Is the Rally Starting to Stall?

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What’s in Today’s Report:

  • Is the Rally Starting to Stall?
  • Weekly Market Preview:  Important Earnings and Stimulus Negotiations
  • Weekly Economic Cheat Sheet:  Fed Decision on Wednesday.

Futures are moderately higher as the Republican version of the stimulus bill is largely in-line with expectations.

The Republican stimulus bill will be released today with weekly unemployment checks cut to $200-$300/week, but one time stimulus checks roughly equivalent to the last time (in both the amount and scope, i.e. the number of people eligible to receive checks).  The weekly payment amount is mildly disappointing, but the scope of the stimulus checks is larger than expected so they basically offset one another.

On balance this version of the bill isn’t a disappointment, especially considering the amount of stimulus will likely increase modestly during negotiations with Democrats.

Looking forward, the negotiation process on the bill will now begin in earnest,  and since Washington always has a flair for the dramatic, so expect a few “scares” over the next two weeks that imply a deal won’t get done.  But, as we all know, it will get done, and likely in the next two weeks (and the sooner the better because weekly unemployment checks ended Friday, until there’s a new bill passed).

Today stimulus chatter will dominate the news wires, and beyond that there’s one notable economic report, June Durable Goods (E: 6.5%).  But, it shouldn’t move markets as investors know June was a solid month for data, and instead the weekly jobless claims are the key report for this week (out Thursday).

Sevens Report Co-editor Tyler Richey Quoted in MarketWatch on July 23, 2020

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“Oil has shown resilience this week” with WTI prices just shy of multi-month highs thanks, in part, to “optimism that a COVID-19 vaccine will eventually help the global economy normalize…” said Tyler Richey, co-editor at Sevens Report Research. Click here to read the full article.

Is Super Cap Tech Momentum Fading?

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What’s in Today’s Report:

  • Is Super Cap Tech Momentum Fading?

Futures are modestly lower on momentum from yesterday’s declines combined with a further uptick in U.S./China geo-political tension.

Secretary of State Pompeo gave a  harsh speech on China Thursday, while China closed the U.S. consulate in  Chengdu, in a further escalation of tensions.

Positively, July EU flash composite PMIs handily beat expectations, surging to 54.8 vs. (E) 51.1, implying that a global economic recovery is ongoing.

Today the focus will be on the July Flash PMI (E: 50.3), and if we get a disappointing number (showing a lack of improvement from June) then we’ll see concerns grow that the U.S. recovery is “pausing” and that could weigh on stocks further.

Stimulus Update (Progress Is Being Made)

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What’s in Today’s Report:

  • Stimulus Update
  • Weekly EIA/Oil Market Update (Can the Rally Continue?)

Futures are modestly higher thanks to stronger than expected earnings and progress on the stimulus front.

TSLA earnings beat lofty expectations and the stock rallied after hours, while the rest of the major earnings reports (MSFT/CMG) were generally in-line (i.e. no disasters).

Republicans apparently reached a consensus on their version of next stimulus bill, so progress continues and a new stimulus bill is expected in the next few weeks.

Today the key number will be weekly jobless claims.  There are rising fears that the U.S. economy is plateauing after the recovery in May/June, and if weekly claims move back towards, or through 1.5M, that will likely spook markets and imply that the recovery is stalling.  Regarding earnings, the two reports we’re watching are T ($0.78), AAL (-$6.40), but earnings shouldn’t move markets toda

Another Tailwind for European Stocks

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What’s in Today’s Report:

  • Another Positive for Europe (and European Stocks)
  • The Key Driver of the Precious Metals Rally

Stock futures are trading modestly lower this morning as rising U.S.-China tensions offset good economic data.

The U.S. directed China to close its consulate in Houston citing IP security risks, a move which China condemned as “an unprecedented escalation” of tensions.

Today, there are two economic reports to watch: FHFA House Price Index (E: 0.4%) and Existing Home Sales (E: 4.795M) while no Fed officials are scheduled to speak.

The Treasury will hold a 20-Yr Bond Auction at 1:00 p.m. ET and with yields near their lows for the year, a strong auction could act as a headwind for risk assets this afternoon.

Aside from those potential catalysts, investors will be watching the fluid situation between the U.S. and China for any signs of further deterioration in relations while earnings season remains in full swing with: BIIB ($7.99), and CP ($2.71) reporting before the open and TSLA (-$0.71), MSFT ($1.38), LVS (-$0.64), and CSX ($0.67) all due to release Q2 results after the close.

Tom Essaye Quoted in Yahoo Finance on July 17, 2020

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On Monday, Oxford University and AstraZeneca announced promising results from an early phase human trail of its vaccine candidate. In the face of growing hopes for a coronavirus vaccine, investors have been bidding up stocks aggressively, despite mounting bad news about new COVID-19 infections.

Yet Tom Essaye, founder of the Sevens Report, told Yahoo Finance on Monday that markets are downplaying key problems associated with vaccine development. Currently, drug giants Pfizer (PFE), Johnson & Johnson (JNJ), AstraZeneca…Click here to read the full article.

Tom Essaye Interviewed with Yahoo Finance on July 20, 2020

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Sevens Report Research Founder Tom Essaye speaks with Yahoo Finance’s Alexis Christoforous, Brian Sozzi and Jared Blikre about the latest market moves. Click here to watch the full interview.

The New Stimulus Bill (Good, Bad, Ugly)

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What’s in Today’s Report:

  • Technical Take: Finally a Breakout
  • The New Stimulus Bill: Good/Bad/Ugly

Markets are risk-on this morning with U.S. stock futures tracking European shares higher after EU leaders finalized a $2T stimulus package overnight while Q2 earnings from IBM topped expectations after the close yesterday.

The EU spending package, which importantly incorporates EU bonds, still needs to be passed by the EU Parliament and may not begin to take effect until mid-2021.

Looking into today’s session, there are no economic reports to watch and no Fed officials are scheduled to speak however the earnings calendar picks up considerably.

Companies reporting Q2 results today include: KO ($0.40), LMT ($5.71), PM ($1.09), and SYF ($0.04) before the open and SNAP (-$0.09), UAL (-$9.13), TXN ($0.87), and COF (-$1.25) after the close.

Why This Week Is More Important Than It Seems

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What’s in Today’s Report:

  • Why This Week Is More Important Than It Seems
  • Weekly Market Preview:  Still About Vaccines and Stimulus
  • Weekly Economic Cheat

Futures are marginally lower following a mostly quiet weekend, although there was mild disappointment regarding future EU stimulus.

The EU bailout fund saw the amount of direct grants reduced to 390B from 500B euros at this weekend’s EU summit, and that’s weighing marginally on stocks.

Economically, the only notable number was German PPI, which slightly missed estimates (flat vs. (E) 0.2%).

Today there are no notable economic reports and just two important earnings, HAL (-$0.11) and IBM ($2.14), but it’s unlikely either will move markets.

Instead, negotiations will begin on the new stimulus bill and that will be the major market influence today (that or any new vaccine headline).  If negotiations start poorly, expect stocks to sink moderately in response (although markets still very much expect a deal to get done, and that needs to happen as the $600/week stimulus checks end this week).

Please email info@sevensreport.com if you have any trouble downloading today’s Report or need to contact us.  Please do not respond to this email as we do not receive any replies from this email address.

What’s Next for the Oil Market?

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What’s in Today’s Report:

  • Oil Market Outlook: Supply, Demand, and COVID-19
  • Economic Data Takeaways

Stock futures are modestly higher this morning while international markets were mixed overnight as investors weigh a fresh record number of new coronavirus cases in the U.S. against economic data that was mostly upbeat this week.

NFLX is notably down 7% in pre-market trade after the company reported disappointing Q2 results yesterday.

Economically, Eurozone HICP met expectations in June, rising 0.3% but the report did not materially move markets overnight.

Today,  investor focus will be on earnings early with three more notable financial companies reporting before the bell: ALLY ($0.33), BLK ($6.90), and CFG ($0.17).

Then there are two economic reports due out this morning: Housing Starts (E: 1.190M), and Consumer Sentiment (E: 79.3) while no Fed officials are scheduled to speak.

Bottom line, markets began to trade with a more cautious tone over the course of the week but for now, upbeat economic data has been able to offset rising new cases of COVID-19 in the U.S. and as long as underlying sentiment remains largely optimistic, stocks should be able to maintain or extend gains into the weekend today.