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FOMC Preview (Watch the Dots)

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What’s in Today’s Report:

  • FOMC Preview (Watch the Dots)
  • Why Yesterday’s CPI Boosted the “Growth On” Trade
  • Gold Update:  Are the 2023 Highs Already In?

Futures are modestly higher following a quiet night of news as markets look ahead to the FOMC decision and expected pause in rate hikes.

Economic data was mixed overnight as UK Industrial Production missed estimates (-0.3% vs. (E) -0.1% in manufacturing) while Euro Zone IP slightly beat (1.0% vs. (E) 0.9%), but neither number is moving markets.

Today focus will be on the FOMC Decision and the consensus expectation is that the Fed will pause.  But, it’s not clear how many additional 2023 rate hikes the “dots” will show, and that will determine if the Fed decision is hawkish or dovish (more on that inside).

Away from the Fed we also get the May PPI (E: -0.1% m/m, 1.6% y/y) and Core PPI (E: 0.2% m/m, 2.9% y/y) and if this metric comes in under expectations that’ll boost the “Immaculate Disinflation” expectation and should help cyclical sectors extend the rally.

CPI Preview (Good, Bad & Ugly)

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What’s in Today’s Report:

  • CPI Preview (Good, Bad & Ugly)

Futures are little changed despite solid tech earnings and more Chinese stimulus, as markets await the CPI report at 8:30 a.m. ET.

ORCL posted solid earnings and rallied 5% overnight and that’s adding to overall tech and market momentum.

Chinese authorities cut the reverse repo rate to 1.9% from 2.0%, and that move increased market expectations for future additional stimulus.

Today focus will be on the CPI report and expectations are as follows: 0.2% m/m, 4.1% y/y, Core CPI (E: 0.4% m/m, 5.3% y/y).  Additionally, “Super Core” CPI (which is core CPI less housing) will also be in focus and markets will want to see a drop to (or ideally below) 5.2% y/y.

Bottom line, markets need CPI to confirm accelerating disinflation to continue to rally, while a sticky inflation number will result in real market disappointment (although the looming FOMC decision should keep any market moves more muted than they otherwise would have been).

Tom Essaye Interviewed by Yahoo Finance on June 6th, 2023

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‘Talk of $100 oil is pie in the sky,’ says strategist

“Not only is demand an issue, but also we have Russia basically pumping as much oil as they possibly can, whatever their quotas are supposed to say, to try to fund their war,” Tom Essaye, Sevens Report Research founder told Yahoo Finance Live. Click here to watch or read the full article.

Tom Essaye Quoted in Yahoo Finance on June 6th, 2023

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We’re in the midst of a market ‘melt-up’: Morning Brief

“It’s just Wall Street slang, essentially, for a market that won’t go down, even if there are headlines that mean it should,” clarified Tom Essaye, Sevens Report Research Founder and President. Click here to read the full article.

Tom Essaye Joins Yahoo Finance to Discuss Market Trends to Watch on June 5th, 2023

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5 stock market trends to watch this summer

As the 2023 summer season approaches, Yahoo Finance’s Brian Sozzi breaks down 5 stock market trends to watch this summer. Ben Laidler, eToro Global Markets Strategist, and Tom Essaye, Sevens Report Research Founder and President, join Yahoo Finance Live to discuss what they’re watching this summer. Click here to watch the full interview.

Tom Essaye Discusses The Market Outlook on Yahoo Finance on June 5th, 2023

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Morgan Stanley expects 16% earnings drop for S&P 500 companies

The S&P 500 is nearing a bull market. But Morgan Stanley analysts are predicting a 16% earnings drop for S&P 500 companies. Ben Laidler, Global Markets Strategist at eToro, and Tom Essaye, Sevens Report Research Founder and President, give their takes on what lies ahead for the market. Click here to watch the full interview.

Tom Essaye Joined Yahoo Finance Live on June 5th, 2023

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Oil prices rise after Saudi Arabia pledges production cut: How it will impact inflation

Oil prices are on the rise after a pledge from Saudi Arabia to cut production into 2024. Ben Laidler, eToro Global Markets Strategist and Tom Essaye, Sevens Report Research Founder and President discuss the impact of this decision upon the global energy market. Click here to watch the full video.

A “Make or Break” Week for the Rally

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What’s in Today’s Report:

  • A “Make or Break” Week for the Rally
  • Where the Opportunity is in Stocks Right Now
  • Weekly Market Preview:  Will Data Confirm “Goldilocks” Optimism?
  • Weekly Economic Cheat Sheet:  CPI Tuesday, Fed Wednesday, Key Growth Data Thursday

Futures are slightly higher on momentum from last week’s rally, as it was a very quiet weekend of actual news and investors are looking ahead to multiple important market catalysts this week.

Economically, the only notable number was Japanese PPI which rose 5.1% y/y vs. (E) 5.7% y/y in what is the latest sign of global disinflation.

Oil declined more than 2% overnight on over supply concerns as Russia is largely ignoring its production quota.

Today there are no notable economic reports nor any Fed speakers, so barring any major surprises markets should be relatively calm ahead of tomorrow’s CPI report, Wednesday’s FOMC decision and Thursday’s important economic data.

What the BOC Rate Hike Means for U.S. Interest Rates

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What’s in Today’s Report:

  • What the BOC Rate Hike Means for U.S. Interest Rates

Futures are little changed despite more economic stimulus from China.

The Chinese government cut bank deposit rates and encouraged lending to boost auto sales in the latest effort to stimulate the economy, although the moves were already expected so this isn’t a new, positive surprise.

Economic data was sparse overnight with Japanese and EU GDPs the only notable releases, and neither number moved markets.

Today the only notable economic report is Jobless Claims (E: 235K) and markets will want to see stability in the data (so no sudden jump higher), but more broadly markets remain in a temporary “holding pattern” with the CPI report and Fed decision now both looming less than a week away.

Market Multiple Levels: S&P 500 Chart

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What’s in Today’s Report:

  • Market Multiple Levels: S&P 500 Chart (Unbranded PDF Available)
  • Why Did Small Caps Surge?

Stock futures are little changed in premarket trade indicating this week’s digestive churn sideways could continue today following mixed economic data overnight.

Chinese exports dropped -7.5% vs. (E) +1.0% year-over-year in May adding to worries about the health of the recovery in the world’s second largest economy.

Conversely, in Europe, German Industrial Production jumped 1.8% vs. (E) 1.4% y/y helping ease some worries about the health of the EU economy.

Looking into today’s session, the list of potential catalysts remains light as there are just two economic reports to watch: International Trade in Goods and Services (E: -$76.0B) and Consumer Credit (E: $21.0B) while there are no Fed officials scheduled to speak.

That will leave focus on market internals and whether or not the early June money flows into cyclicals and small cap stocks can continue. If so, the improving breadth in the market with the S&P 500 sitting just under YTD highs will add to the case that the 2023 rally is sustainable.