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Fed-Day Technical Tear Sheet (Negative Divergence from Fundamentals)

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Fed-Day Technical Tear Sheet (Negative Divergence from Fundamentals): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Fed-Day Technical Tear-Sheet: Market Technicals Are Diverging Negatively from Still Optimistic Fundamentals
  • Economic Takeaways: Retail Sales and Industrial Production Top Estimates

Stock futures are trading tentatively higher as investors digest mostly as-expected inflation data out of Europe overnight and look ahead to today’s Fed decision.

Economically, Eurozone CPI met estimates at 2.2% y/y in August while the Core figure was also as-expected at an unchanged 2.8% y/y last month.

Today, focus will be on the one notable economic data point due to be released: Housing Starts (1.300M) but it is unlikely to materially move markets with the Fed decision looming this afternoon.

The FOMC Announcement will hit the wires at 2:00 p.m. ET followed by Fed Chair Powell’s Press Conference at 2:30 p.m. ET. The consensus expectation is a 25 bp rate cut will be delivered but market-based policy rate expectations are pricing in a 65% chance of a 50 bp rate cut as of this morning.

Bottom line, whether the Fed delivers a 25 bp or 50 bp rate cut today is less important than the guidance provided on future cuts as the market wants to see the framework laid out for a fairly aggressive rate cutting path in the months ahead to shore up soft-landing hopes. So projections and Powell’s speech will be critical for the market reaction late in the session.

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Markets are currently facing “tectonic risks”

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Markets are currently facing “tectonic risks”: Sevens Report Analysts Quoted in Investing.com

Markets are currently facing ‘tectonic risks’, strategists warn

The latest Sevens Report issued a warning, stating that markets are currently facing “tectonic risks” that could pose significant threats over time.

Sevens acknowledged a sense of disbelief among some investors who were surprised by the resilience of stocks, despite mounting political uncertainty and a clearly slowing economy.

According to Sevens, while there are visible warning signs—including rising unemployment, weak manufacturing data, and negative bank guidance—the overall news isn’t “bad enough yet to cause a sustainable decline in stocks.”

However, they pointed out that the macro risks are real, with political uncertainty (particularly around potential elections), economic ambiguity (whether there will be a soft or hard landing), and geopolitical tensions (including Russia/Ukraine and the situation in Taiwan) looming large.

However, “potential risks and anecdotal negatives, while all legitimate, and not yet enough to distract investors from positive factors in this market,” they wrote.

They believe factors such as the anticipation of Federal Reserve rate cuts, expected earnings growth, and sustained enthusiasm around artificial intelligence have been supporting the market.

The analysts stated that “the burden of proof remains with the bears” as these positive elements keep stocks buoyant for now.

However, the report emphasized that while markets could “grind higher” in the short term, with the potential for the S&P 500 to hit new highs, they remain exposed to “dramatic negative shocks” that could result in a significant 10%-20% decline.

“Bottom line, the risks currently facing this market (economic growth, earnings, geopolitics) are tectonic risks. They don’t present themselves all at once or in a flash, they evolve over time until they become sustainable and that’s when bear markets occur,” said Sevens.

Also, click here to view the full Investing.com article published on September 16th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Lastly, If 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.

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Wednesday’s CPI inflation report has the door open to a half-percentage-point reduction

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Wednesday’s CPI inflation report: Sevens Report Founder Tom Essaye Quoted in Morningstar

The stock market is falling after CPI report. Investors may fear Fed mistake.

Tom Essaye, founder of Sevens Report Research – said that if Wednesday’s CPI inflation report came in weaker than expected and left the door open to a half-percentage-point reduction on Sept. 18, that would be “better for markets” and “generally welcome” news.

Also, click here to view the full MarketWatch article published on Morningstar on September 11th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Oil Inventories

Lastly, If 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.

The Fed could fall behind the curve as real interest rates continue to rise.=

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The Fed could fall behind the curve: Sevens Report Analysts Quoted in Investing.com

The Fed may be further behind the curve

“If we excluded housing from Core CPI, yesterday’s Core CPI reading would have increased just 0.1%,” they explained, downplaying fears of a significant inflation resurgence.

Despite this, the inflation data has reduced the likelihood of a 50-basis-point rate cut by the Fed.

The real risk, according to Sevens, is that the Fed could fall behind the curve as real interest rates continue to rise.

“Real interest rates are now putting more pressure on the economy than they have at any point during the Fed’s tightening cycle,” Sevens stated.

Also, click here to view the full Investing.com article published on September 12th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Lastly, If 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.

Tom Essaye, president of Sevens Report Research, joins BNN Bloomberg

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Top risks tech leadership poses to market stability: Tom Essaye Interviewed on BNN Bloomberg

Top risks tech leadership poses to market stability

Tom Essaye, president of Sevens Report Research, joins BNN Bloomberg to discuss the markets and discusses top risks that tech leadership poses to market stability.

Also, click here to view the full BNN Bloomberg interview published on September 10th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up 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.

Wednesday’s CPI could be the deciding factor

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Wednesday’s CPI could be the deciding factor: Tom Essaye Quoted in Morningstar

CPI inflation report could push Fed to make an even bigger rate cut in September

“Wednesday’s CPI could be the deciding factor in whether the Fed decides to cut 50 bps [next] week or 25 bps,” said Tom Essaye, founder of Sevens Report Research, in a Monday note. “Broadly speaking, the weaker this number, the better for markets and the greater the chance the Fed does cut 50 bps. And regardless of recent growth data, the market will generally welcome the bigger expected rate cut.”

Also, click here to view the full MarketWatch article published on Morningstar on September 10th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Oil Inventories

Lastly, If 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.

How to Explain This Market To Clients (September Update)

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How to Explain This Market To Clients: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • How to Explain This Market To Clients (September Update)
  • Weekly Market Preview:  Two Key Central Bank Decisions (Fed on Wednesday, BOJ on Thursday)
  • Weekly Economic Cheat Sheet:  Important Growth Updates This Week

Futures are little changed despite more negative Chinese economic data as investors look ahead to the Fed decision on Wednesday.

August Chinese economic data disappointed as Industrial Production (4.5% vs. (E) 4.7% and Retail Sales (2.1% vs. (E) 2.7%) both missed estimates, raising more concerns about Chinese growth (and global growth more broadly).

Politically, there was another assassination attempt on Trump, although the event shouldn’t alter the current race.

This week will be both busy and important for this rally, but it starts slowly as the only notable number today is the September Empire Manufacturing Index (-4.1).  An in-line to slightly better than expected number would be the best-case scenario for markets today.

Join thousands 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.

September Market Multiple Table Chart

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September Market Multiple Table Chart: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • September Market Multiple Table Chart

Futures are slightly higher despite more underwhelming tech company guidance.

Adobe (ADBE) posted solid results but disappointing guidance (like many tech firms recently) and the stock is down 8% pre-market, but that’s not impacting the broader averages like other recent disappointing tech guidance.

Economically, Euro Zone Industrial Production slightly missed estimates although that’s not moving markets.

Today focus will be on inflation expectations in the University of Michigan Consumer Sentiment Index and expectations are:  1-Yr Inflation Expectations: 2.8%, 5-Yr. Inflation Expectations: 3.0%.  If we see better than expected numbers, that should further fuel the “dovish” rally that pushed stocks higher on Thursday.

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This market remains vulnerable to negative shocks

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This market remains vulnerable to negative shocks: Sevens Report Analysts Quoted in Investing.com

S&P 500 could hit low 4,000s if ‘things get worse’: The Sevens Report

According to the latest Sevens Report Research note, the S&P 500 may face a significant drop into the low 4,000s in a worst-case scenario, if economic conditions deteriorate and key market assumptions falter.

The firm said in its latest note that recent market activity has shown that the S&P 500 is trading at a valuation that does not reflect current economic realities.

“This market remains vulnerable to negative shocks on growth, Fed rate cuts, inflation, and earnings,” the analysts explained, highlighting the risks the index faces.

Economic data, especially in the labor market, has shown a deterioration in recent months, which has led to rising concerns about a potential hard landing.

While the data still suggests a soft landing is more likely, the slowing economy does not justify the S&P 500’s current 21X multiple, according to Sevens.

“The economy is notably losing momentum, and that’s simply not an environment that warrants a 20X multiple,” Sevens stated.

Also, click here to view the full Investing.com article published on September 10th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Lastly, If 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.

Market Multiple Table: Still Overvalued

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Market Multiple Table: Still Overvalued: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • September Market Multiple Table Update: Still Overvalued
  • Chart – Oil Falls to 52-Week Lows on Demand Worries

Futures are modestly lower this morning as last week’s volatility and yesterday’s relief rally are digested by investors while focus is shifting to tomorrow’s CPI release.

Economically, the NFIB Small Business Optimism Index whiffed estimates of 93.6 and fell 2.5 points to 91.2 in August while German CPI met estimates at 1.9% y/y.

Looking into today’s session, there are no notable economic reports on the calendar, but two Fed officials are scheduled to speak: Barr (10:00 a.m. ET) and Bowman (12:15 p.m. ET). It is unlikely that either move markets though.

Finally, in the afternoon, the Treasury will hold a 3-Yr Note auction at 1:00 p.m. ET. If demand for the Notes is weak it could spark hawkish money flows while an auction outcome too-strong could reignite recession worries in afternoon trade.

Bottom line, more “wait-and-see” trading is most likely for today’s session as traders await the latest inflation data which has the potential to shift Fed policy expectations (25 bop or 50 bp Fed rate cut) ahead of next week’s meeting.

Join thousands 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.