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Commercial Real Estate Primer Part Two: Risks, Opportunities & Indicators to Watch

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Commercial Real Estate Primer Part Two: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Commercial Real Estate Primer Part Two:  Risks, Opportunities & Indicators to Watch

Futures are slightly higher following better than expected Chinese economic data and in-line inflation readings from Europe.

China’s new yuan loans were stronger than expected (4.92B yuan vs. (E ) 4.5B yuan) providing some anecdotal evidence that stimulus is starting to work.

On inflation, German CPI met expectations at German CPI met expectations, rising 2.9% y/y.

Today the key event is the annual revisions to the CPI data, which hits at 8:30 a.m. ET.  Usually this is a relative non-event, but last year there were substantial upward revisions that resulted in more rate hikes.  Point being, this can change the inflation outlook (positively or negatively) and it has the potential to move markets.  Any downward revision to the 2023 CPI data should be positive for markets (yields lower/stocks higher) while any upward revisions should be negative (yields higher/stocks lower).

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Is NYCB the Canary in the Commercial Real Estate Coal Mine?

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Is NYCB the Canary in the Commercial Real Estate Coal Mine? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Is NYCB the Canary in the Commercial Real Estate Coal Mine?
  • EIA Update and Oil Market Analysis

Futures are slightly lower following more disappointing Chinese economic data and on dimming hopes for an Israel/Hamas ceasefire.

Chinese CPI fell more than expected (-0.8% vs. (E –0.5%) and increased deflation concerns for that economy.

Geopolitically, Secretary of State Blinken returned from the Mid-East without a Israel/Hamas cease fire deal and oil is rallying as a result.

Today focus will be on Jobless Claims (E: 222K), which rose to a one-month high last week and if claims move closer towards 250k, it will get people’s attention as a hint the labor market is starting to soften (something that’s not priced into stocks).  We also have one Fed speaker, Barkin (8:30 a.m. and 11:30 a.m. ET), but he shouldn’t move markets.

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Updated Market Multiple Targets: S&P 500 Chart

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Updated Market Multiple Targets: S&P 500 Chart: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • S&P 500 Market Multiple Targets Chart – February Update (Shareable PDF)

Stock futures are little changed amid a stable bond market as investors await another busy day of Fed commentary and another key Treasury auction.

Economically, German Industrial Production was better than feared at -3.1% vs. (E) -3.9% Y/Y in December, but the still negative headline is not helping ongoing concerns for a potential recession in Europe this year.

Looking into the U.S. session today, there are two economic reports on the calendar: International Trade in Goods and Services (E: -$62.2B) and Consumer Credit (E: $16.2B). Neither release should move markets but a meaningful rise in Consumer Credit could stoke concerns about a potential rise in delinquencies and weigh on stocks.

Beyond the data, we have another very busy day of Fed speak with Kugler (11:00 a.m. ET), Collins (11:30 a.m. ET), Barkin (12:00 p.m. ET), and Bowman (2:00 p.m. ET) all due to speak around mid-day. Markets have largely absorbed the hawkish shift in tone of the last week but if there is any more dovish-leaning chatter today, it could support a continued rally in equity markets and further stabilize bonds.

Finally, there is a 10-Yr Treasury Note auction at 1:00 p.m. ET and if demand is as strong as it was in yesterday’s 3-Yr Note auction, that could be another bullish catalyst for both stocks and bonds in the afternoon.

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Jobs Day (Updated Jobs Report Preview)

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Jobs Day: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Jobs Day (Updated Jobs Report Preview)

Futures are solidly higher ahead of today’s jobs report thanks to strong earnings overnight.

META (up 17% pre-market) and AMZN (up 7% pre-market) posted strong earnings while AAPL (down 2% pre-market) underwhelmed, but overall earnings results were good overnight and that’s pushing futures higher.

Today focus will be on the jobs report and expectations are as follows: 187K job adds, 3.8% Unemployment Rate, 0.3%/4.1% wage growth.  Powell pushing back on a March rate cut helped increase the threshold for a “Too Hot” report, so there’s a wider lane for a “Just Right” reading.  But, if job growth remains very strong (so solidly above 200k) and the other details are “Too Hot,” don’t be surprised if yields rise and stocks decline as some investors start to doubt a May rate cut.

Other notable events today include Consumer Sentiment (E: 78.8, 1-Yr inflation expectations: 2.9%) and the last “important” day of earnings, although neither of those should move markets.

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Was the Fed Decision Hawkish? No. Here’s Why.

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Was the Fed Decision Hawkish? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Was the Fed Decision Hawkish?  No.  Here’s Why.
  • Do We Need to Start to Worry About Banks Again?

Futures are bouncing modestly following Wednesday’s declines as investors digest the Fed decision and look ahead to important earnings after the close.

Economically, EU Core HICP (their CPI) rose 3.3% vs. (E) 3.2% and that’s slightly reducing rate cut expectations.

Today is another important day of economic data and arguably the most important day of earnings results for the Q4 reporting season.

The most important events today start with earnings as we get AMZN ($0.81), AAPL ($2.09) and META ($4.82) earnings after the close and obviously investors will want to see solid results.   Economically, the key reports today are the ISM Manufacturing PMI (E: 47.4), Jobless Claims (E: 214K) and Unit Labor Costs (E: 2.1%), and markets will be looking for in-line data to keep hard landing worries low.  Finally, we also get a Bank of England rate decision, but no change to rates is expected.

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Key Technical Levels to Watch on Fed Day

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Key Technical Levels to Watch: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Key Technical Levels to Watch on Fed Day (Shareable PDF Available)
  • Jobs Report Preview

Stock futures are in the red this morning after mega-cap tech earnings failed to meet overly optimistic estimates (but were not that bad, all things considered), Chinese Manufacturing PMI missed estimates, and French CPI was higher than expected.

On the earnings front, AMD (-11%), GOOGL (-6%), and MSFT (-1%) are all lower in the pre-market despite generally healthy quarterly reports with most earnings and revenue figures topping analysts estimates while some corporate guidance was not as strong as hoped.

Today is lining up to be a very busy day full of catalysts. Starting with the economic data, we get the first look at January labor market data with the ADP Employment Report (E: 130K) while Q4 Employment Cost Index (E: 1.0%) will offer a look at wage pressures from late 2023.

The Treasury will release the official Refunding Announcement details before the open (8:30 a.m. ET) before focus will turn to the Fed with the FOMC Decision (2:00 p.m. ET) and Powell’s press conference (2:30 p.m. ET) in the afternoon.

There are no “Mag7” earnings today, but a few notables to watch include: MA ($3.08), QCOM ($2.37), and MET ($1.95).

Bottom line, equities are on edge in pre-market trade this morning with all of today’s catalysts looming, but, if the Treasury Refunding Announcement supports the bond market (keeps a lid on yields) and the Fed doesn’t not offer a hawkish surprise, we should be able to see markets stabilize. Conversely, any disappointments or hawkish reactions will support further volatility into the back half of the week.

Computer chips

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Fed Meeting Preview

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Fed Meeting Preview: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why the Treasury Refunding Estimate Moved Markets
  • FOMC Meeting Preview

U.S. futures are slightly lower as yesterday’s late session rally is digested ahead of the Fed and key earnings reports.

Economically, Australian Retail Sales data from December missed (-2.7% vs. E: -0.6%) but the EU GDP Flash was slightly better than feared at 0.1% vs. (E) 0.0% Y/Y in Q4.

Today there are multiple economic reports beginning with housing market statistics ahead of the open: Case-Shiller Home Price Index (E: 0.4%) and FHFA House Price Index (E: 0.3%). Some moderation in home prices would be welcomed ahead of the Fed today.

After the open, two more closely followed releases on the health of the consumer: Consumer Confidence (E: 112.5) and state of the labor market: JOLTS (E: 8.70 million) will be released. With the FOMC meeting beginning today and some mega-cap tech names reporting earnings after the close, it will take a big surprise in the data to materially move markets this morning.

Regarding earnings, we have entered the peak of the reporting season with several notables reporting this morning: GM ($1.08), UPS ($2.44), and SYY ($0.88) while some of the biggest tech names, MSFT ($2.76) and GOOGL ($1.60) will report after the close. AMD ($0.77), and SBUX ($0.93) are two other notable releases to watch.

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Five Bullish Market Assumptions Updated

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Five Bullish Market Assumptions Updated: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Five Bullish Market Assumptions Updated (Are They Still True?)
  • Weekly Market Preview:  Important Updates on Fed Rate Cuts and Economic Growth
  • Weekly Economic Cheat Sheet:  Fed Meeting Wednesday, ISM and Jobs Report Friday

Futures are little changed following an increase in geo-political tensions over the weekend and ahead of the first really busy week of 2024.

Three U.S. soldiers were killed in an attack in Jordan by Iranian backed militants and that’s further escalating tensions in the region and oil rallied in response.

There were no economic reports overnight.

This is the first truly busy week of 2024 as we have a Fed decision on Wednesday and a jobs report on Friday and it’s the most important week of earnings season.  But, the week starts slowly as there are no economic reports today and minimal earnings.  So, focus will remain on geo-politics and 1) Any additional attacks on U.S. soldiers in the region or 2) Information about a U.S. retaliatory strike could push oil higher and weigh on stocks.

Earnings Today:  WHR ($ 3.64), SOFI (E: $0.00), CLF ($-0.07).

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What Earnings Are Saying

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What’s in Today’s Report:

  • What Earnings Are Saying About Current Economic Growth

Futures are modestly lower following a night of underwhelming earnings results.

INTC (stock down 10% premarket) gave soft guidance while V and TMUS (stocks down –3% each) posted underwhelming results.

Economically, German GfK Consumer Climate missed expectations (-29.7 vs. (E) -24.5) but that’s not moving markets.

Today focus will be on the Core PCE Price Index (E: 0.2% M/M, 3.0% Y/Y) and this number needs to meet or be lower than expectations to help support the stock rally.  If Core PCE prints solidly above expectations look for higher yields and lower stock prices.  The other notable economic number today is Pending Home Sales (E: 1.3%) but that shouldn’t move markets.

On the earnings front, the key report today is AXP ($2.65) and specifically we’ll be watching for is their commentary on consumer spending (the more positive, the better for markets).  Other notable earnings include CL ($0.85) and NSC ($2.90).

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Why Are Chinese Stocks So Weak? (And Is There an Opportunity?)

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Why Are Chinese Stocks So Weak? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Are Chinese Stocks So Weak? (And Is There an Opportunity?)
  • Chart: Leading Economic Indicators Remain Deeply Negative

U.S. futures are flat amid mixed trade overseas as European shares pulled back modestly after a weak ECB Lending Survey while Asian shares bounced solidly amid news China is planning a $278B “market rescue package” aimed at stabilizing the nation’s volatile capital market environment.

Looking into today’s session, there is one regional Fed survey release: Richmond Fed Manufacturing Index (E: -15). And while the Richmond release is less popular than other regional Fed reports, it will be more closely monitored today after both the Empire and Philly Fed surveys badly disappointed last week.

December M2 Money Supply will also be released at 1:00 p.m. ET which could move markets in early afternoon trade (especially if there is a sharp and unexpected contraction in money supply).

There are no Fed officials scheduled to speak today but there is a 2-Yr Treasury Note auction at 1:00 p.m. ET that could offer fresh insight into market expectation for Fed policy outlook. A weak auction sending yields higher, would be a negative catalyst for stocks today.

Finally earnings season is continuing to pick up with: VZ ($1.07), MMM ($2.31), GE ($0.90), PG ($1.70), JNJ ($2.27), and SYF ($0.96) reporting before the open, and NFLX ($2.20) and TXN ($1.46) releasing results after the close.

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