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What to Make of Yesterday’s Drop & Jobs Report Preview

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What’s in Today’s Report:

  • What to Make of Yesterday’s Drop
  • Jobs Report Preview
  • Natural Gas Update

Futures are slightly lower as markets digest the whiplash of the past two trading days following a mostly quiet night.

German economic data again badly missed estimates as German Industrial Production fell –3.9% vs. (E) -1.0% and fears of outright stagflation in the EU are rising quickly.

Today focus will be on the Jobs Report and estimates are as follows:  Job Adds: 400K, UE Rate: 3.6%, Wages: 0.4% m/m, 5.5% y/y.  This market needs a “Goldilocks” report that’s subdued on wages and with job adds modestly below the estimate of 400k.  If markets get that Goldilocks jobs report it should help stocks stabilize.  If the report ends up “Too Hot” though, especially on wages, brace for more selling.

There are also numerous Fed speakers today including: Williams (9:15 a.m. ET), Kashkari (11:00 a.m. ET), Bostic (3:20 p.m. ET), Waller and Bullard (7:15 p.m. ET) and Daly (8:00 p.m. ET).  Don’t be surprised if they all sound more hawkish than Powell did on Wednesday.  Remember, it appears the Fed’s tactic is to “Talk Tough” on looming rate hikes and inflation, yet be more measured on actual rate hikes than rhetoric would suggest.  Regardless, if there’s a consistent chorus of hawkish commentary, that will likely weigh on stocks, at least partially.

Updated Jobs Report Preview

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What’s in Today’s Report:

  • Jobs Report Preview (Slightly Updated)

Futures are modestly higher ahead of today’s jobs report as markets bounce back from Thursday’s late-day selloff.

Markets dropped into the close yesterday but that was driven by quarter-end re-positioning and rebalancing, not be any news, so it’s being partially unwound this morning.

Economic data underwhelmed as the EU and UK March Manufacturing PMIs both slightly missed estimates.

Today’s focus will be on the Jobs Report and expectations are as follows: Job Adds:  490K, UE Rate:  3.7%, Wages: 0.4% m/m, 5.5% y/y).  The estimates for the jobs report have crept higher the past two days so we slightly revised our “Too Hot” and “Just Right” ranges for today’s jobs report, and they are included inside today’s Sevens Report.

Outside of the jobs report, we also get the ISM Manufacturing PMI (E: 58.6), and markets will want to see stability in the data above all else (so no big miss vs. expectations).  We also get one Fed speaker, Evans at 9:05 a.m. ET, but he shouldn’t move markets.

For Sevens Report Quarterly Letter subscribers, the Q1 ’22 Quarterly Letter and compliance back up will be delivered via email around mid-day today.  If you are not a subscriber and are interested in the letter, please click this link to learn more.

Finally, today is April Fools Day, so be extra wary of any preposterous declarations from your family, friends, or colleagues.

Jobs Report Preview

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What’s in Today’s Report:

  • Jobs Report Preview
  • EIA Analysis/Oil Market Update

Futures are slightly higher as oil drops sharply on reports the U.S. is considering a massive oil release from the Strategic Petroleum Reserve.

Reports hit overnight that the U.S. is considering releasing 180 million barrels of oil from the SPR over the coming six months, and oil is down 6% as a result.

Economic data was slightly underwhelming as the March Chinese manufacturing PMI dropped below 50 to 49.5.

Today focus will be on inflation, as we get the Fed’s preferred measure of inflation via the Core PCE Price Index (E: 0.4%, 5.5%).  If these numbers slightly underwhelm vs. expectations, that could lead to more hope inflation pressures are finally peaking, and we could see a rally as a result.  Today we also get Jobless Claims (E: 195K) and have one Fed speaker, Williams at 9:00 a.m. ET.

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.