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Jobs Report Preview

What’s in Today’s Report:

  • Jobs Report Preview (First of Two Key Economic Reports)
  • EIA and OPEC Meeting Analysis

Futures are slightly higher on momentum from Wednesday’s rally and as the market again ignored soft economic data.

Economic data from Europe was again disappointing as German Manufacturers’ Orders slightly missed estimates (-9.0% vs. (E) -8.9%) as did the UK Construction PMI (48.9 vs. (E) 52.0).

Geo-politically, China began massive military drills around Taiwan, although they were previously announced.

Today focus will be on the Bank of England rate decision (E: 50 bps hike) and on weekly Jobless Claims (E: 260K).  Specifically, markets will want to see if the BOE implies more 50 bps hikes are ahead (if so that’s a mild negative for the region).  On jobless claims, will they continue to move methodically towards 300k? (That would be a mild positive as it implies slowing in the labor market, which the Fed needs to get to peak hawkishness).

From a Fed speak standpoint, Mester speaks at 12:00 p.m. ET.

What The Hot CPI Report Means for Markets

What’s in Today’s Report:

  • What the Hot CPI Report Means for Markets
  • EIA Analysis and Update (Demand Falling)

Futures are sharply lower as markets digest the hot CPI amidst numerous hawkish central bank decisions.

Global central banks are aggressively tightening policy and that was displayed yesterday and overnight as the Bank of Canada and the central banks of Singapore, Philippines, and, Chile all hiked more than expected.

Meanwhile, U.S. Fed Fund Futures are now pricing in a 100-bps hike in July.

Today we get two notable economic reports via Jobless Claims (E: 234K) and PPI (0.8% m/m, 10.4% y/y).  Starting with PPI, if we see a big drop (which isn’t expected but possible) that will be a mild positive as PPI is sometimes a leading indicator for broader inflation.  Jobless claims, meanwhile, should continue to tick higher towards 250k.

On the earnings front, Q2 earnings season unofficially kicks off today with results from JPM ($2.85) and MS ($1.55) and in addition to wanting to see earnings beats, markets will be looking for commentary from management on the state of the economy, and if that commentary is cautious it’ll be a headwind on stocks.

Jobs Report Preview

What’s in Today’s Report:

  • Jobs Report Preview

Futures are slightly higher despite negative COVID news from China and after British Prime Minister Boris Johnson announced he intends to resign.

COVID cases rose in Shanghai to the highest level since late May, prompting mass testing and increasing concerns of another lockdown.

Politically, British Prime Minister Boris Johnson will announce his resignation, but this shouldn’t impact stocks.

Today’s focus will be on Jobless Claims (E: 230K) and a continued slow drift higher will imply the jobs market is softening, which is needed if the Fed is going to get to “Peak Hawkishness” sooner than later.  We also have two Fed speakers, Bullard (1:00 p.m. ET) and Waller (1:00 p.m. ET) and we should expect their commentary to be hawkish (they’re two of the louder hawks on the Fed).

Looking Ahead to 2022

What’s in Today’s Report:

  • Looking Ahead to 2022 (The Omicron Threat May be Fading But the Coast Isn’t Clear)
  • Weekly Market Preview (Clear for a Santa Rally but Depends on Omicron Headlines)
  • Weekly Economic Cheat Sheet (Housing Data and Jobless Claims This Week)

Futures are slightly higher on continued momentum from last week’s rally following a quiet holiday weekend.

Omicron optimism continued to help push risk assets higher as markets continued to adopt the idea that while COVID cases will soar, hospitalizations will remain low and as such there won’t be any major lockdowns.

There were no economic reports overnight and the global economic calendar for the week is pretty empty (as is usually the case for this week).

Today there are no notable economic reports and no Fed speakers, so we’d expect generally quiet trading that will be driven by Omicron headlines and year-end positioning (that’s likely to be the case all week).  Any stories that further confirm Omicron COVID is not as severe as the previous COVID will help stocks extend the rally into year-end, while any headlines about lockdowns will be a headwind.

 

Annual Discounts on Sevens Report, Alpha and Quarterly Letter

We’ve continued to be contacted by advisor subscribers who want to use the remainder of their 2021 pre-tax research budgets to extend their current subscriptions, upgrade to an annual (and get a month free), or add a new product (Alpha or Quarterly Letter).

If you have unused pre-tax research dollars, we offer month-free discounts on all our products. If you want to extend current subscriptions or save money by upgrading to an annual subscription (across any Sevens Report product), please email info@sevensreport.com.

Are Policy Mistake Fears Rising?

What’s in Today’s Report:

  • Bottom Line: Are Central Banks Tightening Policy into an Economic Slowdown?
  • Philly Fed and Flash PMI Takeaways (Both Missed Expectations)
  • Chart: Jobless Claims Remain Low

U.S. stock futures are trading lower along with most global equity markets today as investors digest the hawkish shift by most global central banks this week while concerns about the health of the economy rebound continue.

Economically, Eurozone HICP (their CPI equivalent) rose 0.4% vs. (E) 0.5% in November, easing some of the recent inflation concerns while the latest German Ifo Survey missed estimates on both current and future business expectations metrics which weighed on the regional growth outlook.

Today, there are no economic reports due out in the U.S. however there are two Fed speakers to watch: Daly (1:00 p.m. ET) and Waller (1:00 p.m. ET). The market will want to see Fed chatter echo Powell’s mostly dovish tone from the press conference on Wednesday and any hints at a more aggressive or sooner rate hiking cycle will cause more volatility today.

Finally, today is quadruple witching options expiration so expect very high trading volumes along with the threat of amplified moves as traders continue to digest this week’s hawkish pivot amid year-end rebalancing.

What the SPR Release Means for Oil

What’s in Today’s Report:

  • Global Flash Composite PMI Data Takeaways
  • What the SPR Release Means for Oil

Stock futures are trading lower and international markets were mixed overnight as investors look ahead to a very busy day of economic data while volumes are already thinning out given the Thanksgiving holiday tomorrow.

Today, there is a slew of economic data due out including: Durable Goods Orders (E: 0.3%), Q3 GDP (E: 2.1%), Jobless Claims (E: 264K), New Home Sales (E: 790K), Core PCE (E: 0.4%, 4.1%), and Consumer Sentiment (E: 66.9).

There are no Fed officials speaking today however the November FOMC meeting minutes will be released at 2:30 p.m. ET.

Bottom line, investors will be looking for good economic data today, but not so good that it will cause the Fed to accelerate tapering plans or pull forward the first rate hikes. That is especially true for the Core PCE print as it is the Fed’s preferred measure of inflation.

Why Does the Market Think COVID Has Peaked?

What’s in Today’s Report:

  • Why Does the Market Think COVID Has Peaked?
  • EIA Analysis and Oil Market Update

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

Chinese shares saw profit taking (Hang Seng down –2%) and that’s weighing on global stocks slightly, but there was no materially negative news out of China overnight.

Economic data was sparse as the German Gfk Consumer Climate slightly missed expectations (-1.2 vs. –1.0) while the Euro Zone money supply met estimates (up 8.1%).

Today we do get two economic reports including Jobless Claims (E: 340K) and revised Q2 GDP (E: 6.6%) but neither number should move markets unless they are major surprises.  Instead, pre-Powell speech positioning will likely dominate markets today (Powell’s speech is tomorrow) and given stocks hit new highs this week, don’t be surprised if there’s some mild profit taking ahead of Powell’s speech tomorrow.  Finally, in the bond markets, there’s a seven year Treasury auction mid-day today, and if the results are soft look for a continued rally in the 10 year yield (and an improving technical outlook for that yield).

 

Thank You!

I wanted to say a heartfelt, “Thank you” to all of you who sent me condolences and well wishes over the past week.

While I wish I could respond to each individual email or call, there have literally been hundreds of them, and if I took on that endeavor I’d have no time to write the Report! I believe that continuing to stay focused on the

markets and helping us to navigate this unprecedented time successfully is the best way I can show you my thanks, and you can count on me to do just that.

Again, thank you all.  You have made this time easier.

Tom Essaye Quoted in CNBC on August 5, 2021

10-year Treasury yield tops 1.2% after weekly jobless claims data matches expectations

Negatively, there remain aggressive buyers on Treasury dips and it’s going to take a real, impactful headline…Tom Essaye of Sevens Report said in a note. Click here to read the full article.

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Tom Essaye Quoted in Market Watch on August 5, 2021

Treasury yields end higher as jobless claims fall

The 10-year yield bounced off the 1.13% level (which seems to be support) and clearly the 10-year can react…Tom Essaye, founder of the Sevens Report Research, said in a note. Click here to read the full article.

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What the Fed Decision Means for Markets

What’s in Today’s Report:

  • What the Fed Decision Means for Markets
  • EIA and Oil Market Update

Futures are marginally higher following some infrastructure progress combined with a bounce in Chinese stocks.

The bi-partisan $1 trillion infrastructure bill (which the market wants) comfortably passed a key Senate vote on Wednesday, although it still remains a long way from becoming law.

Chinese shares bounced as officials tried to calm markets, although nothing materially positive happened and this should be viewed as nothing more than an oversold bounce.

Today the financial media focus will be on Initial Q2 GDP (E: 8.0%), but as we and others have said, GDP doesn’t usually move markets, and likely won’t today.  Instead, Jobless Claims (E: 390K) will be the key economic report today, specifically whether the increase from last week continues, or is reversed (if it’s reversed, that will be a mild positive for stocks).  We also get Pending Home Sales (E: -0.8%) but that shouldn’t move markets.

On the earnings front, the key number today comes after the close from AMZN ($12.22), while we’ll also be watching MA ($1.72) and MO ($1.17).