Investing – Page 267 – Sevens Report Research

A New Headwind on Stocks

December 17, 2018/in Investing/by Tom Essaye

What’s in Today’s Report:

A New Headwind on Stocks (It’s Potentially a Big One)
It’s Not All Bad – A Legitimate Positive Scenario for Q1 ‘19
Weekly Market Preview
Weekly Economic Cheat Sheet

Futures are slightly lower as markets digest Friday’s selloff following a quiet weekend.

There was no notable geo-political (i.e. U.S./China trade) or economic (global growth) news over the weekend, and investors/markets are looking ahead to Wednesday’s FOMC Decision.

Economic data was sparse but EU Core HICP (their CPI) met expectations at 1.0% yoy.

We get two economic numbers this morning via the Empire State Manufacturing Survey (E: 21.0) and Housing Market Index (E: 61.0) but neither should move markets. Investors will be looking ahead to Wednesday’s big FOMC Decision and that should lead to generally quiet trading, barring any surprise headlines or tweets. More broadly, for stocks to bounce in the near term, we need to see leadership from the tech sector, and participation from financials and energy (both of which are very, very oversold).

Political Risks to this Market

December 14, 2018/in Investing/by Tom Essaye

What’s in Today’s Report:

Political Risks to This Market

Futures are sharply lower (about 1%) as bad economic data is furthering worries about a slowdown in global growth.

Chinese Retail Sales (8.1% vs. (E) 9.0%) and Industrial Production (5.4% vs. (E) 5.9%) both badly missed estimates.

In Europe, the flash composite PMIs also missed expectations at 51.3 vs. (E) 52.5.

Geopolitically it was a quiet night although Chinese officials confirmed the reduction of auto tariffs to 15% from 40% (this was already pledged but it is good to see it will be enacted on Jan 1.).

Today it’s all about economic data. The numbers from China and the EU this morning were not good and fears of a global economic slowdown are rising, and we need Retail Sales (E: 0.1%) and Industrial Production (E: 0.3%) to push back on that narrative, otherwise today could be another ugly day.

Economic Breaker Panel December Update

December 13, 2018/in Investing/by Tom Essaye

What’s in Today’s Report:

Economic Breaker Panel December Update (More Signs of Weakness)
EIA Analysis – Can the Bounce in Oil Hold?

Futures are slightly higher following a very quiet night of news, as markets digest recent volatility.

There was no change in U.S./China trade overnight but that’s a net positive as there has been legitimate and concrete progress on U.S./China trade over the past week.

Economic data was sparse as German CPI was the only notable number and it met expectations (2.3% yoy).

Today the highlight event is the ECB Meeting (E: No Change to Rates) but other than a potentially dovish tone from Draghi at the press conference, this shouldn’t impact markets too much. Outside of the ECB, we get Jobless Claims (E: 228K) and Import & Export Prices (E: -1.0%, 0.1%).

Bottom line, geo-political headlines remain key but as long as nothing implies a reversal of U.S./China trade progress, then stocks can extend this rally, led by tech and other China sensitive sectors (industrials, materials, consumer discretionary).

Finally, at a subscribers suggestion (thank you Maria!) we are now including the 10’s-2’s Treasury yield spread in the currencies and bonds table. Given how close the curve is to inversion, we’ll update that spread daily going forward so you’ll have a consistent place to check and see the latest levels. We hope you find it useful.

Sector Value and Performance

December 12, 2018/in Investing/by Nidhi Maniar

What’s in Today’s Report:

Sector Valuations and Performance Since the Breakdown

Stock futures are trading higher again this morning thanks to ongoing improvement in US-China trade war sentiment as Brexit drama and the threat of a potential US government shutdown continue to be largely shrugged off.

Huawei’s CFO was released on bail in Canada which was a market positive and Trump also told Reuters he may intervene in the case if it would help with a trade deal.

Economic data overnight was mixed but did not move markets as focus remained on trade.

Looking into today’s Wall Street session, focus will be on U.S. inflation data early with CPI due out ahead of the bell (E: 0.0%).

Beyond that release, the list of scheduled catalysts is thin as there are no Fed officials speaking or other economic reports which will leave traders focused on any further trade war developments.

Dow Theory Just Turned Bearish

December 11, 2018/in Investing/by Tom Essaye

What’s in Today’s Report:

Dow Theory: First Bearish Signal Since July 2015

Futures are enjoying a bounce this morning after top economic officials from the US and China held a conference call o/n regarding the next stages of trade negotiations.

Economically, the German ZEW Survey was mixed as the Current Conditions reading badly missed at 45.3 vs. (E) 55.0 but Business Expectations were not as bad as feared: -17.5 vs. (E) -26.0.

The NFIB Small Business Optimism Index was a disappointment this morning with the headline coming in at 104.8 vs. (E) 107.0, the lowest headline since May.

Looking at the calendar today, the catalyst list is fairly thin as there is only one economic report: PPI (E: 0.0%) however inflation has been an important topic recently and a material “miss” or “beat” could move markets. Meanwhile there are no Fed officials scheduled to speak.

That will leave the primary focus of the market on U.S.-China trade relations including any further developments or details from last night’s “trade call” as well as the Huawei CFO’s bail hearing in Canada.

Bottom line, as long as we see more positive trade headlines, sentiment should improve and trade optimism will likely continue to act as a near term tailwind for markets.

Why Markets Dropped and How We Find Stability

December 10, 2018/in Investing/by Tom Essaye

What’s in Today’s Report:

Why Stocks Dropped (New Reason) and How Markets Stabilize
Weekly Market Preview
Weekly Economic Cheat Sheet (CPI Wed. and lots of data Friday)

Futures and global markets are modestly lower due to momentum from Friday’s sell off.

News over the weekend was actually net positive as U.S./Chinese officials implied the Huawei CFO arrest was separate from trade, while China signaled it will begin buying U.S. soybeans and energy again.

Economically, Chinese exports missed estimates (5.4% vs. (E) 10.0%), although that number is very “noisy” and it’s not moving markets this morning (the Chinese economic data this Friday is more important than the trade balance).

There’s only one economic report today, JOLTS (E: 7.0M), and no Fed speakers so focus will remain on geo-political headlines (trade) and we should continue to expect more volatility. That said, the market is now deeply oversold in the short term, and if tech can stabilize and rally early, markets can bounce.

Technical Update (Encouraging Signals)

December 7, 2018/in Investing/by Tom Essaye

What’s in Today’s Report:

Market Technical Update (Encouraging Signals)
Why Stocks Rebounded Yesterday
Why the Yield Curve Has Flattened SO Quickly (Blame Oil)

Futures are modestly lower as markets digest yesterday’s late day rally and look ahead to this morning’s jobs report.

Geopolitically, initial reports imply the U.S./China trade talks will continue despite the Huawei CFO arrest, which if confirmed is clearly a positive.

Global economic data was mixed again as Chinese currency reserves beat estimates while German IP missed. But, neither number is moving markets this morning.

Today is all about the jobs report and given sudden uncertainty on Fed policy (will they pause?) this jobs report is now the most important one of the year. Expectations are as follows: Job Adds: (E) 190K, UE Rate: (E) 3.7%, Wages (E) 3.2% yoy), and the best outcome for stocks is a “mild miss” across all three segments.

Away from the jobs report we also get Consumer Sentiment (E: 97.4) and one Fed speakers, Brainard (12:15 p.m. ET).

Why Markets Are Dropping Again

December 6, 2018/in Investing/by Tom Essaye

What’s in Today’s Report:

Why Markets Are Dropping Again (And Why We Don’t Think It’s a Bearish Gamechanger)
What Needs to Happen in the Short Term for Markets to Stabilize
Jobs Report Preview
Bond Market Analysis (Yield Curve)

Futures are sharply lower as the arrest of the Huawei CFO in Canada has added to uncertainty on U.S./China trade, while oil is down sharply due to OPEC disappointment.

Huawei (Huawei is a giant Chinese telecom company) CFO Meng Wanzhou was arrested in Canada overnight and that is perceived as potentially complicating U.S./China trade.

Further adding to the downward pressure in markets is a 3% drop in oil, as Saudi Arabia proposed a 1 million barrel production cut, less than the 1.3 million barrel expectation.

Focus today will be on geo-political headlines, specifically any further reaction to the Huawei CFO arrest and anything that minimizes the situation will help stocks.

Away from geo-politics, we get several important economic reports including: ADP Employment Report (E: 175K), Jobless Claims (E: 225K), Productivity and Costs (E: 2.3%, 1.1%) and ISM Non-Manufacturing index (E: 59.0). But, even if the reports are all “Goldilocks” today’s price action will still be driven by geo-political headlines and, to a lesser extent, oil (it needs to stabilize).