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Three Keys to a Bottom (Updated)

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What’s in Today’s Report:

  • Three Keys to a Bottom (Updated)
  • Weekly Market Preview:  Focus Turns to Earnings
  • Weekly Economic Cheat Sheet:  Flash PMI on Friday is the Big Report to Watch

Futures are moderately higher mostly on momentum from Friday’s rally and following a generally quiet weekend.

Investors continue to hope for a near-term peak in inflation and Friday’s drop in University of Michigan inflation expectations (2.8% vs. (E) 3.0%) and multi-month lows in the Empire Manufacturing price indices fueled that hope and resulted in the rally on Friday and in futures this morning.

Today’s focus will shift to earnings, and they will dominate market action early this week as there are no Fed speakers and no market-moving economic reports till later this week.  If earnings are better than feared, they can help extend this rally in the near term while disappointing results will cause more volatility.  Some reports we’re watching today include BAC ($ 0.77), GS ($6.99), SCHW ($0.91), IBM ($ 2.29).

Why Is the Market Suddenly Resilient?

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What’s in Today’s Report:

  • Why Is the Market Suddenly Resilient?

Futures are slightly higher on momentum from yesterday’s recovery and despite mixed Chinese economic data.

Chinese Industrial Production and Fixed Asset Investment both slightly missed estimates while Retail Sales beat expectations, but importantly the data didn’t show the Chinese economy had lost significant momentum.

Today there are numerous economic reports and some of them potentially will move markets.  The most important report today is 5-Yr Inflation Expectations (3.1% previous) and if they drop to 3.0% or lower that will be a good sign on inflation.  Retail Sales (E: 0.9%) and Empire State Manufacturing Index (E: -1.3) are the next most important reports today and again markets will want to see moderation – a slowing of activity but not a collapse.  Finally, we also get Industrial Production (E: 0.1%) and Consumer Sentiment (E: 50.0).

We also have one Fed speaker today, Bostic (8:45 a.m. ET), and we’d expect him to follow yesterday’s script and push back on the inevitability of a 100 basis point hike (although acknowledge that anything’s possible depending on the data).

Tom Essaye Quoted in Market Watch on July 13th, 2022

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Stock market faces inflation test Wednesday: Here are ‘good, bad and ugly’ scenarios

This would likely spark a move higher in stocks, allowing the relief rally to continue, since waning inflation pressures might allow the Federal Reserve to potentially pause its interest rate hikes later this year…Tom Essaye said. Click here to read the full article.

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

Market Multiple Table

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What’s in Today’s Report:

  • July Market Multiple Table (Important Changes)
  • Weekly Market Preview:  All About Inflation (and CPI on Wednesday)
  • Weekly Economic Cheat Sheet: Important Inflation and Growth Data This Week

Futures are modestly lower following new COVID-related shutdowns in China.

Macau will close most businesses, including casinos, for one week following a COVID outbreak while Shanghai will continue with massive testing, in what is a signal that the “Zero COVID” policy is at least partially still in effect.

Geo-politically, Canada released a turbine to Gazprom (a Russian energy company) and the hope is that will result in increased natural gas flows to Europe in the coming weeks, putting more pressure on commodity prices.

Today there are no notable economic reports and just one Fed speaker, Williams at 2:00 p.m. ET.  Futures are taking the new lockdowns in China somewhat in stride but if headlines imply anything like a repeat of the Shanghai lockdowns of March-May, expect stocks to drop as a result.

Jobs Report Preview

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What’s in Today’s Report:

  • Jobs Report Preview

Futures are slightly higher despite negative COVID news from China and after British Prime Minister Boris Johnson announced he intends to resign.

COVID cases rose in Shanghai to the highest level since late May, prompting mass testing and increasing concerns of another lockdown.

Politically, British Prime Minister Boris Johnson will announce his resignation, but this shouldn’t impact stocks.

Today’s focus will be on Jobless Claims (E: 230K) and a continued slow drift higher will imply the jobs market is softening, which is needed if the Fed is going to get to “Peak Hawkishness” sooner than later.  We also have two Fed speakers, Bullard (1:00 p.m. ET) and Waller (1:00 p.m. ET) and we should expect their commentary to be hawkish (they’re two of the louder hawks on the Fed).

Are Stocks Pricing in an Economic Contraction?

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What’s in Today’s Report:

  • Bottom Line – Are Stocks Pricing in an Economic Contraction?
  • Weekly Economic Cheat Sheet – Is Stagflation Imminent?

Stock futures are trading modestly lower with European markets this morning as recession fears continue to weigh on sentiment.

Economically, global Composite PMI data was better than feared but broader concerns of a slowdown remain.

Today, investor focus will be on economic data early with Motor Vehicle Sales (E: 13.5M) and Factory Orders (E: 0.5%) both due out before the opening bell.

There are no Fed officials scheduled to speak today but the Treasury will hold auctions for 3-Month and 6-Month Bills at 11:30 a.m. ET which may move bond markets and ultimately move equities.

A Historical Reason to be Optimistic for the Second Half

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What’s in Today’s Report:

  • A Historical Reason to Be Optimistic for the Second Half

Futures are slightly lower following another high-profile guidance cut and more mixed economic and inflation data.

Micron (MU) materially cut forward guidance, sighting a steep drop in demand at the end of the second quarter and becoming the latest company to warn of deteriorating business conditions.

Economic and inflation data was mixed as EU headline HICP (their CPI) was hotter than expected but Core HICP underwhelmed, while the EU and UK final manufacturing PMIs reflected the slowing growth sweeping the globe.

Today’s focus will be on the ISM Manufacturing Index (E: 55.0) and the key here is moderation – markets need to see a slowing of growth but not a dramatic collapse.  If we see moderation, stocks can rally to start the second half.

State of Inflation: Hints of a Peak?

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What’s in Today’s Report:

  • State of Inflation:  Hints of a Peak?

Futures are sharply lower following another profit warning from a national retailer and mixed economic data.

Restoration Hardware (RH) cut guidance just a few weeks after reporting earnings, citing a sudden deterioration in demand and increasing worries about corporate earnings.

Economic data was mixed as the Chinese manufacturing PMI rose back above 50, while German unemployment rose more than expected (5.3% vs. (E) 5.0%.

Today focus will be on the Core PCE Price Index (E: 0.4% m/m, 4.8% y/y) and if we get a materially hot number above the 4.8% yoy expectation, we can expect more selling pressure while a drop towards the mid 4% range would be a welcomed surprise (and likely cut the early morning losses).  Today we also get weekly Jobless Claims (E: 226K), although that number shouldn’t move markets.

Why Stocks Dropped Again

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What’s in Today’s Report:

  • Why Stocks Dropped Again
  • Consumer Confidence Takeaways
  • Gold Update: A Soft Landing Is the Worst-Case Scenario

Stock futures are modestly lower thanks to some hawkish Fed chatter and another hot inflation print in Europe.

Economically, Spanish CPI jumped to 10.2% vs. (E) 9.2% in June, up from 8.5% in May suggesting inflation has not yet peaked, at least in parts of Europe.

Domestically, the Fed’s Mester reiterated that a 75 bp hike is likely in July given elevated consumer inflation expectations.

Today, there is one economic report to watch early: Final Q1 GDP (E: -1.4%) and investors would like to see the headline at least hold unchanged from the previous revision (if not get revised higher) before focus turns to several global central bankers speaking at an ECB Forum including Fed Chair Powell at 9:00 a.m. ET.

If the discussion takes on a more hawkish tone or there is any sign the market is losing confidence in the Fed (which would be evident in the bond markets) then yesterday’s selling pressure could continue.