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Market Multiple Table: Pushing Justifiable Valuations

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Market Multiple Table: Pushing Justifiable Valuations: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • June Market Multiple Table – Pushing the Edge of Justifiable Valuations
  • Empire State Manufacturing Survey Takeaways
  • Chart – NVDA Tests Near-Term Uptrend

Futures are little changed as ongoing strength in technology shares offsets weakness in small caps in pre-market trade after mixed economic data overnight.

Economically, the German ZEW Survey missed estimates while the EU’s Narrow Core HICP (Core CPI equivalent) was inline with the May Flash of 2.9%, which was up from 2.7% in April.

Today, focus will be on economic data early with Retail Sales (E: 0.3%) and Industrial Production (E: 0.3%) both due to be released. Investors will be looking for signs of healthy consumer spending but not a figure that is “too hot” (hawkish policy concerns) or “too cold” (growth worries) while steady factory sector data would be welcomed but not as impactful for markets today.

There is also a long list of Fed speakers today. In chronological order, we will hear from: Barkin (10:00 a.m. ET), Collins (11:40 a.m. ET), Musalem (1:00 p.m. ET), Logan (1:00 p.m. ET) and Goolsbee (2:00 p.m. ET).

Finally, there is a 20-Yr Treasury Bond auction at 1:00 p.m. ET and weak demand could send yields higher and weigh on equities in afternoon trade.

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Is Disinflation Still Good for Markets? (The Answer May Surprise You)

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Is Disinflation Still Good for Markets? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Is Disinflation Still Good for Markets? (The Answer May Surprise You)
  • Weekly Market Preview:  Are Hard Landing Chances Rising?
  • Weekly Economic Cheat Sheet:  A holiday-shortened week, but still one with important growth updates.

Futures are slightly lower on mixed Chinese economic data and following a quiet summer weekend of news.

Chinese Fixed Asset Investment (4.0% vs. (E) 4.2%) and Industrial Production (5.6% vs. (E) 6.2%) both missed estimates while Retail Sales beat (3.7% vs. (E) 3.0%) leaving the outlook for Chinese growth still mixed (at best).

There were no notable political or geo-political updates over the weekend.

The focus of the data this week will be on economic growth and today we get the first look as June activity via the June Empire Manufacturing Index (E: -12.50).  Given recent worries about growth, the stronger this number, the better for the broader markets.

We also have three Fed speakers today, Williams (12:00 p.m. ET), Harker (1:0 p.m. ET) and Cook (11:00 p.m. ET) but again, given last week’s Fed meeting, they shouldn’t move markets.

Finally, markets are closed on Wednesday for observance of Juneteenth (this is a recently new Federal holiday so I just want to make sure everyone was aware of the closure).

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Evidence That Investors Are Starting to Worry About Growth

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Evidence That Investors Are Starting to Worry About Growth: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Evidence That Investors Are Starting to Worry About Growth

Futures are moderately lower despite a slightly dovish Bank of Japan decision and more strong tech earnings (ADBE), as growing political anxiety in Europe weighed on markets.

French stocks dropped another 1% (down 5% on the week) on growing political uncertainty and that’s weighing on European markets and U.S. futures.

Today focus will remain on economic data and the notable report is the University of Michigan Consumer Sentiment Index (E: 73.0).  But, more important than the consumer sentiment reading will be the inflation data in that report (1-Year Inflation Expectations E: 3.2%, Five-Year Inflation Expectations E: 3.0%) and markets will want to see stable consumer sentiment and better than expected inflation readings to rally.

We also have two Fed speakers today, Goolsbee (2:00 p.m. ET) and Cook (7:00 p.m. ET)., but they shouldn’t move markets.

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What the Good CPI and Mixed Fed Message Means for Markets

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What the Good CPI and Mixed Fed Message Means for Markets: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What Yesterday’s Good CPI and Mixed Fed Messaging Means for Markets

Futures are little changed despite more positive tech earnings as markets digest Wednesday’s CPI driven rally.

Broadcom (AVGO) became the latest AI-linked tech company (after AAPL and ORCL) to post strong earnings as the stock is up 14% pre-market.

Economically, it was a mostly quiet night as EU Industrial Production slightly missed estimates (-0.1% vs. (E) 0.1%) but that isn’t moving markets.

Today focus will remain on economic data and the two notable reports are Jobless Claims (222k) and PPI (E: 0.1% m/m, 2.5% y/y).  Of the two, PPI is more important and if it is lower than expected that’ll strengthen the belief in disinflation and increase September rate cut expectations, and stocks should extend yesterday’s rally.

Additionally, we do get one Fed speaker today, Williams at 12:00 p.m. ET, and he is part of leadership so his commentary on rate cuts could move markets.

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FOMC Preview (All About the Dots)

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FOMC Preview (All About the Dots): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • FOMC Preview (All About the Dots)

Futures are slightly higher following more solid tech earnings and despite some stagflationary economic data.

ORCL earnings beat estimates and the stock is up 9% pre-market, helping to support stock futures.

Economically, Chinese inflation ran slightly hot while UK Industrial Production badly missed estimates.

Today brings the two key events of the week via CPI and the Fed Decision.  For CPI, estimates are:  E: 0.1% m/m, 3.4% y/y, Core CPI (0.3% m/m, 3.5% y/y).  The key here is that core CPI is flat or declines from last month.  If we see a bounce back above 3.6% that will likely be a material surprise negative.

For the Fed, there is no change expected to rates and focus at 2:00 will be on the dots (and how much they changed since March).  Anything from the Fed (dots or Powell commentary) that makes a September rate cut more likely will help stocks, while anything that makes it less likely will be a headwind.

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The fall in gasoline supplied last week suggests a near-term peak in demand

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The fall in gasoline supplied last week suggests a near-term peak in demand: Sevens Report Research Analysts, Quoted in Morningstar

Oil prices post back-to-back gains as worries about economic outlook fade

The fall in gasoline supplied last week below the four-week average suggests a near-term peak in demand, analysts at Sevens Report Research said in a note.

Encouragingly, the four-week average did rise by 37,000 barrels a day to 9.07 million barrels a day, so there’s hope that demand could still be a source of fundamental support, they said, though last week wasn’t a step in that direction, based on the data.

Oil rose Wednesday not so much because of the EIA data, but rather because economic data eased worries about recession, added to expectations the Federal Reserve will cut interest rates in the fall and boosted hopes for a soft economic landing in the U.S., they wrote.

“The stabilization in oil should be considered fragile, however, as the oil market does not like sources of uncertainty like OPEC+ delivered with last weekend’s production policy decision,” the analysts said.

Also, click here to view the full MarketWatch article published on Morningstar on June 6th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Oil Inventories

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What’s in Today’s Report: When Does Bad Economic Data Become Bad for Stocks?

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Jobs Day Technical Preview & Wildcards to Watch: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • When Does Bad Economic Data Become Bad for Stocks?
  • Weekly Market Preview:  An Important Week:  Fed Decision (Including the Dots), CPI and AI Updates.
  • Weekly Economic Cheat Sheet:  Do We See Real Movement in Rate Cut Expectations?

Futures are modestly lower as global bond yields rise following surprise political news over the weekend.

Far right political parties outperformed expectations in EU elections while French President Macron called for surprise snap elections.  The results are pushing French and German bond yields higher, which are pulling Treasury yields up in sympathy and weighing slightly on futures.

Outside of the political results, it was a mostly quiet weekend of news as investors look ahead to an important week of AI catalysts, the FOMC decision and the latest CPI report.

This is a busy and important week for markets as it will either confirm current (positive) expectations on Fed rate cuts and inflation or challenge them and increase volatility.  That said, the week starts quietly as there are no notable economic reports today and the key event is likely to be AAPL’s Worldwide Developer Conference keynote announcement, which is focused on AI.  If it’s underwhelming, tech could lag and slightly weigh on markets.

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Jobs Day Technical Preview & Wildcards to Watch

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Jobs Day Technical Preview & Wildcards to Watch: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Jobs Report Technical Preview – S&P 500, 10Y, Gold, VIX (Shareable PDF)
  • Two “Wildcard Scenarios” to Watch for Today
  • Initial Jobless Claims Show Signs of Bottoming: Chart

Futures are flat while international markets were mostly lower overnight as traders await the widely anticipated May jobs report to gauge the outlook for Fed policy.

Economically, Eurozone GDP met estimates in Q1 at 0.4% y/y, however wage growth accelerated to 5.1% y/y in Q1 vs. 4.9% in Q4 after the ECB lowered inflation forecasts yesterday. The “warming” wage inflation data raises concerns the ECB moved to cut rates too early.

Today, focus will be on the May BLS Employment Situation release at 8:30 a.m. ET with an estimated +188K Job Adds, 3.9% Unemployment Rate, and 3.9% Wage Growth. The market needs to see an inline number preferably with a modest downside surprise on wages in order for dovish money flows and soft-landing hopes to continue to drive stocks to new records.

There is also one Fed speaker mid-day today: Cook (12:00 p.m. ET) and Consumer Credit (E: $10.4B) will be released late in the day but neither should more markets with markets digesting the jobs report.

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Recent data have traders worried that the economy is slowing

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Recent data have traders worried that the economy is slowing: Sevens Report Editor, Tom Essaye, Quoted in Barron’s

Stocks Are Slipping. The Market Can’t Find Middle Ground.

Recent data have traders worried that the economy is slowing more than people think, Sevens Report Research’s Tom Essaye tells Barron’s. He notes that if the economy slows too much, the question becomes whether rate cuts in September and December would be enough to turn things around.

“The market can’t ever find the middle,” Essaye says.

He says that sentiment has bounced back and forth between worries about hot inflation to worries that the Federal Reserve won’t be able to navigate a slowing economy. Essaye thinks the pullback in stocks can be chalked up to already-high valuations.

“It’s not that things have suddenly turned bad,” says Essaye. “It’s that we’re priced for a very still-perfect environment, and the data is implying it’s maybe not so perfect.”

Also, click here to view the full Barron’s article published on June 5th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

It’ll be Very Hard for This Market to RallyIf you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

The data is starting to show a potential soft landing

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The data is starting to show a potential soft landing: Sevens Report Editor, Tom Essaye, Quoted in Barron’s

Only Two S&P 500 Sectors Are Rising

Sevens Report Research’s Tom Essaye told Barron’s the data is starting to show a potential soft landing, though where it goes from here is anyone’s guess.

“A soft landing was always a slowing of growth that sort of didn’t get too bad,” Essaye says. “So it appears we are kind of arriving at that point. Now, the issue is that every hard landing started with a soft landing. You don’t just jump from growth to contraction.”

Also, click here to view the full Barron’s article published on June 5th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

It’ll be Very Hard for This Market to RallyIf you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.