Posts

What is the “Short Vol” Trade and How Is It Impacting Markets?

/in , /by

What is the “Short Vol” Trade? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What is the “Short Vol” Trade and How Is It Impacting Markets?
  • An Important Trading Range to Watch
  • EIA Analysis:  A Bearish Report for Oil

Futures are slightly higher despite soft economic data and more earning guidance cuts.

UK monthly GDP declined –0.3% and the UK officially entered recession, although that’s also boosting rate cut expectations.

On earnings, both CSCO and DE cut guidance and both stocks are solidly lower pre-market.

Today is a very busy day of economic data and the data will likely determine if stocks extend yesterday’s rebound or give some of it back.

The key reports are, in order of importance:  Retail Sales (E: -0.1%), Jobless Claims (E: 219k), Philly Fed (E: -9.0), Empire Manufacturing Index (E: -12.5) and Industrial Production (E: 0.2%).  For Empire and Philly Fed, the price indices will be closely watched and if they show further substantial gains, expect that to push yields higher on inflation concerns.

There are also two Fed speakers today,  Waller (1:15 p.m. ET) and Bostic (7:00 p.m. ET), and Waller could move markets as he is part of Fed leadership.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

Was Yesterday the Start of a Pullback?

/in , /by

Was Yesterday the Start of a Pullback? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Was Yesterday’s Hot CPI the Start of a Pullback? (Four Issues to Address)
  • VIX Chart Shows Options Trading Amplified Yesterday’s Selloff
  • CPI Takeaways

Stock futures are rebounding back from yesterday’s steep post-CPI selloff thanks to some “cooler” inflation data in the U.K. overnight and better than expected factory data out of Europe. The 10-Yr yield is stable, just below 4.30%.

Economically, the Q4 Eurozone GDP Flash met estimates at a tepid 0.1% y/y but EU Industrial Production jumped 2.6% vs. (E) -0.3% in December easing some ongoing growth worries.

U.K. PPI also favorably declined across the board which is offsetting the nation’s slightly higher than expected CPI data.

Looking into today’s session, there are no notable economic reports but two Fed officials who happen to be scheduled to speak at the open and close: Goolsbee (9:30 a.m. ET), Barr (4:00 p.m. ET).

Goolsbee is notably an FOMC voting member who leans towards the dovish camp and could potentially add support for a relief rally today after yesterday’s sharp decline. VIX futures expiration could also impact money flows in early trade.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

European Shares Edged Up On Better Than Feared Retail Sales

/in , /by

European Shares Edged Up: Tom Essaye Quoted in Barron’s

European Stocks Drift Higher

London’s FTSE 100 gained 0.6%, with the Paris CAC 40 up 0.3%. Frankfurt’s DAX slipped 0.1% into the red, while the pan-European Stoxx 600 rose 0.1%.

“European shares edged up on better than feared Retail Sales and a very strong German Manufacturing Orders Report,” said Tom Essaye, founder of Sevens Report Research.

Also, click here to view the full Barron’s article published on February 6th, 2023. However, to see the Sevens Report’s full comments on the current market environment sign up here.

It’ll be Very Hard for This Market to Rally

If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

CPI Preview: Good, Bad, and Ugly

/in , /by

CPI Preview: Good, Bad, and Ugly: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • CPI Preview – Good, Bad, and Ugly
  • Middle East Update: Understanding the Situation with Rafah

U.S. equity futures are lower with European shares as investors await today’s critical inflation data ahead of the bell while most Asian markets are closed for holidays.

Economically, the German ZEW Survey was mixed as Current Conditions deteriorated to -81.7 vs. (E) -79.0 but Economic Sentiment Improved to +19.9 vs. (E) +18.0. The headline miss is one more of several recent data points that suggests the German economy is slowing more rapidly than most anticipated.

Domestically, the NFIB Small Business Optimism Index was disappointing as it fell to 89.9 vs. (E) 92.4 underscoring a downbeat and cautious mood among small business owners despite economic data otherwise pointing to continued resilience in the U.S. economy.

Today, focus will be almost exclusively on the CPI report (8:30 a.m. ET) with the headline expected to come in at 0.2% m/m and 3.0% y/y while the Core CPI figure is expected to come in at 0.3% m/m and 3.7% y/y (full scenario analysis in today’s report).

There are no Fed speakers on the calendar or Treasury auction scheduled for today which will leave the session likely dominated by how the market digests the latest inflation data. Market-based Fed policy rate expectations are currently pricing in a 16% chance of a March rate cut and a 56% chance of a May cut. If those two figures decline materially, especially the latter one, expect an extension of yesterday’s intraday pullback.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

Is NYCB the Canary in the Commercial Real Estate Coal Mine?

/in , /by

Is NYCB the Canary in the Commercial Real Estate Coal Mine? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Is NYCB the Canary in the Commercial Real Estate Coal Mine?
  • EIA Update and Oil Market Analysis

Futures are slightly lower following more disappointing Chinese economic data and on dimming hopes for an Israel/Hamas ceasefire.

Chinese CPI fell more than expected (-0.8% vs. (E –0.5%) and increased deflation concerns for that economy.

Geopolitically, Secretary of State Blinken returned from the Mid-East without a Israel/Hamas cease fire deal and oil is rallying as a result.

Today focus will be on Jobless Claims (E: 222K), which rose to a one-month high last week and if claims move closer towards 250k, it will get people’s attention as a hint the labor market is starting to soften (something that’s not priced into stocks).  We also have one Fed speaker, Barkin (8:30 a.m. and 11:30 a.m. ET), but he shouldn’t move markets.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

Jobs Day (Updated Jobs Report Preview)

/in , /by

Jobs Day: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Jobs Day (Updated Jobs Report Preview)

Futures are solidly higher ahead of today’s jobs report thanks to strong earnings overnight.

META (up 17% pre-market) and AMZN (up 7% pre-market) posted strong earnings while AAPL (down 2% pre-market) underwhelmed, but overall earnings results were good overnight and that’s pushing futures higher.

Today focus will be on the jobs report and expectations are as follows: 187K job adds, 3.8% Unemployment Rate, 0.3%/4.1% wage growth.  Powell pushing back on a March rate cut helped increase the threshold for a “Too Hot” report, so there’s a wider lane for a “Just Right” reading.  But, if job growth remains very strong (so solidly above 200k) and the other details are “Too Hot,” don’t be surprised if yields rise and stocks decline as some investors start to doubt a May rate cut.

Other notable events today include Consumer Sentiment (E: 78.8, 1-Yr inflation expectations: 2.9%) and the last “important” day of earnings, although neither of those should move markets.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

What Earnings Are Saying

/in , /by

What Earnings Are Saying: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What Earnings Are Saying About Current Economic Growth

Futures are modestly lower following a night of underwhelming earnings results.

INTC (stock down 10% premarket) gave soft guidance while V and TMUS (stocks down –3% each) posted underwhelming results.

Economically, German GfK Consumer Climate missed expectations (-29.7 vs. (E) -24.5) but that’s not moving markets.

Today focus will be on the Core PCE Price Index (E: 0.2% M/M, 3.0% Y/Y) and this number needs to meet or be lower than expectations to help support the stock rally.  If Core PCE prints solidly above expectations look for higher yields and lower stock prices.  The other notable economic number today is Pending Home Sales (E: 1.3%) but that shouldn’t move markets.

On the earnings front, the key report today is AXP ($2.65) and specifically we’ll be watching for is their commentary on consumer spending (the more positive, the better for markets).  Other notable earnings include CL ($0.85) and NSC ($2.90).

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

China Cut Reserve Requirements

/in , /by

China Cut Reserve Requirements: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • China Cut Reserve Requirements.  Does that Improve Risk/Reward?

Futures are little changed following a mixed night of earnings and ahead of the ECB rate decision.

Earnings were mixed overnight with cautious TSLA guidance (TSLA down –7% pre-market). This is offsetting other solid tech results from IBM, NOW and others.

Today focus will remain on rates, data and earnings.  The key event today is the ECB meeting there is little to no chance of a rate hike or cut.  Instead, the key will be insight into when the ECB expects the first rate cut.  If it’s before the summer, that’s dovish/bullish.  If it’s after the summer that’s hawkish/bearish.

Turning to the data, there are several notable reports today. Including (in order of importance) Advanced Q4 GDP (E: 2.0%), Jobless Claims (E: 200K), Durable Goods (E: 1.0%) and New Home Sales (E: 650K). “Goldilocks” data that meets expectations is the best outcome for stocks.

Finally, earnings season rolls on and important reports today include: AAL ($0.06), LUV ($0.11), VLO ($2.95), SHW ($1.80), INTC ($0.48), V ($2.33), TMUS ($1.90), COF ($2.50).

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

Why Are Chinese Stocks So Weak? (And Is There an Opportunity?)

/in , /by

Why Are Chinese Stocks So Weak? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Are Chinese Stocks So Weak? (And Is There an Opportunity?)
  • Chart: Leading Economic Indicators Remain Deeply Negative

U.S. futures are flat amid mixed trade overseas as European shares pulled back modestly after a weak ECB Lending Survey while Asian shares bounced solidly amid news China is planning a $278B “market rescue package” aimed at stabilizing the nation’s volatile capital market environment.

Looking into today’s session, there is one regional Fed survey release: Richmond Fed Manufacturing Index (E: -15). And while the Richmond release is less popular than other regional Fed reports, it will be more closely monitored today after both the Empire and Philly Fed surveys badly disappointed last week.

December M2 Money Supply will also be released at 1:00 p.m. ET which could move markets in early afternoon trade (especially if there is a sharp and unexpected contraction in money supply).

There are no Fed officials scheduled to speak today but there is a 2-Yr Treasury Note auction at 1:00 p.m. ET that could offer fresh insight into market expectation for Fed policy outlook. A weak auction sending yields higher, would be a negative catalyst for stocks today.

Finally earnings season is continuing to pick up with: VZ ($1.07), MMM ($2.31), GE ($0.90), PG ($1.70), JNJ ($2.27), and SYF ($0.96) reporting before the open, and NFLX ($2.20) and TXN ($1.46) releasing results after the close.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

Does March vs. May Really Matter?

/in , /by

Does March vs. May Really Matter? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Does March vs. May Really Matter?
  • Weekly Economic Cheat Sheet – Retail Sales Data in Focus

U.S. futures are tracking European shares lower this morning. This is amid rising bond yields and a stronger dollar following some hawkish central banker commentary this weekend.

Economically, the German ZEW’s Economic Sentiment rose to 15.2 vs. (E) 11.7 in January. Both eased recession concerns but also weighed on the prospects for imminent Fed and ECB rate cuts in the coming months.

This weekend, several ECB officials pushed back on expectations for rate cuts in H1’24. This is resulting in more of the late 2023 dovish money flows being unwound.

Looking into today’s session, there is one economic report to watch: Empire State Manufacturing Index (E: -4.0) and one Fed official scheduled to speak: Waller (11:00 a.m. ET).

Earnings season also continues to pick up with several big banks due to report today: GS ($3.47), MS ($1.07), PNC ($2.99), IBKR ($1.54).

Bottom line, investors will be looking for more Goldilocks economic data in the NY Fed release and a less-hawkish tone from Waller and no bad news out of the banks reporting earnings today in order to stabilize. Otherwise the premarket weakness is likely to continue into the primary session this morning.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.