Why the Falling Yen Matters to Your Clients

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Why the Falling Yen Matters to Your Clients: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why the Falling Yen Matters to Your Clients
  • ISM Manufacturing Index Takeaways
  • 10-Yr Yield Testing Key 2024 Resistance – Chart

Stock futures are modestly lower and Treasury yields are testing YTD highs this morning amid new multi-month highs in oil and better-than-feared EU economic data.

Economically, the final EU Manufacturing PMI for March was revised up from 45.7 to 46.1 which is still in contraction territory but adding pressure to global bond markets.

Looking into today’s session, we will get data on Motor Vehicle Sales early (E: 16.0 million) but trader focus will be on two more important reports for the outlook for the economy and critically Fed policy: Factory Orders (E: 1.0%) and JOLTS (E: 8.8 million).

If either of the latter two reports come in “hot” expect the 10-Yr to extend pre-market gains and stocks to remain under pressure today.

Additionally, there are a few Fed speakers on the calendar with: Bowman (10:10 a.m. ET), Williams (12:00 p.m. ET), Mester (12:05 p.m. ET), and Daly (1:30 p.m. ET). Any pushback on the case for a summer rate cut and a total of three cuts in 2024 will add to hawkish money flows with yields rising and stocks likely extending the so-far-modest weekly declines.

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Assessing (and Ranking) Market Risks as We Start Q2

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Assessing (and Ranking) Market Risks as We Start Q2: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Assessing (and Ranking) Market Risks as We Start Q2
  • Weekly Market Preview:  Will Important Data Continue to Point Towards a Soft Landing?
  • Weekly Economic Cheat Sheet:  Jobs Report Friday, ISM Manufacturing and Services Mon/Wed

Futures are solidly higher to start Q2 as expectations for a June rate cut remain high after the Core PCE Price Index met expectations and Powell provided no surprises in his comments (both last Friday).

Friday’s Core PCE Price Index met expectations, rising 2.8% y/y and keeping June rate cut expectations in place.

The Chinese March Manufacturing PMI rose to 50.8 vs. (E) 50.1 increasing hopes for an economic rebound.

Today focus will be on the ISM Manufacturing PMI (E: 48.3) and the key here is stability.  An in-line or better than expected result will further reinforce that growth is resilient and likely support the early rally.   There’s also one Fed speaker,  Cook at 6:50 p.m. ET, but her comments come after the close.

Sevens Report Quarterly Letter Delivered Today

Our Q1 ’24 Quarterly Letter will be released today. We use our strength (writing about the markets) to help you:

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How the Baltimore Bridge Collapse Could Impact Markets

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What’s in Today’s Report:

  • Core PCE Price Index Preview
  • How the Baltimore Bridge Collapse Could Impact Markets
  • Sevens Report Q1 ’24 Quarterly Letter Coming Monday

Futures are little changed on the final day of the quarter following a mostly quiet night of news.

Fed Governor Waller stated overnight the Fed should be in “no rush” to cut rates and while that’s being spun as hawkish, his full comments largely point to a June rate cut.

Economic data overnight, including Aussie Retail Sales, UK GDP and German Unemployment, met expectations.

Today is the final day of the quarter and the eve of a long weekend so trading should be mostly quiet, although some quarter-end book squaring could make for some low volume volatility late in the day.

Looking at the calendar, there are some notable economic reports to watch including, in order of importance:  Jobless Claims (E: 213K), Final Q4 GDP (3.2%) and Pending Home Sales (E: 1.3%) but as long as they mostly meet expectations, they shouldn’t move markets.  Additionally, the bond market will have an early close today (2:00 p.m. ET).

Sevens Report Q1 ’24 Quarterly Letter Coming April 1st.

The Q1 2024 Quarterly Letter will be delivered to advisor subscribers on Monday, April 1st.

The Q1 Sevens Report Quarterly Letter will highlight the best quarterly returns since 2019 but also address risks in the market, so clients aren’t blindsided by any sudden volatility over the next three months

We will deliver the letter on Monday, the 1st business day of the new quarter, because we want you to be able to send your quarterly letter before your competition (and with little to no work from you).

You can view our Q4 ’23 Quarterly Letter here.

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Is the Baltimore Bridge Collapse a Risk to Inflation?

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Is the Baltimore Bridge Collapse a Risk to Inflation? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Could the Baltimore Bridge Collapse Spark a Rebound in Inflation?
  • Durable Goods Orders Takeaways (More Weak Revisions)
  • Philly Fed Nonmanufacturing Survey (Another Whiff of Stagflation)
  • Consumer Confidence Shows Fading Household Financial Situations – Chart

Stock futures are rebounding from yesterday’s late session selloff as economic data overnight was mostly market-friendly while traders eye continued volatility in the yen.

Economically, Chinese Industrial Profits jumped by 10.2% y/y in the first two months of the year and the Eurozone Economic Sentiment headline rose to 96.3 vs. (E) 95.8. The overseas data helped ease global growth concerns.

The yen is attempting to stabilize this morning after falling to its lowest level against the dollar since 1990 overnight. A short-squeeze in the yen is a threat stocks and other risk assets as it would force traditional carry trades to unwind. The yen warrants close attention into the end of the week here.

There is no economic data today and just one Fed speaker after the close: Waller 6:00 p.m. ET.

There is a 7-Yr Treasury Note auction at 1:00 p.m. ET today. Yesterday’s 5-Yr auction was solid and investors will be looking for more strong demand for Treasuries in the belly of the duration curve today (a rise in yields would weigh on stocks).

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Data from the EIA was largely bullish

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Data from the EIA was largely bullish: Sevens Report Co-Editor, Tyler Richey, Quoted in MarketWatch

Oil futures edge lower early Thursday

“Yesterday’s weekly inventory data from the EIA was largely bullish but the futures market had become overbought and there was a knee-jerk selloff in the immediate wake of the release as short-term traders booked profits on the latest breakout to new 2024 highs,” analysts at Sevens Report Research wrote in a note.

Also, click here to view the full MarketWatch article published on March 21st, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

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The Rally Is Broadening

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The Rally Is Broadening: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • The Rally Is Broadening
  • SPY vs. RSP Comparison – Bar Chart

Equity futures are higher this morning as traders position into a fairly busy morning of U.S. economic data while Chinese authorities intervened in the currency market to support the yuan which is helping general investor sentiment.

Economically, the German GfK Consumer Climate index was slightly better than feared at -27.4 vs. (E) -27.9 but the release is not materially impacting markets this morning.

Today, focus will be on economic data early with several key reports due to be released including: Durable Goods Orders (E: 1.3%), Case-Shiller Home Price Index (E: 0.2%), and Consumer Confidence (E: 106.7).

There are no Fed officials scheduled to speak today but there is a 5-Yr Treasury Note auction at 1:00 p.m. ET. With the elevated level of market anxiety surrounding Friday’s Core PCE release (when markets will be closed) any surprises via strong or weak demand in the auction could move yields and impact equities.

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Updated Risk/Reward Outlook

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Updated Risk/Reward Outlook: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Updated Risk/Reward Outlook

Futures are modestly lower following a quiet weekend of news as investors digest last week’s Fed decision, AI news and economic data.

Atlanta Fed President Bostic stated over the weekend he only expected one rate cut in 2024, pushing back slightly on the 2024 dot (which showed three cuts).

Oil rose above $81/bbl on rising geo-political tensions as Russia attacked Ukrainian energy infrastructure.

Today there are two notable economic reports, Chicago Fed (E: -0.50) and New Home Sales (E: 675k) but they’d have to be big surprises (positively or negatively) to move markets.  There are also two Fed speakers, Bostic (8:25 a.m.) and Cook (10:30 a.m.) and if they both push back on the idea of three cuts in 2024 that would slightly weigh on stocks.

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The Fed’s “Dovish Upgrade” Dilemma

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The Fed’s “Dovish Upgrade” Dilemma : Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • The Fed’s “Dovish Upgrade” Dilemma
  • Economic Data Takeaways – Goldilocks Narrative at Risk
  • Chart – Existing Home Sales Unexpectedly Surge

Futures are tentatively higher this morning as mostly favorable economic data overnight is helping offset a sharp drop in the yuan and subsequent volatility in Chinese markets.

Economically, Japanese Core CPI cooled down to 3.2% y/y vs. (E) 3.3% while the German Ifo Survey came in stronger than expected at 87.8 vs. (E) 86.0. U.K Retail Sales, meanwhile, were flat vs. (E) -0.5% in February after a 3.6% rise in January.

There are no notable economic reports today, but Fed Chair Powell will provide opening remarks and participate in the “Fed Listens” event that begins at 9:00 a.m. ET covering the economy’s transition to the post-pandemic environment. The Fed’s Jefferson and Bowman will also partake in the live discussion.

Bottom line, focus will return to the Fed today, and anything officials say that challenges the idea of three rate cuts in 2024, amid a stronger economy will likely spur some profit taking after this week’s robust post-Fed decision rally.

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Growth is holding up, and that’s the key

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Growth is holding up, and that’s the key: Tom Essaye Quoted in Barron’s

S&P 500 Marks Record Close. Tech Stocks Rebound.

Sevens Report Research’s Tom Essaye told Barron’s that markets can rally higher on developments in the artificial intelligence world and signs of continued economic growth, even in the face of diminished hopes for imminent rate cuts.

“Growth is holding up, and that’s the key,” Essaye says. “It’s when growth begins to roll over that rate cuts really matter. And we’re not there yet. We’re getting hints of it. But we’re not there yet.”

Also, click here to view the full Barron’s article published on March 19th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

It’ll be Very Hard for This Market to RallyIf you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

What the Fed Decision Means for Markets

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What the Fed Decision Means for Markets: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What the Fed Decision Means for Markets: Still All About Growth
  • Fed Statement and SEP Takeaways
  • Lesser Followed, But Still Important Data Eases Stagflation Threat
  • EIA Data Takeaways and Oil Update

Futures are rallying to new highs after the SNB unexpectedly cut rates overnight, the first major central bank to do so, while MU is up 18% pre-market on solid AI driven earnings which is bolstering big tech shares.

The March Eurozone Composite PMI rose to 49.9 vs. (E) 49.6 due to a 0.9-point rise in the Services index while the Manufacturing index unexpectedly fell 0.8 points to 45.7 pointing to an imbalanced EU economy that is at risk of slowing down meaningfully.

Looking into today session, there is a lot of domestic economic data to watch with Jobless Claims (E: 209K), the Philadelphia Fed Business Survey (E: -5.0), the PMI Composite Flash (E: 51.5), and the Existing Home Sales report (E: 3.92 million) all due to be released.

Additionally, traders will be focused on the BoE Decision and meeting minutes (8:00 a.m. ET) before the bell and then later the Fed’s Vice Chair, Michael Barr is schedule to speak at a  University of Michigan round table event (12:00 p.m. ET).

Bottom line, after the Fed yesterday, investors will want to see data hold up well but not be so “hot” that it dents the case for three rate cuts before yearend. Data that comes in “too hot” or “too cold” will be a negative for stocks as the Fed has a very narrow path to achieving a soft landing here.

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