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Unhealthy Price Action and Revisiting Credit Spreads

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Unhealthy Price Action and Revisiting Credit Spreads: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Tech Update – An Unhealthy Start to a Critical Two Weeks
  • What Credit Spreads Are Saying About the Economy and Markets
  • JOLTS Data Takeaways – Available Jobs Fall Below Previous Cycle Peak (2019)

Equities are mixed in pre-market trade as earnings dominate early money flows.

Tech-heavy Nasdaq futures are outperforming and holding overnight gains thanks to solid earnings from GOOG helping to offset disappointing guidance from AMD while CAT earnings are weighing on Dow futures. S&P 500 futures are little changed.

Economically, the Eurozone’s Q3 GDP Flash firmed to +0.4% vs. (E) +0.2% largely thanks to growth in Germany which is easing concerns about the health of the EU economy and that is ultimately resulting in a favorable pullback in the recently strong dollar.

Today, focus will be on economic data early with the ADP Employment Report (E: 115K), and Q3 GDP Report (E: 3.0%) both due out before the bell while Pending Home Sales (E: 1.0%) will be released shortly after the open.

There are no Fed speakers today as they remain in their “blackout period” ahead of next week’s FOMC meeting which will leave traders watching for more earnings. Notable companies reporting today include: LLY ($1.52), CAT ($5.33), and HUM ($3.48) before the open, and  MSFT ($3.08), META ($5.17), and ALL ($2.20) after the close.

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What Yesterday’s “Inside Day” Means for Markets

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What Yesterday’s “Inside Day” Means for Markets: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What Yesterday’s Inside Day Means for Markets
  • Takeaways From Oil’s Reaction to Israel’s Retaliatory Air Strikes

Futures are flat this morning while global markets rallied modestly overnight amid quiet news flow as traders look ahead to multiple important catalysts looming over the next week.

Economically, data was largely encouraging overnight as the Japanese Unemployment Rate fell to 2.4% vs. (E) 2.5% while the German GfK Consumer Climate Index rose to -18.3 vs. (E) -20.5, however, neither report meaningfully impacted markets.

Looking ahead to the U.S. session, there are several noteworthy economic releases today beginning with a housing market report, the Case-Shiller Home Price Index (E: 5.2%), before we the first labor market report of this critical jobs week, JOLTS (E: 7.9 million), and finally Consumer Confidence (E: 99.1).

There are no Fed officials scheduled to speak today but there is a 7-Yr Treasury Note auction at 1:00 p.m. ET. The 7-yr auction is notable because soft demand in past auction have roiled bond markets and sparked volatility in equities, something to watch for today.

In corporate news, this critical week of earnings begins in earnest today with consumer-focused companies including PYPL ($1.08), MCD ($3.18), and BP ($0.78) reporting before the bell while tech giants AMD ($0.92) and GOOG ($1.83) report after the close along with credit card staple V ($2.58).

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Emerging markets may indeed be approaching an opportune moment

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Emerging markets may indeed be approaching an opportune moment: Sevens Report Analysts Quoted in Investing.com

Are emerging markets finally a buy?

As per analysts at Sevens Report, emerging markets may indeed be approaching an opportune moment for investors to re-enter. Sevens Report analysts point out that emerging markets are widely “hated,” evidenced by the dismal equity flows into these regions. 

The Sevens Report outlines several investment vehicles, including ETFs that offer diversified exposure to these markets.

The Vanguard FTSE Emerging Markets ETF (NYSE:VWO), for instance, provides broad-based, low-cost exposure, while the WisdomTree Emerging Markets High Dividend Fund (NYSE:DEM) focuses on income-generating assets within emerging markets.

Also, click here to view the full article featured on Investing.com published on October 13th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

Is China the Next Japan?

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Is China the Next Japan?: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Is China the Next Japan?

Futures and EU shares are lower as cautious retailer earnings guidance and heavy trade in China overnight are offsetting easing geopolitical tensions following reports that Israel would not strike Iranian oil/energy infrastructure (oil futures are down nearly 5%).

Economically, EU Industrial Production met expectations overnight while a German Economic Sentiment gauge topped estimates, but neither report is materially moving markets this morning.

Today, there is one important economic report to watch: The Empire State Manufacturing Index (E: 0.0), and two Fed officials are scheduled to speak: Daly late morning (11:30 a.m. ET) and Kugler in the early afternoon (1:05 p.m. ET).

Additionally, there are two typically lesser-followed Treasury auctions for 3-Month and 6-Month T-Bills at 11:30 a.m. ET that could shed fresh light on market expectations for Fed policy rates between now and Q2’25 which have swung sharply hawkish over the last two weeks. Strong auction would have dovish implications for the market and be well received by equity investors today.

Finally, earnings season is getting into full swing with several more big banks reporting quarterly results today: BAC ($0.78), C ($1.34), and GS ($6.85) while two members of the Dow Jones Transportation Average: UAL ($3.10) and JBHT ($1.43) are also due to report today.

Bottom line, equity markets have rallied solidly over the last week amid a combination of earnings optimism and soft-landing hopes. If any of the economic data, Fed chatter, or earnings results damage either of those narratives, expect some mild profit taking in equities today, otherwise the path of least resistance is still higher for stocks right now.

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Are Emerging Markets Finally A Buy?

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Are Emerging Markets Finally A Buy?: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Are Emerging Markets Finally A Buy?
  • FOMC Minutes:  Did They Reinforce Rate Cut Expectations?

Futures are slightly lower mostly on digestion of Wednesday’s rally and as markets look ahead to today’s important economic data (CPI and claims).

Economically, Germany updated the last several retail sales reports and the net change was slightly better than expected, although that’s not moving markets.

Today focus will be on economic data as we get two potentially market moving reports:  CPI (E: 0.1% m/m, 2.3% y/y) / Core CPI (E: 0.2% m/m, 3.2% y/y) and Jobless Claims (E: 226K).  Goldilocks data, meaning an in-line CPI/Core CPI report and stable jobless claims, will keep soft landing hopes strong and likely boost stocks later today.

We also have several Fed speakers today including Cook (9:15 a.m. ET), Barkin (10:30 a.m. ET) and Williams (11:00 a.m. ET) but none of them should move markets.

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Jobs Report Preview (Important for Fed Rate Cut Expectations)

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Jobs Report Preview: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Jobs Report Preview (Important for Fed Rate Cut Expectations)
  • EIA Analysis and Oil Market Update

Futures are modestly lower on continued elevated geo-political tensions and following mixed economic data.

Geopolitically, markets await the response from Israel to Tuesday’s attack and recent reports are stating it will be more aggressive than in April (increasing escalation risks).

Economically, EU and UK Service PMIs were mixed but both stayed above 50 (and economic positive).

Today focus will remain on economic data and the two key reports are Jobless Claims (E: 225K) and the ISM Services PMI (E: 51.5).  If the reports are close to in-line with expectations, look for a bounce in stocks as that will imply a still solid economy (soft landing) with looming Fed rate cuts (50 bps between now and year-end).

Regarding geopolitics, Israel’s response attack could come at any minute and the key here is whether it’s an aggressive attack on key Iranian military or oil infrastructure, or not.  If so, that could lead to further escalation (negative for the market).  If not, we likely have a repeat of April (where the situation cools down).  Regardless, watch oil.  If it spikes numerous percent (say 3% or more) that will reflect real, elevated geo-political tensions.

Sevens Report Quarterly Letter Delivered

Our Q3’24 Quarterly Letter was delivered to subscribers. We use our strength (writing about the markets) to help you:

  • Save time (an average of 4-6 hours per quarterly letter)
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You can view our Q2 ’24 Quarterly Letter here. To learn more about the product (including price) please click this link.

If you’re interested in subscribing, please email: info@sevensreport.com.

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U.S. oil futures fell to new lows for the week

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U.S. oil futures fell to new lows for the week: Sevens Report Co-Editor, Tyler Richey, Quoted in Morningstar

U.S. oil prices end lower for the week as demand fears outweigh Middle East war jitters

U.S. oil futures fell to new lows for the week as Chinese data showed declining imports and refinery input demand suggested that a further slowdown in the Chinese economy will weigh on total global demand, Tyler Richey, co-editor at Sevens Report Research, told MarketWatch. Data from China reportedly showed refinery runs fell 6.1% year over year in July.

That followed a negative International Energy Agency report on Thursday, which mentioned a likely surplus emerging in the physical market in the quarters ahead, and a “lackluster” weekly Energy Information Administration report Wednesday, which showed a surprise build in headline crude stockpiles, Richey noted.

Gains early on this week were geopolitically driven amid heightened tensions between Israel and Iran, said Richey.

Looking ahead, Richey said that “geopolitical tensions remain an influence on the market … with a mild fear bid remaining in place.” However, “recession fears have emerged to be a more important factor for the market as we approach the end of the summer driving season, and any rallies driven by headlines out of the Middle East are likely to be capped in the low $80s.”

A soft economic landing is “continuing to be priced in with oil at current levels but if a hard landing becomes more likely in the weeks or months ahead,” expect oil prices to fall, Richey said – with WTI moving toward the low to mid-$60s “not only possible, but likely.”

Also, click here to view the full MarketWatch article published on Morningstar on August 16th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Oil Inventories

Lastly, If you want research that comes with no long-term commitment, yet provides independent, value-added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

Updated Market Outlook

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Updated Market Outlook: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Updated Market Outlook
  • Weekly Market Preview:  Will Powell Confirm A September Rate Cut?
  • Weekly Economic Cheat Sheet:  The First Big Number of August (and It Needs to be Goldilocks)

Futures are little changed following a very quiet weekend of news as investors look ahead to more growth data this week and Powell’s speech on Friday.

There was no notable economic data over the weekend or overnight.

Geopolitically, optimism is continuing to build towards a ceasefire between Israel and Hamas and that’s weighing on oil prices, although nothing formal has been announced.

Today there is only one economic number, Leading Indicators (E: -0.3%), and barring a big surprise that shouldn’t move markets.  There is also one Fed speaker, Waller (9:15 a.m. ET), and he is part of Fed leadership so if he strongly hints at a September rate cut, that should be a mild tailwind for stocks and bonds.

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The Yield Curve May Un-Invert Soon. Why That’s Not Good (Historically)

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The Yield Curve May Un-Invert Soon. Why That’s Not Good (Historically): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • The Yield Curve May Un-Invert Soon. Why That’s Not Good (Historically)
  • How the Post CPI “Rest of the Market” Rally Is Accelerating

Futures are moderately lower thanks to significant weakness in tech stocks.

Semi-conductor chip stocks are lower this morning on a trifecta of negative news including soft ASML guidance, reports of tighter chip restrictions with China and bellicose rhetoric from Trump on Taiwan in a recent interview.

Focus will remain on economic data today and the most important report is Industrial Production (E: 0.3%) while we also get Housing Starts (1.305M).  As Tuesday showed, markets still want Goldilocks economic reports, meaning they aren’t too strong but don’t point to economic weakness, either.  We also have two Fed speakers, Barkin (9:00 a.m. ET) and Waller (9:35 a.m. ET), but unless one of them floats the possibility of a third rate cut in 2024, they shouldn’t move markets.

Finally, earnings season continues to roll on and some notable reports today include: ASML ($3.87), JNJ ($2.82), and UAL ($3.97).

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My biggest concern for this market remains that we get an unexpected economic slowdown

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My biggest concern for this market remains that we get an unexpected economic slowdown: Sevens Report Editor, Tom Essaye, Quoted in Barron’s

The Stock Market Needs a Strong Economy to Keep Rising. The Data Are Getting Worse.

“My biggest concern for this market remains that we get an unexpected economic slowdown because that’s one of the few events that can legitimately cause a material correction in stocks,” writes Sevens Report founder Tom Essaye, noting that his worry ticked up last week due to corporate earnings.

However, Essaye warns, it doesn’t always work so neatly. “Twice in my career I have seen investors cheer a slowdown, and both times the Fed was not able to cut rates at the right time to prevent the slowing from becoming a broader economic contraction,” he wrote. “That doesn’t mean they can’t do it this time, but catching a falling knife doesn’t work in real life, it doesn’t work in stock trading, and I’ve never seen it work in monetary policy.”

Also, click here to view the full Barron’s article published on June 4th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

It’ll be Very Hard for This Market to RallyIf you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.