Economic Breaker Panel: August Update

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What’s in Today’s Report:

  • Sevens Report Economic Breaker Panel – August Update
  • Consumer Confidence Data Points to Stagflation – Chart

Futures are trading near record highs this morning after mostly disappointing economic data helped reinforce dovish expectations for global central bank policy overnight.

Economically, a private Manufacturing PMI in China showed factory activity fell into contraction last month while European PMI data underwhelmed versus estimates and German Retail sales fell 5.1% vs. (E) -0.9% in July.

Looking into the U.S. session, focus will be one economic data early with the ADP Employment Report (E: 500K) due out ahead of the bell and then the ISM Manufacturing Index (E: 59.0) and Construction Spending (E: 0.3%) reports due shortly after the open.

There are no Fed speakers or Treasury auctions today so the biggest driver of markets will likely be the reaction to the economic data and what it means for Fed policy expectations. The biggest risk to the rally into the end of the week is data that is “too hot” and causes a hawkish shift to a currently very accommodative Fed policy outlook.

Infrastructure Update

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What’s in Today’s Report:

  • Infrastructure Update
  • Hurricane Ida and Energy Markets

Stock futures are trading at all-time highs this morning as dovish, risk-on money flows continue into the end of the month following mixed economic data overseas.

Economically, China’s Manufacturing PMI fell to 50.1 vs. (E) 50.2 in August while inflation data in Europe was slightly firmer than estimates but the outlook for global central bank policy remains notably accommodative and that is a positive for equities and other risk assets.

Today, there are two reports on the housing market in the US: Case-Shiller Home Price Index (E: 1.7%) and FHFA House Price Index (E: 1.8%) before the more important Consumer Confidence (E: 123.0) report is released shortly after the open.

Beyond those economic data points, there are no other material catalysts as no Fed officials are scheduled to speak and there are no Treasury auctions this afternoon.

Bottom line, momentum remains positive for stocks into the end of the month however a soft Consumer Confidence number or negative COVID headline could serve as an excuse for profit taking and cause a reversal of the early morning gains today.

Why Powell’s Speech Caused a Rally

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What’s in Today’s Report:

  • Why Powell’s Speech Caused a Rally
  • Weekly Market Preview:  Will Data Keep the Goldilocks Rally Going?
  • Weekly Economic Cheat Sheet:  Jobs Week (This is the Most Important Jobs Report in Months)

Futures are slightly higher mostly on momentum from Friday’s “dovish Powell” rally, following a quiet weekend.

Fed Chair Powell’s speech on Friday was taken as slightly dovish and that drove the rally in U.S. stocks and it’s carried over globally as we start a new week (all the major foreign markets we monitor are modestly positive).

Economic data was sparse as Euro Zone Economic Sentiment slightly missed expectations (117.5 vs. (E) 118) although that’s not moving markets.

Today there is one economic report, Pending Home Sales (E: 0.3%), but that shouldn’t’ move markets.  Instead, as long as the dual tailwinds of 1) Receding COVID cases in the U.S. and 2) A dovish Fed remain, stocks should be buoyant (although if either idea is contradicted expect some give back of last week’s rally).  Finally, keep in mind this is one of the most popular vacation weeks of the year due to the looming Labor Day weekend, so don’t be surprised by low volumes and some added volatility.

Tom Essaye Quoted in The Detroit News on August 25, 2021

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For Fed taper, forget when it starts. It’s the end that matters.

The key for markets is how quickly the Fed removes the accommodation, because that…said Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter. Click here to read the full article.

Tom Essaye Quoted in Barron’s on August 25, 2021

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Dick’s Soars, Nordstrom Drops — And What Else Is Happening in the Stock Market Wednesday

The odds that the market makes a material move one way or another are…writes Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

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Tom Essaye Quoted in Bloomberg on August 25, 2021

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For Fed Taper, Forget When It Starts. The End Matters More

The key for markets is how quickly the Fed removes the accommodation, because that dictates…said Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter. Click here to read the full article.

Tom Essaye Quoted in Forbes on August 24, 2021

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S&P 500, Nasdaq Hit New Record Highs As Vaccine Rally Continues—But Here’s What Investors Are Focused On Next

If there’s a reason for the rally, it’s the growing sense that the Fed won’t…market analyst Tom Essaye, author of the Sevens Report, wrote in a Tuesday email. Click here to read the full article.

 

Tom Essaye Quoted in Bloomberg on August 24, 2021

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U.S. Stocks Top Record as Strong Earnings Continue: Markets Wrap

How the Fed tapers is the next major variable for this market…wrote Tom Essaye, a former Merrill Lynch trader who founded The Sevens Report newsletter. Click here to read the full article.

Tom Essaye Quoted in Barron’s on August 23, 2021

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Pfizer Climbs, Exxon Jumps — And What Else Is Happening in the Stock Market Monday

Futures are modestly higher on momentum from Friday’s rally and following mixed…writes Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

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Tom Essaye Quoted in Forbes on August 20, 2021

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U.S.-Listed Chinese Stocks Have Lost Another $150 Billion In Market Value This Week As Beijing Targets ‘Excessive’ Wealth

In a matter of weeks, China has introduced harsh regulations targeting wide swaths of its…Tom Essaye, author of the Sevens Report, wrote in a recent note. Click here to read the full article.