Tom Essaye Quoted in Axios on January 27, 2020

Between the lines: That likely paints the Fed into a corner in addressing the program at its meeting tomorrow, Tom Essaye, director of Sevens Report Research, says in a note.

  • “[T]he dovish Fed has underwritten a lot of this four-plus-month rally, and they need to reassure markets they’re going…” Click here to read the full article.

FOMC Takeaways (An End to QE4?)

What’s in Today’s Report:

  • FOMC Takeaways:  Slightly Dovish, But Could Set Up For a More Volatile Q2
  • Are Repo Operations Really QE?  (And Why You Should Care)

Futures are sharply lower as concerns about the economic fallout from the Wuhan coronavirus continue to mount.

The spread of the Wuhan virus isn’t accelerating, but markets becoming more concerned about future earnings and economic growth as companies implement work stoppages to reduce the chance of the disease spreading.

Today there is a Bank of England rate decision and while the official market expectation is for no change, don’t be shocked if there’s a 25 bps rate cut.  Outside of the BOE, we also get the first look at Q1 GDP (E: 2.1%) and Jobless Claims (E: 215K).

On the earnings front, today is really the last “big” day of earnings, and the clear highlight is AMZN ($3.98) after the close, followed by: V ($1.46), KO ($0.43), UPS ($2.10), VZ ($1.15), MO ($1.01).

Market Multiple Support Levels

What’s in Today’s Report:

  • Bottom Line: Market Multiple Support Levels to Watch
  • Durable Goods and Consumer Confidence Takeaways

Futures are trading higher this morning thanks to strong earnings from AAPL and positioning into today’s Fed Announcement while coronavirus fears continue to ease as the mortality rate is importantly holding steady near 2%.

Today is lining up to be a busy day as there are a slew of potential market catalysts on the calendar.

First, there are two economic releases to watch: International Trade in Goods (E: -$66.9B) and Pending Home Sales (E: 0.4%) before the Fed events kick off with the FOMC Meeting Announcement at 2:00 p.m. ET, followed by the Fed Chair Press Conference at 2:30 p.m. ET.

Meanwhile, we are in the peak of Q4’19 earnings season and there are a number of major U.S. corporations reporting results today including: BA ($1.73), T ($0.87), MCD ($1.96), MA ($1.87), GE ($0.18), GD ($3.46), DOW ($0.74), MSFT ($1.32), FB ($2.51), TSLA ($2.03), and PYPL ($0.84).

Bottom line, the Wuhan coronavirus outbreak, disappointing economic data, a hawkish Fed, and negative earnings surprises are all risks that could cause volatility in stocks into the end of the week, however, the market is currently showing resilience in the face of these potentially negative catalysts which leaves the pain trade higher for now.

Yield Curve Update and Fed Meeting Preview

What’s in Today’s Report:

  • Technical Outlook: S&P 500
  • Fed Meeting Preview
  • Yield Curve Update

Futures are slightly higher this morning as the coronavirus outbreak continues to spread but other market influences including key earnings and the Fed  are coming into focus.

Reports show that the number of coronavirus cases has climbed to more than 4,500 and the death toll has topped 100 in China however the mortality rate encouragingly remains ~2%, well below the 10% rate of SARS in the early 2000s.

The number of market catalysts picks up today starting with three economic data points to watch: Durable Goods Orders (E: 0.5%) being the key report to watch while the S&P Case-Shiller HPI (0.4%) and Consumer Confidence (E: 127.8) will also be released.

Additionally, the January FOMC Meeting begins and earnings season remains in full swing. The key report to watch today is AAPL ($4.54) after the closing bell but other notables include: LMT ($4.99), MMM ($2.10), PFE ($0.57), UTX ($1.84), AMD ($0.31), and EBAY ($0.75).

Will the Wuhan Virus Cause a Correction?

What’s in Today’s Report:

  • Will the Wuhan Virus Cause a Correction?
  • Weekly Market Preview:  A Fed Meeting Wednesday and the Biggest Week of Earnings
  • Weekly Economic Cheat Sheet (Several Important Report This Week)

Futures are down more than 1% as the continued spread of the Wuhan coronavirus over the weekend further raised fears of a global economic slowdown.

Total cases of the Wuhan virus continued to rise over the weekend (nearly 3000 confirmed cases globally) and the number of U.S. cases rose to five.

Economically, German IFO Business Expectations missed estimates at 92.9 vs. (E) 95.0.

This is going to be a very busy week, but the calendar is a bit sparse today as we get just one economic report, New Home Sales (E: 728k), and one notable earnings report after the close: WHR ($4.30).  So, any updates on the spread of the Wuhan virus will continue to drive markets today, although that will change later in the week as we get more earnings and the Fed decision on Wednesday.

Earnings Season Update

What’s in Today’s Report:

  • Earnings Season Update (Not Great, But Not Bad, Either)
  • What’s Up With Natural Gas?

Futures are flat as concern about the Wuhan coronavirus offset better than expected earnings.

Chinese authorities expanded the quarantine zone around Wuhan to limit the transmission of the disease, and that’s increasing fears of a bigger negative economic impact.

Earnings overnight were solid as TXN beat estimates,  boosting semi-conductors and tech more generally.

Today we get an ECB Announcement, but no change in rates is expected and really markets will just want to hear a dovish tone from new ECB President Lagarde (which should happen).

Away from the ECB,  Jobless Claims (E: 213K) is the key economic report, while earnings season continues to roll on.  Some reports we’re watching today include: PG (E: $1.37) and INTC (E: $1.24).

Tom Essaye Quoted in Benzinga on January 22, 2020

Tom Essaye, founder of Sevens Report Research, said investors should be prepared for more Wuhan headlines to move markets in coming weeks.

“From a market standpoint, since this disease is closely related to SARS, I think the market…” Essaye said. Click here to read the full article.

Pills

Tom Essaye Quoted in Barron’s on January 22, 2020

According to Sevens Report, the two factors that could reverse the upward trajectory of valuations would be stalling economic growth and higher interest rates. Until those occur, the rally is expected to shoot up to “20 times earnings, which equates to about 3,500 in the…” Click here to read the full article.

What the Wuhan Coronavirus Means for Markets

What’s in Today’s Report:

  • What the Wuhan Coronavirus Means for Markets

S&P 500 futures rallied to new record highs overnight amid easing concerns over the deadly virus outbreak in China that weighed on risk assets Tuesday.

Chinese health officials announced plans to both screen for, and contain the Wuhan coronavirus which helped reduce fears that a SARS-like epidemic is developing.

Today, there are a few different potential catalysts for the market that warrant watching. First, there are two economic reports on the housing market: FHFA House Price Index (E: 0.3%) and Existing Home Sales (E: 5.430M) which should show a continued rebound in the sector into the end of 2019.

Second, earnings season is in full swing and investors will continue to sift through the releases closely. Notable corporations reporting today include: JNJ ($1.87), ABT ($0.95), ALLY ($0.95), TXN ($1.02), KMI ($0.26), LVS ($0.80), and RJF ($1.90).

Lastly, any new developments on the spread, or containment of, the Wuhan coronavirus will likely get a reaction from markets as it was the primary focus of traders across asset classes yesterday.

Tom Essaye Quoted in the Cover Story for Barron’s on January 17, 2020

“This rally now has a life of its own. I do want to caution that any pullback that occurs (and there will be one) likely will be a bit more painful than before and on the order of 5% to 10%, given how stretched the market has become…” writes Tom Essaye of the Sevens Report newsletter. Click here to read the full article.

Graph