“At this point, and with yields this high, markets need to see solid data and that means the ISM Manufacturing PMI moving closer towards 50 and beating expectations,” Sevens Report Research’s Tom Essaye writes. Click here to read the full article.
At that price, the S&P is aggressively pricing in a lot of good things occurring and virtually zero negative surprises, Sevens Report analyst Tom Essaye wrote Tuesday. Click here to read the full article.
“Yes, AI does have great potential and it does appear to be the ‘next big thing’,” wrote Tom Essaye, a former Merrill Lynch trader who founded The Sevens Report newsletter. “But I don’t see how that promise can offset the reality of higher interest rates and more pressure on the economy, at least not for a sustainable period.” Click here to read the full article.
What’s in Today’s Technical Report:
S&P 500 futures are little changed to start the week this morning. Last week’s pullback paused at a longer standing, multi-week uptrend line leaving the broader equity at a tipping point. How the market trades today will very likely decide if the S&P will continue to bleed lower or break last week’s downtrend and retest the recent highs.
The Nasdaq has been a notable outperformer this year but there are cracks emerging in the rally and we outline key levels to watch this week within the Report.
Among the sectors, we view five sectors as trending higher, four as market neutral, and two as trending lower.
In the currency and bond markets, both the dollar and multiple benchmark Treasury Notes have pulled back to critical price support zones and whether those levels hold or not will have a varying impact on all asset classes.
Commodities as an asset class have been fluctuating in a tight range in 2023 with gold outperforming and oil underperforming, but there are signs that oil is poised to take the lead in the complex and gold may be losing upside momentum.
Finally, the VIX is still deeply under pressure which is confusing many investors but we dive into the specific reasons for the movement in the index and what to look for in the weeks and months ahead as we continue to navigate this historically difficult market backdrop amid very uncertain macroeconomic dynamics.
“Bottom line, banks have reemerged as the primary influence on markets in the back half of the week and if the weakness in the sector continues today, stocks will have a very hard time extending yesterday’s modest bounce,” says Tom Essaye, the founder of Sevens Report Research. Click here to read the full article.
What’s in Today’s Report:
Stock futures are cautiously higher and yields are bouncing globally following better than expected economic data overnight and more stable price action in U.S. bank shares while traders continue to unwind hawkish Fed policy bets ahead of today’s CPI report.
Economically, the U.K’s ILO Unemployment Rate came in at 3.7% vs. (E) 3.8% which is pressuring Gilts (down 11 bp) and lifting yields across Europe and the U.S. while the NFIB Small Business Optimism Index rose to 90.9 vs. (E) 89.9.
Looking into today’s session, focus will be on the February Consumer Price Index release before the bell with the headline expected to rise 0.4% m/m (6.0% y/y) while the all-important Core CPI figure is also expected to rise 0.4% m/m (5.5% y/y).
There are no Fed speakers today so if the inflation data comes in hot, expect a rebound in yields that would likely pressure equities as traders reassess the less-hawkish policy expectations that have been priced into rates markets since the SVB debacle began.
Additionally, bank shares (KBE) will remain in focus and if contagion fears persist and financial stocks remain under pressure, it will be hard for the broader equity market to meaningfully stabilize, much less recover some of the recent losses.
“We are now witnessing the biggest game of ‘Chicken’ between the Fed (who says rates are going to above 5%) and the market (who thinks the Fed cuts rates at least twice this year) that I’ve ever seen,” said Tom Essaye, founder of Sevens Report Research, in a Tuesday newsletter. Click here to read the full article.
What’s in Today’s Report:
Futures are slightly higher following a better night of earnings and more encouraging inflation data.
Earnings from NFLX and PPG were solid after yesterday’s close and that’s helping to slightly bolster sentiment.
On inflation, Japanese CPI was slightly better than estimates (4.0% y/y vs. (E) 4.1%) and that will help to reduce hawkish expectations for the BOJ.
Today there’s just one economic report, Existing Home Sales (E: 3.97 million) and that shouldn’t move markets. So, focus will be on Fed speak and we get two speakers today: Harker (9:00 a.m. ET) and Waller (1:00 p.m. ET). If they reiterate the desire for Fed Funds to get above 5%, despite the recent progress on inflation, that will be a mild headwind on stocks.
On earnings, two notable results to watch today are ALLY ($0.98) and STT ($2.00).
“In China, Covid-19 cases continue to explode higher and there were reports of overwhelmed hospitals, but officials are proceeding with a full economic reopening.” said Tom Essaye, the founder of Sevens Report Research. Click here to read the full article.
What’s in Today’s Report:
Futures are higher on potential improvement in the UK fiscal drama and on better than feared economic data.
UK PM Truss will meet with the UK Office for Budget Responsibility today and the hope is something comes from the meeting to further stabilize markets.
Economically, the September Chinese manufacturing PMI beat estimates and rose back above 50 (50.1 vs. (E) 49.4).
The key event today will be the result of the meeting between UK PM Truss and the Office for Budget Responsibility, as that whole situation needs to stabilize if stocks are going to hold up. Beyond the UK fiscal drama, today there is an important inflation report, the Core PCE Price Index (E: 0.5% m/m, 4.8% y/y) but unless it surprisingly drops, it shouldn’t move markets.
Finally, there are several Fed speakers today but the most important one is Brainard (9:00 a.m. ET) and if she’s slightly dovish, that could help stocks further rally. Other speakers include Barkin (8:30 a.m., 12:30 p.m. ET), Bowman (11:00 a.m. ET) and Williams (4:15 p.m. ET).