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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.

Tom Essaye Quoted in Business Insider on June 4, 2019

“The unpredictability of the administration regarding tariffs/trade combined with a late cycle economy and a Fed seemingly on hold makes a 16x multiple…” says Tom Tom Essaye. Click here to read the full article.

Jobs Report Preview

What’s in Today’s Report:

  • Jobs Report Preview
  • Is the AAPL Decline an Opportunity for Value Stocks?

Futures are down more than 1% as AAPL sharply cut Q4 revenue guidance.

AAPL cut Q4 revenue guidance to $84 bln from the previous $89-$93 bln range, citing slowing Chinese demand as the main negative influence.

Economically UK Construction PMI and Euro Zone Money supply both slightly missed expectations.

The entire tech sector will be in focus today to see how well it can hold up in the face of the AAPL news, which wasn’t a shock as analysts and suppliers have been cutting IPhone numbers for months.  If stocks can set the lows early in the day and rally back, that would be an anecdotal sign near term selling pressure may be exhausted.

Away from AAPL, we get a lot of economic data today including (in order of importance): ISM Manufacturing Index (E: 57.9), ADP Employment Report (E: 175K), Jobless Claims (E: 217K) and Motor Vehicle Sales (E: 17.3M).  Data today could be important because if the data is firm, it should decrease the AAPL fallout.  However, if the data is weak, then it’s going to be another ugly day as the news will reinforce worries about corporate earnings and economic growth.

More Growth Fears

What’s in Today’s Report:

  • The Aussie-Yen Points to Further Growth Fears

S&P futures are tracking international shares lower to start the year this morning as another set of soft economic data stoked fears of slowing global growth.

The Chinese Caixin Manufacturing PMI Index fell 0.5% to 49.7 in December suggesting the world’s second largest economy is slipping into contraction.

Meanwhile, the Eurozone PMI Manufacturing Index met expectations but dipped to a near two year low of 51.4.

In the U.S. today, there is one economic report to watch: PMI Manufacturing Index (E: 53.9) and there are no Fed officials scheduled to speak.