Posts

Is the Ukraine Conflict a Threat to Stocks?

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What’s in Today’s Report:

  • Is Russia/Ukraine a Potential Major Bearish Event? (Good, Bad, and Ugly Scenarios)
  • Chart: S&P 500 Tipping Points to Watch

Stock futures are flat and international markets traded mixed through a quiet night of news however Treasury yields notably continued to grind higher overnight.

Economically, the January NFIB Small Business Optimism Index fell to 97.1 vs. (E) 97.5 but the release is not materially moving markets this morning.

Looking into today’s session, there is just one lesser followed economic report due out: International Trade in Goods (E: -$83.0B), which should not have a major impact on trading, while no Fed officials are scheduled to speak.

Earnings season is already beginning to wind down but a few notable releases today include: PFE ($0.85), BP ($1.18), and PTON (-$1.18).

Bottom line, investors are continuing to digest last week’s jobs print and looking ahead to the CPI report on Thursday as the main driver of the market remains central bank policy expectations. There is a 3-Yr Treasury Note auction at 1:00 p.m. ET today and with an otherwise quiet calendar the results could move markets (strong auction = dovish, stocks can rebound; weak auction = hawkish, volatility likely to rise).

Why Inflation is the Key Variable Going Forward

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What’s in Today’s Report:

  • Why Inflation Is the Key Variable Going Forward
  • Weekly Market Preview:  More Clarity on Fed Rate Hikes This Week?
  • Weekly Economic Cheat Sheet:  CPI Thursday, Inflation Expectations Friday.

Futures are slightly lower following a quiet weekend as investors digested the strong jobs report and last weeks’ hawkish surprises from the ECB and BOE.

ECB officials downplayed the idea of a summer rate hike over the weekend but didn’t rule out a hike in 2022 (largely confirming the hawkish commentary from Lagarde).

Economic data remained mixed as China’s Caixin services PMI beat estimates (51.4 vs. (E) 50.5) but German Industrial Production missed expectations (-0.3% vs. (E) 0.4%) although the data isn’t moving markets.

Today should be a generally quiet day, as from a market influence standpoint all the really important companies have released earnings, so earnings season is “over” for all intents and purposes.  Additionally, there’s only one notable economic report, Consumer Credit ($21.0 bln), but given the strength of personal balance sheets that shouldn’t move markets today.  On the geo-political front, French President Macron travels to Moscow to meet with Putin about Ukraine, and any positive headlines could produce a mild tailwind on stocks.

Jobs Report Preview

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What’s in Today’s Report:

  • Jobs Report Preview
  • Why Surging EU HICP Matters to Us
  • EIA Analysis and Oil Market Update

Futures are sharply lower following a big earnings miss by Facebook (FB was down 20% after hours).

FB posted disappointing margins and guidance and the steep decline in the stock is pulling futures lower.

EU and UK Composite PMIs were mixed as the EU reading slightly missed while the UK PMI beat estimates, although neither number is moving markets.

Today will be a busy day.  First, we get two central bank announcements (BOE at 7:00 a.m. and ECB at 7:45 a.m.).  The BOE is expected to hike rates 25 basis points and while there’s no change expected to ECB policy if Lagarde is hawkish at her press conference that will add to the earnings-inspired declines.

We also get some notable economic data, including the ISM Services PMI (E: 59.9), Jobless Claims (E: 250K), and Productivity and Costs (E: 2.4%, 1.7%) and as has been the case, markets will crave stability to ward off stagflation fears.

Finally, on the earnings front, AMZN ($3.88) after the close is the big report today.  Of the super cap tech stocks, we’re had some good reports (AAPL/MSFT/GOOGL) and some bad reports (NFLX/FB), and markets need AMZN to land in the former.  Beyond AMZN, some other reports we’ll be watching include: MRK ($1.52), LLY ($2.51), COP ($2.20), HON ($2.08),  SNAP ($0.10), and F ($0.43).

Market Multiple Table: February Update

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What’s in Today’s Report:

  • Market Multiple Table: February Update

Stock futures swung between gains and losses overnight as the sizeable two-day rally to end January is being digested while most global equity markets rallied to start the month of February.

Economically, the EU unemployment rate fell to 7.0% vs. (E) 7.2% but final Manufacturing PMIs were disappointing. None of the data is materially impacting markets this morning, however.

Looking into the U.S. session, there are a few economic reports to watch today: ISM Manufacturing Index (E: 57.5), Construction Spending (E: 0.7%), and JOLTS (10.5 million) while no Fed officials are scheduled to speak.

We are getting into the heart of earnings season and there are some notable companies releasing Q4 results today including: UPS ($3.11), and XOM ($1.96) before the open and then PYPL ($1.13), AMD ($0.76), GOOGL ($26.69), GM ($1.15) and SBUX ($0.80) after the close.

Bottom line, near-term momentum continues to favor the bulls right now and this relief rally can continue if economic data is inline or slightly better than estimates (not too hot), earnings remain positive, and Fed policy expectations continue to get less hawkish.

Why the Bounce Can Continue (But Volatility Isn’t Over)

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What’s in Today’s Report:

  • Why Stocks Can Bounce Further (But Volatility Isn’t Over)
  • Technical Update:  Important Support and Resistance Levels to Watch
  • Weekly Economic Cheat Sheet:  Jobs Report Friday

Futures are slightly lower following a quiet weekend as markets digested last week’s volatility and Friday’s rally.

Atlanta Fed President Bostic was encouraged by Friday’s inflation data and expected three hikes this year, which is less hawkish than the current market expectation.

China’s manufacturing PMI slightly best estimates at 51.1 vs. (E) 51.0, further implying that economy is stabilizing.

There are no economic reports today, but there are two Fed speakers, Daly (11:30 a.m. ET) and George (12:40 p.m. ET) and if they echo Bostic’s “not as hawkish as expected” commentary from this weekend, then stocks can extend the rally.

On the earnings front, most of the big reports come later this week (FB, GOOGL, AMZN) but after the close today, we get NXPI ($2.98) and markets will be focused on chip availability, and if there’s positive commentary there that could be another tailwind on this market.

Tom Essaye Quoted by Switzer Daily on January 28, 2022

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Why are stocks slumping and why am I not worried?

The Fed is serious about raising rates, that’s going to continue to … keep markets volatile…Tom Essaye, founder of Sevens Report, said in a note. Click here to read the full article.

Tom Essaye Quoted by Big News Network on January 28, 2022

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Yesterday’s FOMC decision and Powell’s presser was both positive and negative for markets, but in the end, it mostly reinforced what we know: The Fed is serious about raising rates, that’s going to continue to…Tom Essaye, founder of Sevens Report, said in a note to clients Thursday, as reported by CNBC. Click here to read the full article.

 

Tom Essaye Quoted by CNBC on January 26, 2022

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S&P 500 closes lower, gives up earlier gains as volatility continues

Yesterday’s FOMC decision and Powell’s presser was both positive and negative for markets, but in the end, it mostly reinforced what we know: The Fed is serious about raising rates, that’s going to continue to…Tom Essaye, founder of Sevens Report, said in a note. Click here to read the full article.

Why Aren’t TIPS Rising?

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What’s in Today’s Report:

  • Why Aren’t TIPS Rising?
  • What Could Send 10’s-2’s Closer to Inversion?

Futures are slightly lower as markets continue to digest Wednesday’s Fed decision (50 bps in March or five hikes in 2022) amidst mixed earnings results.

AAPL posted better than expected earnings and the stock was up 3% overnight, but overall results continue to be mixed and that’s contributing to market volatility.

Today’s focus will be on important inflation data and the reason is clear:  If the inflation data is materially stronger than estimates, that will only encourage the Fed to get more hawkish/unpredictable, and that will add to the headwinds on stocks.  The key inflation numbers to watch today are: Core PCE Price Index (E: 0.5%, 4.8%), Employment Cost Index: (E: 1.2%, 4.1%), and the Inflation Expectations in the 10:00 a.m. Consumer Sentiment Index.

We also get some notable earnings today, including CAT ($2.22), CVX ($3.10), SYC ($1.47), and CL ($0.79).  But, barring a major disappointment, they shouldn’t move markets.

What the Fed Decision Means for Markets

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What’s in Today’s Report:

  • What The Fed Decision Means for Markets (50 bps in March and/or five hikes in ’22)
  • EIA Analysis and Oil Market Update

Futures are little changed and recouped modest losses earlier this morning, as global markets digest yesterday’s Fed decision and mixed earnings.

Economic data was sparse as German Gfk Consumer Climate and UK Distributive Trades both slightly beat estimates.

Today will be a busy day of data and earnings and generally speaking markets need solid data and good earnings/guidance to help this market continue to stabilize.  Some reports we’re watching include: Jobless Claims (E: 265K), Durable Goods (E: -0.5%), Initial Q4 ‘21 GDP (5.7%) and Pending Home Sales (E :0.6%).

On the earnings front, the key report today is AAPL ($1.89) after the close, but other reports we’re watching include: MA ($2.19), MCD ($2.31), JBLU (-$0.40), LUV ($0.05), VLO ($1.69), SHW ($1.35), V ($1.69).