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Valuation Support in the S&P (Updated)

What’s in Today’s Report:

  • How Intense Was the Selling Yesterday?
  • Valuation Support and Technical Update: S&P 500

Stock futures enjoyed a “relief rally” overnight but have since returned to the flat mark as yields continue to bleed lower amid coronavirus fears however there were no materially negative developments regarding the outbreak since yesterday’s close.

There were no market-moving economic reports overnight.

While investor focus will continue to be on the COVID-19 outbreak, there are a handful of additional catalysts on the calendar today that could move markets.

First, there are four economic reports to watch: S&P CoreLogic Case-Shiller HPI (E: 0.5%), FHFA House Price Index (E: 0.3%), Consumer Confidence (E: 132.5), and the Richmond Fed Manufacturing Index (E: 13). Two Fed officials are also scheduled to speak during market hours: Kaplan (9:45 a.m. ET) and Clarida (3:00 p.m. ET).

Finally, the U.S. Treasury will hold a 2-Yr Note Auction at 1:00 p.m. ET. This could be an important event to watch as the results of the auction could shed further light on the market’s expectations for rate cuts in the months ahead (which have risen significantly this week) and potentially compress the 10s-2s yield curve spread to fresh multi-month lows which could further stoke fears of a global slowdown.

Tom Essaye Interviewed with Yahoo Finance’s Brian Sozzi on February 11, 2020

“In the short-term, there are two things holding this market up. One, expectations of a dovish Fed. And it’s the expectation of a global economic rebound. If either one of those come into doubt, the market is going to…” Sevens Report Research founder Tom Essaye said on Yahoo Finance’s The First Trade. Click here to watch the full video.

What Outperforms If Stocks Trade With a 20X Multiple?

What’s in Today’s Report:

  • What Outperforms If Stocks Trade With a 20X Multiple?

Global equity markets are rallying as the spread of the coronavirus continues to slow while statistics show that Sanders victory in the New Hampshire primary increases the odds of a “market-friendly” Trump reelection in 2020.

Eurozone Industrial Production was soft in December with the headline falling -2.1% vs. (E) -1.8% but optimism for a 2020 economic rebound is offsetting the poor data point.

There are no notable economic reports today however there are two Fed speakers ahead of the bell: Harker (8:30 a.m. ET) and Daly ( 9:00 a.m. ET), while Powell will testify before Congress for a second day (10:00 a.m. ET).

Outside of the Fed speakers today, the Treasury will hold a 10-Yr Note auction at 1:00 p.m. ET and as has been the case recently, any sizeable moves in the bond market, especially that impact the yield curve, could influence stock trading in the afternoon.

Tyler Richey, co-editor at Sevens Report Research Quoted in MarketWatch on February 10, 2020

“Energy traders are focused on the coronavirus right now, trying to gauge how it has, and will, affect demand in China, supply internationally, and ultimately how OPEC+ will adjust…” Tyler Richey, co-editor at Sevens Report Research, told MarketWatch. Click here to read the full article.

China flag

Tom Essaye Quoted in Unseen Opportunity on February 7, 2020

But that hasn’t exactly been reflected in this morning’s trading activity. Some analysts, like The Sevens Report founder Tom Essaye, believe that the jobs gain was already priced-in by automated trading firms.

“I don’t think it was anything surprising because we had very good ADP number and good jobless…” Essaye said. Click here to read the full article.

Health Technician

Tom Essaye Quoted in CNBC on February 7, 2020

Worried Healthcare Technician

“I don’t think it was anything surprising because we had very good ADP number and good jobless claims. So people were expecting a good number. Overall, what the jobs number is saying about the economy is what we already know…” said Tom Essaye. Click here to read the full article.

Tom Essaye Quoted in Yahoo Finance on January 30, 2020

The National Health Commission of China reported 7,711 confirmed cases of the coronavirus, including 170 casualties. According to CNBC, Sevens Report founder Tom Essaye said that global markets are “becoming more concerned” about future earnings and economic growth…Click here to read the full article.

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Tom Essaye Quoted in MSN on January 30, 2020

“The spread of the Wuhan virus isn’t accelerating, but markets becoming more concerned about future earnings and economic growth as companies implement work stoppages…” said Tom Essaye, the founder of The Sevens Report.

Will the Wuhan Virus Cause a Correction?

What’s in Today’s Report:

  • Will the Wuhan Virus Cause a Correction?
  • Weekly Market Preview:  A Fed Meeting Wednesday and the Biggest Week of Earnings
  • Weekly Economic Cheat Sheet (Several Important Report This Week)

Futures are down more than 1% as the continued spread of the Wuhan coronavirus over the weekend further raised fears of a global economic slowdown.

Total cases of the Wuhan virus continued to rise over the weekend (nearly 3000 confirmed cases globally) and the number of U.S. cases rose to five.

Economically, German IFO Business Expectations missed estimates at 92.9 vs. (E) 95.0.

This is going to be a very busy week, but the calendar is a bit sparse today as we get just one economic report, New Home Sales (E: 728k), and one notable earnings report after the close: WHR ($4.30).  So, any updates on the spread of the Wuhan virus will continue to drive markets today, although that will change later in the week as we get more earnings and the Fed decision on Wednesday.

What the Wuhan Coronavirus Means for Markets

What’s in Today’s Report:

  • What the Wuhan Coronavirus Means for Markets

S&P 500 futures rallied to new record highs overnight amid easing concerns over the deadly virus outbreak in China that weighed on risk assets Tuesday.

Chinese health officials announced plans to both screen for, and contain the Wuhan coronavirus which helped reduce fears that a SARS-like epidemic is developing.

Today, there are a few different potential catalysts for the market that warrant watching. First, there are two economic reports on the housing market: FHFA House Price Index (E: 0.3%) and Existing Home Sales (E: 5.430M) which should show a continued rebound in the sector into the end of 2019.

Second, earnings season is in full swing and investors will continue to sift through the releases closely. Notable corporations reporting today include: JNJ ($1.87), ABT ($0.95), ALLY ($0.95), TXN ($1.02), KMI ($0.26), LVS ($0.80), and RJF ($1.90).

Lastly, any new developments on the spread, or containment of, the Wuhan coronavirus will likely get a reaction from markets as it was the primary focus of traders across asset classes yesterday.