Tom Essaye Quoted in Bloomberg on August 24, 2021

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

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

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.

Tom Essaye Quoted in Barron’s on August 19, 2021

Copper Prices Just Fell to a Dangerous Level. What That Means for the Economy.

The metal has found “key technical support at $4.20…writes Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

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Tom Essaye Quoted in Yahoo Finance on August 19, 2021

Stocks in Choppy Trading Ahead of Big Options Day: Markets Wrap

This week’s options expiration is likely amplifying the volatility…wrote Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter. Click here to read the full article.

Powell Speech Preview

What’s in Today’s Report:

  • Powell Speech Preview

Futures are modestly higher as markets bounce back from Thursday’s declines ahead of Powell’s speech.

There were no new developments in Afghanistan overnight as evacuations continued.  The tragedy temporarily hit stocks but it won’t be an ongoing influence on markets.

Expectations for more stimulus from China rose overnight as chatter regarding a Reserve Ration cut grew louder and this, combined with some pre-Powell positioning, are the main reasons futures are higher.

Today the key event is obviously the Powell speech (10:00 a.m. ET) but as a reminder, he won’t announce anything specific regarding tapering (that will come at the Sept 22nd Fed meeting).  Instead, the key will be how much Powell discusses the Delta variant as an economic headwind (the more he mentions it, the more dovish the speech will be taken) and if he reaffirms the Fed is getting close to being able to taper QE (which will mean before year-end).

Outside of Powell, the Core PCE Price Index (E: 0.3% m/m, 3.6% y/y) is the key economic report this morning but as long as it’s much higher than expectations, it won’t move markets.

Why Does the Market Think COVID Has Peaked?

What’s in Today’s Report:

  • Why Does the Market Think COVID Has Peaked?
  • EIA Analysis and Oil Market Update

Futures are slightly lower following a quiet night of news as markets digest this week’s rally.

Chinese shares saw profit taking (Hang Seng down –2%) and that’s weighing on global stocks slightly, but there was no materially negative news out of China overnight.

Economic data was sparse as the German Gfk Consumer Climate slightly missed expectations (-1.2 vs. –1.0) while the Euro Zone money supply met estimates (up 8.1%).

Today we do get two economic reports including Jobless Claims (E: 340K) and revised Q2 GDP (E: 6.6%) but neither number should move markets unless they are major surprises.  Instead, pre-Powell speech positioning will likely dominate markets today (Powell’s speech is tomorrow) and given stocks hit new highs this week, don’t be surprised if there’s some mild profit taking ahead of Powell’s speech tomorrow.  Finally, in the bond markets, there’s a seven year Treasury auction mid-day today, and if the results are soft look for a continued rally in the 10 year yield (and an improving technical outlook for that yield).

 

Thank You!

I wanted to say a heartfelt, “Thank you” to all of you who sent me condolences and well wishes over the past week.

While I wish I could respond to each individual email or call, there have literally been hundreds of them, and if I took on that endeavor I’d have no time to write the Report! I believe that continuing to stay focused on the

markets and helping us to navigate this unprecedented time successfully is the best way I can show you my thanks, and you can count on me to do just that.

Again, thank you all.  You have made this time easier.

Using the Yield Curve to Measure Taper Expectations

What’s in Today’s Report:

  • Using the Yield Curve to Measures Taper Expectations
  • Strong 2-Year Note Auction Implies a Dovish Powell

U.S. stock futures are slightly higher in very quiet trading this morning as investors assess the state of the pandemic against expectations about the Fed’s taper plans ahead of the Jackson Hole Economic Symposium later in the week.

Economically, the German Ifo Survey was slightly soft with the Business Climate headline falling to 99.4 vs. (E) 100.4 and Business Expectations declining to 97.5 vs. (E) 100.0.

Looking into today’s session, there is one economic report ahead of the bell: Durable Goods Orders (E: -0.2%, Core Capital Goods: +0.5%). As has been the case recently, the market will be looking for a report that is good enough to not suggest the recovery is losing momentum but not too strong that it would influence a sooner-than-later taper by the Fed.

As the day goes on, we will hear from one Fed official: Daly who is scheduled to speak at 1:00 p.m. ET however her comments should not move markets will focus already moving ahead to Powell’s speech on Friday.

Finally, there is a 5-Yr Treasury Note auction at 1:00 p.m. ET. If we see strong demand like we saw in yesterday’s 2-Year auction, then that could offer a modest, dovish tailwind to equities as it will suggest expectations for Powell’s speech are shifting more dovish.

Bottom line, there are a few potential market catalysts today, but the odds that the market makes a material move one way or another are low given the sense of Fed paralysis ahead of Powell’s speech on Friday.

Taper Outlook: Good, Bad, and Ugly Scenarios

What’s in Today’s Report:

  • It’s Not When, But How the Fed Tapers That Matters

U.S. stock futures are tracking most global equity markets higher this morning as Chinese tech shares recovered from recent declines and trader focus is shifting ahead to the Fed’s Economic Policy Symposium later in the week.

Economically, German GDP rose 1.6% vs. (E) 1.5% in the second quarter, easing some concerns that the global economic recovery is losing momentum.

Today, there is one economic report due out: New Home Sales (E: 700K) but it shouldn’t materially move markets and no Fed officials are scheduled to speak.

There is a 2-Yr Treasury Note auction at 1:00 p.m. ET, and given the increased sensitivity towards taper plans and interest rates right now, the outcome could move markets in the afternoon.

Why Negative Headlines Still Aren’t Hurting Stocks

What’s in Today’s Report:

  • Why Negative Headlines Still Aren’t Hurting Stocks (Three Reasons)
  • Weekly Market Preview:  Can Good Earnings Continue to Offset Negative Macro Headlines?
  • Weekly Market Cheat Sheet:  Flash PMIs and Powell’s speech Friday are the highlights.

Futures are modestly higher on momentum from Friday’s rally and following mixed (but not bad) global PMIs.

Economic data was mixed as the EU August flash composite PMI was solid (59.5 vs. (E ) 59.7) although the UK  PMI (55.3 vs. (E ) 58.4) missed expectations, as did the Japanese and Australian readings.  But, in aggregate, the numbers were good enough to show the global economic recovery is still on going (and that helped stocks rally this morning).

There was improvement on the COVID front as new cases in China continued to plunge with daily new cases falling to zero in many local precincts and that’s raising hopes the current COVID wave in China is subsiding.

Today focus will be on the August Flash Composite PMI (E: 59.5) and markets will want to see solid data (so close to last month’s reading and close to expectations).  If it’s a bad miss, that will likely weigh on stocks.  We also get Existing Home Sales (E: 5.83M) but that shouldn’t move markets.