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Money Supply and Stocks: Is There a Disconnect?

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Money Supply and Stocks: Is There a Disconnect? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Money Supply and Stocks: Is There a Disconnect?
  • ISM Services Index Takeaways (Slightly Dovish)

Futures are rebounding with global shares amid positive stimulus news out of China and mostly better-than-feared economic data overseas ahead of several important catalysts today.

Overnight, China’s State Planner and the head of the PBOC both reiterated their commitment to achieving 5% growth in 2024 which is supporting a rebound in risk assets as investors gain confidence in the prospects of a stabilizing Chinese economy.

Eurozone Retail Sales fell -1.0% vs. (E) -1.4% helping ease concerns of a sharp slowdown in the EU economy which is adding to the risk-on money flows this morning.

Looking into the U.S. session, focus will be on economic data early today starting with the: ADP Employment Report (E: +150K job adds) followed by the JOLTS release (E: 8.9 million job openings).

From there attention will turn to Capitol Hill where Fed Chair Powell will begin his semi-annual testimony at 10:00 a.m. ET. The Fed’s Daly (12:00 p.m. ET) and Kashkari (4:15 p.m. ET) will also speak today but Powell will be firmly in the spotlight as investors look for clues as to whether the FOMC plans to begin rate cuts in the second quarter (market positive) or wait until H2’24 (market negative).

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How might a second Trump term impact stocks?

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How might a second Trump term impact stocks? Tom Essaye Quoted in Morningstar

A second Trump term may benefit these stock-market sectors most

Therefore, it’s worth asking: How might a second Trump term impact stocks? Tom Essaye, publisher of Sevens Report Research, recently shared his expectations for which corners of the stock market might outperform, and which might struggle, if Trump triumphs in an expected election rematch with President Joe Biden.

“Obviously, those policies would be negative for Chinese shares and emerging markets more broadly, as they would increase trade tensions,” Essaye said.

As a result, investors can expect Chinese stocks, and emerging-markets more broadly, to struggle, like they did during Trump’s first term and like they have, relative to the U.S., for much of the past 15 years.

Also, click here to view the full MarketWatch article published on Morningstar on February 27th, 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.

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The Oil Market Has Seemed Skeptical

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The Oil Market Has Seemed Skeptical: Tyler Richey Quoted in Morningstar

Oil prices finish higher as traders weighs risks tied to U.S. airstrikes

The oil market has “seemed skeptical of the potentially positive demand implications of the recent string of strong economic data,” though prices did move up in the wake of the better-than-expected ISM report, Tyler Richey, co-editor of Sevens Report Research, told MarketWatch.

As far as what to watch for this week, Richey said a rise in consumer demand for refined products metrics in the weekly Energy Information Administration report due out Wednesday would be a bullish development, while a return to record U.S. oil output would be “negative for prices in the near term.”

Also, click here to view the full MarketWatch article published on Morningstar on February 5th, 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.

Five Bullish Market Assumptions Updated

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Five Bullish Market Assumptions Updated: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Five Bullish Market Assumptions Updated (Are They Still True?)
  • Weekly Market Preview:  Important Updates on Fed Rate Cuts and Economic Growth
  • Weekly Economic Cheat Sheet:  Fed Meeting Wednesday, ISM and Jobs Report Friday

Futures are little changed following an increase in geo-political tensions over the weekend and ahead of the first really busy week of 2024.

Three U.S. soldiers were killed in an attack in Jordan by Iranian backed militants and that’s further escalating tensions in the region and oil rallied in response.

There were no economic reports overnight.

This is the first truly busy week of 2024 as we have a Fed decision on Wednesday and a jobs report on Friday and it’s the most important week of earnings season.  But, the week starts slowly as there are no economic reports today and minimal earnings.  So, focus will remain on geo-politics and 1) Any additional attacks on U.S. soldiers in the region or 2) Information about a U.S. retaliatory strike could push oil higher and weigh on stocks.

Earnings Today:  WHR ($ 3.64), SOFI (E: $0.00), CLF ($-0.07).

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What Earnings Are Saying

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What Earnings Are Saying: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What Earnings Are Saying About Current Economic Growth

Futures are modestly lower following a night of underwhelming earnings results.

INTC (stock down 10% premarket) gave soft guidance while V and TMUS (stocks down –3% each) posted underwhelming results.

Economically, German GfK Consumer Climate missed expectations (-29.7 vs. (E) -24.5) but that’s not moving markets.

Today focus will be on the Core PCE Price Index (E: 0.2% M/M, 3.0% Y/Y) and this number needs to meet or be lower than expectations to help support the stock rally.  If Core PCE prints solidly above expectations look for higher yields and lower stock prices.  The other notable economic number today is Pending Home Sales (E: 1.3%) but that shouldn’t move markets.

On the earnings front, the key report today is AXP ($2.65) and specifically we’ll be watching for is their commentary on consumer spending (the more positive, the better for markets).  Other notable earnings include CL ($0.85) and NSC ($2.90).

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China Cut Reserve Requirements

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China Cut Reserve Requirements: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • China Cut Reserve Requirements.  Does that Improve Risk/Reward?

Futures are little changed following a mixed night of earnings and ahead of the ECB rate decision.

Earnings were mixed overnight with cautious TSLA guidance (TSLA down –7% pre-market). This is offsetting other solid tech results from IBM, NOW and others.

Today focus will remain on rates, data and earnings.  The key event today is the ECB meeting there is little to no chance of a rate hike or cut.  Instead, the key will be insight into when the ECB expects the first rate cut.  If it’s before the summer, that’s dovish/bullish.  If it’s after the summer that’s hawkish/bearish.

Turning to the data, there are several notable reports today. Including (in order of importance) Advanced Q4 GDP (E: 2.0%), Jobless Claims (E: 200K), Durable Goods (E: 1.0%) and New Home Sales (E: 650K). “Goldilocks” data that meets expectations is the best outcome for stocks.

Finally, earnings season rolls on and important reports today include: AAL ($0.06), LUV ($0.11), VLO ($2.95), SHW ($1.80), INTC ($0.48), V ($2.33), TMUS ($1.90), COF ($2.50).

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Why Are Chinese Stocks So Weak? (And Is There an Opportunity?)

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Why Are Chinese Stocks So Weak? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Are Chinese Stocks So Weak? (And Is There an Opportunity?)
  • Chart: Leading Economic Indicators Remain Deeply Negative

U.S. futures are flat amid mixed trade overseas as European shares pulled back modestly after a weak ECB Lending Survey while Asian shares bounced solidly amid news China is planning a $278B “market rescue package” aimed at stabilizing the nation’s volatile capital market environment.

Looking into today’s session, there is one regional Fed survey release: Richmond Fed Manufacturing Index (E: -15). And while the Richmond release is less popular than other regional Fed reports, it will be more closely monitored today after both the Empire and Philly Fed surveys badly disappointed last week.

December M2 Money Supply will also be released at 1:00 p.m. ET which could move markets in early afternoon trade (especially if there is a sharp and unexpected contraction in money supply).

There are no Fed officials scheduled to speak today but there is a 2-Yr Treasury Note auction at 1:00 p.m. ET that could offer fresh insight into market expectation for Fed policy outlook. A weak auction sending yields higher, would be a negative catalyst for stocks today.

Finally earnings season is continuing to pick up with: VZ ($1.07), MMM ($2.31), GE ($0.90), PG ($1.70), JNJ ($2.27), and SYF ($0.96) reporting before the open, and NFLX ($2.20) and TXN ($1.46) releasing results after the close.

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Five Optimistic Market Assumptions for 2024

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Five Optimistic Market Assumptions for 2024: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Weekly Market Preview – Five Market Assumptions to Know As We Start 2024
  • Weekly Economic Cheat Sheet – Jobs Report in Focus

Futures are moderately lower to start 2024 amid concerns about China’s economy and rising geopolitical tensions.

Economically, China’s government-issued PMI fell to 49.0 vs. (E) 49.6 in December while President Xi Jinping made some cautious comments on the state of the economy over the weekend that has poured cold water on Asian markets to start the year.

In Europe, the December PMI rose to 44.4 vs. (E) 44.2 but still points to a factory sector deep in contraction which reiterates very real recession risks in the Eurozone in 2024.

Geopolitical tensions are pushing oil prices higher to start the new year after the U.S. Navy sunk three Iran-backed Houthi vessels in the Red Sea this weekend.

Looking into today’s session, the Final U.S. December Manufacturing PMI (E: 48.2) will be in focus this morning and traders will want to see stability in the data in order for stocks to start the new year with an extension of the 2023 rally.

Sevens Report Quarterly Letter Delivered Today

Our Q4 ’23 Quarterly Letter will be released today. We use our strength (writing about the markets) to help you:

  1. Save time (an average of 4-6 hours per quarterly letter) and
  2. Show you’re on top of markets with impressive, compelling market analysis.

You can view our Q3 ’23 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.

Market Assumptions

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Why the Bar for the Fed to Be Hawkish Is High

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Why the Bar for the Fed to Be Hawkish Is High: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why the Bar for the Fed to Be Hawkish Is High
  • What the CPI Report Means for Markets

Futures are slightly higher despite soft economic data, as markets await the Fed decision later this afternoon.

Economically, data from the UK and the EU was bad and is slightly increasing growth concerns.   UK monthly GDP  and UK & EU Industrial Production all missed estimates.

Chinese growth concerns also rose as China declared industrial development as the #1 economic priority, potentially signaling less economic stimulus in 2024.

Today focus will be on the FOMC decision (2:00 p.m. ET, No change to rates expected) and the keys are the 2024 dot (does it show 50 bps of cuts?) and whether Powell slams the door on the idea of rate cuts (or leaves it slightly open).  In addition to the Fed, we also get another important inflation reading via PPI (E: 0.1% 1.0%). A further decline will be peripherally positive for markets.

Annual Discounts on Sevens Report, Alpha, Quarterly Letter, and Technicals.

We’ve been contacted by advisor subscribers who wanted to use the remainder of their 2023 pre-tax research budgets to extend their current subscriptions, upgrade to an annual (and get a month free) or add a new product (Alpha, Quarterly Letter, Technicals).

If you have unused pre-tax research dollars, we offer month-free discounts on all our products. If you would like to extend current subscriptions or save money by upgrading to an annual subscription, please email info@sevensreport.com.

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Small Cracks in the Three Pillars of the Rally?

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Small Cracks in the Three Pillars of the Rally? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Small Cracks in the Three Pillars of the Rally?
  • Weekly Market Preview:  Can the Ideas of A Dovish Fed and Economic Soft-Landing Power Stocks to 2023 Highs?
  • Weekly Economic Preview:  Key Inflation and Growth Data This Week

Futures are slightly lower after a mostly quiet weekend as Chinese growth worries offset geo-political positives.

Chinese industrial profit growth slowed to 2.7% in Oct vs. 11.9% in Sept and that data combined with news of a quickly spreading respiratory illness in China is weighing on growth expectations.

Geo-politically, the Israel-Hamas cease fire will likely be extended several days and that’s easing geo-political tensions and oil is falling as a result (down more than 1%).

This week contains several potentially important catalysts on inflation and economic growth, but they come later in the week. So, focus today will be on holiday spending commentary and New Home Sales (E: 721k).  Positive commentary on spending and Goldilocks data would help support stocks.

Three Pillars of the Rally?

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