Another Positive for Banks

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What’s in Today’s Report:

  • Another Positive for Financials
  • Nasdaq Hits Fresh Record (Chart)

Futures declined overnight after President Trump threatened to veto the recently passed stimulus bill but markets have since stabilized as hopes for fiscal aid remain strong and investors look ahead to a slew of economic data today.

Late Tuesday, Trump said he hoped Congress would increase the amount of direct payments to individual American from $600 to $2,000 and remove unnecessary spending in the package however the bill is still likely to become law given the overwhelming Congressional support which is easing market angst this morning.

Today, there is a long list of economic data due to be released including Durable Goods Orders (E: 0.6%), Jobless Claims (E: 875K), Core PCE Price Index (E: 1.5%), New Home Sales (E: 989K), and Consumer Sentiment (E:81.0).

If the data is better than expected, that could help lift equity markets after several days of heavy trading while the impact of disappointing data will be limited given the optimism of the new aid package in the works.

Beyond the data, investors will be continuing to watch coronavirus statistics and lockdown measures as the latest surge in cases and hospitalizations remains a risk to the economic recovery and any negative developments could weigh on risk assets in thinning holiday trade.

Tom Essaye Quoted in ETF Trends on December 22, 2020

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“The passage of this package only solidifies that there are massive structural tailwinds on the economy and markets as we enter 2021, which is longer-term positive for…” Tom Essaye, founder of Sevens Report, said in a note on Tuesday. Click here to read the full article.

Could the New Strain Cause a Correction?

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What’s in Today’s Report:

  • Could the New Coronavirus Strain Cause a Correction
  • Gold Failure (Chart)

U.S. equity futures are little changed after a mixed night of overseas trading as investors digest the emergence of a new strain of the coronavirus in the U.K. against the passage of a fresh stimulus package overnight.

Congress passed a COVID-19 relief bill totaling $892B late Monday which is being generally well received by markets today despite the fact that it was somewhat disappointing vs. lofty market expectations.

An executive from BioNTech stated that their vaccine with Pfizer should work against the new strand of the coronavirus in the U.K., which helped ease some of the concerns linked to the new outbreak in the U.K.

Today, there are two notable economic reports to watch: Final Q3 GDP (E: 33.1%) and Consumer Confidence (E: 97.0).

The market will likely be more sensitive to the latter report as it is much more timely being a December release however focus will also remain on the latest COVID-19 headlines as an acceleration in the spread of the new strain in the U.K. or stricter lockdown measures could again weigh on risk assets in thinning holiday trade.

Tom Essaye Quoted in Unseen Opportunity on December 22, 2020

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“The passage of this package only solidifies that there are massive structural tailwinds on the economy and markets as we enter 2021, which is longer-term positive for cyclicals and…” explained Sevens Report founder Tom Essaye. Click here to read the full article.

Tom Essaye Quoted in Barron’s on December 18, 2020

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How Vaccines Are Tanking the Dollar, and What It Means for Stocks

Now, the dollar is testing a critical level. The index had the dollar at 89.95 by mid morning on Friday, while the nearest support level for the greenback is 89.13, according to analysis from The Sevens Report Research. A drop of 0.9% from the current level is all it would take to hit…Click here to read the full article.

Why the Long-Term Bullish Case Got Stronger Last Week

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What’s in Today’s Report:

  • Why the Long-Term Bull Case Got Stronger Last Week
  • Weekly Market Preview:  Will Lockdown Worries Cause a Near Term Pullback?
  • Weekly Economic Cheat Sheet:  Is the Economic Recovery Starting to Stall?

Futures are down nearly 2% this morning as concerns about a coronavirus mutation offset news of a stimulus deal being reached.

England went into lockdown again after a mutation of COVID-19 started to spread rapidly throughout the country, sparking fears of an extension of the pandemic.  Positively, scientists are confident that the vaccine will work for COVID mutations as well, but that’s not helping stocks this morning as concerns rise about wider/longer economic lockdowns.

On stimulus, Congress agreed to a $900 billion stimulus bill and a vote is expected today. However, this was already priced into stocks (that’s why it’s not causing a rally).

Today there are no economic reports and no Fed speakers, so focus will remain on stimulus and the coronavirus.

Regarding stimulus, the stimulus bill is expected to pass Congress today (so markets will expect that to happen).  Regarding coronavirus, any headlines that imply this mutated coronavirus is spreading across the globe will cause further downside in stocks (because it could lead to greater/longer economic lockdowns, which has been the focus of the market throughout the pandemic).

Dollar Outlook (This Matters to Stocks)

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What’s in Today’s Report:

  • Dollar Outlook (This Matters to Stocks)

Futures are little changed following a quiet night as markets digest the week’s rally.

Economic data beat estimates overnight, as UK Retail Sales fell less than expected (-3.8% vs. (E) -4.2%) while German Ifo Business Expectations also beat estimates (92.8 vs. 91.8).

Stimulus talks continued, and while a deal isn’t likely today (a mild disappointment), one is still expected in the next few days.

Today we get one notable economic report, Leading Indicators (E: 0.4%) and two Fed speakers, Evans (11:00 a.m. ET), Brainard (11:10 a.m. ET).  But, none of that should move markets.

Instead, markets will be on “stimulus watch” and right now the expectation is for a $900 billion-ish stimulus deal to be approved in the next few days (definitely before Christmas).  Anything that confirms that expectation will help stocks rally today, and anything that implies it might not happen will cause a stock decline. Finally, today is Quadruple Witching options expiration so expect some big volumes and potential volatility into the close.

Tom Essaye Quoted in Newsmax on December 15, 2020

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Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report,” warned clients Tuesday that share prices are also at risk of falling if the Fed disappoints. U.S. stocks are poised to open higher after a four-day slump, index futures…Click here to read the full article.

Why the Fed Decision Was More Bullish Than It Seemed

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What’s in Today’s Report:

  • Why the FOMC Decision Was More Bullish Than It Seemed
  • Economic Data Update:  Is the Recovery Starting to Stall?
  • EIA and Oil Update

Futures are moderately higher as markets digest a “more positive than it appeared” FOMC decision on Wednesday, along with growing expectations for a stimulus bill.

Regarding stimulus, expectations for the total size of the bill have grown from $700 billion-ish to $900 billion-ish, and passage is now expected before next week.

The Dollar Index dropped sharply and fell below 0.90 for the first time since ‘18, and that’s helping futures rally.  The dollar decline is the result of the FOMC decision yesterday.

Stimulus headlines will dominate trading today as markets expect a deal in the next few days, and anything that further confirms that will be a tailwind on stocks.

Stimulus aside, though, there are also important economic reports today.  The key number is Jobless Claims (E: 806K), followed by Philadelphia Fed Manufacturing Index (E: 21.2).  Both numbers need to show stability and push back on the growing narrative that the economic recovery is losing momentum.  We also get Housing Starts (E: 1.53M but that shouldn’t move markets.

Tom Essaye Quoted in Invezz on Decemeber 14, 2020

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Nancy Pelosi said last week that negotiations over a coronavirus stimulus package could run through the holiday period, but this is too late according to some analysts. “At this point, markets have priced in and are expecting stimulus near term, so if that…”, said analyst Tom Essaye. Click here to read the full article.