Why Stocks Dropped (Again)

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What’s in Today’s Report:

  • Why Stocks Dropped Yesterday
  • More Housing Trouble?
  • Are “Gassy” MLPs a Buy?

Futures are moderately lower on momentum as Monday’s U.S market declines spilled over globally and international weakness is now weighing on futures.

Economically it was another quiet night as German PPI met expectations at 3.3% while UK Industrial Trends were better than expected (10 vs. (E) -5).

There was no new news on the Fed or U.S./China trade although expectations are rising for a Trump/Xi “truce” at the G-20 and a more dovish tone from the Fed.

Today will be another quiet day, at least based on the calendar, as we have no Fed speakers and just one economic number: Housing Starts (E: 1.24M).   Given that, focus will remain on tech and the super cap names specifically.  FDN needs to stabilize and bounce to help arrest this short term sell off and that ETF is now at the top of my quote screen, as it’s driving the markets in the very short term.

Four Keys to a Bottom (Some Progress Achieved)

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What’s in Today’s Report:

  • Four Keys to a Bottom – Some Progress Achieved
  • Weekly Market Preview (Busy Despite the Holiday)
  • Weekly Economic Cheat Sheet (All About Flash PMIs and Housing).

Futures are marginally lower following a very quiet weekend as markets digest the Thursday/Friday rally.

There were no new developments on the Fed or U.S./China trade over the weekend so markets will start this week looking for something to further the recent positive momentum on both topics.

Economically, Japanese exports slightly missed estimates at 8.2% vs. (E) 9.0% but that’s not moving markets.

As mentioned, markets will be looking daily for any comments that reinforce the dovish comments from Fed Vice Chair Clarida on Friday and apparent improvement in U.S./China trade (Trump was positive on this Friday afternoon).  But that said, today should be pretty quiet as there is just on economic report, Housing Market Index (E: 68.00), and one Fed speaker, Williams (9:40 a.m. ET, 10:45 a.m. ET, 3:15 a.m. ET).

Sevens Report’s Tom Essaye quoted in Barron’s on November 15, 2018.

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Sevens Report’s Tom Essaye quoted in Barron’s on November 15, 2018. Read the full article here.

Sevens Report’s Tom Essaye appeared on Fox Business on November 15, 2018

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Sevens Report’s Tom Essaye appeared on Fox Business on November 15, 2018. Watch the full clip here.

 

Technical Update

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What’s in Today’s Report:

  • Technical Update
  • Economic Data Recap
  • EIA Analysis and Oil Update

US futures are down roughly 0.5% this morning thanks to soft earnings after the close yesterday, most notably by NVDA (the company’s shares fell nearly 20% overnight). Otherwise it was a relatively quiet night of news.

Oil is up over 1% this morning on optimism surrounding a potential OPEC-cut, but serious technical damage has been done on the charts this week, and right now, the medium term outlook is neutral at best for energy.

Economically, the only data point released overnight was Eurozone HICP which matched estimates at 2.2% y/y and is not materially affecting the euro or longer term outlook for the ECB.

Today, there is one important economic report to watch: Industrial Production (E: 0.2%) and two Fed speakers: Clarida before the open (8:30 a.m. ET) and Evans just before lunch (11:30 a.m. ET).

Otherwise, focus will be on tech shares today as if the bad earnings from NVDA weigh on the sector more broadly, then stocks will have a hard time extending yesterday’s bounce.

On the charts, yesterday’s close of 2730 in the S&P is an important level to watch as a close above would be a positive development for the near term technical outlook.

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.