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Updated Near-Term Market Outlook

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What’s in Today’s Report:

  • Updated Near-Term Market Outlook
  • Weekly Economic Cheat Sheet

U.S. stock futures are trading higher with European shares amid renewed hopes of a ceasefire in Ukraine while Asian markets declined overnight on new Covid-19 lockdowns.

Geopolitically, Russia continued with aggressive military attacks against Ukraine over the weekend but diplomatic negotiators noted solid progress in ceasefire discussions which is helping risk assets bounce this morning.

There are no economic reports today and no Fed officials are scheduled to speak.

The Treasury will hold an auction for both 3-month and 6-month Bills at 11:30 a.m. ET today which may shed some light on the market’s current outlook for near-term Fed policy. And if shorter duration rates rise in the wake of the auctions, that could weigh on stocks as the Fed meeting comes into focus.

Bottom line, markets are still very much focused on Russia and Ukraine right now and for stocks to meaningfully bounce today, we will need to see real progress towards a ceasefire. Conversely, a deteriorating situation in Ukraine could see stocks retest multi-month lows to start the week today.

Tom Essaye Quoted in Barron’s on February 22, 2022

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The Russia Issue Is Hurting the Stock Market. How Things Could Get Worse.

Regarding Ukraine, investors will await the announcement of new sanctions from the west against Russia, and depending on how severe they are, it could add to the selling pressure on stocks…wrote Tom Essaye, founder of Sevens Report Research.  Click here to read the full article.

 

Early Earnings Season Takeaways

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What’s in Today’s Report:

  • Early Earnings Season Takeaways

Futures are modestly higher as China made two surprise interest rate cuts overnight, helping stocks bounce from Wednesday’s late-day declines.

China’s central bank made two small surprise interest rate cuts overnight which helped Asian stocks rally (Hang Seng up 3%) and that’s pushing U.S. futures higher.

Today focus will be on economic data and earnings, and for stocks to extend the early morning rebound we need to see stable data and solid earnings (meaning no extreme cost pressures).  Economically, the key report today is the  Philly Fed Manufacturing Index (E: 19.1).  If it suddenly plunges as Empire did on Tuesday, that will slightly increase anxiety about the economy.  We’ll also be watching Jobless Claims (E: 207K) and Existing Home Sales (E: 6.40M).

On the earnings front, the key report today is NFLX ($0.82) after the close, but we’ll also be watching:  AAL (-$1.54), TRV ($3.86), UNP ($2.60), CSX ($0.41) and PPG ($1.19).  If margins are much weaker than expected, look for more earnings-related volatility.

What Could Go Right in 2022

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What’s in Today’s Report:

  • What Could Go Right in 2022

S&P 500 futures are trading at a fresh record high as investors shrug off rising COVID cases while global markets rallied following fresh monetary stimulus from China.

The PBOC injected 200B yuan to help meet end-of-year demand for cash, the largest injection since October which is easing liquidity and adding to risk-on money flows.

Japanese Industrial Production surged 7.2% vs. (E) 1.8% in November, bolstering hopes that the economic recovery is regaining momentum.

This morning, there are two reports on the housing market due to be released: Case-Shiller Home Price Index (E: 1.0%), FHFA House Price Index (E: 0.7%) but neither should move markets.

There are no Fed speakers today but there is a 5-Year Treasury Note auction at 1:00 p.m. ET that could impact that bond markets and potentially equities but with the calendar otherwise pretty clear, a continued “Santa Claus rally” appears to be the path of least resistance for equities this week.

Markets Still Need Macro Clarity

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What’s in Today’s Report:

  • Bottom Line:  Markets Still Need Macro Clarity
  • Weekly Market Preview:  The Heart of Earnings Season
  • Weekly Economic Cheat Sheet:  October Flash PMIs are the Key Report this Week

Futures are modestly lower thanks to underwhelming Chinese economic data and rising global bond yields.

Chinese data disappointed as GDP (4.9% vs. (E) 5.2%), Industrial Production, and Fixed Asset Investment all missed estimates, raising concern about the strength of the Chinese economy.

Global yields are higher as New Zealand CPI spiked to 2.2% (a decade high) while BOE Governor Bailey hinted at a rate hike in December.

Today there are two notable economic reports, Industrial Production (E: 0.2%) and the Housing Market Index (E: 75) and one Fed speaker: Kashkari (2:15 p.m.ET).   On the earnings front, the majority of the important reports come later this week but reports we’ll be watching today include:  STT ($ 1.92), STLD ($4.95), ZION ($1.38).

However, unless there are major surprises in the data or earnings today, they shouldn’t move markets.  So, yields will be the main influence on stocks today and if yields rise throughout the day, expect a stiffening headwind on stocks.

Tom Essaye Quoted in OPTO on September 28, 2021

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Why the Evergrande crisis is causing global market jitters

There really isn’t a global contagion risk with Evergrande because in the end, and as far as we know, the loans…wrote Tom Essaye, the founder of Sevens Report Research. Click here to read the full article.

Tom Essaye Quoted in Forbes on September 27, 2021

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Evergrande And Chinese Regulators Pummel Crypto Markets

The losses quickly spread to broader markets as experts started warning its default…market analyst Tom Essaye wrote in a note last week. Click here to read the full article.

Tom Essaye Quoted in Forbes on September 23, 2021

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Dow Soars Another 500 Points As Investors Rally Around Fed, China Stimulus Plans

It’s now clear that Chinese officials won’t allow a disorderly default, and that’s really all global markets care about…money manager Tom Essaye, president of Sevens Report Research wrote. Click here to read the full article.

Tom Essaye Quoted in Quartz on September 21, 2021

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Evergrande is a massive problem—but it’s China’s problem

But it operates like one large company. Yes, there are “private” banks in China and yes, there are “private” corporations, but in the end the Communist Party…wrote Sevens Report Research president Tom Essaye in a note last week. Click here to read the full article.

What the Fed Decision Means for Markets

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What’s in Today’s Report:

  • What the Fed Decision Means for Markets
  • EIA Analysis and Oil Update

Futures are moderately higher as the rally continued overnight as China injected more liquidity into their economy.

Chinese officials injected another 17 billion yuan into the economy to prevent any liquidity issues, as it’s now clear that Chinese officials won’t allow a disorderly default (and that’s really all global markets care about).

Economic data disappointed as both the EZ and UK flash composite PMIs missed expectations (EZ PMIs fell to 56.1 vs. (E) 58.9 while UK PMI dropped to 54.1 vs. (E) 54.7).

Focus today will be on economic data, specifically the Flash Composite PMI (E: 55.5) and Jobless Claims (E: 309K).  Markets will want to see both numbers confirm what the Philly Fed and Empire survey implied last week, namely that the surge in COVID cases was a temporary and limited headwind on the economy.  If that’s the case the rebound in stocks should continue.