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Tom Essaye Quoted in Barron’s on August 11th, 2023

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Stocks Eked Out a Very Small Gain, Snapped Their Losing Streak

“The market already assumes continued disinflation, so the fact that inflation declined modestly in July just met existing (and already priced in) expectations,” Sevens Report Research founder Tom Essaye told Barron’s. “And, much of the gains in the morning were technical, on a rebound from Wednesday’s drop and an anticipation of the CPI report. But, when it failed to provide a new, positive catalyst, we saw trade exit positions as this market needs something new and positive to rally, not just confirmation of what we already assume and have priced in.”

Click here to read the full article.

What Is the Yen Carry Trade?

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What’s in Today’s Report:

  • What Is the Yen Carry Trade and Why Does it Matter to Markets?
  • Manheim Used Car Index Takeaways
  • S&P 500 Chart – Summer Uptrend Has Been Violated

Markets are risk-off this morning thanks to soft Chinese economic data, disappointing UPS earnings and guidance (shares are down over 6% in the premarket), and negative banking sector news in the U.S. and Europe.

Economically, Chinese exports fell -14.5% vs. (E) -12.6% in July, the steepest drop since the pandemic while imports also fell much more than expected which raises further concerns about the health of the Chinese economy, which was supposed to be a major source of global growth this year.

A surprise windfall tax on bank profits announced by the Italian government paired with Moody’s downgrading 10 smaller U.S. banks is weighing heavily on financials this morning and acting as a headwind on the broader equity indices as well.

Looking into today’s session, there is one economic report to watch: International Trade in Goods and Services (E: -$65.4B) and two Fed speakers: Harker (8:15 a.m. ET) and Barkin (8:30 a.m. ET), all scheduled for before the opening bell. The trade data shouldn’t move markets but if Harker and/or Barkin strike a more hawkish than anticipated tone today, that could send bond yields higher and weigh on equities.

Finally the Treasury will hold a 3-Yr Note auction at 1:00 p.m. ET and any meaningful moves in yields (higher or lower) could influence equity market trading this afternoon.

Tom Essaye Quoted in Barron’s on August 3rd, 2023

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Treasury Yields Keep Climbing

“The stronger-than-expected ADP jobs report pushed the dollar and long-dated Treasury yields higher on Wednesday, as the bond market continues to price in more resilient growth and/or inflation,” Tom Essaye, founder of the Sevens Report, wrote Thursday.

Click here to read the full article.

Tom Essaye Quoted in Barron’s on July 3rd, 2023

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Stocks Tick Lower to Start Holiday-Shortened Session

“At this point, and with yields this high, markets need to see solid data and that means the ISM Manufacturing PMI moving closer towards 50 and beating expectations,” Sevens Report Research’s Tom Essaye writes. Click here to read the full article.

Tom Essaye Interviewed on BNN Bloomberg’s Morning Markets on March 10th, 2023

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A 50bps hike is entirely possible for the U.S. after today’s jobs data: Tom Essaye

Tom Essaye, founder and president of Sevens Report Research, joins BNN Bloomberg to discuss the latest movements in the markets after today’s jobs data. Essaye is expecting another big hike from the Fed at the upcoming meeting and discusses his take on SVP bank’s halt in trading, Silvergate’s shutdown and bitcoin. He says 2023 will be volatile and investors should remain conservative. Click here to watch the full interview.

Tom Essaye Quoted in Forbes on March 10th, 2023

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Biggest Bank Failure Since Great Recession Sparks ‘Overblown’ Fears Of Contagion—But Big Lingering Risks Remain

The broad selloff was “undoubtedly an unwelcome reminder” of the 2008 financial crisis, says Sevens Report analyst Tom Essaye, noting SVB scrambled and ultimately failed to stay afloat after it was forced to sell a bond portfolio at a $1.8 billion loss because higher interest rates pushed bond prices “far below” where they were when purchased. Click here to read the full article.

What the Bank Failures Mean for Markets

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What’s in Today’s Report:

  • What’s Happened with the Bank Failures
  • What the Government Response Means for Markets
  • Is This A Bearish Gamechanger?
  • CPI Preview

Futures are little changed as markets digest the three bank failures last week and the government response.

Silicon Valley Bank (SVB) and Signature Bank of New York (SBNY) both failed over the weekend, making three bank failures last week.  In response to the SVB and SBNY failures, the government announced the creation of a bank lending facility, the Bank Term Funding Program, which is helping to ease concern about a broader bank run (but doesn’t entirely solve the crisis).

Today President Biden will address the nation on the situation this morning, but the key remains stability in the regional banks and in Treasury yields (they need to stop collapsing).  If regional banks (KRE) and yields stabilize, markets can rally.

Now What? Updated Market Outlook

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What’s in Today’s Report:

  • Now What?  Updated Market Outlook
  • Weekly Market Preview:  Will Yields Keep Rising?
  • Weekly Economic Cheat Sheet:  Key Growth Updates This Week

Futures are modestly higher on a bounce back from last week’s losses following a generally quiet weekend of news.

Economic data was sparse and the only notable report was EU M3 money supply, which rose less than expected (3.5% vs. (E) 3.9%).

Geopolitically, fears are easing that China will send arms to Russia (concerns about this weighed on stocks late last week and an easing of them is helping futures rally).

Today focus will remain on economic data and the two notable reports are Durable Goods (E: -4.0%) and Pending Home Sales (E: 1.0%).  While neither should be a major market mover, markets will want to see stable data (so reports that don’t imply growth is too strong, or too weak).  We also get one Fed speaker, Jefferson (10:30 a.m. ET).

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.

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).