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What to Make of Yesterday’s Drop & Jobs Report Preview

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What’s in Today’s Report:

  • What to Make of Yesterday’s Drop
  • Jobs Report Preview
  • Natural Gas Update

Futures are slightly lower as markets digest the whiplash of the past two trading days following a mostly quiet night.

German economic data again badly missed estimates as German Industrial Production fell –3.9% vs. (E) -1.0% and fears of outright stagflation in the EU are rising quickly.

Today focus will be on the Jobs Report and estimates are as follows:  Job Adds: 400K, UE Rate: 3.6%, Wages: 0.4% m/m, 5.5% y/y.  This market needs a “Goldilocks” report that’s subdued on wages and with job adds modestly below the estimate of 400k.  If markets get that Goldilocks jobs report it should help stocks stabilize.  If the report ends up “Too Hot” though, especially on wages, brace for more selling.

There are also numerous Fed speakers today including: Williams (9:15 a.m. ET), Kashkari (11:00 a.m. ET), Bostic (3:20 p.m. ET), Waller and Bullard (7:15 p.m. ET) and Daly (8:00 p.m. ET).  Don’t be surprised if they all sound more hawkish than Powell did on Wednesday.  Remember, it appears the Fed’s tactic is to “Talk Tough” on looming rate hikes and inflation, yet be more measured on actual rate hikes than rhetoric would suggest.  Regardless, if there’s a consistent chorus of hawkish commentary, that will likely weigh on stocks, at least partially.

Tom Essaye Quoted in CNBC on April 26, 2022

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Treasury yields fall as economic slowdown fears mount

Growth scares will cause a temporary decline in yields but unless there’s a real threat of a global slowdown (which there isn’t yet) then the direction of global yields remains higher, and we again think it’s just a matter of time until the 10-year yield hits 3%…Tom Essaye, founder of Sevens Report, said in a research note. Click here to read the full article.

Why Yields Have Risen So Sharply

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What’s in Today’s Report:

  • Understanding Why Longer-Duration Yields Are Rising So Sharply
  • Chart – Dollar Index Hits New Multiyear Highs

Futures declined overnight as NFLX dropped sharply on disappointing earnings (specifically declining subscribers) but a pullback in yields has helped the market stabilize in early morning trade.

Economically, German PPI was the latest hot inflation print as the headline spiked 4.9% vs. (E) 2.3% M/M.

Looking into today’s session, there is a slew of potential catalysts for the market beginning with another report on the housing market: Existing Home Sales (E: 5.86M) and then a busy Fed speaker circuit with: Daly (10:30 a.m. ET), Evans (11:30 a.m. ET), and Bostic (1:00 p.m. ET) all scheduled to speak.

There is also a 20-Yr Treasury Bond auction at 1:00 p.m. ET that could move yields and impact equity markets.

Finally, earnings season continues today with: PG ($1.29) ahead of the bell and TSLA ($2.27), UAL (-$4.15), AA ($2.99), and CSX ($0.38) due to report after the close.

Earnings In Focus

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What’s in Today’s Report:

  • Bottom Line – Earnings In Focus
  • Natural Gas Update

Stock futures are trading lower after another quiet night of news as bond yields hit new multi-year highs overnight while investors look ahead to a fresh set of earnings reports today.

The 10-year Treasury Note yield notably tested 2.90% overnight following hawkish commentary from the Fed’s Bullard, who mentioned the possibility of a 75 basis point hike late yesterday.

Looking into today’s session, there is just one economic report to watch: Housing Starts and Permits (E: 1.75M, 1.83M) but it is not likely to move markets. Then there is one Fed speaker mid-day: Evans (12:05 p.m. ET).

Finally, earnings season continues to pick up today with JNJ ($0.34), LMT ($6.22), TRV ($3.70), and CFG ($0.96) reporting before the open and NFLX ($2.92) and IBM ($1.34) due to report after the closing bell.

Tom Essaye Interviewed by Yahoo Finance on November 15, 2021

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Market Recap: Monday, November 15: Stocks drop as tech leads losses, 10-year yield tops 1.6%

I think what it is, is essentially that the bond market is looking past this transitory spike in inflation…said Tom Essaye, founder of Sevens Report Research. Click here to watch the full interview.

Sector Winners from the Infrastructure Bill

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What’s in Today’s Report:

  • Sector Winners from the Infrastructure Bill

Futures are slightly higher following a generally quiet night of news as global yields are again little changed.

10 year Treasury yields are up two basis points to 1.59% and that small move is helping futures to slightly rally.

Economic data was sparse as the only notable report was Euro Zone Industrial Production which fell –0.2% vs. (E) -0.6% but that number isn’t moving markets.

Focus today will be on economic data, and specifically the inflation expectations component of the Consumer Sentiment report.  If inflation expectations rise above 5% for next year and above 3% for the next five years, that will get the Fed’s attention and likely push yields higher.  The other economic report this morning is JOLTS (E: 10.1M) and we have one Fed speaker, Williams at 12:10 p.m. ET.

Why Stocks Dropped Yesterday (It Wasn’t CPI)

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What’s in Today’s Report:

  • Why Stocks Dropped Yesterday (It Wasn’t CPI)
  • EIA Analysis and Oil Market Update

Futures are enjoying a mild bounce following Wednesday’s losses as global yields are stable while U.S. bond markets are closed.

10 year Bund and GILT yields are little changed and that, combined with the bond market closure in the U.S., is allowing stocks to rebound.

Economically, British IP missed estimates (-0.4% vs. (E) 0.1%) while monthly GDP slightly beat (0.6% vs. (E) 0.5%).

Today is Veterans Day and as such, the bond markets are closed and there will be no economic reports and no Fed speakers.  So, GILT and Bund yields will partially dictate trading and as long as they don’t rise, stocks can continue this early rebound from yesterday’s losses.

Focus Turns to Earnings and Yields

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What’s in Today’s Report:

  • Focus Turns to Earnings and Yields (And Away from Washington, For Now)
  • Weekly Market Preview:  Will Earnings Results Ease Market Anxiety?
  • Weekly Economic Cheat Sheet:  Key Inflation and Growth Data this Week

Futures are modestly lower on a resumption of the commodity rally following an otherwise quiet weekend.

Energy prices (oil, natural gas, coal) are all rallying again (up 2% – 3%) and that’s increasing global inflation anxiety, which is weighing moderately on futures.

Global bond yields are also rising as two hawkish Bank of England members warned of a possible rate hike this year, although that is not the consensus expectation (although a rate hike from the BOE in early 2022 is looking more likely).

Today is Columbus Day and the U.S. bond markets are closed and there are no economic reports today, although there is one Fed speaker: Evans (6:00 p.m. ET).  So, commodity prices are Treasury yields should drive trading today.  The more they rise, the stronger the headwind on stocks will become.

Tom Essaye Quoted in Barron’s on October 5, 2021

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Tech Stocks and Yields Are Rising Together. That’s Not Supposed to Happen.

The yield has been rangebound between 1.46% and 1.54%. A move above that higher level could indicate the yield…writes Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

Tom Essaye Quoted in Barron’s on September 29, 2021

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Why Higher Bond Yields Are Bad News for Tech Stocks Like Amazon and Zoom

Bottom line, the stock market is being driven by the bond market this week and if we see…writes Tom Essaye, founder of Sevens Report Research. Click here to read the full article.