Valuation Update: Good, Bad, and Ugly

/in /by

What’s in Today’s Report:

  • Valuation Update: Good/Bad/Ugly Scenario Analysis
  • Technical Update: Not Necessarily Done Yet

Futures are slightly higher this morning and Asian stocks traded relatively well overnight despite yesterday’s selloff in the US while EU markets fell on soft economic data.

Italian GDP missed (0.0% vs. 0.2%) which led to some further risk off money flows amid the ongoing budget drama but otherwise, data in Europe was mostly inline overnight including German Unemployment figures, the Eurozone GDP Flash, and Eurozone Economic Sentiment.

Looking to the calendar in the US today, there are two second tier economic reports due out: S&P Corelogic Case-Shiller HPI (E: 0.1%) and Consumer Confidence (E: 136.3) and there are no Fed officials scheduled to speak.

That will leave focus on earnings: GE ($0.21), MA ($1.68), PFE ($0.76) before the open and FB ($1.46) after the close, and of course price action, especially in tech, will be very important.

For the S&P to gain material upside momentum, we will need to see a strong run to and through 2700 and then for that area to hold, otherwise an early gain followed by a pullback (like yesterday) will be more likely and the path of least resistance still lower for the very near term.

Updated Market Outlook (Fundamental & Technical)

/in /by

What’s in Today’s Report:

  • Updated Market Outlook (Medium/Longer Term Risk/Reward Attractive As Long As Growth Remains Solid)
  • Updated Technical Outlook
  • Weekly Economic Cheat Sheet (Inflation Metrics)

Futures are enjoying a modest oversold bounce following Friday’s drop.

The weekend was generally quiet although sentiment towards Italy is a bit better after S&P did not downgrade the country’s credit rating.

Economically, Japanese Retail Sales beat estimates (2.1% vs. (E) 1.7%) but that report isn’t moving markets.

There are no notable earnings reports today so focus will be on the Core PCE Price Index (E: 0.1% m/m, 1.9% y/y) which is contained in the Personal Income and Outlays Report.  This market does not need suddenly “hot” inflation numbers that will make the Fed more hawkish.  So, if the Core PCE Price Index prints in-line, that should help fuel today’s early rally.  Finally, there is also one Fed speaker:   Evans (9:45 a.m. ET).

Bounce or Bottom? Updated Market Technicals

/in /by

What’s in Today’s Report:

  • Bounce or Bottom?  Updated Market Technicals

Futures and global markets are sharply lower and have given back most of Thursday’s gains as it was another bad night of corporate earnings.

AMZN and GOOGL both posted disappointing earnings and that caused a resumption of the weakness in tech, which is dragging global markets lower.

The only notable economic data was German GkK Consumer Climate, which was unchanged at 10.6.

Today we get Initial Q3 GDP (E: 3.3%) but that won’t move markets unless it’s a major disappointment (remember GDP is very backward looking).

Bottom line, markets look like they are going to open sharply lower, so holding Thursday’s lows, especially in the Nasdaq (7099) is important, otherwise we could be looking at another Wednesday washout.

Sevens Report’s Tom Essaye quoted in MarketWatch on October 25, 2018

/in /by

Sevens Report’s Tom Essaye quoted in MarketWatch on October 25, 2018. He wrote in a note to clients that so far, third-quarter earnings have been disappointment and that “peak earnings is a potential reality” that investors are now struggling with. Read the full article here.

Sevens Report’s Tom Essaye quoted in CNBC on October 25, 2018

/in /by

Sevens Report’s Tom Essaye quoted in CNBC on October 25, 2018.

“What happened yesterday was the market got way oversold,” said Tom Essaye, founder of The Sevens Report. “Was a decline on earnings warranted? Yes, but not 10 percent.” Read the full article here.

What If It Is Peak Earnings? (Market Outlook)

/in /by

What’s in Today’s Report:

  • What If It Is Peak Earnings? (It Hasn’t Been That Bad in the Past)

Futures are bouncing from yesterday’s carnage following good earnings reports overnight.

MSFT, F, V, XLNX, TSLA and WHR all posted solid earnings and that is helping stocks to bounce moderately.

Economic data was sparse as German IFO Business Expectations was the only report and it slightly missed estimates.

Today there are actually multiple macro events including an ECB Decision (No Change is expected to rates or QE but we’ll be watching to see if Draghi notes equity market volatility), Durable Goods Orders (E: -1.4%), Jobless Claims (E: 212K) and Pending Home Sales (E: 0.0%) plus there are two Fed speakers:  Clarida (12:15 p.m. ET), Mester (7:00 p.m. ET).

But, despite that busy calendar, barring dovish commentary from the ECB or Fed speakers (which isn’t expected) focus will remain on earnings, and this market needs more solid results to break the current negative feedback loop.

Four Steps to a Bottom

/in /by

What’s in Today’s Report:

  • Technical Update
  • Four Steps to a Bottom

US futures are in the red again this morning although there is again no clear reason why while overseas shares traded mostly “ok” overnight amid mixed economic data.

Japanese PMI Manufacturing Flash beat (53.1 vs. E: 52.6) helping the Nikkei rally but EU data was on the soft side.

As far as US economic data goes today, there are two reports on the housing market this morning: FHFA House Price Index (E: 0.3%) and New Home Sales (E: 625K) while the more important release to watch will be the PMI Composite Flash (E: 54.1) due out shortly after the open.

The Fed speaker circuit also remains busy with Bostic (10:00 a.m. ET, 2:00 p.m. ET), Bullard (11:30 a.m. ET), and Mester (12:30 p.m. ET) all speaking during the Wall Street session today.

Lastly, and likely most importantly for stocks right now, there are a slew of earnings reports today. A few notables include: BA ($3.51) and T ($0.93) ahead of the open and MSFT ($0.96) and V ($1.20) after the close.

Tom Essaye’s Sevens Report CNBC Asia Interview on October 23rd 2018

/in /by

Tom Essaye’s Sevens Report CNBC Asia Interview on October 23rd 2018. Watch the full video here.

Sevens Report’s Tom Essaye quoted in Yahoo Finance on October 22, 2018

/in /by

Sevens Report’s Tom Essaye quoted in Yahoo Finance on October 22, 2018. Watch the full video here.

Technical Update

/in /by

What’s in Today’s Report:

  • Market Technical Update (Three Support Levels for the S&P 500 and a Line in the Sand for the VIX)

Futures are slightly higher thanks to a rally in Asian markets following mixed Chinese economic data.

Chinese Fixed Asset Investment (5.4% vs. (E) 5.3%) and Retail Sales (9.2% vs. (E) 9.1%) beat estimates, while GDP (6.5% vs. (E) 6.6%) and Industrial Production (5.8% vs. (E) 6.0%)  missed.  But, commentary from Chinese officials raised hopes of more economic stimulus and Chinese markets rallied more than 1%.

Today there is one economic report, Existing Home Sales (E: 5.30M) and two Fed speakers: Bostic (12:00 p.m. ET) and Kaplan (12:45 p.m. ET), but focus will remain on earnings (which were “ok” overnight and this morning as AXP, PYPL and HON beat) and Italy.  If there’s further deterioration in the Italy/EU situation, stocks will come under pressure once again.