Posts

Is a Dovish Hike the Same as a Fed Pivot? No.

/in , /by

What’s in Today’s Report:

  • Is a Dovish Hike the same as a Fed Pivot?  No.  Here’s Why.
  • EIA Update and Oil Analysis

Futures are little changed as rising hope of smaller than expected future rate hikes is being offset by ugly tech earnings.

Meta (FB) missed earnings and posted underwhelming guidance and the stock fell nearly 20% after hours, continuing this week’s trend of disappointing tech earnings.

Today will be a busy day of earnings and economic data.  The most important events of the day will come after the close via the AAPL ($1.26), AMZN ($0.22), INTC ($0.34) earnings, and given the disappointing tech earnings so far this week, the market will need solid numbers today.

Outside of those earnings, other key events today include the ECB Rate Decision (E: 75 bps hike), Durable Goods Orders (E: 0.6%), Jobless Claims (E: 223K) and Preliminary Q3 GDP (E: 2.3%) and the market will be looking for “just right” outcomes from each (an ECB that’s not too hawkish, and U.S. economic data that’s not too good or not too bad).

How Far Could This Relief Rally Run?

/in , /by

What’s in Today’s Report:

  • Technical Support for a Near Term Bottom and How Far This Relief Rally Could Run
  • Chart: 10-Yr Note Futures Test Trend Resistance
  • Housing Market Update

Stock futures are trading lower this morning as soft tech earnings are overshadowing a continued bounce in bonds.

MSFT and GOOGL both fell roughly 6% overnight after delivering disappointing quarterly results yesterday afternoon which is dragging the broader tech sector lower in premarket trading.

Today, there are two economic reports to watch in the morning: International Trade in Goods (E: -$87.8B) and New Home Sales (E: 585K), while there is a 5-Yr Treasury Note auction in the early afternoon (1:00 p.m. ET).

Earnings will remain in focus today with BA (-$0.01), BMY ($1.83), HLT ($1.25), KHC ($0.55), and HOG ($1.45) reporting before the bell, and META ($1.88), F ($0.31), and CP ($0.77) releasing results after the close.

Bottom line, soft earnings out of mega-cap tech are weighing on the market this morning however stable bond markets are limiting losses. If we see Treasuries roll over today and yields begin to climb again, expect pressure on equities to pick up as both earnings expectations and multiple compression will weigh on stocks broadly.

Three Keys to a Bottom Updated

/in , /by

What’s in Today’s Report:

  • Three Keys to a Bottom Updated
  • Was Friday’s WSJ Article A “Fed Pivot?”  No.  Here’s Why.
  • Weekly Market Preview:  The Height of Earnings Season
  • Weekly Economic Cheat Sheet:  More Hints of Stagflation?

Futures are slightly higher as momentum from Friday’s close offset steep losses in Chinese markets.

The Hang Seng fell 6% as Premier Xi emerged from China’s National Conference with an even tighter grip on power, ensuring continued “zero COVID” policies and heightened tensions with the West.

Economically, the Euro Zone and UK flash PMIs missed estimates as both remained below 50 (47.1 and 47.2 respectively).

This week will being a deluge of critical earnings reports but that doesn’t’ start until tomorrow, so focus today will be on the flash PMIs (October Flash Manufacturing PMI (E: 51.2), October Flash Services PMI (E: 49.3)) and if those numbers show solid activity and falling prices, stocks can extend the rally.

Incremental Positive Developments

/in , /by

What’s in Today’s Report:

  • Bottom Line – Incremental Positive Developments, But Not Enough for a Bottom
  • Industrial Production Takeaways
  • Chart: 5-Yr Breakevens Continue to Trend Lower Amid Confidence in the Fed
  • Housing Market Index Underscores Cooling Real Estate Market

Futures are slightly higher in more cautious trade this morning as strong earnings from NFLX (+14%)  and UAL (+3%) are helping offset hot inflation data overseas.

UK CPI rose 0.2% to 10.1% vs. (E) 10.0%, revisiting a 40-year high which is bringing inflation back into focus today.

From a catalyst standpoint, there is one economic report to watch today: Housing Starts (1.475M), and two Fed speakers to watch: Kashkari (1:00 p.m. ET) and Evans (6:30 p.m. ET).

There is also a 20-Yr Treasury Bond Auction at 1:00 p.m. ET. If yields rise in the wake of the auction, that could once again weigh on equities.

Finally, earnings continue with: ALLY ($1.73), PG ($1.55), CFG ($1.21), and WGO ($2.99) reporting ahead of the bell, and TSLA ($1.01), IBM ($1.78), AA ($0.09), and PPG ($1.67) releasing their results after the bell.

Bottom line, there have been some incremental fundamental positives that have helped support the relief rally in stocks this week, and if fixed-income markets can remain orderly and earnings continue to surprise to the upside, the S&P 500 could continue towards 3,800 or beyond today.

Sevens Report Analysts Quoted in Market Watch on October 17th, 2022

/in , /by

Oil futures settle slightly lower, extending last week’s sharp loss

“The backdrop of sticky high inflation resulting in increasingly more hawkish Fed policy expectations for the foreseeable future and the subsequent rise in recession fears will likely keep a lid on WTI in the low to mid $90s,” analysts at Sevens Report Research wrote in Monday’s newsletter. Click here to read the full article.

Tom Essaye Quoted in Forbes on October 17th, 2022

/in , /by

Yet Another Rollercoaster Week For Stocks On Deck: Dow Jumps 550 Points

Inflation cooling is the “key to market stabilization,” Sevens Report analyst Tom Essaye wrote in a Monday note, pointing out that the Federal Reserve and other central banks will not ease their monetary policy until there’s “conclusive” proof of inflation receding. Click here to read the full article.

Is the UK Fiscal Crisis Over?

/in , /by

What’s in Today’s Report:

  • Is the U.K. Fiscal Crisis Over? (If So, What Does It Mean for Markets?)
  • Empire State Manufacturing Index Takeaways

U.S. equity futures are up more than 1% in sympathy with EU markets following mixed messages about BOE policy.

An FT article overnight said the BOE would delay QT plans further in an attempt to insure stability in U.K. markets which fueled a continued rebound in risk assets, however, the BOE later said the report was “inaccurate” which has seen some of those pre-market moves unwind.

Looking into today’s session, there are two economic reports to watch: Industrial Production (E: 0.1%) and the Housing Market Index (E: 44) while there are two Fed officials scheduled to speak: Bostic (2:00 p.m. ET) and Kashkari (5:30 p.m. ET).

Earnings season will continue to pick up today with GS ($7.47), JNJ ($2.49), and LMT ($6.60) reporting ahead of the bell while NFLX ($2.11), UAL ($2.21), and JBHT ($2.46) releasing results after the close.

Bottom line, risk assets remain buoyant following last week’s volatility, and as long as fixed-income markets continue to stabilize and earnings do not materially disappoint, the relief rally that stocks enjoyed yesterday should be able to extend higher today.

What Yesterday’s Rebound Means for Markets

/in , /by

What’s in Today’s Report:

  • Five Reasons Stocks Rallied Yesterday
  • What the Rebound Means for Markets

Futures are slightly higher as markets digest Thursday’s rebound amidst more positive news from the UK.

Support for the Truss spending/tax cut plan has totally eroded and markets are hopeful the plan will be scrapped entirely, and that’s helping global bond yields fall.

Today there are two notable economic reports, Retail Sales (E: 0.2%) and University of Michigan Consumer Sentiment (E: 58.8), but the key for markets will be the inflation expectations within Consumer Sentiment and if the five-year inflation expectations fall further below 3.0%, that’ll be a positive for markets.  We also get two Fed speakers, George (10:00 a.m. ET) and Cook (10:30 a.m. ET) but we don’t expect them to move markets.

Earnings season also unofficially starts today and key reports to watch include: JPM ($2.97), MS ($1.51), C ($1.55), WFC ($1.09), PNC ($3.66), USB ($1.17) and FRC ($2.19).  If results are better than expected, that can extend Thursday’s rebound.

Market Multiple Table Chart

/in , /by

What’s in Today’s Report:

  • Market Multiple Table Chart
  • CPI Preview:  Good Bad and Ugly

Futures are slightly higher ahead of this morning’s CPI as reports suggest UK PM Truss will have to abandon more of her fiscal spending and tax cut plan.

Positively, conservative members of Parliament continued to push back against PM Truss’s fiscal plan and that’s helping the Pound rally and GILT yields to decline.

Negatively, Chinese authorities are reimposing some restrictions in Shanghai as COVID cases rise and as Chinese officials hold on to the “Zero COVID” policy.

Focus today will be on CPI and estimates are as follows: Headline: 0.2% m/m and 8.1% y/y. Core:  0.4% m/m and 6.5% y/y.  For CPI to spark a material rally, markets will want to see outright declines in CPI (so less than 8.1% and 6.3% respectively).  Conversely, year over year CPI coming in higher than September readings will reinforce the idea that inflation is not declining, and the market is a long, long way from a Fed pivot.  The other notable report today is Jobless Claims (E: 225K) but that shouldn’t move markets.

Market Multiple Table: Headwinds Building

/in , /by

What’s in Today’s Report:

  • Market Multiple Table: Headwinds Building

Stock futures are higher this morning as Treasury markets are steady despite more turmoil in the Gilts market with the 30-Yr jumping another 20+ bp back towards 5.00%.

Economic data was mixed overnight as U.K. GDP dropped off further than expected in August (-0.3% vs. E: -0.1%) while EU Industrial Production for the same month was solid at 1.5% vs. (E) 0.5%.

Today, there is one inflation data point to watch pre-market: Producer Price Index (E: 0.2%) and if it runs hot, it would likely send yields to new highs and pressure risk assets ahead of the bell.

After the open, the focus will shift to the Fed with two officials speaking through the middle of the day: Kashkari (10:00 a.m. ET) and Barr (1:45 p.m. ET) before the most recent FOMC Meeting Minutes are due to be released at 2:00 p.m. ET.

In the minutes, investors will be looking for any new indication of a timeline for a policy “pivot” or what might result in one as that is still a major catalyst needed in order for stocks to bottom.

Finally, there is a 10-Yr Treasury Note Auction at 1:00 p.m. ET and if the outcome is weak, as was the case with yesterday’s 3-Yr Note auction, and yields begin to rise, that will likely be a renewed headwind on equities in the afternoon.

Bottom line, yields are still the primary driver of the stock market this week and if we see Treasuries remain stable as they are this morning, then stocks could break their multi-day losing streak, however, if yields do rise meaningfully it will be hard for the major indices to hold this week’s lows.