Yield Curve Update (Getting Closer to a Danger Zone)

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What’s in Today’s Report:

  • Yield Curve Update (Getting Closer to a Danger Zone)
  • Jobs Day

Futures are modestly higher as the Senate moved forward on stimulus, so the positive market narrative of more stimulus and more vaccine continued overnight.

The Senate voted 51-50 (VP Harris breaking the tie) to move forward with the reconciliation process on a stimulus bill, meaning a $1.5T-$1.9T bill should pass in mid-March.

On the vaccine front, the FDA scheduled a Feb. 26th hearing to approve the JNJ single dose vaccine, so by March 1st there will be three COVID vaccines in the market.

Looking forward to today, the key number is the Jobs Report and estimates are for Job Adds of 50K and Unemployment Rate of 6.7%.  Unless the number is very good (so over 400k jobs adds, UE rate sharply lower) or absolutely horrible (-100k job losses or more) it shouldn’t interrupt this week’s rally.

Tom Essaye Quoted in Courthouse News Service on February 2, 2021

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The run on silver, a notoriously volatile asset, could continue. “Looking ahead, the trend in silver is bullish…” wrote Tom Essaye of the Sevens Report in a Tuesday morning investor’s note, adding that it is not unreasonable to see silver reach $80 per ounce in a longer timeframe. Click here to read the full article.

Jobs Report Preview

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What’s in Today’s Report:

  • Jobs Report Preview
  • EIA and Oil Market Analysis (Still Bullish)

Futures are slightly higher as markets continue to digest the week’s early rally following a quiet night of news.

Economic data underwhelmed as the UK Construction PMI and EuroZone Retail Sales both missed estimates, but neither number is moving markets this morning.

On the stimulus front, the Democrats continue to move forward with reconciliation and markets now expect a stimulus bill between $1.5-$1.9T sometime in March.

Today stimulus headlines will continue to drive markets and the real question now is whether the stimulus bill ends up more towards $1.9 trillion (more bullish for stocks, yields and inflation in the short term) or $1.5 trillion (less bullish for stocks, yields and inflation in the short term).

Away from stimulus expectations, the key number today is Jobless Claims (E: 835K) and markets will want to see a continued decline to show the labor market is not deteriorating further.  We also get two Fed speakers: Kaplan (1:00 p.m. ET) and Daly (2:00 p.m. ET), but neither should move markets.

Is the Silver Rally Sustainable?

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What’s in Today’s Report:

  • Is the Silver Rally Sustainable?
  • ISM Manufacturing PMI takeaways

Stock futures are solidly higher this morning as the rebound from last week’s declines continues amid renewed stimulus optimism and positioning into key earnings.

Moderate Senate Republicans presented President Biden with a $600B+ stimulus package yesterday raising hopes for a bipartisan deal sooner than previously expected.

Today, there is only one economic report due out this morning: Motor Vehicle Sales (16.2M), and two Fed speakers are scheduled for the early afternoon: Williams (2:00 p.m. ET), Mester (2:00 p.m. ET).

That will leave investor focus on any new stimulus developments out of Washington and another busy earnings release schedule today

Notable companies releasing their Q4 results today include: UPS ($2.10), BABA ($3.22), PFE ($0.45), and XOM ($0.01) before the open and AMZN ($7.05), GOOGL ($15.89), and CMG ($3.71) after the close.

A Potentially Bearish Technical Signal

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What’s in Today’s Report:

  • A Potentially Bearish Technical Signal
  • Updated Market Outlook (Factoring in GME)
  • Weekly Market Preview:  GME, Stimulus and Economic Data
  • Weekly Economic Cheat Sheet:  Jobs Week

Futures are sharply higher as markets bounce back from last weeks’ declines following a generally quiet weekend.

Stocks are seeing an oversold bounce and are recouping some of Friday’s losses as there was no notable news (positive or negative) on the GME situation, although the Reddit short squeeze crowd is now targeting silver – so they haven’t gone away.

Regarding stimulus, the process is continuing and at this point markets expect a stimulus bill in the coming weeks (likely somewhat smaller than $1.9 trillion but not that much smaller).

Economic data was mixed as the Jan. Chinese Manufacturing PMI missed estimates (51.3 vs. (E) 51.6) while the UK Mfg PMI beat estimates and the EU number was in-line with expectations, but none of those numbers are moving markets.

Today focus will be on the two near term market catalysts:  GME and stimulus.  Regarding GME, if there are any signs of contagion we should expect more volatility.  On stimulus, Biden is meeting with centrist Republicans today but the bottom line is the market expects a lot more stimulus in the coming weeks and anything that alters that view would be a negative.

Tom Essaye Quoted in Courthouse News Service on January 28, 2021

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“Stocks such as GameStop usually don’t move markets, but as is almost always the case, fears of contagion are starting to impact the broad market…” Tom Essaye of the Sevens Report wrote in an investor’s note early on Thursday. Click here to read the full article.

Tom Essaye Quoted in Barrons’s on January 26, 2020

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“In late-morning trade, selling pressure quickly picked up on the back of comments from Sen. Schumer…” wrote Tom Essaye, founder of Sevens Report Research, in a note. Click here to read the full article.

Can GameStop Cause A Correction?

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What’s in Today’s Report:

  • Can GameStop Cause a Correction?
  • Why Yesterdays FOMC Meeting Was More Important Than It Seemed
  • Oil Analysis and EIA Update

Futures are marginally lower as markets digest Wednesday’s selloff following a quiet night of news.

Foreign markets traded lower as they reacted to Wednesday’s U.S. sell off, but that was driven by sentiment, not any actual bad news. To the contrary, earnings after the close yesterday were solid, including AAPL and FB.

Today there are important events outside of GameStop and it’s heavily shorted peers, but how those stocks trade will decide whether this pullback gets worse or takes a pause.  Broadly, the market is moving inverse to GME and similar stocks, so if they rally today, expect more market declines, and if they decline, look for stocks to bounce back.

Looking at actual fundamentals, the key report today is Jobless Claims (E: 875K) and markets will want to see that number continue to decline from the recent highs.  We also get Advanced Q4 GDP (4.2%), but while that will get media attention, it’s a dated number and won’t move markets.  New Homes Sales (869K) will also be released later this morning, but shouldn’t move markets.

On the earnings front, the biggest reports for the week have already been released, but there are still notable reports today including: AAL (-$3.92), JBLUE (-$1.72), LUV (-$1.69), MA ($1.51), SHW ($4.85), CMCSA ($0.49), V ($1.27), X (-$0.67).

Sevens Report Co-editor Tyler Richey Quoted in MarketWatch on January 26, 2021

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“So far in 2021, oil traders have gained increased clarity regarding global production and supply dynamics which has acted as a tailwind…” Tyler Richey, co-editor at Sevens Report Research, told MarketWatch. Click here to read the full article.

Tyler Richey Co-editor of the Sevens Report Quoted in Barron’s on January 27, 2021

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Tyler Richey of Sevens Report Research tells Barron’s that an ongoing short squeeze may also weigh on the broader market. In order to fund the ability to buy back stocks that were previously shorted, long-short hedge funds must sell existing holdings…Click here to read the full article.