Updated Market Outlook (Near Term Pain for Long Term Gain)

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What’s in Today’s Report:

  • Updated Market Outlook:  Near Term Pain for Long Term Gain?
  • Weekly Market Preview:  Economic Data and More Vaccine Optimism (MRNA)
  • Weekly Economic Cheat Sheet:  November Data Key This Week (Empire/Philly/Jobless Claims)

Futures are moderately higher despite a continued surge in COVID cases and more partial lockdowns, as markets look beyond the short term and focus on vaccine optimism.

The weekend brought more partial lockdowns in Michigan and Washington, but that was countered by Dr. Fauchi saying he thought the U.S. could be back to normal by April given the current and future vaccines.  That positive vaccine outlook is insulating the market, so far, from the negatives of surging COVID cases and lack of fiscal stimulus.

Chinese economic data was solid as Industrial Production and Retail Sales both beat estimates and generally the Chinese economy continues to recover (which is positive for emerging markets specifically).

For today (and all week), markets will be on “Moderna Watch” as MRNA could release vaccine results any minute, and positive Phase 3 results will obviously be an additional tailwind on stocks.

Economically, the key number today is the Empire State Manufacturing Index (E: 13.5).  This is the first datapoint from November, so markets will want to see stability, especially in the face of growing partial lockdowns.  Finally, there are two Fed speakers, Daly (1:45 p.m. ET) and Clarida (2:00 p.m. ET), but neither should move markets.

Economic Breaker Panel (November Update)

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What’s in Today’s Report:

  • Economic Breaker Panel (November Update)
  • The Two Reasons Stocks Dropped Yesterday
  • EIA Analysis and Oil Update

Futures are moderately higher as markets bounce from Thursday’s declines following a night of strong earnings.

DIS, CSCO and AMAT all posted stronger than expected earnings, and commentary was upbeat (especially from CSCO) and that’s helping to offset COVID concerns.

Economic data was slightly better than estimates as Euro Zone flash GDP and Exports both slightly beat estimates.

Today we have two economic report, PPI (E: 0.2%) and Consumer Sentiment (E: 82.0) and two Fed speakers, Williams (7:00 a.m. ET) and Bullard (8:30 a.m. ET) but none of that should move markets unless there’s a big surprise lurking.

Instead, focus will remain on any new lockdowns in the U.S. and on stimulus negotiation updates.  Incremental updates yesterday were negative on both topics, and if that happens again don’t be surprised to see these early gains given back (although it’s important to remember that the longer term outlook for COVID got materially better this week – it’s just going to be a bit bumpy in the near term).

Tom Essaye Quoted in SPGlobal on November 9, 2020

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“While there will be some discussion about how many people will take the vaccine, and some consternation that it’s a two-dose vaccine that takes 28…” Tom Essaye, founder of the Sevens Report, wrote in a Nov. 9 note. Click here to read the full article.

Tom Essaye Quoted in SP Global on November 10, 2020

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News of Pfizer Inc. and BioNTech SE’s investigational coronavirus vaccine likely reduced the chances of further QE as it boosted the likelihood of returning the U.S. economy to relatively normal in the coming months, Tom Essaye, founder of the Sevens Report, wrote in a Nov. 10 note.

“Going forward, the key becomes if the rise in yields stays ‘orderly…” Essaye wrote. Click here to read the full article.

Tom Essaye Interviewed with TD Ameritrade Network on November 10, 2020q

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Tom Essaye interviewed with Thomas White from TD Ameritrade Network, where he discussed covid19 vaccine, sectors to buy, value stocks, election, stocks on the downside, & more…Watch the full interview here.

Political Update

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What’s in Today’s Report:

  • Political Update
  • Yield Curve Steepening:  A Future Headwind?

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

The outlook for a stimulus bill to occur in 2020 has dimmed due to the looming Georgia Senate run-offs on Jan 5th, and that’s created a mild headwind on stocks.

On the vaccine front, Moderna (MRNA) announced that its Phase 3 trial accrued enough COVID-19 cases to be able to submit findings to regulators, so results are imminent (i.e. any day or over the next few weeks).

Today the key report is Jobless Claims (E: 741K) and markets will want to continue to see those numbers decline (or at least stay stable) as it’s looking more and more likely that stimulus will be delayed into 2021.  We also get CPI (E: 0.2%, 1.3%) and comments from Fed Chair Powell (9:30 a.m. ET), but neither should move markets unless there’s a big surprise lurking.

Market Multiple Levels: S&P 500 Chart

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What’s in Today’s Report:

  • Market Multiple Levels: S&P 500 Chart
  • Growth vs. Value: A Lower-Risk Way to Play the RotationU.S. equity futures are trading comfortably higher this morning as vaccine optimism continues to offset a resurgence in the COVID-19 pandemic and big cap tech stocks are showing signs of stabilizing in pre-market trade.

Daily new cases of the coronavirus hit a new high of over 135,000 in the U.S. yesterday while hospitalizations also hit record levels however investors continue to hold out hope that a vaccine will halt the spread in the coming months and the economy will be quick to normalize.

There are no economic reports today and no Fed officials are scheduled to speak which will leave investors focused on the timeline for the widespread availability of a vaccine and more importantly how quickly it will result in economic normalization.

The election remains a secondary influence on the market as well with Biden having declared victory over the weekend while Trump continues to file lawsuits in swing states about alleged voter fraud. Any further clarity or resolution on the election should act as a tailwind for markets in the near term as it will pull forward the timeline for the next coronavirus aid package.

Tom Essaye Quoted in MarketWatch on November 9, 2020

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“While there will be some discussion about how many people will take the vaccine, and some consternation that it’s a two-dose vaccine that takes 28 days to achieve effectiveness…” writes The Sevens Reports’ Tom Essaye. Click here to read the full article.

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Tom Essaye Quoted in CNBC on November 9, 2020

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S&P 500 could hit 3,900, according to the Sevens Report

Amid news of a successful Covid-19 vaccine, the S&P 500 making a run to the 3,900 level is possible, according to editor of the Sevens Report, Tom Essaye. “It is materially bullish for stocks in the near term…” Essaye told clients. Click here to read the full article.

Market Multiple Table: October Update

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What’s in Today’s Report:

  • Market Multiple Update: October Update

Stock futures are little changed this morning after wavering between gains and losses overnight as investors eye rising COVID-19 cases, an uptick in lockdown measures in the U.S., as well as stimulus and vaccine uncertainties.

Several economic reports in the EU including the German ZEW Survey as well as the U.S. NFIB Small Business Optimism Index missed estimates which is acting as a headwind on stocks this morning.

Looking into today’s session there is one economic report to watch: September JOLTS (E: 6.508M) and two Fed officials are scheduled to speak: Rosengren (10:00 a.m. and 4:00 p.m. ET) and Brainard (5:00 p.m. ET).

Additionally, the Treasury will hold a 10-Yr Note action at 1:00 p.m. ET and with the massive steepening we saw in the yield curve yesterday, the outcome could influence a further steepening trend which will eventually become a headwind for equities.

Outside of those potential catalysts, investor focus will remain on emerging details about the COVID-19 vaccine, specifically when it will be available and how it may impact the next stimulus package from Congress.