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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

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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.

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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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Was the CPI a Bullish Gamechanger?

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Was the CPI a Bullish Gamechanger? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Was the CPI Report a Bullish Gamechanger?
  • CPI Data Analysis and Takeaways

Stock futures are extending the November gains this morning and Treasuries are steady after more cool inflation readings in Europe and stabilizing economic data in China.

Economically, Chinese FAI and Industrial Production figures met estimates while Retail Sales importantly accelerated to 7.6% vs. (E) 7.0% in October up from 5.5% in September.

In Europe, CPI data from the U.K., France, and Italy all met estimates or came in “cooler” than expected. This bolsters the view that global central banks are done with rate hikes, fueling risk-on money flows today.

Today, there are several economic reports to watch early: PPI (E: 0.1% m/m, 2.0% y/y), Empire State Manufacturing Index (E: -3.0), and Retail Sales (E: -0.3%). The market will be looking for more signs of cooling inflation in the PPI release. And no major surprises either way in the Empire and Retail Sales releases as the market is still vulnerable to data that is “too hot” (risks of more Fed tightening) or “too cold” (risks of a “hard landing”).

There are also two Fed speakers today: Barr (9:30 a.m. ET) and Barkin (3:30 p.m. ET) but neither are expected to move markets.

Was the CPI Report a Bullish Gamechanger?

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CPI Preview: Good, Bad & Ugly

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CPI Preview: Good, Bad & Ugly: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • CPI Preview:  Good, Bad & Ugly
  • Weekly Market Preview:  Will Market Catalysts This Week Support A Further Rally?
  • Weekly Economic Cheat Sheet:  CPI Tomorrow, Key Growth Data the Rest of the Week

Futures are slightly lower as markets digest two slightly negative events from the weekend and look ahead to a week filled with possible market moving catalysts.

Moody’s downgraded the U.S. credit outlook to negative but importantly did not change the rating and as such it’s not significantly impacting markets.

Geo-politically, U.S. forces struck more targets in Syria over the weekend, escalating regional tensons but so far markets are not reacting (oil isn’t rallying off the news).

Looking forward, this is a potentially important week, but it starts slowly as there are no notable economic reports today nor any Fed speakers.

Beyond today, though, in addition to the economic catalysts this week, risk of another U.S. government shutdown is rising as there needs to be a short-term spending deal by Friday to avoid a shutdown.  So, any progress on that front today will help markets, while any negative headlines will likely provide a small headwind.

CPI Preview:  Good, Bad & Ugly

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Key Levels to Watch on Fed Day (Technical Tear-Sheet)

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Key Levels to Watch on Fed Day: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Key Levels to Watch on Fed Day (Printable/Shareable Tear-Sheet)
  • Economic Data Takeaways – Employment Cost Index, Eurozone CPI, Case-Shiller HPI

Futures are slightly lower as traders digest more weak economic data overseas ahead of today’s Fed decision.

Economically, Manufacturing PMIs in China and the U.K. both disappointed. Both came in under the 50 threshold indicating contraction in the sector in both countries. This is weighing modestly on stocks this morning ahead of the Fed.

Looking into today’s session, focus will be on economic data early. The October ADP Employment Report (E: 150K), JOLTS (E: 9.375 million), and ISM Manufacturing Index (E: 49.0) are all due to be released this morning.

From there, attention will turn to the Fed with the FOMC Meeting Announcement at 2:00 p.m. ET followed by Fed Chair Powell’s press conference at 2:30 p.m. ET. Investors are hoping for a dovish message from the Fed, and if they deliver, a continued relief rally is likely this afternoon.

Lastly, outside of the policy decision and economic data, there are some notable earnings releases today. With: CVS ($2.13) and W ($2.98) releasing results before the open, and PYPL ($1.23), QCOM ($1.80), ABNB ($2.08), MET ($1.99) and AIG ($1.55) reporting after the close.

Key Levels to Watch on Fed Day

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