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Why Last Week Was More Positive for Stocks Than It Seems

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What’s in Today’s Report:

  • Why Last Week Was More Positive for Markets Than It Seems
  • Weekly Market Preview:  Will COVID Concerns Recede?
  • Weekly Economic Cheat Sheet:  Key Inflation Report on Wednesday

Futures are moderately higher on Powell optimism and as there were no incremental COVID restrictions in Europe.

President Biden was reportedly highly complimentary of Powell in meetings this weekend, leading markets to fully expect he will be reappointed as Fed Chair this week.

There were no new COVID restrictions announced in Europe over the weekend, providing some hope lockdowns won’t be extensive.

There were no notable economic reports overnight.

Today there are no Fed speakers and just one economic report, Existing Home Sales (E: 6.20 M), and that won’t move markets.  So, any news on Powell’s reappointment as Fed Chair and incremental COVID headlines will move markets today (if Powell is reappointed and COVID headlines don’t get worse, stocks can extend the rally).

Tom Essaye Quoted in CNBC on August 30, 2021

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Treasury yields fall slightly as investors await key jobs report

The 10-year yield continues to build upside momentum, and Powell’s dovish tone on Friday won’t…Tom Essaye of the Sevens Report said in a note on Monday. Click here to read the full article.

Tom Essaye Quoted in Barron’s on August 30, 2021

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Affirm Holdings Soars, Moderna Falls — And What Else Is Happening in the Stock Market Monday

Futures are slightly higher mostly on momentum from Friday’s ‘dovish Powell’ rally, following…writes Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

Why Powell’s Speech Caused a Rally

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What’s in Today’s Report:

  • Why Powell’s Speech Caused a Rally
  • Weekly Market Preview:  Will Data Keep the Goldilocks Rally Going?
  • Weekly Economic Cheat Sheet:  Jobs Week (This is the Most Important Jobs Report in Months)

Futures are slightly higher mostly on momentum from Friday’s “dovish Powell” rally, following a quiet weekend.

Fed Chair Powell’s speech on Friday was taken as slightly dovish and that drove the rally in U.S. stocks and it’s carried over globally as we start a new week (all the major foreign markets we monitor are modestly positive).

Economic data was sparse as Euro Zone Economic Sentiment slightly missed expectations (117.5 vs. (E) 118) although that’s not moving markets.

Today there is one economic report, Pending Home Sales (E: 0.3%), but that shouldn’t’ move markets.  Instead, as long as the dual tailwinds of 1) Receding COVID cases in the U.S. and 2) A dovish Fed remain, stocks should be buoyant (although if either idea is contradicted expect some give back of last week’s rally).  Finally, keep in mind this is one of the most popular vacation weeks of the year due to the looming Labor Day weekend, so don’t be surprised by low volumes and some added volatility.

Powell Speech Preview

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What’s in Today’s Report:

  • Powell Speech Preview

Futures are modestly higher as markets bounce back from Thursday’s declines ahead of Powell’s speech.

There were no new developments in Afghanistan overnight as evacuations continued.  The tragedy temporarily hit stocks but it won’t be an ongoing influence on markets.

Expectations for more stimulus from China rose overnight as chatter regarding a Reserve Ration cut grew louder and this, combined with some pre-Powell positioning, are the main reasons futures are higher.

Today the key event is obviously the Powell speech (10:00 a.m. ET) but as a reminder, he won’t announce anything specific regarding tapering (that will come at the Sept 22nd Fed meeting).  Instead, the key will be how much Powell discusses the Delta variant as an economic headwind (the more he mentions it, the more dovish the speech will be taken) and if he reaffirms the Fed is getting close to being able to taper QE (which will mean before year-end).

Outside of Powell, the Core PCE Price Index (E: 0.3% m/m, 3.6% y/y) is the key economic report this morning but as long as it’s much higher than expectations, it won’t move markets.

Using the Yield Curve to Measure Taper Expectations

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What’s in Today’s Report:

  • Using the Yield Curve to Measures Taper Expectations
  • Strong 2-Year Note Auction Implies a Dovish Powell

U.S. stock futures are slightly higher in very quiet trading this morning as investors assess the state of the pandemic against expectations about the Fed’s taper plans ahead of the Jackson Hole Economic Symposium later in the week.

Economically, the German Ifo Survey was slightly soft with the Business Climate headline falling to 99.4 vs. (E) 100.4 and Business Expectations declining to 97.5 vs. (E) 100.0.

Looking into today’s session, there is one economic report ahead of the bell: Durable Goods Orders (E: -0.2%, Core Capital Goods: +0.5%). As has been the case recently, the market will be looking for a report that is good enough to not suggest the recovery is losing momentum but not too strong that it would influence a sooner-than-later taper by the Fed.

As the day goes on, we will hear from one Fed official: Daly who is scheduled to speak at 1:00 p.m. ET however her comments should not move markets will focus already moving ahead to Powell’s speech on Friday.

Finally, there is a 5-Yr Treasury Note auction at 1:00 p.m. ET. If we see strong demand like we saw in yesterday’s 2-Year auction, then that could offer a modest, dovish tailwind to equities as it will suggest expectations for Powell’s speech are shifting more dovish.

Bottom line, there are a few potential market catalysts today, but the odds that the market makes a material move one way or another are low given the sense of Fed paralysis ahead of Powell’s speech on Friday.

Why Negative Headlines Still Aren’t Hurting Stocks

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What’s in Today’s Report:

  • Why Negative Headlines Still Aren’t Hurting Stocks (Three Reasons)
  • Weekly Market Preview:  Can Good Earnings Continue to Offset Negative Macro Headlines?
  • Weekly Market Cheat Sheet:  Flash PMIs and Powell’s speech Friday are the highlights.

Futures are modestly higher on momentum from Friday’s rally and following mixed (but not bad) global PMIs.

Economic data was mixed as the EU August flash composite PMI was solid (59.5 vs. (E ) 59.7) although the UK  PMI (55.3 vs. (E ) 58.4) missed expectations, as did the Japanese and Australian readings.  But, in aggregate, the numbers were good enough to show the global economic recovery is still on going (and that helped stocks rally this morning).

There was improvement on the COVID front as new cases in China continued to plunge with daily new cases falling to zero in many local precincts and that’s raising hopes the current COVID wave in China is subsiding.

Today focus will be on the August Flash Composite PMI (E: 59.5) and markets will want to see solid data (so close to last month’s reading and close to expectations).  If it’s a bad miss, that will likely weigh on stocks.  We also get Existing Home Sales (E: 5.83M) but that shouldn’t move markets.

Tom Essaye Interviewed with TD Ameritrade Network on July 14, 2021

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Consumer Price Index Takeaways / The Fed’s Comments

Tom Essaye, founder of the Sevens Report, discusses the Consumer Price Index takeaways as well as Powell’s comments. Click here to watch the full interview.

Why Powell Wasn’t Dovish (Tapering is Coming)

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What’s in Today’s Report:

  • Why Powell Wasn’t Dovish (Tapering is Coming)
  • Infrastructure Update (Tax Hike Risks)
  • Oil Update, EIA Analysis, and OPEC Outlook (Where is Oil Going?)

Futures are modestly lower following mixed Chinese economic data.

Chinese Fixed Asset Investment, Retail Sales, and Industrial Production all beat estimates, although they were offset by a miss in Q1 GDP (7.9% vs. (E) 8.2%).  But, while GDP got most of the headlines, the bottom line is the rest of the data is more current, and on balance, the outlook for the Chinese economy has improved (which is good for global stocks).

Today there are numerous economic reports to watch including, in order of importance:   Philly Fed Manufacturing Index (E: 28.5), Empire State Manufacturing Index (E: 18.3), Jobless Claims (E: 368K), and Industrial Production (E: 0.7%).  As has been the case “Goldilocks” data with muted pricing indices will help stocks rally (markets won’t want to see data that’s too strong or too weak).

Turning to the Fed, Chair Powell speaks to the Senate at 9:30 a.m. ET but we should expect the same message as Wednesday and his comments shouldn’t move markets.

Finally, earnings season continues to gain momentum and some reports we’ll be watching today include: TSC ($0.89), MS ($1.63), UNH ($4.41), USB ($1.14), BK ($1.01).

CPI Takeaways

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What’s in Today’s Report:

  • CPI Takeaways

Stock futures are little changed as Treasuries recover some of yesterday’s losses ahead of more U.S. inflation data and Congressional testimony from Fed Chair Powell today.

Economically, U.K. CPI was above estimates in June but PPI was unexpectedly soft while Eurozone Industrial Production also disappointed, but none of the data from overnight seems to be having a material impact on markets this morning.

Today, there is one more inflation report in the U.S., PPI (E: 0.6% m/m, 6.8% y/y) at 8:30 a.m. ET and then focus will turn to Fed speak with Chair Powell’s semiannual testimony before Congress beginning at 12:00 p.m. ET and Kashkari also speaking at 1:30 p.m. ET.

The start of Q2 earnings season will also remain in focus with notable reports coming from: WFC ($0.97), BAC ($0.78), C ($1.99), DAL (-$1.37), BLK ($9.24), and PNC ($4.22).