Tom Essaye Quoted in MarketWatch on November 5, 2019

“Right now, markets are strong, and momentum is clearly higher, as the market is seizing on any positive trade utterance or economic data point…” wrote Tom Essaye, president of the Sevens Report, in a Monday note to clients. Click here to read the full article.

Tom Essaye Quoted in MarketWatch on November 6, 2019

Whether or not the performance of these cyclical stocks trading at cheap valuations can continue to lead the market depends on whether faith in an accelerating economy is correct. Tom Essaye, president of the Sevens Report, is not ready to endorse this view just yet. “In the last few days there have been hints of stabilization in the growth data, but just hints…” he wrote in a Tuesday note to clients. Click here to read the full article.

U.S./China Trade Update (What’s Priced In Now?)

What’s in Today’s Report:

  • U.S./China Trade Update:  What’s Priced in Now?
  • One More Important Stat on Corporate Buybacks

Futures are modestly higher as the Chinese Ministry of Commerce  said the U.S. and China have agreed to existing tariff reduction in “phases.”

There were no further details on the timing or conditions that would accompany tariff reduction, however, and that’s tempering the rally somewhat.

Economically, German Industrial Production declined but slightly beat estimates (-0.6% vs. (E) -0.7%).

Today the only notable economic reports are Jobless Claims (E: 220K) while we also have two Fed speakers: Kaplan (1:05 p.m. ET), Bostic (7:10 p.m. ET), but none of that should move markets.

Instead, the focus will remain on the U.S./China trade, and if the U.S. confirms this “tariff reduction in phases” statement by the Chinese, then we could see the S&P 500 make a run at 3100.

How Corporate Buybacks Are Skewing EPS Statistics

What’s in Today’s Report:

  • How Share Buybacks Are Skewing EPS Statistics

S&P futures are flat after a quiet night of mixed trading overseas as investors digest mostly positive economic data.

The Japanese PMI Composite was the only report to miss overnight as German Manufacturers’ Orders jumped 1.3% vs. (E) 0.2% while the EU Composite PMI edged up to 50.6 vs. (E) 50.2 and EU Retail Sales rose 3.1% vs. (E) 2.7% year over year.

On balance, the data was slightly hawkish from a monetary policy standpoint but is importantly easing global growth concerns.

Today, there is one economic report to watch: Productivity and Costs (E: 1.1%, 2.2%) and three Fed officials are scheduled to speak: Evans (8:00 a.m. ET), Williams (9:30 a.m. and 6:30 p.m. ET), and Harker (3:15 p.m. ET).

With limited catalysts on the calendar, the market will likely remain focused on the trade war and any incremental developments, negative or positive, will move stocks today.

Does this Cyclical Rotation Have Legs?

What’s in Today’s Report:

  • Does this Cyclical Rotation Have Legs?
  • Factory Orders Data Takeaways
  • Dr. Copper Update

U.S. stock futures are higher this morning and global stocks rallied overnight thanks to more positive trade headlines and mostly “Goldilocks” economic data overseas.

The Financial Times was the first to report the Trump administration is considering rolling back $112B worth of tariffs that went into effect on September 1st which would be a significant concession and first sign of real progress towards a “phase one” deal being reached.

Economically, the first composite PMI reports were released overseas and both the Chinese and British figures firmed in October, further easing concerns about the health of the global economy.

Today, there are several economic reports due to be released: International Trade (E: $52.5B), ISM Non-Manufacturing Index (E: 53.5), and JOLTS (Previous: 7.051M, while two Fed officials are scheduled to speak: Kaplan (12:40 p.m. ET) and Kashkari (6:00 p.m. ET).

Beyond the data and Fed speakers, focus will be primarily on the trade war as investors look for further insight to whether or not the Trump Administration will move forward with tariff rollbacks and delays as was reported overnight. Any confirmation would be well-received and see stocks extend this recent squeeze higher towards 3,100 in the S&P.

An Analogy To Explain This Market (Investors Loved It)

What’s in Today’s Report:

  • An Analogy to Help Explain This Market (Investors Loved It)
  • Weekly Market Preview (Trade and Data Remain the Focus)
  • Weekly Economic Cheat Sheet (Global Growth Updates This Week)

Futures are modestly higher as global markets extended Friday’s jobs report and trade-driven rally.

On trade, U.S. and Chinese officials again repeated that substantial progress has been made on Phase One, while Wilbur Ross downplayed chances of auto tariffs (something that wasn’t ever priced into the market but was a peripheral risk).

Economically, EU and British manufacturing PMIs slightly beat estimates but remained in contraction territory (45.9 and 44.2 respectively).

Today there is one economic report, Factory Orders (E: -0.5%), and normally I don’t follow it, but it’ll give us greater insight into the current state of business spending, so a better than expected reading there will be a positive.  Additionally, there is one Fed speaker, Daly (3:05 p.m. ET) but she won’t move markets as Clarida and Powell made future Fed policy very clear last week – they’re done cutting barring an economic rollover.

ISM PMI Day (More Important than the Jobs Report)

What’s in Today’s Report:

  • Jobs Report Preview (Minor Post Fed Adjustments)
  • Is Dr. Copper Sending Another Signal?

Futures are slightly higher following yesterday’s declines thanks to decent economic data and ahead of the jobs report and ISM Manufacturing PMI.

Global manufacturing PMIs were a bit better this morning as a private market reading of Chinese manufacturing beat estimates (51.7 vs. (E) 51.0) and that’s notable because it contradicts the soft government reading from Thursday.  Additionally, the British manufacturing PMI also beat estimates.  The Japanese reading, however, was soft (48.4 vs. (E) 48.9).

Bottom line, global manufacturing PMIs aren’t collapsing, but they aren’t showing the type of stabilization that markets have priced in, either.

Today the focus will be on economic data and while the Employment Situation report (E: 93K job adds, 3.6% UE rate, 3.0% wage growth) will dominate the headlines, the ISM Manufacturing PMI (E: 49.0) is actually going to be the more important report, because if it shows further deterioration, that will increase worries about the U.S. economy.  More broadly, as we said yesterday, with the Fed on hold, “good” data is good for stocks, and “bad” data is bad.

Finally, there are two notable Fed speakers today, Williams (12:00 p.m. and 2:30 p.m. ET) and Clarida (1:00 p.m. ET) although neither should move markets given we just heard from Powell.

Tom Essaye Quoted in MSN on October 30, 2019

“People had aggressively pushed cyclicals higher over the past two weeks,” said Tom Essaye, founder of the Sevens Report. “But in order for that to work out beyond the short term, we need to see economic data get better, and that’s not really happening.” Click here to read the full article.

Tom Essaye Headshot

FOMC Takeaway: Will Three Rate Cuts Save the Bull Market?

What’s in Today’s Report:

  • Will Three Fed Rate Cuts Be Enough To Save the Bull Market?
  • Why Wednesday’s GDP Report is Important
  • Oil Market Update

Futures are modestly lower as weak global economic data offsets good earnings from AAPL and FB.

The Chinese October manufacturing PMI fell to 49.3 vs. (E) 49.8, the lowest level since January 2016.  German retail sales and EU unemployment also slightly missed estimates and the takeaway is that the hoped for stabilization in the global economy isn’t happening yet.

On U.S./China trade, a Bloomberg headline hit early this morning saying a long term U.S./China trade deal is unlikely, but that’s not news as it was never expected.  Instead, consensus expectations are for an ineffectual Phase One document to be signed, and then no further progress after that (the key to this whole drama remains whether there’s any tariff relief).

Today’s focus will remain on economic data as earnings begin to move towards the back burner.  Key reports to watch today, in order of importance, are:  Core PCE Price Index (E: 0.1%, 1.7%), Employment Cost Index (E: 0.7%) and Jobless Claims (E: 215K). From a data standpoint, with the Fed now on hold, “good” economic news is good for stocks, and “bad” economic news is bad.  So, the bulls are looking for good news for the remainder of the week.

Tom Essaye Quoted in MarketWatch on October 30, 2019

“If the Fed clearly signals that this cut is the last cut for sometime, then I’d expect it a pretty nasty reaction from stocks as markets want more rate cuts…” wrote Tom Essaye, president of the Sevens Report, in a Tuesday note to clients. Click here to read the full article.

Jerome Powell_MarketWatch