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Market Multiple Table Chart

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What’s in Today’s Report:

  • Market Multiple Table Chart
  • What Fed Speak Means for Markets (Yesterday and Today)

Futures are little changed following a mostly quiet night and ahead of the ECB decision and Powell Q&A session.

The Reserve Bank of Australia signaled it will slow the pace of rate hikes going forward but gave no insight into its “Terminal Rate.”

Economically, Japanese GDP slightly beat estimates (3.5% vs. (E) 3.0%) but that’s not moving markets.

Today’s focus will be on Powell (9:10 a.m. ET) and the ECB (75 bps hike), and any hint of “peak hawkishness” from Powell or the ECB will be a positive catalyst for markets (and no hints of it will likely be a headwind on stocks).  Outside of Powell and the ECB, we also get Jobless Claims (E: 240K) and there’s one Fed speaker, Evans (12:00 p.m. ET), but neither of those should move markets.

Sevens Report Quoted in MorningStar on September 2nd, 2022

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EMEA Morning Briefing: Stocks Seen Higher But Caution Likely Ahead of U.S. Jobs Report

The jobs report once again carries risks for stocks because if it runs ‘too hot,’ that will increase the prospects of more hikes and, more importantly, delay when markets expect rates will be cut, Sevens Report said. Click here to read the full article.

Tom Essaye Quoted in Blockworks on September 2nd, 2022

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Higher-than-expected Jobs Report Not Enough To Push Stocks, Cryptos Green

The question for markets here is, at what point do investors begin to cheer the resilience of economic growth this year in the face of historically aggressive Fed policy tightening that is now beginning to show signs of being effective in capping and likely reducing inflation pressures? Tom Essaye, founder of Sevens Report Research, wrote in a note Friday. Click here to read the full article.

Three Keys to a Bottom (Updated)

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What’s in Today’s Report:

  • Three Keys to a Bottom Updated (Some Progress But Not There Yet)
  • Economic Takeaways – Goldilocks Trends Emerging
  • Weekly Economic Cheat Sheet

There is a tentative risk-on tone to trading this morning as U.S. equity futures track global shares higher thanks to new stimulus measures in China and easing natural gas prices in Europe.

The PBOC announced new measures to help stabilize the yuan and bolster the economy in the face of renewed Covid lockdowns and recent signs of slowing growth which was welcomed by markets overnight.

In Europe, German Manufacturers Orders fell -1.1% vs. (E) -0.4% but that is helping dial back some of the recently more hawkish policy expectations ahead of this week’s ECB meeting.

Looking into today’s session, there is one economic report to watch: ISM Services Index (E: 55.4), and no Fed officials are scheduled to speak.

That should leave the focus on currency and bond markets in the U.S. if both the dollar and short-duration yields can stabilize, and not move materially higher, then stocks should be able to make an attempt to stabilize after Friday’s late session reversal lower.

Additionally, if we see natural gas prices in Europe continue to pull back from Friday and yesterday’s rise, that should help the risk-on mood in markets persist as the Nord Stream 1 halt was the main catalyst for stocks rolling over on Friday.

What a “Soft Landing” Looks Like

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What’s in Today’s Report:

  • What A “Soft Landing” Looks Like (At Least From One Economic Report)

Futures are slightly lower following a mostly quiet night as investors await today’s jobs report.

Economic data was disappointing as German exports unexpectedly declined (-2.1% vs. (E) 4.1%) while Euro Zone PPI was hotter than expected (37.9% y/y vs. (E) 36.4% y/y).

In China, authorities announced that companies in Chengdu could implement “closed loop” systems and stay in operation, which should reduce supply chain disruptions.

Today the key event is the August Employment Situation report and expectations are as follows: Job Adds: 293K, UE Rate: 3.5%, Wages: 0.4% m/m, 5.3% y/y.  If markets can get a “Just Right” number (small job adds, a rise in the unemployment rate and a drop in wages) then stocks can extend yesterday’s rally as that will be the second straight “Goldilocks” report in two days (the other being yesterday’s ISM Manufacturing PMI) and it’ll increase hopes for an economic soft landing.

Jobs Report Preview

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What’s in Today’s Report:

  • Jobs Report Preview
  • EIA Analysis and Oil Update

Futures are solidly lower as negative China/COVID headlines and lackluster economic data weighed on markets.

Chinese authorities put the city of Chengdu (population 17 million) in a COVID lockdown, reminding markets “Zero COVID” is still in effect.

Economically, global manufacturing PMIs were underwhelming as all major regions (EU, UK and China) posted numbers below 50 (signaling contraction).

Today focus will be on economic data and the most important number is the ISM Manufacturing PMI (E: 52.2).  Markets need to see an in-line reading, because if it’s a very strong number that will increase hawkish concerns about the Fed, and if it’s a very weak number (below 50) that will spike stagflation concerns.  Outside of the PMI we also get Jobless Claims (E: 248K) and Unit Labor Costs (E: 10.7%) and there’s also one Fed speaker, Bostic at 3:30 p.m. ET.

What Should Clients Do in This Environment?

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What’s in Today’s Report:

  • What Should Clients Do in This Environment?
  • S&P 500 Approaching Key Support: Chart
  • JOLTS Data Takeaways – Labor Market Remains Tight

Stock futures pulled back from overnight gains and are now trading flat as most international markets are lower following mixed economic data.

Japanese Retail Sales and Industrial Production figures both handily topped estimates but the August HICP Flash in Europe (their CPI equivalent) showed core inflation jumped 4.3% vs. (E) 4.0%, reiterating inflation risks.

Today, the early focus will be on the ADP Employment Report (E: 200K) which will be the first one since they updated the methodology of the report so be prepared for a potentially surprising print.

From a market standpoint, traders will want to see a moderation in the labor market (especially after yesterday’s JOLTS report) to show the Fed’s tightening actions are beginning to cool the labor market which is one of the key steps towards reaching “peak hawkishness.”

There are also a few Fed speakers to watch today: Mester (8:00 a.m. ET), Logan (6:00 p.m. ET), and Bostic (6:30 p.m. ET) and the market would welcome any degree of less hawkish commentary as the more hawkish tone of the last week has been largely responsible for the equity market losses into the end of the month.

Tom Essaye Interviewed by BNN Bloomberg on August 30th, 2022

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Invest in defensive sectors so you don’t get shaken out by oncoming volatility: Tom Essaye

Tom Essaye, founder and president of Sevens Report Research, joins BNN Bloomberg to talk on the markets. Click here to watch the full interview.

A History of Fed Warnings

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What’s in Today’s Report:

  • A History of Fed Warnings
  • Chart: 10-Year Yield in a ”Broadening Triangle” Pattern

Stock futures are enjoying a solid oversold bounce this morning with both Treasury yields and the dollar index pulling back from their recent highs as Powell’s hawkish comments from Jackson Hole continue to be digested.

Eurozone Economic Sentiment dipped to 97.6 vs. (E) 97.7 this month, a 1.5 year low, but the soft survey data is seeing investors dial back some recent hawkish money flows.

Looking into today’s session, it will be a busy morning with two housing market data points due out before the bell: Case-Shiller Home Price Index (E: 1.1%) and FHFA House Price Index (E: 0.9%) before focus will shift to Consumer Confidence (E: 97.4) and JOLTS (10.4M) data at the top of the 10 a.m. hour ET.

Additionally, there are two Fed speakers to watch: Barkin (8:00 a.m. ET) and Williams (11:00 a.m. ET).

Bottom line, stocks became near-term oversold between Friday and yesterday and as long as the dollar and yields remain steady today, and economic data and Fed chatter doesn’t shift policy expectations any more hawkish than they have already repriced, stocks should be able to enjoy a bounce as traders begin to position into the end of the month.

On the charts, the 4,020 area will be a critical support level to watch in the S&P 500 today as a material break below would open the door to a swift drop into the low-to-mid 3,900s.

Sevens Report Co-Editor Tyler Richey Quoted in Market Watch on August 26th, 2022

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Grass-roots group urges U.K. public to stop paying energy bills. Its campaign has drawn over 100,000 supporters.

If one million households in the U.K. didn’t pay their utility bills, I have to assume the respective utility companies would eventually cut power to those homes and that would actually ease some of the demand pressures on the grid which is expected to be strained this winter given the very low flows from Russia to Europe…Tyler Richey, co-editor at financial research firm, Sevens Report Research, told MarketWatch. Click here to read the full article.