiling but optimism remains high and a deal is expected before the “X” date.

Focus today will be on economic data, because beyond any short-term debt ceiling drama (or resolution) the bigger issue for this market remains hard vs. soft landing.  Key reports today include (in order of importance):  Jobless Claims (E: 255K), Philly Fed (E: -20.0) and Existing Home Sales (E: 4.295M).  As has been the case, stability remains the key for stocks to extend the rally.

We also have two Fed speakers, Jefferson (9:05 a.m. ET) and Logan (10:00 a.m. ET), but they shouldn’t move markets.

Why the “Pain Trade” Remains Higher

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What’s in Today’s Report:

  • Why the “Pain Trade” Remains Higher
  • Bullish Reversal in the Dollar Forming – Chart

Stock futures are slightly lower this morning as traders digest disappointing economic data from overseas and look ahead to today’s debt ceiling negotiations.

Economically, Chinese Fixed Asset Investment slowed in April while Industrial Production came in at just 5.6% vs. (E) 10.7% and Retail Sales rose to 18.4% vs. (E) 22.0%. The underwhelming data is continuing to pour some cold water on hopes that a robust recovery in China will help support broader growth in the global economy this year.

Looking into today’s session there are several economic releases to watch in the U.S. including (in order of importance): Retail Sales (E: 0.7%), Industrial Production (E: 0.0%), and the Housing Market Index (E: 45). Specifically, if Retail Sales is disappointing, that could rekindle hard-landing fears and pressure stocks.

Several Fed officials are also expected to speak today: Mester (8:15 a.m. ET), Bostic (8:55 a.m. ET), Williams (12:15 p.m. ET), and Logan (3:15 p.m. ET). A more cautious tone regarding policy plans would be welcomed while any decidedly hawkish commentary is likely to pressure markets.

Finally, the main focus today will be the debt ceiling talks between the Biden Administration and House Republicans as we are fast approaching the “X date” and prospects of a deal being reached remain very uncertain. Any reported progress on the topic will be well-received today and likely result in a modest relief rally but if concerns about the debt ceiling increase, expect equities to come under pressure.

 

Sevens Report Technicals – Discounted Subscription Offer for Sevens Report Subscribers Ends Today!

Response to our announcement of Sevens Report Technicals has been tremendous, and we have been thrilled with the feedback we have received on the first few issues.

Sevens Report Technicals is similar in look and feel to the special technical report we delivered to subscribers in late April which can be viewed here.

This week’s edition was packed with value-add analysis including a bullish shift in the outlook for the Dollar Index (not good for stocks) and a deep dive into some key measures of market breadth, which remain historically weak right now.

During this launch phase we have offered an additional month free on any quarterly ($75 value) or annual ($150 value) subscription.

With a one-month “grace period” during which you can receive a full refund for any reason, you take no risk trying Sevens Report Technicals to see if it’s a complement to your business or investment process.

To start your risk-free trial subscription, please send an email to info@sevensreport.com.

To learn more about Sevens Report Technicals, click this link.

What Happens If There’s No Debt Ceiling Deal?

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What’s in Today’s Report:

  • What Happens If There’s No Debt Ceiling Deal?
  • Why CPI Was Positive for Stocks and Bonds Yesterday
  • EIA Analysis and Oil Market Update

Futures are modestly higher mostly on momentum from Wednesday’s rally and following a quiet night of news.

China’s CPI rose 0.1% vs. (E) 0.3% and that’s combining with recently underwhelming Chinese economic data to raise doubts about the economic recovery.

There was no notable news on the debt ceiling, although another round of high level meetings will occur tomorrow.

Today focus will first be on the Bank of England Rate Decision (E: 25 bps hike) and then on economic data, specifically Jobless Claims (E: 245K) and PPI (E: 0.3% m/m, 2.5% y/y).  Stocks have benefitted from mostly “goldilocks” data over the past week, and if we get more of the same via in-line claims and PPI, stocks should be able to extend the rally.  Finally, there’s one Fed speaker, Waller (10:15 a.m. ET), but he shouldn’t move markets.

Market Multiple Table: May Update

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What’s in Today’s Report:

  • Market Multiple Table – May Update (Unbranded PDF Available on Request)
  • Senior Loan Officer Opinion Survey

Stock futures are lower this morning after soft economic data overseas and growing angst about the debt ceiling.

Chinese merchandise trade data for April revealed a -7.9% drop in imports vs. (E) -0.2% which has poured some cold water on hopes for a strong recovery in the world’s second largest economy.

In the U.S., the NFIB Small Business Optimism Index came in at 89.0 vs. (E) 89.7 for the month of April but the release is not materially moving markets this morning. There are no additional economic reports today.

There are two Fed officials scheduled to speak today: Jefferson (8:30 a.m. ET) and Williams (12:05 p.m. ET) as well as a 3-Yr Treasury Note auction at 1:00 p.m. ET, all of which have the potential to impact markets in intraday trade.

With increasing focus on the debt ceiling, investors will be keenly focused on today’s meeting between President Biden and Congressional leadership as hopes for a delay to September are building and any disappointment of those hopes could result in volatility across asset classes.

The Fed Pivoted, So Now What?

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What’s in Today’s Report:

  • Sevens Report Technicals First Issue Today (Delivered to subscribers later this morning)
  • The Fed Pivoted, So Now What?
  • Weekly Market Preview:  Will there be any debt ceiling progress, and does disinflation resume?
  • Weekly Economic Cheat Sheet:  CPI on Wednesday is the key report this week.

Futures are slightly higher following a mostly quiet weekend of news as markets look ahead to Wednesday’s CPI.

News was slightly positive on the debt ceiling over the weekend, as reports indicate the White House will try to negotiate a short term debt ceiling extension (to the end of September).  However, it remains uncertain if even this short-term deal can get done before the “X” date.

Economically, German Industrial Production missed estimates (-3.4% vs. (E) -1.5%) but that’s not moving markets.

Today there are no notable economic reports but there is a potentially important release at 2:00 p.m. via the Bank Senior Loan Office Survey.  Markets (and the Fed) are nervous the regional bank stress will curtail lending and put a bigger headwind on the economy.  If the loan officer survey reflects that reality (a drop in bank lending) it could cause volatility as that would increase the chances of a potential hard landing.

 

Sevens Report Technicals – First Issue Being Delivered To Trial Period Subscribers This Morning!

We have been thrilled with the response to our new research offering: Sevens Report Technicals and we are very excited to deliver the first official issue later this morning. Sevens Report Technicals will be similar in appearance to the special technical report we sent out two weeks ago, which you can view here.

This new report will offer a “deep dive” into the technical dynamics of all of the asset classes we cover in the daily Sevens Report including:

  • A “Top-Down” Technical View
  • Dow Theory Update
  • Key Levels to Watch Across Asset Classes
  • A Dynamic Equity Sector “Dashboard”
  • A Deep Dive Into Treasury Market Trends
  • Market Volatility Observations and Takeaways

During this launch phase we continue to offer an additional month free on any quarterly ($75 discount) or annual ($150 discount) subscription. With a one month “Grace Period” during which you can receive a full refund for any reason, you take no risk trying Sevens Report Technicals. We are confident that you will find the research a perfect complement to your business or investment process.

To start your risk-free trial subscription, please send an email to info@sevensreport.com. To learn more about Sevens Report Technicals, click this link.

Fed Wildcard to Watch

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What’s in Today’s Report:

  • Dynamics Between Stocks, Bonds, and the Economy Have Changed Since Covid
  • Fed Wildcard to Watch Today
  • KBE Chart – Visualizing the Recent Carnage
  • Existing Home Sales Rebound Amid a Pullback in Mortgage Rates: Chart

Stock futures briefly spiked lower overnight in the wake of a hot CPI print in the U.K. but bond markets are steady and futures have largely stabilized as focus turns to the Fed.

Economically, U.K. CPI jumped from 10.1% in January to 10.4% in February, well ahead of estimates of 9.9%, however, both input and output PPI readings unexpectedly declined, easing some of the inflation worries this morning.

There are no notable economic reports today which will leave markets focused on the price action in the banking sector in the morning (meaningful weakness could drag the broader market lower) before attention shifts to the FOMC Meeting Announcement (2:00 p.m. ET) and Fed Chair Press Conference (2:30 p.m. ET) this afternoon.

A 25 basis point hike and no change to the dot plot is the consensus expectation but there are a lot of moving pieces to today’s meeting so watching the reaction from the Treasury market this afternoon will be critical in interpreting what today’s decision means for markets.

Fed Meeting Preview: Hike or No Hike?

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What’s in Today’s Report:

  • FOMC Preview
  • Three Reasons Oil Could Stabilize (At Least in the Near-Term)

U.S. stock futures are tracking European shares higher with banks notably outperforming while bonds retreat.

Bloomberg reported last night that Treasury Department officials are reviewing options to temporarily insure all bank deposits in order to avoid a potential financial crisis which is helping support risk on money flows this morning.

Economically, the German ZEW Survey was mixed but the Current Conditions Index was importantly not as bad as feared, helping risk assets extend the week’s gains.

Looking into today’s session, there is just one economic report to watch: Existing Home Sales (E: 4.170 million) and given the focus on the recent banking turmoil as well as the March FOMC meeting beginning, it is unlikely to move markets.

As such, a sense of “Fed paralysis” is likely to begin to grip markets today but any outsized moves in the broader banking sector, headline driven or otherwise, has the potential to impact the broader equity markets. To that point, if FRC can finally stabilize, that would be well received by investors today.

Catalysts to Watch This Week

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What’s in Today’s Report:

  • Roadmap for the Catalysts This Week
  • Economic Takeaways – Inflation Is Still High and the Consumer Is Still Healthy (For Now)
  • FOMC in Focus This Week – Will The Fed Signal a Pause?

Stock futures are little changed but cross-asset money flows remain cautious with Treasuries and gold both trading higher as the latest developments in the global banking sector are digested.

Swiss regulators brokered a deal for UBS to take over Credit Suisse for $3.2B over the weekend, a steep discount from CS’s $8B market value on Friday but global bank shares are relatively stable to start the week today helping the broader market hold steady in early trade.

The Fed and several other major central banks coordinated efforts to boost liquidity in dollar swaps over the weekend in their latest attempt to ease strains in the global financial system, which so far, is being received fairly well.

There are no notable economic reports today and no Fed officials are schedule to speak which will leave focus on the price action in banks today. If financials can hold above last week’s lows, that will be a positive, but if the selling pressure continues, the broader market is likely to be dragged lower with the banks as the March Fed meeting comes into focus.

Tom Essaye Interviewed on BNN Bloomberg’s Morning Markets on March 10th, 2023

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A 50bps hike is entirely possible for the U.S. after today’s jobs data: Tom Essaye

Tom Essaye, founder and president of Sevens Report Research, joins BNN Bloomberg to discuss the latest movements in the markets after today’s jobs data. Essaye is expecting another big hike from the Fed at the upcoming meeting and discusses his take on SVP bank’s halt in trading, Silvergate’s shutdown and bitcoin. He says 2023 will be volatile and investors should remain conservative. Click here to watch the full interview.