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Why Stocks Dropped Again

What’s in Today’s Report:

  • Why Stocks Dropped Again
  • Consumer Confidence Takeaways
  • Gold Update: A Soft Landing Is the Worst-Case Scenario

Stock futures are modestly lower thanks to some hawkish Fed chatter and another hot inflation print in Europe.

Economically, Spanish CPI jumped to 10.2% vs. (E) 9.2% in June, up from 8.5% in May suggesting inflation has not yet peaked, at least in parts of Europe.

Domestically, the Fed’s Mester reiterated that a 75 bp hike is likely in July given elevated consumer inflation expectations.

Today, there is one economic report to watch early: Final Q1 GDP (E: -1.4%) and investors would like to see the headline at least hold unchanged from the previous revision (if not get revised higher) before focus turns to several global central bankers speaking at an ECB Forum including Fed Chair Powell at 9:00 a.m. ET.

If the discussion takes on a more hawkish tone or there is any sign the market is losing confidence in the Fed (which would be evident in the bond markets) then yesterday’s selling pressure could continue.

When Could the Selling Stop?

What’s in Today’s Report:

  • When Could the Selling Stop?
  • Weekly Economic Cheat Sheet

Stock futures are solidly higher this morning, rebounding from last week’s more than 5% selloff while global markets stabilized following a mostly quiet weekend.

President Biden and St. Louis Fed President, Jim Bullard, both downplayed the threat of a severe recession on Monday which is helping drive risk-on money flows this morning while there were no market-moving economic reports overnight.

From a catalyst standpoint, there is just one economic report today: Existing Home Sales (E: 5.40M) and two Fed officials are scheduled to speak: Mester (12:00 p.m. ET) and Barkin (3:30 p.m. ET).

Bottom line, for this morning’s relief rally to continue today the market will need to see stable price action in bond markets, economic data meet or beat expectations and Fed officials to maintain an optimistic tone as that could see the S&P 500 test near term resistance between 3,780 and 3,840.

Sevens Report Analyst Quoted in Market Watch on April 14th, 2022

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.

 

Sevens Report Analysts Quoted in Market Watch on March 7, 2022

Gold prices log highest finish in more than a year and a half

Ongoing concerns about price pressures and Fed policy expectations being dialed back slightly due to geopolitics are both strong tailwinds behind gold here…analysts at Sevens Report Research wrote. Click here to read the full article.

 

Tom Essaye Quoted in Bloomberg on February 24, 2022

Bitcoin’s Digital Gold Luster Fades as Customary Havens Win Out

Gold is doing exactly what it should be doing right now, but it’s a much more mature asset and it’s got a proven history in these types of conflicts of how it trades…said Tom Essaye. Click here to read the full article.

Sevens Report Co-Editor Tyler Richey Quoted in Market Watch on January 4, 2022

Gold recoups half of its Monday loss on disappointing U.S. data, omicron uncertainty

A sharp rise in Treasury yields which begins to drive real interest rates higher is a “major risk to the gold market…analysts at Sevens Report Research wrote. Click here to read the full article.

Two Key Inflation Reports Today

What’s in Today’s Report:

  • Future Headwinds on Gold?

Futures are modestly higher following a generally quiet night as markets await the latest readings on inflation via today’s CPI and inflation expectations index in Consumer sentiment.

Economic data slightly underwhelmed as UK Industrial Production (1.3% vs. (E) 1.4%) and UK GDP (0.9% vs. (E) 1.0%) both missed expectations.

There were no notable Omicron updates overnight.

Today the focus will be on inflations via the  Consumer Price Index (E: 0.7% m/m, 6.8% y/y) and the inflation expectations index in the Consumer Sentiment report (E: 67.0).  Markets are already expecting the Fed to materially accelerate the pace of tapering of QE next week, but if these inflation readings come in much hotter than expected, that likely will be a headwind on stocks as it will only encourage the Fed to get even more aggressive in tapering QE.

Sevens Report Co-Editor Tyler Richey Quoted in Market Watch on October 25, 2021

Gold futures top $1,800 to post highest finish in nearly 6 weeks

Real interest rates are as low as they have been since the beginning of the pandemic, which is supportive of gold…Tyler Richey, co-editor at Sevens Report Research, told MarketWatch. Click here to read the full article.

Sevens Report Co-Editor Tyler Richey Quoted in Market Watch on October 25, 2021

Gold futures mark highest finish in almost 6 weeks

The precious metal’s relatively quiet price action may wind up being the calm before the storm of a…said Tyler Richey, co-editor at Sevens Report Research. Click here to read the full article.

Valuation Update

What’s in Today’s Report:

  • Valuation Update
  • Gold Market Update: Breakout or Breakdown?

Futures are indicating an open at fresh record highs and international markets traded higher overnight as earnings continue to top expectations and economic concerns fade.

There were no notable economic reports or market-moving headlines overnight outside of more mostly upbeat earnings.

Looking into today’s session, there are several reports on the housing market due out early: Case-Shiller Home Price Index (E: 1.3%), FHFA House Price Index (E: 1.3%), and New Home Sales (E: 760K), but the most important economic release to watch today is Consumer Confidence (E: 109.0) as a disappointing print could weigh on consumer spending expectations into year-end.

There are no Fed officials scheduled to speak today however the Treasury will hold a 2-Yr Note Auction at 1:00 p.m. ET. The risk to equities is a soft outcome as that could rekindle the hawkish policy concerns that weighed on risk assets this past Friday.

Finally, earnings remain the main focus of the market right now and several big companies are due to report today including: UPS ($2.52), GE ($0.41), and SHW ($2.07) before the open, and AMD ($0.67), MSFT ($2.06), GOOGL ($23.13), V ($1.53) after the close.