Why Have RSP and SPY Diverged?

What’s in Today’s Report:

  • Why Have RSP and SPY Diverged?

Futures are little changed following a mostly quiet night as markets digest the actions by large banks to shore up FRC.

Positively, banks borrowed $165 billion from the Fed via the discount window and the new BTFP this week and that importantly shows banks are using the Fed’s programs to shore up liquidity.

On inflation, core EU HICP met expectations at 5.6% y/y, although that’s an increase from the previous 5.3% gain.

Today focus will remain on any banking headlines and economic data, but as long as there are no surprises from either (meaning KRE is stable) then stocks can digest this week’s volatility and hold yesterday’s gains.

Economically, notable reports today include Industrial Production (E: 0.4%), Consumer Sentiment (E: 67.0) and Leading Indicators (E: -0.2%), but again it’ll take a substantial surprise from them to move markets.

Economic Breaker Panel: February Update

What’s in Today’s Report:

  • Sevens Report Economic Breaker Panel – February Update
  • January Durable Goods Orders Takeaways
  • Breakout in Natural Gas Futures

Stocks futures are trading with modest gains this morning while Treasury yields are tracking European bond yields higher following stubbornly high inflation data overnight.

Economically, both Spanish and French CPI headlines were hotter than expected, above 6%, which saw European rates markets price in a 4% terminal ECB rate for the first time. Government bond yields across the Eurozone notably rose to multi-year highs.

Looking into today’s session, there are several economic reports to watch including: International Trade (E: -$91.0B), Case-Shiller Home Price Index (-0.5%), FHFA House Price Index (E: -0.3%), and Consumer Confidence (E: 108.5).

Traders will be looking for less signs of stagflation in the data as elevated inflation figures and weakening growth metrics were a headwind for equities last week.

Finally, the Chicago Fed’s Goolsbee (who just succeeded Evans) has his first speaking engagement since taking over the role at 2:30 p.m. ET, and as a voting member of the FOMC, his comments will be closely watched for any new clues about Fed policy plans in the months ahead. A notably hawkish tone, could easily cause another bout of volatility in risk assets this afternoon.

Technical Update: Is This Another Bull Trap?

What’s in Today’s Report:

  • Technical Update:  Is This Another Bull Trap?
  • EIA Analysis and Oil Market Update

Futures are flat following a quiet night and as solid CSCO earnings are helping stocks hold yesterdays’ gains.

CSCO beat estimates and raised guidance and the stock is up 4% pre-market and that’s helping broader sentiment.

Economically, the only notable number was the Chinese Home Price Index (in-line at –1.5%).

Today focus will remain on economic data and the key reports are (in order of importance):  Philly Fed (E: -7.2), PPI (E: 0.4%m/m, 5.5% y/y), Jobless Claims (E: 200K) and Housing Starts (E: 1.365M).  As has been the case, solid data that implies a “No Landing’ scenario should support stocks, as long as yields don’t spike too much.

We also have several Fed speakers today including Mester (8:45 a.m. ET), Bullard (1:30 p.m. ET) and Cook (4:00 p.m. ET) although they shouldn’t move markets.

Jobs Report Preview

What’s in Today’s Report:

  • Jobs Report Preview

Futures are moderately lower following a disappointing night of tech earnings and more hot inflation data.

AAPL, AMZN, and GOOGL all reported earnings overnight and the results underwhelmed.  Each stock is down between 2% and 5% pre-market.

Economically, EU PPI rose 1.1% vs. (E) -0.7% and became the third inflation number this week to hint at a rebound.

Focus today will be on the Employment Situation Report and expectations are as follows: Job Adds 185K, UE Rate 3.6%, Wages 0.3% m/m, 4.5% y/y).  Financial media focus will be on the headline job adds number but thanks to Powell’s less hawkish speech it’ll take a big number (300k or more) to be “Too Hot.”  Instead, focus on wages as they are directly related to services inflation, which remains sticky.  If wages are strong, that’ll be a negative.  The other notable economic report today is the ISM Services Index (E: 49.6) and markets will want to see stability in the data (no not worse than expectations).

Did Yesterday’s Data Imply a Soft Landing is More Likely?

What’s in Today’s Report:

  • Did Yesterday’s Data Imply a Soft Landing is More Likely?

Futures are slightly lower as markets digest Thursday’s rally following a mostly disappointing night of earnings.

Intel (INTC) posted very disappointing results and the stock dropped –9% overnight while other earnings reports were mostly mixed.

Economic data was sparse as Euro Zone Money supply was the only notable indicator and it rose 4.7% vs. (E) 4.8%.

Today focus will turn to inflation via the Core PCE Price Index (E: 0.3%, 4.4%) and five-year inflation expectations in U-Michigan Consumer Sentiment (E: 64.6).  The lower those inflation numbers, the better, and if we get soft inflation data that likely will help extend this week’s rally as it’ll increase expectations for a Fed pause in the next month or two.  We also get Pending Home Sales (E: -1.0%) but that shouldn’t move markets.

On the earnings front, important reports today include: CVX ($4.16), AXP ($2.18), and CL ($0.76).

Technical Market Update

What’s in Today’s Report:

  • Technical Market Update
  • Why are Small Caps Outperforming?
  • How Bad Was Economic Data Yesterday? (Answer:  Bad)

Futures are extending Wednesday’s losses following more disappointing earnings and as worries about the economy grow.

Alcoa (AA), Allstate (ALL), and Discovery Financial (DFS) posted soft earnings or negative guidance overnight.

Today we get several important economic reports including, in order of importance: Philly Fed (E: -10.3), Jobless Claims (E: 215K), and Housing Starts (E: 1.362M).

There are also several Fed speakers and the most important one is Brainard (1:15 p.m. ET) and if she’s slightly dovish, that will help markets stabilize.  Collins (9:00 a.m. ET) and Williams (6:35 p.m. ET) also speak today.

Finally on the earnings front, we get more important results today and the market needs some good news.  Reports we’re watching include:  PG ($1.58), FAST ($0.42), NFLX ($0.45), and PPG ($1.15).

Why Friday’s Data Wasn’t As Positive As the Market Implied

What’s in Today’s Report:

  • Why Friday’s Data Wasn’t As Positive As The Market Implied
  • Weekly Market Preview:  Can Inflation Fall Faster than Growth?
  • Weekly Economic Cheat Sheet:  All About Inflation (CPI the Key Report)

Futures are modestly higher mostly on momentum from Friday’s close, following a quiet weekend of news.

Stocks rallied on Friday thanks to increasing hopes for an economic soft landing, and nothing happened over the weekend to offset that hope.

Economic data met expectations as German Industrial Production and EU Unemployment were both in-line.

Today focus will be on the NY Fed Inflation Expectations (Previous:  4.0% one-year, 3.8% three-year), and if they decline from previous levels that will be positive.  We also get one Fed speaker, Bostic (12:30 p.m. ET).

Jobs Report Preview

What’s in Today’s Report:

  • Jobs Report Preview
  • What Political Dysfunction Means for Markets (Not Now, But Later)

Futures are slightly higher following more signs of disinflation in the EU.

Euro Zone PPI fell more than expected (-0.9% vs. (E ) -0.5%) and that’s the third EU inflation statistic this week to imply inflation has peaked and is receding.

Politically, Rep. McCarthy failed to become Speaker again yesterday although he is expected to win eventually.

Focus today will be on economic data and the key reports are all employment related:  Challenger job cuts (Previous 76,835), ADP Employment Report (E: 145K) and Jobless Claims (E: 228K).  Again, markets want to see a moderation in this employment data so underwhelming reports will be embraced by the market.  Finally, we also have two Fed speakers, Bostic (9:20 a.m. ET) and Bullard (1:20 p.m. ET), but data will move markets more than Fed speak at this point.

Why There’s Some Cause for (Cautious) Optimism

What’s in Today’s Report:

  • Why There’s Some Cause for Cautious Optimism

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

Economically the only notable number was the UK Home Price Index, which like the U.S. readings this week saw smaller than expected declines, falling –0.1% vs. (E) -0.7%.

Geopolitically, Russia continued Thursday’s missile bombardment of Ukraine is a clear signal that fighting will rage on as the New Year begins.

Trading today will be dominated by book squaring and year-end positioning but there is one notable economic report, Chicago PMI (E: 41.0), and if it’s weak it could weigh on markets moderately.

A Positive Scenario for 2023

What’s in Today’s Report:

  • Bottom Line – There’s a Positive Scenario for 2023, Too
  • Weekly Economic Cheat Sheet: Focus on Jobless Claims

U.S. equity futures are tracking global markets higher while the dollar is lower in risk-on trading this morning following more positive reopening news out of China.

China will end its eight day quarantine for inbound travelers on January 8th and scrapped international flight limits in the latest move away from Covid-Zero which is bolstering the outlook for global growth in the months ahead and markets are responding favorably to the news.

Today, there are three economic reports due to be released: International Trade in Goods (E: -$97.0B), Case Shiller Home Price Index (E: -1.2%), and FHFA House Price Index (E: -0.5%) but none of them should meaningfully impact the outlook for Fed policy and therefore are likely to have a limited impact on stocks.

There are no Fed speakers today but the Treasury will hold a 2-Yr Note auction at 1:00 p.m. ET. If demand is weak and yields rise following the auction, that could weigh on equities as it would be a mildly hawkish signal from the fixed-income market as we approach the end of the year.


Sevens Report Q4’22 Quarterly Letter Coming January 3.

The Q4 2022 Quarterly Letter will be delivered to advisor subscribers on Tuesday, January 3.

Especially given all the volatility in 2022 and continued challenges for markets, we think the start of the year is a critically important time to communicate with clients and prospects.

We will deliver the letter on the first business day of the quarter because we want you to be able to send your quarterly letter before your competition (and with little-to-no work from you).

You can view our Q3‘22 Quarterly Letter here.

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