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Investors still view ‘bad data as good for stocks’

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Investors still view ‘bad data as good for stocks’: Sevens Report Editor, Tom Essaye, Quoted in Barron’s

Nvidia Earnings Spark a Rally in Tech Stocks

“For now, investors still view ‘bad data as good for stocks’ as it makes rate cuts more likely so a small miss vs. expectations should extend the early rally,” writes Sevens Report Research’s Tom Essaye.

Also, click here to view the full Barron’s article published on May 23rd, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

It’ll be Very Hard for This Market to RallyIf you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

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Explaining This Market to Clients (Summer Edition)

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Explaining This Market to Clients (Summer Edition): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Explaining This Market to Clients (Summer Edition)
  • Weekly Economic Preview – All Eyes on Inflation (Friday)

Futures are modestly higher, led by mega-cap tech, as traders return from the long weekend to mixed headlines.

Economically, an ECB survey showed a favorable dip in medium term (3-year) consumer inflation expectations which was well received by equity traders overnight.

Geopolitically, an Egyptian soldier was killed in a fire fight with Israeli forces at the Rafah border over the weekend while, separately, there were dozens of civilian casualties following an Israeli airstrike just north of Rafah leaving Middle East tensions as high as they’ve been in months (oil is up more than 1%).

Looking into today’s session, there are two economic reports to watch: S&P Case-Shiller Home Price Index (E: 0.3%) and Consumer Confidence (E: 95.3) while several Fed officials are scheduled to speak: Kashkari (9:55 a.m. ET), Cook (1:05 p.m. ET), and Daly (1:00 p.m. ET). The market will want to see more “goldilocks” economic data and preferably less-hawkish Fed chatter.

Additionally, there are two key Treasury auctions, the first for 2-Yr Notes at 11:30 a.m. ET, and the second for 5-Yr Notes at 1:00 p.m. ET. With the total amount being auctioned just shy of $150B, demand for the Notes will be closely watched and weak auction outcomes could push yields higher and weigh on stocks with key inflation data looming later in the week.

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Short vs. Long Term Market Outlook (Is Falling Inflation & Slowing Growth Good for Stocks?)

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What’s in Today’s Report:

  • Short vs. Long Term Market Outlook (Is Falling Inflation & Slowing Growth Good for Stocks?)
  • EIA Update and Oil Market Analysis

Futures are little changed as market digest Wednesday’s new high amidst more dovish global data.

Japanese GDP (-0.5% vs. (E) -0.4%), Aussie Unemployment (4.1% vs. (E) 3.9%) and Italian HICP (their CPI, 0.9% vs. (E) 1.0% y/y) all pointed towards falling inflation and slowing global growth, which investors welcome (for now).

Today is a busy day full of data and Fed speak.  Broadly speaking, if the data/Fed speak is dovish and Treasury yields drop, it’ll extend the rally.

Notable economic data today includes (in order of importance):  Jobless Claims (E: 219K), Philly Fed (E: 7.8), Industrial Production (E: 0.1%) and Housing Starts (E: 1.435MM).

On the Fed, there are numerous speakers including:  Barr (10:00 a.m. ET), Barkin (10:00 a.m. ET), Harker (10:30 a.m. ET), Mester (12:00 p.m. ET), Bostic (3:50 p.m. ET).  But, unless they all start talking about rate hikes (very unlikely), their commentary shouldn’t move markets.

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Is Gasoline Demand Another Economic Warning Sign?

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What’s in Today’s Report:

  • Is Gasoline Demand Another Economic Warning Sign?
  • Did Earnings Season Change the Market Outlook?

Futures are solidly higher thanks to continued momentum from Thursday’s rally following a quiet night of news.

Economically, UK data was stronger than expected (GDP and Industrial Production beat estimates) but it’s not changing BOE June rate cut assumptions.

Today there is just one notable economic report, the University of Michigan Consumer Sentiment Index (E: 77.0) and the key parts of that release will be the 1-Yr Inflation Expectations (E: 3.2%) and the 5-Yr. Inflation Expectations (E: 3.0%).  If both of those numbers are higher than expected, it’ll be another negative signal on inflation and don’t be surprised if Treasury yields rise in response to them and stocks give back these early gains.

In addition to that one economic report, we also get numerous Fed speakers today including: Bowman (9:00 a.m. ET), Logan (10:00 a.m. ET), Kashkari (10:00 a.m. ET), Goolsbee (12:45 p.m. ET) and Barr (1:30 p.m. ET).  However, unless one of them explicitly advocates for rate hikes, they shouldn’t move markets.

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Jobs Report Preview

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What’s in Today’s Report:

  • Jobs Report Preview

Futures are modestly higher ahead of the jobs report thanks to good AAPL earnings and solid economic data.

AAPL posted better than expected earnings and boosted its buyback.  The stock is rallying 6% pre-open and that’s helping to push futures higher.

Economically, the UK Services PMI was better than expected (55.0 vs. (E) 54.9) implying solid growth.

Today focus will be on the jobs report and expectations are: 243K Job Adds, 3.8% Unemployment Rate and 0.3% m/m and 4.0% y/y Wage Growth.  To help extend this late week bounce, markets will need to see the jobs number modestly below expectations (preferably on all three metrics) to imply solid growth but still increase the likelihood of a September rate cut.  If the jobs report prints “Too Hot” across all three metrics, don’t be shocked if Thursday’s rally is given back and then some.

Outside of the jobs report, there are two Fed speakers today:  Williams & Goolsbee (7:45 a.m. ET).  Williams will be the more important of the two as he’s part of Fed leadership and if he brings up rate hikes again, look for an uptick in volatility.

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Was the Fed Decision Positive? (No, Not Really)

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What’s in Today’s Report:

  • Was the Fed Decision Positive? (No, Not Really)
  • EIA Analysis and Oil Market Update

Futures are solidly higher following a mostly quiet night of news as markets further digested Fed Chair Powell pushing back on the idea of future rate hikes.

Economic data showed more buoyant inflation globally as Swiss CPI rose 1.4% vs. (E) 1.2% while the Euro Zone Manufacturing PMI met estimates.

Today the focus will remain on economic data as we get two notable economic reports, Jobless Claims (E: 211K) and Unit Labor Costs (E: 3.3%). If both are “hot” (and especially if Unit Labor Costs are high) then expect higher yields and more pressure on stocks ahead of tomorrow’s Jobs Report.

Earnings season is winding down but there’s an important report via AAPL (E: $1.51) after the close, while I’ll also be watching SQ ($0.72), COIN (E: $1.20) and BKNG ($14.03) for any insight into the state of the U.S. consumer.

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Why Stocks Have Really Pulled Back

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What’s in Today’s Report:

  • Why Stocks Have Really Pulled Back
  • Weekly Market Preview:  Will the Fed and Growth Data Make the Pullback Worse This Week?
  • Weekly Economic Cheat Sheet:  A Very Busy Week (Fed Wednesday, Jobs Report Friday)

Futures are slightly higher following a mostly quiet weekend of news as markets digest last week’s gains ahead of a busy and important week of catalysts.

Economically, Spanish Core HICP (their CPI) rose 2.9% vs. (E) 3.3% y/y, offering a positive note on inflation.

Geo-politically, Secretary of State Blinken is in the Mid-East to push for another Gaza ceasefire and oil is down slightly in response.

Looking forward, this is a very busy and important week filled with numerous potential catalysts including Wednesday’s Fed decision and Friday’s jobs report, but the week starts slowly from a data standpoint as there are no notable reports today.

On earnings, we get some important updates from semiconductor companies today and reports we’re watching include: ON ($1.04), NXPI ($3.16), SOFI ($0.01).

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Investors are on edge the Fed may delay rate cuts

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Investors are on edge the Fed may delay rate cuts: Sevens Report Founder, Tom Essaye, Quoted in MarketWatch

A ‘too hot’ jobs report poses biggest risk to stock-market rally: strategist

The setup for the stock market heading into the release of the Labor Department’s April employment report at 8:30 a.m. Eastern time is a bit out of the ordinary, Tom Essaye, founder of Sevens Report Research, said in a Thursday note.

While either a “too hot” or “too cold” jobs figure is often sufficient to spark a market selloff, the biggest danger on Friday is firmly tilted toward a stronger-than-expected reading, he said.

“Investors are on edge the Fed may delay rate cuts from June until later in the summer (or late in 2024) if we get another hot employment report,” Essaye wrote. “If that occurs, expect a partial repeat of Tuesday,” when the Dow Jones Industrial Average fell nearly 400 points, or 1%, for its worst performance since March 5, while the S&P 500 lost 0.7% and the Nasdaq Composite declined 1%.

Also, click here to view the full MarketWatch article published on April 4th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Jobs Report Preview (An Important One)

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Jobs Report Preview: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Jobs Report Preview (An Important One)
  • Is the Short-Vol Trade Starting to Unwind?
  • EIA Analysis and Oil Market Update

Futures are modestly higher as economic data and corporate earnings were slightly better than expected.

Economically, Euro Zone and UK Composite PMIs were above 50 and that’s pushing back on EU recession worries.

On earnings, Levi Strauss (LEVI) posted strong results (stock up 9% pre-market) and that’s helping to counter soft retailer earnings from PVH and ULTA.

Markets are still sensitive to hawkish data or commentary that reduces June rate cut chances, so the focus today will be on Jobless Claims (E: 213K) and on several Fed speakers including Barkin (12:15 p.m. ET), Mester (2:00 p.m. ET) and Kugler (7:30 p.m. ET).  Tomorrow’s jobs report should keep volatility somewhat subdued, but if there are any hawkish surprises from the data or Fed speak, don’t be surprised if there’s more volatility.

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How oil futures close out the week today will largely depend on how investors digest today’s jobs data

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Sevens Report Analysts Quoted in MarketWatch

Jobs report could decide how oil closes out the week

“How oil futures close out the week today will largely depend on how investors digest today’s jobs data. If it is more ‘market-friendly’ data that points to slowing inflation (specifically wages) and more loosening in the jobs market, oil is likely to rally past the $80/barrel mark,” analysts at Sevens Report Research said in a note.

“Conversely, a ‘hot’ report would likely send futures back towards support in the mid-$70s,” they wrote.

Also, click here to view the full MarketWatch article published on March 8th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.