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Why Home Depot Earnings Point to a Soft Landing

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What’s in Today’s Report:

  • Why Home Depot Earnings Point to a Soft Landing
  • Retail Sales Data Takeaways
  • Debt Ceiling Barometer: 1-Month T-Bill Yield Steadies

Stock futures are rebounding modestly from yesterday’s declines this morning as traders await more clarity on the debt ceiling negotiations (1-Month yield is down 2 bp to 5.56%) and digest in-line European inflation data.

Economically, Eurozone HICP (their CPI equivalent) met estimates at 7.0% y/y with the Narrow Core reading falling 0.1% to 5.6%, also as expected but still well above target.

There is just one economic report this morning: Housing Starts & Permits (E: 1.405M, 1.430M) and no Fed officials are scheduled to speak.

Retailer earnings continue this morning with TGT ($1.74) reporting ahead of the bell and investors will be looking for more signs of “soft landing” spending trends as we saw with HD yesterday.

As far as other potential catalysts go, there is a 20-Yr. Treasury Bond auction at 1:00 p.m. ET today and any big move in yields could impact stocks (too weak would indicate inflation worries, too strong would underscore growing debt ceiling fears).

Why Negative News (Still) Isn’t Making Stocks Drop

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What’s in Today’s Report:

  • Why Negative News (Still) Isn’t Making Stocks Drop
  • Weekly Market Preview:  More Insights into Hard vs. Soft Landing This Week
  • Weekly Economic Cheat Sheet:  Retail Sales (Tues) the Key Report This Week

Futures are modestly higher following reports of progress on the debt ceiling negotiations over the weekend.

Another debt ceiling meeting is scheduled for Tuesday at the White House and major officials (including Biden and Yellen) stated progress was made in negotiations over the weekend, although a deal still isn’t likely this week.

Economically, Euro Zone IP slightly missed estimates.

Today there’s only one notable economic report, the May Empire Manufacturing Index (E: -3.70), and markets will want to see stability in the data to further hint towards a soft landing.

Looking at the Fed, there are numerous speakers today including Bostic (8:45 a.m. ET), Kashkari (9:15 a.m. ET), Barkin (12:30 p.m. ET) and Cook (5:00 p.m. ET) and while their comments may have a hawkish tone, the market firmly believes the Fed has paused on rate hikes and it’ll take Powell disavowing that notion for investors to reconsider.

Finally, debt ceiling headlines will likely continue, and don’t be shocked if there’s some pushback on the “progress” narrative from the weekend as the political gamesmanship kicks into high gear, with just over two weeks till the “X” date.

What Happens If There’s No Debt Ceiling Deal?

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What’s in Today’s Report:

  • What Happens If There’s No Debt Ceiling Deal?
  • Why CPI Was Positive for Stocks and Bonds Yesterday
  • EIA Analysis and Oil Market Update

Futures are modestly higher mostly on momentum from Wednesday’s rally and following a quiet night of news.

China’s CPI rose 0.1% vs. (E) 0.3% and that’s combining with recently underwhelming Chinese economic data to raise doubts about the economic recovery.

There was no notable news on the debt ceiling, although another round of high level meetings will occur tomorrow.

Today focus will first be on the Bank of England Rate Decision (E: 25 bps hike) and then on economic data, specifically Jobless Claims (E: 245K) and PPI (E: 0.3% m/m, 2.5% y/y).  Stocks have benefitted from mostly “goldilocks” data over the past week, and if we get more of the same via in-line claims and PPI, stocks should be able to extend the rally.  Finally, there’s one Fed speaker, Waller (10:15 a.m. ET), but he shouldn’t move markets.

Tom Essaye Quoted in Swissinfo.ch on May 9th, 2023

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US Stocks Slump Before Inflation Report; Dollar Up: Markets Wrap

Equities could finally break out of that range and move higher if, data points more convincingly towards a soft landing, there are no more regional bank failures, core inflation drops faster than expected, the Fed confirms the pause and a debt ceiling deal is reached, said Tom Essaye, founder of The Sevens Report newsletter. Click here to read the full article.

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Tom Essaye Quoted in Barron’s on May 9th, 2023

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U.S. Stock Futures Slip as Investors Look Ahead to Inflation Data

With increasing focus on the debt ceiling, investors will be keenly focused on today’s meeting between President Biden and Congressional leadership as hopes for a delay to September are building and any disappointment of those hopes could result in volatility across asset classes, said Tom Essaye, the founder of Sevens Report Research. Click here to read the full article.

Tom Essaye Quoted in Barron’s on May 8th, 2023

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Stocks Are Holding Steady Ahead of Busy Week

Futures are slightly higher following a mostly quiet weekend of news as markets look ahead to Wednesday’s CPI, wrote Sevens Report’s Tom Essaye. Click here to read the full article.

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Market Multiple Chart: S&P 500

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What’s in Today’s Report:

  • Market Multiple Table Chart: S&P 500 (Separate PDF Available on Request)
  • CPI Preview – Will the Data Contradict Fed “Pause” Expectations

Futures are down modestly this morning, tracking global shares lower after soft earnings while focus turns to today’s CPI data.

ABNB shares are down 14% in premarket trade after the company offered disappointing revenue guidance after the close yesterday and that is weighing modestly on equities this morning.

Economically, German CPI was unchanged at 7.2% y/y in April, meeting analysts’ estimates, but importantly, the headline remains very elevated and much beyond policy makers’ 2.0% target which will support further tightening in the months ahead.

Looking into today’s session, U.S. inflation data will be in focus with CPI (E: 0.4% m/m, 5.0% y/y) due at 8:30 a.m. ET, but the more important figure to watch is Core CPI (E: 0.4% m/m, 5.5% y/y) as a print above 5.5% will raise concerns that price pressures are sticky and not declining which will warrant a continued, aggressive stance by the Fed.

There are no Fed officials scheduled to speak today but there is a 10-Yr Treasury Note auction at 1:00 p.m. ET that could move markets, especially in the wake of the CPI data as investors look for insight as to how the “smart market” is digesting the latest look at inflation.

Finally, earnings season is winding down but there are a few notably companies reporting today: TM ($2.83) before the open, and DIS ($0.89) after the close.

Market Multiple Table: May Update

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What’s in Today’s Report:

  • Market Multiple Table – May Update (Unbranded PDF Available on Request)
  • Senior Loan Officer Opinion Survey

Stock futures are lower this morning after soft economic data overseas and growing angst about the debt ceiling.

Chinese merchandise trade data for April revealed a -7.9% drop in imports vs. (E) -0.2% which has poured some cold water on hopes for a strong recovery in the world’s second largest economy.

In the U.S., the NFIB Small Business Optimism Index came in at 89.0 vs. (E) 89.7 for the month of April but the release is not materially moving markets this morning. There are no additional economic reports today.

There are two Fed officials scheduled to speak today: Jefferson (8:30 a.m. ET) and Williams (12:05 p.m. ET) as well as a 3-Yr Treasury Note auction at 1:00 p.m. ET, all of which have the potential to impact markets in intraday trade.

With increasing focus on the debt ceiling, investors will be keenly focused on today’s meeting between President Biden and Congressional leadership as hopes for a delay to September are building and any disappointment of those hopes could result in volatility across asset classes.

The Fed Pivoted, So Now What?

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What’s in Today’s Report:

  • Sevens Report Technicals First Issue Today (Delivered to subscribers later this morning)
  • The Fed Pivoted, So Now What?
  • Weekly Market Preview:  Will there be any debt ceiling progress, and does disinflation resume?
  • Weekly Economic Cheat Sheet:  CPI on Wednesday is the key report this week.

Futures are slightly higher following a mostly quiet weekend of news as markets look ahead to Wednesday’s CPI.

News was slightly positive on the debt ceiling over the weekend, as reports indicate the White House will try to negotiate a short term debt ceiling extension (to the end of September).  However, it remains uncertain if even this short-term deal can get done before the “X” date.

Economically, German Industrial Production missed estimates (-3.4% vs. (E) -1.5%) but that’s not moving markets.

Today there are no notable economic reports but there is a potentially important release at 2:00 p.m. via the Bank Senior Loan Office Survey.  Markets (and the Fed) are nervous the regional bank stress will curtail lending and put a bigger headwind on the economy.  If the loan officer survey reflects that reality (a drop in bank lending) it could cause volatility as that would increase the chances of a potential hard landing.

 

Sevens Report Technicals – First Issue Being Delivered To Trial Period Subscribers This Morning!

We have been thrilled with the response to our new research offering: Sevens Report Technicals and we are very excited to deliver the first official issue later this morning. Sevens Report Technicals will be similar in appearance to the special technical report we sent out two weeks ago, which you can view here.

This new report will offer a “deep dive” into the technical dynamics of all of the asset classes we cover in the daily Sevens Report including:

  • A “Top-Down” Technical View
  • Dow Theory Update
  • Key Levels to Watch Across Asset Classes
  • A Dynamic Equity Sector “Dashboard”
  • A Deep Dive Into Treasury Market Trends
  • Market Volatility Observations and Takeaways

During this launch phase we continue to offer an additional month free on any quarterly ($75 discount) or annual ($150 discount) subscription. With a one month “Grace Period” during which you can receive a full refund for any reason, you take no risk trying Sevens Report Technicals. We are confident that you will find the research a perfect complement to your business or investment process.

To start your risk-free trial subscription, please send an email to info@sevensreport.com. To learn more about Sevens Report Technicals, click this link.

Jobs Report Preview

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What’s in Today’s Report:

  • Jobs Report Preview

Futures are moderately higher ahead of the jobs report thanks to solid earnings overnight.

Earnings overnight were good, highlighted by AAPL and SQ, which both rallied after hours and are helping lift futures.

Economic data underwhelmed as both the Chinese Composite PMI and German Manufacturers’ Orders missed expectations, but the numbers aren’t moving markets.

Today focus will be on the jobs report and expectations are as follows:  178K Job Adds, 3.6% Unemployment Rate and 0.3% m/m,4.2% y/y wages.  As we cover in the Report, risks to this jobs number are two sided, as a “Too Hot” number could reverse the Fed pause expectations, while a “Too Cold” number will spike hard landing fears.  So, the market needs a number at or modestly below the expectation, and if it gets that “Just Right” number, stocks can rally today.

We also get two Fed speakers today, Cook (1:00 p.m. ET) and Bullard (1:00 p.m. ET), but neither should move markets.