Are Utilities the New AI Stocks?

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Are Utilities the New AI Stocks?: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Are Utilities the New AI Stocks?
  • Chart – Utilities Overtakes Tech Stocks in YTD Performance

Stock futures are slightly lower this morning while international markets were mixed in quiet trading overnight.

Economically, the Organization for Economic Cooperation and Development (OECD) raised their 2024 global growth forecast to 3.2% vs. 3.1% in May which saw yields edge higher overnight.

Looking into today’s session, there is one economic report to watch: New Home Sales (E: 700K) and one Fed speaker on the calendar but not until the close: Kugler (4:00 p.m. ET).

The Treasury will hold a 4-Month Bill auction at 11:30 a.m. ET and a 5-Yr Note auction at 1:00 p.m. ET. The Note auction has more potential to move markets, especially if demand is weak and yields move higher in reaction (negative for stocks), however the Bill auction could also move short-duration yields and impact stocks today.

Finally, there is one notable tech company reporting earnings today: MU (E: $1.15), but barring a big surprise either way, it is unlikely to move the broader stock market.

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Sevens Report Co-Editor Tyler Richey Quoted in S&P Global

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Rate-cut expectations played a major role in the stock market rebound: Sevens Report Co-Editor Tyler Richey Quoted in S&P Global

Stocks surge to all-time highs; market questions if Fed cuts can sustain rally

“Rate-cut expectations played a major role in the stock market rebound off the early August pullback, but only because the increasingly dovish Fed policy expectations for sooner-and-deeper rate cuts were accompanied by encouraging economic data that helped ease the suddenly urgent fears of an imminent recession in the wake of the July jobs report,” said Tyler Richey, a co-editor with Sevens Report Research.

Rate cut expectations will weigh heavily on the stock market through the end of 2024, primarily as they relate to the outlook for economic growth, said Richey with Sevens Report Research.

“Soft landings are historically elusive, and the Fed has notably never pulled one off after a deep and prolonged yield curve inversion like we have seen in the Treasury market since the summer of 2022,” he said. “Using history as a guide, we are in a late cycle environment and very likely closer to seeing a lasting market top established than a new leg higher in a sustainable bull market.”

Also, click here to view the full S&P Global article published on September 20th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

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.

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Tyler Richey of the Sevens Report highlights a market breadth concern

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Tyler Richey of the Sevens Report highlights a market breadth concern and is quoted in MarketWatch

A technical concern suggests upside momentum is fading

Tyler Richey of the Sevens Report highlights a market breadth concern: there are more stocks trading below their 200-day average than their 50-day average.

“In simple terms, a situation where there are more stocks below their 200-day MA than their 50-day is a bearish one as in a healthy market environment, there should consistently be more stocks above their 200-day MAs than 50-day MAs,” Richey says. Another concern is the NYSE advance-decline line declined last week even though the S&P 500 hit record highs.

Also, click here to view the full MarketWatch article published on September 24th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

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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The threat of significant earnings reports or major economic releases

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The threat of significant earnings reports or major economic releases: Sevens Report Analysts Quoted in Investing.com

What the Fed decision means for markets, beyond the near term

Without the threat of significant earnings reports or major economic releases, investors appear to be operating in an environment that is “1) easing Fed, 2) slowing but ‘OK’ economic data, and 3) generally solid earnings,” Sevens Report said in a recent note.

According to the Sevens Report, if the rate cuts are timely, they could lead to falling yields, strong earnings growth, and positive economic tailwinds. This would likely result in continued upward momentum for stocks, with the potential for the S&P 500 to hit 6,000.

“I say that confidently because the Fed cutting in time would create this macroeconomic outcome: 1) Falling yields, 2) Continued very strong earnings growth, 3) Positive economic tailwinds, 4) The prominent existence of the Fed put and 5) Expectations of accelerating growth in the future,” President of Sevens Report wrote in the note.

Also, click here to view the full Investing.com article published on September 20th, 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.

0DTE Options Primer (3 ETF Plays)

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0DTE Options Primer (3 ETF Plays): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • A Primer (and Potential Plays) on 0DTE Options
  • September Flash PMI Takeaways
  • Chart: The Rally in the “Rest of the Market” Is Losing Momentum

U.S. stock futures are tracking most global equity markets higher after the People’s Bank of China announced new stimulus measures to support economic growth overnight.

The PBOC cut a key policy interest rate, reduced bank reserve requirements, and injected more than $100B into the financial system sending Chinese stocks higher by 4%+.

Today, there are three economic reports to watch: Case-Shiller Home Price Index (E: 5.9%), FHFA House Price Index m/m (E: -0.1%), and Consumer Confidence (E: 103.0). After last week’s 50 bp rate cut from the Fed, investors are looking for stable and solid economic data so the risk to markets is underwhelming data this morning.

There is one Fed speaker today: Bowman at 9:00 a.m. ET and investors are increasingly hopeful the FOMC will cut rates by 50 bp again in November in order to pull off a soft landing so any pushback on that idea from Bowman could weigh on risk assets.

Finally, there is a 2-Yr Treasury Note auction at 1:00 p.m. ET. Strong demand (lower yields) will be supportive of a continued rally in stocks while a weak auction (higher yields) could also weigh on equity markets this afternoon.

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Understanding Why the Fed Cut 50 bps

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Understanding Why the Fed Cut 50 bps: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Understanding Why the Fed Cut 50 bps
  • Weekly Market Preview:  Can Momentum Keep Pushing Markets Higher?
  • Weekly Economic Cheat Sheet:  Focus Turns Back to Growth

Futures are slightly higher following a mostly quiet weekend of news and despite soft economic data overnight.

Economically, the EU flash PMIs were weaker than expected as manufacturing declined to 44.8 vs. (E) 45.7 while services nearly broke 50 (falling to 50.5 vs. (E) 52.3).

Geopolitically, Israeli strikes against Hezbollah continued but for now, markets are ignoring the escalation.

Today brings the two most important economic reports of the week vis the Flash Manufacturing PMI (E: 48.5) and Flash Services PMI (E: 55.3).  Numbers that meet or modestly exceed estimates should keep last week’s rally going while very disappointing readings will modestly increase growth concerns.

There are also several Fed speakers today including Bostic (8:00 a.m. ET), Goolsbee (10:15 a.m. ET) and Kashkari (1:00 p.m. ET).

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Hard Landing/Soft Landing Scoreboard (Updated)

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Hard Landing/Soft Landing Scoreboard (Updated): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Hard Landing/Soft Landing Scoreboard (Updated)
  • Post Fed Technical Takeaways

Futures are modestly lower on disappointing earnings results and as markets digest Thursday’s big rally.

Fed Ex (FDX) missed earnings, cut guidance and voiced concern about economic growth and that negative print is contributing to the decline in futures.

The Bank of Japan kept rates unchanged (as expected) and didn’t provide a hawkish surprise, although the BOJ is expected to hike rates again between now and year-end.

Today there are no notable economic reports and just one Fed speaker (Harker (2:00 p.m. ET)) and given that lack of catalysts we’d expect some continued digestion of Thursday’s big rally.

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What the Fed Decision Means for Markets (Near Term vs. Longer Term)

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What the Fed Decision Means for Markets (Near Term vs. Longer Term): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What the Fed Decision Means for Markets (Near Term vs. Longer Term)

Futures are sharply higher (up nearly 2%) as the Fed’s rate cut sparked a large global stock market rally (most major global indices are 1% – 2% higher).

Economically, there were no notable reports overnight.

Geopolitically, concerns are rising about a direct Israel/Hezbollah war, although investors are ignoring those increased risks, for now.

Today will be another busy day as there are two prominent central bank meetings and important economic data.  First, there is a BOE Rate Decision (E: No change) this morning but, more importantly, there’s a Bank of Japan rate decision late tonight.  The BOJ isn’t expected to raise rates but if they do (like in July) that could inject volatility into the markets (like it did in July).

Economically, there are two especially notable reports today, Jobless Claims (E: 230K) and Philly Fed (E: 2.0), while we also get Existing Home Sales (E: 3.90 million) and Leading Indicators (E: -0.3%).  With the Fed now having cut 50 bps, the stronger the data, the better, as it’ll increase soft landing expectations.

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Beyond the very short term, it’s all about growth

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Beyond the very short term, it’s all about growth: Sevens Report Editor, Tom Essaye, Quoted in Barron’s

The Stock Market Is Rising. It’s Not All About the Size of Rate Cuts.

Data on both retail sales and U.S. industrial production were solid, but traders still see a 61% chance of a half-point rate cut tomorrow. Sevens Report Research’s Tom Essaye says investors are still optimistic about a soft landing for the economy as the Fed prepares to cut rates. He notes tech earnings recently showed signs of life after some weaker showings in August.

Though you can expect some fireworks tomorrow as traders react to the rate decision and the forecasts for future cuts from central bank officials, Essaye argues economic data and earnings will be the market’s main driver ahead.

“Beyond the very short term, it’s all about growth,” Essaye says. “This Fed rate cut is honestly, other than from a sentiment standpoint, largely inconsequential, because whether or not the economy slows a lot between now and year end, this rate cut is not going to impact that; they take too long to filter through the economy.”

Also, click here to view the full Barron’s article published on September 17th, 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.

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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