Jobs Day

What’s in Today’s Report:

  • Jobs Day
  • Signs of Slowing Growth and Inflation Are Growing
  • Technical Update

Futures little changed following a quiet night of news as investors further digest Wednesday’s big rally in stocks and Thursday’s big rally in bonds all while awaiting today’s jobs report.

Economically, the only notable number overnight was Euro Zone PPI which fell more than expected (-2.9% vs. (E) -2.0%), adding to this week’s list of indicators showing global dis-inflation.

Focus today will be on the jobs report and expectations are as follows:  Job Adds 200K, UR Rate 3.7%, Wages 0.3% m/m 4.6% y/y.  Due to the big rally in stocks and bonds on Wed/Thurs, a lot of the “benefit” from a “Just Right” number is likely priced in at these levels, so the risk going into the report today is for disappointment, especially if we get a job adds number in the mid to high 200k.

Away from the jobs report, we also get two Fed speakers: Barkin (9:15 a.m. ET) and Evans (10:15 a.m., 1:00 p.m. ET).

How Bad Can It Get? (And What Makes It Stop?)

What’s in Today’s Report:

  • How Bad Could It Get and What Makes It Stop?
  • Weekly Market Preview:  Can the June lows hold?
  • Weekly Economic Cheat Sheet:  Does economic growth stay resilient?

Futures are modestly lower as global bond yields rose further while the British Pound remained extremely volatile.

The British Pound plunged to an all time low vs the dollar earlier this morning before rebounding and the extreme volatility is adding to investor worries.

Economically, the German Ifo Business Expectations Index fell to the lowest level since March 2020 (84.3 vs. (E) 87.1).

Today there are no notable economic reports but there are numerous Fed speakers, including Collins (10:00 a.m. ET), Bostic (12:00 p.m. ET), Logan (12:30 p.m. ET) and Mester (4:00 p.m. ET).  But, they shouldn’t move markets (we already know what the Fed intends to do).

Instead, the Pound and global bond yields (especially 10-year GILT yields) will determine trading today.  Markets need to see the Pound stabilize and 10-year GILT yields stop rising (they’re up nearly 60 bps in two days) to inject some macro-economic stability into the markets.  Don’t be shocked if the Bank of England announces a surprise rate hike today (or in the coming days) and if so, that should help global yields stabilize (which would be positive for sentiment and markets).

Why Stocks Rallied Last Week (And Is It Sustainable?)

What’s in Today’s Report:

  • Why Stocks Rallied Last Week (And Is It Sustainable?)
  • Weekly Market Preview:  Can Inflation Fall Quickly and Growth Stay Resilient?
  • Weekly Economic Cheat Sheet:  CPI Tomorrow is the Key Report

Futures are moderately higher as the U.S. Dollar extended Friday’s declines thanks to a hawkish ECB article.

The euro is surging another 1% and pushing the Dollar Index lower following a hawkish ECB Reuters article that stated the ECB may have to raise rates to 2% to curb inflation, which is higher than current expectations.

Economic data was slightly underwhelming as UK Industrial Production (0.1% vs. (E) 0.3%) and UK Monthly GDP (0.2% vs. (E) 0.4%) both missed estimates.

Today there are no notable economic reports nor any major Fed speakers, so we’d expect stocks to continue to follow the dollar ahead of tomorrow’s CPI report.  If the dollar extends this morning’s declines, stocks should be able to hold this early rally.

Did the Markets Achieve Peak Inflation & Peak Hawkishness

What’s in Today’s Report:

  • Keys to a Bottom Update:  Did the Markets Achieve Peak Inflation & Peak Hawkishness?
  • Weekly Market Update:  Can Stocks Hold the Recent Gains?
  • Weekly Economic Cheat Sheet:  All About Growth This Week (And the Data Needs to be Solid)

Futures are modestly lower after Chinese economic data missed estimates and the Chinese central bank cut rates in response.

Chinese economic data was soft as Industrial Production (3.8% vs. (E) 4.3%) and Retail Sales (2.7% vs. (E) 4.9%) both missed estimates.  In response, China’s central bank announced a surprise 10 bps rate cut, a move that signals economic concern but also doesn’t offer a lot of help (a 10 bps cut won’t make a difference as long as “Zero COVID” is an in-force policy).

Focus today will be on the August Empire Manufacturing Survey (E: 5.0) and specifically the price index within the report.  The sharp drop in that price index kicked off the “peak inflation” rally of the last month, so markets will be looking for continued signals that growth is stable (so a solid headline reading) and inflation is falling (another drop in the price index).

We also get the July Housing Market Index (E: 55.0) and we have one Fed speaker,  Waller (10:50 a.m. ET), but they shouldn’t move markets.

Market Multiple Table

What’s in Today’s Report:

  • August Market Multiple Table
  • Growth and Inflation – Which One Falls Faster? (It’s an Important Question Going Forward)

Futures are modestly higher as markets digest Wednesday’s big rally and following better than expected earnings.

Disney (DIS) posted better than expected earnings driven by theme park performance and strong Disney+ subscriber numbers and that’s anecdotally adding to the idea that the economy remains resilient.

There was no notable economic data overnight and investors are looking ahead to this week’s claims data.

Today focus will be on Jobless Claims (E: 260k) and PPI (E: 0.3% m/m, 10.3% y/y) and the market will want to see continued moderation in the jobs market (so claims slowly drifting towards 300k) and for the PPI to also signal a peak in inflation pressures (so numbers that a better than expectations).  If the markets get those two readings from the data, the rally can continue.

Tom Essaye Quoted by Forbes on July 27th, 2022

Fed Raises Interest Rates By 75 Basis Points Again As Investors Brace For Recession

By making borrowing more expensive and thereby tempering demand, rate increases are critical in combating inflation, but “growing fears” that the hikes will spur a recession by undercutting economic growth are the “driving forces” behind recent market weakness, says analyst Tom Essaye of the Sevens Report. Click here to read the full article.

Is Value Outperformance Ending?

What’s in Today’s Report:

  • Is Value Outperformance Ending?
  • The S&P 500 Has Reached Another Key Technical Tipping Point

Stock futures are higher this morning despite soft earnings from IBM after the close yesterday as European inflation data was not as bad as feared in June.

Eurozone HICP (their CPI equivalent) met estimates with a rise of 8.6% Y/Y in June up from 8.1% in May, however, the core figure slipped to 3.7% Y/Y from 3.8% in May. The release has prompted new bets for a 50 bp hike from the ECB this week, but that is bolstering hopes that peak inflation will come sooner than later.

Looking into today’s session, there is one economic report to watch: Housing Starts (E: 1.588) and after yesterday’s terrible Housing Market Index print, investors will want to see a number more in line with expectations that does not point to such a rapid deterioration in the real estate market.

There are no Fed speakers or Treasury auctions today which will leave traders largely focused on earnings with: JNJ ($2.57), HAL ($0.45), LMT ($6.29), ALLY ($1.90), and TFC ($1.17) reporting before the bell, and NFLX ($2.90) and JBHT ($2.31) releasing results after the close.

Bottom line, the broader equity market remains at a key tipping point right now as recession fears continue to simmer, but earnings have so far been mostly upbeat suggesting there is still a path to a soft landing. And if earnings news is upbeat today, we could see the S&P 500 breakout through key downtrend resistance near 3,890 and make a run at new multi-week highs.

Have Bond Yields Peaked?

What’s in Today’s Report:

  • Are Stocks Starting to Signal Bond Yields Have Peaked?
  • Growth Is Beginning to Outperform Value; Will It Last?
  • Oil Tumbles Through Technical Trend Support: Chart

Futures are flat while international markets were mixed overnight as investors continue to weigh recession fears against a slightly less hawkish shift in monetary policy expectations.

The 10s-2s yield curve spread notably inverted overnight as the odds of a recession in the quarters ahead continue to rise.

Economically, Eurozone Retail Sales edged up just 0.2% vs. (E) 0.4% in May which was the latest data point to show a slowdown in consumer spending amid high inflation, further compounding worries about global growth.

Looking into today’s session, there is one Fed speaker ahead of the bell (Williams at 9:00 a.m. ET) and the focus will be on economic data with the ISM Services Index (E: 54.8) and JOLTS (E: 11.250M) both due out shortly after the open.

The market will want to see a continued moderation in growth to show the Fed’s policy actions are working to slow demand, but not too weak to suggest we are quickly fading into a recession.

From there, the focus will shift to the release of the June FOMC Meeting Minutes at 2:00 p.m. ET as investors look for new insight into the Fed’s view of the economy and potential clues as to whether we have reached “peak hawkishness” yet, or not. If there is evidence peak hawkishness is behind us, yesterday’s risk-on money flows could continue today.

Economic Breaker Panel: June Update

What’s in Today’s Report:

  • Economic Breaker Panel – June Update
  • Economic Data Takeaways – Further Signs of Slowing Growth

Stock futures are bouncing modestly with European shares and bond markets are stable this morning as inflation data met expectations in the Eurozone and the BOJ decision was viewed as dovish versus expectations.

The BOJ maintained a very easy monetary policy, sending the yen back towards recent lows while Eurozone HICP (their CPI equivalent) came in at 8.1% vs. (E) 8.1% y/y which is helping markets stabilize this morning.

Looking into today’s session, there is one economic report to watch: Industrial Production (E: 0.4%) and the market will be looking for a strong print to ease concerns surrounding this week’s soft survey-based factory data and bolster the outlook for economic growth in the face of an aggressive Fed.

Fed Chair Powell is also set to deliver a speech at 8:45 a.m. ET and any comments on the economy or future policy plans could move markets today.

Finally, today is quadruple witching options expiration so expect very heavy volumes and the potential for momentum to build in either direction as derivatives traders square their books into the end of the quarter. In the S&P 500 3,650, 3700, and 3750 will all be key levels to watch into the afternoon today.

Ukraine Update

What’s in Today’s Report:

  • Bottom Line: Real Focus Remains on the Fed and Growth
  • Weekly Economic Cheat Sheet: Rising Threat of Stagflation?

Stock futures are down slightly this morning but well off the overnight lows as traders digest the latest geopolitical developments between Russia and Ukraine.

Russian President Putin recognized the independence of two “breakaway” regions in eastern Ukraine yesterday, but the risk of a full scale invasion of Ukraine still remains low.

Looking into today’s session, there are several economic reports due to be released including: Case-Shiller Home Price Index (E: 1.1%), FHFA House Price Index (E: 1.0%), PMI Composite Flash (E: 51.9), and Consumer Confidence (E: 110.0). There is also one Fed speaker on the schedule: Bostic (3:30 p.m. ET).

Finally, there is a 2-Yr Treasury Note auction at 1:00 p.m. ET and with the underlying market focus still on future Fed policy, a soft outcome (hawkish) could add to the current geopolitically fueled market volatility.

Regarding Ukraine, investors will await the announcement of new sanctions from the west against Russia, and depending on how severe they are, it could add to the selling pressure on stocks today. Additionally, as of now, Blinken and Lavrov are still scheduled to meet this week but if that meeting is canceled that will suggest a more severe conflict is imminent, resulting in more risk-off money flows.