Three Major September Catalysts

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What’s in Today’s Report:

  • Three Key September Events/Dates (Print this List)

Stock futures are solidly higher this morning after Hong Kong’s Carrie Lam announced the withdraw of the extradition bill that was the major catalyst for the recent protests. The news sparked a near 4% rally in the Hang Seng Index.

Composite PMI data for August was also better than expected with the Chinese figure rising to 51.6 from 50.9 while the EU headline firmed to 53.5 from 53.2 in July helping ease concerns about the health of the global economy.

Looking into today’ session, there are two economic data points to watch: Motor Vehicle Sales (E: 16.8M) and International Trade (E: -$53.5B) however investors will be primarily focused on the very busy schedule of Fed speakers: Williams (9:30 a.m. ET), Kaplan (10:00 a.m. ET), Bowman and Bullard (12:30 p.m. ET), Kashkari (1:00 p.m. ET), and Evans (3:15 p.m. ET).

Investors will be looking for any further insight into how accommodative the Fed will be in the coming months, specifically how likely a 50 bp cut at this month’s meeting is (current expectations are low, so a dovish surprise would be well received by stocks).

Beyond the Fed speak, the trade war is still the major influence on the broader markets right now and investors continue to wait for updates on the next round of trade talks that are supposed to take place in the coming days.

Tyler Richey co-editor of Sevens Report Quoted in MarketWatch on September 3, 2019

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“The trade war remains the market’s main focus and with new tariffs going into effect over the [past] weekend, investor sentiment towards U.S.-China relations are continuing to deteriorate…” Tyler Richey, co-editor at Sevens Report Research, told MarketWatch. Click here to read the full article.

Tyler Richey

Tom Essaye Quoted in CNBC on September 3, 2019

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“Going forward, the dollar will have a hard time declining unless the Fed gets aggressively dovish, simply because global growth remains lackluster and global central banks are easing policy…” said Tom Essaye, founder of the Sevens Report. Click here to read the full article.

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Did Things Get Better Last Week?

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What’s in Today’s Report:

  • Bottom Line: Did Things Get Better Last Week?

Stock futures are in the red this morning and international markets were mostly lower overnight thanks to on-going trade tensions and more political drama in Europe.

The latest set of U.S. tariffs on Chinese goods went into effect over the weekend as expected however there were no updates regarding this month’s scheduled trade talks which is weighing on risk assets this morning.

Brexit concerns continue to simmer as the odds of a no-deal exit from the EU creep higher ahead of the October deadline but for now, the situation is largely isolated to Europe and not having a significant impact on U.S. equity markets.

Economic data was mixed overnight but there were no material, market moving surprises.

Today, there are two economic reports to watch: ISM/PMI Manufacturing Indexes (E: 49.9) and Construction Spending (E: 0.3%) while the Fed’s Rosengren is scheduled to speak shortly after the close (5:00 p.m. ET).

Investor focus will primarily remain on the trade war however, so any positive headlines regarding the planned, in-person negotiations this month will be well received while a continued lack of clarity on the topic will be a headwind for stocks.

Tom Essaye Quoted in CNBC on August 30, 2019

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“For U.S.-China trade to cause a sustainable rally, we need some proof of actual movement towards a trade ‘truce,’” said Tom Essaye, founder of the Sevens Report, in a note. Click here to read the full article.

Has There Been Actual U.S./China Trade Progress?

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What’s in Today’s Report:

  • Has There Been Actual U.S./China Trade Progress?
  • The Most Important Economic Number to Watch Going Forward

Futures are moderately higher as more positive U.S./China trade chatter fuels the rebound.

There was more vague, but positive, commentary on the tone of current U.S./China communications, as China called the conversations ”effective.”

There was a lot of economic data overnight and it was decidedly mixed.  Japanese IP beat estimates but German Retail Sales (-2.2% vs. (E) 1.1%) disappointed.  Bottom line, the outlook on the global economy remains decidedly mixed.

Today should be quiet given the looming holiday weekend, but the key number to watch is the Core PCE Price Index (E: 0.2% m/m, 1.7% y/y).  If that runs very “hot” (so a number close to 2.0%) that will be taken as slightly hawkish and could reverse some of this week’s rally.

Tom Essaye Appeared on TD Ameritrade Network on August 29, 2019

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Tom Essaye appeared in Mid-Day Movers by TD Ameritrade Network discussing equities, what’s driving the markets right now, earnings and more…Click here to watch the full interview.

TD Ameritrade Video Shot

Tom Essaye Quoted in Barron’s on August 28, 2019

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“In the bond market, the benchmark 10s-2s yield curve spread hit a fresh 12 year low below -5 basis points this morning while the 30-Year yield has hit a record low, signaling more broad market angst by the “smart market…” writes The Sevens Report’s Tom Essaye. Click here to read the full article.

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Tom Essaye Quoted in The Wall Street Journal on August 27, 2019

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“The staples are actually poised to be in a pretty good spot,” said Tom Essaye, founder of the Sevens Report. He said he thinks positive but slowing economic growth could continue to benefit the group. Click here to read the full article.

Identifying Potential Positive Surprises

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What’s in Today’s Report:

  • Identifying Potential Positive Surprises
  • EIA/Oil Analysis

Futures are sharply higher on more positive U.S./China trade “chatter” and political resolution in Italy.

Chinese officials made general comments about not wanting to further escalate the trade war and won’t retaliate to the recent tariffs, and that’s helping sentiment.  But, to be clear, no actual progress has occurred – just vague rhetoric, and as far as we can tell the phone call between the two delegations has not occurred yet (remember it was loosely scheduled for Tuesday).  Point being, things haven’t improved as much as the two day rally would imply.

Economic data was decent as German unemployment met expectations while EU Economic Sentiment was better than expected (103.1 vs. (E) 102.5).  Regarding Italy, the country will avoid new elections, and while that’s not a sustainable positive catalyst for markets, it does, for now, remove another potential headwind.

Attendance and volumes will continue to decrease into the long weekend, but focus will remain on any trade related headlines.  Economically, the notable reports today include Q2 Revised GDP (E: 2.0%), Jobless Claims (E: 213K) and Pending Home Sales (E: -0.3%) although none of those should move markets.

Bottom line, if Treasury yields are stable, stocks can hold these early gains, although we continue to caution this rally is being driven by month-end positioning more than any actual, positive progress on the headwinds facing this market.