Recession – Page 12 – Sevens Report Research

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CPI Preview

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What’s in Today’s Report:

  • CPI Preview: Focus on the Core Figure
  • Chart – Gold Moving Higher in Well Defined Uptrend

U.S. stock futures are tracking global shares higher in moderate risk-on trading this morning as investors look past Powell’s lack of commentary of monetary policy plans yesterday and await tomorrow’s all-important CPI data.

Economically, Retail Sales reports in both Australia and Italy handily beat expectations overnight, adding to optimism for a global economic soft landing.

There are no market-moving economic reports today and no Fed officials are scheduled to speak.

That leaves just one potential market catalyst today, a 10-Yr Treasury Note auction at 1:00 p.m. ET. And while it is possible a surprise outcome in the auction moves yields and causes some modest moves in equities in the afternoon, the session is likely to be mostly quiet as traders position into the CPI report.

Tom Essaye Quoted in MarketWatch on January 9th, 2023

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Traders made money ‘selling the rip’ in stocks last year. Why it might work again in 2023.

“A sustained break above the 200-day moving average would imply that investors are becoming fundamentally more optimistic about the market. That would require real progress toward the Fed actually stopping its rate-hike campaign. Or progress toward the economy actually achieving a soft landing. Or progress toward inflation falling somewhere that is reasonably more acceptable to the Fed,” said Tom Essaye, founder of the Sevens Report. Click here to read the full article.

Sevens Report Co-Editor Tyler Richey Quoted in S&P Global on December 7th, 2022

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Stock market’s ‘fear gauge’ plunges as investors shift hedging strategies

Still, the VIX has not behaved in its typical fashion for much of this year, said Tyler Richey, a co-editor at Sevens Report Research. Click here to read the full article.

Tom Essaye Quoted in The Washington Post on December 6th, 2022

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PepsiCo layoffs could indicate broader economic woes

The company, which has a market cap of $252.3 billion, is simply signaling the headwinds to come. This is really confirming so many other signs that we are headed toward a potentially pretty significant economic slowdown, said Tom Essaye, president of Sevens Report Research. Click here to read the full article.

Market Multiple Levels: S&P 500 Chart

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What’s in Today’s Report:

  • Market Multiple Levels – S&P 500 Chart
  • VIX Breaks Longstanding Downtrend in Cautious Signal

Futures are modestly lower as persistent concerns about hawkish Fed policy and fading global growth overshadow positive Covid policy news out of China and encouraging EU economic data.

Economically, German Industrial Production was better than feared at -0.1% vs. (E) -0.6% while  Q3 Eurozone GDP topped estimates at 2.3% vs. (E) 2.1% Y/Y suggesting the EU economy may be stabilizing.

China’s NHC issued new guidelines on Covid restrictions overnight that eased certain testing and quarantine requirements and will hold a press conference tomorrow which points to the potential for more progress in moving away from Covid-Zero.

Looking into today session, there is one economic report before the bell: Productivity & Costs (E: 0.4%, 3.3%) and then Consumer Credit (E: 27.3B) will be released in the afternoon. The latter report is not one we typically follow closely but there has been increasing concern about the health of household balance sheets, so a sharp move higher in outstanding credit could raise concerns about defaults in the coming quarters.

Finally, there are no Fed speakers today but stocks have been taking queues from rate markets and the dollar so if either meaningfully move higher, that will add pressure to the broader equity market today.

Jobs Report Preview

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What’s in Today’s Report:

  • Jobs Report Preview

Futures are moderately higher on solid economic data and rising hope China could relax its “Zero COVID” policies.

The EU Composite PMI (47.3 vs. (E) 47.1) and UK Construction PMI (53.2 vs. (E) 50.5) both beat estimates, implying economic activity in Europe isn’t collapsing.

In China, an article in the South China Morning Post stated “big and substantive” changes looming for COVID policies.

Today focus will be on the Jobs Report and estimates are as follows:  Job Adds: 210K, UE Rate: 3.6%, Wages: 0.3% m/m, 4.7% y/y.  If markets can get an underwhelming number (say the low 100’s) that will be the first material sign the labor market is starting to deteriorate, and it could spark a rally in stocks as the Fed needs better balance in the labor market before they can “pivot.”

Away from the jobs report, we also have one Fed speaker, Collins at 10:00 a.m. ET but she shouldn’t move markets.

How Far Could This Relief Rally Run?

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What’s in Today’s Report:

  • Technical Support for a Near Term Bottom and How Far This Relief Rally Could Run
  • Chart: 10-Yr Note Futures Test Trend Resistance
  • Housing Market Update

Stock futures are trading lower this morning as soft tech earnings are overshadowing a continued bounce in bonds.

MSFT and GOOGL both fell roughly 6% overnight after delivering disappointing quarterly results yesterday afternoon which is dragging the broader tech sector lower in premarket trading.

Today, there are two economic reports to watch in the morning: International Trade in Goods (E: -$87.8B) and New Home Sales (E: 585K), while there is a 5-Yr Treasury Note auction in the early afternoon (1:00 p.m. ET).

Earnings will remain in focus today with BA (-$0.01), BMY ($1.83), HLT ($1.25), KHC ($0.55), and HOG ($1.45) reporting before the bell, and META ($1.88), F ($0.31), and CP ($0.77) releasing results after the close.

Bottom line, soft earnings out of mega-cap tech are weighing on the market this morning however stable bond markets are limiting losses. If we see Treasuries roll over today and yields begin to climb again, expect pressure on equities to pick up as both earnings expectations and multiple compression will weigh on stocks broadly.

Sevens Report Co-Editor Tyler Richey Quoted in Market Watch on October 14th, 2022

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Oil prices fall for the week, thanks to economic outlooks ‘denting demand expectations’

“Oil has given back roughly half of the October gains this week thanks to the negative shift in policy and economic outlooks denting demand expectations,” Tyler Richey, co-editor at Sevens Report Research, told MarketWatch. Click here to read the full article.

Sevens Report Co-Editor Tyler Richey Quoted in Market Watch on October 14th, 2022

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Oil futures finish lower for the session and week

“With many analysts and economists now forecasting a recession as their base case outlook for 2023, demand estimates for everything from energy products to industrial metals are taking a hit,” said Tyler Richey, co-editor at Sevens Report Research. Click here to read the full article.

Why the U.K. Budget Drama Matters to You

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What’s in Today’s Report:

  • Why the U.K. Budget Drama Matters (Hint: Spiking Yields)
  • Two Technical Takeaways from Yesterday’s New Lows

Stock futures are trading cautiously higher while yields and the dollar ease from yesterday’s highs after the Fed’s Evans made some less hawkish commentary overnight.

While speaking on “Squawk Box Europe” early this morning, Charles Evans said he was getting nervous about the Fed’s pace of tightening and that if inflation peaks, the FOMC could cut rates as soon as early 2023 which has sparked a relief rally across risk assets amid renewed hopes for “peak hawkishness.”

Economically, Chinese Industrial Profits declined -2.2% in August from -1.1% in July but slowing global growth is largely priced into the market at this point.

Looking into today’s session there are multiple economic reports to watch including: Durable Goods (E: -1.2%), S&P Case-Shiller Home Price Index (E: 0.3%), New Home Sales (E: 498K), and Consumer Confidence (E: 104.3). Investors will be continuing to look for slowing growth, a moderating labor market and most importantly any further signs of easing price pressures as those are all necessary components in getting the Fed to “peak hawkishness.”

Regarding the Fed, there are several officials speaking today: Powell (7:30 a.m. ET), Daly (8:35 a.m. ET), and Bullard (9:55 a.m. ET). And while it is unlikely any of them echo Evans’ dovish tone form earlier this morning, if they do come across as less hawkish, we could see a violent relief rally play out as stocks have become oversold in recent sessions.