Tom Essaye Quoted in S&P Global Market Intelligence on October 7th, 2022

US job growth slows in September as labor market cools

“This just reinforces to the Fed that they have to stay the course, there’s nothing in this report that will make the Fed think: ‘Oh gee, we need to alter our plan.” said Tom Essaye, a trader and publisher of The Sevens Report. Click here to read the full article.

Tom Essaye Quoted in Yahoo on August 8th, 2022

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.

FOMC Preview

What’s in Today’s Report:

  • FOMC Meeting Preview
  • The S&P 500 Approaches Downside Target: Chart

Stock futures are modestly higher this morning as yesterday’s sharp declines are digested while bond yields pulled back from multi-year highs as focus remains on the Fed.

The 10s-2s spread inverted again overnight after GS and JPM changed their forecasts to reflect a 75 bp hike tomorrow which is in line with rate market expectations. This dynamic is a sharp change in expectations from just the end of last week and largely the reason for the carnage in equities yesterday.

Economic data was slightly better than feared overnight between the German ZEW Survey and the NFIB Small Business Optimism Index, but good data is being seen as hawkish in this aggressive policy environment.

Looking into today’s session, we will get another read on U.S. inflation via the PPI report (E: 0.8% m/m, 11.0% y/y) but the release is not likely to materially shift policy expectations at this point with the June FOMC Meeting getting underway this morning.

Bottom line, the latest declines in stocks have been due to a rapid repricing of Fed rate hike expectations, from 50 basis points as recently as last week to 75 basis points as of yesterday and whether stocks can stabilize here will likely depend on how the bond market (namely Fed Funds futures) trade today and through the conclusion of the Fed meeting tomorrow. New highs in yields and another yield curve inversion will weigh on stocks while stabilization in rates could lead to some degree of a relief rally.

Sector Trends: Relative Strength to the S&P 500

What’s in Today’s Report:

  • Sector Trends:  Relative Strength to the S&P 500
  • EIA Analysis and Oil Market Update

Futures are slightly higher as incrementally positive macro news offset more disappointing tech earnings.

Nvidia earnings underwhelmed and the stock fell 5% after hours, and that is weighing on tech this morning.

But, not as hawkish as feared in FOMC minutes and the continued reopening of Shanghai offset the soft NVDA earnings.

Today’s focus will be on economic data via the Revised Q1 GDP (-1.4%), Jobless Claims (E: 208K), and Pending Home Sales (E: -1.3%).  Given the recent weakness in other economic data, the market will want to see stability in the numbers to continue to push back on stagflation concerns.

Why Are the VIX and S&P 500 Possibly Diverging?

What’s in Today’s Report:

  • Why Are the VIX and S&P 500 Possibly Diverging?
  • Is Selling Becoming Mechanical?
  • CPI Takeaways (It Won’t Make the Fed More Hawkish)

Futures are moderately lower mostly on momentum from Wednesday’s afternoon selloff.

Economically, UK economic data disappointed (GDP and Industrial Production both missed estimates) while BOE officials warned of more rate hikes reminding markets there’s a real stagflation threat in the UK.

Geo-politically, Finland formally applied to join NATO (and Sweden is expected to follow), keeping NATO/Russia tensions high for the foreseeable future (meaning quarters and years).

Today, we get Jobless Claims (E: 190K) and PPI (0.5% m/m, 10.7% y/y) and one Fed speaker, Daly (4:00 p.m. ET), but barring a big spike in claims, a big move in PPI or incrementally hawkish commentary from Daly (all of which are unlikely) these events won’t move markets.  So, short-term technical will continue to be the main driver of stocks, and markets need to show some stabilization, otherwise, the declines themselves will invite more selling.

Fed Meeting Preview

What’s in Today’s Report:

  • FOMC Preview
  • Q&A: Technical Resistance and Downside Targets for the S&P
  • ISM Manufacturing Index Takeaways

Stock futures are little changed as yesterday’s late-session rally is being digested following more hot inflation data and a slightly hawkish RBA hike (25 bp vs. E: 15 bp) overnight.

Economic data on growth was better than feared overnight but Eurozone PPI was hotter than expected with a staggering annual rise of 36.8% vs. (E) 36.2% in March.

Looking into today’s session, there are a few economic reports to watch including March JOLTS (E: 11.27M) and Factory Orders (E: 1.1%), however, with the May FOMC Meeting beginning this morning, a sense of Fed paralysis is likely to begin to grip markets ahead of tomorrow’s announcement.

Finally, earnings season does continue with a few notables reporting today: PFE ($1.66), BP ($1.41), HLT ($0.59), AMD ($0.90), and SBUX ($0.60) which could have an impact on sector trading but is not likely to move the broader markets given the focus-shift to the Fed.

Market Multiple Levels: S&P 500 Chart

What’s in Today’s Report:

  • Market Multiple Levels: S&P 500 Chart

Futures are solidly higher this morning after more strong tech earnings as investor focus shifts to January jobs data.

Q4 results from GOOGL and AMD handily beat estimates, sending both stocks higher by more than 10% overnight.

Economically, the Eurozone HICP Flash rose to 5.1% vs. (E) 4.3% which is rekindling some global inflation concerns.

Today, there are no Fed speakers on the calendar which will leave the focus on economic data including: the ADP Employment Report (E: 225K) and Motor Vehicle Sales (E: 12.6 million).

On the earnings front, we hear from: ABBV ($3.28), MPC ($0.47), TMO ($5.22), and CHRW ($1.85) before the open and FB ($3.78), QCOM ($3.00) and TMUS ($0.16) after the close.

Fed officials have been talking down the January jobs report so far this week, so if today’s ADP report comes in hot, that could cause another wave of hawkish money flows and equity volatility while the prospect of more upbeat tech earnings could see this week’s relief rally continue.

Tom Essaye Quoted in Barron’s on July 1, 2021

Stocks Close Up. The S&P 500 Hits Another High.

Markets will want ‘Goldilocks’ data to start the quarter, in that the numbers show solid…writes Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

Tom Essaye Quoted in Barron’s on June 24, 2021

Eli Lilly Jumps, Dollar Tree Slips as Stock Market Chases Infrastructure Plan Higher

S&P futures are trading solidly higher this morning amid infrastructure…writes Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

Deteriorating Economic Data

What’s in Today’s Report:

  • Economic Breaker Panel – Deterioration in June

S&P futures are down roughly 10 points as the recent melt-up rally continues to be digested ahead of key inflation data in the U.S. while trade headlines were negative overnight.

Trade sentiment deteriorated over the last 12 hours as expectations of a G20 deal are fading while protests in Hong Kong over an extradition bill pressured the Hang Seng to fall nearly 2%.

Economically, Chinese CPI and PPI met estimates overnight while Japanese Machine Orders rose 5.2% vs. (E) 0.5% helping the Nikkei outperform with a loss of just 0.35%.

Today’s focus will be on inflation data due out ahead of the bell: CPI (E: 0.1%). There are no other notable reports due to be released and no Fed officials are scheduled to speak today.

The digestive tone will likely continue as the blistering rally of the last week was overdone however the “pain trade” remains higher and if the CPI print is soft, we could see another run back to and potentially through 2900 in the S&P today.