Tom Essaye, president of the Sevens Report, said in a Monday note to clients that the near 10% rally the S&P 500 pulled off in the fourth quarter of last year was driven by the idea that “the U.S.-China trade truce combined with global central bank easing (and specifically the Fed being very dovish) will result in a rebound in global growth…” Click here to read the full article.
What’s in Today’s Report:
Futures are drifting cautiously higher this morning while international markets rallied overnight thanks to more upbeat economic data amid a static geopolitical backdrop.
There were no material developments regarding tensions between the U.S. and Iran overnight.
Economically, a Eurozone inflation reading (HICP) met expectations for the month of December while EU Retail Sales rose 1.0% in November, topping estimates of 0.6%.
Today, there are three economic reports to watch: International Trade (E: -$43.9B), Factory Orders (E: -0.7%), and the ISM Non-Manufacturing Index (E: 54.5). No Fed officials are scheduled to speak.
As far as other catalysts go, the Treasury will hold a 3-Yr. Note Auction at 1:00 p.m. ET and the results could move bond yields and have an impact on the yield curve. And if the curve compresses further (it has narrowed by more than 10 basis points over the last week), it could begin to pressure stocks.
Lastly, tensions between the U.S. and Iran remain a major market focus right now and further escalation could also weigh on risk assets, however, no news is good news regarding the situation right now, so if things continue to calm down in the Middle East, stocks could continue to drift back towards all-time highs.
Veteran trader and Sevens Report Research founder Tom Essaye recently told Yahoo Finance that this kind of “short-term volatility is something we all have to get more used to.” Traders will find that the herd mentality of algorithms, coupled with their wild swings, will price many out of participating in the market entirely. Click here to read the full article.
The Sevens Report’s Tom Essaye underscored the importance of the development, likening the killing of Soleimani “to a foreign government assassinating our Secretary of Defense and our Secretary of State. “Point being, this was significant action. Retaliation from Iran is expected and all…” he wrote, adding that a regional war wasn’t priced into the markets and could easily push the S&P 500 down 5% to 10% from a reaction to the spike in oil prices alone. Click here to read the full article.
With the Federal Reserve’s decision to leave interest rates unchanged and rates seemingly to remain low for now, fixed-income market watchers are reviewing their outlooks on the best places to invest now. Tom Essaye, the founder of Sevens Report Research, says in a research note that the Fed’s decision to consider “global developments and muted inflation pressures,” along with the U.S. economic…Click here to read the full article.
What’s in Today’s Report:
Futures are moderately lower on rising general concerns about the geo-political fallout from the Soleimani killing.
Geo-political headlines over the weekend were incrementally negative, but none of them were specific or material enough to imply a material drop in stocks is more likely, and the dip in futures is driven by just general concerns (more on that inside the Report).
Economic data, meanwhile, was positive as Dec. German Retail Sales, EU Services PMI (52.8 vs. (E) 52.4, and UK Services PMI (50.0 vs. (E ) 49.0) all beat estimates.
Today geo-political headlines will continue to dominate trading, and any implication of further deterioration in the U.S./Iran situation will weigh on futures. Economically, the key number to watch it the December Markit Services PMI (E: 52.2) and, as remains the case, the stronger the number, the better.
What’s in Today’s Report:
Futures are sharply lower following a spike in geopolitical tensions after a U.S. military strike killed a high ranking Iranian general.
A U.S. missile strike killed Iranian general Suleimani, who was the head of the Iranian military and arguably the second (and definitely the third) most important man in Iran. Iran has vowed a response and oil spiked 4% on the news.
Today focus will be on any Iranian military response, and obviously a further escalation in tensions will be negative for markets.
Away from geopolitics, we also get an important economic report, the ISM Manufacturing PMI (E: 49.1) and several Fed speakers including Barkin (11:05 a.m. ET), Brainard & Evans (1:15 p.m. ET), Kaplan (3:30 p.m. ET) and the FOMC Minutes (2:00 p.m. ET).
“The whole infrastructure of the market is changing, for all of us, especially traders, dealing with this extreme short-term volatility is something we all have to get more used to. And, we have to somehow assimilate that into our trading plans and figure out how…” said veteran trader and Sevens Report Research founder Tom Essaye on Yahoo Finance’s “The First Trade.” Click here to read the full article.
Tom Essaye interviewed with Brian Sozzi and Jared Blikre from Yahoo Finance. Click here to watch the full interview.
“The market was very overbought at the end of last week. Nothing really new has occurred to push the market up in…” said Sevens Report‘s Tom Essaye.
