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Three Keys to a Bottom Update

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What’s in Today’s Report:

  • Three Keys to a Bottom: Update
  • Weekly Economic Cheat Sheet: Are Growth and Inflation Both Peaking?
  • Weekly Market Preview: Jobs Data in Focus

Stock futures are moderately lower this morning, tracking losses in EU shares amid renewed inflation concerns.

German CPI jumped to 7.9% vs. (E) 7.5% and the Eurozone HICP Flash rose to 8.1% vs. (E) 7.7% in May. Additionally, the EU agreed to a partial ban on Russian energy imports which has sent oil to multi-month highs, compounding inflation fears this morning.

Looking into today’s session, there are three economic reports due to be released: Case-Shiller Home Price Index (E: 2.2%), FHFA HPI (E: 1.9%), and Consumer Confidence (E: 104.0). Investors will want to see the latter report at least meet estimates as the health of the U.S. consumer has become less certain in the face of lofty inflation pressures.

Finally, there are no Fed officials speaking today but Powell is set to meet with Biden at the White House at 1:15 p.m. ET. And following Waller’s more hawkish comments about suggesting 50 bp hikes until inflation is back at 2% from yesterday, any insight to the Fed’s policy plans after the summer rate hikes, which are solidly priced in, will move markets (more aggressive policy expectations could hit stocks today).

Bounce or Bottom? A Key Level to Watch

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What’s in Today’s Report:

  • Bounce or Bottom?  A Key Level to Watch

Futures are slightly higher following a night of mixed earnings and continued reopening in China.

Shanghai continued to reopen and Beijing is still avoiding the most draconian lockdowns and that’s helping broader market sentiment.

Economic data was sparse as the only notable report was Euro Zone M3 (6.2% vs. (E) 6.3%) but that’s not moving markets.

Today the key report is the Core PCE Price Index (E: 0.3%, 4.9%) and if it underwhelms vs. expectations and furthers the idea that inflation has peaked, look for a continuation of this week’s rally.  We also get Consumer Sentiment (E: 59.1) and the key there will be the five-year inflation expectations.  If they drop below 3.0%, that’ll be an additional positive for stocks today.

A Critical Time for the Yield Curve

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What’s in Today’s Report:

  • A Critical Time for 10s-2s
  • Empire State Manufacturing PMI Takeaways

There is a clear risk-on tone in markets this morning with stock futures sharply higher amid optimism that China will ease regulation on the tech sector (the Hang Seng rallied 3%) while economic data surprised to the upside.

Economically, the Q1 Eurozone GDP Flash came in at 5.1% vs. (E) 5.0% Y/Y which helped ease recently elevated concerns about global growth which may have been overdone.

Looking into today’s session, focus will be on economic data early with several reports due to be released including: Retail Sales (E: 0.7%), Industrial Production (E: 0.4%), Housing Market Index (E: 75). Investors will be looking for solid data that helps further ease fears about a potential slowdown in the economy.

There are also multiple Fed speakers today: Harker (9:15 a.m. ET), Powell (2:00 p.m. ET), Mester (2:30 p.m. ET), and Evans (6:45 p.m. ET). Powell will be the main focus but the market will want to see officials collectively strike a less hawkish tone if we are going to see these early gains in equities hold.

Bottom line, the overnight rally in equity futures came on very light volume and it should not be surprising to see the market gravitate back towards yesterday’s levels this morning as investors assess the new economic data and slew of Fed speakers. But with good news flow, we could see the relief rally resume today.

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Tom Essaye Quoted in Barron’s on May 9th, 2022

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The Dow Fell, Palantir Tumbled—and What Else Happened in the Stock Market Today

The selling is technical and emotions (fear/greed) that are driving the markets on an intraday basis and we should all prepare for more elevated volatility ahead…wrote Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

Market Multiple Levels Chart

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What’s in Today’s Report:

  • Market Multiple Levels: S&P 500 Chart
  • Quick CPI Preview

There is a tentative sense of relief in markets this morning with stock futures tracking global equities higher while bond yields and the dollar pullback ahead of key inflation data in the U.S. today.

Economically, Chinese CPI and PPI were both hotter-than-expected however German CPI met estimates of 7.4% y/y which is giving investors hope that price pressures are still high but in the process of peaking.

Looking into today’s session investors will be primarily focused on the CPI report (E: 0.2% m/m, 8.1% y/y), and more specifically the Core CPI figures (E: 0.4% m/m, 6.0% y/y).

We will also hear from one Fed speaker: Bostic (12:00 p.m. ET), and there is a 10-Yr Treasury Note auction at 1:00 p.m. ET.

Bottom line, if today’s inflation data comes in below expectations, it will likely bolster this morning’s already solid gains in stock futures and lead to a further relief rally. Conversely, if inflation runs hot, expect more volatility across asset classes and the potential for new lows in the major equity indices.

Tom Essaye Quoted in Barron’s on May 5th, 2022

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The Dow Lost More Than 1,000 Points as Wednesday Gain Vanishes

China’s PMI this morning was horrific, that underscores that the Chinese economy is a huge drag on global growth right now. It’s a risk to keep inflation high…said Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

Tom Essaye Interviewed on Fox Business on April 27, 2022

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Sevens Report Research reveals what makes the sell-off stop

Sevens Report Research founder Tom Essaye discusses if the market has hit its lows of the year or if there is still more to come on Fox Business’s “The Claman Countdown.” Click here to watch the interview.

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.