Yield Curve Update and Fed Meeting Preview

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What’s in Today’s Report:

  • Technical Outlook: S&P 500
  • Fed Meeting Preview
  • Yield Curve Update

Futures are slightly higher this morning as the coronavirus outbreak continues to spread but other market influences including key earnings and the Fed  are coming into focus.

Reports show that the number of coronavirus cases has climbed to more than 4,500 and the death toll has topped 100 in China however the mortality rate encouragingly remains ~2%, well below the 10% rate of SARS in the early 2000s.

The number of market catalysts picks up today starting with three economic data points to watch: Durable Goods Orders (E: 0.5%) being the key report to watch while the S&P Case-Shiller HPI (0.4%) and Consumer Confidence (E: 127.8) will also be released.

Additionally, the January FOMC Meeting begins and earnings season remains in full swing. The key report to watch today is AAPL ($4.54) after the closing bell but other notables include: LMT ($4.99), MMM ($2.10), PFE ($0.57), UTX ($1.84), AMD ($0.31), and EBAY ($0.75).

Will the Wuhan Virus Cause a Correction?

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What’s in Today’s Report:

  • Will the Wuhan Virus Cause a Correction?
  • Weekly Market Preview:  A Fed Meeting Wednesday and the Biggest Week of Earnings
  • Weekly Economic Cheat Sheet (Several Important Report This Week)

Futures are down more than 1% as the continued spread of the Wuhan coronavirus over the weekend further raised fears of a global economic slowdown.

Total cases of the Wuhan virus continued to rise over the weekend (nearly 3000 confirmed cases globally) and the number of U.S. cases rose to five.

Economically, German IFO Business Expectations missed estimates at 92.9 vs. (E) 95.0.

This is going to be a very busy week, but the calendar is a bit sparse today as we get just one economic report, New Home Sales (E: 728k), and one notable earnings report after the close: WHR ($4.30).  So, any updates on the spread of the Wuhan virus will continue to drive markets today, although that will change later in the week as we get more earnings and the Fed decision on Wednesday.

Earnings Season Update

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What’s in Today’s Report:

  • Earnings Season Update (Not Great, But Not Bad, Either)
  • What’s Up With Natural Gas?

Futures are flat as concern about the Wuhan coronavirus offset better than expected earnings.

Chinese authorities expanded the quarantine zone around Wuhan to limit the transmission of the disease, and that’s increasing fears of a bigger negative economic impact.

Earnings overnight were solid as TXN beat estimates,  boosting semi-conductors and tech more generally.

Today we get an ECB Announcement, but no change in rates is expected and really markets will just want to hear a dovish tone from new ECB President Lagarde (which should happen).

Away from the ECB,  Jobless Claims (E: 213K) is the key economic report, while earnings season continues to roll on.  Some reports we’re watching today include: PG (E: $1.37) and INTC (E: $1.24).

Tom Essaye Quoted in Benzinga on January 22, 2020

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Tom Essaye, founder of Sevens Report Research, said investors should be prepared for more Wuhan headlines to move markets in coming weeks.

“From a market standpoint, since this disease is closely related to SARS, I think the market…” Essaye said. Click here to read the full article.

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Tom Essaye Quoted in Barron’s on January 22, 2020

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According to Sevens Report, the two factors that could reverse the upward trajectory of valuations would be stalling economic growth and higher interest rates. Until those occur, the rally is expected to shoot up to “20 times earnings, which equates to about 3,500 in the…” Click here to read the full article.

What the Wuhan Coronavirus Means for Markets

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What’s in Today’s Report:

  • What the Wuhan Coronavirus Means for Markets

S&P 500 futures rallied to new record highs overnight amid easing concerns over the deadly virus outbreak in China that weighed on risk assets Tuesday.

Chinese health officials announced plans to both screen for, and contain the Wuhan coronavirus which helped reduce fears that a SARS-like epidemic is developing.

Today, there are a few different potential catalysts for the market that warrant watching. First, there are two economic reports on the housing market: FHFA House Price Index (E: 0.3%) and Existing Home Sales (E: 5.430M) which should show a continued rebound in the sector into the end of 2019.

Second, earnings season is in full swing and investors will continue to sift through the releases closely. Notable corporations reporting today include: JNJ ($1.87), ABT ($0.95), ALLY ($0.95), TXN ($1.02), KMI ($0.26), LVS ($0.80), and RJF ($1.90).

Lastly, any new developments on the spread, or containment of, the Wuhan coronavirus will likely get a reaction from markets as it was the primary focus of traders across asset classes yesterday.

Tom Essaye Quoted in the Cover Story for Barron’s on January 17, 2020

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“This rally now has a life of its own. I do want to caution that any pullback that occurs (and there will be one) likely will be a bit more painful than before and on the order of 5% to 10%, given how stretched the market has become…” writes Tom Essaye of the Sevens Report newsletter. Click here to read the full article.

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Tom Essaye Quoted in CNBC on January 18, 2020

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“People are getting too optimistic in the short-term. We keep pricing in all this really good stuff that’s going to happen, but it has not shown up yet…” said Tom Essaye, founder of The Sevens Report. Click here to read the full article.

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Tom Essaye Quoted in MSN Money on January 17, 2020

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“Phase one is behind us and it met market expectations. Now the very real question of whether phase one results in an uptick in economic growth lies in front of us…” Tom Essaye, the founder of The Sevens Report, said in a note. Click here to read the full report.

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Tom Essaye Quoted in MarketWatch on January 17, 2020

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“Nothing in phase one will specifically add much to global [economic] growth…” wrote Tom Essaye, president of the Sevens Report in a Thursday note to clients. Click here to read the full article.

President Trump and Chinese Vice Premier Liu