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Why the Transmission Protection Instrument Matters to Markets

What’s in Today’s Report:

  • Why the Transmission Protection Instrument Matters to Markets
  • ECB Decision Takeaways (Not Hawkish Enough)
  • Another Sign Inflation Has Peaked?

Stocks are resilient this morning as futures are only slightly lower despite disappointing overnight earnings and ugly economic reports from Europe.

Earnings overnight were bad with several ugly reports including SNAP (-30%), COF (-3.5%), and STX (-13%).

Economically, July flash PMIs from the EU were also ugly as the composite PMI fell into contraction territory at 49.6 vs. (E) 51.0.

Hope that inflation has peaked is the reason stocks are resilient lately, so today’s focus will be on the July Flash Manufacturing PMI (E: 51.8) and the July Flash Services PMI (E: 52.3).  If these reports show meaningful drops in the price indices (like we’ve seen in the Empire and Philly Fed surveys) then that will further the idea that inflation is peaking and support stocks (as long as the headline readings aren’t huge misses).

On the earnings front, results to watch today include TWTR (-$0.06), VZ $1.34), and AXP ($2.37).

Market Multiple Levels: S&P 500 Chart

What’s in Today’s Report:

  • Market Multiple Levels Chart: S&P 500

U.S. futures are tracking European shares lower this morning amid hawkish money flows ahead of tomorrow’s ECB meeting announcement.

Economically, Eurozone Q1 GDP was revised up to 0.6% vs. (E) 0.3%, bolstering bets that the ECB could raise rates by 50 bp in July which is driving bond yields higher and pressuring equities this morning.

There are no notable economic reports and no Fed officials are scheduled to speak today but there is a 10-Yr Treasury Note auction at 1:00 p.m. ET.

Bottom line, investors remain focused on high inflation and uncertain economic growth right now and if we see rates begin to meaningfully move higher again today, especially in the wake of the 10-year auction, then the S&P 500 test and potentially break down through key near term support at 4,080 today.

Tom Essaye Quoted in CNBC on June 2, 2022

Dow falls 300 points, Nasdaq drops 2%, as major indexes notch weekly losses

Numbers this strong would likely reverse any hopes the Fed would consider a pause in rate hikes after the June/July increases, because it would signal the labor market remains very tight…Tom Essaye of the Sevens Report said. Click here to read the full article.

Are Semiconductors A Buy?

What’s in Today’s Report:

  • Are Semiconductors A Buy?

Futures are little changed following a quiet night of news.

Economic data was mixed as final May manufacturing PMIs were in-line with expectations for the EU and UK, although German Retail Sales missed estimates (–5.4% vs. (E) -0.1%).

On the Fed front, Bostic said his comments about a “pause” on rate hikes shouldn’t be interpreted that the Fed will help rescue volatile markets.

Today focus will be on economic data and Fed speak via the ISM Manufacturing PMI (E: 54.5), JOLTS (E: 11.40M) and comments by Williams (11:30 a.m. ET) and Bullard (1:00 p.m. ET).  Bottom line, the ideas of slowly moderating (but not collapsing) growth and the possibility for a Fed “pause” in rate hikes in late summer/early fall have helped stocks rally, and as long as today’s data and Fed speak don’t refute those possibilities, stocks can extend the recent rally.

Bad Things Happen Fast (Part II)

What’s in Today’s Report:

  • Bad Things Happen Fast, Part II
  • Composite PMI Flash Data Takeaways
  • New Home Sales Plunge – Chart
  • 10-Year Yield Breaking a 15 Year Downtrend – Chart

Stock futures are little changed this morning, well off the overnight highs after a mostly quiet night of news as investors look ahead to the release of the latest Fed meeting minutes.

Economically, the German GfK Consumer Climate Index met expectations of -26.0 while German GDP came in at 3.8% vs. (E) 3.7% but today’s data is not materially impacting markets.

Looking into today’s session, there is one economic report to watch early: Durable Goods Orders (E: 0.5%) and the Treasury will hold an auction for 5-Year Notes at 1:00 p.m. ET. Markets will want to see data that shows healthy demand and steady trade in fixed income markets if stocks are to stabilize further.

As far as the Fed goes, Vice-Chair Brainard is scheduled to speak at 12:15 p.m. ET before the day’s main event, the release of the FOMC Meeting Minutes will hit at 2:00 p.m. ET. If Brainard and the minutes are less hawkish that could support a continuation of the latest attempt at a relief rally. At the same time, any more-hawkish leaning rhetoric or verbiage could lead to a resurgence in volatility as news flow has been decidedly negative over the last week.

Tom Essaye Quoted in Barron’s on May 5th, 2022

The Dow Lost More Than 1,000 Points as Wednesday Gain Vanishes

China’s PMI this morning was horrific, that underscores that the Chinese economy is a huge drag on global growth right now. It’s a risk to keep inflation high…said Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

Can the Rally Keep Going?

What’s in Today’s Report:

  • Weekly Market Preview:  Can the Rally Keep Going?
  • Weekly Economic Cheat Sheet:  Flash PMIs Are the Key Number This Week

Futures are slightly lower following a generally quiet weekend as investors digest last week’s gains.

The Russia/Ukraine war continued with no notable progress towards a cease-fire over the weekend and hope for a near-term peace is fading.

Economically, the only notable report was German PPI, which encouragingly missed expectations, rising 1.4% m/m vs. (E) 1.7% m/m.

Today there are no economic reports and just one Fed speaker, Bostic at 8:00 a.m. ET, and he shouldn’t move markets.  So, focus will remain on Russia/Ukraine, and any hints of progress towards a ceasefire will help extend the rally, while any additional escalation will be a headwind on stocks.

Hedging Uncertainty with Russia/Ukraine

What’s in Today’s Report:

  • Hedging Uncertainty with Russia/Ukraine
  • PMI Composite Flash Takeaways (Strong Report)
  • Consumer Confidence Index: Chart

Stock futures are enjoying a bounce this morning, tracking global equity markets higher as investors view the initial rounds of sanctions on Russia as less severe than feared while inflation data out of Europe was mildly encouraging.

Economically, the Eurozone’s Narrow Core HICP reading was -0.9%, down from +0.4% in December suggesting price pressures may finally be peaking in parts of the world.

Looking into today’s session, there are no notable economic reports to watch and just one Fed speaker ahead of the bell: Daly (9:00 a.m. ET).

There is a 5-Yr Treasury Note auction at 1:00 p.m. ET that could move markets but investor focus is likely to remain on any developments with the Russia/Ukraine situation.

After the close yesterday, it was reported that the scheduled meeting this week between Blinken and Lavrov was called off, which was a negative development but if we see a new meeting agreed to, or any signs of further de-escalation in the conflict today, stocks could enjoy a potentially sizeable relief rally. Conversely, further aggressive actions in Ukraine by Russia and/or more severe sanctions being announced by the West would likely drive more risk-off money flows.

What the SPR Release Means for Oil

What’s in Today’s Report:

  • Global Flash Composite PMI Data Takeaways
  • What the SPR Release Means for Oil

Stock futures are trading lower and international markets were mixed overnight as investors look ahead to a very busy day of economic data while volumes are already thinning out given the Thanksgiving holiday tomorrow.

Today, there is a slew of economic data due out including: Durable Goods Orders (E: 0.3%), Q3 GDP (E: 2.1%), Jobless Claims (E: 264K), New Home Sales (E: 790K), Core PCE (E: 0.4%, 4.1%), and Consumer Sentiment (E: 66.9).

There are no Fed officials speaking today however the November FOMC meeting minutes will be released at 2:30 p.m. ET.

Bottom line, investors will be looking for good economic data today, but not so good that it will cause the Fed to accelerate tapering plans or pull forward the first rate hikes. That is especially true for the Core PCE print as it is the Fed’s preferred measure of inflation.

Why Treasury Yields Spiked Yesterday

What’s in Today’s Report:

  • Why Treasury Yields Spiked Yesterday

Futures are modestly lower as markets digested the rally of the past two days, following underwhelming economic data and earnings overnight.

Nike (NKE) became the latest major company to cut guidance on margin concerns and supply chain issues and the stock dropped nearly 5% after hours.

Japanese flash manufacturing PMI missed estimates at 51.2 vs. (E) 52.0 mirroring the loss of momentum from global flash PMIs.

Today focus will remain on China headlines (although Evergrande is fading as a major market influence) and on multiple Fed speakers:  Mester (8:45 a.m. ET), Powell, Bowman, Clarida, George (10:00 a.m. ET), and Bostic  (12:00 p.m. ET).   Finally, we also get New Home Sales (E: 708K) but that shouldn’t move markets.