Posts

Is FAANGM Now GARP?

/in , /by

What’s in Today’s Report:

  • Is FAANGM Now GARP?
  • Chart: The 10-Yr Note Yield Is Approaching Key Trend Support

U.S. stock futures are extending yesterday’s gains this morning as easing inflation concerns and more accommodative Fed chatter are fueling a rebound in tech shares.

The German Ifo Survey topped estimates overnight offering further evidence that the economic recovery is accelerating in the EU.

This morning, there are several housing market reports to watch: Case-Shiller Home Price Index (E: 1.3%), FHFA House Price Index (E: 0.9%), and New Home Sales (E: 957K), before May Consumer Confidence data (E: 119.0) is released shortly after the bell.

Additionally, there is a 2-Yr Treasury Note Auction at 1:00 p.m. ET that could impact Fed policy expectations (a weak auction could rekindle taper fears) and one Fed official is scheduled to speak: Quarles (10:00 a.m. ET).

Tom Essaye Quoted in Bloomberg on May 24, 2021

/in , /by

Tech Leads Gains in Stocks as Inflation Fears Ease: Markets Wrap

Until then, expect a more volatile market, but at this point, strong policy support for stocks remains very much in place, and that’s a good thing…according to Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter. Click here to read the full article.

Tom Essaye Quoted in Bloomberg on May 23, 2021

/in , /by

Nasdaq 100 Rallies 2% as Inflation Concerns Ebb: Markets Wrap

Inflation fears will remain a headwind for stocks until it becomes clear that price pressures are temporary. “Until then, expect a more volatile market, but at this point, strong policy support for…” Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter. Click here for the full article.

More Volatility Ahead But Not Necessarily a Correction

/in , /by

What’s in Today’s Report:

  • Bottom Line: More Volatility Ahead (But Not Necessarily A Correction)
  • Weekly Market Preview:  All About Inflation (Still)
  • Weekly Economic Cheat Sheet:  Friday’s the Most Important Day This Week

Futures are moderately higher as markets ignore more Bitcoin volatility following a generally quiet weekend.

Bitcoin volatility remained elevated, with the cryptocurrency falling more than 10% over the weekend, and then bouncing back more than 5% this morning, but markets are ignoring the volatility so far today.

There were no notable economic reports over the weekend, nor any notable central bank speak.

Today there are multiple Fed speakers but we’ll be watching Brainard (9:00 a.m. ET) and Mester (11:00 a.m. ET) specifically to see if there’s any reference to thinking about tapering (if there is look for a small hawkish response from markets). Bostic (12:00 p.m. ET) and George (5:30 p.m. ET) also speak today but shouldn’t move markets.

Technical Update (Levels to Watch)

/in , /by

What’s in Today’s Report:

  • Technical Update – Levels to Watch

Futures are moderately higher on momentum from Thursday’s rebound combined with a drop in industrial metals’ prices, which is helping to ease some anxiety on inflation.

Iron ore prices dropped sharply overnight as Chinese officials stated they would take measures to curb price increases in various industrial metals and that headline is pushing back on the “surging inflation” narrative (although it doesn’t change the inflation outlook).

There was no notable economic data overnight nor any important central bank speak (outside of the China metals news it was a quiet night).

Today we get several notable economic reports including Retail Sales (E: 1.0%), Industrial Production (E: 1.2%), and Consumer Sentiment (E: 90.3).  In general, the stronger the better for these reports but we’ll be watching the inflation expectations component of the Consumer Sentiment Index – if it runs “hot” expect a headwind on stocks.  There’s also one Fed speaker, Kaplan (1:00 p.m. ET), but he shouldn’t move markets.

Was the Strong CPI Report A Bearish Gamechanger?

/in , /by

What’s in Today’s Report:

  • Was the Strong CPI Report a Bearish Gamechanger?
  • Inflation Hedge Part 2:  Natural Resource Stock ETFs
  • EIA and Oil Market Update

Futures are modestly lower mostly on momentum from Wednesday’s drop following a generally quiet night.

There was no new inflation news overnight, but investors are cautious ahead of the PPI report this morning, which should be similarly strong to yesterday’s CPI report.

Bitcoin and the entire crypto-currency space is getting hit hard after Tesla (TSLA) announced it would no longer accept Bitcoin as a form of payment and that’s weighing on some of the momentum parts of the market.

Looking forward to today, the key number will be PPI.  Expectations for PPI are 0.3% m/m and 5.9% y/y but if the numbers come in much stronger expect that to send yields higher and to hit stocks, at least temporarily.

The other notable number this morning is Jobless Claims (E: 475K) although that will start to fade a bit in importance as the market views the issues in the labor market as supply based (people not choosing to work) rather than demand based (people not being able to work).

There are also three Fed speakers today Barkin (10:00 a.m. ET), Waller (1:00 p.m. ET), Bullard (4:00 p.m. ET), and any commentary on inflation will be closely watched.

What the Disappointing Jobs Report Means for Markets

/in , /by

What’s in Today’s Report:

  • What the Disappointing Jobs Report Means for Markets
  • Weekly Market Preview:  Can the Goldilocks Setup Continue This Week?
  • Weekly Economic Cheat Sheet:  Key Inflation Data This Week

Futures are flat following a mostly quiet weekend of news as markets digested Friday’s jobs report, which was a disappointment but isn’t changing the broad market outlook (more on that in the Report).

Commodity prices continued to surge over the weekend, and that’s going to continue to increase inflation pressures.  Iron Ore prices rose 10% as China tightened supply amidst the global recovery.   Meanwhile, wholesale gasoline prices rose 2% following a cyber-attack that closed the Colonial Pipeline, although the outage isn’t expected to be long-lasting.

Today there are no notable economic reports and only one Fed speaker, Evans (8:30 a.m. ET, 2:00 p.m. ET).  So, unless we learn the Colonial Pipeline outage will be long-lasting (which would send gasoline prices sharply higher), I’d expect relatively quiet trading today.

Click here to sign up for a free trial to the Sevens Report.

What Would Make the Fed Less Dovish?

/in , /by

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

/in , /by

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

/in /by

“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.