Tom Essaye Quoted in CNBC on April 24, 2020
“Looking ahead, it’s still all about demand for oil right now, and so far there is little evidence to support the idea…” said Tom Essaye, founder of The Sevens Report. Click here to read the full article.
What the Bulls Need to Believe
What’s in Today’s Report:
- What the Bulls Need to Believe
- Weekly Market Preview: The Remdesivir trial results are the biggest event this week.
- Weekly Economic Cheatsheet: Fed meeting Wednesday (will they reiterate the promise to do whatever it takes to support the markets?)
Futures are moderately higher as markets are extending Friday’s rally following a very quiet weekend.
Anticipation for the reopening of the U.S. and global economy is the “reason” for the rally this morning, although nothing new occurred on that front over the weekend. Instead, there was just a lot of chatter about reopening in the media, and that is helping stocks rally absent any other important news.
There were no economic reports overnight.
Notably, markets are ignoring a greater than 10% drop in oil prices this morning, as oil markets digest last week’s volatility (and late week rally).
Today there are no economic reports and no Fed speakers, so markets will remain focused on the rollout of reopening plans by states (larger states matter most), and the results from a Remdesivir trial, which will come literally any day this week. The Remdesivir trial results need to meet optimistic expectations, otherwise we’ll likely see another drop in stocks similar to what we say last week.
Tom Essaye Quoted in Oil and Gas 360 on April 21, 2020
“The oil market is sending a bold warning that economic growth may not recover nearly as quickly as some equity investors would hope…” wrote Tom Essaye, president of the Sevens Report, in a Tuesday note to clients. Click here to read the full article.
Tom Essaye Quoted in ETF Trends on April 21, 2020
“The oil market is sending a bold warning that economic growth may not recover nearly as quickly as some equity investors would hope,” wrote Tom Essaye, president of the Sevens Report, in a Tuesday note to clients. “The S&P 500 is pricing a relatively quick return to a normal economy…” Click here to read the full article.
Sevens Report Co-editor Tyler Richey Quoted in MarketWatch on April 23, 2020
Despite the drop in active rigs, the EIA on Wednesday showed domestic oil production “perfectly unchanged” at 12.2 million barrels per day, “relative to the corresponding week in 2019…” said Tyler Richey, co-editor at Sevens Report Research. Click here to read the full article.
Why Are Markets Ignoring Bad Economic Data?
What’s in Today’s Report:
- Why Are Markets Ignoring Bad Economic Data?
- Important Context For Jobless Claims (Chart)
Futures are moderately higher following a quiet night of news.
Economic data was disappointing, again, as British Retail Sales dropped –5.1% vs. (E) -3.5%, while German Ifo Business Expectations declined to 69.4 vs. (E) 75.0. But, once again markets are looking past current data and instead focusing on hope that the worst is behind us.
There was no notable coronavirus news overnight.
Today focus will be on economic data, specifically Consumer Sentiment (E: 68.1) as it offers us a more “real-time” gauge of economic activity. Durable Goods (E: -11.4%) will also be closely watched, although it’s a March report so it won’t reflect the depths of the slowdown in business spending.
Tom Essaye Quoted in CNBC on April 22, 2020
“The historic drop by front month oil futures was largely due to logistical issues in the physical market, namely lack of available storage, paired with futures expiration looming…” wrote Tom Essaye, founder of The Sevens Report. Click here to read the full article.
Reopened vs. Normal
What’s in Today’s Report:
- What’s Next for the Economy: Reopened vs. Normal
- Oil Inventory Analysis
Futures are slightly lower as markets digest Wednesday’s rally and, so far, ignore very soft economic data.
April global flash PMIs were horrible and worse than feared. The EU composite PMI collapsed to 13.5 vs. (E) 26, the British composite PMI imploded to 12.9 vs. (E) 32, and the Japanese composite dropped to 27.8 vs. the prior 36.2.
The weak PMIs show the scope of the economic damage, and it’s bad, but hope remains for a rebound in the coming months given trend in the virus data, and that’s why these historically bad numbers aren’t causing a deeper sell off this morning.
Focus today will be on economic data, via Jobless Claims (E: 4.000MM) and the U.S. April Composite Flash PMIs (E: 37.5). If both numbers are not as bad as feared, and combined with the chatter of economic “reopening,” then stocks can extend yesterday’s rally. We also get New Home Sales (E: 632K), although that shouldn’t move markets.
What’s Next for Oil?
What’s in Today’s Report:
- The Oil Crash and Contango Explained
- Why Is Copper Considered to have a PhD?
Stock futures are enjoying a solid 1%+ bounce this morning while international markets were mixed overnight as oil prices are relatively steady following a two day rout.
WTI crude oil futures, which turned negative on Monday, are wavering between gains and losses this morning but are importantly well above yesterday’s lows ahead of the key weekly EIA inventory report this morning (10:30 ET).
There are no Fed speakers today and just one second tiered economic report that shouldn’t move markets: FHFA House Price Index (E: 0.4%).
Earnings season is in full swing, continuing today with reports from: DAL (-$0.72), T ($0.84), BIIB ($7.74), CSX ($0.92), AA (-$0.29), KMI ($0.24), DFS ($1.80), and STX ($1.29).
Investors remain shaken by the historic surge in oil market volatility this week and energy will continue to be a primary focus of the market today.
And if the EIA print mid-morning is bearish (big inventory builds, resilient U.S. production, low refinery runs), and oil comes for sale again, stocks will likely struggle to maintain this morning’s bid.
How Much Good News Is Already Priced In?
What’s in Today’s Report:
- How Much Good News Is Already Priced In?
- Weekly Market Preview: Focus remains on the global economic re-opening
- Weekly Economic Cheatsheet: Flash PMIs on Thursday are a big report
Futures are down more than 1% mostly on digestion of last week’s big rally, as the weekend was relatively quiet from a news standpoint.
WTI crude oil is down nearly 30% (not a typo) but that decline is about logistics, as there are fears of not enough storage in the U.S. for looming oil imports. Conversely, Brent crude is down only 3%. Point being, the declines are being driven by a logistical issue, not a fresh reduction in demand (i.e. lower than expected economic growth).
Economic data was sparse overnight, as German PPI fell slightly more than expected (-0.8% vs. (E) -0.7%).
Today there are no economic reports so focus will remain on “reopening” news, as the pace of normalization of the U.S. and global economy will decide whether stocks can hold last week’s gains.