Posts

Yield Curve Update

What’s in Today’s Report:

  • Yield Curve Update (Are Recession Risks Rising?)
  • Why European Energy Companies Buying Gas in Rubles Matters to Stocks
  • Q1 GDP – Not as Bad as It Looks

Futures are moderately lower following underwhelming earnings and guidance from AMZN and AAPL.

AMZN results underwhelmed the street (especially margins) while APPL beat earnings but had cautious guidance for Q2 based on supply chain issues.

Economically, inflation pressures remained high as core EU HICP (their CPI) rose 3.5% yoy vs. (E) 3.1%.

Today focus will be on inflation as we get two important readings: Core PCE Price Index (E: 0.3%, 5.3%) and the Employment Cost Index (E: 1.1%).  Markets will want to see the actual numbers miss estimates, and in doing so further hint at a peak of inflation.  If the opposite happens (the numbers are hotter than estimates) that will further pressure stocks.  We also get Consumer Sentiment (E: 65.6) and the Inflation Expectations sub-index will be watched closely.

On the earnings front, some important results today include:  XOM ( $2.25), CVX ($3.44), CL ($0.74).

December Economic Breaker Panel

What’s in Today’s Report:

  • December Economic Breaker Panel – Are Economic Clouds Gathering on the Horizon?

Futures are little changed following a quiet night as investors digest the recent volatility and look ahead to the holiday at the end of the week.

Economic data was sparse overnight and the only notable report was UK GDP which slightly missed estimates (1.1% vs. (E ) 1.3%) although that’s not moving markets.

The Omicron outlook remained unchanged, as cases continued to surge but hospitalizations remain low, and as long as that’s the case market fallout will be limited.

Today we get three economic reports including Final Q3 GDP (E: 2.1%), Consumer Confidence (E: 110.7) and Existing Home Sales (E: 6.510M) but unless they provide a major surprise they won’t move markets. So, with the holiday quickly approaching and tomorrow’s Core PCE Price Index the only remaining “big” report of the week, and we’d expect both liquidity and activity to begin to decline into the weekend starting today.

 

Annual Discounts on Sevens Report, Alpha and Quarterly Letter

We’ve continued to be contacted by advisor subscribers who want to use the remainder of their 2021 pre-tax research budgets to extend their current subscriptions, upgrade to an annual (and get a month free), or add a new product (Alpha or Quarterly Letter).

If you have unused pre-tax research dollars, we offer month-free discounts on all our products. If you want to extend current subscriptions or save money by upgrading to an annual subscription (across any Sevens Report product), please email:  info@sevensreport.com.

What the Fed Decision Means for Markets

What’s in Today’s Report:

  • What the Fed Decision Means for Markets
  • EIA and Oil Market Update

Futures are marginally higher following some infrastructure progress combined with a bounce in Chinese stocks.

The bi-partisan $1 trillion infrastructure bill (which the market wants) comfortably passed a key Senate vote on Wednesday, although it still remains a long way from becoming law.

Chinese shares bounced as officials tried to calm markets, although nothing materially positive happened and this should be viewed as nothing more than an oversold bounce.

Today the financial media focus will be on Initial Q2 GDP (E: 8.0%), but as we and others have said, GDP doesn’t usually move markets, and likely won’t today.  Instead, Jobless Claims (E: 390K) will be the key economic report today, specifically whether the increase from last week continues, or is reversed (if it’s reversed, that will be a mild positive for stocks).  We also get Pending Home Sales (E: -0.8%) but that shouldn’t move markets.

On the earnings front, the key number today comes after the close from AMZN ($12.22), while we’ll also be watching MA ($1.72) and MO ($1.17).

All About Demand

What’s in Today’s Report:

  • All About Demand
  • Weekly Market Preview:  The Fed and Inflation
  • Weekly Economic Cheat Sheet:  Fed Meeting, Core PCE Price Index and GDP.

Futures are marginally lower as increased concerns about regulation in China caused a sharp drop in Chinese shares, and that’s weighing on global equities.

The Hang Seng dropped more than 4% on Monday on fears of increased regulation from the Chinese government, following reports China was going to make the education business sector “not for profit.”

COVID headlines remained generally unchanged over the weekend as cases continued to rise in the U.S, although governments continue to resist restrictions and lockdowns.

Today there’s only one notable economic report, New Home Sales (E: 800k), and that shouldn’t move markets.  On the earnings front, the key report today comes after the close (TSLA $0.96), so focus will be on COVID headlines and if there are any reports of increased restrictions or lockdowns here in the U.S., that will hit stocks.

How to Allocate to Commodities

What’s in Today’s Report:

  • How to Allocate to Commodities

Stock futures are under pressure for the third day in a row this morning as inflation fears continue to grip global markets ahead of today’s key April CPI report in the U.S.

Economically, Eurozone Industrial Production missed expectations while both the U.K. Monthly GDP and Industrial Production reports handily topped estimates which is helping the FTSE buck the trend and rally today.

Looking into today’s session, all eyes will be on the April CPI report due out at 8:30 a.m. ET (E: 0.2% m/m, 3.6% y/y). A hot print could spook investors and cause a continuation of the early week’s risk-off money flows.

Later in the session, there are multiple Fed speakers including: Clarida (9:00 a.m. ET), Bostic (1:00 p.m. ET), and Harker (1:30 p.m. ET) however Fed speak has remained decidedly dovish and none of today’s speakers should move markets.

Finally, there is a 10-Yr Treasury Note Auction at 1:00 p.m. ET and the outcome could give investors an idea of how bond traders view inflation in the wake of the CPI report.

Ultimately a soft bond auction and a subsequent rise in yields would likely compound this week’s already elevated inflation concerns and cause more volatility in equity markets while a strong auction could ease those concerns and see a relief rally develop.

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Tom Essaye Quoted in SPGlobal on March 10, 2021

The Federal Reserve Bank of Atlanta on March 8 estimated real GDP will grow 8.4% in the first quarter. Adding the new stimulus package is likely to push economic growth close to record levels in 2021, said Tom Essaye, president of Sevens Report Research, in an interview. Click here to read the full article.

FOMC Takeaway: Will Three Rate Cuts Save the Bull Market?

What’s in Today’s Report:

  • Will Three Fed Rate Cuts Be Enough To Save the Bull Market?
  • Why Wednesday’s GDP Report is Important
  • Oil Market Update

Futures are modestly lower as weak global economic data offsets good earnings from AAPL and FB.

The Chinese October manufacturing PMI fell to 49.3 vs. (E) 49.8, the lowest level since January 2016.  German retail sales and EU unemployment also slightly missed estimates and the takeaway is that the hoped for stabilization in the global economy isn’t happening yet.

On U.S./China trade, a Bloomberg headline hit early this morning saying a long term U.S./China trade deal is unlikely, but that’s not news as it was never expected.  Instead, consensus expectations are for an ineffectual Phase One document to be signed, and then no further progress after that (the key to this whole drama remains whether there’s any tariff relief).

Today’s focus will remain on economic data as earnings begin to move towards the back burner.  Key reports to watch today, in order of importance, are:  Core PCE Price Index (E: 0.1%, 1.7%), Employment Cost Index (E: 0.7%) and Jobless Claims (E: 215K). From a data standpoint, with the Fed now on hold, “good” economic news is good for stocks, and “bad” economic news is bad.  So, the bulls are looking for good news for the remainder of the week.

A Make Or Break Month Ahead

What’s in Today’s Report:

  • Why March Will Be A Make Or Break Month For The 2019 Rally
  • The Q4 GDP Report – Why It Wasn’t As Strong As It Seemed

Futures are moderately higher thanks to strength in Asia and generally in-line economic data.

Chinese shares are up 1% because index firm MSCI announced it will increase the weighing for mainland Chinese stocks to 20% from the current 5%.

Economically, global Feb manufacturing PMIs largely met estimates as the EU number rose to 49.3 vs. (E) 49.2. while the British reading was in-line at 52.0.

Today focus will be on data as we get two important economic reports.  First, the Fed’s preferred measure of inflation, the Core PCE Price Index (E: 0.2% m/m, 1.9% y/y) is released, and that year over year number needs to stay around 2% to continue the “dovish Fed” narrative.  Later, we get the Feb. ISM Manufacturing PMI (E: 55.0) and it needs to meet expectations to help offset some of the poor data from February (retail sales, etc.).