Did the Pandemic Finally Peak?

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What’s in Today’s Report:

  • What Quietly Positive COVID News Means for Markets
  • Favorable Oil Fundamentals

S&P futures came for sale this morning amid more margin call concerns (like we saw Monday) as some of the most shorted U.S. companies continue to squeeze higher, led by GME which rose nearly 150% in overnight trade.

Economically, Chinese Industrial Profits encouragingly jumped to 20.1% in December from 15.5% in November while the GFK Consumer Climate report badly missed estimates which underscores the negative effects of lockdowns on sentiment in Europe.

Looking into today’s session, there is one economic report to watch pre-market: Durable Goods Orders (E: 1.0%) before focus will turn to the Fed events: FOMC Meeting Announcement (2:00 p.m. ET) and the Fed Chair Press Conference (2:30 p.m. ET).

Additionally, some of the most widely followed U.S. corporations will release Q4 earnings today including: BA (-$1.78), and T ($0.73) before the open, and AAPL ($1.41), TSLA ($0.99), FB ($3.24), LVS (-$0.30), RJF ($1.71), and AMP ($4.44) after the close.

Finally, we are seeing a repeat of Monday in the pre-market this morning as massive short squeezes are continuing to play out in the most heavily shorted names in the market (multiple stocks have doubled or more during the overnight session) and that is reverberating across the broader equity markets as the fear of sizeable margin calls is weighing on stock futures.

Despite the Fed meeting and important earnings being in focus today, expect the inverse relationship between names like GME, BBBY, DDS, and AMC, vs. the S&P 500 to continue as long-short equity funds are potentially forced to liquidate long positions over the course of the session.

Tom Essaye Quoted in Unseen Opportunity on January 26, 2021

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“The short squeeze/volatility we saw in heavily-shorted stocks such as GameStop and others yesterday only further confirms that, at least in the near term…” explained Tom Essaye, founder of The Sevens Report, in a note. Click here to read the full article.

Tom Essaye Quoted in CNBC on January 25, 2021

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“The short squeeze/volatility we saw in heavily-shorted stocks such as GameStop and others only further confirms that, at least in the near term, complacent/frothy investor sentiment…” Tom Essaye, founder of Sevens Report, said in a note Tuesday. Click here to read the full article.

FOMC Preview

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What’s in Today’s Report:

  • What the GameStop Drama Means for Markets
  • FOMC Preview

Stock futures are modestly lower this morning as yesterday’s volatile start to the week is digested while investors look ahead to the Fed meeting and a busy earnings week.

Volatility remained elevated overnight as the PBOC unexpectedly withdrew liquidity from the Chinese financial system while the U.K. unemployment rate hit a 5 year high.

Looking into today’s session, there are two measures of the health of the real estate market due out before the market opens: Case-Shiller Home Price Index (E: 0.8%) and FHFA House Price Index (E: 0.8%), and then Consumer Confidence (E: 88.5) will print shortly after the opening bell.

On the earnings front, the Q4 reporting season picks up today with several notable companies reporting quarterly results pre-market including: JNJ ($1.81), MMM ($2.19), GE ($0.08), VZ ($1.16), and AXP ($1.26), while MSFT ($1.64), AMD ($0.47), and COF ($2.85) will report after the close.

With the FOMC meeting beginning today and more mega-cap tech earnings due later in the week, it is likely we see some sense of “Fed paralysis” in the market as traders reposition into the middle of the week.

Three Things That Could Go Wrong

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What’s in Today’s Report:

  • Three Things That Could Go Wrong
  • Weekly Market Preview:  Stimulus Progress and Earnings Will Move Markets
  • Weekly Economic Cheatsheet:  Fed Meeting on Wednesday.

Futures are marginally higher as markets bounce back from Friday’s declines following a quiet weekend of news.

Economically, the only notable report was the German Ifo Business Expectations Index, which slightly missed estimates at 91.1 vs. (E) 93.2.

Politically, there was no progress on stimulus (that is the main focus of markets going forward) while the COVID travel bans that were announced won’t move markets as they were largely in place for the past several months (the bans were effectively just extended by the Biden Administration, so it’s not something materially new).

Today there are no economic reports so any “color” on the stimulus progress will move markets.

On the earnings front, we get some notable reports today (KMB ($1.61), BOH ($1.11), XLNX ($0.71)) but the really important results don’t come until Tuesday (MSFT) and Wednesday (AAPL, TSLA, FB, etc.)

Why Stocks Faded Yesterday (and Why They Are Down This Morning)

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What’s in Today’s Report:

  • Why Stocks Faded Yesterday (And Why They Are Down This Morning)

Futures are moderately lower on disappointing economic data and as optimism on stimulus fades slightly.

On stimulus, the political reality of Washington is starting to impact markets, and it’s becoming more unclear when Democrats’ ambitious stimulus goals will become law.

Economically, global flash PMIs were bad.  Japanese, EU and British PMIs all fell further below 50 and there was significant deterioration across the board from the December readings, implying that the coronavirus lockdowns are having a negative impact on global growth (and slowing global growth isn’t priced into stocks).

Today the key number will be the Flash Composite PMI (E: 55.5).  Markets will be looking for stability and for the U.S. to avoid the slowing of activity that we saw in the global data earlier this morning, because again a material slowing in growth is not priced into stocks at these levels.  We also get Existing Home Sales (E: 6.540M) later this morning.

Finally, earnings season remains in full swing, and some reports we’ll be watching today include:  ALLY ($ 1.05), SLB ($ 0.18) KSU ($1.91).

Revisiting Modern Monetary Theory (What It Means for Markets)

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What’s in Today’s Report:

  • Revisiting Modern Monetary Theory (Because It’ll Be Visiting Us for the Foreseeable Future)
  • What the Adoption of MMT Means for Markets (Specific Sectors)Futures are marginally higher mostly on momentum following a generally quiet night of news.

The familiar refrain of stimulus expectations (given the new administration) is pushing futures slightly higher this morning, but there was no actual news overnight.

Economic data was minimal and is not moving markets.

Today will be a busy day on the economic front, with the key numbers being Jobless Claims (E: 890K) and the Philadelphia Fed Manufacturing Index (E: 12.0) and markets will want to see stability in the data (so not a continued steep drop off that implies the recovery is losing more momentum).  We also get Housing Starts (E: 1.558M) later this morning.

Earnings will continue to be in focus as well, and some names we’re watching today include: TRV ($3.00), UNP ($2.25), INTC ($1.10), IBM ($1.77), CSX ($1.00), PPG ($1.57), STX ($0.99).

Economic Breaker Panel: January Update

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What’s in Today’s Report:

  • Sevens Report Economic Breaker Panel: January Update

Stock futures are trading higher as investors digest strong earnings and look ahead to the inauguration of Joe Biden as the 46th President today.

NFLX is up 13%+, testing record highs in premarket trade after the company released strong Q4 results yesterday.

Economically, European inflation data was largely inline with expectations and not moving markets this morning.

There will be a lot of moving pieces in the market today as investors focus on the inauguration ceremonies for incoming President Joe Biden, however there are multiple other catalysts on the calendar.

On the economic front, there is one report due to be released this morning: Housing Market Index (E: 86) while no Fed officials are scheduled to speak today.

Turning to earnings, there are several notable releases ahead of the bell including: PG ($1.51), UNH ($2.39), FAST ($0.33), and MS ($1.29), while UAL (-$6.37) AA ($0.12), and DFS ($2.27) will all report after the close.

Bottom line, barring any materially negative surprises from earnings or economic data today, optimism surrounding the stimulus plans of the incoming administration should help markets maintain this week’s risk-on tone into the back half of the holiday-shortened week.

Tom Essaye Interviewed with TD Ameritrade Network on January 19, 2021

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Tom Essaye was interviewed by Ben Lichtenstein from TD Ameritrade Network, discussing the auto industry, future growth opportunities within this field, EV market, & more…Click here to read the full article.

Can the Market Have the Best of Both Worlds?

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What’s in Today’s Report:

  • Can the Market Have the Best of Both Worlds?
  • Weekly Market Preview: The Problem Isn’t the Fundamentals, It’s the Expectations
  • Weekly Economic Cheat Sheet: Flash PMI Data in Focus

U.S. futures are tracking international equity markets higher this morning as investors remain optimistic about more fiscal stimulus bolstering a continued rebound in growth.

Economically, the German ZEW Survey was slightly better than expected overnight with the Sentiment component notably improving from the previous month.

There are no economic reports today and no Fed officials are scheduled to speak however Janet Yellen will speak before the Senate Finance Committee at 10:00 a.m. ET before the committee votes to confirm her nomination as Treasury Secretary. Her remarks are expected to be very accommodative and support significant fiscal stimulus for the foreseeable future, so any disappointment on that topic could weigh on stocks.

Beyond Yellen’s commentary, Q4 earnings season continues today with several notable financials reporting ahead of the bell: BAC ($0.56), GS ($6.99), and SCHW ($0.70) while NFLX ($1.38) will release results after the close.

Bottom line, it appears Friday’s risk-off move into the long weekend is being reversed this morning as there were no notable or market moving developments over the weekend and hope for stimulus clearly remain one of the most important supporting factors for this market right now.