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Sevens Report – Is Conflicting Data Signaling a Shift in the Economy?

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What’s in Today’s Report:

  • Is Conflicting Data Signaling a Shift in the Economy?
  • Weekly Market Preview:  Earnings Take Center Stage (Lots of Key Reports This Week)
  • Weekly Economic Cheat Sheet:  Is Disinflation Continuing? (Key Inflation Stats on Friday)

Futures are sightly lower following a quiet weekend of news as markets look ahead to key earnings reports and economic data this week.

Economically, the only notable report was German IFO Business Expectations, which slightly beat estimates.

Debt ceiling headlines will increase this week as Republicans try to pass a debt ceiling bill, and if it fails to pass that will increase debt ceiling anxiety in the markets.

Today there is only one economic report, Chicago Fed National Activity Index (E: -0.02), and barring a major surprise that shouldn’t move markets.

Focus then will be on earnings, and especially the First Republic results after the close (estimates are $0.72/share).  Markets will want to see stability from what’s viewed as one of the most vulnerable regional banks.  Other notable earnings today also include KO ($0.65) and WHR ($2.44) which will give us insight into consumer spending.

 

Special Technical Market Update Delivered Today

The special technical report will be delivered via email later this morning.

Due to increased demand for more detailed technical insights from our subscribers, we have prepared a separate, special market update that provides detailed analysis of the current technical state of this market, including:

  • Major stock indices
  • Stock sectors
  • Investment styles (growth vs. value) and
  • Major trends in Treasury, commodity, and currency markets.

As the economy (and possibly markets) approach a tipping point and the Fed readies for the likely final rate hike, we can expect more volatility and conflicting fundamental economic data. Having high quality, plain-English technical analysis can help us better navigate this market.

Tyler Richey, Sevens Report CMT, has been the lead analyst on this special report, and we are all excited to deliver this value-add research to subscribers today.

How the Debt Ceiling is Starting to Impact Markets

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What’s in Today’s Report:

  • How the Debt Ceiling is Starting to Impact Markets

Futures are slightly lower despite solid economic data overnight, as markets await this morning flash PMIs.

EU and UK flash composite PMIs were better than expected at 54.4. vs. (E) 54.0 for the Euro Zone and 53.9 vs. (E) 52.4 for the UK, and both numbers are pushing back on the global recession narrative.

Today the focus will be on the April Flash Composite PMI (E: 50.7) and after yesterday’s soft Philly data, markets will absolutely want to see solid numbers. If that happens, we should expect a rebound from yesterday’s declines.

We also get another Fed speaker, Cook at 4:35 p.m. ET and some additional earnings: PG ($1.32), HCA ($3.99), SLB ($0.61), FCX ($0.46), RF ($0.65), SAP ($1.25).

Tom Essaye Quoted in Barron’s on April 19th, 2023

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The Dow Slips as Earnings Ramp Up

“If earnings news is not encouraging today, and yields continue to move higher over the course of the session, the selling pressure on equities is likely to continue and liable to accelerate,” wrote Tom Essaye, founder of the Sevens Report. Click here to read the full article.

Tom Essaye Quoted in MarketWatch on April 19th, 2023

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Why is the stock market so resilient? Blame the ‘pain trade’.

The stock market’s resilience so far in 2023 is an example of a well-worn but sometimes useful market concept known as the “pain trade.” Tom Essaye, founder of Sevens Report Research, defined it succinctly in a Tuesday note: “The goal of the market is to extract the most amount of pain from the greatest number of people.” Click here to read the full article.

Tom Essaye Joined BNN Bloomberg To Discuss The Markets on April 13th, 2023

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If the U.S. Fed doesn’t make good on rate cut expectations, the market rally will be undone: Analyst

Tom Essaye, president of Sevens Report Research, joins BNN Bloomberg to discuss the disparity of the market’s rate cut expectations, and central bank pushback. Click here to watch the full interview.

How Positive is the Restart of Disinflation?

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What’s in Today’s Report:

  • How Positive is the Restart of Disinflation?
  • Weekly Market Preview:  Regional Bank Earnings This Week (Do They Ease Contagion Concerns?)
  • Weekly Economic Cheat Sheet:  First Look at April Economic Activity

Futures are little changed following a quiet weekend of news as investors await key regional bank earnings this week.

The only notable economic report this morning was Italian CPI, which fell –0.4% vs. (E) -0.3% and further implied that global disinflation has restarted (which is a positive).

Today we get the first look at April economic activity via the Empire Manufacturing Survey (E: -18.3) and markets will want to see stability (so not a continued steep drop).  We also get the latest look at housing via the Housing Market Index (E: 45).

Additionally, regional bank earnings start and their commentary on deposits and “Held to Maturity” securities will be especially important.  Some reports we’re watching today include: SCHW ($0.90), GNTY ($0.69), MTB ($3.98), JBHT ($2.05).

Tom Essaye Interviewed on Yahoo Finance Live on April 11th, 2023

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‘The Fed will be more hawkish than the market is currently expecting,’ Sevens Report Research President says

Sevens Report Research President Tom Essaye joins Yahoo Finance Live to discuss U.S. inflation, Fed policy, economic uncertainty, and the outlook for markets. “I think the Fed will be more hawkish than the market is currently expecting. We have to remember something. If we look at year-end Fed Funds estimates, it’s 4% to 4 and 1/4%. So the market is pricing in numerous rate cuts, not hikes, rate cuts before year end”…said Tom Essaye. Click here to watch the full interview.

CPI Preview: Good, Bad, & Ugly

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What’s in Today’s Report:

  • CPI Preview: Good, Bad, & Ugly
  • WTI Crude Oil Chart – Futures Pinned In Tight Range at $80/bbl

Stock futures are rising in sympathy with overseas markets on the back of dovish commentary by new BOJ Governor Kazuo Ueda and favorable economic data overnight that is easing “hard landing” worries.

Economically, Chinese CPI rose just 0.7% vs. (E) 1.1% and PPI dropped -2.5% vs. (E) -2.3% while Eurozone Retail Sales fell -3.0% vs. (E) -3.5%. In the U.S., the NFIB Small Business Optimism Index came in at 90.1 vs. (E) 89.0. The mostly better than expected data is helping rekindle hopes that a soft landing may be achieved.

There are no other notable economic reports today which will leave focus on a 10-Yr Treasury Note auction at 1:00 p.m. ET and the sole Fed speaker today: Goolsbee (1:30 p.m. ET) as traders are largely looking ahead to tomorrow’s CPI report.

Current Market Assumptions (Why Stocks Remain Resilient)

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What’s in Today’s Report:

  • Current Market Assumptions (Why Stocks Remain Resilient)
  • Why Jobless Claims Jumped Last Week
  • Weekly Economic Cheat Sheet:  Inflation is the Key This Week (CPI on Wed, PPI on Thurs)
  • Weekly Market Preview:  Do Stagflation Risks Rise?

Futures are little changed following a mostly quiet weekend of news as investors digest the “Just Right” jobs report and look ahead to CPI on Wednesday and the start of earnings season on Friday.

Friday’s jobs report was “Just Right” with job adds rising 238k vs. (E) 230k and wages gaining 4.2% vs. (E) 4.3% y/y. The report is helping to slightly ease the hard landing worries from last week.

Today should be a mostly quiet day of trading as European markets are closed for the Easter holiday and there are no notable economic reports and just one Fed speaker, Williams at 4:15 p.m. ET, as investors will look ahead to Wednesday’s critical CPI report and the start of bank earnings on Friday.

 

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If you are behind, please let us help!  Our Q1 ’23 Quarterly Letter was delivered to subscribers last Monday along with compliance backup and citations, and we’re continuing to hear from advisors how happy they are with the quality of the letter and how much time and work it’s saved them.  We also have not had one compliance rejection! 

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Three Catalysts in Focus

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What’s in Today’s Report:

  • What Can Break the S&P 500 Out of the Current Trading Range? Three Candidates
  • ISM Manufacturing Index Takeaways (Fairly “Goldilocks”)
  • OPEC+, Oil Prices, Inflation, the Economy, and Fed Policy – They’re All Tied Together

U.S. stock futures are tracking European markets higher this morning thanks to a cooler-than-expected inflation print in Europe while news flow was otherwise mostly quiet overnight.

Economically, Eurozone PPI for February came in at -0.5% vs. (E) -0.3% m/m but a still lofty 13.2% vs. (E) 13.5% y/y. Despite the still elevated annual figure, the lower than expected print is bolstering risk assets this morning.

Today, there are three economic reports to watch in the U.S. including: Motor Vehicle Sales (E: 14.9 million), Factory Orders (E: -0.4%), and JOLTS (E: 10.4 million). Investors will want to see more evidence of slowing growth and a weakening labor market to reinforce hopes for both a less-hawkish Fed and soft landing in order for the recent stock market resilience to continue.

Finally, there is one Fed speaker to watch late in the day: Mester (6:45 p.m. ET).