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Inflation Expectations Dashboard

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What’s in Today’s Report:

  • Sevens Report Inflation Expectations Dashboard
  • Chart: Gold Holds Key Trend Support

Stock futures are wavering between gains and losses this morning as traders digest mixed economic data and look ahead to a key inflation report due later in the week.

Economically, Japanese GDP was not as bad as feared in Q1 but German Industrial Production missed estimates as did the U.S. NFIB Small Business Optimism Index which is weighing modestly on sentiment this morning.

There are two economic reports to watch in the U.S. today: International Trade in Goods and Services (E: -$69.0B) and JOLTS (E: 8.045M). The latter will be the more important to watch as investors continue to look for clues regarding the state of the labor market recovery.

No Fed officials are scheduled to speak today however there is a 3-Yr Treasury Note auction at 1:00 p.m. ET and a weak outcome could rekindle taper fears with Thursday’s CPI report coming into focus.

Jobs Report Preview

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What’s in Today’s Report:

  • Jobs Report Preview:  Two Sided Risks for the Market

Futures are modestly lower following mixed economic data while the Fed announced it’s winding down one of its pandemic era support programs.

Service PMIs for May were mixed as the Chinese PMI missed estimates while the EU & British PMIs were in-line with expectations, but none of the data is altering the expectation that the global economic recovery is on going.

The Fed announced it’s going to start selling assets from the “Secondary Market Credit Facility” which was the program the Fed used to buy corporate bonds to stabilize markets during March/April of 2020.  This has nothing to do with QE, but it is a general reminder that we are seeing central banks removing market support as society returns to normal, and it’s a tangential reminder that tapering of QE is coming at some point.

Today’s focus will be on economic data as we get several notable reports today:   ISM Services PMI (E: 63.1), Jobless Claims (E: 400k), and ADP Employment (627k).  Generally speaking, markets will want to see “Goldilocks” data from all three reports – close to or better than expectations but not so good they make the Fed think more about tapering.  We also have three Fed speakers:  Bostic (12:30 p.m. ET), Harker (1:50 p.m. ET), and Quarles (E: 3:05 p.m. ET) but none of them should move markets.

Tom Essaye Quoted in Barron’s on May 25, 2021

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Shake Shack Pops, Domino’s Drops, and the Stock Market Is Rising

U.S. stock futures are extending yesterday’s gains this morning as easing inflation concerns…writes Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

Economic Breaker Panel: May Update

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What’s in Today’s Report:

  • Economic Breaker Panel – May Update
  • Empire State Manufacturing Survey Takeaways (Price Index Charts)

Futures are trading modestly higher in sympathy with global shares which rallied on rising re-opening bets overnight while economic data came in largely as expected.

Economically, Japanese and Eurozone GDP data as well as the U.K. Labour Market Report all printed largely in-line with estimates o/n and did not materially move markets.

Today, there is one economic report: Housing Starts (E: 1.715M) but it should not have a major impact on markets while the Treasury will hold a 52-Week Treasury Bill auction at 11:30 a.m. ET (these shorter duration auctions will become increasingly important as investors gauge the market’s taper/tightening expectations).

Turning to Fed, there are two speakers to watch today: Bostic (11:00 a.m. & 12:30 p.m. ET) and Kaplan (11:05 a.m. ET).

You can receive the Sevens Report for free, click here to take advantage of this offer.

Jobs Report Preview (Too Hot is the Risk)

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What’s in Today’s Report:

  • Jobs Report Preview (Too Hot Is the Risk)
  • EIA Analysis  and Oil Market Update

Futures are modestly higher as markets digest yesterday’s dovish Fed rhetoric while data overnight was solid.

German Manufacturers’ Orders and Euro Zone Retail Sales both beat estimates, again implying the economic recovery in Europe is gaining momentum (this is positive for European stocks).

Fed officials repeated their dovish stance yesterday with Vice Chair Clarida reinforcing it’s not time to think about tapering despite rising inflation and strong growth.

Today focus will be on weekly Jobless Claims (E: 533K) and again markets will want to see them hold the gains of the past few weeks.  We also get numerous Fed speakers including (in order of importance): Williams (9:00 a.m. ET), Mester (1:00 p.m. ET), Bostic (1:00 p.m. ET) and Kaplan (10:00 a.m. ET) but we don’t expect any of them to materially move markets.

What’s Going To Move This Market Higher?

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What’s in Today’s Report:

  • What’s Going to Move This Market Higher?
  • Weekly Market Preview:  How Strong is the Global Recovery (The Stronger, the Better)
  • Weekly Economic Cheat Sheet:  What Happens if Friday’s Jobs Report is “Too Hot?”

Futures are modestly higher as markets bounce back from Friday’s decline thanks to solid global economic data.

Economically, German Retail Sales beat estimates, surging 7.7% vs. (E) 3.0% while the final EU manufacturing PMI slightly missed estimates at 62.9 vs. (E) 63.3.  But, that’s still a strong number in an absolute sense and implies the EU economy is rebounding from COVID.

Politically, President Biden signaled support for a bipartisan infrastructure plan, which means it will be smaller than proposed but also more likely to pass and become law.

Today the key number will be the ISM Manufacturing PMI (E: 65.0) and markets will want to see continued strength in the U.S. recovery.  We also get one Fed speaker, Williams at 2:10 p.m. ET, and it will be interesting to see if he acknowledges that it’s time to “talk about, talking about” tapering QE, like Dallas Fed President Kaplan did on Friday.  If so, that could push the 10 year yield slightly higher.

Earnings Season Update

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What’s in Today’s Report:

  • Earnings Season Update: Are Upside Risks Building?

U.S. stock futures are trading lower with most overseas markets as investors digest the recent run to fresh records amid rising COVID-19 cases and mostly upbeat earnings.

German PPI was hotter than expected o/n with a headline of 0.9% (E: 0.5%) but the report is not materially moving markets.

Looking into the U.S. session today, there are no economic reports and no Fed officials are scheduled to speak. There is a 52 Week T-Bill Auction at 11:30 a.m. ET, however, that could influence bond yields and ultimately stocks if the results are far from expectations.

Earnings season will continue to pick up today with JNJ ($2.31), LMT ($6.32), PG ($1.19), and TRV ($2.44) releasing Q1 results ahead of the bell while NFLX ($2.98), CSX ($0.95), and IBKR ($0.90) will report after the close.

Bottom line, markets have been trading with a risk-off tone so far this week amid a resurgence in COVID-19 cases in several global hotspots. And if the news flow regarding the latest regional outbreaks continues to deteriorate, stocks could continue to decline, potentially sharply, as the health of the recovery will come into question.

April Economic Breaker Panel: Is the Economy Set to Overheat?

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What’s in Today’s Report:

  • April Economic Breaker Panel: Is the Economy Set to Overheat?
  • EIA Analysis and Oil Update

Futures are moderately higher following a solid start to earnings season (GS/WFC/ABB/TSMC/LVMH all posted good results) and ahead of a lot of economic data later today.

Speaking of today’s data, the key reports to watch today are (in order of importance):  Jobless Claims (E: 695K), Empire State Manufacturing Index (E: 17.0), Philadelphia Fed Manufacturing Index (E: 43.0), Retail Sales (E: 5.6%) and Industrial Production (E: 2.8%).  As has been the case, markets will want to see solid activity to imply the economic recovery is on-going, but also no hints of building inflation pressures.

There are also several Fed speakers including Bostic (11:30 a.m. ET), Daly (2:00 p.m. ET) and Mester (4:00 p.m. ET).  Yesterday Vice Chair Clarida got more forcefully dovish, so we’ll see if that sentiment is echoed by other Fed members today.

Finally, earnings season continues to roll on and we get several notable reports this morning including: BAC ($0.65), C ($2.56), TSM ($0.95), PEP ($1.12), UNH ($4.41), DAL (-$2.94), AA ($0.48), PPG ($3.67).

Is the Tapering Talk Set to Begin?

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What’s in Today’s Report:

  • Is the Tapering Talk Set to Begin?

Futures are little changed following a quiet night as markets wait for the latest reading on inflation via this morning’s CPI report.

Economic data was mixed overnight.  UK Industrial Production was better than feared (-4.2% vs. (E) -5.1%) while the German ZEW Economic Sentiment slightly missed expectations (70.7 vs. (E) 77.0) but neither number is moving markets.

Today there are two notable events and both pertain to Treasury yields.  First, we get Core CPI (E: 0.2% m/m, 1.6% y/y) and later this afternoon there is a 30 year Treasury auction.  If CPI comes in hot and there’s tepid demand at the auction, Treasury yields will likely rise and that should be a headwind on stocks.  Conversely, if CPI is tame and the auction is solid, yields will likely be little changed, and stocks should be able to grind higher.

We also have several Fed speakers today:  George, Daly, Harker, Barkin (12:00 p.m. ET) and Bostic (3:15 p.m. ET) but unless they give us more insight into tapering requirements (like Bullard did yesterday) they shouldn’t move markets.

Global Bond Yields Are Rising Too (And That’s Important)

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What’s in Today’s Report:

  • Global Bond Yields Are Rising Too (And That’s Important)

Futures are modestly lower following a quiet night of news as global bond yields remained buoyant.

Bond yields were slightly higher earlier this morning and  they are holding this weeks’ gains, and absent any other notable news that weighed on global stocks and futures.

There was no notable economic data other than the Australian Labour Force Survey which met expectations.

Today economic will be in focus and if the data comes in better than expectations, look for the 10 year yield to rise further (and that could put a headwind on stocks and tech especially).  The key reports today are: Jobless Claims (E: 757K), Philadelphia Fed Manufacturing Index (E: 20.0) and Housing Starts (E: 1.650M). We also get two Fed speakers, Brainard (8:00 a.m. ET) and Bostic (10:00 a.m. ET) but we don’t expect them to move markets.