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Core PCE Reading Was Inline With Expectations

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Core PCE Reading Was Inline With Expectations: Tom Essaye Quoted in Barron’s

S&P 500 Joins Nasdaq in Correction Territory

Sevens Report Research’s Tom Essaye told Barron’s the core PCE reading was inline with expectations but didn’t eliminate the risk of inflation rebounding.

He added that Amazon and Intel’s earnings didn’t outweigh what has been a bad week overall.

“And, while there’s progress in Washington, markets won’t celebrate the Republicans being able to finally elect a speaker, and there’s still the prospect of a government shutdown looming,” Essaye added.

Also, click here to view the full Barron’s article published on October 28th, 2023. 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 Rally

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Sectors: Expensive, Cheap, and In Line With the S&P 500

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What’s in Today’s Report:

  • Sectors: Expensive, Cheap, and In-Line With the S&P 500
  • Chart: 10-Year German Bund Yield Turns Positive

U.S. stock futures are bouncing modestly after yesterday’s steep selloff as the surge in bond yields is showing signs of pausing after some mixed inflation data overnight.

German CPI met estimates of 0.5% in December, while U.K. PPI was 0.3% vs. (E) 0.6%, which is helping to ease some inflation concerns today.

Looking into today’s session, there is one economic report to watch: Housing Starts and Permits (E: 1.65M, 1.710M) while no Fed officials are scheduled to speak today.

There is a 20-Yr Treasury Bond auction at 1:00 p.m. ET that could spark another move in yields (a further rise in rates will continue to weigh on high valuation/growth tech stocks and the broader market while a pullback will open the door to a relief rally).

Finally, earnings season is continuing to pick up with BAC ($0.76), MS ($2.00), UNH ($4.30), PG ($1.65), and CFG ($1.61) all reporting ahead of the bell while UAL ($2.23), AA ($2.04), and DFS ($3.61) will release results after the close.

Bottom line, rising yields have been the biggest influence on stocks in recent sessions so it will take a stabilizing bond market and likely an additional positive catalyst or two (such as good earnings/good economic data) to see equity markets find their footing and rally today.

Tom Essaye Quoted in S&P Global on September 14, 2021

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US debt ceiling fight could cause markets to tumble, delay Fed taper

I think in a market that’s stretched, that doesn’t have a lot of backing at these fundamental levels, if you get some sort of serious scare, it could take 5% to 10% out of the S&P 500 pretty quick…Essaye said. Click here to read the full article.

Tom Essaye Quoted in Report Door on July 20, 2021

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Stock market is at risk of a correction if this happens amid the spread of the Delta variant

This market is vulnerable to a bigger pullback or correction if there’s a new negative…warns Sevens Report Research founder Tom Essaye in a research note to clients. Click here to read the full article.

Tom Essaye Quoted in Yahoo Finance on July 20, 2021

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Stock market is at risk of a correction if this happens amid the spread of the Delta variant

This market is vulnerable to a bigger pullback or correction if there’s a new… warns Sevens Report Research founder Tom Essaye. Click here to read the full article.

Tom Essaye Quoted in CNBC on August 4, 2020

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“The bottom line is that if we do see real disappointment in stimulus or the vaccine, then a 10% correction is the likely best-case scenario, and it’ll come…” said Tom Essaye of The Sevens Report, in a note. Click here to read the full article.

Four Events that Could Cause a Correction

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What’s in Today’s Report:

  • Four Events that Could Cause a Correction

Futures are drifting cautiously higher this morning while international markets rallied overnight thanks to more upbeat economic data amid a static geopolitical backdrop.

There were no material developments regarding tensions between the U.S. and Iran overnight.

Economically, a Eurozone inflation reading (HICP) met expectations for the month of December while EU Retail Sales rose 1.0% in November, topping estimates of 0.6%.

Today, there are three economic reports to watch: International Trade (E: -$43.9B), Factory Orders (E: -0.7%), and the ISM Non-Manufacturing Index (E: 54.5). No Fed officials are scheduled to speak.

As far as other catalysts go, the Treasury will hold a 3-Yr. Note Auction at 1:00 p.m. ET and the results could move bond yields and have an impact on the yield curve. And if the curve compresses further (it has narrowed by more than 10 basis points over the last week), it could begin to pressure stocks.

Lastly, tensions between the U.S. and Iran remain a major market focus right now and further escalation could also weigh on risk assets, however, no news is good news regarding the situation right now, so if things continue to calm down in the Middle East, stocks could continue to drift back towards all-time highs.