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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.

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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

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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.

Growing Economic Concerns

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Growing Economic Concerns: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why I am Getting More Concerned About an Economic Slowdown
  • Weekly Economic Preview – A Critical Week of Data

Futures are higher on momentum from Friday’s late-day rally while news wires were mostly quiet this weekend.

Economically, the Eurozone Manufacturing PMI rose from 45.7 to 47.3 vs. (E) 47.4 in May while the UK’s Manufacturing PMI headline rose from 49.1 to 51.2 vs. (E) 51.3. The as-expected data is having a limited impact on markets, leaving stocks to extend Friday’s rally.

Today, focus will be on the ISM Manufacturing Index (E: 49.8) early with a report on Construction Spending (E: 0.2%) also due out after the open. There are no Fed officials scheduled to speak today which leaves the ISM data the key catalysts of the session. A report that is “too hot” or “too cold” could see volatility pick up while a “Goldilocks” number would likely allow Friday’s relief rally to continue.

Finally, the Treasury will hold 3-Month and 6-Month Bill auctions at 11:30 a.m. ET, and while these auctions don’t typically move markets, we are within 6-months of the first expected rate cuts from the Fed so any surprises could impact yields and in-turn move equities.

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Advisor Considerations of the “T+1” Settlement Change

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Advisor Considerations of the “T+1” Settlement Change: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Practice Management Update: Examining the Upcoming Move to T+1 Settlement
  • Long-Term S&P 500 Chart: Greatest Volatility Risk Since January 2022

Futures are flat this morning as economic data was mixed in Europe and global traders await NVDA earnings (tomorrow) to gauge the outlook for AI industry growth.

In Europe, German PPI fell -3.3% vs. (E) -3.1% underscoring that disinflation trends remain underway in the EU while the UK’s CBI Industrial Trends Order Balance dropped -33% vs. (E) -20% adding to global factory sector worries.

Looking into today’s session, there are no economic reports to watch but a handful of Fed speakers on the calendar this morning: Barkin (9:00 a.m. ET), Waller (9:00 a.m. ET), Williams (9:05 a.m. ET), Bostic (9:10 a.m. ET) and Barr (11:45 a.m. ET).

At this point, the higher-for-longer mantra has been absorbed by markets and it would take renewed talk of rate hikes to meaningfully move markets, especially as traders settle in and await tomorrow’s post-bell earnings release from NVDA which is widely viewed as the most important catalyst of this week.

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How Long Can Goldilocks Last?

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How Long Can Goldilocks Last? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • How Long Can Goldilocks Last?
  • Weekly Market Preview:  More Updates on Growth and AI Enthusiasm (NVDA Earnings on Wednesday)
  • Weekly Economic Cheat Sheet:  Will the First Big Report of May Confirm Slowing Growth?

Futures are little changed following a generally quiet weekend of news and ahead of another important week of potential market catalysts.

Geopolitics was in focus this weekend as Iranian President Raisi was killed in a helicopter crash, although it appears an accident and oil isn’t rallying on the news.

There was no notable economic data overnight.

Today there are no economic reports but there are multiple Fed speakers including: Bostic (7:30 & 8:45 a.m. ET), Barr & Waller (9:00 a.m. ET), Jefferson (10:30 a.m. ET), Mester (2:00 p.m. ET) and Bostic again (7:00 p.m. ET).  However, for all the commentary, unless multiple Fed officials start openly discussing rate hikes (which is extremely unlikely) their commentary shouldn’t meaningfully move markets.

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Still A Soft Landing, But Growth Is Slowing

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Still A Soft Landing, But Growth Is Slowing: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Hard Landing/Soft Landing Scoreboard:  Still A Soft Landing, But Growth Is Slowing

Futures are little changed as markets again digested the post CPI rally amidst more in-line inflation data and additional Chinese economic stimulus.

Core EU HICP (their CPI) met expectations, rising 0.7% m/m and 2.7% y/y, and kept a June rate cut on track.

In China, the government announced a sweeping program to support the property industry, potentially adding more critical stimulus to the Chinese economy.

Today focus will be on Leading Indicators (E: -0.3%) and two Fed speakers, Waller (10:15 a.m. ET) and Daly (12:15 p.m. ET), but barring any major surprises, they shouldn’t move markets and further digestion of the new highs is to be expected.

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