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An Important Earnings Season (It Really Starts This Week)

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What’s in Today’s Report:

  • An Important Earnings Season (It Starts This Week)
  • Weekly Market Preview:  Can Solid Earnings Spark a Rally?
  • Weekly Economic Cheat Sheet:  If Housing Finally Starting to Cool?

Futures are modestly lower following a generally quiet weekend of news.

Chinese economic data was better than expected as Q1 GDP rose 4.8% vs. (E) 4.2%, but concerns remain about future economic growth given continued lockdowns (concerns about future Chinese growth is a headwind on global stocks right now).

Geopolitically there was no change in the Russia/Ukraine war as fighting ranges in eastern Ukraine and there is no reason to expect a cease fire anytime soon.

Today the key report is the Housing Market Index (E: 78) and we’ll be looking for any signs that mortgage rates at 10+ year highs are starting to slow the housing market.    We also get one Fed speaker, Bullard (4:00 p.m. ET), and we can expect him to be hawkish (but the market already knows that).

Finally, this is a big week for earnings and some important reports today include: BAC ($0.76), SCHW ($0.85), JBHT ($1.91).

Market Multiple Table: April Update

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What’s in Today’s Report:

  • Market Multiple Table: April Update

Futures are modestly lower with European markets while oil rallies and global bond yields move higher amid simmering geopolitical tensions and lingering inflation fears.

Economically, Final Composite PMI data was mostly better than expected in Europe overnight but price measures continued to rise, suggesting inflation has still not peaked.

Today, we will get two economic reports starting with International Trade (E: -$88.8B), but the ISM Services Index (E: 58.5) will be the more important release to watch shortly after the opening bell as a continued rise in the price measures could further stoke inflation/stagflation fears.

Additionally, there are multiple Fed speakers today: Kashkari (10:00 a.m. ET), Brainard (11:05 a.m. ET), Daly (12:30 p.m. ET), and Williams (2:00 p.m. ET). And if their tone is more hawkish than current market expectations, that could send yields to new highs and pressure high growth tech names which would drag the broad market lower.

Tom Essaye Quoted in CNBC on March 31, 2022

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Dow drops to snap four-day winning streak, Nasdaq falls more than 1%

Above 4,600 in the S&P 500, markets have now traded through most fundamental bounds of valuation, and for this rally to continue, we’ll need to see real, actual positive events (not just events that aren’t as bad as feared)…Tom Essaye of The Sevens Report said in a note to clients Wednesday. Click here to read the full article.

Tom Essaye Quoted in Forbes on April 1, 2022

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This Recession Indicator Is Flashing Warning Signs As Fed, War And Oil Threaten Economic Recovery

Instead, it’s a signal that the bull market’s time is now limited… said market analyst Tom Essaye of the Sevens Report. Click here to read the full article.

Is the 10’s-2’s Spread Outdated?

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What’s in Today’s Report:

  • Is the 10’s-2’s Spread Outdated?
  • EIA Analysis and Oil Market Update (Prices Back Near the Recent Highs)

Futures are modestly higher following good economic data and as oil didn’t continue Wednesday’s rally (at least not overnight).

Economic data was solid as both the March EU Flash Composite PMI (54.5 vs. (E) 54.1.) and the UK Flash Composite PMI (59.7 vs. (E) 58.7) beat estimates, implying the Russia/Ukraine war wasn’t materially slowing growth.

Today focus will be on economic data, specifically the March Flash PMIs (E: 56.7).  With inflation still high and the Fed threatening a 50 bps hike in May, the PMIs need to give markets a “goldilocks” number to extend the early rally, as a “Too Hot” number will invite even more Fed tightening, while a “Too Cold” number will increase stagflation risks.  Outside of the PMIs, we also get Jobless Claims (210K) and Durable Goods (E: -0.5%) although they shouldn’t move markets.

From the Fed today we get Kashkari (8:30 a.m. ET), Waller (9:10 a.m. ET) and Bostic (11:00 a.m. ET) and of the three, Waller is the most important (he’s Fed leadership and if he hints at a 50 bp hike expect that to mildly weigh on stocks).

Powell Speech Preview

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What’s in Today’s Report:

  • Powell Speech Preview
  • Can Strong Consumer Spending Prevent a Recession?

Futures are marginally higher following a quiet night as trader position ahead of the Powell speech later this morning.

Economic data was sparse overnight although core Japanese CPI met expectations at 0.6% y/y.

There was no trade news overnight although Kudlow (Director of the National Economic Council) said discussions between the U.S. and China were “productive” on Wednesday (although he always says that).

Today the big event is the Powell speech at 10:00 a.m. ET. From a market standpoint, the 10’s-2’s spread will tell us whether the speech is positive or negative for stocks.  If Powell is sufficiently dovish, then 10’s-2’s should widen out towards 5 basis points, and that should help stocks rally.  Conversely, if Powell is not sufficiently dovish, 10s’-2’s will invert, likely notably, and in that case, if could get a bit ugly for stocks in the afternoon.

Tom Essaye Quoted on Market Watch on April 12, 2019

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Tom Essaye quoted in MarketWatch to share his view on earnings season. “Bottom line, this earnings season is make or break for this market, because we need earnings growth to resume if the S&P 500 is going to…” Click here to read the full article.