Posts

CPI Preview: Good, Bad, and Ugly

/in , /by

What’s in Today’s Report:

  • CPI Preview – Good, Bad, & Ugly
  • Chart: Is Disinflation Accelerating?

U.S. stock futures are extending this week’s gains ahead of the all-important CPI report this morning following a mostly quiet night of news.

There were no economic reports overnight but the Reserve Bank of New Zealand did notably pause their rate hiking cycle leaving their policy rate unchanged at 5.50% (however this was expected and did not meaningfully move markets).

Looking into today’s session the big catalyst is the CPI report due out before the open. On the headline, CPI is expected to come in at 0.3% m/m and 3.1% y/y while the Core figure is seen rising 0.3% m/m and 5.0% y/y.

From there, focus will turn to Fed speakers with Kashkari speaking shortly after the open (9:45 a.m. ET) and Mester at the close (4:00 p.m. ET).

Finally, there is a 10-Yr Treasury Note auction at 1:00 p.m. ET and the outcome could shed light on the bond market’s outlook for the economy and Fed policy expectations in the wake of the CPI data release, so there is potential this auction moves markets in the early afternoon.

Explaining Current Market Risks to Clients (And Prospects)

/in , /by

What’s in Today’s Report:

  • How to Explain Risks in This Market to Clients/Prospects
  • Mannheim Used Vehicle Value Index Takeaways (Chart)

Futures are slightly higher while most international markets rallied overnight thanks to news of more Chinese government support for the property sector and steady EU inflation data.

German CPI met estimates of 0.3% m/m and 6.4% y/y in June, both unchanged from May, while the ZEW Survey was inline with expectations on the headline but Economic Sentiment deteriorated to -14.7 vs. (E) -10.2.

Domestically, the NFIB Small Business Optimism Index came in at 91.0 vs. (E) 89.8 in June which is helping bolster investor sentiment in the premarket.

There are no additional economic reports today and just one Fed speaker on the calendar: Bullard (9:00 a.m. ET) which will leave investors looking ahead to tomorrow’s critical CPI report.

Jobs Day

/in , /by

What’s in Today’s Report:

  • How the Two-Year Yield Caused Yesterday’s Drop in Stocks
  • EIA Analysis and Oil Market Update

Futures are slightly lower following a mostly quiet night of news as investors wait for this morning’s jobs report.

Economic data underwhelmed as Japanese Household Spending (-1.1% vs. (E) 0.5%) and German Industrial Production (-0.2% vs. (E) -0.1%) both missed expectations.

Taiwan exports also fell more than expected, down 23.4%, and that’s adding to general anxiety about future global growth.

Today the only major event is the June jobs report and expectations are as follows:  213K job adds, 3.7% UE Rate, 0.3% wage increase m/m and 4.2% y/y.  As we saw from yesterday’s ADP report, a “Too Hot” number will spike yields and further pressure stocks, as the rise in yields is now getting high enough to be a headwind on the market.  Conversely, a “Too Cold” number will increase stagflation worries.

A job adds number in the 100k range coupled with an increase in the unemployment rate and a drop in wages remains the best outcome for stocks, and if we get that number don’t be surprised if the S&P 500 recoups all of yesterday’s losses.

Tom Essaye Quote in Barron’s on June 30th, 2023

/in , /by

U.S. Stock Futures Rise Ahead of Key PCE Inflation Data

Futures are moderately higher mostly on momentum and end of quarter/half positioning, as economic data overnight was mixed but not bad enough to interrupt the rally, said Tom Essaye, founder at Sevens Report Research. Click here to read the full article.

Tom Essaye Quoted in Barron’s on June 30th, 2023

/in , /by

Bank Stocks Are Higher After Passing Fed’s Stress Test

The 23 largest banks in the U.S. passed the Fed’s annual stress tests, and while none were expected to fail, the fact that there were no negative surprises is a general positive for the banking sector and financials, Tom Essaye, founder of research firm Sevens Reports, wrote Thursday. Click here to read the full article.

Why Economic Data Will Decide if the Rally Continues in 2H ’23

/in , /by

What’s in Today’s Report:

  • Why Economic Data Will Decide if the Rally Continues in 2H ‘23
  • Weekly Market Preview:  Does Economic Data This Week Reinforce “No Landing” Expectations?
  • Weekly Economic Cheat Sheet:  Jobs Report Friday, ISM PMIs Monday and Thursday.

Futures are flat to start the second half of 2023 following a quiet weekend of news.

Economic data was mixed overnight as the EU Manufacturing PMI slightly missed estimates (43.4 vs. (E) 43.6) while the UK reading slightly beat expectations (46.5 vs. (E) 46.2), but neither number is moving markets.

Saudi Arabia and Russia made separate announcements about further reducing oil supply in the coming months, although they aren’t causing a material rally.

Today focus will be on the ISM Manufacturing PMI (E: 47.2) and at this point, and with yields this high, markets need to see solid data and that means the ISM Manufacturing PMI moving closer towards 50 and beating expectations.

As a reminder, the stock market will close at 1:00 p.m. today ahead of the July 4th holiday.

 

Sevens Report Quarterly Letter Delivered Today

Our Q2 ’23 Quarterly Letter will be released today.

We use our strength (writing about the markets) to help you:

  • Save time (an average of 4-6 hours per quarterly letter)
  • Enjoy the holiday shortened week and know your client quarterly letter is already done, or mostly done!

You can view our Q1 ’23 Quarterly Letter here

To learn more about the product (including price) please click this link.

If you’re interested in subscribing, please email info@sevensreport.com.

Is “No Landing” Back?

/in , /by

What’s in Today’s Report:

  • Is “No Landing” Back?
  • Why Thursday’s Data Was Positive for the “Growth On” Basket

Futures are moderately higher mostly on momentum and end of quarter/half positioning, as economic data overnight was mixed but not bad enough to interrupt the rally.

European inflation (HICP) fell to 5.5% vs. (E) 5.7% y/y, although the more important core reading rose to 5.4% y/y from 5.3%, as expected.  So, there was some progress on headline inflation, but core inflation remains a problem.

In China, the June Manufacturing PMI rose to 49.0 vs. (E) 49.1, which is increasing expectations for more stimulus.

Today focus will be on inflation via the Core PCE Price Index (E: 0.4% m/m, 4.7% y/y).  The idea of “No Landing” requires inflation to, at a minimum, stay flat, so any hotter than expected inflation metric will push yields higher and that likely would weigh on stocks today.

Tom Essaye Quoted in MarketWatch on June 28th, 2023

/in , /by

The Fed’s been hawkish even as CPI recedes. A Bernanke research paper helps explains why.

If the current Fed is listening to Bernanke (and I imagine they are), then the Fed may be more focused on unemployment than anyone appreciates, that’s why there is 50 more basis points of hiking in store, probably regardless if CPI declines further, says Essaye. Click here to read the full article.

Why the Sintra Comments Were Slightly Hawkish

/in , /by

What’s in Today’s Report:

  • Why the Sintra Comments Were Slightly Hawkish (And What They Mean for Markets)
  • Clarifying the “Growth On” Trade vs. “Growth” Style

Futures are modestly higher after all 23 U.S. banks passed the Fed’s annual stress tests.

The 23 largest banks in the U.S. passed the Fed’s annual stress tests, and while none were expected to fail, the fact that there were no negative surprises is a general positive for the banking sector and financials.

Economically, Euro Zone Economic Sentiment, was basically in-line with expectations and isn’t moving markets.

Today focus will be on economic data, and the key reports today are:  German CPI (E: 6.3% y/y), Jobless Claims (E: 270k) and Final Q1 GDP (E: 1.4%).  Markets have priced in “Immaculate Disinflation” so inflation needs to continue to fall everywhere (including Germany), while markets also need to see jobless claims gradually rise (a big spike in claims would be a negative) to keep to bullish momentum going.

 

Sevens Report Q2 ’23 Quarterly Letter Coming Monday, July 3rd.

The Q2 2023 Quarterly Letter will be delivered to subscribers on Monday, July 3rd.

Stocks were surprisingly strong in the first half of 2023, but with investor sentiment now very bullish and the financial media proclaiming a new “Bull Market” has started, it’s important for advisors to keep client expectations grounded. A well-written quarterly letter that details the opportunities and risks facing investors can keep investor expectations grounded.   

We will deliver the Q2 ‘23 Quarterly Letter on the first business day of the new quarter because we want you to be able to send your quarterly letter before your competition (and with little-to-no work from you).

You can view our Q1 ’23 Quarterly Letter here.

To learn more about the product (including price) please click this link, and if you’re interested in subscribing please email info@sevensreport.com.

What’s Changed Since February? (Other than the S&P 500, Not Much)

/in , /by

What’s in Today’s Report:

  • What’s Changed Since February?  (Other than the S&P 500, Not Much)

Futures are slightly lower on potentially negative U.S./China trade headlines and after more hawkish rhetoric from ECB members.

A WSJ article released late Tuesday stated the U.S. was considering more restrictions on chip exports to China, and that’s weighing on sentiment and the chip stocks.

Multiple ECB members made hawkish comments overnight, increasing the expectation for two more rate hikes.

Today there are no notable economic reports, but Fed Chair Powell does speak at 9:30 a.m. ET.  However, if he just reiterates his previous message (progress has been made on inflation but the work isn’t done, meaning another rate hike) then his comments shouldn’t materially move markets.