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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).

Tom Essaye Interview by Yahoo Finance Live on January 24, 2022

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Market rout leading to ‘a much more balanced risk-reward outlook’

I wouldn’t go into treasuries. I think that inflation is here to stay. We don’t know exactly how high it will be, but it’s here to stay, and that’s negative for bonds…said Tom Essaye. Click here to watch the full interview.

Tom Essaye Quoted in Courthouse News Service on January 24, 2022

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Markets claw back losses after worries spurred by Fed, Ukraine

The problem is that unlike 2013, the economy has an inflation problem, and the Fed is under enormous political pressure to rein in inflation…Tom Essaye of the Sevens Report noted. Click here to read the full article.

Fed Wildcards to Watch

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What’s in Today’s Report:

  • Wildcards to Watch: Tapering Schedule and Balance Sheet Reduction
  • Chart: Inside Day in the S&P Underscores Trader Indecision
  • Technical Breakpoints for the Market Today

Stock futures are firmly higher as trader focus shifts ahead to the Fed while investors digest mostly upbeat earnings.

MSFT initially fell by 7%+ after earnings yesterday but a positive outlook by management during the investor call has helped shares turn positive and rise by more than 4%.

Looking into today’s session, there are two economic reports due out this morning: International Trade in Goods (E: -$95.1B) and New Home Sales (E 760K) but neither should move markets ahead of the FOMC Announcement (2:00 p.m. ET) and Fed Chair Press Conference (2:30 p.m. ET) which will be the main events today.

Earnings today include: BA (-$0.09), T ($0.76), FCX ($0.96), PGR ($0.99), TSLA ($2.26), INTC ($0.90), STX ($2.36), RJF ($1.77).

Bottom line, the market is coiled up after the volatile start to the week and whether the Fed is dovish or hawkish today will decide whether we see a relief rally or break down to new lows.

Tom Essaye Quoted in Barron’s on January 21, 2022

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Netflix Tumbled, Bitcoin Slipped—and What Else Happened in the Stock Market Today

Several companies cited higher costs as impacting profitability, furthering margin concerns…wrote Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

It’s a Tightening Tantrum, Not a Taper Tantrum

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What’s in Today’s Report:

  • It’s a Tightening Tantrum, Not a Taper Tantrum
  • Weekly Market Preview:  Will the Fed Ease Hawkish Concerns, and Will Earnings Improve?
  • Weekly Economic Cheat Sheet:  FOMC Decision Wednesday, Key Inflation Data

Futures are modestly lower as escalating Russia/NATO tensions erased early solid gains.

Tensions between Russia and NATO increased over the weekend as the US and UK reduced embassy personnel, implying a military conflict could be imminent.

Economically, the EU flash manufacturing PMI beat estimates at 59.0 vs. (E) 57.9, but the UK number slightly missed (56.9 vs. (E) 57.3).

Today’s focus will be on the U.S. Flash January Composite PMI (E: 56.7) and markets will want to see stable data to ensure the economy is solid heading into future Fed rate hikes.  On the earnings front, there are three notable reports today, HAL ($0.34), IBM ($3.39), and LOGI ($1.22), but the really important reports won’t come until later this week.

On the geopolitical front, headlines have turned more ominous regarding a conflict in Ukraine, but as long as it’s limited and there isn’t imminent risk of a larger Russia/NATO conflict, then markets should largely look past the issue as it won’t impact economic growth or Fed policy.

Why Did Stocks Drop Again?

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What’s in Today’s Report:

  • Why Did Stocks Drop Again?
  • Technical Analysis Follow Up to Sector Valuations
  • EIA Analysis and Oil Market Update

Futures are modestly lower but that’s not that bad considering Thursday’s ugly close and the soft NFLX earnings overnight.

Earnings were generally underwhelming, highlighted by the soft NFLX guidance which sent the stock down 20% after hours.  But, PPG and CSX also cited higher costs as impacting profitability, furthering margin concerns.

UK Retail Sales was the only notable economic number, and it missed estimates (-0.9% vs. (E) 3.4%).

Today there are no economic reports and just two notable earnings announcements, SLB ($ $0.39) and ALLY ($2.01), but they shouldn’t move markets.  Instead, it’s all about tech.  If tech can stabilize today, then markets can bounce (possibly into the Fed meeting next week).

Early Earnings Season Takeaways

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What’s in Today’s Report:

  • Early Earnings Season Takeaways

Futures are modestly higher as China made two surprise interest rate cuts overnight, helping stocks bounce from Wednesday’s late-day declines.

China’s central bank made two small surprise interest rate cuts overnight which helped Asian stocks rally (Hang Seng up 3%) and that’s pushing U.S. futures higher.

Today focus will be on economic data and earnings, and for stocks to extend the early morning rebound we need to see stable data and solid earnings (meaning no extreme cost pressures).  Economically, the key report today is the  Philly Fed Manufacturing Index (E: 19.1).  If it suddenly plunges as Empire did on Tuesday, that will slightly increase anxiety about the economy.  We’ll also be watching Jobless Claims (E: 207K) and Existing Home Sales (E: 6.40M).

On the earnings front, the key report today is NFLX ($0.82) after the close, but we’ll also be watching:  AAL (-$1.54), TRV ($3.86), UNP ($2.60), CSX ($0.41) and PPG ($1.19).  If margins are much weaker than expected, look for more earnings-related volatility.

Sectors: Expensive, Cheap, and In Line With the S&P 500

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What’s in Today’s Report:

  • Sectors: Expensive, Cheap, and In-Line With the S&P 500
  • Chart: 10-Year German Bund Yield Turns Positive

U.S. stock futures are bouncing modestly after yesterday’s steep selloff as the surge in bond yields is showing signs of pausing after some mixed inflation data overnight.

German CPI met estimates of 0.5% in December, while U.K. PPI was 0.3% vs. (E) 0.6%, which is helping to ease some inflation concerns today.

Looking into today’s session, there is one economic report to watch: Housing Starts and Permits (E: 1.65M, 1.710M) while no Fed officials are scheduled to speak today.

There is a 20-Yr Treasury Bond auction at 1:00 p.m. ET that could spark another move in yields (a further rise in rates will continue to weigh on high valuation/growth tech stocks and the broader market while a pullback will open the door to a relief rally).

Finally, earnings season is continuing to pick up with BAC ($0.76), MS ($2.00), UNH ($4.30), PG ($1.65), and CFG ($1.61) all reporting ahead of the bell while UAL ($2.23), AA ($2.04), and DFS ($3.61) will release results after the close.

Bottom line, rising yields have been the biggest influence on stocks in recent sessions so it will take a stabilizing bond market and likely an additional positive catalyst or two (such as good earnings/good economic data) to see equity markets find their footing and rally today.