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Why Have Stocks Hit Multi-Month Highs?

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What’s in Today’s Report:

  • Why Have Stocks Hit Multi-Month Highs?
  • Weekly Market Preview:  Real Debt Ceiling Progress is Needed This Week
  • Weekly Economic Cheat Sheet:  Flash PMIs and Core PCE the Key Reports This Week

Futures are little changed despite a lack of progress on the debt ceiling and an increase in trade tensions between the U.S. and China over the weekend.

There was no progress on the debt ceiling over the weekend although Biden and McCarthy will meet again today to resume negotiations.

China banned the use of Micron (MU) chips in what is yet another escalation in U.S./China trade tensions.

Today focus will be on the debt ceiling and markets will want to hear positive and optimistic commentary from Biden and McCarthy, as the potential “X” date of June 1st is now less than 10 days away.

There are also multiple Fed speakers today, including Bullard (8:30 a.m. ET), Logan (9:00 a.m. ET), Barking & Bostic (10:50 a.m. ET) and Daly (11:05 a.m. ET), but given Powell on Friday reiterated the Fed has likely paused, their comments shouldn’t move markets.

What the Stronger Dollar Means for Markets

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What’s in Today’s Report:

  • What the Stronger Dollar Means for Markets

Futures are little changed following a quiet night of news as markets digest Thursday’s extension of the rally and as markets await comments from Fed Chair Powell later this morning.

Economically, the only notable numbers were Japanese CPI (met expectations at 3.5%) and German PPI (slightly hot at 4.1% vs. (E) 4.0%) but neither number changed the outlook for global inflation and, as such, aren’t moving markets.

Today there are no notable economic reports, but there are several important Fed speakers including Chair Powell (11:00 a.m. ET).  So far this week, markets have looked past hawkish commentary from regional Fed Presidents but if Powell hints that the Fed may hike rates in June, we could see some of this week’s rally given back.  Other Fed speakers today include Williams (8:45 a.m. ET) and Bowman (9:00 a.m. ET).

Hard vs. Soft Landing Scoreboard Update

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What’s in Today’s Report:

  • Hard vs. Soft Landing Scoreboard Update

Futures are slightly higher mostly on momentum from Wednesday’s rally and despite more disappointing earnings, this time from Cisco (CSCO).

CSCO orders underwhelmed and that’s weighing on the stock (down 4% after hours) and limiting gains in futures.

There was no new news on the debt ceiling but optimism remains high and a deal is expected before the “X” date.

Focus today will be on economic data, because beyond any short-term debt ceiling drama (or resolution) the bigger issue for this market remains hard vs. soft landing.  Key reports today include (in order of importance):  Jobless Claims (E: 255K), Philly Fed (E: -20.0) and Existing Home Sales (E: 4.295M).  As has been the case, stability remains the key for stocks to extend the rally.

We also have two Fed speakers, Jefferson (9:05 a.m. ET) and Logan (10:00 a.m. ET), but they shouldn’t move markets.

Why Negative News (Still) Isn’t Making Stocks Drop

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What’s in Today’s Report:

  • Why Negative News (Still) Isn’t Making Stocks Drop
  • Weekly Market Preview:  More Insights into Hard vs. Soft Landing This Week
  • Weekly Economic Cheat Sheet:  Retail Sales (Tues) the Key Report This Week

Futures are modestly higher following reports of progress on the debt ceiling negotiations over the weekend.

Another debt ceiling meeting is scheduled for Tuesday at the White House and major officials (including Biden and Yellen) stated progress was made in negotiations over the weekend, although a deal still isn’t likely this week.

Economically, Euro Zone IP slightly missed estimates.

Today there’s only one notable economic report, the May Empire Manufacturing Index (E: -3.70), and markets will want to see stability in the data to further hint towards a soft landing.

Looking at the Fed, there are numerous speakers today including Bostic (8:45 a.m. ET), Kashkari (9:15 a.m. ET), Barkin (12:30 p.m. ET) and Cook (5:00 p.m. ET) and while their comments may have a hawkish tone, the market firmly believes the Fed has paused on rate hikes and it’ll take Powell disavowing that notion for investors to reconsider.

Finally, debt ceiling headlines will likely continue, and don’t be shocked if there’s some pushback on the “progress” narrative from the weekend as the political gamesmanship kicks into high gear, with just over two weeks till the “X” date.

Why Are Regional Banks Still Causing Market Declines? (It’s Not Contagion)

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What’s in Today’s Report:

  • Why Are Regional Banks Still Causing Market Declines (It’s Not Contagion)
  • What the 1.5 Year High in Jobless Claims Means for the Economy

Futures are modestly higher following some potentially small progress on debt ceiling negotiations.

The debt ceiling meeting today was postponed to early next week as staffers needed more time to work on potential areas of compromise, and that’s being taken as a mild sign of progress.

Economically, UK manufacturing was stronger than expected (0.7% vs. (E) -0.1%) but that’s not moving markets.

Today focus will be on the University of Michigan Inflation Expectations Survey, and specifically the five-year inflation expectations.  The farther they fall from 3.0%, the better for markets as it reinforces inflation is not yet a longer-term problem.  There are also three Fed speakers today: Daly (2:20 p.m. ET), Bullard & Jefferson (7:45 p.m. ET), but even if they’re hawkish they shouldn’t move markets.

What Happens If There’s No Debt Ceiling Deal?

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What’s in Today’s Report:

  • What Happens If There’s No Debt Ceiling Deal?
  • Why CPI Was Positive for Stocks and Bonds Yesterday
  • EIA Analysis and Oil Market Update

Futures are modestly higher mostly on momentum from Wednesday’s rally and following a quiet night of news.

China’s CPI rose 0.1% vs. (E) 0.3% and that’s combining with recently underwhelming Chinese economic data to raise doubts about the economic recovery.

There was no notable news on the debt ceiling, although another round of high level meetings will occur tomorrow.

Today focus will first be on the Bank of England Rate Decision (E: 25 bps hike) and then on economic data, specifically Jobless Claims (E: 245K) and PPI (E: 0.3% m/m, 2.5% y/y).  Stocks have benefitted from mostly “goldilocks” data over the past week, and if we get more of the same via in-line claims and PPI, stocks should be able to extend the rally.  Finally, there’s one Fed speaker, Waller (10:15 a.m. ET), but he shouldn’t move markets.

Tom Essaye Quoted in Barron’s on May 9th, 2023

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U.S. Stock Futures Slip as Investors Look Ahead to Inflation Data

With increasing focus on the debt ceiling, investors will be keenly focused on today’s meeting between President Biden and Congressional leadership as hopes for a delay to September are building and any disappointment of those hopes could result in volatility across asset classes, said Tom Essaye, the founder of Sevens Report Research. Click here to read the full article.

Tom Essaye Quoted in Barron’s on May 8th, 2023

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Stocks Are Holding Steady Ahead of Busy Week

Futures are slightly higher following a mostly quiet weekend of news as markets look ahead to Wednesday’s CPI, wrote Sevens Report’s Tom Essaye. Click here to read the full article.

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Market Multiple Chart: S&P 500

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What’s in Today’s Report:

  • Market Multiple Table Chart: S&P 500 (Separate PDF Available on Request)
  • CPI Preview – Will the Data Contradict Fed “Pause” Expectations

Futures are down modestly this morning, tracking global shares lower after soft earnings while focus turns to today’s CPI data.

ABNB shares are down 14% in premarket trade after the company offered disappointing revenue guidance after the close yesterday and that is weighing modestly on equities this morning.

Economically, German CPI was unchanged at 7.2% y/y in April, meeting analysts’ estimates, but importantly, the headline remains very elevated and much beyond policy makers’ 2.0% target which will support further tightening in the months ahead.

Looking into today’s session, U.S. inflation data will be in focus with CPI (E: 0.4% m/m, 5.0% y/y) due at 8:30 a.m. ET, but the more important figure to watch is Core CPI (E: 0.4% m/m, 5.5% y/y) as a print above 5.5% will raise concerns that price pressures are sticky and not declining which will warrant a continued, aggressive stance by the Fed.

There are no Fed officials scheduled to speak today but there is a 10-Yr Treasury Note auction at 1:00 p.m. ET that could move markets, especially in the wake of the CPI data as investors look for insight as to how the “smart market” is digesting the latest look at inflation.

Finally, earnings season is winding down but there are a few notably companies reporting today: TM ($2.83) before the open, and DIS ($0.89) after the close.

The Fed Pivoted, So Now What?

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What’s in Today’s Report:

  • Sevens Report Technicals First Issue Today (Delivered to subscribers later this morning)
  • The Fed Pivoted, So Now What?
  • Weekly Market Preview:  Will there be any debt ceiling progress, and does disinflation resume?
  • Weekly Economic Cheat Sheet:  CPI on Wednesday is the key report this week.

Futures are slightly higher following a mostly quiet weekend of news as markets look ahead to Wednesday’s CPI.

News was slightly positive on the debt ceiling over the weekend, as reports indicate the White House will try to negotiate a short term debt ceiling extension (to the end of September).  However, it remains uncertain if even this short-term deal can get done before the “X” date.

Economically, German Industrial Production missed estimates (-3.4% vs. (E) -1.5%) but that’s not moving markets.

Today there are no notable economic reports but there is a potentially important release at 2:00 p.m. via the Bank Senior Loan Office Survey.  Markets (and the Fed) are nervous the regional bank stress will curtail lending and put a bigger headwind on the economy.  If the loan officer survey reflects that reality (a drop in bank lending) it could cause volatility as that would increase the chances of a potential hard landing.

 

Sevens Report Technicals – First Issue Being Delivered To Trial Period Subscribers This Morning!

We have been thrilled with the response to our new research offering: Sevens Report Technicals and we are very excited to deliver the first official issue later this morning. Sevens Report Technicals will be similar in appearance to the special technical report we sent out two weeks ago, which you can view here.

This new report will offer a “deep dive” into the technical dynamics of all of the asset classes we cover in the daily Sevens Report including:

  • A “Top-Down” Technical View
  • Dow Theory Update
  • Key Levels to Watch Across Asset Classes
  • A Dynamic Equity Sector “Dashboard”
  • A Deep Dive Into Treasury Market Trends
  • Market Volatility Observations and Takeaways

During this launch phase we continue to offer an additional month free on any quarterly ($75 discount) or annual ($150 discount) subscription. With a one month “Grace Period” during which you can receive a full refund for any reason, you take no risk trying Sevens Report Technicals. We are confident that you will find the research a perfect complement to your business or investment process.

To start your risk-free trial subscription, please send an email to info@sevensreport.com. To learn more about Sevens Report Technicals, click this link.