Tracking the Key Variable

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What’s in Today’s Report:

  • Tracking the Key Variable
  • What Could the Government Do (and Would It Help)?

Futures are lower this morning as hopes for timely fiscal stimulus measures from the U.S. government to combat the negative impact of the coronavirus fade while a “Biden bounce” failed to materialize after the former VP had another strong showing in primary elections yesterday.

Overseas, European shares traded higher after an emergency rate cut by the BOE while Asian markets remained under pressure due to COVID-19 fears with the Nikkei falling into bear market territory overnight.

Today, there is one economic report to watch: CPI (E: 0.1%) while no Fed speakers are scheduled to speak. The only other potential catalyst on the calendar is a 10-Yr Note Auction by the Treasury at 1 p.m. ET that could move bond markets and subsequently, the stock market.

With limited market moving events on the schedule, investors will be looking for further details on the U.S. government’s plans to support the economy through the coronavirus outbreak as well as any further news about the confirmed cases/related deaths as well.

Technically speaking, a break either above yesterday’s highs or below yesterday’s lows in the S&P 500 will likely trigger a follow through move as the market is in a state of indecision and susceptible to a momentum based squeeze either way.

Sevens Report Co-editor Tyler Richey Quoted in MarketWatch on

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U.S. oil futures settled more than 10% higher on Tuesday, rebounding a bit a day after posting the largest percentage loss since 1991. Tuesday’s rebound for oil is “relatively modest” compared to Monday’s plunge, said Tyler Richey, co-editor at Sevens Report Research. “We could easily see a retracement higher in prices in the days and weeks ahead…Click here to read the full article.

Tyler Richey

Sevens Report Quoted in Market Beat on March 9, 2020

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The positive feedback started off with B. of A. Securities strategists who noted that—once the panic finally died off—there was room for “huge rotation to growth stocks and bond proxies” to kick in. The Sevens Report noted that, currently, the S&P 500 was trading at 17 times estimated earnings for 2020, down from just under…Click here to read the full article.

 

Tom Essaye Interviewed with TD Ameritrade on March 10, 2020

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Tom Essaye interviewed with Oliver Renick from TD Ameritrade to discuss the market, oil, coronavirus, and much more. Click here to watch the full interview.

TD Ameritrade Interview

Are Things Really this Bad?

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What’s in Today’s Report:

  • Bottom Line: Are Things Really this Bad?
  • The Oil Price War Explained

U.S. equity index futures up well over 4% in early trade this morning as investors bet on government stimulus efforts to ease the negative impact of the COVID-19 outbreak.

President Trump and VP Pence announced “very dramatic actions to support the economy” in a press conference late on Tuesday which triggered broad risk-on money flows.

Economically, Q4 Eurozone GDP was 1.0% vs. (E) 0.9%, and the NFIB Small Business Optimism Index was 104.5 vs. (E) 103.7 in February; both are helping investor sentiment today.

Looking into today’s session, there are no economic reports and no Fed speakers however price action is expected to remain volatile amid the uncertainties related to the coronavirus outbreak.

Any positive news regarding U.S. government stimulus measures could help sustain this pre-market rebound in stocks while, if the accommodating measures are underwhelming or there is any incrementally negative news regarding the outbreak statistics, it could rekindle fear among investors and see stocks pullback towards yesterday’s trading range.

Sevens Report Co-editor Tyler Richey Quoted in MarketWatch on March 5, 2020

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OPEC’s recommendation for the 1.5 million barrel per day cut was “a bullish surprise versus expectations on the surface, however, Russia was not willing to participate in the…” which total 500,000 barrel per day, said Tyler Richey, co-editor of Sevens Report Research. Click here to read the full article.

More Volatility

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What’s in Today’s Report:

  • What Drove Yesterday’s Selling (There’s a New Market Worry)
  • Jobs Report Preview (Abbreviated Version)
  • OPEC + Update

It’s another ugly morning as futures are down sharply on the same issue as Thursday: The growing spread of the coronavirus and fears of a larger economic slowdown.

There was no notable, new news overnight, but the virus continues to spread in the U.S. and the number cancelled travel plans and conferences/events continues to grow.

Economically, German Manufacturers’ Orders rose 5.5% vs. (E) 1.5%, although economic data is being ignored by markets right now (data this week has been better than feared).

Today the key is the jobs report, and the expectations are:  Jobs: 175K, UE Rate:  3.6%, Wages:  0.3%/3.0%.  A strong jobs report won’t arrest the coronavirus declines (the data will be viewed as dated) but a bad jobs report will make things worse, so we need to see a solid print this morning.

There are also multiple Fed speakers today, and while the market is increasingly expecting 0% rates and potentially QE (seriously), none of the speakers today are leadership so they shouldn’t shed any additional light on those topics.  Today’s lineup includes:  Evans & Mester (9:20 a.m. ET), Bullard (11:20 a.m. ET), Williams & Rosengren (2:00 p.m. ET), George (3:30 p.m. ET).

What to Make of Yesterday’s Rally

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What’s in Today’s Report:

  • What to Make of Yesterday’s Rally
  • Jobs Report Preview
  • EIA/Oil Update (Will An OPEC Production Cut Help?)

Futures are sharply lower and they are giving back more than half of yesterday’s rally as coronavirus continues to spread throughout the U.S.  Clearly some of this morning’s decline is just normal give back from yesterday’s explosive rally, although economic fears are continuing to mount as the number of cancelled events, gatherings and conferences continues to rise.

There are now 160 coronavirus cases in the U.S. as California declared a state of emergency while another cruise ship is being held at sea due to fears of an outbreak.  But, the news wasn’t all bad as there were just 160 new coronavirus cases in China, and evidence continues to mount that Chinese officials are getting the spread of the disease under control.

Economically, there were no notable reports overnight.

Coronavirus headlines will continue to drive trading, and broadly speaking anyreports of U.S. or global economic stimulus will be a tailwind on stocks, while any reports of an acceleration of the spread will obviously be a headwind.

Outside of coronavirus, there is just one economic report, Jobless Claims (E: 215K), but we’ll be watching this closely because it’s the best real time indicator of the labor market we have.  If claims rise (say above 230k) that will fan fears of an economic fallout from coronavirus.  Outside of the jobs report we also get multiple Fed speakers (Kaplan (6:30 p.m. ET), Kashkari (8:00 p.m. ET) and Williams (E: 8:45 p.m. ET)) but none of them should move markets.

Tom Essaye Quoted in Yahoo Finance on March 3, 2020

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Sevens Report’s Tom Essaye said Friday that another rate cut might be a bearish signal for the economy.

“While this is a fairly unique situation that the markets have rarely seen in the past, especially in the age of high-frequency trading houses and 24 hour, instant news sources, if the Fed does indeed cut rates in the coming months as the markets are pricing in…” Essaye said. Click here to read the full article.

Sevens Report Co-editor Tyler Richey Quoted in MarketWatch on March 4, 2020

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The EIA, however, also reported that domestic production edged up to a fresh all-time high of 13.1 million barrels a day and “exports from the U.S. climbed to their second highest level on record, suggesting that the U.S…” said Tyler Richey, co-editor at Sevens Report Research. Click here to read the full article.

Oil Rig