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Are Junk Bonds Signaling Recession?

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What’s in Today’s Report:

  • Are Junk Bonds Signaling Recession?
  • What Does Terminal Fed Funds Mean in Plain English?

Futures are modestly higher on solid tech earnings and after another global central bank ended rate hikes.

Nvidia (NVDA) earnings beat estimates and the stock us up 8% pre-market, and that’s helping general tech sentiment.

South Korea’s central bank ended its rate hike campaign and while that’s not a major central bank, it’s another reminder the global hiking cycle is ending.

Focus today will remain on economic data and Fed speak and that includes Jobless Claims (E: 200K) and Revised Q4 GDP (E: 2.9%). Fed speakers include Bostic (10:50 a.m. ET) and Daly (2:00 p.m. ET) and as has been the case for two weeks, any data or comments that increase rate hike expectations will pressure stocks (and vice-versa).

Tom Essaye Joins Yahoo Finance To Discuss The Economy on February 21st, 2023

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‘The economy is stronger than everybody thought,’ Sevens Report Research Founder says

Sevens Report Research Founder and President Tom Essaye to discuss the expectations for the Fed’s upcoming FOMC minutes meeting, the future of Fed policy pathway, why investors should remain on recession watch in 2023, and the outlook for markets. Click here to watch the full discussion.

Equity Risk Premium Hits 2007 Levels

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What’s in Today’s Report:

  • Equity Risk Premium at 2007 Levels
  • February Composite PMI Flash Takeaways
  • Why Are Rising Rates Causing Stocks to Drop Now?
  • S&P 500 Chart: Trend Support From the October Lows In Focus

U.S. equity futures are little changed this morning following yesterday’s steep losses as Treasuries have stabilized ahead of today’s Fed meeting minutes release.

Economically, German CPI met estimates at 8.7% y/y but that remains a historically very high reading which continues to warrant aggressive policy from the ECB in the months ahead.

Looking into today’s session, there are no notable economic reports which will leave investors primarily focused on the FOMC meeting minutes release (2:00 p.m. ET). Before that release, the Treasury will hold a 5-Yr Note auction at 1:00 p.m. ET which could move bond markets, and if we see new highs in yields, expect additional pressure on stocks.

Finally, the Fed’s Williams speaks after the close at 5:30 p.m. ET and his comments could move markets in after-hours trading if he is materially hawkish.

Sevens Report Analysts Quoted in MorningStar on February 16th, 2023

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Oil ends lower on signs of ‘sluggish’ U.S. consumer demand and a big build in supplies

The U.S. Energy Information Administration data so far this year has been “consistently bearish and pointed to sluggish consumer demand, hesitant refining activity, sizeable builds in oil stockpiles and incrementally rising domestic oil production,” analysts at Sevens Report Research wrote in Thursday’s newsletter. Click here to read the full article.

Is the Market Pendulum Swinging Back?

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What’s in Today’s Report:

  • Is the Market Pendulum Swinging Back?
  • Weekly Economic Cheat Sheet

Stock futures are lower while the dollar and Treasury yields move higher as part of a continuation of last week’s hawkish money flows, partially thanks to strong data overnight.

Economically, the EU Composite PMI jumped to 52.3 vs. (E) 50.7 due to strength in the service sector, bolstering expectations for increasingly aggressive monetary policy in the months ahead which is weighing on risk assets globally this morning.

Today, economic data will be in focus early with the key report in the U.S. being the PMI Composite Flash (E: 47.2) while Existing Home Sales (E: 4.10M) will also be released. A hot PMI print like we saw in Europe earlier this morning would likely add to the hawkish tone and weigh further on stocks today while a weaker, but not terrible report, could see yields and the dollar ease back and allow for a modest relief rally.

As far as other catalysts go, there are no Fed officials scheduled to speak but there is a 2-Yr Treasury Note auction at 1:00 p.m. ET and if yields continue higher in the wake of the auction, expect more pressure on stocks, especially higher valuation/growth names.

Finally, earning season is winding down but a pre-market release by WMT ($1.52) should shed some light on the health of the consumer and could impact markets as well.

Three Technical “Cs” for a Lasting Market Bottom

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What’s in Today’s Report:

  • Three Technical “Cs” for a Lasting Market Bottom

Futures are sharply lower on continued momentum from Thursday’s late day drop and following hot German inflation data and strong UK retail sales.

German CPI didn’t decline as much as hoped, falling –1.0% vs. (E) -1.6% and rising 17.8% vs. (E) 16.0%.  UK Retail Sales were also better than expected (0.5% vs. (E) -0.3% and the two reports are combining with yesterday’s hot US PPI to push rate hike expectations higher.

Today focus will remain on data and Fed speak.  The two notable economic reports are Import & Export Prices (E: -0.1%, -0.2%) and Leading Indicators (E: -0.3%).  The first deals with inflation and the second deals with growth, and if inflation is hot and growth is cool, expect more selling pressure.

There are also two Fed speakers today, Barkin (8:30 a.m. ET) and Bowman (8:45 a.m. ET) and we should expect them to sound hawkish (as most Fed speakers have been this week).

Sevens Report Co-Editor Tyler Richey Quoted in MarketWatch on February 14th, 2023

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Oil traders hit ‘sell button’ with U.S. set to release more crude from its Strategic Petroleum Reserve

The release plans were part of a congressional-mandate related to annual budgets that has been in place for almost a decade, Tyler Richey, co-editor of Sevens Report Research, told MarketWatch. But “when traders see an SPR release headline cross the wires, they think ‘more supply on the market’ and hit the sell button first and ask questions later.” Click here to read the full article.

Technical Update: Is This Another Bull Trap?

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What’s in Today’s Report:

  • Technical Update:  Is This Another Bull Trap?
  • EIA Analysis and Oil Market Update

Futures are flat following a quiet night and as solid CSCO earnings are helping stocks hold yesterdays’ gains.

CSCO beat estimates and raised guidance and the stock is up 4% pre-market and that’s helping broader sentiment.

Economically, the only notable number was the Chinese Home Price Index (in-line at –1.5%).

Today focus will remain on economic data and the key reports are (in order of importance):  Philly Fed (E: -7.2), PPI (E: 0.4%m/m, 5.5% y/y), Jobless Claims (E: 200K) and Housing Starts (E: 1.365M).  As has been the case, solid data that implies a “No Landing’ scenario should support stocks, as long as yields don’t spike too much.

We also have several Fed speakers today including Mester (8:45 a.m. ET), Bullard (1:30 p.m. ET) and Cook (4:00 p.m. ET) although they shouldn’t move markets.

Market Multiple Levels: S&P 500 Chart

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What’s in Today’s Report:

  • Market Multiple Levels: S&P 500 Chart (Printable/Shareable PDF Available)
  • NY Fed Inflation Expectations Data Takeaways
  • Key Levels to Watch Today in the Dollar and Treasuries

Stock futures are modestly higher thanks to good economic data overnight as traders await today’s U.S. CPI report and more Fed speak.

Economically, the U.K.’s Unemployment Rate held steady below 4% but wage growth favorably slowed to 5.9% in January from 6.5% in December.

Meanwhile the NFIB Small Business Optimistic Index in the U.S. met estimates at 90.3 which saw S&P 500 futures hit new pre-market highs at the top of the 6:00 a.m. hour ET.

Today, focus will be on economic data early with CPI (E: 0.5% m/m, 6.2% y/y) and Core CPI (E: 0.3% m/m, 5.5% y/y) due out before the opening bell. Cooling inflation pressures have largely been priced in recently so a low print could see stocks add to YTD gains, but the risk is for a hot print to spark a significant wave of selling amid further hawkish shifting money flows across asset classes.

Moving through the day, there are three Fed speakers to watch: Logan (11:00 a.m. ET), Harker (1:00 p.m. ET), and Williams (2:05 p.m. ET) and they will all likely echo the hawkish tone coming from other Fed officials recently but their comments should not have a major impact on markets.

Earnings season is winding down but a few notable companies reporting today include: KO ($0.45), MAR ($1.84), ABNB ($0.27).

Tom Essaye Quoted in Blockworks on February 9th, 2023

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Analysts Warn Investors to Taper Expectations for 2023 Returns

Markets should be poised for a higher open, as they want to see claims begin to rise over the coming weeks, otherwise it’ll imply the labor market remains much, much too tight, Tom Essaye, founder of Sevens Report Research, said. Click here to read the full article.