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The Yield Curve May Un-Invert Soon. Why That’s Not Good (Historically)

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The Yield Curve May Un-Invert Soon. Why That’s Not Good (Historically): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • The Yield Curve May Un-Invert Soon. Why That’s Not Good (Historically)
  • How the Post CPI “Rest of the Market” Rally Is Accelerating

Futures are moderately lower thanks to significant weakness in tech stocks.

Semi-conductor chip stocks are lower this morning on a trifecta of negative news including soft ASML guidance, reports of tighter chip restrictions with China and bellicose rhetoric from Trump on Taiwan in a recent interview.

Focus will remain on economic data today and the most important report is Industrial Production (E: 0.3%) while we also get Housing Starts (1.305M).  As Tuesday showed, markets still want Goldilocks economic reports, meaning they aren’t too strong but don’t point to economic weakness, either.  We also have two Fed speakers, Barkin (9:00 a.m. ET) and Waller (9:35 a.m. ET), but unless one of them floats the possibility of a third rate cut in 2024, they shouldn’t move markets.

Finally, earnings season continues to roll on and some notable reports today include: ASML ($3.87), JNJ ($2.82), and UAL ($3.97).

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The Important Question in a Noisy Market

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The Important Question in a Noisy Market: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • The Important Question in a Noisy Market

Futures are slightly higher mostly on momentum as markets again ignore disappointing retailer earnings.

Hugo Boss became the latest retailer to post poor results and cut guidance as anecdotal warnings on consumer spending continue to grow.

The only notable economic number overnight was the German ZEW Sentiment Index and it met expectations.

Today focus will stay on economic data and earnings. The key economic report today (and of the week) is Retail Sales (E: -0.3%) and if that number is weaker than expected, look for concerns about a slowdown to grow (although that likely won’t hit stocks immediately as bad data is still good for stocks).  We also get the Housing Market Index (E: 43) and one Fed speaker, Kugler (2:45 p.m. ET), but they shouldn’t move markets.

On the earnings front the season continues to heat up and reports we’ll be watching today include:  BAC ($0.79), UNH ($6.65) and MS ($1.65).

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Market Impact of the Assassination Attempt on Former President Trump

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Market Impact of the Assassination Attempt on Former President Trump: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Market Impact of the Assassination Attempt on Former President Trump
  • Acknowledging There’s a Downside to Current Market Events, Too
  • Weekly Market Preview:  Do Growth and Earnings Hold Up?
  • Weekly Economic Cheat Sheet:  An Important Check on the Consumer This Week

Futures are moderately higher as markets further price in an expected Trump win and Republican sweep following the assignation attempt on the former President.

Former President Trump survived an assignation attempt over the weekend and while expectations of a Trump win in November are boosting futures this morning, the event is unlikely to sustainably impact markets.

Today focus will be on economic data and Fed speak as Powell speaks at noon while we also get the first look at July economic data via the Empire Manufacturing PMI (-5.50).  If Powell is dovish and the data is solid, expect this early rally to continue.

Turning to earnings, this will be a busy week of results but it starts relatively slowly and the only two notable reports today are GS ($8.52) and BLK ($9.96).

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Consumer demand remains rather strong

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Consumer demand remains rather strong: Tyler Richey, Sevens Report Co-Editor, Quoted in MarketWatch on MSN

Oil prices log first gain in 4 sessions with crude supply down a second straight week

Consumer demand remains rather strong “despite higher prices at the pump this year and simmering concerns about the health of the economy,” Tyler Richey, co-editor at Sevens Report Research, told MarketWatch.

‘An added tailwind for oil is the largely dovish tone from [Federal Reserve Chairman Jerome] Powell this week helping to shore up expectations of a soft economic landing and fading concerns about a demand-crippling hard landing in 2024.’ — Tyler Richey, Sevens Report Research

“An added tailwind for oil is the largely dovish tone from [Federal Reserve Chairman Jerome] Powell this week helping to shore up expectations of a soft economic landing and fading concerns about a demand-crippling hard landing in 2024,” he said.

Also, click here to view the full MarketWatch article published by MSN on July 10th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

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CPI Preview (Good, Bad & Ugly)

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CPI Preview (Good, Bad & Ugly): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • CPI Preview (Good, Bad & Ugly)
  • EIA Analysis and Oil Market Update

Futures are slightly lower as investors digest Wednesday’s new highs while earnings this morning underwhelmed.

PEP and DAL both posted disappointing guidance and the stocks are down pre-market, weighing on futures.

Economically, data was good overnight as German CPI was in-line while UK GDP was better than expected.

The most important report of the week comes this morning via the CPI report and expectations are as follows:  CPI (E: 0.1% m/m, 3.1% y/y), Core CPI (E: 0.2% m/m, 3.4% y/y).  To keep things simple, if CPI shows a continued decline in inflation, that will make a September rate cut even more likely and help support stocks.  If inflation bounces back, that’s a real surprise negative and don’t be shocked if the S&P 500 falls 1% or more.

Other notable events today include Jobless Claims (E: 239K) and one Fed speaker, Bostic (11:30 a.m. ET), along with the start of earnings season (notable reports today include PEP ($2.15), DAL ($2.37) and CAG ($0.56)).  Each of these events are important in their own right but the morning will be dominated by CPI and as that goes, so likely goes the market today.

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Market Multiple Table: An Important Change

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Market Multiple Table: An Important Change: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Market Multiple Table: An Important Change

Stock futures are trading higher this morning with tech stocks continuing to outperform as traders look ahead to Fed Chair Powell’s Congressional testimony today.

Economically, the NFIB Small Business Optimism Index rose 1 point to 91.5 vs. (E) 90.3 in June.

There are no additional economic reports today which will leave trader focus on Fed Chair Powell’s semi-annual testimony before Congress beginning at 10:00 a.m. ET. There are two additional Fed speakers as well today: Barr (9:15 a.m. ET) and Bowman (1:30 p.m. ET).

The only other potential catalyst on the calendar is a 3-Yr Treasury Note auction at 1:00 p.m. ET. Weak demand and subsequently rising yields after the auction could weigh on stocks as money flows have been very dovish in recent weeks.

Sevens Report Quarterly Letter

Our Q2 ’24 Quarterly Letter was delivered to subscribers last Monday, complete with compliance backup and citations. We’re already receiving feedback about how it is saving advisors time and helping them communicate with their clients in this volatile environment!

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A lack of market breadth won’t lead to markets reversing

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Lack of market breadth won’t lead to markets reversing: Sevens Report Editor, Tom Essaye, Quoted in Barron’s

The Stock Market’s Breadth Is Improving. Why It Matters.

Though a lack of market breadth won’t lead to markets reversing, Sevens Report Research’s Tom Essaye told Barron’s, it is worth watching.

“The lack of breadth tells you something about the underlying business fundamentals in the economy,” Essaye says. “If everything were as healthy as the S&P 500 would have you believe, breadth would be better.”

He says the index’s performance may be overstating how well things are going for U.S. firms.

“It doesn’t mean the reality is bad—it’s just not as good as that single index is making you think it is,” Essaye says.

Also, click here to view the full Barron’s article published on July 3rd, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

It’ll be Very Hard for This Market to RallyIf you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

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The Economy: Landing or Crashing?

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The Economy: Landing or Crashing? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • The Economy:  Landing or Crashing?
  • Weekly Market Preview:  Will A September Rate Cut Become a Guarantee This Week?
  • Weekly Economic Data:  Inflation Back in Focus (CPI This Week)

Futures are little changed despite positive geo-political news over the weekend.

In France, the “far-right” National Rally party underperformed expectations and will not be the majority party, reducing the chances of radical French policy changes.

In the Middle East, chatter surrounding a cease-fire between Israel and Hamas continues to get louder and a deal could be announced soon.  That news is weighing on oil this morning.

This week will be an important one with two days of Powell testimony, the CPI report and the start of the Q2 earnings season, but today will be relatively quiet as there are no economic reports today and no Fed speakers.

Sevens Report Quarterly Letter

Our Q2 ’24 Quarterly Letter was delivered to subscribers last Monday, complete with compliance backup and citations. We’re already receiving feedback about how it is saving advisors time and helping them communicate with their clients in this volatile environment!

You can view our Q1 ’24 Quarterly Letter here.

To learn more about the product (including price) please click this link.

If you’re interested in subscribing, please email info@sevensreport.com.

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Jobs Day

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Jobs Day: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Jobs Day
  • Why Wednesday’s Weak Economic Data Is Increasing Growth Concerns

Futures are little changed following the U.S. holiday as the last 24 didn’t provide any substantial market surprises while focus turns towards today’s jobs report.

The Labour Party won a landslide election victory in the UK, as expected, but that victory isn’t altering the outlook for growth or inflation (so it’s not impacting markets).

U.S. growth worries are creeping slightly higher following Wednesday’s surprisingly soft economic data.

Today focus will be on the jobs report and expectations are as follows: 189K Job-Adds, 4.0% Unemployment Rate, 0.3% m/m & 3.9% y/y Wage Growth.  Markets are still in a “bad is good” mode for data so the biggest risk to markets today is for a “Too Hot” number.  But, that said, Wednesday’s economic data was outright bad and for those paying attention, there are now a lot of signs that the U.S. economy may be losing more momentum than expected.  So, if there is a surprisingly weak jobs report (possible but unlikely) it will increase growth concerns and that’s a future risk to this rally.

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French Election Takeaways

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French Election Takeaways: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • French Election Takeaways
  • ISM Manufacturing PMI – The Latest Goldilocks Report
  • Chart: S&P 500 Adjusted for Inflation

U.S. equity futures are tracking European markets lower this morning as ECB President Lagarde pushed back on the idea of another summer rate cut amid resilient labor market data and another stubbornly high inflation reading.

Economically, Eurozone Unemployment held steady at 6.4% vs. (E) 6.5% while the June Core HICP Flash (CPI equivalent) was also unchanged at 2.9% vs. (E) 2.8%.

Looking ahead to today’s session, there are two economic reports to watch: JOLTS (E: 7.9 million) and Motor Vehicle Sales (E: 15.9 million). Investors will be looking for a “cool” but not too-soft JOLTS headline to help reinforce expectations for a September Fed rate cut.

Beyond the economic data, market focus will be on Fed speak this morning as Powell is scheduled to speak at 9:30 a.m. ET. A dovish tone from the Fed chair would be well received and likely influence risk-on money flows while any hawkish surprises have the potential to spark volatility and profit taking in equities.

Sevens Report Quarterly Letter Delivered Yesterday!

Our Q2 ’24 Quarterly Letter was released yesterday.

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