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What Could Interrupt This Rally?

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What Could Interrupt This Rally? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What Could Interrupt This Rally?
  • Weekly Market Preview:  Can Inflation and Growth Data Push Stocks Even Higher?
  • Weekly Economic Preview:  CPI Tomorrow, Key Growth Readings Thursday.

Futures are little changed following a mostly quiet weekend of news, although geo-political risks continued to creep higher over the weekend.

Israel is reportedly planning a ground offensive into the southern Palestinian province of Rafah and that’s met with pushback from numerous nations in the region and risks to further reduce any chances for a cease fire.

Today trading should be mostly quiet as the majority of Asian markets are closed for a holiday, but focus will be on the NY Fed Consumer Inflation Expectations (E: 3.00%) and any number below expectations will support Fed rate cut expectations (and support stocks).  We also have three Fed speakers today, Bowman (9:20 a.m. ET), Barkin (12:00 p.m. ET) and Kashkari (1:00 p.m. ET) but they shouldn’t move markets.

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Commercial Real Estate Primer Part Two: Risks, Opportunities & Indicators to Watch

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Commercial Real Estate Primer Part Two: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Commercial Real Estate Primer Part Two:  Risks, Opportunities & Indicators to Watch

Futures are slightly higher following better than expected Chinese economic data and in-line inflation readings from Europe.

China’s new yuan loans were stronger than expected (4.92B yuan vs. (E ) 4.5B yuan) providing some anecdotal evidence that stimulus is starting to work.

On inflation, German CPI met expectations at German CPI met expectations, rising 2.9% y/y.

Today the key event is the annual revisions to the CPI data, which hits at 8:30 a.m. ET.  Usually this is a relative non-event, but last year there were substantial upward revisions that resulted in more rate hikes.  Point being, this can change the inflation outlook (positively or negatively) and it has the potential to move markets.  Any downward revision to the 2023 CPI data should be positive for markets (yields lower/stocks higher) while any upward revisions should be negative (yields higher/stocks lower).

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Is NYCB the Canary in the Commercial Real Estate Coal Mine?

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Is NYCB the Canary in the Commercial Real Estate Coal Mine? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Is NYCB the Canary in the Commercial Real Estate Coal Mine?
  • EIA Update and Oil Market Analysis

Futures are slightly lower following more disappointing Chinese economic data and on dimming hopes for an Israel/Hamas ceasefire.

Chinese CPI fell more than expected (-0.8% vs. (E –0.5%) and increased deflation concerns for that economy.

Geopolitically, Secretary of State Blinken returned from the Mid-East without a Israel/Hamas cease fire deal and oil is rallying as a result.

Today focus will be on Jobless Claims (E: 222K), which rose to a one-month high last week and if claims move closer towards 250k, it will get people’s attention as a hint the labor market is starting to soften (something that’s not priced into stocks).  We also have one Fed speaker, Barkin (8:30 a.m. and 11:30 a.m. ET), but he shouldn’t move markets.

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Updated Market Multiple Targets: S&P 500 Chart

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Updated Market Multiple Targets: S&P 500 Chart: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • S&P 500 Market Multiple Targets Chart – February Update (Shareable PDF)

Stock futures are little changed amid a stable bond market as investors await another busy day of Fed commentary and another key Treasury auction.

Economically, German Industrial Production was better than feared at -3.1% vs. (E) -3.9% Y/Y in December, but the still negative headline is not helping ongoing concerns for a potential recession in Europe this year.

Looking into the U.S. session today, there are two economic reports on the calendar: International Trade in Goods and Services (E: -$62.2B) and Consumer Credit (E: $16.2B). Neither release should move markets but a meaningful rise in Consumer Credit could stoke concerns about a potential rise in delinquencies and weigh on stocks.

Beyond the data, we have another very busy day of Fed speak with Kugler (11:00 a.m. ET), Collins (11:30 a.m. ET), Barkin (12:00 p.m. ET), and Bowman (2:00 p.m. ET) all due to speak around mid-day. Markets have largely absorbed the hawkish shift in tone of the last week but if there is any more dovish-leaning chatter today, it could support a continued rally in equity markets and further stabilize bonds.

Finally, there is a 10-Yr Treasury Note auction at 1:00 p.m. ET and if demand is as strong as it was in yesterday’s 3-Yr Note auction, that could be another bullish catalyst for both stocks and bonds in the afternoon.

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Market Multiple Table: February Update

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Market Multiple Table: February Update: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Market Multiple Table – February Update (Shareable PDF)
  • ISM Services PMI Takeaways: Prices Subindex Surges

U.S. equity futures are little changed as Treasuries stabilize following a 30 basis point spike in yields over the last two sessions while global markets were mixed overnight.

Chinese stocks rallied 4% overnight amid government intervention to stem recent losses while European shares edged up on better than feared Retail Sales and a very strong German Manufacturing Orders Report (+ 8.9%).

Looking into today’s session, there are no economic reports but there is a busy afternoon of Fed speak with Mester (12:00 p.m. ET), Kashkari (1:00 p.m. ET), Collins (2:00 p.m. ET), and Harker (7:00 p.m. ET) all scheduled to deliver commentary. The market will want to hear a less hawkish tone than Powell’s from last week and the weekend in order for Treasuries to continue to stabilize and stocks resume the rally.

Additionally, there is a 3-Yr Treasury Note auction at 1:00 p.m. ET and the outcome could move bond markets and influence equity market trading this afternoon.

Finally, earnings season is beginning to slowdown but there are a few notable quarterly releases today including: SNAP ($0.06), F ($0.13), and CMG ($9.73).

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Jobs Day (Updated Jobs Report Preview)

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

What’s in Today’s Report:

  • Jobs Day (Updated Jobs Report Preview)

Futures are solidly higher ahead of today’s jobs report thanks to strong earnings overnight.

META (up 17% pre-market) and AMZN (up 7% pre-market) posted strong earnings while AAPL (down 2% pre-market) underwhelmed, but overall earnings results were good overnight and that’s pushing futures higher.

Today focus will be on the jobs report and expectations are as follows: 187K job adds, 3.8% Unemployment Rate, 0.3%/4.1% wage growth.  Powell pushing back on a March rate cut helped increase the threshold for a “Too Hot” report, so there’s a wider lane for a “Just Right” reading.  But, if job growth remains very strong (so solidly above 200k) and the other details are “Too Hot,” don’t be surprised if yields rise and stocks decline as some investors start to doubt a May rate cut.

Other notable events today include Consumer Sentiment (E: 78.8, 1-Yr inflation expectations: 2.9%) and the last “important” day of earnings, although neither of those should move markets.

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Was the Fed Decision Hawkish? No. Here’s Why.

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Was the Fed Decision Hawkish? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Was the Fed Decision Hawkish?  No.  Here’s Why.
  • Do We Need to Start to Worry About Banks Again?

Futures are bouncing modestly following Wednesday’s declines as investors digest the Fed decision and look ahead to important earnings after the close.

Economically, EU Core HICP (their CPI) rose 3.3% vs. (E) 3.2% and that’s slightly reducing rate cut expectations.

Today is another important day of economic data and arguably the most important day of earnings results for the Q4 reporting season.

The most important events today start with earnings as we get AMZN ($0.81), AAPL ($2.09) and META ($4.82) earnings after the close and obviously investors will want to see solid results.   Economically, the key reports today are the ISM Manufacturing PMI (E: 47.4), Jobless Claims (E: 214K) and Unit Labor Costs (E: 2.1%), and markets will be looking for in-line data to keep hard landing worries low.  Finally, we also get a Bank of England rate decision, but no change to rates is expected.

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Time to Chase This Market?

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Time to Chase This Market? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Time to Chase This Market?
  • Weekly Market Preview:  Do Rate Cut Expectations for March Keep Falling? (It Depends on the Data)
  • Weekly Economic Cheat Sheet:  Important inflation report on Friday and important growth report on Wednesday.

Futures are modestly higher on momentum from Friday’s record highs, following a mostly quiet weekend of news and despite more economic stress in China.

Chinese markets continued to collapse (Hang Seng, Shanghai and Shenzen all down 2%-3%) after there was no cut to the 1/5 year Prime Loan Rates, despite clear signs of deflation and contracting economic growth.

Today there is one notable economic report,  Leading Indicators (E: -0.3%), but barring a major surprise it shouldn’t move markets.

Instead, focus will shift to earnings as the next two weeks will be the most important ones of this earnings season.  Some important reports today include:  PG ($1.70), JNJ ($2.27), VZ ($1.07), MMM ($2.31), UAL ($1.61), LOGI ($1.13), GE ($0.90).

Bullish

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The Reason Stocks & Bonds Are Declining (You’ve Seen It Before)

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The Reason Stocks & Bonds Are Declining: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • The Reason Stocks & Bonds Are Declining (You’ve Seen It Before)

Futures are bouncing modestly following solid earnings and positive corporate news overnight.

Earnings overnight were decent as TSMC beat expectations while Bank of American upgraded AAPL.

Economically, however, the Aussie jobs report was soft (- 66k vs. (E) 15k) and that’s increasing global growth worries.

Today focus will stay on economic data as we get two important report, Jobless Claims (E: 206K) and Philly Fed Manufacturing Index (E: -6.7).  The Philly index will be especially watched following the implosion of the Empire Manufacturing survey on Tuesday and if we see a similar number this morning, look for some hard landing concerns to drift higher.

Away from those two reports we also get Housing Starts (1.425 million) and there is one Fed speaker, Bostic (7:30 a.m. and 12:05 p.m. ET), but they are unlikely to move markets.

On earnings, results really ramp up next week but some reports we’re watching today include: TSM ($1.37), PPG ($1.50), JBHT ($1.74).

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Sentiment Update

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What’s in Today’s Report:

  • Sentiment Update
  • Empire State Manufacturing Index Falls to Pandemic Lows

U.S. futures are tracking global shares lower as the ECB’s Lagarde became the latest to push back on overly dovish policy expectations. While Chinese economic data showed consumer weakness (but industrial strength) and inflation reaccelerated in Europe. This is adding to the recent trend of less-dovish/more-hawkish money flows.

Toay is lining up to be a busy session as there are a slew of economic reports due this morning. Including: Retail Sales (E: 0.4%), Import & Export Prices (E: -0.6%, -0.6%), Industrial Production (E: -0.1%), and the Housing Market Index (E: 38).

There are also several Fed officials scheduled to speak over the course of the session: Barr, Bowman, and Williams.

Earnings will also continue to come in today with several more notable financial companies reporting: SCHW ($0.65), CFG ($0.60), and DFS ($2.50).

Bottom line, trading has taken a more cautious tone this week with heavier price action in stocks. In order for that to ease and risk appetites return to the market today, we will need to see data that is consistent with a still healthy and resilient consumer but not to the point where the Fed would be inclined to delay rate cuts or cut less in 2024. Investors will look for less-hawkish Fed commentary and stable earnings as well. If those developments do not occur the risk of an acceleration lower in stocks this week will rise meaningfully.

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