Why Stocks Faded Yesterday (and Why They Are Down This Morning)

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What’s in Today’s Report:

  • Why Stocks Faded Yesterday (And Why They Are Down This Morning)

Futures are moderately lower on disappointing economic data and as optimism on stimulus fades slightly.

On stimulus, the political reality of Washington is starting to impact markets, and it’s becoming more unclear when Democrats’ ambitious stimulus goals will become law.

Economically, global flash PMIs were bad.  Japanese, EU and British PMIs all fell further below 50 and there was significant deterioration across the board from the December readings, implying that the coronavirus lockdowns are having a negative impact on global growth (and slowing global growth isn’t priced into stocks).

Today the key number will be the Flash Composite PMI (E: 55.5).  Markets will be looking for stability and for the U.S. to avoid the slowing of activity that we saw in the global data earlier this morning, because again a material slowing in growth is not priced into stocks at these levels.  We also get Existing Home Sales (E: 6.540M) later this morning.

Finally, earnings season remains in full swing, and some reports we’ll be watching today include:  ALLY ($ 1.05), SLB ($ 0.18) KSU ($1.91).

Revisiting Modern Monetary Theory (What It Means for Markets)

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What’s in Today’s Report:

  • Revisiting Modern Monetary Theory (Because It’ll Be Visiting Us for the Foreseeable Future)
  • What the Adoption of MMT Means for Markets (Specific Sectors)Futures are marginally higher mostly on momentum following a generally quiet night of news.

The familiar refrain of stimulus expectations (given the new administration) is pushing futures slightly higher this morning, but there was no actual news overnight.

Economic data was minimal and is not moving markets.

Today will be a busy day on the economic front, with the key numbers being Jobless Claims (E: 890K) and the Philadelphia Fed Manufacturing Index (E: 12.0) and markets will want to see stability in the data (so not a continued steep drop off that implies the recovery is losing more momentum).  We also get Housing Starts (E: 1.558M) later this morning.

Earnings will continue to be in focus as well, and some names we’re watching today include: TRV ($3.00), UNP ($2.25), INTC ($1.10), IBM ($1.77), CSX ($1.00), PPG ($1.57), STX ($0.99).

Economic Breaker Panel: January Update

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What’s in Today’s Report:

  • Sevens Report Economic Breaker Panel: January Update

Stock futures are trading higher as investors digest strong earnings and look ahead to the inauguration of Joe Biden as the 46th President today.

NFLX is up 13%+, testing record highs in premarket trade after the company released strong Q4 results yesterday.

Economically, European inflation data was largely inline with expectations and not moving markets this morning.

There will be a lot of moving pieces in the market today as investors focus on the inauguration ceremonies for incoming President Joe Biden, however there are multiple other catalysts on the calendar.

On the economic front, there is one report due to be released this morning: Housing Market Index (E: 86) while no Fed officials are scheduled to speak today.

Turning to earnings, there are several notable releases ahead of the bell including: PG ($1.51), UNH ($2.39), FAST ($0.33), and MS ($1.29), while UAL (-$6.37) AA ($0.12), and DFS ($2.27) will all report after the close.

Bottom line, barring any materially negative surprises from earnings or economic data today, optimism surrounding the stimulus plans of the incoming administration should help markets maintain this week’s risk-on tone into the back half of the holiday-shortened week.

Tom Essaye Interviewed with TD Ameritrade Network on January 19, 2021

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Tom Essaye was interviewed by Ben Lichtenstein from TD Ameritrade Network, discussing the auto industry, future growth opportunities within this field, EV market, & more…Click here to read the full article.

Can the Market Have the Best of Both Worlds?

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What’s in Today’s Report:

  • Can the Market Have the Best of Both Worlds?
  • Weekly Market Preview: The Problem Isn’t the Fundamentals, It’s the Expectations
  • Weekly Economic Cheat Sheet: Flash PMI Data in Focus

U.S. futures are tracking international equity markets higher this morning as investors remain optimistic about more fiscal stimulus bolstering a continued rebound in growth.

Economically, the German ZEW Survey was slightly better than expected overnight with the Sentiment component notably improving from the previous month.

There are no economic reports today and no Fed officials are scheduled to speak however Janet Yellen will speak before the Senate Finance Committee at 10:00 a.m. ET before the committee votes to confirm her nomination as Treasury Secretary. Her remarks are expected to be very accommodative and support significant fiscal stimulus for the foreseeable future, so any disappointment on that topic could weigh on stocks.

Beyond Yellen’s commentary, Q4 earnings season continues today with several notable financials reporting ahead of the bell: BAC ($0.56), GS ($6.99), and SCHW ($0.70) while NFLX ($1.38) will release results after the close.

Bottom line, it appears Friday’s risk-off move into the long weekend is being reversed this morning as there were no notable or market moving developments over the weekend and hope for stimulus clearly remain one of the most important supporting factors for this market right now.

Tom Essaye Quoted in Barron’s on January 15, 2021

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But “President-elect Biden’s $1.9 trillion plan is being met by a “sell the news” reaction as markets already priced in most of what was included…” wrote Tom Essaye, founder of Sevens Report Research, in a note. Cyclical stocks, whose fate rests on the perceived health of the economy, had a strong Thursday in anticipation of Biden’s speech. Click here to read the full article.

Are Investors Expecting Too Much from This Market?

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What’s in Today’s Report:

  • Are Investors Expecting Too Much from This Market?

Futures are modestly lower following a generally quiet night as Biden’s stimulus plan met market expectations.

President Elect Biden’s $1.9 trillion stimulus plan is being met by a “sell the news” reaction as markets already priced in most of what was included, while easy passage of the bill is not guaranteed (this could still take months to become law).

Economically, UK Industrial Production missed estimates, while EU Exports were in line with expectations but neither number is moving markets.

Today focus will be on economic data, as we get the first data point from January via the  Empire State Manufacturing Index (E: 6.0) and markets will want to see stability in the data to imply that the recovery isn’t losing too much momentum. Other notable reports include Retail Sales (E: -0.1%), Industrial Production (E: 0.5%) and PPI (E: 0.4%).  There’s also one Fed speaker, Kashkari at 11:30 a.m. ET, but he shouldn’t move markets.

Finally, earnings season begins today with results from JPM (E: $2.72), WFC (E: $0.59) and C (E: $1.35).

Tom Essaye Quoted in CNBC on January 14, 2021

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Tom Essaye, founder of The Sevens Report, said the proposal was “being met by a ‘sell the news’ reaction as markets already priced in most of what was included…” Click here to read the full article.

Tom Essaye

Tom Essaye Quoted in NBC Philadelphia on January 11, 2021

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Tom Essaye, founder of The Sevens Report, noted that “with all this current and expected stimulus, the risks of a disorderly acceleration in bond yields and inflation…” Click here to read the full article.

Tom Essaye Quoted in CNBC on January 11, 2021

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Tom Essaye, founder of The Sevens Report, noted that “with all this current and expected stimulus, the risks of a disorderly acceleration in bond yields…” Click here to read the full article.