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More Aggressive Rate Cuts Will Provide Temporary Relief…

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More Aggressive Rate Cuts Will Provide Temporary Relief, It Won’t Stop A Decline In Stocks: Tom Essaye Quoted in Blockworks

Bitcoin jumps above $60k for first time in 27 months

A hard landing and resulting economic slowdown could be enough to erase the stock gains traders have enjoyed since October, according to Tom Essaye, founder of Sevens Report Research.

“The reason a hard landing would be so damaging to markets in the near term is the Fed can’t really help the market out because it’s already dovishly pivoted and the market already expects aggressive rate cuts,” Essaye said. “So, while more aggressive rate cuts will provide temporary relief, it won’t stop a decline in stocks because the economic benefit of rate cuts will take too long to hit the economy to prevent a slowdown.”

Also, click here to view the full Blockwork article published on February 28th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

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Hard vs. Soft Landing Scoreboard: Losing Momentum?

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Hard vs. Soft Landing Scoreboard: Losing Momentum? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Hard vs. Soft Landing Scoreboard: Losing  Momentum?
  • Richmond Fed Manufacturing Index Falls Sharply: Chart

Stock futures ramped higher overnight amid more Chinese stimulus news, mixed economic data, and strong earnings from streaming giant NFLX which is up 10% premarket.

The PBOC cut bank reserve requirements by 0.40% o/n triggering a 3.5%+ rally in the Hang Seng as growth worries eased while PMI data in Europe was mildly disappointing

Looking into today’s session there is one economic release to watch shortly after the open: PMI Composite Flash (Service PMI: 51.2, Manufacturing PMI: 47.2) and markets will be looking for more “Goldilocks” economic trends in the data in order to hold this week’s gains.

There are no Fed speakers today but the Treasury will hold a 5-Yr Note auction at 1:00 p.m. ET that could move markets, especially if the results are weak and yields move higher as that would become a renewed headwind on growth stocks which have led the latest leg of the rally to all-time highs.

Earnings season continues as well with: T ($0.55), PGR ($2.38), FCX ($0.23), and GD ($3.66) reporting ahead of the bell, while results from TSLA ($0.74), IBM ($3.76), STX (-$0.06), and CSX ($0.44) are due after the close.

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Hard Landing vs. Soft Landing Scoreboard Update

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Hard Landing vs. Soft Landing Scoreboard Update: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Didn’t Stocks Drop On Yesterday’s Yield Spike?
  • Hard Landing vs. Soft Landing Scoreboard Update

Stock futures are lower and oil is up 3% as tensions in the Middle East remain elevated despite President Biden’s visit to Israel.

Chinese economic data topped estimates across the board overnight. But an imminent default by embattled property developer Country Garden weighed on sentiment in Asian markets.

In Europe, U.K. CPI came in hot as it held steady at 6.7% vs. (E) 6.5% in September.  While the Eurozone HICP “Narrow Core” met estimates at 4.5%.

Looking into today’s session, there will remain considerable focus on the conflict between Israel and Hamas amid Biden’s visit to the region and if no progress is made towards a ceasefire, rising oil prices will continue to act as a headwind on risk assets.

Domestically, there is just one economic report today: Housing Starts (E: 1.394 million) that should not meaningfully move markets. There are aslo multiple Fed officials scheduled to speak: Waller, Williams, Bowman, and Harker.

Earnings season also continues today with: MS ($1.27), ALLY ($0.80), CFG ($0.92), WGO ($1.32), TRV ($2.93), and PG ($1.71) and reporting ahead of the bell, while TSLA ($0.75) and NFLX ($3.46) will release results after the close.Hard Landing vs. Soft Landing

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Hard Landing vs. Soft Landing Scoreboard

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Hard Landing vs. Soft Landing Scoreboard: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Hard Landing vs. Soft Landing Scoreboard
  • Chart: 10-Yr Yield Quickly Approaching Last Week’s “Hawkish Technical Target”

Stock futures are lower and there is a modest fear bid in Treasuries this morning. This is amid renewed worries about China’s property sector and growing angst about a potential government shutdown in the U.S.

After one of China’s largest property developers, Evergrande, missed a debt payment, multiple former executives were arrested overnight adding to worries about the embattled sector and the Chinese economy more broadly.

Also, multiple ratings agencies have offered negative warnings regarding the impact of a government shutdown on U.S. debt as the deadline for Congress to reach a deal on spending is just days away. Any progress towards a deal will be a modest positive for risk assets today.

Looking further into today’s session, there are several economic reports to watch this morning including: Case-Shiller Home Price Index (E: 0.6%), New Home Sales (E: 699K), and Consumer Confidence (E: 105.9). To stabilize, markets will want to see more Goldilocks data showing stable but slowing growth and demand metrics and no signs of rising price pressures.

In the afternoon, there is a 2-Yr Treasury Note auction at 1:00 p.m. ET, the first since the hawkish Fed meeting so the results very well could move yields and impact stocks today. Finally, there is one Fed speaker: Bowman (1:30 p.m. ET), and if “higher for longer” is reiterated, that could weigh on risk assets.

Hard Landing vs. Soft Landing Scoreboard

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Hard Landing/Soft Landing Scoreboard Update

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What’s in Today’s Report:

  • Hard Landing/Soft Landing Scoreboard Update

Futures are little changed as markets digest Thursday’s failed rally amidst more conflicting economic data.

Chinese money supply growth missed estimates and again underscored existing recession risks and that modestly weighed on sentiment.

UK economic data was better than expected, however, with  GDP (0.2% vs. (E) 0.0%) and manufacturing (2.4% vs. (E) 0.2%) both beating estimates.

Today focus will remain on inflation, as we get headline PPI (E: 0.2% m/m, 0.7% y/y) and Core PPI (E: 0.2% m/m, 2.3% y/y) along with the University of Michigan inflation readings within Consumer Sentiment (E: 71.3).  As CPI showed, an in-line inflation number that shows on going and modest disinflation won’t spark a rally, as that’s already priced in, but it will help support stocks around current levels.  A hotter than expected number, however, will likely spark another market decline.

Hard vs. Soft Landing Scoreboard Update

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What’s in Today’s Report:

  • Hard vs. Soft Landing Scoreboard Update (Cracks Emerging)

Futures are flat as investors digest a disappointing earnings forecast by FDX (down 3% premarket) and a hotter than expected inflation print overseas as focus turns to Powell’s testimony on Capitol Hill today.

U.K. CPI held steady at 8.7% vs. (E) 8.4% y/y in May which saw the odds of a 50 bp BOE hike tomorrow jump to 50% which is weighing modestly on bonds this morning.

There are no notable economic reports in the U.S. today which will leave investors focused on Powell’s semiannual testimony before Congress which begins at 10:00 a.m. ET. Investors will be looking for any clarity on the Fed’s future policy plans as the markets currently do not believe the FOMC’s dot plot showing two more rate hikes before year end.

Outside of the D.C., there are several other Fed speakers to watch including: Cook (10:00 a.m. ET), Jefferson (10:00 a.m. ET), Goolsbee (12:25 p.m. ET), and Mester (E: 4:00 p.m. ET). Again markets will be looking for any clarity on rate hiking plans following the June “skip.”

Finally, there is a 20-Yr Treasury Bond auction at 1:00 p.m. ET that could impact yields and if we see yields move meaningfully higher, that will weigh on the high valuation sectors that have led the market higher this year.

Hard Landing vs. Soft Landing Scoreboard

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What’s in Today’s Report:

  • Hard Landing vs. Soft Landing Scoreboard (Table Included)

Stock futures are tracking global equity markets lower while bonds rally thanks to disappointing bank earnings.

FRC, which has been in focus since the banking turmoil began in March, is trading lower by more than 20% in the premarket after reporting that deposits fell more than 40% in Q1 to just $104.5B vs. (E) $145B while the bank plans to cut as much as 25% of staff in Q2. The lower than expected deposit levels rekindled worries about the health of the banking system and financials are dragging the broader market lower this morning.

Today, there are a few economic releases to watch: Case-Shiller Home Price Index (E: -0.4%), Consumer Confidence (E: 104.2), and New Home Sales (E: 635K) but unless there are any material surprises, investors will remain focused on earnings as we will begin to get some of the big tech companies’ results after the close today.

On the earnings front we will hear from UPS ($2.19), VZ ($1.19), GM ($1.58), MCD ($2.30), GE ($0.13), PEP $1.37), and MMM ($1.60) before the open, and MSFT ($2.22), GOOGL ($1.07), V ($1.97), and TXN ($1.76) after the close. Investors will be looking for good top and bottom line results but potentially more importantly, solid guidance given the uncertain market backdrop right now.

Tom Essaye Quoted in BNN Bloomberg on April 6th, 2023

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U.S. stocks rise amid hopes for ‘just right’ jobs print

As investors have aggressively priced in rate cuts this year, a “too hot” payrolls number would undermine those expectations, while a “too cold” report would add to concerns about a hard landing, according to Tom Essaye, a former Merrill Lynch trader who founded The Sevens Report newsletter. Click here to read the full article.
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Hard Landing, Soft Landing, or No Landing?

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What’s in Today’s Report:

  • Hard Landing, Soft Landing, or No Landing? (Printable PDF Table Available)
  • Powell Interview Takeaways

Futures are moderately lower this morning as investors continue to digest Powell’s commentary from yesterday which was largely viewed as another missed opportunity to push back on recent dovish money flows across markets.

Looking into today’s session there are no notable economic reports but a slew of Fed speakers that could move markets. In chronological order, we will hear from: Williams (9:20 a.m. ET), Cook (9:30 a.m. ET), Bostic (10:00 a.m. ET), Kashkari (12:30 p.m. ET), and finally Waller (1:45 p.m. ET).

Additionally, the Treasury will hold a 10-Yr Note auction at 1:00 p.m. ET and seeing as yesterday’s dismal 3-Yr auction sent the S&P 500 to session lows, the outcome could very well move markets today.

Finally, Q4 earnings season continues today with a few notable companies releasing results: UBER (-$0.21), CVS ($1.92), DIS ($0.80).

Hard Landing or Soft Landing?

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What’s in Today’s Report:

  • Hard Landing or Soft Landing?
  • Weekly Economic Cheat Sheet:  Does Growth Stabilize?
  • Weekly Market Preview:  The Peak of Earnings Season

Futures are little changed following a mostly quiet weekend of news as markets look ahead to more earnings and economic data this week.

On Sunday the WSJ published an article on the Fed that stated the Fed will hike 25 bps at the upcoming meeting and begin discussions on when to end the rate hike cycle.  The article is being taken as dovish, but it’s not very different from current consensus thinking.

Today the focus will be on Leading Indicators (E: -0.7%) because this number flashed an intense recession warning signal last month and if there’s further deterioration that will likely weigh on stocks modestly.

On the earnings front, most of the key names this week report Tuesday – Thursday, but some results we’re watching today include:  SYF ($1.12), BKR ($0.41), and LOGI ($1.06).