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Earnings Season Update (What MSFT’s Results Mean for Markets)

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What’s in Today’s Report:

  • Earnings Season Update (What MSFT’s Results Mean for Markets)
  • EIA Analysis and Oil Market Update

Futures are slightly higher thanks mostly to momentum from Wednesday’s rebound and as earnings overnight were no worse than feared.

On earnings, TSLA rallied 6% after hours as Elon Musk teased more deliveries on the call in ‘23 than actual guidance, while IBM results were slightly disappointing.

Today focus will be on economic data and the key reports today are:  Durable Goods (E: 2.8%), Jobless Claims (E: 202K), Q4 ’22 GDP (E: 2.7%), and New Home Sales (E: 614K).  As has been the case through the end of ’22 and early ’23, moderation in the data, not an outright collapse, is what stocks and bonds need to extend yesterday’s rally.

On earnings, the key report today comes after the close with INTC ($0.20), while other notable reports include: V $($2.01), MA ($2.56), AAL ($1.14), JBLU ($0.19), and VLO ($7.45).

Why Is Tech/Growth Rallying So Hard?

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What’s in Today’s Report:

  • Why Is Tech/Growth Rallying So Hard?
  • Leading Indicators – Data Takeaways
  • Chart: Dollar Index Approaches Key Long-Term Technical Support

Futures are slightly lower as yesterday’s gains are digested while focus shifts to the start of big tech earnings.

Economically, Flash PMI data was mixed overnight with the broader Eurozone figure topping estimates but the U.K. headline badly missing expectations. The Solid Eurozone data is helping shore up recently more hawkish policy expectations for the ECB and that is weighing on EU shares this morning.

Today, the U.S. Composite PMI Flash will be in focus right after the opening bell. The report is comprised of two parts: the PMI Manufacturing Flash (E: 46.5) and the PMI Services Flash (E: 45.5) and investors will want to see some degree of stabilization in the data.

There are no Fed speakers today however the Treasury will hold a 2-Yr Note auction at 1:00 p.m. ET and the results could shed light on the market’s latest policy expectations ahead of next week’s Fed meeting, and weak demand (higher yields out of the auction) could weigh on stocks.

Finally, earnings season is continuing to pick up with: JNJ ($2.22), VZ ($1.21), MMM ($2.34), UNP ($2.75), and TRV ($3.50) reporting before the bell while the big report will be MSFT  ($2.29) after the bell. COF ($3.81) will also report after the close.

Hard Landing or Soft Landing?

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What’s in Today’s Report:

  • Hard Landing or Soft Landing?
  • Weekly Economic Cheat Sheet:  Does Growth Stabilize?
  • Weekly Market Preview:  The Peak of Earnings Season

Futures are little changed following a mostly quiet weekend of news as markets look ahead to more earnings and economic data this week.

On Sunday the WSJ published an article on the Fed that stated the Fed will hike 25 bps at the upcoming meeting and begin discussions on when to end the rate hike cycle.  The article is being taken as dovish, but it’s not very different from current consensus thinking.

Today the focus will be on Leading Indicators (E: -0.7%) because this number flashed an intense recession warning signal last month and if there’s further deterioration that will likely weigh on stocks modestly.

On the earnings front, most of the key names this week report Tuesday – Thursday, but some results we’re watching today include:  SYF ($1.12), BKR ($0.41), and LOGI ($1.06).

Is Tech Still An Anchor on the S&P 500?

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What’s in Today’s Report:

  • Is Tech Still An Anchor on the S&P 500?

Futures are slightly higher following a better night of earnings and more encouraging inflation data.

Earnings from NFLX and PPG were solid after yesterday’s close and that’s helping to slightly bolster sentiment.

On inflation, Japanese CPI was slightly better than estimates (4.0% y/y vs. (E) 4.1%) and that will help to reduce hawkish expectations for the BOJ.

Today there’s just one economic report, Existing Home Sales (E: 3.97 million) and that shouldn’t move markets.  So, focus will be on Fed speak and we get two speakers today: Harker (9:00 a.m. ET) and Waller (1:00 p.m. ET).  If they reiterate the desire for Fed Funds to get above 5%, despite the recent progress on inflation, that will be a mild headwind on stocks.

On earnings, two notable results to watch today are ALLY ($0.98) and STT ($2.00).

Technical Market Update

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What’s in Today’s Report:

  • Technical Market Update
  • Why are Small Caps Outperforming?
  • How Bad Was Economic Data Yesterday? (Answer:  Bad)

Futures are extending Wednesday’s losses following more disappointing earnings and as worries about the economy grow.

Alcoa (AA), Allstate (ALL), and Discovery Financial (DFS) posted soft earnings or negative guidance overnight.

Today we get several important economic reports including, in order of importance: Philly Fed (E: -10.3), Jobless Claims (E: 215K), and Housing Starts (E: 1.362M).

There are also several Fed speakers and the most important one is Brainard (1:15 p.m. ET) and if she’s slightly dovish, that will help markets stabilize.  Collins (9:00 a.m. ET) and Williams (6:35 p.m. ET) also speak today.

Finally on the earnings front, we get more important results today and the market needs some good news.  Reports we’re watching include:  PG ($1.58), FAST ($0.42), NFLX ($0.45), and PPG ($1.15).

Has the Outlook for China Finally Turned Positive?

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What’s in Today’s Report:

  • Has the Outlook for China Finally Turned Positive?
  • Chart – FXI (China) vs. S&P 500 Divergence
  • Empire State Manufacturing Survey Takeaways

Stock futures were volatile o/n as the BOJ doubled down on their bond-buying program, sending the yen lower by nearly 3% but markets have stabilized as focus turns to a busy morning of economic data and more earnings in the U.S.

Economically, Eurozone HICP met estimates at 9.2% y/y and the Narrow Core also met estimates at 5.2% y/y.

Looking into today’s session, focus will be on earnings in the pre-market with SCHW ($1.10) and PNC ($3.95) due to release earnings ahead of the bell while DFS ($3.58) will report after the close.

There is also a slew of economic data due out this morning including: Retail Sales (E: -0.8%), PPI (E: -0.1%, 6.8%), Industrial Production (E: -0.1%), and the Housing Market Index (E: 31). The market wants to see data continue to point to slowing, but not collapsing growth (as we saw with the Empire report yesterday) and a continued deceleration in inflation metrics to maintain bets for a soft landing.

As far as other catalysts go, there are two Fed speakers to watch this morning: Bostic (9:00 a.m. ET) and Bullard (9:30 a.m. ET) and then a 20-Yr Treasury Bond auction at 1:00 p.m. ET.

Bottom line, much of the recent rally has been based on hopes for a soft landing and less hawkish pivot by the Fed and anything that contradicts those two possibilities would likely trigger a wave of volatility today.

Tom Essaye Quoted in Blockworks on January 12th, 2023

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Crypto Miners Log Double-digit Stock Price Gains After CPI Report

Tom Essaye, the founder of Sevens Report Research, said Wednesday before the CPI print that inflation metrics would need to continue falling quickly if the market hopes to sustain a broader rally. Click here to read the full article.

Tom Essaye Quoted in Yahoo on January 11th, 2023

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Stocks End on High Note With ‘Risk-On’ CPI Wagers: Markets Wrap

Now the caveat is that if the headline number drops, but core CPI doesn’t, the report won’t be that positive, wrote Tom Essaye, a former Merrill Lynch trader who founded The Sevens Report newsletter. Click here to read the full article.

Fed Speak and Updated Rate Expectations

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What’s in Today’s Report:

  • Fed Speak and Updated Rate Expectations
  • CPI Takeaways

Futures are slightly lower following mixed economic data, as markets continue to digest increased hopes for an economic “soft landing.”

Chinese exports declined but fell less than expected (-9.9% vs. (E) -11.1%), offering more “not as bad as feared” news.

Today’s focus will switch to earnings (and that’s true for next week too) and key reports today include:  JPM ($ 3.11), BAC ($ 0.76), C ($ 1.18), UNH ($5.17), WFC ($0.63) and BLK ($ 8.00).  If earnings are better than feared, that should help stocks extend yesterday’s gains.

Economically the focus will stay on inflation with Import & Export Prices (E: -0.9%, -0.7%) and Consumer Sentiment (E: 60.0) while we get another Fed speaker: Harker (10:20 a.m. ET).  As has been the case, anything that implies declining inflation and/or a 25 bps rate hike in February will help stocks rally.

Market Multiple Table Chart

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What’s in Today’s Report:

  • Market Multiple Table Chart
  • EIA Analysis and Oil Market Update

Futures are little changed as overnight economic data was in-line with expectations while investors look ahead to this morning’s CPI Report.

Economically, Chinese CPI was the only notable number and it largely met expectations at 1.8% y/y (vs. (E) 1.9%).  That reading will keep Chinese authorities actively stimulating the Chinese economy, which is a positive for the global economy.

Today focus will clearly be on the CPI report (E: 0.0, 6.6%), but remember the Core CPI report is the more important number (E: 0.3%, 5.7%).  Markets need to see continued declines in CPI to underwrite recent gains in stocks and bonds.

Away from CPI, we get the latest Jobless Claims reading (E: 215K) and this number needs to move higher to reflect a better balance in the labor market.  Finally, there are multiple Fed speakers today including Harker (7:30 a.m. ET), Bullard (11:30 a.m. ET), and Barkin (12:40 p.m. ET) and while we should expect typically hawkish rhetoric, they shouldn’t reveal anything new (and as such shouldn’t move markets).