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Tom Essaye Quoted in CNBC on August 8th, 2022

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Strong economic data puts ‘Fed pivot’ rally in danger, Essaye says

The market has rallied hard on the idea of a Fed pivot. Friday’s jobs report didn’t support that hope and, if anything, will make the Fed more resolute about rate hikes. So, now inflation needs to clearly show signs of peaking and declining, otherwise we’d expect this market to abandon some of that near-term hope, and for volatility to increase, Essaye wrote. Click here to read the full article.

Tom Essaye Quoted in Barron’s on August 4th, 2022

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The Dow Wavered, Alibaba Gained—and What Else Happened in the Stock Market Today

I think that as we are on the precipice of this jobs report, really what we’re seeing today is a bit of digestion of that of the recent of the two days gains,” Tom Essaye, founder of Sevens Report Research, told Barron’s on Thursday. Click here to read the full article.

 

Jobs Day

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What’s in Today’s Report:

  • Jobs Day
  • Why the BOE Hiked 50 bps Yesterday

Futures are flat ahead of today’s jobs report and following a generally quiet night of news.

The only notable economic report was German Industrial Production and it beat estimates rising 0.4% vs. (E) -0.4%.

Geo-politically, China suspended military, climate, and drug enforcement communications with the U.S in retaliation for the Pelosi visit to Taiwan.  But, unless retaliation from China impacts U.S./China trade or commodities prices, markets will largely ignore it.

Today the focus will be on the jobs report and the key for markets is that it shows easing wage pressures and moderation in the labor market.  So, a mildly underwhelming reports vs expectations (E: 250K job adds, 3.6% UE Rate, 5.0% y/y wage growth) is the best outcome for stocks.

There’s also one Fed speaker today, Barkin at 8:00 a.m. ET, but he shouldn’t move markets.

Jobs Report Preview

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What’s in Today’s Report:

  • Jobs Report Preview (First of Two Key Economic Reports)
  • EIA and OPEC Meeting Analysis

Futures are slightly higher on momentum from Wednesday’s rally and as the market again ignored soft economic data.

Economic data from Europe was again disappointing as German Manufacturers’ Orders slightly missed estimates (-9.0% vs. (E) -8.9%) as did the UK Construction PMI (48.9 vs. (E) 52.0).

Geo-politically, China began massive military drills around Taiwan, although they were previously announced.

Today focus will be on the Bank of England rate decision (E: 50 bps hike) and on weekly Jobless Claims (E: 260K).  Specifically, markets will want to see if the BOE implies more 50 bps hikes are ahead (if so that’s a mild negative for the region).  On jobless claims, will they continue to move methodically towards 300k? (That would be a mild positive as it implies slowing in the labor market, which the Fed needs to get to peak hawkishness).

From a Fed speak standpoint, Mester speaks at 12:00 p.m. ET.

What Can Take Stocks Sustainably Higher?

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What’s in Today’s Report:

  • What Can Take Stocks Sustainably Higher?
  • Weekly Market Preview:  Does Fed Commentary Get Less Hawkish?
  • Weekly Economic Cheat Sheet:  Jobs Report Friday

Futures are slightly lower as markets digest last week’s big rally and following generally disappointing European economic data.

Data from Europe underwhelmed as German Retail Sales plunged –9.8% vs. (E) 7.5%, the biggest annual drop in 40 years.

The July EU and UK manufacturing PMIs were in-line with low expectations (Euro Zone manufacturing PMI 49.8 vs. (E) 49.6 and UK manufacturing PMI 52.1 vs. (E) 52.2.)

Today focus will be on the ISM Manufacturing PMI (E: 52.2) and markets will want to see a moderation in the data – a decline to show economic momentum is cooling, but no sudden drop.  Practically speaking, if the ISM PMI drops to or below 50, that might scare markets that the economy is slowing too quickly.

Tom Essaye Quoted in Kiplinger on July 7th, 2022

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Stock Market Today: S&P Surges to Fourth Gain in a Row

The key for tomorrow’s jobs report is that it furthers the idea that we’ve hit ‘peak hawkishness’ with the Fed and peak inflation…says Tom Essaye, editor of the Sevens Report. Click here to read the full article.

 

Why Stocks Rallied Yesterday

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What’s in Today’s Report:

  • Why Stocks Rallied
  • Jobs Report Preview (Redux)
  • Is the VIX Fixed? (Chart)
  • Oil Update: Demand Rebound Helps Energy Markets Stabilize

Stock futures are trading modestly lower with EU markets this morning as traders digest yesterday’s gains ahead of today’s June jobs report.

Sadly, former PM of Japan, Shinzo Abe, has died after an assassination attempt at a campaign stop overnight.

Economically, Japanese Household Spending fell -1.9% vs. (E) +1.2%  in May, rekindling concerns about the health of global growth.

Looking into today’s session, the focus will be almost entirely on the June Employment Situation report from the BLS (E: Job Adds 270K, Unemployment Rate 3.6%, Wages 5.0% y/y) which is due out at 8:30 a.m. ET. There is also one Fed official speaking this morning: Williams (8:30 a.m. and 11:00 a.m. ET).

Bottom line, the market will want to see jobs data that meets our “Just Right” scenario from our Jobs Report Preview which would suggest we are seeing slowing growth in the labor market, yet not a full-on collapse, and increase hopes we are close to or beyond “peak hawkishness” from the Fed. That would open the door to a continued relief rally, however, a report that is either too strong or overly disappointing could send stock falling sharply today.

Jobs Report Preview

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What’s in Today’s Report:

  • Jobs Report Preview

Futures are slightly higher despite negative COVID news from China and after British Prime Minister Boris Johnson announced he intends to resign.

COVID cases rose in Shanghai to the highest level since late May, prompting mass testing and increasing concerns of another lockdown.

Politically, British Prime Minister Boris Johnson will announce his resignation, but this shouldn’t impact stocks.

Today’s focus will be on Jobless Claims (E: 230K) and a continued slow drift higher will imply the jobs market is softening, which is needed if the Fed is going to get to “Peak Hawkishness” sooner than later.  We also have two Fed speakers, Bullard (1:00 p.m. ET) and Waller (1:00 p.m. ET) and we should expect their commentary to be hawkish (they’re two of the louder hawks on the Fed).

Jobs Day

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What’s in Today’s Report:

  • Jobs Day
  • Why the ADP Report Helped Stocks Rally

Futures are slightly lower following a generally quiet night of news as markets look ahead to today’s jobs report.

Economic data from Europe underwhelmed as Euro Zone Services PMI declined to 56.1 vs. (E) 56.3 while Euro-Zone Retail Sales missed estimates, falling –1.3% vs. (E) 0.4%.

Elon Musk made cautious comments saying he had a “super bad” feeling about the economy in a Reuters interview.

Today’s focus will be on the Jobs Report and expectations are as follows: Job Adds (E: 325k), UE Rate (E: 3.5%), Wages (E: 0.4% m/m & 5.3% y/y).  As long as data shows “moderation” in the labor market (so a positive number but in the lower part of the range) then stocks can extend Thursday’s rally.  Other data today includes  ISM Services PMI: 56.3, and we get one Fed speaker:  Brainard (10:30 a.m. ET).

Jobs Report Preview

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What’s in Today’s Report:

  • Jobs Report Preview
  • Is Good Economic Data Bad for Markets?

Futures are modestly higher following a soft EU inflation reading and on reports, OPEC members may increase oil production.

Euro Zone PPI undershot expectations (1.2% vs. (E) 2.3%) offering some hope that inflation in the EU is peaking.

Oil is down 2.5% after Saudi Arabia said it may increase oil production to make up for any Russian shortfall.

Today’s focus will be on the economic and inflation data including, in order of importance: ADP Employment Report (E: 240k), Unit Labor Costs (E: 11.6%), and Jobless Claims (E: 210k).  If the data is “Goldilocks” then this early rally can continue.  Finally, there are two Fed speakers today, Logan (12:00 p.m. ET) and Mester (1:00 p.m. ET), with the latter more important (and if she’s hawkish that will weigh on sentiment).