What’s Next for Markets

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What’s in Today’s Report:

  • Why We Still Think Stocks Are in a Trading Range (And We’re Near the Top)
  • Two Indicators That Would Make Us More Bullish on Stocks (In the Currency & Bond Section)
  • Weekly Market Preview
  • Weekly Economic Cheat Sheet

Futures are flat following a very quiet weekend of no incremental news (the weekend news flow was similar to the scoring in the first half of the super bowl).

The only notable economic report was Chinese Service PMI which met expectations at 53.6 vs. (E) 53.9.  But, the composite PMI still dropped to 50.9 vs. the previous 52.2 so there are still legitimate reasons to worry about Chinese, and global, economic growth.

Today there are no notable economic reports and the only notable earnings report comes after the close (GOOGL ($11.08)) so I’d expect a generally quiet trading day as investors digest the recent rally/news.

Sevens Report’s Tom Essaye quoted in MarketWatch

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Sevens Report’s Tom Essaye quoted in MarketWatch on February 1, 2019.

“Under normal circumstances we would have had a negative reaction to this number, because it would cause the market to expect more rate hikes. But this won’t change the Fed’s calculus. Also, jobs are a really…” Read the full article here.

U.S./China Trade Update

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What’s in Today’s Report:

  • U.S./China Trade Update (What’s Expected Now and What It Means for Markets)

Futures are slightly lower as disappointing economic data offset U.S./China trade optimism.

Worries about global growth persist as the Caixin Chinese Manufacturing PMI fell to 48.3 vs. (E) 49.7 while European data wasn’t much better. The British Manufacturing PMI fell to 52.8 vs. (E) 53.5 while the EU reading was 50.5.

Today focus will be on the jobs report but the ultra-dovish Fed has taken some of the impact away from this report, because it’ll have to be incredibly strong to make the Fed skew more hawkish.  Expectations are: Jobs Adds of 158K, Unemployment of 3.9%,  M/M Wage gains of 0.3%.

In some ways, the ISM Manufacturing Index (E: 54.0) is the more important number today because if that’s a soft number, it’ll fan fears the Fed is reacting to a U.S. economy that’s losing momentum, so that’s the number I’m watching closely today.

Sevens Report’s Tom Essaye appeared on Yahoo Finance on January 31, 2019

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Sevens Report’s Tom Essaye appeared on Yahoo Finance on January 31, 2019. Watch the entire interview here.

Was the Fed A Bullish Gamechanger?

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What’s in Today’s Report:

  • Fed Takeaways – Was It a Bullish Gamechanger? (Not Yet)
  • Jobs Report Preview
  • EIA/Oil Market Analysis

Futures are slightly higher as markets digest yesterday’s very dovish Fed statement and subsequent rally, while Chinese economic data beat expectations but still was weak in the absolute.

Chinese January Manufacturing PMI beat estimates at 49.5 vs. (E) 49.3, but it still signals outright contraction, so this doesn’t imply stabilization in that economy.

Other economic data from Europe, including Euro Zone GDP and German Unemployment, met expectations.

Today there are two economic reports, Jobless Claims (E: 220K) and the Employment Cost Index (E: 0.8%) but neither should materially move markets.

So, focus will move back to earnings (there are a lot of reports today and GE has started us on the right foot) and any headlines from the U.S./China trade talks.  Regarding U.S./China trade, we don’t expect a deal from this meeting, but more reports of progress will support (and likely extend) yesterday’s rally.

Sevens Report’s Tom Essaye quoted in Axios on January 30, 2019

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Sevens Report’s Tom Essaye quoted in Axios on January 30, 2019. Read the full article here.

Pre-Fed Technical Update

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What’s in Today’s Report:

  • Pre-Fed Technical Update: Levels to Watch
  • Why Did Tech Lag so Badly Yesterday?

Futures are drifting modestly higher this morning as investors focus on the Fed, U.S.-China trade talks, and earnings.

News flows were slow overnight although the well-received AAPL earnings from late yesterday are helping US futures rally.

Today, primary focus will be on the Fed with the FOMC Meeting Announcement at 2:00 p.m. ET followed by Chair Powell’s press conference at 2:30 p.m. ET.

There are two economic reports due out this morning: ADP Employment Report (E: 174K) and Pending Home Sales (E: 0.3%). The former will be closely watched but it is unlikely we see any sort of material move in markets ahead of the Fed.

Earnings season is reaching its peak so there are a slew of reports to watch today with: BABA ($1.65), BA ($4.52), T ($0.85) before the open and FB ($2.17), MSFT ($1.09), TSLA ($2.15), V ($1.25), and QCOM ($1.09) all due to report after the close.

Again, earnings and data will be followed today and ultimately will be digested by the market accordingly, but the Fed this afternoon will be the major focus and whether or not the outcome of the meeting is as dovish as recent Fed commentary has been will decide whether the S&P breaks higher towards 2700 or retests initial, key support at 2600.

FOMC Preview

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What’s in Today’s Report:

  • FOMC Preview

U.S. equity futures are little changed this morning after a generally quiet night as investors focus turns to the Fed.

Late yesterday, the DOJ officially accused Huawei with financial fraud, stealing trade secrets, and sanctions violations and formally requested the extradition of the CFO from Canada which mildly pressured stock futures o/n.

Today, there are two, second tiered economic reports due to be released: S&P Case-Shiller HPI (E: 0.4%) and Consumer Confidence (E: 124.6), and the FOMC meeting begins which will likely bring a sense of “Fed paralysis” over the markets.

Earnings season remains in full swing and there are a few notable corporate releases on the calendar today: VZ ($1.09), MMM ($2.27), PFE ($0.63), AAPL ($4.17), AMD ($0.09), EBAY ($0.68).

If earnings are generally in-line (especially AAPL after the close) then the market will likely remain fairly choppy into tomorrow’s Fed Announcement and Powell’s press conference.

A Make or Break Week for the Rally

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What’s in Today’s Report:

  • A Make or Break Week for the Rally (Key Catalysts to Watch)
  • Why Last Week Was Better Than It Seemed

Futures are modestly lower following an uneventful weekend as markets digest Friday’s rally ahead of a very busy week.

The government shutdown ended on Friday but the shutdown was never an influence on stocks so the resolution isn’t going to be a positive catalyst.

There were no notable economic reports out over the weekend.

Today should be generally quiet as there are no economic reports and just one notable earnings report (although it’s an important one), CAT ($2.98).

But, barring any major surprises from CAT, investors and markets will likely spend today looking ahead to the key events coming later this week including:  FOMC Decision (Wed), Chinese Manufacturing PMIs (Thurs), Employment Cost Index (Thurs), Jobs Report (Fri) and U.S. Composite PMIs (Fri).  Those events, in aggregate, will likely decide whether we see an extension of this 2019 rally or a retracement back to previous support, so the stakes are high.

Finally, our regular editor is out through Wednesday so please excuse any higher than normal typos, etc.

Tyler Richey Quoted in MarketWatch on January 25, 2019

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Tyler Richey, co-editor of the Sevens Report Quoted in MarketWatch on January 25, 2019. His take on this market, natural gas, volatility and more. Read the full article here.