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Sevens Report Research’s Tom Essaye Quoted by Barron’s in a Phone Interview

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Price pressures are firming up: Sevens Report Editor, Tom Essaye, Quoted in Barron’s

Dow Drops 300 Points. Price Pressures Are Firming Up.

Sevens Report Research’s Tom Essaye told Barron’s in a phone interview that hotter-than-expected employment cost and home price data spooked markets after a couple strong days.

“What I think that’s doing is reminding everybody, after a couple of days of a breather, that there’s really a long and growing list of indicators that are showing price pressures are firming up,” Essaye says.

He notes that while inflation is not roaring back, the numbers have remained elevated enough to increase the likelihood that the Federal Reserve keeps rates higher for longer.

“If he says, ‘Look, this is very disappointing and we may have to consider hiking rates again,’ which I don’t think he will do, but if he does do that, then it’s going to hit the markets really hard,” Essaye says.

Also, click here to view the full Barron’s article published on April 30th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

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Why the Outlook For Stocks Got Worse Last Week (Not Better)

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Why the Outlook For Stocks Got Worse Last Week (Not Better): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why the Outlook For Stocks Got Worse Last Week (Not Better)
  • Weekly Market Preview:  Will Fed Officials and the BOE Increase Rate Cut Hopes?
  • Weekly Economic Cheat Sheet:  A Quiet Week but Friday’s Inflation Expectations Will Be Important

Futures are extending the gains from Friday’s Goldilocks jobs report despite a potential increase in geo-political tensions this week.

Oil prices are rallying moderately following the breakdown of Israel/Hamas cease fire talks and an Israeli military operation in Rafah is likely.

Economically, the Euro Zone services PMI beat estimates at 53.5 vs. (E) 52.9, pushing back on EU recession risks.

Today there are no notable economic reports but there are two Fed speakers, Barkin (12:50 p.m. ET) and Williams (1:00 p.m. ET).  If either of them sound more open to rate hikes than Powell did last week, it’ll likely push yields higher and take back some of last week’s post-Fed rally.

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Jobs Report Preview

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Jobs Report Preview: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Jobs Report Preview

Futures are modestly higher ahead of the jobs report thanks to good AAPL earnings and solid economic data.

AAPL posted better than expected earnings and boosted its buyback.  The stock is rallying 6% pre-open and that’s helping to push futures higher.

Economically, the UK Services PMI was better than expected (55.0 vs. (E) 54.9) implying solid growth.

Today focus will be on the jobs report and expectations are: 243K Job Adds, 3.8% Unemployment Rate and 0.3% m/m and 4.0% y/y Wage Growth.  To help extend this late week bounce, markets will need to see the jobs number modestly below expectations (preferably on all three metrics) to imply solid growth but still increase the likelihood of a September rate cut.  If the jobs report prints “Too Hot” across all three metrics, don’t be shocked if Thursday’s rally is given back and then some.

Outside of the jobs report, there are two Fed speakers today:  Williams & Goolsbee (7:45 a.m. ET).  Williams will be the more important of the two as he’s part of Fed leadership and if he brings up rate hikes again, look for an uptick in volatility.

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A Flash of Fear: FOMC Technical Preview

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A Flash of Fear: FOMC Technical Preview: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • FOMC Technical Preview – A Flash of Fear in the Market (Shareable PDF By Request)
  • More Hot Inflation Data: Employment Cost Index and Case Shiller/FHFA Home Price Indices
  • Chart: Stagflation Concerns Bring Focus Back to the Yield Curve

Futures are lower as stagflation fears continue to weigh on risk assets while earnings were mixed overnight with AMZN reporting strong quarterly cloud sales (the stock is up 2%+) while AMD’s AI-chip demand forecast disappointed (the stock is down 6%+).

Economically, the U.K.’s April Manufacturing PMI was better than feared, rising to 49.1 vs. (E) 48.7 which is helping the FTSE buck the heavy trend across global equity markets this morning.

Looking into today’s session, focus will be on economic data early with the ADP Private Payrolls (E: 175K), ISM Manufacturing Index (E: 50.0), Construction Spending (E: 0.3%), and JOLTS (E: 8.7 million) all due to be released by 10 a.m. ET.

Additionally, the Treasury Refunding Announcement (8:30 a.m. ET) for which estimates sparked some volatility earlier in the week, could move bond markets and subsequently impact equities in the pre-market.

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

Earnings season takes a breather today before AAPL and other tech companies report tomorrow but there are still a few notables to monitor today including: MA ($3.22), CVS ($1.69), QCOM ($2.31).

Bottom line, there are a lot of potential catalysts for markets today but the key to stocks stabilizing will be economic data that contradicts recent signs of stagflation emerging in the economy and a benign Fed day with an as-expected to dovish announcement and no surprises from Chair Powell. Otherwise, we could easily see a test or breakdown through the April lows in the S&P 500 today.

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Why Stocks Have Really Pulled Back

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Why Stocks Have Really Pulled Back: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Stocks Have Really Pulled Back
  • Weekly Market Preview:  Will the Fed and Growth Data Make the Pullback Worse This Week?
  • Weekly Economic Cheat Sheet:  A Very Busy Week (Fed Wednesday, Jobs Report Friday)

Futures are slightly higher following a mostly quiet weekend of news as markets digest last week’s gains ahead of a busy and important week of catalysts.

Economically, Spanish Core HICP (their CPI) rose 2.9% vs. (E) 3.3% y/y, offering a positive note on inflation.

Geo-politically, Secretary of State Blinken is in the Mid-East to push for another Gaza ceasefire and oil is down slightly in response.

Looking forward, this is a very busy and important week filled with numerous potential catalysts including Wednesday’s Fed decision and Friday’s jobs report, but the week starts slowly from a data standpoint as there are no notable reports today.

On earnings, we get some important updates from semiconductor companies today and reports we’re watching include: ON ($1.04), NXPI ($3.16), SOFI ($0.01).

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Core PCE Price Index Preview (Next Potential Catalyst)

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Core PCE Price Index Preview: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Core PCE Price Index Preview (Next Potential Catalyst)

Futures are solidly higher following better than expected tech earnings overnight.

GOOGL (up 12% pre-open) and MSFT (up 4% pre-open) posted strong earnings results and that’s leading a rebound in tech stocks and pushing futures higher.

Economically, the Bank of Japan rate decision was slightly dovish as it kept rate unchanged and didn’t reduce QE.

Today focus will be on the Core PCE Price Index (E: 0.3% m/m, 2.6% y/y) and the bottom line is this number needs to be at, or ideally under, expectations to help further fuel the earnings driven bounce in futures.  The other economic report today is the University of Michigan Consumer Sentiment Index (E: 77.9, 1-Yr Inflation Expectations: 3.1%) but barring a jump in inflation expectations, it shouldn’t move markets.

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Here We Go Again: Why Bad Data Isn’t Good for Stocks

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Here We Go Again: Why Bad Data Isn’t Good for Stocks: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Here We Go Again: Why Bad Data Isn’t Good for Stocks
  • EIA Analysis and Oil Market Update

Futures are moderately lower following disappointing tech earnings overnight.

META (down 13% pre-open), IBM (down 10% pre-open) and NOW (down 5% pre-open) all posted disappointing results and tech stock weakness is weighing on futures.

Economically there was no notable data overnight.

Today focus will be on economic data and earnings.  From a data standpoint, Advanced Q1 GDP (E: 2.3%) is the key report and markets will want to see a headline that meets (or slightly misses) expectations and price data that’s in-line or lower than estimates (if that occurs, July rate cuts hopes will rise).  Other data today includes Jobless Claims (E: 215K) and Pending Home Sales (E: 1.0%).

On earnings, there is a deluge of reports today, but the key potential market movers include:  MSFT ($2.81), GOOGL ($1.49), INTC ($0.11), AAL (-$0.28), RCL ($1.30), CAT ($5.12), TMUS ($1.89).

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Bull Market Warning From Dow Theory

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Bull Market Warning From Dow Theory: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Dow Theory Update: Transports Rolling Over (Charts Included)
  • Flash PMI Takeaways – Signs of Weakness
  • Has Gold Bottomed Yet (Probably Not)

Futures are higher on well-received guidance from “Mag-7” member TSLA (+11% pre-market) and U.S. semiconductor giant TXN (+7% pre-market) while economic data in Europe topped estimates overnight.

Economically, Australian CPI was “warm” at 1.0% vs. (E) 0.8% in Q1 which is supporting a modest rise in the aussie dollar while the German Ifo Survey’s Business Expectations Index firmed to 89.9 vs. (E) 88.9 helping bolster European shares.

Today, there is one economic report to watch: Durable Goods Orders (E: 2.3%) and markets will be looking for a “goldilocks,” as-expected number as either a “hot” print would initiate a hawkish reaction while a “cold” print would rekindle growth concerns.

There are no Fed speakers today, but the Treasury will hold a 5-Yr Note auction at 1:00 p.m. ET which once again could move yields. A weak auction would send yields towards 5% which is another threat to this week’s robust relief rally.

Earnings season also continues to ramp up with BA (-$1.43), T ($0.53), and GD ($2.89) reporting results ahead of the open while META ($4.32), IBM ($1.59), F ($0.42), and CMG ($11.63) will report after the close. META will be the most important to watch as the results could either bolster this strong week-to-date rally that’s been led by tech, or de-rail it and send stocks back towards the Q2 lows.

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What Makes The Pullback Worse?

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What’s in Today’s Report:

  • What Makes The Pullback Worse?
  • Weekly Market Preview:  Will Earnings and Growth Data Stabilize Stocks?
  • Weekly Economic Cheat Sheet:  Growth focus early in the week, important inflation report on Friday.

Futures are enjoying a modest rebound following a quiet weekend of news and ahead of an important week of earnings (especially in tech).

There are major tech earnings this week (TSLA, META, GOOG, MSFT) and tech stocks are bouncing this morning ahead of those reports.

There was no notable economic or geo-political news over the weekend.

This is a potentially busy week of economic data and earnings but it starts slowly, as today there’s only one economic report,  Chicago Fed National Activity Index (E: 0.05), and that’s unlikely to move markets.

On earnings, the importance of the results increases this week.  Results we’re watching today include:  VZ ($1.12), TFC ($0.78), NUE ($3.62).

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What Has Really Changed In This Market?

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What’s in Today’s Report:

  • Thoughts on the Israeli Strike in Iran
  • What Has Really Changed In This Market?
  • Oil Market:  Technicals vs. Fundamentals

Futures are moderately lower as Israel conducted a limited strike in Iran while NFLX guidance disappointed.

Israel struck an Iranian military base in response to the weekends’ drone attack, but the operation was small and viewed as an effort to de-escalate the situation.

NFLX posted strong earnings but mixed guidance and the stock is down 6% pre-market.

Today there are no economic reports and only one Fed speaker, Goolsbee at 10:30 a.m. ET, and on the dovish side of the spectrum so barring a hawkish tone from him, he shouldn’t move markets.

On the earnings front, results early in the season have been a bit disappointing and focus on earnings will increase (especially next week).  This market needs better results to help stabilize.  Earnings we’re watching today include:  AXP ($2.97), PG ($1.42) and SLB ($0.74).

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