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Is the Market Doing the Fed’s Job?

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What’s in Today’s Report:

  • Is the Market Doing the Fed’s Job?
  • Oil Update and EIA Analysis

Futures are moderately higher following a solid night of earnings.

Earnings overnight were better than expected as QCOM posted strong results while FB also beat expectations.

Economic data was sparse, but the Bank of Japan made more dovish comments and the yen is down 2% and hitting fresh multi-decade lows.

Today focus will be on earnings as this is the most important day of the entire earnings season. We get several major companies reporting results including (in order of importance): AAPL ($1.43), AMZN ($8.73), INTC ($0.80), MA ($2.17), TWTR ($0.01), CAT ($2.66) and MCD ($2.18).  Given how oversold the market is on a short-term basis, solid results from these companies could fuel a rally, while disappointing results likely will cause another test of the 2022 lows in the S&P 500.

Economically, numbers today include Advanced Q1 GDP (E: 1.1%) and Jobless Claims (E: 181K) but I don’t expect either to move markets.

Tom Essaye Quoted in Forbes on April 26, 2022

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Bear Market Looms As ‘Relentless Selling’ Batters Stocks—Not Even Lower Inflation Can Help Now

While major stock market indexes plunged as much as 2% Tuesday, analyst Tom Essaye of the Sevens Report warned clients he remains “cautious” on the S&P 500 as stocks struggle to stabilize, pointing to “relentless selling” on Friday as a potential predecessor to a sharp downturn of as much as 5%. Click here to read the full article.

Four Questions for the Selloff

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What’s in Today’s Report:

  • 4 Questions for the Selloff: Why Have Stocks Dropped to the March Lows, What’s Holding Up Best, What Makes This Stop, and How Bad Can It Get?

S&P futures are up 1% this morning as yesterday’s steep declines are digested amid upbeat earnings and guidance out of MSFT after the close yesterday (MSFT is up 5%).

Economic data was net negative overnight as Australian CPI was hotter than expected while U.K. CBI Distributive Trades and the German GfK Consumer Climate Index both badly missed estimates, however, investors are shrugging off the data as the focus is on earnings this morning.

Looking into today’s session, there are two economic reports: International Trade in Goods (E: -$105.0B) and Pending Home Sales (E: -1.1%) but neither should move markets and no Fed officials are scheduled to speak.

There is a 5-Yr Treasury Note auction at 1:00 p.m. ET that could move the bond market as yields have pulled back considerably since last week’s highs and a reversal back higher could become a headwind on stocks again, especially growth names.

Finally, the market’s main focus at the moment is earnings and we will get results from: BA (-$0.26) and HOG ($1.52) before the bell and then FB ($2.58), F ($0.39), PYPL ($0.89), QCOM ($2.91), and DFS ( $3.58) after the close. If earnings, especially by big tech companies can top estimates, a relief rally could play out as stocks are near-term oversold, however, momentum through yesterday’s close has been decidedly negative and the price action remains heavy.

Why Yields Have Risen So Sharply

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What’s in Today’s Report:

  • Understanding Why Longer-Duration Yields Are Rising So Sharply
  • Chart – Dollar Index Hits New Multiyear Highs

Futures declined overnight as NFLX dropped sharply on disappointing earnings (specifically declining subscribers) but a pullback in yields has helped the market stabilize in early morning trade.

Economically, German PPI was the latest hot inflation print as the headline spiked 4.9% vs. (E) 2.3% M/M.

Looking into today’s session, there is a slew of potential catalysts for the market beginning with another report on the housing market: Existing Home Sales (E: 5.86M) and then a busy Fed speaker circuit with: Daly (10:30 a.m. ET), Evans (11:30 a.m. ET), and Bostic (1:00 p.m. ET) all scheduled to speak.

There is also a 20-Yr Treasury Bond auction at 1:00 p.m. ET that could move yields and impact equity markets.

Finally, earnings season continues today with: PG ($1.29) ahead of the bell and TSLA ($2.27), UAL (-$4.15), AA ($2.99), and CSX ($0.38) due to report after the close.

Earnings Season Preview

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What’s in Today’s Report:

  • Earnings Season Preview
  • EIA Analysis and Oil Market Update

Futures are little changed following a quiet night of news and ahead of the long weekend.

There were no notable economic reports overnight. Geopolitically, the Russia/Ukraine war raged on as fighting intensifies in eastern Ukraine (as has been expected).

Earnings overnight were net positive as Taiwan Semiconductor (TSM) provided solid guidance and that’s helping to relieve some ongoing semiconductor supply anxiety.

Today will be a busy day, with the first potentially big event being the ECB Decision at 7:45 a.m. ET.  No change is expected to rates or QE, but if Lagarde is hawkish in her commentary it could hit stocks.

Economically, we’ll have multiple reports today including, in order of importance, Retails Sales (E: 0.6%), Consumer Sentiment (E: 58.8), and Jobless Claims (E: 175K).  As has been the case, markets will want to see continued stability in the data.

Finally, we have two Fed speakers, Mester (2:30 p.m. ET) and Harker (6:00 p.m. ET), but they shouldn’t move markets.

Will Inflation Start to Peak This Week?

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What’s in Today’s Report:

  • Updated Market Outlook
  • Weekly Market Preview:  Will Inflation Start to Peak?
  • Weekly Economic Cheat Sheet:  Key Inflation Data This Week

Futures are modestly lower as Chinese inflation stayed high while the Russia/Ukraine war may be intensifying.

Chinese PPI rose 8.3% vs. (E) 8.1% while CPI gained 1.5% vs. (E) 1.4%, underscoring that inflation has not yet peaked in China.

Geo-politically, Russia is poised for a large assault on eastern Ukraine and analysts are anticipating some of the more intense fighting of the war.

Today there are no economic reports but there are several Fed speakers including Bostic (9:30 a.m. ET), Williams (12:00 p.m. ET) and Evans (12:40 p.m. ET) and we expect them to continue the trend of guiding markets towards a 50 bps hike in May and endorsing the idea of 250 basis points of tightening by year-end (but that shouldn’t move markets as that is already well known).

General Technical Take for Equities

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What’s in Today’s Report:

  • What the FOMC Minute Mean for Markets (Hawkish)
  • General Technical Take for Equities
  • EIA Analysis and Oil Market Update

Futures are bouncing slightly following a quiet night as markets digest the declines of the past two days.

Economic data was mixed overnight as German Industrial Production missed estimates while Euro Zone Retail Sales beat expectations, but neither number is moving markets.

Geopolitically there was no new news on Russia/Ukraine as the conflict continues with little signs of any progress towards a cease fire.

Today we get one notable economic report, Jobless Claims (E: 202K) but three Fed speakers:  Bullard (9:00 a.m. ET), Evans (2:00 p.m. ET) and Williams (4:05 p.m.).  We expect each of them to further hammer the point that rates are rising by 50 bps in May, with balance sheet reduction beginning in the same month.  But, as long as they don’t say anything “hawkishly new” then stocks should be able to look past the commentary.

Tom Essaye Quoted in Financial Post on April 5, 2022

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Treasuries Retreat While U.S. Stocks Decline: Markets Wrap

Stocks are vulnerable to disappointment once again given the recent rally, so any deterioration in the Russia/Ukraine situation, spike in oil and hints of stagflation (high inflation/lagging growth) will hit stocks, and a 10% air pocket shouldn’t shock anyone…Tom Essaye, a former Merrill Lynch trader who founded The Sevens Report newsletter, said in a note. Click here to read the full article.

Tom Essaye Quoted in Bloomberg on February 24, 2022

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Bitcoin’s Digital Gold Luster Fades as Customary Havens Win Out

Gold is doing exactly what it should be doing right now, but it’s a much more mature asset and it’s got a proven history in these types of conflicts of how it trades…said Tom Essaye. Click here to read the full article.

Tom Essaye Quoted in Coinspeaker on February 23, 2022

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Dow Jones Tanks as Tension between Russia and Ukraine Escalates

The Russia/Ukraine situation remains very fluid, and tensions remain high, and in the short term that will remain a headwind on stocks…said Tom Essaye, founder of the Sevens Report. Click here to read the full article.