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Market Multiple Levels Chart

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What’s in Today’s Report:

  • Market Multiple Levels: S&P 500 Chart
  • Quick CPI Preview

There is a tentative sense of relief in markets this morning with stock futures tracking global equities higher while bond yields and the dollar pullback ahead of key inflation data in the U.S. today.

Economically, Chinese CPI and PPI were both hotter-than-expected however German CPI met estimates of 7.4% y/y which is giving investors hope that price pressures are still high but in the process of peaking.

Looking into today’s session investors will be primarily focused on the CPI report (E: 0.2% m/m, 8.1% y/y), and more specifically the Core CPI figures (E: 0.4% m/m, 6.0% y/y).

We will also hear from one Fed speaker: Bostic (12:00 p.m. ET), and there is a 10-Yr Treasury Note auction at 1:00 p.m. ET.

Bottom line, if today’s inflation data comes in below expectations, it will likely bolster this morning’s already solid gains in stock futures and lead to a further relief rally. Conversely, if inflation runs hot, expect more volatility across asset classes and the potential for new lows in the major equity indices.

Tom Essaye Quoted in CNBC on May 9th, 2022

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10-year Treasury yield rises to its highest level since November 2018

To start the year, we knew that central bank tightening would make for a challenging market, but that has been compounded by two surprise events: The Russia/Ukraine war (no one expected that in January) and Chinese lock-downs (it’s quasi-shocking the Chinese are still adopting these policies and crushing their economy)…wrote Tom Essaye of The Sevens Report. Click here to read the full article.

Market Multiple Table

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What’s in Today’s Report:

  • Why Stocks Dropped Again (It Wasn’t Actual News)
  • Market Multiple Table – May Update

Stock futures are trading with tentative gains this morning as yesterday’s steep declines are digested after a mostly quiet night of news.

Economically, data overseas was slightly better than feared (specifically Economic Sentiment within the German ZEW Survey) while the NFIB Small Business Optimism Index in the U.S. held steady at 93.2, topping estimates of 92.9.

There are no notable economic reports today but there is a 3-Yr Treasury Note auction at 1:00 p.m. ET and if the results help the bond market stabilize, that could help equities bounce today.

Finally, there are a slew of Fed speakers today including: Williams (7:40 a.m. ET), Bostic (8:30 a.m. ET), Barkin (9:15 a.m. ET), Kashkari (1:00 p.m. ET), and Mester (3:00 p.m. ET). If they collectively strike a “less-hawkish” tone, that could also help fuel a relief rally in stocks today.

Tom Essaye Quoted in The Madison Leader Gazette on May 5, 2022

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Stock Market Today: Dow Slides, Shopify Tumbles, NIO Slumps

We shouldn’t have gone up 2% yesterday on the news…said Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

Update on the Three Headwinds on Stocks

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What’s in Today’s Report:

  • Update on the Three Headwinds on Stocks
  • Weekly Market Preview:  Is Inflation Finally Peaking?
  • Weekly Economic Cheat Sheet:  All About Inflation (CPI Wednesday)

Futures are sharply lower following new COVID lockdowns in China.

COVID cases in Shanghai are rising again, prompting new restrictions on movement and work.  Meanwhile, Beijing continues to suffer from limited lockdowns and this is compounding worries about global economic growth.

Geo-politically, Victory Day in Russia offered no notable news and there remains no end in sight to the Ukraine war.

Today there are no economic reports and just one Fed speaker, Bostic at 8:45 a.m. ET.  So, we should expect technicals to dominate trading and if last week’s intra-day lows are broken in the S&P 500 and we don’t get any positive news on 1) Fed hawkishness, 2) Chinese lockdowns or 3) Russia/Ukraine, we should not be shocked if the S&P 500 move closer to a test of support at 4,000.

What to Make of Yesterday’s Drop & Jobs Report Preview

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What’s in Today’s Report:

  • What to Make of Yesterday’s Drop
  • Jobs Report Preview
  • Natural Gas Update

Futures are slightly lower as markets digest the whiplash of the past two trading days following a mostly quiet night.

German economic data again badly missed estimates as German Industrial Production fell –3.9% vs. (E) -1.0% and fears of outright stagflation in the EU are rising quickly.

Today focus will be on the Jobs Report and estimates are as follows:  Job Adds: 400K, UE Rate: 3.6%, Wages: 0.4% m/m, 5.5% y/y.  This market needs a “Goldilocks” report that’s subdued on wages and with job adds modestly below the estimate of 400k.  If markets get that Goldilocks jobs report it should help stocks stabilize.  If the report ends up “Too Hot” though, especially on wages, brace for more selling.

There are also numerous Fed speakers today including: Williams (9:15 a.m. ET), Kashkari (11:00 a.m. ET), Bostic (3:20 p.m. ET), Waller and Bullard (7:15 p.m. ET) and Daly (8:00 p.m. ET).  Don’t be surprised if they all sound more hawkish than Powell did on Wednesday.  Remember, it appears the Fed’s tactic is to “Talk Tough” on looming rate hikes and inflation, yet be more measured on actual rate hikes than rhetoric would suggest.  Regardless, if there’s a consistent chorus of hawkish commentary, that will likely weigh on stocks, at least partially.

Economic Breaker Panel: May Update

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What’s in Today’s Report:

  • Economic Breaker Panel – May Update
  • Chart: Copper Breakdown

Stock futures are trading cautiously higher this morning ahead of the Fed while oil prices are spiking after the EU announced plans for a full Russian oil embargo that will be phased in over the next 6 months.

Economic data was mostly in-line with estimates overnight with Composite PMI reports notably holding up better than the recently released manufacturing PMIs which is a modest tailwind for risk assets this morning.

Looking into today’s session, focus will be on economic data early with the ADP Employment Report (E: 398K) due out ahead of the open while the ISM Services Index (E: 58.9) will be released shortly after the bell. The market will want to see firm data that helps contradict the idea that the Fed is beginning to accelerate the pace of rate hikes into an economic slowdown.

From there, price action should begin to slow as the Fed comes into focus with the FOMC Announcement (2:00 p.m. ET) and Fed Chair Press Conference (2:30 p.m. ET) in the afternoon. A more hawkish than expected Fed could send stocks back down to test Monday’s lows while a not-as-hawkish-as-feared announcement/press conference would open the door to a relief rally back towards 4,300.

On the earnings front, there are a few notables today including: MRNA ($5.18), CVS ($2.14), MAR ($0.94), YUM ($1.07), UBER (-$0.28), and EBAY ($1.03).

Fed Meeting Preview

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What’s in Today’s Report:

  • FOMC Preview
  • Q&A: Technical Resistance and Downside Targets for the S&P
  • ISM Manufacturing Index Takeaways

Stock futures are little changed as yesterday’s late-session rally is being digested following more hot inflation data and a slightly hawkish RBA hike (25 bp vs. E: 15 bp) overnight.

Economic data on growth was better than feared overnight but Eurozone PPI was hotter than expected with a staggering annual rise of 36.8% vs. (E) 36.2% in March.

Looking into today’s session, there are a few economic reports to watch including March JOLTS (E: 11.27M) and Factory Orders (E: 1.1%), however, with the May FOMC Meeting beginning this morning, a sense of Fed paralysis is likely to begin to grip markets ahead of tomorrow’s announcement.

Finally, earnings season does continue with a few notables reporting today: PFE ($1.66), BP ($1.41), HLT ($0.59), AMD ($0.90), and SBUX ($0.60) which could have an impact on sector trading but is not likely to move the broader markets given the focus-shift to the Fed.

Is the Outlook Really This Bad?

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What’s in Today’s Report:

  • Is the Outlook Really This Bad?
  • Weekly Market Preview:  FOMC Decision Wednesday (Will It Be More Hawkish Than Feared?)
  • Weekly Economic Cheat Sheet:  A Busy and Important Week (ISM Manufacturing PMI today, FOMC Decision Wednesday, Jobs Report Friday)

Futures are enjoying a modest oversold bounce following Friday’s selloff, but there was no improvement over the weekend on the three headwinds pressuring stocks:  Chinese growth worries, Ukraine war and hawkish Fed.

Economic data was mixed as the April Chinese manufacturing PMI dropped further (to 47.4 from 49.5) while the EU PMI slightly beat estimates (55.5 vs. (E) 55.3) and German Retail Sales underwhelmed (-0.1% vs. (E) 0.3%).

Today focus will be on the ISM Manufacturing PMI (E: 58.0) and markets need to see a solid number to push back on stagflation concerns.  If we get a weak number, expect the selling to resume and stagflation fears to grow.

Earnings season will begin to wind down this week but there are still some important results coming and some we’re watching today include:  NXPI ($3,17), CAR ($3.54) and MGM ($-0.09).

Yield Curve Update

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What’s in Today’s Report:

  • Yield Curve Update (Are Recession Risks Rising?)
  • Why European Energy Companies Buying Gas in Rubles Matters to Stocks
  • Q1 GDP – Not as Bad as It Looks

Futures are moderately lower following underwhelming earnings and guidance from AMZN and AAPL.

AMZN results underwhelmed the street (especially margins) while APPL beat earnings but had cautious guidance for Q2 based on supply chain issues.

Economically, inflation pressures remained high as core EU HICP (their CPI) rose 3.5% yoy vs. (E) 3.1%.

Today focus will be on inflation as we get two important readings: Core PCE Price Index (E: 0.3%, 5.3%) and the Employment Cost Index (E: 1.1%).  Markets will want to see the actual numbers miss estimates, and in doing so further hint at a peak of inflation.  If the opposite happens (the numbers are hotter than estimates) that will further pressure stocks.  We also get Consumer Sentiment (E: 65.6) and the Inflation Expectations sub-index will be watched closely.

On the earnings front, some important results today include:  XOM ( $2.25), CVX ($3.44), CL ($0.74).