For oil’s drop, it’s mostly a demand story. If you see oil move into the high to mid 70s, people are going rethink the idea that these companies are cash flow-generating machines, Essaye said. Click here to read the full article.
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.
I think that as we are on the precipice of this jobs report, really what we’re seeing today is a bit of digestion of that of the recent of the two days gains,” Tom Essaye, founder of Sevens Report Research, told Barron’s on Thursday. Click here to read the full article.
What’s in Today’s Report:
Futures are slightly higher thanks to solid Chinese economic data and following a mostly quiet weekend.
Chinese exports rose more than expected (18% vs. (E) 14.1%) and that’s helping to slightly improve global economic sentiment.
Politically, Senate Democrats passed the Inflation Reduction Act over the weekend as expected and it should become law this week. But, markets don’t expect any meaningful impact on corporate earnings in the n
Today there are no notable economic reports and most of the focus will be on the specific implications of the Inflation Reduction Act, which should pass the House this week. But, this bill does not appear to have any meaningful macro-economic implications. So, markets will look ahead to Wednesday’s all-important CPI report, and with stocks still extended, it needs to be better than expectations to support the rally.
What’s in Today’s Report:
Futures are flat ahead of today’s jobs report and following a generally quiet night of news.
The only notable economic report was German Industrial Production and it beat estimates rising 0.4% vs. (E) -0.4%.
Geo-politically, China suspended military, climate, and drug enforcement communications with the U.S in retaliation for the Pelosi visit to Taiwan. But, unless retaliation from China impacts U.S./China trade or commodities prices, markets will largely ignore it.
Today the focus will be on the jobs report and the key for markets is that it shows easing wage pressures and moderation in the labor market. So, a mildly underwhelming reports vs expectations (E: 250K job adds, 3.6% UE Rate, 5.0% y/y wage growth) is the best outcome for stocks.
There’s also one Fed speaker today, Barkin at 8:00 a.m. ET, but he shouldn’t move markets.
What’s in Today’s Report:
Stock futures are lower and the 10-year yield fell to a 4-month low overnight amid heightened tensions between the U.S. and China over Speaker Pelosi’s trip to Taiwan.
Speaker Pelosi is scheduled to land in Taiwan later this morning despite repeated and stern warnings from China about a potential military response to the visit and the elevated tensions are resulting in equity market weakness and rising demand for safe havens assets such as Treasuries.
Looking beyond geopolitics, there are a few other potential catalysts to watch today including two economic reports: Motor Vehicle Sales (E: 13.5M) and JOLTS (11.0M), as well as two Fed officials scheduled to speak: Evans (9:00 a.m. ET) and Bullard (6:45 p.m. ET).
Earnings season also continues today with results from CAT ($3.00), JBLU (-$0.11), MAR ($1.59), TSEM ($0.52), AMD ($1.03), PYPL ($0.85), and SBUX ($0.77).
Bottom line, markets are trading with a risk-off tone due to the U.S.-China tensions surrounding Taiwan however a meaningful escalation including military action between the U.S. and China remains very unlikely, and as such the pressure on equities is not expected to deepen or last very long and market focus is likely to turn back to Fed policy later in the week as the July jobs report is due out on Friday.
By making borrowing more expensive and thereby tempering demand, rate increases are critical in combating inflation, but “growing fears” that the hikes will spur a recession by undercutting economic growth are the “driving forces” behind recent market weakness, says analyst Tom Essaye of the Sevens Report. Click here to read the full article.
What’s in Today’s Report:
Futures are moderately higher following a solid night of earnings.
AAPL (up 2%) and AMZN (up 12%) both beat estimates and that’s helping to extend this week’s rally.
Eurozone inflation came in slightly hotter than expected, as EU HICP rose 8.9% yoy vs. (E ) 8.8% yoy, but stronger than expected earnings are helping the market look past the slightly hot number.
Today the focus will be on inflation as we get three notable inflation readings: Core PCE Price Index (E: 0.5% m/m, 4.7% y/y), Employment Cost Index (E: 1.1%), and the University of Michigan Five Year Inflation Expectations (E: 2.8%). Markets have aggressively priced in a near term peak in inflation, and the data needs to start to confirm that, starting today. If these inflation stats run hot, don’t be surprised to see stocks decline.
On the earnings front, the season is starting to wind down but there are still a few more days of notable results. Some reports we’re watching today include: XOM ($3.80), CVX ($5.02), PG ($1.23) and CL ($0.71).
The market looks at that, and basically, the logic is, ‘oh crap, if they’re doing this then what about the ones aren’t as strong?’ And what are they seeing coming that everyone else isn’t…said Tom Essaye, president of Sevens Report Research. Click here to read the full article.
You’ve seen a relief rally, the Fed maybe being slightly less hawkish than you think is the hope…said Tom Essaye, founder of Sevens Report Research. Click here to read the full article.
