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Have the Real Headwinds on Stocks Even Started Yet?

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What’s in Today’s Report:

  • Have the Real Headwinds on Stocks Even Started Yet?
  • Weekly Market Preview:  Is Economic Growth Stable?
  • Weekly Economic Cheat Sheet:  Jobs Report Friday

Futures are little changed following a quiet weekend of news as investors await key economic data later this week.

Geo-politically, in-person peace talks between Russia and Ukraine will resume on Tuesday in Turkey and there remains some cautious optimism for progress towards a cease-fire.

Economically there were no notable reports overnight, although Shanghai is entering a two-phased COVID lockdown that weighed on oil and Chinese shares overnight (as that’s negative for economic growth and oil demand).

Today there are no notable economic reports and no scheduled Fed speakers, so focus will remain on oil (do the early declines continue?) and geo-politics, as any more hints of a cease fire will put a tailwind on stocks.

Jobs Day

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What’s in Today’s Report:

  • Jobs Day (An Important Report)

Futures are moderately lower and European markets are down 3% as the Russia/Ukraine war shows little to no signs of actual de-escalation.

Russian forces attacked the largest nuclear power plant in Ukraine (and Europe) and a fire broke out at the plant.  The fire has been extinguished, but Russians now control the plant and the episode highlights the increasing chances of regional collateral damage from the ongoing conflict.

Today focus will remain first on the Russia/Ukraine conflict and any headlines about a cease-fire will obviously result in a knee-jerk rally higher (although to be clear no cease-fire headlines are expected today).

Away from Russia/Ukraine, the key event today is the Employment Situation report and expectations are as follows:  Job adds: 390K, Unemployment Rate: 3.9%, Wages: 0.5% m/m, 5.8% y/y.  Especially given geopolitical concerns, the market needs a “Just Right” number to help limit losses this morning, and if we get a “Too Hot” reading (on all three metrics) or a very soft number, expect losses to accelerate.

Finally, we get one Fed speaker today, Evans (8:45 a.m. ET), but he shouldn’t move markets given Powell’s testimony the past two days.

Jobs Report Preview

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What’s in Today’s Report:

  • Jobs Report Preview
  • Oil Market Update and EIA Analysis

Futures are slightly lower following a mostly quiet night of news as the world awaits the results of the latest peace talks today between Russia and Ukraine.

Russia continued its bombardment of Ukraine’s cities while another round of peace talks will occur today.

Economic data was slightly underwhelming as Chinese, UK, and EU February composite PMIs slightly missed estimates.

Today’s focus will be on the Ukraine/Russia peace talks and if a cease-fire is agreed to, that will cause another knee-jerk rally in stocks.

Beyond geopolitics, we also get several important economic reports today.  The key report is the ISM Services PMI (E: 60.9), and markets will want to see stability in those numbers.  We also get Jobless Claims (E: 232K) and Unit Labor Costs (E: 0.3%).  The later is a notable inflation indicator and if it’s “hot” that could weigh slightly on stocks.

Finally, we get the second half of Powell’s testimony (10:00 a.m. ET), although we likely won’t get any surprises.   Barkin (12:00 p.m. ET) and Williams (6:00 p.m. ET) also speak today but shouldn’t move markets.

Tom Essaye Quoted in Investing.com on February 3, 2022

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Asian Stocks Mixed, Recovery from $250B Meta Wipeout Continues

The looming jobs report is a reminder that expectations for Fed policy are the key influence on this market right now…Tom Essaye, a former Merrill Lynch trader who founded The Sevens Report newsletter, told Bloomberg. Click here to read the full article.

Jobs Report Preview

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What’s in Today’s Report:

  • Jobs Report Preview
  • Why Surging EU HICP Matters to Us
  • EIA Analysis and Oil Market Update

Futures are sharply lower following a big earnings miss by Facebook (FB was down 20% after hours).

FB posted disappointing margins and guidance and the steep decline in the stock is pulling futures lower.

EU and UK Composite PMIs were mixed as the EU reading slightly missed while the UK PMI beat estimates, although neither number is moving markets.

Today will be a busy day.  First, we get two central bank announcements (BOE at 7:00 a.m. and ECB at 7:45 a.m.).  The BOE is expected to hike rates 25 basis points and while there’s no change expected to ECB policy if Lagarde is hawkish at her press conference that will add to the earnings-inspired declines.

We also get some notable economic data, including the ISM Services PMI (E: 59.9), Jobless Claims (E: 250K), and Productivity and Costs (E: 2.4%, 1.7%) and as has been the case, markets will crave stability to ward off stagflation fears.

Finally, on the earnings front, AMZN ($3.88) after the close is the big report today.  Of the super cap tech stocks, we’re had some good reports (AAPL/MSFT/GOOGL) and some bad reports (NFLX/FB), and markets need AMZN to land in the former.  Beyond AMZN, some other reports we’ll be watching include: MRK ($1.52), LLY ($2.51), COP ($2.20), HON ($2.08),  SNAP ($0.10), and F ($0.43).

Why the Bounce Can Continue (But Volatility Isn’t Over)

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What’s in Today’s Report:

  • Why Stocks Can Bounce Further (But Volatility Isn’t Over)
  • Technical Update:  Important Support and Resistance Levels to Watch
  • Weekly Economic Cheat Sheet:  Jobs Report Friday

Futures are slightly lower following a quiet weekend as markets digested last week’s volatility and Friday’s rally.

Atlanta Fed President Bostic was encouraged by Friday’s inflation data and expected three hikes this year, which is less hawkish than the current market expectation.

China’s manufacturing PMI slightly best estimates at 51.1 vs. (E) 51.0, further implying that economy is stabilizing.

There are no economic reports today, but there are two Fed speakers, Daly (11:30 a.m. ET) and George (12:40 p.m. ET) and if they echo Bostic’s “not as hawkish as expected” commentary from this weekend, then stocks can extend the rally.

On the earnings front, most of the big reports come later this week (FB, GOOGL, AMZN) but after the close today, we get NXPI ($2.98) and markets will be focused on chip availability, and if there’s positive commentary there that could be another tailwind on this market.

The Single Reason the FOMC Minutes Were Hawkish

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What’s in Today’s Report:

  • Jobs Report Preview
  • The Single Reason the FOMC Minutes Were Hawkish

Futures are little changed following Wednesday’s sell-off, as solid economic data is helping sentiment.

The Chinese December Composite PMI beat estimates at 53.0 vs. (E) 51.2, the second straight better than expected data point from China.  UK Composite PMI also beat estimates, imply a resilient economy in response to Omicron.

President Biden and Senator Manchin are set to resume negotiations on “Build Back Better” signaling the legislation isn’t dead (again passage of this in Q1 shouldn’t shock markets but it will not likely be a major market influence, either).

Today’s focus will be on economic data, specifically Jobless Claims (E: 205K) and the ISM Services PMI (E: 67.0).  If the data is very strong, will that increase concerns the Fed will get even more hawkish, and that will pressure stocks again.

Two Questions to Start 2022

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What’s in Today’s Report:

  • Two Key Questions To Start 2022
  • Weekly Market Preview:  Omicron, Build Back Better Progress?
  • Weekly Economic Cheat Sheet:  A Busy Start to the Year (Highlighted by the Jobs Report Friday)

Futures are starting the new year with moderate gains driven mostly by momentum/start of year positioning, following a quiet weekend of news.  Many major markets today (London, Japan, Australia, U.S. Bonds) are closed.

Tesla (TSLA) reported better than expected deliveries for the fourth quarter and the stock is up 7% pre-market, and that’s helping markets rally.

There was no new news on Omicron over the weekend as cases skyrocket but hospitalizations remain relatively low.

With so many major markets closed, today will be a mostly quiet day, and barring any surprises tomorrow will be the first “real” trading day of the year.  We do get one notable economic report today, the Markit December Manufacturing PMI (E: 57.8), and markets will want to see a “Goldilocks” number that shows Omicron isn’t a major economic headwind, but at the same time the data isn’t so strong it makes the Fed more aggressive.

 

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Market Multiple Table Chart

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What’s in Today’s Report:

  • Market Multiple Table Chart
  • EIA Analysis and Oil Update

Futures are modestly lower on a slightly hawkish Reuters article about ECB QE and as markets digest this week’s rally.

According to Reuters, the ECB is considering tapering its QE program in March, which is sooner than markets expected and is another reminder that global central banks will be removing accommodation throughout 2022.

Economic data was sparse overnight as Chinese CPI met expectations rising 0.4%.

Today the only notable economic report is Jobless Claims (E: 223K) and they should show continued improvement in the labor market.  Additionally, markets will remain on the lookout for any official government data or more findings from MRNA/PFE on vaccine effectiveness against Omicron, and anything that implies substantial protection against infection and severe illness will be a tailwind on stocks (although at this point the market doesn’t view Omicron as a material threat so the tailwind won’t be that strong).

 

Annual Discounts on Sevens Report, Alpha and Quarterly Letter

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Tom Essaye Quoted in Barron’s on December 3, 2021

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The Dow Fell, November’s Jobs Report Missed—and What Else Happened in the Stock Market Today

Initially, the stock market took the jobs report as good news. Any result above 200,000 but not wildly above expectations..wrote Tom Essaye, founder of Sevens Report Research. Click here to read the full article.