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Market Multiple Table: Pushing Justifiable Valuations

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Market Multiple Table: Pushing Justifiable Valuations: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • June Market Multiple Table – Pushing the Edge of Justifiable Valuations
  • Empire State Manufacturing Survey Takeaways
  • Chart – NVDA Tests Near-Term Uptrend

Futures are little changed as ongoing strength in technology shares offsets weakness in small caps in pre-market trade after mixed economic data overnight.

Economically, the German ZEW Survey missed estimates while the EU’s Narrow Core HICP (Core CPI equivalent) was inline with the May Flash of 2.9%, which was up from 2.7% in April.

Today, focus will be on economic data early with Retail Sales (E: 0.3%) and Industrial Production (E: 0.3%) both due to be released. Investors will be looking for signs of healthy consumer spending but not a figure that is “too hot” (hawkish policy concerns) or “too cold” (growth worries) while steady factory sector data would be welcomed but not as impactful for markets today.

There is also a long list of Fed speakers today. In chronological order, we will hear from: Barkin (10:00 a.m. ET), Collins (11:40 a.m. ET), Musalem (1:00 p.m. ET), Logan (1:00 p.m. ET) and Goolsbee (2:00 p.m. ET).

Finally, there is a 20-Yr Treasury Bond auction at 1:00 p.m. ET and weak demand could send yields higher and weigh on equities in afternoon trade.

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What the Good CPI and Mixed Fed Message Means for Markets

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What the Good CPI and Mixed Fed Message Means for Markets: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What Yesterday’s Good CPI and Mixed Fed Messaging Means for Markets

Futures are little changed despite more positive tech earnings as markets digest Wednesday’s CPI driven rally.

Broadcom (AVGO) became the latest AI-linked tech company (after AAPL and ORCL) to post strong earnings as the stock is up 14% pre-market.

Economically, it was a mostly quiet night as EU Industrial Production slightly missed estimates (-0.1% vs. (E) 0.1%) but that isn’t moving markets.

Today focus will remain on economic data and the two notable reports are Jobless Claims (222k) and PPI (E: 0.1% m/m, 2.5% y/y).  Of the two, PPI is more important and if it is lower than expected that’ll strengthen the belief in disinflation and increase September rate cut expectations, and stocks should extend yesterday’s rally.

Additionally, we do get one Fed speaker today, Williams at 12:00 p.m. ET, and he is part of leadership so his commentary on rate cuts could move markets.

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FOMC Preview (All About the Dots)

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FOMC Preview (All About the Dots): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • FOMC Preview (All About the Dots)

Futures are slightly higher following more solid tech earnings and despite some stagflationary economic data.

ORCL earnings beat estimates and the stock is up 9% pre-market, helping to support stock futures.

Economically, Chinese inflation ran slightly hot while UK Industrial Production badly missed estimates.

Today brings the two key events of the week via CPI and the Fed Decision.  For CPI, estimates are:  E: 0.1% m/m, 3.4% y/y, Core CPI (0.3% m/m, 3.5% y/y).  The key here is that core CPI is flat or declines from last month.  If we see a bounce back above 3.6% that will likely be a material surprise negative.

For the Fed, there is no change expected to rates and focus at 2:00 will be on the dots (and how much they changed since March).  Anything from the Fed (dots or Powell commentary) that makes a September rate cut more likely will help stocks, while anything that makes it less likely will be a headwind.

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Tom Essaye has proposed two unlikely scenarios for Friday’s jobs report

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Two unlikely scenarios for Friday’s jobs report: Tom Essaye Quoted in MarketWatch

Two ‘wildcard’ scenarios for Friday’s jobs report

Tom Essaye, founder of Sevens Report Research, has proposed two unlikely scenarios for Friday’s jobs report that are nevertheless worth considering.

In a report shared with MarketWatch early Friday, Essaye outlined his two “wildcard” scenarios — one where jobs growth surprises to the upside, but wage growth slows, and another that is essentially the inverse.

  • “The first potential wildcard to watch today is a jobs report that supports the case for a “no landing” or already-achieved soft-landing, which would be characterized by an as-expected or better-than-anticipated job adds headline, steady or falling unemployment rate, and significant drop in wage growth to suggest suddenly easing inflation pressures.”
  • “The second wildcard to watch is data that suggests the economy is falling into a rut of stagflation with a sharp slowdown in growth that is on the brink of contraction but with still sticky and elevated inflation pressures. A very underwhelming job adds headline, a spike in the unemployment rate, and an unforeseen jump in wage growth would fit the criteria of a stagflationary release.”

Also, click here to view the full MarketWatch article published on June 7th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

CPI Preview: Good, Bad & Ugly

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CPI Preview: Good, Bad & Ugly: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • CPI Preview:  Good, Bad & Ugly

Futures are modestly lower again following a quiet night of news as investors focus on tomorrow’s CPI report and Fed rate decision.

Economically, the UK Labour Market Report showed higher than expected average earnings (5.9% vs. (E) 5.7%) and that’s pushing back slightly on expectations for a rate cut this summer.

European bond yields remained elevated as polling suggests France’s far-right party should win the election.

Today should be another mostly quiet day as investors await the two potentially major catalysts on Wednesday, although we do get one notable economic report today via the NFIB Small Business Optimism Index (E: 89.7).  However, it’d have to be substantially lower or higher than estimates to move markets.

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My biggest concern for this market remains that we get an unexpected economic slowdown

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My biggest concern for this market remains that we get an unexpected economic slowdown: Sevens Report Editor, Tom Essaye, Quoted in Barron’s

The Stock Market Needs a Strong Economy to Keep Rising. The Data Are Getting Worse.

“My biggest concern for this market remains that we get an unexpected economic slowdown because that’s one of the few events that can legitimately cause a material correction in stocks,” writes Sevens Report founder Tom Essaye, noting that his worry ticked up last week due to corporate earnings.

However, Essaye warns, it doesn’t always work so neatly. “Twice in my career I have seen investors cheer a slowdown, and both times the Fed was not able to cut rates at the right time to prevent the slowing from becoming a broader economic contraction,” he wrote. “That doesn’t mean they can’t do it this time, but catching a falling knife doesn’t work in real life, it doesn’t work in stock trading, and I’ve never seen it work in monetary policy.”

Also, click here to view the full Barron’s article published on June 4th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

It’ll be Very Hard for This Market to RallyIf you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

Traders will be keenly focused on the EIA data

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Traders will be keenly focused on the EIA data: Sevens Report Analysts Quoted in MarketWatch

Gasoline demand in focus as oil futures slip

Traders will be keenly focused on the EIA data, particularly its measure of implied gasoline demand, said analysts at Sevens Report Research, in a note.

The data “could either reinforce the thesis that U.S. demand for fuel at the pump is rebounding into the summer driving season, a trend in line with those from 2021 and 2023 that both matched annual trends of pre-Covid years when demand would peak in the summer, or if we are going to see demand destruction’ due to inflation and elevated prices at the pump like we did in 2022,” they wrote.

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

If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

Jobs Report Preview (Too Hot, Too Cold, and Just Right)

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Jobs Report Preview (Too Hot, Too Cold, and Just Right): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Jobs Report Preview: Too Hot, Too Cold, and Just Right Scenarios
  • ISM Services Index Takeaways – A “Warm” Report
  • EIA Data Takeaways and Oil Update

Equity markets are mixed in the pre-market as tech-heavy Nasdaq 100 futures are extending gains to new record highs while small-cap Russell 2000 futures are lower ahead of the ECB decision and more U.S. economic data. NVDA notably rose as much as 2% overnight.

Economically, Taiwan’s May CPI rose from 1.95% to 2.24% while German Manufacturing Orders were down -0.2% vs. (E) +0.5% and EU Retail Sales fell -0.5% vs. (E) -0.2%. The market is “ok” with the soft European data ahead of the widely anticipated ECB rate cut this morning.

Looking into today’s session, trader focus will be on the ECB Decision early (8:15 a.m. ET) and as mentioned, rate cuts to benchmark interest rates are expected which will leave commentary from Lagarde and any forward guidance provided critical to the market’s reaction.

In the U.S., there are no Fed speakers or notable Treasury auctions today so focus will shift to the several U.S. economic reports due to be released including: Jobless Claims (E: 216K), International Trade (E: -$75.2B), and potentially most importantly, Productivity & Costs (E: 0.2%, 4.7%).

Bottom line, any “cold” or stagflationary data has the potential to put this week’s rally on pause ahead of tomorrow’s all important jobs report.

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What Is the “Smart Market” Telling Us? (Part I)

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What Is the “Smart Market” Telling Us? (Part I) : Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What Is the Smart Market Telling Us? (Part I)
  • May ISM Manufacturing Index Takeaways
  • OPEC+ Decision Takeaways – Focus Shifts to Demand

Markets are trading with a risk-off tone globally as U.S. stock futures are tracking overseas equities lower while Treasuries maintain a strong safe-haven bid amid worries about global growth ahead of more key economic data today.

Overnight, Korean CPI fell to 2.7% vs. (E) 2.8% and Swiss CPI was unchanged at 1.4% vs. (E) 1.6%. German Unemployment was also steady at 5.9%, meeting estimates. The lack of positive response to the easing inflation data underscores increasing growth concerns.

Looking into today’s session focus will be on economic data early with JOLTS (E: 8.4 million), Factory Orders (E: 0.7%), and Motor Vehicle Sales (E: 15.8 million) all due to be released.

There are no Fed speakers or major Treasury auctions today, leaving the economic data releases the main potential market catalysts. If the data disappoints, growth worries could see the early risk-off money flows accelerate, however, “goldilocks” data could help stocks continue to stabilize after last week’s spike in volatility.

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Growing Economic Concerns

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Growing Economic Concerns: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why I am Getting More Concerned About an Economic Slowdown
  • Weekly Economic Preview – A Critical Week of Data

Futures are higher on momentum from Friday’s late-day rally while news wires were mostly quiet this weekend.

Economically, the Eurozone Manufacturing PMI rose from 45.7 to 47.3 vs. (E) 47.4 in May while the UK’s Manufacturing PMI headline rose from 49.1 to 51.2 vs. (E) 51.3. The as-expected data is having a limited impact on markets, leaving stocks to extend Friday’s rally.

Today, focus will be on the ISM Manufacturing Index (E: 49.8) early with a report on Construction Spending (E: 0.2%) also due out after the open. There are no Fed officials scheduled to speak today which leaves the ISM data the key catalysts of the session. A report that is “too hot” or “too cold” could see volatility pick up while a “Goldilocks” number would likely allow Friday’s relief rally to continue.

Finally, the Treasury will hold 3-Month and 6-Month Bill auctions at 11:30 a.m. ET, and while these auctions don’t typically move markets, we are within 6-months of the first expected rate cuts from the Fed so any surprises could impact yields and in-turn move equities.

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