The threat of significant earnings reports or major economic releases

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The threat of significant earnings reports or major economic releases: Sevens Report Analysts Quoted in Investing.com

What the Fed decision means for markets, beyond the near term

Without the threat of significant earnings reports or major economic releases, investors appear to be operating in an environment that is “1) easing Fed, 2) slowing but ‘OK’ economic data, and 3) generally solid earnings,” Sevens Report said in a recent note.

According to the Sevens Report, if the rate cuts are timely, they could lead to falling yields, strong earnings growth, and positive economic tailwinds. This would likely result in continued upward momentum for stocks, with the potential for the S&P 500 to hit 6,000.

“I say that confidently because the Fed cutting in time would create this macroeconomic outcome: 1) Falling yields, 2) Continued very strong earnings growth, 3) Positive economic tailwinds, 4) The prominent existence of the Fed put and 5) Expectations of accelerating growth in the future,” President of Sevens Report wrote in the note.

Also, click here to view the full Investing.com article published on September 20th, 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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0DTE Options Primer (3 ETF Plays)

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0DTE Options Primer (3 ETF Plays): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • A Primer (and Potential Plays) on 0DTE Options
  • September Flash PMI Takeaways
  • Chart: The Rally in the “Rest of the Market” Is Losing Momentum

U.S. stock futures are tracking most global equity markets higher after the People’s Bank of China announced new stimulus measures to support economic growth overnight.

The PBOC cut a key policy interest rate, reduced bank reserve requirements, and injected more than $100B into the financial system sending Chinese stocks higher by 4%+.

Today, there are three economic reports to watch: Case-Shiller Home Price Index (E: 5.9%), FHFA House Price Index m/m (E: -0.1%), and Consumer Confidence (E: 103.0). After last week’s 50 bp rate cut from the Fed, investors are looking for stable and solid economic data so the risk to markets is underwhelming data this morning.

There is one Fed speaker today: Bowman at 9:00 a.m. ET and investors are increasingly hopeful the FOMC will cut rates by 50 bp again in November in order to pull off a soft landing so any pushback on that idea from Bowman could weigh on risk assets.

Finally, there is a 2-Yr Treasury Note auction at 1:00 p.m. ET. Strong demand (lower yields) will be supportive of a continued rally in stocks while a weak auction (higher yields) could also weigh on equity markets this afternoon.

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Understanding Why the Fed Cut 50 bps

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Understanding Why the Fed Cut 50 bps: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Understanding Why the Fed Cut 50 bps
  • Weekly Market Preview:  Can Momentum Keep Pushing Markets Higher?
  • Weekly Economic Cheat Sheet:  Focus Turns Back to Growth

Futures are slightly higher following a mostly quiet weekend of news and despite soft economic data overnight.

Economically, the EU flash PMIs were weaker than expected as manufacturing declined to 44.8 vs. (E) 45.7 while services nearly broke 50 (falling to 50.5 vs. (E) 52.3).

Geopolitically, Israeli strikes against Hezbollah continued but for now, markets are ignoring the escalation.

Today brings the two most important economic reports of the week vis the Flash Manufacturing PMI (E: 48.5) and Flash Services PMI (E: 55.3).  Numbers that meet or modestly exceed estimates should keep last week’s rally going while very disappointing readings will modestly increase growth concerns.

There are also several Fed speakers today including Bostic (8:00 a.m. ET), Goolsbee (10:15 a.m. ET) and Kashkari (1:00 p.m. ET).

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Hard Landing/Soft Landing Scoreboard (Updated)

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Hard Landing/Soft Landing Scoreboard (Updated): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Hard Landing/Soft Landing Scoreboard (Updated)
  • Post Fed Technical Takeaways

Futures are modestly lower on disappointing earnings results and as markets digest Thursday’s big rally.

Fed Ex (FDX) missed earnings, cut guidance and voiced concern about economic growth and that negative print is contributing to the decline in futures.

The Bank of Japan kept rates unchanged (as expected) and didn’t provide a hawkish surprise, although the BOJ is expected to hike rates again between now and year-end.

Today there are no notable economic reports and just one Fed speaker (Harker (2:00 p.m. ET)) and given that lack of catalysts we’d expect some continued digestion of Thursday’s big rally.

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What the Fed Decision Means for Markets (Near Term vs. Longer Term)

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What the Fed Decision Means for Markets (Near Term vs. Longer Term): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What the Fed Decision Means for Markets (Near Term vs. Longer Term)

Futures are sharply higher (up nearly 2%) as the Fed’s rate cut sparked a large global stock market rally (most major global indices are 1% – 2% higher).

Economically, there were no notable reports overnight.

Geopolitically, concerns are rising about a direct Israel/Hezbollah war, although investors are ignoring those increased risks, for now.

Today will be another busy day as there are two prominent central bank meetings and important economic data.  First, there is a BOE Rate Decision (E: No change) this morning but, more importantly, there’s a Bank of Japan rate decision late tonight.  The BOJ isn’t expected to raise rates but if they do (like in July) that could inject volatility into the markets (like it did in July).

Economically, there are two especially notable reports today, Jobless Claims (E: 230K) and Philly Fed (E: 2.0), while we also get Existing Home Sales (E: 3.90 million) and Leading Indicators (E: -0.3%).  With the Fed now having cut 50 bps, the stronger the data, the better, as it’ll increase soft landing expectations.

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Beyond the very short term, it’s all about growth

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Beyond the very short term, it’s all about growth: Sevens Report Editor, Tom Essaye, Quoted in Barron’s

The Stock Market Is Rising. It’s Not All About the Size of Rate Cuts.

Data on both retail sales and U.S. industrial production were solid, but traders still see a 61% chance of a half-point rate cut tomorrow. Sevens Report Research’s Tom Essaye says investors are still optimistic about a soft landing for the economy as the Fed prepares to cut rates. He notes tech earnings recently showed signs of life after some weaker showings in August.

Though you can expect some fireworks tomorrow as traders react to the rate decision and the forecasts for future cuts from central bank officials, Essaye argues economic data and earnings will be the market’s main driver ahead.

“Beyond the very short term, it’s all about growth,” Essaye says. “This Fed rate cut is honestly, other than from a sentiment standpoint, largely inconsequential, because whether or not the economy slows a lot between now and year end, this rate cut is not going to impact that; they take too long to filter through the economy.”

Also, click here to view the full Barron’s article published on September 17th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

It’ll be Very Hard for This Market to RallyIf 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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Fed-Day Technical Tear Sheet (Negative Divergence from Fundamentals)

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Fed-Day Technical Tear Sheet (Negative Divergence from Fundamentals): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Fed-Day Technical Tear-Sheet: Market Technicals Are Diverging Negatively from Still Optimistic Fundamentals
  • Economic Takeaways: Retail Sales and Industrial Production Top Estimates

Stock futures are trading tentatively higher as investors digest mostly as-expected inflation data out of Europe overnight and look ahead to today’s Fed decision.

Economically, Eurozone CPI met estimates at 2.2% y/y in August while the Core figure was also as-expected at an unchanged 2.8% y/y last month.

Today, focus will be on the one notable economic data point due to be released: Housing Starts (1.300M) but it is unlikely to materially move markets with the Fed decision looming this afternoon.

The FOMC Announcement will hit the wires at 2:00 p.m. ET followed by Fed Chair Powell’s Press Conference at 2:30 p.m. ET. The consensus expectation is a 25 bp rate cut will be delivered but market-based policy rate expectations are pricing in a 65% chance of a 50 bp rate cut as of this morning.

Bottom line, whether the Fed delivers a 25 bp or 50 bp rate cut today is less important than the guidance provided on future cuts as the market wants to see the framework laid out for a fairly aggressive rate cutting path in the months ahead to shore up soft-landing hopes. So projections and Powell’s speech will be critical for the market reaction late in the session.

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Markets are currently facing “tectonic risks”

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Markets are currently facing “tectonic risks”: Sevens Report Analysts Quoted in Investing.com

Markets are currently facing ‘tectonic risks’, strategists warn

The latest Sevens Report issued a warning, stating that markets are currently facing “tectonic risks” that could pose significant threats over time.

Sevens acknowledged a sense of disbelief among some investors who were surprised by the resilience of stocks, despite mounting political uncertainty and a clearly slowing economy.

According to Sevens, while there are visible warning signs—including rising unemployment, weak manufacturing data, and negative bank guidance—the overall news isn’t “bad enough yet to cause a sustainable decline in stocks.”

However, they pointed out that the macro risks are real, with political uncertainty (particularly around potential elections), economic ambiguity (whether there will be a soft or hard landing), and geopolitical tensions (including Russia/Ukraine and the situation in Taiwan) looming large.

However, “potential risks and anecdotal negatives, while all legitimate, and not yet enough to distract investors from positive factors in this market,” they wrote.

They believe factors such as the anticipation of Federal Reserve rate cuts, expected earnings growth, and sustained enthusiasm around artificial intelligence have been supporting the market.

The analysts stated that “the burden of proof remains with the bears” as these positive elements keep stocks buoyant for now.

However, the report emphasized that while markets could “grind higher” in the short term, with the potential for the S&P 500 to hit new highs, they remain exposed to “dramatic negative shocks” that could result in a significant 10%-20% decline.

“Bottom line, the risks currently facing this market (economic growth, earnings, geopolitics) are tectonic risks. They don’t present themselves all at once or in a flash, they evolve over time until they become sustainable and that’s when bear markets occur,” said Sevens.

Also, click here to view the full Investing.com article published on September 16th, 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.

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.

Wednesday’s CPI inflation report has the door open to a half-percentage-point reduction

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Wednesday’s CPI inflation report: Sevens Report Founder Tom Essaye Quoted in Morningstar

The stock market is falling after CPI report. Investors may fear Fed mistake.

Tom Essaye, founder of Sevens Report Research – said that if Wednesday’s CPI inflation report came in weaker than expected and left the door open to a half-percentage-point reduction on Sept. 18, that would be “better for markets” and “generally welcome” news.

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

Oil Inventories

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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The Fed could fall behind the curve as real interest rates continue to rise.=

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The Fed could fall behind the curve: Sevens Report Analysts Quoted in Investing.com

The Fed may be further behind the curve

“If we excluded housing from Core CPI, yesterday’s Core CPI reading would have increased just 0.1%,” they explained, downplaying fears of a significant inflation resurgence.

Despite this, the inflation data has reduced the likelihood of a 50-basis-point rate cut by the Fed.

The real risk, according to Sevens, is that the Fed could fall behind the curve as real interest rates continue to rise.

“Real interest rates are now putting more pressure on the economy than they have at any point during the Fed’s tightening cycle,” Sevens stated.

Also, click here to view the full Investing.com article published on September 12th, 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.

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.