Will Politics Add to the Volatility?

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What’s in Today’s Report:

  • Will Politics Add to the Volatility?
  • Why Natural Gas is Surging

Futures are slightly higher as more positive U.S./China commentary was offset by Brexit upheaval.

The outlook for U.S./China trade continued to improve as it was confirmed “high level” talks are occurring.  But, that positive was offset by Brexit turmoil as the British Brexit Minister resigned over the proposed deal.  The Brexit upheaval isn’t a material macro headwind, but it can be filed in the “things this market didn’t need right now” category and it’ll add to volatility.

Fed Chair Powell’s comments after the close were a non-event (he acknowledged some mild softening of economic momentum but didn’t hint at any shift in the policy outlook).

Today there is a lot of important economic data to watch (in order of importance):  Retail Sales (E: 0.5%), Empire State Manufacturing Index (E: 20.0), Philly Fed (E: 20.0) and Jobless Claims (E: 215K).  There are also multiple Fed speakers today including Quarles (10:00 a.m. ET), Powell (11:00 a.m. ET), Bostic (1:00 p.m. ET), Kashkari (3:00 p.m. ET) but I don’t expect any of them, including Powell, to reveal anything new.

Finally, I’ll be joining Liz Claman on Countdown to the Closing Bell on Fox Business today between 3:00 – 4:00 pm ET to discuss the outlook for this market.

Inflation Peaking?

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What’s in Today’s Report:

  • Is Inflation Peaking Already?

Futures are flat while overseas markets were mostly lower o/n after yesterday’s huge drop in oil weighed on risk sentiment, global data was mixed, and EU political tensions continued.

Chinese FAI and Industrial Production figures for October were slightly ahead of expectations but Retail Sales notably missed which pressured Asian shares overnight.

In Europe, the German GDP flash missed which only added to ongoing angst over Brexit and the Italian budget drama in broader European markets.

Today is the busiest day of the week as far as catalysts go. First we will get the latest inflation release in the U.S. ahead of the open: CPI (E: 0.3%), then Quarles speaks shortly thereafter (9:00 a.m. ET).

There is nothing major scheduled during market hours today but focus this evening will be on CSCO earnings ($0.72) after the close and then Powell and Kaplan are speaking in Texas at 5:00 p.m. ET (with Q&A) where Powell is expected to take a more dovish tone.

Sevens Report’s Tyler Richey quoted in Wall Street Journal on November 13, 2018

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Sevens Report’s Tyler Richey quoted in Wall Street Journal on November 13, 2018. Read the full article here.

Sevens Report’s Tom Essaye appeared on Yahoo Finance on November 12, 2018.

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Sevens Report’s Tom Essaye appeared on Yahoo Finance on November 12, 2018. Go here to watch the clip.

A Disconcerting ERP Update

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What’s in Today’s Report:

  • Equity Risk Premium: A Disconcerting Statistic

Futures are bouncing modestly after yesterday’s steep equity selloff as Secretary Mnuchin reportedly resumed talks with Chinese officials regarding trade but the budget drama between Italy and the EU remains a headwind.

Economically, the German ZEW Survey missed (badly): 58.2 vs. (E) 65.0 while the NFIB Small Business Optimism Index was more inline: 107.4 vs. (E) 108.0, underscoring the ongoing divergence between US and overseas data right now.

Looking ahead to today’s Wall Street session, there are no other economic reports to watch and only one of the two Fed speakers is during market hours: Kashkari (10:00 a.m. ET), Daly (5:00 p.m. ET).

Most of the more notable catalysts this week will come tomorrow (U.S. CPI, Chinese economic data, Powell speaks, earnings, etc.) but that doesn’t mean that downward momentum that began yesterday can’t continue so support in the S&P between 2705 and 2720 will be important to watch today.

Four Keys to a Bottom Updated

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What’s in Today’s Report:

  • Four Keys to a Market Bottom Updated
  • Weekly Market Preview
  • Weekly Economic Cheat Sheet (All About Inflation)

Futures are slightly lower following a quiet weekend outside of the oil markets.

Saudi Arabia signaled it will cut oil output by 500k bbls in December in response to falling oil prices, and Russia hinted it will do the same.  Oil rallied 2% on the news initially although it’s given back most of those gains as of this writing.

Away from oil it was a quiet weekend as there were no notable economic reports or changes in U.S./China trade, although the U.S. dollar is hitting new 2018 highs on the latest negative Brexit headlines.

Today should be a generally quiet day given 1) the Veteran’s Day holiday (banks and bond markets are closed), and 2) There are no notable economic reports or earnings today.  There is one Fed speaker, Daly (2:30 p.m. ET) but her comments won’t move markets.

So, our focus today will be on the dollar, which is now at fresh 2018 highs. If it continues to grind higher that will likely pressure stocks today (a suddenly stronger dollar is not what this market needs right now).

Why the October Sell Off Was Different

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What’s in Today’s Report:

  • Why The October Sell Off Was Different
  • Valuation Update (the market is fairly valued here)

Futures are moderately lower following more disappointing Chinese economic data.

Chinese auto sales plunged 12% yoy in November and annual car sales growth turned negative for the first time since the early 1990’s, further fanning fears of a Chinese economic slowdown.

Earnings results were mixed as DIS posted solid numbers while EU corporate earnings were disappointing.

Today focus will be on inflation via PPI (E: 0.2%) and it needs to remain “Goldilocks” so as to not put more downward pressure on stocks.  We also have several Fed speakers (Williams (8:30 a.m. ET), Harker (8:50 a.m. ET), Quarles (9:00 a.m. ET)) although the next big Fed event will be Fed Chair Powell speaking on Tuesday.

Election Takeaways & FOMC Preview

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What’s in Today’s Report:

  • Election Takeaways (Short and Longer Term Implications)
  • FOMC Preview – All About the Fed Put
  • A Seasonal Pattern That’s Worked 100% of the Time

Futures are modestly higher on a relief rally as the U.S. mid-term elections provided no surprises.

As was widely expected, Democrats gained a small majority in the House of Representatives, while the Republicans expanded their majority in the Senate.

Economically, data from Europe was good as German Industrial Production (0.2% vs. (E) -0.1%) and Euro Zone Retail Sales (0.1% vs. (E) 0.0%) both beat estimates.

Today focus will be on the FOMC Decision (2:00 p.m. EST, E: No Change to Rates) and the key will be whether the Fed mentions recent stock market volatility.  If they do, that will be taken as a slightly dovish shift, and it likely will help extend today’s early rally.

Sevens Report’s Tyler Richey quoted in Wall Street Journal on November 1, 2018

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Sevens Report’s Tyler Richey quoted in Wall Street Journal on November 1, 2018. Read the full article here.

Trade War Indicator

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What’s in Today’s Report:

  • A Realtime Trade-War Indicator to Watch

Futures are slightly lower with EU markets this morning on renewed political tensions despite upbeat economic data o/n while US focus turns ahead to the mid-terms.

Italian shares are down nearly 1% as the revised budget due on 11/13 is not expected to have the improvements investors previously hoped which could lead to further tensions with the EU.

Economically, the EU Composite PMI came in better than expected (53.1 vs. E: 52.7) which is a longer term positive as we need to see overseas data “catch up” to US growth metrics to help fuel continued gains in stocks broadly.

Today, trader focus is going to primarily be on the mid-term elections although results will not come in until after the close.

On the economic front, there is just one report to watch: September JOLTS (E: 7.110M) while there are no Fed officials schedules to speak ahead of the two-day Fed meeting that begins tomorrow.

Lastly, markets will remain sensitive to any trade war developments while technicals are still playing a major role in intraday price swings so if momentum is generated back towards 2700, the odds of another ugly break to the mid $2600’s would rise significantly.