Technical Outlook for Growth vs. Value

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What’s in Today’s Report:

  • Current Technical Outlook for Growth vs. Value
  • Cooler Than Feared German CPI Roils Currency Markets

Markets are trading with a risk-on tone this morning following favorable economic data overnight while traders look ahead to today’s domestic data and the release of the Fed minutes.

Economically, France’s December CPI headline fell to 5.9% vs. (E) 6.3% y/y while Composite PMI headlines across Europe were revised solidly higher from the Flash prints. Those data points indicate a faster drop in inflation and more resilient economic activity which bolsters the prospects of a soft landing.

Looking into today’s session, we get a few notable economic reports this morning including: Motor Vehicle Sales (E: 13.7 million), ISM Manufacturing Index (E: 48.0), and JOLTS (10.1 million) before the focus will turn to the release of the December FOMC Meeting Minutes at 2:00 p.m. ET.

Bottom line, optimism about quickly retreating inflation rates overseas and better-than-feared growth readings are driving risk-on money flows overseas today and if we see more of the same in the U.S. data today, that can continue. Regarding the Fed Minutes, any positive mention about progress on getting inflation under control will be well received and could see the pre-market gains extended into the afternoon.

Tom Essaye Quoted in Yahoo via Bloomberg on December 29th, 2022

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Stocks Post Month’s Best Day as Rate Surge Fades: Markets Wrap

“Markets enter 2023 at important transition points. One path is paved with continued disinflation, resilient earnings, moderating growth, a balanced labor market, and higher stock and bond prices. The other path is paved with sticky inflation, slowing growth, a continued tight labor market and lower stock and bond prices. Data points at the start of the year will offer important clues as to which path the markets are taking.” Said Tom Essaye, a former Merrill Lynch trader who founded The Sevens Report newsletter. Click here to read the full article.

Tom Essaye Quoted in Barron’s on December 21st, 2022

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Dow Soars 500 Points as Consumer Data Adds Some Cheer

“Stocks are digesting the declines of the past two weeks and while there are some notable employment and inflation numbers looming on Thursday and Friday, the bottom line is the calendar into year-end should be mostly quiet, again barring any material surprises,” Tom Essaye, the founder of Sevens Report Research, wrote Wednesday. Click here to read the full article.

Tom Essaye Quoted in Barron’s on December 29th, 2022

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The Nasdaq Jumped Over 2% as Markets Staged a Relief Rally

“In China, Covid-19 cases continue to explode higher and there were reports of overwhelmed hospitals, but officials are proceeding with a full economic reopening.” said Tom Essaye, the founder of Sevens Report Research. Click here to read the full article.

Three Keys to a Bottom: Update

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What’s in Today’s Report:

  • Three Keys to a Bottom: Update
  • Weekly Economic Cheat Sheet – Jobs Report in Focus

U.S. equity futures have a tentative bid to start the new year today as tech stocks are outperforming amid a sharp pullback in Treasury yields.

Economically, China’s Manufacturing PMI fell to 49.0 in December from 49.4 in November while the U.K.’s Manufacturing PMI came in at 45.3 vs. (E) 44.7 last month. Both figures remained well below 50, in contraction territory, and that is seeing some of the recent hawkish central bank expectations unwind as we begin the new year.

Looking into today’s session, there are two economic reports to watch in the U.S., the Manufacturing PMI (E: 46.2) and Construction Spending (E: -0.4%).

Investors will be looking for data that points to a continued slowdown in growth but a more pronounced drop in price readings as that should help further ease hawkish policy expectations and allow the early but tentative risk-on money flows to continue.

There are no Fed officials scheduled to speak and no notable Treasury auctions today. That will leave investors focused on Treasuries as a continued drop in yields today should support a continued bid in tech stocks and equities more broadly as traders reposition into the new year.

 

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Why There’s Some Cause for (Cautious) Optimism

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What’s in Today’s Report:

  • Why There’s Some Cause for Cautious Optimism

Futures are slightly lower following a quiet night of news as markets digest Thursday’s rally.

Economically the only notable number was the UK Home Price Index, which like the U.S. readings this week saw smaller than expected declines, falling –0.1% vs. (E) -0.7%.

Geopolitically, Russia continued Thursday’s missile bombardment of Ukraine is a clear signal that fighting will rage on as the New Year begins.

Trading today will be dominated by book squaring and year-end positioning but there is one notable economic report, Chicago PMI (E: 41.0), and if it’s weak it could weigh on markets moderately.

The Key Events to Start 2023

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What’s in Today’s Report:

  • The Key Events to Start 2023

Futures are slightly higher following a quiet night of news as markets bounce following Wednesday’s declines.

The economic calendar was mostly quiet overnight and the only notable economic report was Euro Zone Money Supply while was essentially in-line with expectations, rising 5.4% vs. (E) 5.5%.

In China, COVID cases continue to explode higher and there were reports of overwhelmed hospitals, but officials are proceeding with a full economic reopening.

Today the focus will be on Jobless Claims (E: 222K) and markets will want to see this number move higher towards 250k (and ultimately 300k).  If claims remain stubbornly low, that could weigh on stocks (like it did last week).

Is It Time to Allocate to Growth?

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What’s in Today’s Report:

  • The Start of 2023 Isn’t the Time to Allocate to Growth
  • Case-Shiller and FHFA House Price Indices
  • Chart: Value Massively Outperformed Growth in 2022

Stock futures are modestly higher in cautious trade this morning with Treasuries largely steady and overseas markets mixed as focus remains on China’s reopening efforts.

China’s government will resume the issuance of passports and visas while Hong Kong dropped PCR testing requirements for travelers, however the rapid move away from “Zero Covid” is beginning to rekindle inflation worries which could become a renewed headwind on equities.

Looking into today’s session, there are two economic reports to watch: Pending Home Sales (E: -0.5%) and the Richmond Fed Manufacturing Index (E: -6) but neither should impact Fed policy expectations or meaningfully move markets in quiet holiday trading.

There are no Fed speakers to watch today but the Treasury will hold a 5-Yr Note auction at 1:00 p.m. ET and following yesterday’s large move higher in yields, surprisingly strong or unexpectedly weak demand could influence equity market trading.

Sevens Report Analysts Quoted in Market Watch on December 21st, 2022

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Oil prices end higher after drop in U.S. crude inventories

“Specifically, despite skyrocketing cases and reports of stressed hospitals, Chinese authorities are not locking down cities and that implies continued increases in energy demand as the world’s second largest economy comes back online,” said analysts at Sevens Report Research, in a note. Click here to read the full article.

Tom Essaye Quoted in Barron’s on December 21, 2022

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Dow Soars 500 Points as Consumer Data Adds Some Cheer

“Stocks are digesting the declines of the past two weeks and while there are some notable employment and inflation numbers looming on Thursday and Friday, the bottom line is the calendar into year-end should be mostly quiet, again barring any material surprises,” Tom Essaye, the founder of Sevens Report Research, wrote Wednesday. Click here to read the full article.