Are Investors Too Complacent?

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What’s in Today’s Report:

  • Are Investors Too Complacent Right Now?
  • Weekly Market Preview:  Stimulus and an Important Fed Meeting
  • Weekly Economic Cheat Sheet:  Is the Recovery Slowing?

Futures are modestly higher following reports that the stimulus bill might be broken up into two parts (with the larger part passing before year-end).

Congress is going to try and pass two stimulus bills, the first a $750 billion-ish relief bill, and after that, a 200 billion-ish bill that deals with stickier issues of state funding and COVID liability.  The market is rallying on this news because it increases the chances of near-term stimulus (although even if this happens, and it’s not a done deal, it’s already priced into stocks).

Economic data was sparse as EU Industrial Production was in-line with estimates at 2.1% vs. (E) 2.0%.

Today there are no economic reports and no Fed speakers so stimulus headlines will drive trading.  The key will be Pelosi as she’s not been in favor of a two-part bill before, so her support (or not) will be critical to the chances of stimulus actually happening.  Bottom line, if she’s for it, expect a further rally.  If she’s not, expect stocks to turn negative on the news.

Sevens Report Co-Editor Tyler Richey Quoted in MarketWatch on December 11, 2020

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Overall, the fundamental backdrop for the oil market is “mixed with ominous coronavirus trends being offset by vaccine optimism, while faltering economic growth…” said analysts in the latest Sevens Report Research newsletter. Click here to read the full article.

Tom Essaye Quoted in CNBC on December 11, 2020

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“At this point, markets have priced in and are expecting stimulus near term, so if that really does not…” for risk assets, wrote Tom Essaye, founder of The Sevens Report. Click here to read the full article.

Tom Essaye Quoted in Yahoo Finance on December 8, 2020

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Semiconductor giant Micron’s (MU) upbeat guidance last week for its most recent quarter was a buy signal on tech stocks, Sevens Report Research founder Tom Essaye says.

“Semiconductors have been on fire and not just from momentum…” Essaye explained. Click here to read to read the full article.

Tom Essaye Interviewed with Yahoo Finance on December 7, 2020

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Stocks regressed from record highs Monday as traders took a pause from an end-of-year rally. The Dow fell more than 100 points, or 0.5%, but was still held above the 30,000 level the index first exceeded in late November. Sevens Report Research Founder Tom Essaye joined Adam Shapiro and Seana Smith on Yahoo Finance Live to discuss. Click here to watch the the full interview.

December Economic Breaker Panel (Stronger Than Expected)

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What’s in Today’s Report:

  • Economic Breaker Panel
  • Why Stocks Dropped on Wednesday
  • EIA and Oil Analysis

Futures are slightly higher following Wednesday’s tech-driven declines as markets wait for the ECB decision and more clarity on stimulus and Brexit trade negotiations.

Economic data was sparse overnight, as the only notable report was UK Industrial Production which beat estimates (1.3% vs. (E) 0.3%).

There was no notable news or progress on stimulus (still no deal) or Brexit (still no trade deal) overnight, although the “deadlines” for both events were either moved, or about to be moved, implying that negotiations on both stimulus and Brexit will continue for the coming days (this is what the market expected and already priced in).

Today could be a sneakily busy day with the ECB Announcement (E: € 500 bln Increase in QE), CPI (E: 0.1%/1.1%) and Jobless Claims (E: 724K) all coming today.

Regarding the ECB, the risk here is of a “not dovish enough” outcome as they’ve allowed expectations to get pretty high, and if that happens look for mild stock losses and higher yields global bond yields (including Treasuries).

CPI should stay tame at this point, but we’ll be watching this closely going forward.  Finally, weekly jobless claims are “noisy” right now because of the Thanksgiving holiday, but the bottom line is markets want to see claims moving lower, and a break below 700k would be a tailwind on stocks.

Inflation and Yields in 2021

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What’s in Today’s Report:

  • Inflation and Yields in 2021

S&P futures are trading at all-time highs this morning amid renewed stimulus hopes and more vaccine optimism.

Secretary Mnuchin presented a $916B coronavirus relief plan late Tuesday that satisfied demands from both sides of the aisle in Congress, upping chances for a yearend deal.

Vaccine news remains positive as the U.K. began administering the Pfizer vaccine yesterday and the FDA may approve the same vaccine in the U.S. as soon as tomorrow.

Looking into today’s session there is one economic report to watch: October JOLTS (E: 6.40M) due out shortly after the bell while no Fed officials are scheduled to speak.

There is a 10-Yr Treasury Note Auction at 1:00 p.m. ET which could impact the bond market and ultimately equities if the moves are significant enough however investor focus is likely to largely remain on stimulus talks and the next steps in the vaccine roll-out process.

Market Multiple Levels: S&P 500 Chart

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Today’s Report is attached as a PDF.

Futures are lower with most overseas markets today amid negative COVID-19 trends, no reported progress on stimulus and fading vaccine optimism.

Distribution of Pfizer’s coronavirus vaccine is beginning today in the U.K. but reports suggest far fewer doses will be available than initially thought (as little as half) while hospitalizations continue to hit new highs.

On U.S. stimulus, a stop-gap bill will be voted on tomorrow to buy time to reach an aid package as political gridlock remains.

Looking into today’s session, there is one lesser-followed economic report due to be released: Productivity and Costs (E: 4.9%, -8.9%) which will leave investors largely focused on U.S. stimulus negotiations, Brexit talks, and COVID-19 case/hospitalization trends. If there is disappointment on any of those topics, expect some profit taking in risk-assets as the market remains largely priced-to-perfection.

Tom Essaye Quoted in Fintech Zoom on December 2, 2020

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“We proceed to suppose the rotation to value must be centered on making a extra balanced value/development portfolio, and never abandoning…,” stated Tom Essaye, editor of The Sevens Report investing publication, in a report Tuesday. Click here to read the full report.

How Much Is Left in the Rally?

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What’s in Today’s Report:

  • How Much Is Left in the Rally?
  • Weekly Market Preview:  Can Stimulus Get Done?
  • Weekly Economic Cheat-sheet:  Jobless Claims and Inflation

Futures are modestly lower as markets digest last week’s rally following more lockdown announcements.

California enacted a de-facto state-wide shutdown in response to rising coronavirus cases, and that is the main headwind on futures this morning.

Regarding stimulus, optimism continued to grow that a deal around $1 Trillion can be struck in the next few weeks, although nothing definitive occurred over the weekend.

Economic data was sparse as German Industrial Production beat estimates and rose 3.2% vs. (E) 0.7%.

Today there are no economic reports and no Fed speakers, so focus will remain on stimulus chatter.  Senate Majority Leader McConnell remains the wildcard as he hasn’t yet voiced support for the current proposed bill, but if he does, that will significantly increase the chances it gets done before year-end (and that would cause another short term pop in stocks).