“Consumer gasoline demand has collapsed at a record pace in recent weeks,” wrote Sevens Report’s Tom Essaye, who noted that crude is likely to fall from $83 if demand doesn’t soon stabilize. Click here to read the full article.
What’s in Today’s Report:
Futures are modestly higher as markets bounce back ahead of this morning’s CPI report and following some positive U.S./China geopolitical headlines.
The U.S. unveiled Chinese investment restriction rules that were less intense than feared, while China removed restrictions on group travel to the U.S. (providing small steps towards a more normal U.S./China relationship).
Today focus will be on CPI and estimates are as follows: E: 0.2% m/m, 3.3% y/y, Core CPI E: 0.2% m/m, 4.8% y/y. As we state in the CPI Preview, the risk for markets is that CPI is more resilient than expected, because at these levels investors are already assuming continued disinflation.
The other notable economic report is Jobless Claims (E: 230K) and markets will want to see that number gradually move higher to reduce the likelihood of one more rate hike. Finally, there’s one Fed speaker today, Harker (4:15 p.m. ET), but he shouldn’t move markets.
What’s in Today’s Report:
U.S. futures are modestly higher as deflationary Chinese price data is being offset by risk-on money flows in Europe fueled by a rebound in bank stocks.
The Italian government clarified that a windfall tax on bank profits would be capped, sparking a relief rally in European financials and general risk-on trade in global markets.
Economically, Chinese CPI fell -0.3% vs. (E) -0.5% and PPI fell -4.4% vs. (E) -4.0% revealing the emergence of deflationary price trends as the world’s second largest economy struggles to generate any meaningful growth momentum.
There are no notable economic reports and no Fed officials are scheduled to speak today which is setting the session up to be fairly quiet as traders await tomorrow’s CPI release.
There is a 10-Yr Treasury Note auction at 1:00 p.m. ET, however, and after yesterday’s strong 3-Yr Note auction, bond investors will be looking to see solid demand for longer duration Treasuries given the recent rise in yields, otherwise a further rise in longer-term rates will likely weigh on stocks (especially high valuation corners of the market).
Finally, earnings season is winding down but we will hear from DIS ($0.99) and WYNN ($$0.59) after the close and their quarterly results could shed some new light on the health of the consumer.
What’s in Today’s Report:
Markets are risk-off this morning thanks to soft Chinese economic data, disappointing UPS earnings and guidance (shares are down over 6% in the premarket), and negative banking sector news in the U.S. and Europe.
Economically, Chinese exports fell -14.5% vs. (E) -12.6% in July, the steepest drop since the pandemic while imports also fell much more than expected which raises further concerns about the health of the Chinese economy, which was supposed to be a major source of global growth this year.
A surprise windfall tax on bank profits announced by the Italian government paired with Moody’s downgrading 10 smaller U.S. banks is weighing heavily on financials this morning and acting as a headwind on the broader equity indices as well.
Looking into today’s session, there is one economic report to watch: International Trade in Goods and Services (E: -$65.4B) and two Fed speakers: Harker (8:15 a.m. ET) and Barkin (8:30 a.m. ET), all scheduled for before the opening bell. The trade data shouldn’t move markets but if Harker and/or Barkin strike a more hawkish than anticipated tone today, that could send bond yields higher and weigh on equities.
Finally the Treasury will hold a 3-Yr Note auction at 1:00 p.m. ET and any meaningful moves in yields (higher or lower) could influence equity market trading this afternoon.
“The stronger-than-expected ADP jobs report pushed the dollar and long-dated Treasury yields higher on Wednesday, as the bond market continues to price in more resilient growth and/or inflation,” Tom Essaye, founder of the Sevens Report, wrote Thursday.
Click here to read the full article.
“Looking into today’s session, focus will be on the U.S. credit downgrade as investors digest the potential implications on fixed income markets and re-assess valuations of risk assets,” wrote Tom Essaye, founder of the Sevens Report.
Click here to read the full article.
Wednesday’s market action is a reminder to investors that stocks can still go down, Tom Essaye, founder of the Sevens Report, said in an interview with Barron’s.
“When you have a market that is essentially pricing in nothing bad happening and all of a sudden you get kind of a surprise – then it’s a reason to sell and I think that’s what we’re seeing today,” Essaye said.
Click here to read the full article.
Sevens Report analyst Tom Essaye explained in a Wednesday note that the credit downgrade by Fitch “should have a limited near-term impact”. Click here to read the full article.
What’s in Today’s Report:
Futures are rebounding modestly from last week’s declines following a quiet weekend of news and ahead of an important week of inflation data.
Economically, the only notable number was German Industrial Production, which fell more than expected (-1.5% vs. (E.) -0.5%) and again underscored growing recession risks in Europe.
Today the key economic report is the Manheim Used Vehicle Value Index (9:00 a.m. ET) as this is viewed as an anecdotal reading on inflation, and markets will want to see a further decline in car prices.
We also get Consumer Credit (E: $13.00B) and there are two Fed speakers, Harker (8:15 a.m. ET) and Bowman (8:30 a.m. ET), and markets will want to see those events reinforce the Goldilocks narrative (solid consumer spending and the Fed basically done with rate hikes).
What’s in Today’s Report:
Futures are slightly higher thanks to good AMZN earnings and solid EU economic data.
AMZN and AAPL, the last two big earnings reports for Q2, were mixed but generally fine. AMZN posted strong results (stock up 8%) while AAPL’s numbers were slightly underwhelming, but nothing terrible (stock down 1%).
Economically, EU data was solid as German Manufacturers’ Orders and EU Retail Sales beat estimates.
Today focus will be on the jobs report and estimates are as follows: Job Adds, 200k. Unemployment Rate, 3.6%. Wages, 0.3% m/m, 4.2% y/y. The key for markets today is the reaction of the 10-year yield to the jobs report. If the jobs report is “Too Hot” then 10-year Treasury yield will rise and it’ll likely pressure stocks. Conversely, if we get a Goldilocks number, then the 10-year yield should fall modestly and stocks can extend this early rally.