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What the Fed Decision Means for Markets

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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).

Why Powell Wasn’t Dovish (Tapering is Coming)

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What’s in Today’s Report:

  • Why Powell Wasn’t Dovish (Tapering is Coming)
  • Infrastructure Update (Tax Hike Risks)
  • Oil Update, EIA Analysis, and OPEC Outlook (Where is Oil Going?)

Futures are modestly lower following mixed Chinese economic data.

Chinese Fixed Asset Investment, Retail Sales, and Industrial Production all beat estimates, although they were offset by a miss in Q1 GDP (7.9% vs. (E) 8.2%).  But, while GDP got most of the headlines, the bottom line is the rest of the data is more current, and on balance, the outlook for the Chinese economy has improved (which is good for global stocks).

Today there are numerous economic reports to watch including, in order of importance:   Philly Fed Manufacturing Index (E: 28.5), Empire State Manufacturing Index (E: 18.3), Jobless Claims (E: 368K), and Industrial Production (E: 0.7%).  As has been the case “Goldilocks” data with muted pricing indices will help stocks rally (markets won’t want to see data that’s too strong or too weak).

Turning to the Fed, Chair Powell speaks to the Senate at 9:30 a.m. ET but we should expect the same message as Wednesday and his comments shouldn’t move markets.

Finally, earnings season continues to gain momentum and some reports we’ll be watching today include: TSC ($0.89), MS ($1.63), UNH ($4.41), USB ($1.14), BK ($1.01).

Tom Essaye Quoted in Barron’s on July 1, 2021

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Walgreens Dips, Micron Falls, and Stocks Are Steady After Jobless Claims Data

Markets will want ‘Goldilocks’ data to start the quarter, in that the numbers show solid activity, but…writes Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

What the Fed Decision Means for Markets

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What’s in Today’s Report:

  • What the More Hawkish Than Expected Fed Decisions Means for Markets
  • EIA Analysis and Oil Market Update

Futures are modestly lower as markets digest yesterday’s more hawkish than expected FOMC meeting.

The U.S. dollar is surging this morning off the more hawkish than expected Fed and gold is getting hit hard as currency markets re-price for a less dovish Fed.

Economically the only notable number was the Australian Labour Force Survey, which handily beat expectations (115k job adds vs. (E) 30k), reflecting the global nature of the economic recovery.

Today there are two notable economic reports, Jobless Claims (E: 364K) and Philadelphia Fed manufacturing Index (E: 30.8) but unless either number is a substantial surprise, they shouldn’t move markets.  Instead, markets will be watching the dollar and Treasury yields for reaction to the Fed.  If both rally hard throughout the day, that will pressure stocks further as it erodes some of the “dovish Fed” support that’s helped the S&P 500 rally to recent highs.

Tom Essaye Quoted in Barron’s on May 27, 2021

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Stocks Edge Higher as Jobless Claims Continue to Decline

Inflation not being temporary is easily the biggest long-term risk to this market, because it will cause the Fed to get more…writes Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

Key Summer Market Events (Inflation Today, Fed Tomorrow)

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What’s in Today’s Report:

  • Key Summer Market Events Part 1:  Inflation
  • EIA Analysis and Oil Market Update

Futures are slightly lower following a generally quiet night of news, although on the margin markets are seeing global central banks get less dovish.

On Wednesday, the Reserve Bank of New Zealand had hawkish commentary, while overnight the Bank of Korea hinted at a rate hike before year-end.  Neither the Reserve Bank of New Zealand nor the Bank of Korea will move markets, but the bottom line is we are seeing a global rising tide of “less dovish” central bank policy, and that’s likely to cause volatility as we move forward throughout the year.

There was no market moving economic data overnight.

Today we get several notable economic reports including (in order of importance): Jobless Claims (E: 450K), Durable Goods (E: 0.7%), Revised Q2 GDP (6.5%), and Pending Home Sales (E: 2.0%).  Bottom line, markets will want to see solid, but not “Too Hot” economic data, and if we get that result the data should help stocks rally today.

Was the Strong CPI Report A Bearish Gamechanger?

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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.

Tom Essaye Interviewed with Yahoo Finance on May 6, 2021

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New jobless claims fall to fresh pandemic-era lows

Sevens Report Research Founder & President Tom Essaye joins Yahoo Finance Live to discuss the latest market action following better-than-expected jobless claims. Click here to watch the full interview.

Is Stimulus the New QE?

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What’s in Today’s Report:

  • Is Stimulus the New QE?
  • Economic Data:  Jobless Claims Hit a Low for the Recovery

Futures are moderately lower following a disappointing night of earnings.

Super cap tech earnings were fine in general but didn’t meet lofty expectations, and AAPL, AMZN, FB and TWTR all dropped after posting results after the close.  GOOGL was the only major tech stock to rally after earnings, and that tech weakness is why futures are lower this morning.

Politically, it was a quiet night and according to the polls the Blue Wave remains the likely election outcome.

Today there are a few notable economic reports, including Core PCE Price Index (E: 1.7%), which is the Fed’s preferred measure of inflation, as well as Employment Cost Index (E: 0.6%) and Consumer Sentiment (E: 81.2).  But, they shouldn’t move markets unless there’s a major surprise in the inflation data.

Instead, focus today will remain on the latest polls (does the race tighten?  If so that will weigh on stocks modestly) and coronavirus response (do we get more lockdowns?).

What the Fed Decision Means for Markets (Positive but not a Silver Bullet)

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What’s in Today’s Report:

  • What the Fed Decision Means for Markets (Positive, But Not a Silver Bullet)

Futures are lower following disappointing headlines on U.S. stimulus progress, combined with profit taking ahead of multiple important market catalysts coming today.

U.S. stimulus bill talks were said to be at an “impasse” late Wednesday, and that’s weighing on sentiment (although this drama is to be expected, as we cautioned last week, and a deal is still very much expected by mid- August).

Economically, German Q2 GDP missed estimates (-10.1% vs. (E) -9.4%), which is a reminder just how much damage was inflicted on the global economy in Q2.

As mentioned, one of the reasons futures are weaker this morning is book squaring ahead of several important economic and earnings events today.

First, the most important economic report of the day is Jobless Claims (E: 1.38M).  We address this more in the Report, but there are growing signs the U.S. economic recovery is pausing or stalling, and that’s not priced into stocks above 3200 in the S&P 500.  If we see another notable increase in weekly claims (say through 1.5M) that will amplify fears the recovery is stalling and likely weigh on stocks.

Then, on the earnings front, we get four of the most important stocks in the market announcing results after the close: AMZN (E: $1.75), AAPL (E: $1.99), FB (E: $1.44), GOOGL (E: $8.43).  The earnings results will be “fine” but these stocks have had huge runs, and if they disappoint vs. elevated expectations, just due to these stocks weights in the S&P 500, it could pressure markets after hours.

Finally, today we will get the initial look at Q2 GDP, and it will be historic as it’s estimated to be -35% seasonally adjusted annual rate (remember GDP is usually around 2% saar).  I never in my life thought we’d see such a number, and I hope we don’t ever see it again.  But, today history will be made as the worst GDP print ever.