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Sevens Report Co-Editor Tyler Richey Quoted in Market Watch on July 19th, 2022

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Oil futures finish higher, with U.S. prices holding above $100 as supply concerns resurface

Biden’s visit to Saudi Arabia last week has “already become old news as traders refocus on the major influences on the oil market right now: the Russia-Ukraine war, OPEC+ policy outlook, and recession concerns linked to high inflation, COVID lockdowns in China, and aggressive central bank policy around the globe…Tyler Richey, co-editor at Sevens Report Research, told MarketWatch. Click here to read the full article.

What Would A Recession Mean for Markets?

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What’s in Today’s Report:

  • What Would A Recession Mean for Markets?

Futures are moderately higher thanks mostly to momentum from Thursday’s close and despite more underwhelming economic data.

Economically, UK Retail Sales met expectations but fell sharply (–4.7% yoy) while the German Ifo Business Expectations Index missed estimates (85.8 vs. (E) 87.3).

Geo-politically, Russia continues to advance in the Donbas as Ukraine has withdrawn from the city of Severodonetsk.

Today focus will be on the inflation expectations in the University of Michigan Consumer Sentiment Index, and if we see a decline below 3.3% that could further the idea that inflation is peaking (and extend the rally in stocks).  Other data today includes New Home Sales (E: 587K) and one Fed speaker, Daly at 4:00 p.m. ET, but they shouldn’t move markets.

The State of Inflation (CPI Preview and Inflation Expectations Update)

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What’s in Today’s Report:

  • The State of Inflation:  CPI Preview and Inflation Expectations Update
  • EIA Data and Oil Market Analysis (How High Can The Rally Go?)

Futures are modestly higher as markets bounce back from Wednesday’s declines following mixed news from China.

Positively, Chinese authorities may allow ANT Group to IPO, which is another sign China is easing pressure on tech companies. Additionally, Chinese exports handily beat estimates (16.9% vs. (E) 8.0%).

Negatively, Shanghai and Beijing reimposed some COVID restrictions, showing “Zero COVID” remains in effect.

Today focus will be on the ECB Rate Decision, and while no rate hike is expected, President Lagarde is expected to hint that a rate hike is coming in July and another rate hike is coming later this year (if it’s more hawkish than that, that will be a headwind on global stocks).  We also get Jobless Claims (E: 210K) but that shouldn’t move markets.

Tom Essaye Quoted in CNBC on May 9th, 2022

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10-year Treasury yield rises to its highest level since November 2018

To start the year, we knew that central bank tightening would make for a challenging market, but that has been compounded by two surprise events: The Russia/Ukraine war (no one expected that in January) and Chinese lock-downs (it’s quasi-shocking the Chinese are still adopting these policies and crushing their economy)…wrote Tom Essaye of The Sevens Report. Click here to read the full article.

Update on the Three Headwinds on Stocks

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What’s in Today’s Report:

  • Update on the Three Headwinds on Stocks
  • Weekly Market Preview:  Is Inflation Finally Peaking?
  • Weekly Economic Cheat Sheet:  All About Inflation (CPI Wednesday)

Futures are sharply lower following new COVID lockdowns in China.

COVID cases in Shanghai are rising again, prompting new restrictions on movement and work.  Meanwhile, Beijing continues to suffer from limited lockdowns and this is compounding worries about global economic growth.

Geo-politically, Victory Day in Russia offered no notable news and there remains no end in sight to the Ukraine war.

Today there are no economic reports and just one Fed speaker, Bostic at 8:45 a.m. ET.  So, we should expect technicals to dominate trading and if last week’s intra-day lows are broken in the S&P 500 and we don’t get any positive news on 1) Fed hawkishness, 2) Chinese lockdowns or 3) Russia/Ukraine, we should not be shocked if the S&P 500 move closer to a test of support at 4,000.

Is the Fed’s Bark Worse than Its Bite?

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What’s in Today’s Report:

  • What the FOMC Decision Means for Markets (Is the Fed’s Bark Worse than Its Bite?)
  • EIA Analysis and Oil Outlook Update

Futures are moderately lower as markets digest Wednesday’s big post-Fed rally following a night of underwhelming economic data.

The April Chinese services PMI plunged to 36.2 vs. (E) 41.1, reflecting the economic damage from lockdowns.  In Europe, data was mixed as German Manufacturers’ Orders missed estimates while UK Services PMI beat expectations.

There are multiple Fed speakers today on financial media outlets (there are no official speeches scheduled) and don’t be surprised if they sound hawkish and push back on the post FOMC rally yesterday (this is especially true for Bullard, whose doing interviews today).

Today’s focus will be on the aforementioned Fed speakers, and again don’t be shocked if they sound “hawkish” and that causes some giveback from yesterday’s rally (but a hawkish tone won’t undo the positives from Powell’s press conference, either).

Economically, there is a BOE Rate decision and they are expected to hike 25 bps.  Domestically, the key report today is Unit Labor Costs (E: 6.8%) as that will give us a good look at total wage inflation (and if it’s higher than estimates that will be a negative).  We also get Jobless Claims (E: 178K) but that shouldn’t move markets.

Economic Breaker Panel: May Update

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What’s in Today’s Report:

  • Economic Breaker Panel – May Update
  • Chart: Copper Breakdown

Stock futures are trading cautiously higher this morning ahead of the Fed while oil prices are spiking after the EU announced plans for a full Russian oil embargo that will be phased in over the next 6 months.

Economic data was mostly in-line with estimates overnight with Composite PMI reports notably holding up better than the recently released manufacturing PMIs which is a modest tailwind for risk assets this morning.

Looking into today’s session, focus will be on economic data early with the ADP Employment Report (E: 398K) due out ahead of the open while the ISM Services Index (E: 58.9) will be released shortly after the bell. The market will want to see firm data that helps contradict the idea that the Fed is beginning to accelerate the pace of rate hikes into an economic slowdown.

From there, price action should begin to slow as the Fed comes into focus with the FOMC Announcement (2:00 p.m. ET) and Fed Chair Press Conference (2:30 p.m. ET) in the afternoon. A more hawkish than expected Fed could send stocks back down to test Monday’s lows while a not-as-hawkish-as-feared announcement/press conference would open the door to a relief rally back towards 4,300.

On the earnings front, there are a few notables today including: MRNA ($5.18), CVS ($2.14), MAR ($0.94), YUM ($1.07), UBER (-$0.28), and EBAY ($1.03).

Is the Market Doing the Fed’s Job?

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What’s in Today’s Report:

  • Is the Market Doing the Fed’s Job?
  • Oil Update and EIA Analysis

Futures are moderately higher following a solid night of earnings.

Earnings overnight were better than expected as QCOM posted strong results while FB also beat expectations.

Economic data was sparse, but the Bank of Japan made more dovish comments and the yen is down 2% and hitting fresh multi-decade lows.

Today focus will be on earnings as this is the most important day of the entire earnings season. We get several major companies reporting results including (in order of importance): AAPL ($1.43), AMZN ($8.73), INTC ($0.80), MA ($2.17), TWTR ($0.01), CAT ($2.66) and MCD ($2.18).  Given how oversold the market is on a short-term basis, solid results from these companies could fuel a rally, while disappointing results likely will cause another test of the 2022 lows in the S&P 500.

Economically, numbers today include Advanced Q1 GDP (E: 1.1%) and Jobless Claims (E: 181K) but I don’t expect either to move markets.

Four Questions for the Selloff

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What’s in Today’s Report:

  • 4 Questions for the Selloff: Why Have Stocks Dropped to the March Lows, What’s Holding Up Best, What Makes This Stop, and How Bad Can It Get?

S&P futures are up 1% this morning as yesterday’s steep declines are digested amid upbeat earnings and guidance out of MSFT after the close yesterday (MSFT is up 5%).

Economic data was net negative overnight as Australian CPI was hotter than expected while U.K. CBI Distributive Trades and the German GfK Consumer Climate Index both badly missed estimates, however, investors are shrugging off the data as the focus is on earnings this morning.

Looking into today’s session, there are two economic reports: International Trade in Goods (E: -$105.0B) and Pending Home Sales (E: -1.1%) but neither should move markets and no Fed officials are scheduled to speak.

There is a 5-Yr Treasury Note auction at 1:00 p.m. ET that could move the bond market as yields have pulled back considerably since last week’s highs and a reversal back higher could become a headwind on stocks again, especially growth names.

Finally, the market’s main focus at the moment is earnings and we will get results from: BA (-$0.26) and HOG ($1.52) before the bell and then FB ($2.58), F ($0.39), PYPL ($0.89), QCOM ($2.91), and DFS ( $3.58) after the close. If earnings, especially by big tech companies can top estimates, a relief rally could play out as stocks are near-term oversold, however, momentum through yesterday’s close has been decidedly negative and the price action remains heavy.

Is Housing Starting to Roll Over?

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What’s in Today’s Report:

  • Is Housing Starting to Roll Over?
  • Oil Update and EIA Analysis

Futures are moderately higher as earnings continue to come in better than expected.

TSLA and UAL both posted better than expected earnings and UAL was very upbeat on travel spending and investors are viewing that as a positive macro-economic signal.

EU HICP (their CPI) slightly missed expectations (7.4% vs. (E ) 7.5% yoy), again hinting that inflation may be peaking.

Today will be a busy day with important Fed speak, economic data and earnings.  The key event (potentially) is Fed Chair Powell speaking this morning and while he’s not likely to drop any surprises, it’s always possible.  Economically, the key report today is the Philly Fed Manufacturing Index (E: 20.5) and markets will want to see stability in the data.  We also get Jobless Claims (E: 175K) and Fed President Bullard (1:00 p.m) but they shouldn’t move markets.

On the earnings front, notable reports today include:  T ($0.78), AAL (-$2.48), FCX ($0.88), PM ($1.48), UNP ($2.55), SNAP ($0.01), PPG ($1.13).