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Earnings Season Update

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What’s in Today’s Report:

  • Earnings Season Update: Are Upside Risks Building?

U.S. stock futures are trading lower with most overseas markets as investors digest the recent run to fresh records amid rising COVID-19 cases and mostly upbeat earnings.

German PPI was hotter than expected o/n with a headline of 0.9% (E: 0.5%) but the report is not materially moving markets.

Looking into the U.S. session today, there are no economic reports and no Fed officials are scheduled to speak. There is a 52 Week T-Bill Auction at 11:30 a.m. ET, however, that could influence bond yields and ultimately stocks if the results are far from expectations.

Earnings season will continue to pick up today with JNJ ($2.31), LMT ($6.32), PG ($1.19), and TRV ($2.44) releasing Q1 results ahead of the bell while NFLX ($2.98), CSX ($0.95), and IBKR ($0.90) will report after the close.

Bottom line, markets have been trading with a risk-off tone so far this week amid a resurgence in COVID-19 cases in several global hotspots. And if the news flow regarding the latest regional outbreaks continues to deteriorate, stocks could continue to decline, potentially sharply, as the health of the recovery will come into question.

Is the Tapering Talk Set to Begin?

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What’s in Today’s Report:

  • Is the Tapering Talk Set to Begin?

Futures are little changed following a quiet night as markets wait for the latest reading on inflation via this morning’s CPI report.

Economic data was mixed overnight.  UK Industrial Production was better than feared (-4.2% vs. (E) -5.1%) while the German ZEW Economic Sentiment slightly missed expectations (70.7 vs. (E) 77.0) but neither number is moving markets.

Today there are two notable events and both pertain to Treasury yields.  First, we get Core CPI (E: 0.2% m/m, 1.6% y/y) and later this afternoon there is a 30 year Treasury auction.  If CPI comes in hot and there’s tepid demand at the auction, Treasury yields will likely rise and that should be a headwind on stocks.  Conversely, if CPI is tame and the auction is solid, yields will likely be little changed, and stocks should be able to grind higher.

We also have several Fed speakers today:  George, Daly, Harker, Barkin (12:00 p.m. ET) and Bostic (3:15 p.m. ET) but unless they give us more insight into tapering requirements (like Bullard did yesterday) they shouldn’t move markets.

How Does the S&P 500 Get to 4500?

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What’s in Today’s Report:

  • How Does the S&P 500 Get to 4500?
  • Weekly Market Preview:  Important inflation data, bank earnings, and Treasury auctions.
  • Weekly Economic Cheat Sheet:  Inflation Wednesday, April Data Starts Thursday.

Futures are slightly lower following a “not as dovish as expected” 60 Minutes interview of Fed Chair Powell.

Fed Chair Powell was more optimistic on near-term economic growth during a 60 Minutes interview on Sunday, and while he was by no means “hawkish,” his tone was taken as less dovish than expected and that’s weighing slightly on futures.

Economically, the only notable number was EU Retail Sales which beat expectations, rising 3.0% vs. (E) 1.2%.

Today there are no economic reports and only one Fed speaker, Rosengren (1:00 p.m. ET), so focus will remain on the 10 year yield.  Today there’s a 10 year Treasury auction and tomorrow there’s a 30 year Treasury auction.  If yields can remain stable amidst this stock rally, then the S&P 500 can continue to move higher.  But, if we see a resumption of the rise in yields, expect a headwind on stocks.

What Would Make the Fed Less Dovish?

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What’s in Today’s Report:

  • What Would Make the Fed Less Dovish?

Futures are little changed following mixed economic data that showed higher inflation and underwhelming growth.

Inflation stats could be set to rise as Chinese PPI surged 4.4% vs. (E) 1.7%, and this could be the first of several higher than expected global inflation readings.

Economically, German Industrial Production missed estimates (-1.6% vs. (E) 1.5%)  but the reading isn’t moving markets.

Today the key number is the Core PPI (E: 0.2% m/m, 2.7% y/y).  Markets are expecting an uptick in inflation metrics so a slightly hot number shouldn’t move markets too much, although a much stronger than expected PPI reading will likely send the 10 year yield higher and that would be a headwind on stocks. There is also one Fed speaker, Kaplan (10:00 & 12:00 p.m. ET), but he shouldn’t move markets.

A Crack in One Pillar of the Rally

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What’s in Today’s Report:

  • A Crack in One Pillar of the Rally
  • Weekly Market Preview:  Will Inflation Data Push Yields Higher (And Stocks Lower?)
  • Weekly Economic Cheat Sheet:  CPI on Wednesday.

Futures are moderately lower despite stimulus progress over the weekend, as markets digest Friday’s big rally.

The Senate passed the $1.9 trillion stimulus bill and the House will debate it on Tuesday.  Biden could sign the bill by the end of the week, meeting market expectations and unleashing more stimulus into the economy as we begin the 2nd quarter.

Economically, Chinese trade numbers signaled an ongoing global recovery as exports exploded 60.6% y/y vs. (E) 40%.

The 10 year Treasury yield is up four basis points on the stimulus news and is again testing 1.60% (this is the main reason futures are lower this morning).

Today there are no economic reports and no Fed speakers, but yields will once again dictate trading in stocks.  Markets rallied on Friday because the 10 year Treasury yield failed to meaningfully breakthrough 1.60%.  But, if that happens today, look for stocks to drop in response, as rising yields remain the biggest headwind on stocks in the near term.

Tom Essaye Quoted in Unseen Opportunity on January 26, 2021

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“The short squeeze/volatility we saw in heavily-shorted stocks such as GameStop and others yesterday only further confirms that, at least in the near term…” explained Tom Essaye, founder of The Sevens Report, in a note. Click here to read the full article.

Stimulus Winners and Losers

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What’s in Today’s Report:

  • Stimulus Winners and Losers
  • Empire State Manufacturing Survey Takeaways

Stock futures are higher with global shares today as investors look ahead to the Fed following upbeat economic data o/n while a stimulus deal has still not been reached.

Economically, EU Flash Composite PMIs came in better than expected with the German Manufacturing and the French Services components both handily beating expectations, pointing to still healthy and resilient recovery.

Today, there are a few economic reports to watch in the U.S. session. In order of importance they are: Retail Sales (E: -0.3%), PMI Composite Flash (E: 57.4), Business Inventories (E: 0.6%), and Housing Market Index (E: 88.0).

After the morning data, focus will turn to the Fed with the FOMC Meeting Announcement at 2:00 p.m. ET, followed by Fed Chair Powell’s Press Conference at 2:30 p.m. ET.

With investors keenly watching the Fed for clues about the future or QE and ZIRP today, ongoing negotiations for a stimulus package on Capitol Hill will remain a key influence to watch as well, as a deal is largely priced in with the S&P trading just shy of record highs and any disappointment regarding the next round of coronavirus aid could result in a significant uptick in volatility.

Tom Essaye Quoted in CNBC on November 9, 2020

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S&P 500 could hit 3,900, according to the Sevens Report

Amid news of a successful Covid-19 vaccine, the S&P 500 making a run to the 3,900 level is possible, according to editor of the Sevens Report, Tom Essaye. “It is materially bullish for stocks in the near term…” Essaye told clients. Click here to read the full article.

What the Vaccine News Means for Markets

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What’s in Today’s Report:

  • Vaccine Playbook (Specific Sectors and ETFs)
  • What the Vaccine Means for Markets
  • Why Stocks Have Rallied (Four Reasons – Not Just the Election and Vaccine)
  • Weekly Market Preview:  How High Can Stocks Go?
  • Weekly Economic Cheat Sheet:  Jobless Claims the Key Number on Thursday

Futures have exploded to new all-time highs on positive vaccine results from Pfizer, combined with election uncertainty.

Pfizer just released results stating its COVID-19 vaccine is more than 90% effective in preventing COVID-19 infection among people who had not been previously infected.  That 90% is much higher than was expected.

Election clarity had stocks higher pre-vaccine news as Biden was projected to win the Presidency.

Today it’s all about momentum and as stocks should surge led by value, cyclicals and the “Get out and spend” sectors.

Tom Essaye Quoted in Axios on November 4, 2020

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Stock investors may be in something of a “post-election fog” or a “drunken euphoria” about an apparent quick conclusion to the presidential race but may also be repricing expectations for economic growth, says Tom Essaye, director of Sevens Report Research. Click here to read the full article.