Tom Essaye, president of Sevens Report Research, quoted in BNN Bloomberg

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I think the Fed will be a bigger influence over markets between now and year-end: Tom Essaye Interviewed on BNN Bloomberg

S&P’s $8 Trillion Rally Will Be Tested by Tricky Earnings Season

“Unless earnings are a major disappointment, I think the Fed will be a bigger influence over markets between now and year-end simply because earnings have been pretty consistent,” said Tom Essaye, founder and president of Sevens Report Research. “Investors expect that to continue.” 

Also, click here to view the full BNN Bloomberg article published on October 6th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

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Why Yesterday’s Economic Data Wasn’t That Bad

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What’s in Today’s Report:

  • Why Yesterday’s Economic Data Wasn’t That Bad

Futures are slightly weaker this morning as Tesla’s “Cyber Cab” event underwhelmed while investors look ahead to the start of earnings season.

Economically, German CPI and UK monthly GDP both met estimates and didn’t provide any negative surprises.

Today investors will be focused on more inflation data via PPI (E: 0.2% m/m, 1.6% y/y) and Core PPI (E: 0.2% m/m, 2.7% y/y) while there are also several Fed speakers including Goolsbee (9:45 a.m. ET), Logan (10:45 a.m. ET) and Bowman (1:10 p.m. ET).  But, barring any major surprises from PPI or those Fed officials, they shouldn’t move markets.

Additionally, focus will now turn towards earnings and that will be one of the dominant forces on markets for the next three weeks.  Key reports today include: JPM ($4.02), BLK ($10.42), WFC ($1.27), FAST ($0.52).

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Are Emerging Markets Finally A Buy?

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What’s in Today’s Report:

  • Are Emerging Markets Finally A Buy?
  • FOMC Minutes:  Did They Reinforce Rate Cut Expectations?

Futures are slightly lower mostly on digestion of Wednesday’s rally and as markets look ahead to today’s important economic data (CPI and claims).

Economically, Germany updated the last several retail sales reports and the net change was slightly better than expected, although that’s not moving markets.

Today focus will be on economic data as we get two potentially market moving reports:  CPI (E: 0.1% m/m, 2.3% y/y) / Core CPI (E: 0.2% m/m, 3.2% y/y) and Jobless Claims (E: 226K).  Goldilocks data, meaning an in-line CPI/Core CPI report and stable jobless claims, will keep soft landing hopes strong and likely boost stocks later today.

We also have several Fed speakers today including Cook (9:15 a.m. ET), Barkin (10:30 a.m. ET) and Williams (11:00 a.m. ET) but none of them should move markets.

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October MMT Chart: Record Targets Amid a Cautious Divergence

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What’s in Today’s Report:

  • October MMT Update – Scenario Targets Hit Fresh Records
  • A Concerning Technical Divergence Has Emerged on the Weekly S&P 500 Chart

Futures are mildly lower as the DOJ said it was considering a breakup of GOOGL following a monopoly ruling which dragged down tech stocks overnight while international news was mixed.

Chinese equities retreated 7% on the session amid ongoing stimulus uncertainty, prompting the government to announce a press event for Saturday to address fiscal policy.

Looking into today’s session, there are no notable economic reports to watch, leaving focus on the September FOMC meeting minutes which are due to be released at 2:00 p.m. ET.

There are a slew of Fed speakers today including: Bostic (8:00 a.m. ET), Logan (9:15 a.m. ET), Goolsbee (10:30 a.m. ET), Barkin (12:15 p.m. ET), Jefferson (12:30 p.m. ET), Collins (5:00 p.m. ET), and Daly (6:00 p.m. ET).

A less-dovish tone from Fed speakers over the course of the last week contributed to the uptick in broad market volatility, so more of the same could pressure markets again today while any hint of another 50 bp rate cut in November could spark a dovish wave of risk-on money flows (unlikely, however, after Friday’s jobs report).

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October MMT Update: Positive News (But Priced In)

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What’s in Today’s Report:

  • October Market Multiple Table – Positive News But Priced In

U.S. futures are higher on dovish-leaning comments by the Fed’s Kugler overnight while global shares declined broadly in sympathy with a near-10% drop in Chinese shares after the latest government stimulus efforts disappointed.

Economically, German Industrial Production rose 2.9% vs. (E) 0.8% in August, helping easing EU growth worries while the NFIB Small Business Optimism Index rose to 91.5 but narrowly missed estimates of 91.7.

There are no notable economic reports today, however several Fed officials are scheduled to speak: Bostic (12:45 p.m. ET), Collins (4:00 p.m. ET), and Jefferson (7:30 p.m.). Based on the market’s positive reaction to Kugler’s comments in the pre-market, more dovish commentary has the potential to fuel a further relief rally today while a hawkish tone would likely weigh on stocks.

Finally, there is a 3-Yr Treasury Note auction at 1:00 p.m. ET and given the hawkish money flows in the wake of last week’s ISM data and September jobs report, weak demand at the auction could send yields to new highs and further pressure equity markets.

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How to Cut Through the Market Noise

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What’s in Today’s Report:

  • How to Cut Through the Market Noise
  • Weekly Market Preview:  Inflation and Earnings
  • Weekly Economic Cheat Sheet:  CPI on Thursday is the Key Report

Futures are moderately lower following underwhelming economic data and as investors continue to wait for the Israeli response to Iran.

Economically, German Manufacturers’ Orders and Euro Zone retail sales both missed estimates.

Geopolitically, investors are still awaiting the Israeli response strike to Iran and that lingering uncertainty is further boosting oil and weighing on futures.

Today the calendar is quiet as there is just one economic report, Consumer Credit (E: $13.5B) and two Fed speakers, Bowman (1:00 p.m. ET) and Kaskari (1:50 p.m. ET) but none of that should move markets.  Instead, focus will be on geo-politics as investors anxiously await the Israeli response strikes on Iran and whether they hit key infrastructure (nuclear sites, energy sites) or not will determine the impact on markets.

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Jobs Day

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What’s in Today’s Report:

  • Jobs Day
  • Key VIX Levels to Watch

Futures are slightly higher following the end to the dockworkers’ strike and as investors wait for the jobs report and the Israeli retaliatory attack on Iran.

The dockworkers’ strike ended Thursday night, removing a potential economic headwind.

Geopolitically, markets are still awaiting the Israeli response to Iran, but reports are pointing to a military or domestic energy target, which is a mild positive (if Israel were to attack Iran’s nuclear facilities it’d be viewed as a major escalation and we’d expect oil to surge further and be a stronger headwind on stocks).

Today focus will be on the jobs report and expectations are as follows: 147K job-adds, 4.2% UE Rate and 3.8% wages (y/y).  As long as the job adds and unemployment rate are relatively close to expectations, we should see a mostly Goldilocks reaction as that implies a soft landing and will keep the Fed on track to cut twice more this year (50 bps).  The biggest risk for the market remains a very weak number.

Finally, there is also one Fed speaker today and he is part of leadership, Williams at 9:00 a.m. ET, but barring a substantial surprise, he shouldn’t move markets.

 

Sevens Report Quarterly Letter Delivered

Our Q3’24 Quarterly Letter was delivered to subscribers. We use our strength (writing about the markets) to help you:

  • Save time (an average of 4-6 hours per quarterly letter)
  • Show you’re on top of markets with impressive, compelling market analysis.

You can view our Q2 ’24 Quarterly Letter here. To learn more about the product (including price) please click this link.

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Jobs Report Preview (Important for Fed Rate Cut Expectations)

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What’s in Today’s Report:

  • Jobs Report Preview (Important for Fed Rate Cut Expectations)
  • EIA Analysis and Oil Market Update

Futures are modestly lower on continued elevated geo-political tensions and following mixed economic data.

Geopolitically, markets await the response from Israel to Tuesday’s attack and recent reports are stating it will be more aggressive than in April (increasing escalation risks).

Economically, EU and UK Service PMIs were mixed but both stayed above 50 (and economic positive).

Today focus will remain on economic data and the two key reports are Jobless Claims (E: 225K) and the ISM Services PMI (E: 51.5).  If the reports are close to in-line with expectations, look for a bounce in stocks as that will imply a still solid economy (soft landing) with looming Fed rate cuts (50 bps between now and year-end).

Regarding geopolitics, Israel’s response attack could come at any minute and the key here is whether it’s an aggressive attack on key Iranian military or oil infrastructure, or not.  If so, that could lead to further escalation (negative for the market).  If not, we likely have a repeat of April (where the situation cools down).  Regardless, watch oil.  If it spikes numerous percent (say 3% or more) that will reflect real, elevated geo-political tensions.

Sevens Report Quarterly Letter Delivered

Our Q3’24 Quarterly Letter was delivered to subscribers. We use our strength (writing about the markets) to help you:

  • Save time (an average of 4-6 hours per quarterly letter)
  • Show you’re on top of markets with impressive, compelling market analysis.

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The port strike could disrupt the data

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The port strike could disrupt the data: Tom Essaye Quoted in Forbes

Could Dock Worker Strike Spike Inflation? Experts Are Split.

Sevens Report analyst Tom Essaye wrote Tuesday to clients any strike-related inflation uptick is ultimately just a “temporary disruption” and shouldn’t impact the view of the broader inflation picture.

“The port strike could disrupt the data, essentially creating a smoke screen for the Fed when trying to stick the soft landing,” wrote Essaye.

Also, click here to view the full Forbes article published on October 1st, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Lastly, 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.

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Futures contracts tied to the index are telling a different story

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Futures contracts tied to the index are telling a different story: Tom Essaye Quoted in Market Watch

Why Wall Street’s ‘fear gauge’ could spike again around the election

But futures contracts tied to the index are telling a different story, and it’s one worth paying attention to, according to Tom Essaye, founder of Sevens Report Research.

The October VIX contract is trading at a premium to the November contract, an unusual development known to futures traders as “backwardation.” Typically, the VIX futures curve exhibits a smooth upward slope. But for most of this year, there has been a kink along this part of the curve.

According to Essaye, the inversion is notable not so much for its degree — the October contract was just 0.3 points above its September sibling as of early Thursday — but for its staying power. This segment of the curve has been in backwardation since the October contract started trading in February.

Also, click here to view the full MarketWatch article published on September 26th, 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.

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