“If earnings news is not encouraging today, and yields continue to move higher over the course of the session, the selling pressure on equities is likely to continue and liable to accelerate,” wrote Tom Essaye, founder of the Sevens Report. Click here to read the full article.
As such, the pain trade has been higher for all of 2023 and that’s helping support stocks despite decidedly mixed fundamentals (and mixed is being generous),” Tom Essaye, founder of Sevens Report Research wrote. Click here to read the full article.
The stock market’s resilience so far in 2023 is an example of a well-worn but sometimes useful market concept known as the “pain trade.” Tom Essaye, founder of Sevens Report Research, defined it succinctly in a Tuesday note: “The goal of the market is to extract the most amount of pain from the greatest number of people.” Click here to read the full article.
Looking ahead, economic data will be in focus as a “strong economic recovery in China and the avoidance of hard landings in Europe and the U.S. are both priced into the market with WTI trading with an $80 handle,” said analysts at Sevens Report Research in Tuesday’s newsletter. Click here to read the full article.
What’s in Today’s Report:
Futures are moderately weaker following a disappointing night of earnings.
TSLA, NOK, FFIV and TSMC all missed earnings and provided cautious commentary or guidance, and that’s increasing concerns about an economic slowdown.
Today there are numerous potential catalysts including important economic reports, lots of Fed speak and more earnings reports.
Starting with the data, the key report today is Philly Fed (E: -19.4) and markets will want to see if it confirms the rebound we saw in Empire (if it does, expect some stock weakness as Fed expectations become slightly more hawkish). We also get Jobless Claims (E: 242K) and any move closer to 300k will be welcomed as it signals a slightly more normal labor market.
Turning to the Fed, there are multiple speakers today including Waller (12:00 p.m. ET), Mester (12:20 p.m. ET), Logan (3:00 p.m. ET) and Bostic (5:00 p.m. ET) and it will be notable to see if they all push back on the rate cut expectations in the markets.
Finally, on earnings, results lately have been underwhelming so these reports are becoming more important. Earnings we’re watching today include: T ($0.58), TSM ($1.21), AXP ($2.63), UNP ($2.57), PPG ($1.55), CSX ($0.43), STX ($0.18).
What’s in Today’s Report:
Hawkish money flows are dominating markets this morning with stock futures falling, yields rising and oil and gold both testing support after hot inflation data overnight.
Economically, U.K. CPI was 10.1% vs. (E) 9.8% y/y in March while the Eurozone Narrow Core HICP reading rose 0.1% to 5.7% meeting estimates. The two inflation prints are causing a hawkish shift in central bank policy expectations this morning, which is in turn rekindling hard landing fears.
Looking into today’s session, there are no notable economic reports today however there is a 20-Yr Treasury Bond auction at 1:00 p.m. ET that could impact both bond and equity markets.
As far as the Fed goes there are two speakers today, but both are after the close: Goolsbee (5:30 p.m. ET) and Williams (7:00 p.m. ET).
That will leave investor focus on earnings early with more big banks and notable consumer financial companies reporting ahead of the bell including: MS ($1.67), CFG ($2.15), SYF ($1.49), ALLY ($0.88), USB ($1.13), and TRV ($3.64), while TSLA ($0.85) and IBM ($1.27) will release results after the close.
Bottom line, the 2-Yr Treasury yield is testing a more than one-month high this morning and stocks are coming for sale broadly which underscores deteriorating sentient among investors with the S&P 500 trading well above 4,100 this week. And if earnings news is not encouraging today, and yields continue to move higher over the course of the session, the selling pressure on equities is likely to continue and liable to accelerate.
Oil futures finished with a loss on Monday, with traders weighing the prospects for energy demand. A “shockingly strong” Empire State Manufacturing Index reading Monday helped to live the odds of an interest-rate hike by the Federal Reserve in May, said Tyler Richey, co-editor at Sevens Report Research. Click here to read the full article.
Tom Essaye, president of Sevens Report Research, joins BNN Bloomberg to discuss the disparity of the market’s rate cut expectations, and central bank pushback. Click here to watch the full interview.
“The expectation that consumer demand will firm markedly in China as the economy continues to recover from the impact of strict economic lockdowns is another supporting factor for oil markets this week,” said Richey. Click here to read the full article.
Sevens Report Research President Tom Essaye joins Yahoo Finance Live to discuss U.S. inflation, Fed policy, economic uncertainty, and the outlook for markets. “I think the Fed will be more hawkish than the market is currently expecting. We have to remember something. If we look at year-end Fed Funds estimates, it’s 4% to 4 and 1/4%. So the market is pricing in numerous rate cuts, not hikes, rate cuts before year end”…said Tom Essaye. Click here to watch the full interview.
