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What Would Make the Fed Less Dovish?

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What’s in Today’s Report:

  • What Would Make the Fed Less Dovish?

Futures are little changed following mixed economic data that showed higher inflation and underwhelming growth.

Inflation stats could be set to rise as Chinese PPI surged 4.4% vs. (E) 1.7%, and this could be the first of several higher than expected global inflation readings.

Economically, German Industrial Production missed estimates (-1.6% vs. (E) 1.5%)  but the reading isn’t moving markets.

Today the key number is the Core PPI (E: 0.2% m/m, 2.7% y/y).  Markets are expecting an uptick in inflation metrics so a slightly hot number shouldn’t move markets too much, although a much stronger than expected PPI reading will likely send the 10 year yield higher and that would be a headwind on stocks. There is also one Fed speaker, Kaplan (10:00 & 12:00 p.m. ET), but he shouldn’t move markets.

A Crack in One Pillar of the Rally

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What’s in Today’s Report:

  • A Crack in One Pillar of the Rally
  • Weekly Market Preview:  Will Inflation Data Push Yields Higher (And Stocks Lower?)
  • Weekly Economic Cheat Sheet:  CPI on Wednesday.

Futures are moderately lower despite stimulus progress over the weekend, as markets digest Friday’s big rally.

The Senate passed the $1.9 trillion stimulus bill and the House will debate it on Tuesday.  Biden could sign the bill by the end of the week, meeting market expectations and unleashing more stimulus into the economy as we begin the 2nd quarter.

Economically, Chinese trade numbers signaled an ongoing global recovery as exports exploded 60.6% y/y vs. (E) 40%.

The 10 year Treasury yield is up four basis points on the stimulus news and is again testing 1.60% (this is the main reason futures are lower this morning).

Today there are no economic reports and no Fed speakers, but yields will once again dictate trading in stocks.  Markets rallied on Friday because the 10 year Treasury yield failed to meaningfully breakthrough 1.60%.  But, if that happens today, look for stocks to drop in response, as rising yields remain the biggest headwind on stocks in the near term.

Tom Essaye Quoted in Barron’s on August 28, 2020

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“Now, over the medium and long term, the Fed’s average inflation target means that when cyclicals start to outperform, and when yields begin to rise, both those rallies will last longer…” writes Tom Essaye of The Sevens Report newsletter. Click here to read the full article.

Tom Essaye Quoted in Positively Scottish Scot on August 24, 2020

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“What does that mean for us? It usually means remain long stocks in more time-dated accounts, and make confident you…” Sevens Report Study founder Tom Essaye recently spelled out to Yahoo Finance. Click here to read the full article.

Warren Buffett

Is Inflation The Next Big Thing? (How to be Positioned)

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What’s in Today’s Report:

  • Is Inflation The Next Big Thing? (How to be Positioned)
  • OPEC Meeting Preview:  Bullish If/Bearish If

Futures are modestly lower following a generally quiet night as markets digest this weeks’ gains ahead of jobless claims and the Powell speech.

On the coronavirus front, news was again positive as Austria and Denmark became the first European countries to begin to lift coronavirus restrictions.

Economic data overnight was better than feared as German exports and British IP both beat estimates.

Today focus will be on Jobless Claims (E: 5 MM) and the Powell speech  (10:00 a.m. ET).  For claims, it’d be a positive surprise if they declined from last week’s number and that’d add to the good news from this week, while a spike towards 10MM would be a modest negative vs. expectations.

For the Powell speech, markets just want reassurance that the Fed is committed to doing whatever it takes to ensure orderly operation of markets, which is what we should get.

How to Recognize a Blow Off Top

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Good Morning,

 

Today’s Report is attached as a PDF.

What’s in Today’s Report:

  • How To Recognize a Blow Off Top
  • Don’t Sleep on Inflation?  (PPI Just Hit a Multi-Year High)

Futures are slightly lower as markets digest yesterday’s rally following a mostly quiet night of news.

News on COVID-19 was mixed as China did another “diagnostic change” and the number of COVID 19 cases fell, while in South Korea the number of infections rose.  But, markets still view the transmission rate of the disease  as peaking (and this assumption is what’s driving markets higher – and it’s also the greatest source of near term risk for stocks if the situation changes).

Economic data was sparse but German GfK Consumer Climate and British Retail Sales both beat estimates, although neither is moving markets.

Today there are two notable economic reports, Jobless Claims (E: 211K) and Philly Fed (E: 12.0), and as remains the case, the stronger the data, the better (markets will especially be looking for confirmation of the strong Empire report from Philly Fed).   There is also one Fed speaker, Barkin at 1:20 p.m. ET, but he shouldn’t move markets.

Please email info@sevensreport.com if you have any trouble downloading today’s Report.

Economic Breaker Panel: July Update

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What’s in Today’s Report:

  • Economic Breaker Panel – July Update

Futures are trading modestly higher this morning as investors digest the mixed set of corporate earnings releases so far this week after an otherwise quiet night of macro news.

Eurozone inflation was 1.3% vs. (E) 1.2% year/year in June, but the slightly firmer than expected print was not enough to alter the outlook for ECB policy (the euro is flat).

Today, there is one economic report to watch: Housing Starts (E: 1.260M) and one Fed official scheduled to speak: George (12:30 ET).

With news-flow considerably slower today than yesterday, investor focus will remain on earnings as the reporting season continues to pick up.

Notable releases today include: BAC ($0.70), PNC ($2.83), USB ($1.07), BK ($0.94) before the open, and NFLX ($0.56), IBM ($3.06), EBAY ($0.62), AA (-$0.34), KMI ($0.23) after the close.

Inflation Update (It’s More Important Than Trade)

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What’s in Today’s Report:

  • Inflation Update (This Is More Important Than the Trade Drama)
  • EIA Analysis and Oil Update

Futures are decidedly weaker this morning following more hawkish trade rhetoric from President Trump overnight.

At a rally in Florida Trump said China “broke” the deal and reiterated his tariff threats.  Importantly though, nothing changed as far as actual negotiations and the Chinese trade delegation still arrives today.

Economically Chinese CPI generally met expectations at 2.5% yoy vs. (E) 2.6%.

Today the market will be held hostage again by trade headlines, but beyond the trade headlines there are two notable economic reports.

First, Jobless Claims (E: 215K) have risen lately and we’ll want to see that roll back over soon, otherwise it could be a negative signal on the jobs market.  Second, PPI (E: 0.3%), while not as important as tomorrow’s CPI, could still move markets given inflation’s new-found importance. Finally, there are three Fed speakers, Powell (8:30 a.m. ET), Bostic (10:45 a.m. ET) and Evans (1:15 p.m. ET), but none of them (including Powell) are expected to move markets.

Tom Essaye Interviewed with Bloomberg’s Daybreak Asia on April 22, 2019

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Tom Essaye joined Doug Krizner and David Ingles on Daybreak Asia to discuss markets, inflation, Fed and more. Click here to listen to the entire interview.

Tom Essaye Interviewed with TD Ameritrade on April 16, 2019

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“If this market’s going to continue to rally, it’s going to be led by those cyclical sectors.” Tom talks about the market, the earnings season, banks and more. Watch the full video here.