The Vaccine Playbook

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What’s in Today’s Report:

  • The Vaccine Playbook

S&P 500 futures are approaching record highs this morning amid news that Russia has approved a COVID-19 vaccine while investors remain optimistic for a U.S. stimulus deal.

In a televised meeting, Russian President, Vladimir Putin, stated that Moscow’s Gamaleya Institute successfully developed a “safe and effective” coronavirus vaccine ready to move to a Phase 3 trial, sparking risk-on money flows.

Economically, both the German ZEW Survey and the NFIB Small Business Optimism Index largely met estimates and importantly did not alter the narrative that the broader global economic recovery remains underway.

Today, there is one economic report: PPI (E: 0.3%) and one Fed official is scheduled to speak: Daly (12:00 p.m. ET) but neither should move markets as investors will be keenly focused on the details surrounding the Russian coronavirus vaccine as well as any new progress towards a deal on the next U.S. stimulus bill.

Stimulus Update (Are the Executive Orders Positive for Stocks?)

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What’s in Today’s Report:

  • Stimulus Update – Are The Executive Orders Positive for Stocks?
  • Is It Time to Chase This Market?
  • Weekly Economic Cheat Sheet (Jobless Claims Remain the Key)
  • Weekly Market Preview (What’s Next in the Stimulus Saga)

Futures are little changed as markets look past President Trump’s executive orders on economic stimulus following an otherwise quiet weekend.

With stimulus talks again at an impasse, President Trump issued several executive orders over the weekend to provide economic stimulus, including $300/week in federal unemployment and a payroll tax deferral.

But, for a multitude of reasons (legal and otherwise) none of these actions will have any immediate economic impact, so the market still expects a stimulus bill to be passed (but now in the coming weeks, not immediately).

Today there’s one labor market number, JOLTS (E: 5.288M), but that shouldn’t move markets, and instead focus will be on stimulus.  Today, the key is that both the Democrats and Republicans signal they are going to continue negotiations on the stimulus bill.  If the rhetoric implies the talks have stalled completely, that that will likely pressure stocks.

Tom Essaye Quoted in International Business Times on August 5, 2020

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“The bottom line is that if we do see real disappointment in stimulus or the vaccine, then a 10% correction is the likely best-case scenario…” said Tom Essaye of The Sevens Report, in a note. Click here to read the full article.

Jobs Report Preview (Recovery On/Recovery Pause/Recovery Stall)

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What’s in Today’s Report:

  • Jobs Report Preview:  Recovery On/Recovery Pause/Recovery Stall

Futures are moderately lower following lack of progress on the stimulus bill, combined with further escalation of U.S./China tech tensions.

Markets were hoping for a stimulus deal by today, but there’s been no progress on negotiations for two days.  So while the market still fully expects a deal by next week, there is disappointment that it likely won’t get done by the end of this week.

U.S./China geo-political tensions continue to rise as President Trump issued an executive order banning U.S. transactions with the parent companies of TikTok and WeChat.

Focus today will be on the Employment Situation report and expectations are as follows:   Job Adds: (E) 2.0M, Unemployment Rate: (E) 10.5%.

Bottom line, the strong economic data from earlier this week has made this jobs report more important than it was going to be, as this morning’s number now has the chance to signal the economic recovery is still on (a positive for stocks) or increase concern it’s stalling (which will be a headwind on equities, especially at these levels).

Tom Essaye Quoted in ETF Trends on August 5, 2020

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“The bottom line is that if we do see the real disappointment in the stimulus or the vaccine, then a 10% correction is the likely…” said Tom Essaye of The Sevens Report, in a note. Click here to read the full article.

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What’s in Today’s Report:

  • Market Multiple Levels:  S&P 500 Chart
  • Is the Jobs Market Rolling Over? (ADP Data was Deceiving)

Futures are little changed as solid economic data is offsetting mildly negative stimulus headlines.

Regarding stimulus, the headlines over the last 12 hours were slightly negative (more sticking points are emerging) but the market still expects a deal within the next few days and for that deal to be at the upper end of expectations (the weekly unemployment payments are looking to be $400/week into year-end, which is higher than market expectations).

Economic data was solid as German Manufacturers’ Orders (27.9% vs. (E) 9.6%) and the British Construction PMI (58.1 vs. (E) 57.0) both beat estimates.

Today the focus will be on the weekly Jobless Claims (E: 1.442M), and simply put the market does not want to see any further increases in weekly claims as that implies the recovery is pausing.  A number above 1.5MM will likely put a headwind on stocks today (unless there’s positive stimulus headlines).  There’s also one Fed speaker, Kaplan (E: 10:00 a.m. ET), but he shouldn’t move markets.

Tom Essaye Quoted in CNBC on August 4, 2020

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“The bottom line is that if we do see real disappointment in stimulus or the vaccine, then a 10% correction is the likely best-case scenario, and it’ll come…” said Tom Essaye of The Sevens Report, in a note. Click here to read the full article.

Tom Essaye Interviewed with TD Ameritrade on August 5, 2020

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Tom Essaye intereviewed with Oliver Renick from TD Ameritrade discussing ISM non-manufacturing, COVID-19 trends, stimulus and more…Click here to watch the full interview.

Tom Essaye Interviewed with Yahoo Finance on August 4, 2020

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Yahoo Finance’s Brian Sozzi and Alexis Christoforous break down latest market action with The Sevens Report Founder, Tom Essaye. Click here to watch the full interview.

Market Multiple Table: August Update

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What’s in Today’s Report:

  • Market Multiple Table: August Update

Futures are rallying on optimistic comments from Secretary Mnuchin about a new stimulus deal being reached by the end of the week as well as upbeat economic data.

Composite PMIs were mostly in line with expectations overnight but EU Retail Sales notably rose 1.3% vs. (E) 0.2% Y/Y in June, a recovery to pre-pandemic levels that is rekindling hopes for a V-shaped economic recovery.

This morning, investor focus will be on economic data early as we get the first look at July jobs data via the ADP Employment Report (E: 1.888M) ahead of the bell while International Trade (E: -$50.3B) and the ISM Non-Manufacturing Index (E: 55.0) will both be released after the open.

Earnings season is still in full swing as well with several companies due to report Q2 results today including: CVS ($1.93), MRNA (-$0.36), HUM ($10.34), ROKU (-$0.55), MET ($0.96), ADT ($0.27).

Beyond economic data and earnings, the market’s main focus is clearly the stimulus bill and any news of further progress will be a tailwind for stocks while any new “roadblocks” will likely trigger some risk-off money flows across asset classes.