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Economic Breaker Panel: August Update

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What’s in Today’s Report:

  • Sevens Report Economic Breaker Panel: August Update
  • S&P 500 Reaches Key Technical Support: Chart

Stock futures are steady this morning as this week’s rise in both the dollar and bond yields has paused while economic data in Europe was better than feared

Economically, the Eurozone Manufacturing PMI was 49.7 vs. (E) 49.0 and the Services PMI came in at 50.2 vs. (E) 49.0 which is helping ease some stagflation concerns after last week’s soft growth numbers yet stubbornly high inflation across Europe.

Looking into today’s session, the focus will be on economic data early, specifically, the PMI Composite Flash (E: 49.2) as investors will want to continue to see steady moderation and evidence of slowing growth but not an all-out crash in the data either. New Home Sales (E: 575K) will also be released shortly after the open.

Outside of the data, there is one Fed speaker on the calendar: Kashkari, but not until after the close (7:00 p.m. ET) while there is a 2-Yr Treasury Note auction at 1:00 p.m. ET that could move yields.

Bottom line, news flow has not been decidedly negative over the last few sessions and the pullback in stocks has been largely driven by the rally in the dollar and rising bond yields. So if we can see those two markets stabilize, equities should be able to stabilize today as well, especially with the S&P into solid technical support, however, if the dollar and yields both grind higher, expect further volatility in the stock market ahead of Jackson Hole.

Tom Essaye Quoted in Barron’s on August 20th, 2022

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Bitcoin and Stocks Are Falling Together Again. What’s to Blame.

Bitcoin’s moves definitely follow the market. There’s no question, and that’s been especially true on days when the market has been down a lot, Tom Essaye, founder of Sevens Report Research, told Barron’s. Click here to read the full article.

 

Tom Essaye Quoted in CNBC on August 18th, 2022

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Bond yields tick lower, cooling off after Fed’s meeting minutes released

Bottom line, the market continues to view virtually all Fed utterances as implying a less-hawkish pivot and Wednesday wasn’t any exception as the FOMC minutes erased the dollar’s earlier gains and cut the rise in Treasury yields as stocks continue to ignore signals from the currency and bond markets that imply the Fed will not be making this hoped for pivot anytime soon, wrote Tom Essaye of The Sevens Report. Click here to read the full article.

FOMC Minutes: Not as Dovish as the Market Reaction

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What’s in Today’s Report:

  • FOMC Minutes:  Not as Dovish as the Market Reaction
  • Retail Earnings Takeaways
  • EIA and Oil Market Analysis

Futures are slightly higher on better-than-expected earnings, following an otherwise quiet night of news.

Cisco (CSCO) posted strong earnings and gave positive commentary on tech demand going forward.

Economically, EU HICP (their CPI) met expectations at 8.9% yoy and that reading means a 50 bps rate hike from the ECB is still likely in September.

Today’s focus will be on economic data, specifically the Philadelphia Fed Manufacturing Survey (E: -5.0).  If Philly Fed echoes the weak Empire Manufacturing reading and the price indices don’t decline, we’ll see stagflation concerns rise.  Other reports today include Jobless Claims (E: 265K) and Existing Home Sales (E: 4.85M) but neither should move markets.

We also get two Fed speakers, George (1:20 p.m. ET) and Kashkari (1:45 p.m. ET), and the market will be looking for any insight on a 50 bps vs. 75 bps hike in September (markets are expecting 50 bps).

Tom Essaye Quoted in Barron’s on August 12th, 2022

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The S&P 500 Had Its Fourth Straight Winning Week—and What Else Happened in the Stock Market Today

Data released this week suggests that inflation may have peaked, allowing the Federal Reserve to be less aggressive when boosting interest rates…Tom Essaye, founder of Sevens Report Research said Friday that the S&P 500’s current level reflects that growing sentiment. Click here to read the full article.

Did the Markets Achieve Peak Inflation & Peak Hawkishness

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What’s in Today’s Report:

  • Keys to a Bottom Update:  Did the Markets Achieve Peak Inflation & Peak Hawkishness?
  • Weekly Market Update:  Can Stocks Hold the Recent Gains?
  • Weekly Economic Cheat Sheet:  All About Growth This Week (And the Data Needs to be Solid)

Futures are modestly lower after Chinese economic data missed estimates and the Chinese central bank cut rates in response.

Chinese economic data was soft as Industrial Production (3.8% vs. (E) 4.3%) and Retail Sales (2.7% vs. (E) 4.9%) both missed estimates.  In response, China’s central bank announced a surprise 10 bps rate cut, a move that signals economic concern but also doesn’t offer a lot of help (a 10 bps cut won’t make a difference as long as “Zero COVID” is an in-force policy).

Focus today will be on the August Empire Manufacturing Survey (E: 5.0) and specifically the price index within the report.  The sharp drop in that price index kicked off the “peak inflation” rally of the last month, so markets will be looking for continued signals that growth is stable (so a solid headline reading) and inflation is falling (another drop in the price index).

We also get the July Housing Market Index (E: 55.0) and we have one Fed speaker,  Waller (10:50 a.m. ET), but they shouldn’t move markets.

Tom Essaye Quoted in Bolly Inside on August 9th, 2022

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US Futures Fall, Asia Stocks Face Dovish Open: Markets Roundup

The economy still has to digest all this tightening, and that will materially slow things, wrote Tom Essaye, a former Merrill Lynch trader who founded The Sevens Report newsletter. Click here to read the full article.

Market Multiple Table

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What’s in Today’s Report:

  • August Market Multiple Table
  • Growth and Inflation – Which One Falls Faster? (It’s an Important Question Going Forward)

Futures are modestly higher as markets digest Wednesday’s big rally and following better than expected earnings.

Disney (DIS) posted better than expected earnings driven by theme park performance and strong Disney+ subscriber numbers and that’s anecdotally adding to the idea that the economy remains resilient.

There was no notable economic data overnight and investors are looking ahead to this week’s claims data.

Today focus will be on Jobless Claims (E: 260k) and PPI (E: 0.3% m/m, 10.3% y/y) and the market will want to see continued moderation in the jobs market (so claims slowly drifting towards 300k) and for the PPI to also signal a peak in inflation pressures (so numbers that a better than expectations).  If the markets get those two readings from the data, the rally can continue.

Tom Essaye Quoted in Barron’s on August 9th, 2022

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Oil Earnings Outlook Dims. Blame Cheaper Oil.

For oil’s drop, it’s mostly a demand story. If you see oil move into the high to mid 70s, people are going rethink the idea that these companies are cash flow-generating machines, Essaye said. Click here to read the full article.

Tom Essaye Quoted in Yahoo on August 8th, 2022

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S&P 500 Finishes Lower After Wiping Out 1% Rally: Markets Wrap

The economy still has to digest all this tightening, and that will materially slow things…wrote Tom Essaye, a former Merrill Lynch trader who founded The Sevens Report newsletter. Click here to read the full article.