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Market Multiple Table

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What’s in Today’s Report:

  • Why Stocks Dropped Again (It Wasn’t Actual News)
  • Market Multiple Table – May Update

Stock futures are trading with tentative gains this morning as yesterday’s steep declines are digested after a mostly quiet night of news.

Economically, data overseas was slightly better than feared (specifically Economic Sentiment within the German ZEW Survey) while the NFIB Small Business Optimism Index in the U.S. held steady at 93.2, topping estimates of 92.9.

There are no notable economic reports today but there is a 3-Yr Treasury Note auction at 1:00 p.m. ET and if the results help the bond market stabilize, that could help equities bounce today.

Finally, there are a slew of Fed speakers today including: Williams (7:40 a.m. ET), Bostic (8:30 a.m. ET), Barkin (9:15 a.m. ET), Kashkari (1:00 p.m. ET), and Mester (3:00 p.m. ET). If they collectively strike a “less-hawkish” tone, that could also help fuel a relief rally in stocks today.

Tom Essaye Quoted in Barron’s on May 5th, 2022

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The Dow Lost More Than 1,000 Points as Wednesday Gain Vanishes

China’s PMI this morning was horrific, that underscores that the Chinese economy is a huge drag on global growth right now. It’s a risk to keep inflation high…said Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

Update on the Three Headwinds on Stocks

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What’s in Today’s Report:

  • Update on the Three Headwinds on Stocks
  • Weekly Market Preview:  Is Inflation Finally Peaking?
  • Weekly Economic Cheat Sheet:  All About Inflation (CPI Wednesday)

Futures are sharply lower following new COVID lockdowns in China.

COVID cases in Shanghai are rising again, prompting new restrictions on movement and work.  Meanwhile, Beijing continues to suffer from limited lockdowns and this is compounding worries about global economic growth.

Geo-politically, Victory Day in Russia offered no notable news and there remains no end in sight to the Ukraine war.

Today there are no economic reports and just one Fed speaker, Bostic at 8:45 a.m. ET.  So, we should expect technicals to dominate trading and if last week’s intra-day lows are broken in the S&P 500 and we don’t get any positive news on 1) Fed hawkishness, 2) Chinese lockdowns or 3) Russia/Ukraine, we should not be shocked if the S&P 500 move closer to a test of support at 4,000.

Is the Fed’s Bark Worse than Its Bite?

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What’s in Today’s Report:

  • What the FOMC Decision Means for Markets (Is the Fed’s Bark Worse than Its Bite?)
  • EIA Analysis and Oil Outlook Update

Futures are moderately lower as markets digest Wednesday’s big post-Fed rally following a night of underwhelming economic data.

The April Chinese services PMI plunged to 36.2 vs. (E) 41.1, reflecting the economic damage from lockdowns.  In Europe, data was mixed as German Manufacturers’ Orders missed estimates while UK Services PMI beat expectations.

There are multiple Fed speakers today on financial media outlets (there are no official speeches scheduled) and don’t be surprised if they sound hawkish and push back on the post FOMC rally yesterday (this is especially true for Bullard, whose doing interviews today).

Today’s focus will be on the aforementioned Fed speakers, and again don’t be shocked if they sound “hawkish” and that causes some giveback from yesterday’s rally (but a hawkish tone won’t undo the positives from Powell’s press conference, either).

Economically, there is a BOE Rate decision and they are expected to hike 25 bps.  Domestically, the key report today is Unit Labor Costs (E: 6.8%) as that will give us a good look at total wage inflation (and if it’s higher than estimates that will be a negative).  We also get Jobless Claims (E: 178K) but that shouldn’t move markets.

Economic Breaker Panel: May Update

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What’s in Today’s Report:

  • Economic Breaker Panel – May Update
  • Chart: Copper Breakdown

Stock futures are trading cautiously higher this morning ahead of the Fed while oil prices are spiking after the EU announced plans for a full Russian oil embargo that will be phased in over the next 6 months.

Economic data was mostly in-line with estimates overnight with Composite PMI reports notably holding up better than the recently released manufacturing PMIs which is a modest tailwind for risk assets this morning.

Looking into today’s session, focus will be on economic data early with the ADP Employment Report (E: 398K) due out ahead of the open while the ISM Services Index (E: 58.9) will be released shortly after the bell. The market will want to see firm data that helps contradict the idea that the Fed is beginning to accelerate the pace of rate hikes into an economic slowdown.

From there, price action should begin to slow as the Fed comes into focus with the FOMC Announcement (2:00 p.m. ET) and Fed Chair Press Conference (2:30 p.m. ET) in the afternoon. A more hawkish than expected Fed could send stocks back down to test Monday’s lows while a not-as-hawkish-as-feared announcement/press conference would open the door to a relief rally back towards 4,300.

On the earnings front, there are a few notables today including: MRNA ($5.18), CVS ($2.14), MAR ($0.94), YUM ($1.07), UBER (-$0.28), and EBAY ($1.03).

Fed Meeting Preview

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What’s in Today’s Report:

  • FOMC Preview
  • Q&A: Technical Resistance and Downside Targets for the S&P
  • ISM Manufacturing Index Takeaways

Stock futures are little changed as yesterday’s late-session rally is being digested following more hot inflation data and a slightly hawkish RBA hike (25 bp vs. E: 15 bp) overnight.

Economic data on growth was better than feared overnight but Eurozone PPI was hotter than expected with a staggering annual rise of 36.8% vs. (E) 36.2% in March.

Looking into today’s session, there are a few economic reports to watch including March JOLTS (E: 11.27M) and Factory Orders (E: 1.1%), however, with the May FOMC Meeting beginning this morning, a sense of Fed paralysis is likely to begin to grip markets ahead of tomorrow’s announcement.

Finally, earnings season does continue with a few notables reporting today: PFE ($1.66), BP ($1.41), HLT ($0.59), AMD ($0.90), and SBUX ($0.60) which could have an impact on sector trading but is not likely to move the broader markets given the focus-shift to the Fed.

Is the Outlook Really This Bad?

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What’s in Today’s Report:

  • Is the Outlook Really This Bad?
  • Weekly Market Preview:  FOMC Decision Wednesday (Will It Be More Hawkish Than Feared?)
  • Weekly Economic Cheat Sheet:  A Busy and Important Week (ISM Manufacturing PMI today, FOMC Decision Wednesday, Jobs Report Friday)

Futures are enjoying a modest oversold bounce following Friday’s selloff, but there was no improvement over the weekend on the three headwinds pressuring stocks:  Chinese growth worries, Ukraine war and hawkish Fed.

Economic data was mixed as the April Chinese manufacturing PMI dropped further (to 47.4 from 49.5) while the EU PMI slightly beat estimates (55.5 vs. (E) 55.3) and German Retail Sales underwhelmed (-0.1% vs. (E) 0.3%).

Today focus will be on the ISM Manufacturing PMI (E: 58.0) and markets need to see a solid number to push back on stagflation concerns.  If we get a weak number, expect the selling to resume and stagflation fears to grow.

Earnings season will begin to wind down this week but there are still some important results coming and some we’re watching today include:  NXPI ($3,17), CAR ($3.54) and MGM ($-0.09).

Yield Curve Update

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What’s in Today’s Report:

  • Yield Curve Update (Are Recession Risks Rising?)
  • Why European Energy Companies Buying Gas in Rubles Matters to Stocks
  • Q1 GDP – Not as Bad as It Looks

Futures are moderately lower following underwhelming earnings and guidance from AMZN and AAPL.

AMZN results underwhelmed the street (especially margins) while APPL beat earnings but had cautious guidance for Q2 based on supply chain issues.

Economically, inflation pressures remained high as core EU HICP (their CPI) rose 3.5% yoy vs. (E) 3.1%.

Today focus will be on inflation as we get two important readings: Core PCE Price Index (E: 0.3%, 5.3%) and the Employment Cost Index (E: 1.1%).  Markets will want to see the actual numbers miss estimates, and in doing so further hint at a peak of inflation.  If the opposite happens (the numbers are hotter than estimates) that will further pressure stocks.  We also get Consumer Sentiment (E: 65.6) and the Inflation Expectations sub-index will be watched closely.

On the earnings front, some important results today include:  XOM ( $2.25), CVX ($3.44), CL ($0.74).

Tom Essaye Interviewed on Fox Business on April 27, 2022

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Sevens Report Research reveals what makes the sell-off stop

Sevens Report Research founder Tom Essaye discusses if the market has hit its lows of the year or if there is still more to come on Fox Business’s “The Claman Countdown.” Click here to watch the interview.

Is the Market Doing the Fed’s Job?

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What’s in Today’s Report:

  • Is the Market Doing the Fed’s Job?
  • Oil Update and EIA Analysis

Futures are moderately higher following a solid night of earnings.

Earnings overnight were better than expected as QCOM posted strong results while FB also beat expectations.

Economic data was sparse, but the Bank of Japan made more dovish comments and the yen is down 2% and hitting fresh multi-decade lows.

Today focus will be on earnings as this is the most important day of the entire earnings season. We get several major companies reporting results including (in order of importance): AAPL ($1.43), AMZN ($8.73), INTC ($0.80), MA ($2.17), TWTR ($0.01), CAT ($2.66) and MCD ($2.18).  Given how oversold the market is on a short-term basis, solid results from these companies could fuel a rally, while disappointing results likely will cause another test of the 2022 lows in the S&P 500.

Economically, numbers today include Advanced Q1 GDP (E: 1.1%) and Jobless Claims (E: 181K) but I don’t expect either to move markets.