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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.

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).

What Currencies and Bonds Are Saying About the Fed

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What’s in Today’s Report:

  • Better-Than-Feared WMT and HD Earnings Drive Trading
  • Why Currency and Bond Markets Are Not Signaling a “Less Hawkish” Fed
  • Chart: S&P 500 Quietly Closes at Fresh Highs
  • Economic Takeaways: Housing Starts and Industrial Production

U.S. futures are tracking European shares lower following disappointing economic data out of the EU ahead of today’s release of the July FOMC meeting minutes.

U.K. CPI jumped to a new multi-decade high of 10.1% vs. (E) 9.8% in July while the Q2 Eurozone GDP Flash dipped to 3.9% vs. (E) 4.0%, rekindling concerns about stagflation.

Looking into today’s session, focus will be on economic data early with Retail Sales (E: 0.1%) due out before the bell as well as more retailer earnings including: TGT ($0.71), LOW ($4.63), and TJX ($0.68).

Then there is one Fed speaker, Bowman, at the open (9:30 a.m. ET) before focus will shift to the July FOMC meeting minutes which will be released at 2:00 p.m. ET.

Bottom line, the market will want to see more good earnings and guidance out of the remaining major retailers due to report quarterly results today as well as a not-as-hawkish-as-feared set of Fed minutes released this afternoon, if this latest leg higher in stocks is going to continue. Otherwise, we could be set up for a pullback into the back half of the week as stocks have become near-term overbought without any new meaningfully positive catalysts.

Market Multiple Levels: S&P 500 Chart

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What’s in Today’s Report:

  • Market Multiple Levels: S&P 500 Chart
  • Takeaways From a Dismal Empire State Manufacturing Report

Futures are modestly lower this morning as investors digest more downbeat economic data and disappointing earnings out of HD ahead of the Fed Minutes tomorrow.

The German ZEW Survey’s Economic Sentiment reading was -55.2 vs. (E) -52.7, underscoring ongoing concerns about the outlook for growth in the months ahead.

Looking to today’s session, there are two economic reports to watch: Housing Starts and Permits (1.540M, 1.650M) and Industrial Production (E: 0.3%). Data has been disappointing so far this week so any positivity in the releases could help buoy equities in what has been so far a pretty quiet trading week.

There are no Fed officials scheduled to speak today but WMT ($1.60) will report earnings in the pre-market and investors will be looking for the massive retailer to reiterate guidance and meet or beat estimates to provide evidence that the consumer remains resilient in the face of extremely high inflation. Any disappointment in the quarterly results could spur volatility given the most recent leg higher in stocks leaving the market overbought.

Brace for a Recession on Thursday

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What’s in Today’s Report:

  • Brace for a Recession on Thursday
  • Housing Data Points to Slowdown in Real Estate Market
  • Chart: S&P 500 Holds 50-Day Moving Average by One Point

Stock futures are solidly higher this morning as quarterly earnings results from tech giants MSFT and GOOGL were both well received by investors after the close yesterday while investor focus shifts to the Fed today.

This morning, economic data will be in focus early with Durable Goods Orders (E: -0.5%), International Trade in Goods (-$103.2B), and Pending Home Sales (-1.0%) all due out by 10:00 a.m. ET.

From there, expect price action to slow considerably as focus turns to the Fed with the FOMC Meeting Announcement at 2:00 p.m. ET followed by the Fed Chair Press Conference at 2:30 p.m. ET.

Markets have priced in a 75% chance of a 75 basis point hike today while no changes to forward-guidance are expected so any variance from those expectations could result in sizeable moves in the market this afternoon.

Finally, earnings season remains in full swing with SHOP ($0.03), TMUS ($0.41), HLT ($1.06), SHW ($2.81) reporting ahead of the bell and META ($2.51), F ($0.43), and QCOM ($2.86) releasing results after the close. Any of those reports could lead to sector specific volatility despite the Fed today.

Another Factor Fueling the Rally

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What’s in Today’s Report:

  • SPX Breaks Through Several Key Resistance Levels: Chart
  • Another Factor Fueling the Rally

Stock futures are slightly higher this morning as yesterday’s sizeable rally is digested amid news that Russia will resume gas flows through the Nord Stream 1 pipeline this week.

Economically, German PPI came in below expectation but U.K CPI and PPI both came in slightly hot which is offering mixed signals regarding whether we have reached peak inflation not globally.

Looking into today’s session, we will get another report on the housing market: Existing Home Sales (E: 5.400M), and investors will again be looking for a less dismal print than Monday’s Housing Market Index release.

There are no Fed speakers today, but the Treasury will hold a 20-Yr Bond auction at 1:00 p.m. ET that could move yields and impact equity trading (especially if it sends yields meaningfully higher).

Finally, traders will remain focused on earnings with ABT ($1.07) and BIIB ($4.10) releasing results ahead of the bell and TSLA ($1.73), UAL ($1.86), CSX ($0.47), and DFS ($3.74) reporting after the close.

Bottom line, near-term market momentum has taken a decidedly bullish shift, and while we could see a modest pullback as yesterday’s outsized gains are digested further if news flow remains even slightly positive, the path of least resistance is still higher into the end of the week.

Is Value Outperformance Ending?

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What’s in Today’s Report:

  • Is Value Outperformance Ending?
  • The S&P 500 Has Reached Another Key Technical Tipping Point

Stock futures are higher this morning despite soft earnings from IBM after the close yesterday as European inflation data was not as bad as feared in June.

Eurozone HICP (their CPI equivalent) met estimates with a rise of 8.6% Y/Y in June up from 8.1% in May, however, the core figure slipped to 3.7% Y/Y from 3.8% in May. The release has prompted new bets for a 50 bp hike from the ECB this week, but that is bolstering hopes that peak inflation will come sooner than later.

Looking into today’s session, there is one economic report to watch: Housing Starts (E: 1.588) and after yesterday’s terrible Housing Market Index print, investors will want to see a number more in line with expectations that does not point to such a rapid deterioration in the real estate market.

There are no Fed speakers or Treasury auctions today which will leave traders largely focused on earnings with: JNJ ($2.57), HAL ($0.45), LMT ($6.29), ALLY ($1.90), and TFC ($1.17) reporting before the bell, and NFLX ($2.90) and JBHT ($2.31) releasing results after the close.

Bottom line, the broader equity market remains at a key tipping point right now as recession fears continue to simmer, but earnings have so far been mostly upbeat suggesting there is still a path to a soft landing. And if earnings news is upbeat today, we could see the S&P 500 breakout through key downtrend resistance near 3,890 and make a run at new multi-week highs.

Market Multiple Levels: S&P 500 Chart

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What’s in Today’s Report:

  • Market Multiple Levels: S&P 500 Chart

Stock futures are trading with cautious gains this morning as inflation data overseas met expectations as traders look ahead to today’s all-important CPI report in the U.S.

Economically, German and French CPI headlines both met estimates in June, holding steady from May levels which is offering hope that global inflation pressures have peaked while several growth metrics in the EU topped estimates.

Today, the focus will almost entirely be on the June CPI report with the headline expected to rise 1.1% m/m and 8.8% y/y from 8.6% in May while core CPI is expected to moderate with a rise of 0.5% m/m and 5.8% y/y from 6.0% previously.

There are no Fed officials scheduled to speak today but the Treasury will hold a 30-Yr Bond auction at 1:00 p.m. ET that could move markets in the afternoon.

Bottom line, markets are at a tipping point here and today’s CPI report could cause a breakout if the data suggests we are beyond peak inflation and peak Fed hawkishness, while conversely, we could see sharp declines if the data comes in hot again

Technical Update: Potential Bottom Forming?

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What’s in Today’s Report:

  • Technical Update: Still Trending Lower But Potential Prospects of a Bottom Forming
  • Charts: S&P 500 Downside Target Reached, VIX in Compressing Range

Stock futures are modestly higher with global shares amid positive news out of China regarding covid policies.

China announced shortened quarantine times for incoming visitors in the latest move to ease covid-restrictions and potentially move away from their zero-Covid policy stance.

Economically, the German GfK Consumer Climate Index for July was no worse than feared at -27.4 vs. (E) -27.9 which is easing concerns about a swift drop-off in global economic growth.

Today, there are several economic reports to watch for: International Trade in Goods (E: -$102.0B), Case-Shiller Home Price Index (E: 1.8%), and most importantly Consumer Confidence (E: 101.0). Investors will want to see a continued slowdown in the data, but not to the degree that would raise concerns about a “hard landing.”

Two Fed officials are also scheduled to speak today: Barkin (8:00 a.m. ET) and Daly (12:30 p.m. ET) and there is a 7-Yr Treasury Note auction at 1:00 p.m. ET that could move yields and influence stock trading.

 

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Tom Essaye Quoted in Market Watch on June 23rd 2022

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Don’t trust the stock-market bounce until S&P 500 is back above 3,800: analysts

Since the beginning of last week, 3,800 has become a new ceiling for the S&P 500 as sellers have repeatedly stepped in and overwhelmed the tentative, weakhanded bids…said Tom Essaye, founder of Sevens Report Research, in a Thursday note. Click here to read the full article.