Is the S&P 500 “The Market” Anymore?

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What’s in Today’s Report:

  • Is the S&P 500 “The Market” Anymore?

Stock futures are trading at record highs this morning amid renewed stimulus hopes and soft economic data overseas.

Late yesterday, Treasury Secretary Mnuchin urged Congress to pass new stimulus funding and expressed willingness to sit down with Congressional Democrats to work towards a deal.

German Retail Sales were -0.9% vs. (E) +0.5% in July bolstering the case that more stimulus is needed globally.

Today, we will get an initial look at labor market data for the month of August via the ADP Employment Report (E: 850K) which could move markets if there is a material surprise (either way) in the headline. Data on Factory Orders for July (E: 5.8%) will also be released this morning.

There are multiple Fed speakers today including: Williams (10:00 a.m. ET), Mester (12:00 p.m. ET), Kashkari (3:00 p.m. ET), and Daly (6:00 p.m. ET), from which the market will look for additional signals that the FOMC will remain very accommodative for the foreseeable future.

Finally, the next stimulus package has jumped back into the forefront of the market’s focus so any developments regarding progress towards a deal will be well-received by risk assets including stocks while concerns of an ongoing stalemate will be a headwind.

Why Can’t the Fed Generate Inflation?

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What’s in Today’s Report:

  • Why Can’t the Fed Generate Inflation

U.S. stock futures have a mild bid this morning while international shares were split between gains and losses overnight amid mixed economic data.

Global manufacturing PMI data largely met expectations overnight and did not materially move markets.

The August Eurozone HICP Flash (our equivalent of CPI) missed with a headline of -0.2% vs. (E) +0.2% but a resulting rise in stimulus hopes is helping EU equities outperform today.

Looking into today’s session, there are two economic reports: ISM Manufacturing Index (E: 54.5) and Construction Spending (E: 1.1%) however the former will be the more important release to watch regarding the health of the economic rebound.

Additionally, there is one Fed speaker today: Brainard (1:00 p.m. ET), and markets will simply be looking for further confirmation that the FOMC plans to be very accommodative for quarters to come.

Tyler Richey Co-editor at Sevens Report Quoted in MarketWatch on August 31, 2020

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“The uptrend has clearly lost momentum since the early stages of the Q2 rebound.” However, “the path of least resistance is still higher right…” said Tyler Richey, co-editor at Sevens Report Research. Click here to read the full article.

Tyler Richey

Tom Essaye Quoted in Barron’s on August 28, 2020

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“Now, over the medium and long term, the Fed’s average inflation target means that when cyclicals start to outperform, and when yields begin to rise, both those rallies will last longer…” writes Tom Essaye of The Sevens Report newsletter. Click here to read the full article.

Tyler Richey Co-editor at Sevens Report Quoted in MarketWatch on August 26, 2020

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“Historically, good economic data is negative for gold but in this case, real interest rates declined in the wake of the release, as rising…” Tyler Richey, co-editor at Sevens Report Research, told MarketWatch. Click here to read the full article.

Gold

Are Things Really This Good?

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What’s in Today’s Report:

  • Stocks Go Up Seemingly Every Day – Are Things Really This Good?
  • Weekly Market Preview
  • Weekly Economic Cheat Sheet:  Is the Recovery Losing Strength? (Jobs Report & Global PMIs)

Futures are modestly higher following a generally quiet weekend on the economic and political fronts.

Economic data was mixed but generally “fine” as China’s manufacturing PMI slightly missed estimates (51 vs. (E) 51.2) while the service PMI beat (55.2 vs. (E) 54.2).

On stimulus, the Republicans have upped their offer to $1.3T, so the two sides are getting closer to the likely $1.5T compromise, but a deal is still not expected until mid to late September.

There are no notable economic reports today or impactful earnings, so the key event will be a speech by Fed Vice Chair Clarida (9:00 a.m. ET) to see if he echoes the dovish sentiment we got from Powell last week (and he should).  If Clarida is dovish in tone that should help markets continue the rally as otherwise, it should be a quiet day.

Don’t Fight The Fed (and the Fed Wants Inflation)

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What’s in Today’s Report:

  • Fed Chair Powel’s Speech Preview (All About Inflation)
  • Oil Market Update (Inventories and Hurricane Laura)

Futures are marginally weaker following a quiet night of news as markets digest Wednesday’s rally ahead of weekly jobless claims and Fed Chair Powell’s speech.

Economic data was sparse overnight as Eurozone Money Supply was the only notable economic report and it beat estimates, rising 9.5% vs. (E) 9.1%, but that’s not moving markets.

Today the two key events are weekly Jobless Claims (E: 987K), and Fed Chair Powell’s speech (9:10 a.m.).  The market will be looking for claims below 1MM and for Powell to hint at a new average inflation target, and disappointment on either will likely cause some selling in stocks, especially given this week’s rally.

Other notable events today include Revised Q2 GDP (E: -32.9%), Pending Home Sales Index (E: 1.5%) and another Fed speaker, Barkin (12:30 p.m. ET), but they shouldn’t move markets.

Tom Essaye Quoted in Positively Scottish Scot on August 24, 2020

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“What does that mean for us? It usually means remain long stocks in more time-dated accounts, and make confident you…” Sevens Report Study founder Tom Essaye recently spelled out to Yahoo Finance. Click here to read the full article.

Warren Buffett

Tailwinds for the Residential Housing Sector

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What’s in Today’s Report:

  • Is Residential Housing the Big Winner In All of This?

Stock futures are flat and overseas equities were little changed overnight as investors digest the recent run to fresh record highs in the S&P amid very quiet news flow.

Internationally, Germany extended a “crisis job support program” which has helped keep millions employed since Q1 lockdowns. The extension is bolstering sentiment globally and helping EU shares modestly outperform today.

There were no notable or market-moving economic reports overnight.

Looking into today’s session, there is one economic report to watch ahead of the bell: Durable Goods Orders (E: 4.3%) and one Fed official scheduled to speak shortly after the open: Barkin (10:00 a.m. ET).

The limited number of catalysts today will likely leave stocks to trade with a sense of “Powell paralysis” ahead of the Fed Chair’s speech during the Economic Policy Symposium tomorrow morning however markets will remain sensitive to any further vaccine headlines or stimulus bill developments.

Tom Essaye Quoted in MarketWatch on August 24, 2020

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“What does that mean for us? It means stay long stocks in longer-dated accounts, and make sure…” Sevens Report Research founder Tom Essaye recently explained to Yahoo Finance.

Warren Buffett