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Inflation Update (Post CPI/PPI)

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What’s in Today’s Report:

  • Inflation Update (Post CPI/PPI)

Futures are again little changed following another generally quiet night of news.

Economic data was minimal as the only notable report was EU exports, which missed expectations falling –0.7% vs. (E) 0.6%, but that’s not moving markets.

On the COVID front, there were mixed headlines.  ABNB said it has seen a small slowdown in bookings because of Delta (a negative), but COVID cases have potentially peaked in China (a positive).  In sum, the headlines were mixed enough that they aren’t moving markets, but we will continue to watch for more evidence that the Delta variant is altering consumer behavior.

Today the key report will be the inflation expectations in Consumer Sentiment (E: 81.4) but as long as that doesn’t spike higher, it shouldn’t move markets.  Instead, COVID headlines will continue to move markets and if there is more evidence the Delta variant is impacting travel/leisure, that will be a headwind on stocks.

The Bullish Recipe (Why Stocks Are So Resilient)

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What’s in Today’s Report:

  • The Bullish Recipe (Why Stocks Are So Resilient)
  • Weekly Market Preview:  Will COVID Weigh on the Recovery?
  • Weekly Economic Cheat Sheet:  Key Inflation Data This Week

Futures are slightly lower following a mostly quiet weekend of news as there were no major changes to the COVID outlook or the economic recovery.

Economic data was solid as German and Chinese exports for July both beat estimates.

Chinese CPI rose 1% vs. (E) 0.8% and that may reduce the amount of stimulus officials unleash on the economy (so potentially negative for global growth).

Today focus will be on JOLTS (E: 9825M) and on Fed commentary following the jobs report (Bostic at 10:10 a.m. ET and Barkin at 11:20 a.m. ET).  But, unless JOLTS are a major surprise or Fed officials are shockingly hawkish, these events shouldn’t move markets.  As such, the tenor of COVID headlines (and whether we are seeing behavior changes) will continue to drive markets in the near term.

All About Demand

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What’s in Today’s Report:

  • All About Demand
  • Weekly Market Preview:  The Fed and Inflation
  • Weekly Economic Cheat Sheet:  Fed Meeting, Core PCE Price Index and GDP.

Futures are marginally lower as increased concerns about regulation in China caused a sharp drop in Chinese shares, and that’s weighing on global equities.

The Hang Seng dropped more than 4% on Monday on fears of increased regulation from the Chinese government, following reports China was going to make the education business sector “not for profit.”

COVID headlines remained generally unchanged over the weekend as cases continued to rise in the U.S, although governments continue to resist restrictions and lockdowns.

Today there’s only one notable economic report, New Home Sales (E: 800k), and that shouldn’t move markets.  On the earnings front, the key report today comes after the close (TSLA $0.96), so focus will be on COVID headlines and if there are any reports of increased restrictions or lockdowns here in the U.S., that will hit stocks.

Why Economic Data is Stronger Than it Appears

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What’s in Today’s Report:

  • Why Economic Data Is Stronger Than It Appears

Futures are drifting slightly higher following a mostly quiet night of news.

COVID headlines were mixed as Los Angeles reimposed an indoor mask mandate (negative) while President Biden said the U.S. could ease travel restrictions from Europe soon (positive).  Bottom line, concerns about the Delta variant are a market influence (mild headwind) but at this point, it’s not enough to cause a material pullback.

Economic data was minimal as EU HICP met expectations (0.3% m/m and 1.9% y/y).

Today, focus will be on economic data, specifically Retail Sales (E: -0.4%) and the inflation expectations component in Consumer Sentiment (E: 87.0).  As has been the case, markets will want “Goldilocks” results for both retail sales and inflation expectations (so strong, but not too strong).  There is also one Fed speaker, Williams (9:00 a.m. ET), but he shouldn’t move markets.

An Important Few Weeks for Bonds

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What’s in Today’s Report:

  • Why The Next Few Weeks Are Critical for the Bond Market
  • Weekly Market Preview:  Earnings Season Starts
  • Weekly Economic Cheat Sheet:  Inflation This Week

Futures are slightly lower following a very quiet weekend of news as markets wait for the start of earnings this week along with updated inflation data.

G-20 finance ministers agreed to move forward with a plan for a global minimum tax, but this remains a very, very long way from actual implementation.

China’s reserve requirement ratio cut remained top of the news but it’s unlikely to provide major stimulus and as such it’s not a material bullish catalyst for global stocks.

Today there are no economic reports and just two Fed speakers: Williams (9:30 a.m. ET) and Kashkari (12:00 p.m. ET).  As was the case last week, we expect yields to dictate trading in stocks, so if Treasury yields continue to bounce, stocks should extend Friday’s rally.

Jobs Day

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What’s in Today’s Report:

  • Why Inflation Might Not Be As Temporary as the Fed Thinks
  • OPEC Update and Oil Outlook

Futures are slightly higher ahead of the jobs report following a quiet night of news.

The only notable economic report overnight was Eurozone PPI, which rose 9.6% yoy vs. (E) 9.5% yoy.  That report isn’t moving markets, but it’s the second inflation report in two days to imply inflation pressures haven’t peaked.

There were no new developments on infrastructure.

Today the jobs number is key and expectations are as follows: Job Adds 675K, UE Rate 5.7%, Wages yoy 3.1%.  As long as the headline job adds number isn’t close to 1 million and the wages number doesn’t spike well above expectations, markets should be able to generally digest this report, even if it is a mild surprise.

Other economic indicators today include International Trade in Goods (E: -$71.2B) and Factory Orders (E: 1.3%) but we don’t expect them to move markets.

Tom Essaye Quoted in Bloomberg on June 14, 2021

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From Copper to Corn, Markets Show Peak Inflation Fear Has Passed

Even though inflation metrics are high, the pressure is starting to come off and that leaves investors to say…said Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter. Click here to read the full article.

Tom Essaye Quoted in KITV News on June 7, 2021

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Dollar doldrums are back as inflation worries heat up

The market still views the Fed as the ‘most dovish’ global central bank, and as long as that’s the case, the dollar will have…said Tom Essaye, the founder and president of Sevens Report Research. Click here to read the full article.

Inflation Expectations Dashboard

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What’s in Today’s Report:

  • Sevens Report Inflation Expectations Dashboard
  • Chart: Gold Holds Key Trend Support

Stock futures are wavering between gains and losses this morning as traders digest mixed economic data and look ahead to a key inflation report due later in the week.

Economically, Japanese GDP was not as bad as feared in Q1 but German Industrial Production missed estimates as did the U.S. NFIB Small Business Optimism Index which is weighing modestly on sentiment this morning.

There are two economic reports to watch in the U.S. today: International Trade in Goods and Services (E: -$69.0B) and JOLTS (E: 8.045M). The latter will be the more important to watch as investors continue to look for clues regarding the state of the labor market recovery.

No Fed officials are scheduled to speak today however there is a 3-Yr Treasury Note auction at 1:00 p.m. ET and a weak outcome could rekindle taper fears with Thursday’s CPI report coming into focus.

A Market Still In Search of a Catalyst

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What’s in Today’s Report:

  • Why This Market Still Needs A Positive Catalyst
  • Weekly Market Preview (Fed anticipation and Inflation)
  • Weekly Economic Cheat Sheet (Inflation Thursday and Employment Data Are Key)

Futures are slightly lower on underwhelming economic data and as markets digest last week’s rally.

Economic data was slightly disappointing as Chinese exports missed expectations (27.9% vs. (E) 32.1%) as did German Manufacturers’ Orders (-0.2% vs. (E) 1.0%).

The G-7 agreed in principle to a global minimum corporate tax and that is weighing slightly on global markets.  But, investors view implementation of the tax as taking a very, very long time (if it ever actually happens).

Today there are no notable economic reports and no Fed speakers so focus will be on any apparent infrastructure progress, although at this point any infrastructure deal likely won’t be big enough to provide material stimulus to the economy (and push markets higher).