How Clients Should View Political Headlines

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How Clients Should View Political Headlines: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • How Clients Should View Political Headlines
  • Weekly Economic Preview: Inflation and Fed Minutes in Focus

Markets are trading with a risk-on tone to start the week with stock futures solidly higher, bond yields falling and the dollar declining as investors digest Trump’s Wall-Street-friendly pick of Scott Bessent for Treasury Secretary.

Economically, Industrial Production in Taiwan (a proxy for global semiconductor demand) slowed from 11.22% to 8.85% in October which could weigh modestly on tech stocks today while a German Business Sentiment gauge saw current and expected conditions deteriorate, rekindling worries about the EU economy.

Looking into today’s session, there is one second-tiered economic report to watch: Dallas Fed Manufacturing Survey (E: -3.9) but it should not meaningfully move markets.

There are no Fed officials scheduled to speak today however there is a 2-Yr Treasury Note auction at 1:00 p.m. ET. A good portion of today’s early rally in stocks futures can be attributed to the pullback in yields this morning, so a soft auction that sends yields back higher is the biggest risk to the early week gains today.

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Why the Gaetz Withdrawal Sparked Yesterday’s Rally

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Why the Gaetz Withdrawal Sparked Yesterday’s Rally: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why the Gaetz Withdrawal Sparked Yesterday’s Rally
  • Examining the Strange Positive VIX and S&P 500 Correlation

Futures are modestly weaker following surprisingly disappointing economic data from Europe.

The EU November flash PMIs tumbled (48.1 vs. (E) 50.2) with all three metrics (composite, manufacturing and services) falling below 50 and signaling contraction.

Similarly, the UK November flash PMIs were also weak (49.9 vs. (E ) 51.8) signaling a sudden drop in activity.

Today focus will remain on data and the more Goldilocks the data, the better for markets.  The key reports today are the November Flash Manufacturing PMI (E: 48.8) and Flash Services PMI (E: 55.2) while we also get Consumer Sentiment (E: 73) and, within that report, the 1-Yr Inflation expectations (E: 2.6%).  Again, in-line to slightly soft data will be the best outcome for stocks, as that implies solid growth and encourages a rate cut in December.

Finally, there is one Fed speaker today, Bowman (6:15 p.m. ET), but she shouldn’t move markets.

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Who’s Right on the Consumer? WMT (Positive) or TGT (Negative)

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What’s in Today’s Report:

  • Who’s Right on the Consumer?  WMT (Positive) or TGT (Negative)

Futures are little changed on disappointing NVDA earnings and after further escalation in the Russia/Ukraine war.

NVDA beat earnings estimates ($0.81 vs. (E) $0.74) but guidance disappointed at only 6.8% FQ4 revenue growth vs. (E) 11.75% and the stock is down 2% pre-market.

Geo-politically, Russia fired a non-nuclear ICBM into Ukraine for the first time, further escalating the conflict.

Today focus will turn back towards economic data as there are three notable reports (ranked in order or importance):  Jobless Claims (E: 219K), Philly Fed (E: 7.0) and Existing Home Sales (E: 3.90 million).  Given elevated Treasury yields, in-line to slightly soft data will be best for markets, as it reinforces a soft landing and would slightly boost December rate cut expectations.

There are also several Fed officials speaking today, including Hammack (8:45 a.m.), Goolsbee (12:25 p.m. ET) and Barr (4:40 p.m. ET) although they are unlikely to move markets (the Fed outlook is pretty known at this point and the looming jobs report will likely decide if we get a rate cut in December, or not).

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Data Check: Hard Landing or Soft Landing?

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Data Check: Hard Landing or Soft Landing?: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Hard Landing vs. Soft Landing Scoreboard
  • Chart: NVDA Earnings Loom Large – Key Technical Support in Focus

Futures are slightly higher but well off session highs as “warm” EU inflation data pushed yields higher overnight with the U.S. 10-Yr pushing back beyond 4.40%.

Economically, inflation data in Europe was “warm” as U.K. Core CPI rose 3.3% y/y vs. (E) 3.2% in October while German PPI unexpectedly rose 0.2% m/m last month following a sizeable 0.5% drop in September.

There are no notable economic reports today but there is a 20-Yr Treasury Bond auction at 1:00 p.m. ET that could move markets depending on demand measures for the longer duration government bonds (higher yields would weigh on stocks again).

Additionally, there are two Fed speakers today Cook (11:30 a.m. ET) and Bowman (12:15 p.m. ET), but unless they are materially hawkish, their comments should not move markets.

Finally, earnings season has largely wound down however there are some notables reporting quarterly results today including: TGT ($2.29), TJX ($1.09), NVDA ($0.74), PANW ($1.48), SQM ($0.64).

Interestingly, Barclays analysts noted earlier this week that options markets suggest today’s report from NVDA will be the biggest catalyst remaining in 2024, underscoring the importance of investor sentiment towards the AI-darling’s growth prospects, leaving the chip-maker’s earnings report a potential make-or-break event for markets this afternoon.

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2025 Market Risks: Pullback Causers vs. Rally Killers

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What’s in Today’s Report:

  • 2025 Market Risks: Pullback Causers vs. Rally Killers

Futures are lower with EU shares as escalating geopolitical tensions are driving risk-off money flows this morning.

Overnight, Russian President Putin approved a doctrine that lowered the threshold for the use of nuclear weapons and shortly thereafter, Ukraine reportedly launched their first long-range ballistic missile attack on targets in Russia prompting risk-off/safe-haven money flows.

Economically, Eurozone HICP (CPI equivalent) was inline in October with a headline of 2.0% y/y and 2.7% y/y Core which did not materially move markets amid the geopolitical developments.

Today, the fluid geopolitical situation in between Russia and Ukraine will be in focus as the uncertainties surrounding the next steps in the conflict will likely drive risk-aversion until some degree of clarity emerges.

Domestically, there is one economic report due to be released: Housing Starts (1.3M) and two Fed speakers to watch: Goolsbee (12:25 p.m. ET) and Schmid (1:10 p.m. ET). Barring a big surprise in the data or any meaningfully dovish or hawkish changes in rhetoric, the data and Fed speakers will not likely move markets materially.

Finally, on the earnings front we will get quarterly results from WMT ($0.53), LOW ($2.81) and MDT ($1.24) today.

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Why Did Stocks Drop Last Week?

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Why Did Stocks Drop Last Week?: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Did Stocks Drop Last Week?
  • Weekly Market Preview:  Focus on Treasury Secretary, NVDA earnings and economic growth (Thursday/Friday).
  • Weekly Economic Cheat Sheet:  Important Growth Data Late This Week

Futures are little changed following a quiet weekend of news as markets continue to digest last week’s rise in Treasury yields, and the return of political surprises (via Trump’s cabinet announcements).

There were no notable economic reports overnight.

Politically, the major remaining cabinet pick from Trump is Treasury Secretary and it should come early this week (and another unorthodox choice would further roil markets).

Today the calendar is quiet as there is just one economic report, Housing Market Index (E: 43), and one Fed speaker, Goolsbee (10:00 a.m. ET).  So, focus will be on Trump’s cabinet (again, the more traditional choice for Treasury, the better for markets) and on the 10-year yield.  If it keeps rising, that will be a continued headwind on stocks.

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Where Are We In the Bull Market Cycle? (One Year Later)

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Where Are We In the Bull Market Cycle?: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Where Are We In the Bull Market Cycle? (One Year Later)

Futures are moderately lower as markets continue to digest the market implications of the Republican win while economic data was mixed.

The U.S. Dollar at near two-year highs along with the 10-year yield pushing 4.50%, combined with Trump’s recent unorthodox cabinet picks, is causing investors to re-assess the potential impacts of the incoming Republican government.

Focus today will be on economic data and given the less dovish rhetoric from Fed officials this week, markets will want to see in-line to slightly soft reports to keep rate cuts on track.  If the data is hotter than expected, look for yields to rise and stocks to extend the early losses.  The important reports today include Retail Sales (E: 0.3%), Empire Manufacturing (0.0) and Industrial Production (E: -0.3%) and we have one notable Fed speaker, Williams (1:15 p.m. ET).

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The bullish thesis for stocks is stronger now

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The bullish thesis for stocks is stronger now: Tom Essaye Quoted in Market Watch

The market has passed four key tests, newsletter writer says

Tom Essaye, founder and president of the Sevens Report, says the bullish thesis for stocks is stronger now because all of the tests set up two weeks ago were passed.

The major economic reports of the past two weeks were solid, with the payrolls disappointment largely explained by hurricanes and strikes;

The Fed remains committed to cutting rates;

Earnings were more mixed than excellent but still haven’t changed estimates for S&P 500 earnings per share next year very much;

And Republicans have large enough majorities to push through pro-growth legislative changes.

“While the bullish thesis passed the tests of the past two weeks, do not confuse this with a market that cannot go down,” he says. “There are real risks to this rally that we cannot ignore over the medium/longer term, although investors could ignore them unless forced not to between now and year-end.” A move to 6,200 on the S&P 500 before the end of the year is “entirely possible” as he said the market will likely favor value, cyclical sectors and the equal-weight S&P 500 over the market-weighted index.

Also, click here to view the full MarketWatch article published on November 11th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

I’d expect some digestion of the move or a mild drift higher

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I’d expect some digestion of the move or a mild drift higher: Tom Essaye Quoted in Blockworks

In a surprise to no one, Fed cuts rates by 25bps

It’s the same crucial sentence we’ve seen before, which shouldn’t shock markets. And, as a result of no surprises, stocks should see at least a mild extension of their Trump-fueled rally, according to Sevens Report Research founder Tom Essaye.

“Given yesterday’s strong rally, I’d expect some digestion of the move or a mild drift higher,” Essaye said. “However, this outcome should keep expectations for a rally into year-end in place, led by cyclical sectors — industrials, financials, small caps [and] energy — with tech and defensives lagging.”

Also, click here to view the full Blockwork article published on November 7th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

Equities surged as a Republican sweep is the likely election outcome

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Equities surged as a Republican sweep is the likely election outcome: Tom Essaye Quoted in Morningstar

Dow soars as these areas are ‘likely market winners’ of potential Republican sweep

Equities surged as “a Republican sweep is the likely election outcome,” Tom Essaye, the founder and president of Sevens Report Research, said in a note Wednesday. “This likely ‘green lights’ a solid year-end rally as long as growth and the Fed perform as expected.”

The note described the Republican agenda as favoring “pro-growth policies,” citing tax cuts, deregulation, “a focus on domestic industries and negotiating better trade relationships.”

Essaye pointed to several exchange-traded funds as “the likely market winners from this policy stance,” including the Vanguard Value ETF VTV, which invests in large-cap value stocks in the U.S., and the small-cap equities-focused iShares Russell 2000 ETF IWM.

Also, click here to view the full MarketWatch article published in Morningstar on November 6th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Oil Inventories

If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

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