Tom Essaye Quoted in Benzinga on October 22, 2020

Heading into Thursday night’s final presidential debate between President Donald Trump and former Vice President Joe Biden, Biden has a commanding lead in most polls and online prediction markets. The stock market has a lot riding on the election outcome, but Sevens Report’s Tom Essaye said this week three industries…Click here to read the full article.

Joe Biden

A Market Supported By Great Expectations

What’s in Today’s Report:

  • A Market Supported by Great Expectations
  • Weekly Market Preview:  Earnings, Coronavirus and Polls are key this week.
  • Weekly Economic Cheat Sheet:  How Resilient is the Recovery?

Futures are down about 1% following a continued surge in coronavirus cases in the U.S. and Europe over the weekend, combined with disappointing earnings.

There were new records set in the U.S. and Europe for new daily coronavirus infections, increasing concerns about future growth-restricting lockdowns.

Tech giant SAP cut guidance and the stock is down 20%, which is weighing on the broad market.  SAP sighted coronavirus lockdowns as a reason for the guidance cut.

Today there is only one economic report, New Home Sales (E: 1.016M), and no Fed speakers.  Additionally, any hopes of a last-minute stimulus deal before the election seem to have been extinguished, although we still might get the “progress” or “positive” jawboning regarding the still on-going discussions.

Navigating a Policy Driven Market (All Blue Waves Aren’t the Same)

What’s in Today’s Report:

  • Navigating a Policy Driven Market (All Blue Waves Aren’t the Same)

Futures are modestly higher after a much more typical Presidential debate and following mixed, but generally solid, global flash October PMIs.

October flash PMIs were mixed, as the European PMI was in-line while the Japanese PMI beat estimates and the British reading slightly missed.  But, none of the data was bad enough to cause an increase in worry about the global recovery.

Politically, the final Presidential debate was more retrained and substantive than the first, but analysts don’t see it materially altering the race.

Today we get one important economic report, the October flash Composite PMI (:E 54.2) and it needs to show a solid reading (so close to in-line) to reaffirm the economic recovery is just plateauing and not regressing.

And, of course, we will watch the daily stimulus headlines.  We left off Thursday with Pelosi sounding optimistic on a deal.  Again, while the back and forth on stimulus might move markets in the very short term, stocks don’t need stimulus before the Election – they just need to know it’s coming before year-end (which is almost certainly is).

What Happens to Markets If Trump Wins?

What’s in Today’s Report:

  • What Happens To Markets If Trump Wins?
  • Oil Update and EIA Analysis

Futures are marginally weaker following negative stimulus headlines overnight.

President Trump tweeted that stimulus talks had again hit an impasse, implying there would be no deal before the election.  This has always been the base case for the market, but as we and others have said, as long as the market expects the $1.5T-$2.0T in stimulus before year-end, the breakdown in negotiations isn’t a major headwind on stocks.

Today, stimulus headlines will continue to move the tape in the short term, but we’ve also got an important economic report via weekly Jobless Claims (E: 868k) and if that number breaks above 900k, we’ll see concern start to rise the economic recovery is starting to slip.

Other notable events today include Existing Home Sales (E: 6.2M) and three Fed speakers: Barkin & Daly (1:10 p.m. ET), Kaplan (6:00 p.m. ET).

Finally, earnings season is starting to head up, and while stimulus talks are dominating the headlines, earnings are still important.  Some report to watch today include:  KO ($0.45), AAL (-$5.62), T ($0.77), LUV (-$2.44), UNP ($2.03), INTC ($1.10), COF ($1.99), STX ($0.98).

A Familiar Question: 1998 or 2000?

What’s in Today’s Report:

  • Stimulus Negotiations Update
  • A Familiar Question: 1998 or 2000? (Yield Curve Update)

Stock futures are flat after wavering between gains and losses overnight as investors hold out hope for a last minute stimulus bill while COVID-19 cases continued to rise around the globe.

There were no notable economic releases overnight and no major data points are due to be released today.

Looking into today’s session the lack of economic data will leave investors interested in Fed chatter with several officials speaking over the course of the day: Brainard (8:50 a.m. ET), Mester (10:00 a.m. ET), Kaplan, Daly, & Kashkari (12:00 p.m. ET), Barkin (1 p.m. ET).

Earnings will also continue to be closely watched with multiple notable reports due to be released today: VZ ($1.22), WGO ($0.90), AN ($1.63), TSLA ($0.58), CMG ($3.44), CSX ($0.93), and DFS ($1.63).

While the aforementioned factors will continue to be monitored by investors today, stimulus remains by far the most important influence on markets right now and any progress towards a sizeable, market friendly deal that is actually passable in the near term could trigger a big rally in stocks. Conversely, if talks fall apart and the timeline for a deal is pushed back, we could see stocks begin a potentially steep pullback on the news.

Asset Allocations (Long and Short Term)

What’s in Today’s Report:

  • Thoughts on Asset Allocations (Short and Long Term)

Stock futures are trading higher this morning amid cautious optimism for a last-minute stimulus deal.

There were no market-moving economic reports overnight however updates from Washington suggest that Speaker Pelosi and Treasury Secretary Mnuchin are continuing to make progress towards a deal ahead of today’s deadline.

Looking into today’s session, there is one economic report ahead of the bell: Housing Starts (1.451M), and a few Fed speakers: Quarles (10:50 a.m. ET), Evans (1:00 p.m. ET), Brainard (3:00 p.m. ET), and Bostic (5:00 p.m. ET).

Earnings season is continuing to pick up with several notable corporations releasing Q3 results today: LMT ($6.07), PM ($1.35), PG ($1.43), SYF ($3.47), TRV ($2.94), NFLX ($2.12), SNAP (-$0.05), and TXN ($1.26).

Bottom line, the economic data and Fed chatter likely won’t move markets today and while earnings could influence the price action in specific sectors, investor focus is almost exclusively on Washington and today’s deadline to reach a stimulus deal. So, reports of progress towards a deal will be supportive of stocks recovering from yesterday’s declines while news that the two sides remain far apart on certain issues could see stocks fall to fresh multi-week lows.

Tom Essaye Quoted in Barron’s on October 16, 2020

“While we think the time to rotate is growing closer, we do not agree this Fastly guidance cut is a canary in the…” writes Tom Essaye, author of The Seven Report newsletter. Click here to read the full article.

A Market Blind Spot

What’s in Today’s Report:

  • A Market Blind Spot To Watch
  • Weekly Market Preview:  Earnings In Focus This Week
  • Weekly Economic Cheat Sheet:  More Evidence of a Plateau? (Global Flash PMIs Friday)

Futures are sharply higher thanks to better than expected global economic data following a generally quiet weekend.

Chinese economic data beat estimates as IP (6.9% vs. (E) 5.8%) and Retail Sales (3.3% vs. (E) 1.6%) handily beat estimates, while GDP slightly missed but was still solid at 4.9%.

The U.S. political outlook was unchanged over the weekend, with the market assuming a Biden Presidency and Blue Wave on Nov 3rd (and subsequent stimulus not just in 2020 but also 2021).

Today there is one notable economic report, Housing Market Index (E: 83) and two important Fed speakers, Powell (8:00 a.m. ET) and Clarida (11:45 a.m. ET) but at this point expected monetary policy is well known so I don’t expect their comments will move markets.

So, we expect stimulus headlines to again drive the market in the very short term.  There is not an expectation of stimulus before the election, so if there’s any positive movement on that in the next few days, that will help stocks extend the rally.

Tom Essaye Interviewed with Yahoo Finance on October 16, 2020

“I think we have become fixated with stimulus,” Sevens Report Research founder Tom Essaye said on Yahoo Finance’s The First Trade. “The numbers are so big now…” Click here to watch the full interview.

Sevens Report Quoted in MarketWatch on October 16, 2020

“The not-too distant memory of negative oil prices still stings traders across the space as the threat of another supply chain crunch would rise exponentially with…” analysts wrote in the latest newsletter from Sevens Report Research. Click here to read the full article.