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Tom Essaye Quoted in MaketWatch on August 14th, 2023

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China-focused ETFs drop as country’s property woes highlight ‘recession risks in China are real’

Concerns about China’s economy increased Monday after Country Garden Holdings Co. suspended trading in some offshore bonds, “reminding investors of Chinese property market volatility from years ago and reinforcing that recession risks in China are real,” Tom Essaye, founder and president of Sevens Report Research, said in a note. He also cited “downbeat trade data out of China” last week, with imports and exports both missing estimates.

Click here to read the full article.

What Is the Yen Carry Trade?

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What’s in Today’s Report:

  • What Is the Yen Carry Trade and Why Does it Matter to Markets?
  • Manheim Used Car Index Takeaways
  • S&P 500 Chart – Summer Uptrend Has Been Violated

Markets are risk-off this morning thanks to soft Chinese economic data, disappointing UPS earnings and guidance (shares are down over 6% in the premarket), and negative banking sector news in the U.S. and Europe.

Economically, Chinese exports fell -14.5% vs. (E) -12.6% in July, the steepest drop since the pandemic while imports also fell much more than expected which raises further concerns about the health of the Chinese economy, which was supposed to be a major source of global growth this year.

A surprise windfall tax on bank profits announced by the Italian government paired with Moody’s downgrading 10 smaller U.S. banks is weighing heavily on financials this morning and acting as a headwind on the broader equity indices as well.

Looking into today’s session, there is one economic report to watch: International Trade in Goods and Services (E: -$65.4B) and two Fed speakers: Harker (8:15 a.m. ET) and Barkin (8:30 a.m. ET), all scheduled for before the opening bell. The trade data shouldn’t move markets but if Harker and/or Barkin strike a more hawkish than anticipated tone today, that could send bond yields higher and weigh on equities.

Finally the Treasury will hold a 3-Yr Note auction at 1:00 p.m. ET and any meaningful moves in yields (higher or lower) could influence equity market trading this afternoon.

Tom Essaye Quoted in Barron’s on August 3rd, 2023

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Treasury Yields Keep Climbing

“The stronger-than-expected ADP jobs report pushed the dollar and long-dated Treasury yields higher on Wednesday, as the bond market continues to price in more resilient growth and/or inflation,” Tom Essaye, founder of the Sevens Report, wrote Thursday.

Click here to read the full article.

Current Market Glossary (For Clients & Prospects)

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What’s in Today’s Report:

  • Current Market Glossary (For Clients & Prospects)

Futures are slightly lower following a night of disappointing tech earnings.

NFLX, TSLA and TSM all posted disappointing earnings results (stocks down 3% – 6% pre-market) and that’s weighing on Nasdaq and S&P 500 futures.

There was no notable economic data overnight.

Today will be another busy day of data and earnings results.  On the economic front, the two key reports are Weekly Jobless Claims (E: 250k) and Philly Fed (E: -10.0), and as you can guess (and especially at these stretched valuations) markets will want to see more Goldilocks data (so stable claims and Philly and falling prices).  We also get Existing Home Sales (E: 4.23M) but, barring a big miss, that shouldn’t move markets.

Turning to earnings, focus today is on industrials and consumer/healthcare names, and some important results to watch include:  AAL ($1.58), TSM ($1.07), JNJ ($2.61), PM ($1.48), COF ($3.31), CSX ($0.49), and PPG ($2.14).

Market Multiple Table Chart (July Update)

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What’s in Today’s Report:

  • Market Multiple Table Chart (July Update)
  • Why More Goldilocks Data Sent Stocks Higher Again Tuesday

Futures are little changed ahead of a busy day of earnings and despite more encouraging news on global disinflation.

UK CPI rose less than expected, gaining 0.1% vs. (E) 0.4% m/m and 7.9% vs. (E) 8.2% y/y, providing bullish investors more evidence that inflation is declining globally, although that good news was partially offset by a very slightly higher final look at EU HICP (up 5.5% y/y vs. 5.4%).

Today focus will turn to earnings and the key reports to watch are: TSLA ($ 0.82), NFLX ($2.83) and GS ($3.25), as those results will help set the tone for the start of earnings season (results from companies up to today have been fine, although it’s very, very early).    Other notable earnings include:  ASML ($4.97), USB ($1.13), UAL ($3.99), and IBM ($2.00).

Economically, the only notable number today is Housing Starts (E: 1.48M) but barring a shocking miss, that shouldn’t move the broader markets.

What Pushes Stocks Higher from Here?

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What’s in Today’s Report:

  • What Pushes Stocks Higher from Here?
  • Weekly Market Preview:  Earnings Take Center Stage
  • Weekly Economic Cheat Sheet:  Growth Data in Focus this Week

Futures are slightly lower following mixed Chinese economic data and a potential further escalation of the Russia/Ukraine war.

Chinese economic data was mixed as GDP and Retail Sales both missed estimates, while Industrial Production beat, and the data will keep markets  wanting more stimulus.

Possibility of further escalation of the Russia/Ukraine war increased after Ukraine claimed responsibility for the destruction of a bridge linking Crimea and Russia.

Today focus will be on the first data point for July, the Empire Manufacturing Index (E: -4.3).  Markets will want to see this number be stronger than expectations and ideally turn positive, furthering the “Golidlocks” market narrative of falling inflation but stable growth.

Explaining Current Market Risks to Clients (And Prospects)

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What’s in Today’s Report:

  • How to Explain Risks in This Market to Clients/Prospects
  • Mannheim Used Vehicle Value Index Takeaways (Chart)

Futures are slightly higher while most international markets rallied overnight thanks to news of more Chinese government support for the property sector and steady EU inflation data.

German CPI met estimates of 0.3% m/m and 6.4% y/y in June, both unchanged from May, while the ZEW Survey was inline with expectations on the headline but Economic Sentiment deteriorated to -14.7 vs. (E) -10.2.

Domestically, the NFIB Small Business Optimism Index came in at 91.0 vs. (E) 89.8 in June which is helping bolster investor sentiment in the premarket.

There are no additional economic reports today and just one Fed speaker on the calendar: Bullard (9:00 a.m. ET) which will leave investors looking ahead to tomorrow’s critical CPI report.

Jobs Day

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What’s in Today’s Report:

  • How the Two-Year Yield Caused Yesterday’s Drop in Stocks
  • EIA Analysis and Oil Market Update

Futures are slightly lower following a mostly quiet night of news as investors wait for this morning’s jobs report.

Economic data underwhelmed as Japanese Household Spending (-1.1% vs. (E) 0.5%) and German Industrial Production (-0.2% vs. (E) -0.1%) both missed expectations.

Taiwan exports also fell more than expected, down 23.4%, and that’s adding to general anxiety about future global growth.

Today the only major event is the June jobs report and expectations are as follows:  213K job adds, 3.7% UE Rate, 0.3% wage increase m/m and 4.2% y/y.  As we saw from yesterday’s ADP report, a “Too Hot” number will spike yields and further pressure stocks, as the rise in yields is now getting high enough to be a headwind on the market.  Conversely, a “Too Cold” number will increase stagflation worries.

A job adds number in the 100k range coupled with an increase in the unemployment rate and a drop in wages remains the best outcome for stocks, and if we get that number don’t be surprised if the S&P 500 recoups all of yesterday’s losses.

Tom Essaye Quote in Barron’s on June 30th, 2023

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U.S. Stock Futures Rise Ahead of Key PCE Inflation Data

Futures are moderately higher mostly on momentum and end of quarter/half positioning, as economic data overnight was mixed but not bad enough to interrupt the rally, said Tom Essaye, founder at Sevens Report Research. Click here to read the full article.

Tom Essaye Quoted in Barron’s on June 30th, 2023

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Bank Stocks Are Higher After Passing Fed’s Stress Test

The 23 largest banks in the U.S. passed the Fed’s annual stress tests, and while none were expected to fail, the fact that there were no negative surprises is a general positive for the banking sector and financials, Tom Essaye, founder of research firm Sevens Reports, wrote Thursday. Click here to read the full article.