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Why Did Stocks Drop Last Week?

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Why Did Stocks Drop Last Week?: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Did Stocks Drop Last Week?
  • Weekly Market Preview:  Focus on Treasury Secretary, NVDA earnings and economic growth (Thursday/Friday).
  • Weekly Economic Cheat Sheet:  Important Growth Data Late This Week

Futures are little changed following a quiet weekend of news as markets continue to digest last week’s rise in Treasury yields, and the return of political surprises (via Trump’s cabinet announcements).

There were no notable economic reports overnight.

Politically, the major remaining cabinet pick from Trump is Treasury Secretary and it should come early this week (and another unorthodox choice would further roil markets).

Today the calendar is quiet as there is just one economic report, Housing Market Index (E: 43), and one Fed speaker, Goolsbee (10:00 a.m. ET).  So, focus will be on Trump’s cabinet (again, the more traditional choice for Treasury, the better for markets) and on the 10-year yield.  If it keeps rising, that will be a continued headwind on stocks.

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Why the Next Two Weeks Are So Important For This Market

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Why the Next Two Weeks Are So Important For This Market: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why the Next Two Weeks Are So Important For This Market
  • Weekly Market Preview:  Magnificent Seven Earnings and Important Economic Data
  • Weekly Economic Cheat Sheet:  Jobs and ISM Manufacturing PMI on Friday

Futures are sharply higher following two market-positive geo-political.

In the Mid-East, the Israeli’s response to the Iranian missile attacks was smaller than expected and is viewed as a de-escalation, as oil is down 6% on falling geo-political risks.

In Japan, the ruling LDP party lost its majority in Parliament and looming political gridlock should further delay any BOJ rate hikes (Japanese stocks rose nearly 2% on the news).

Today there are no notable economic reports but as long as oil keeps dropping, the early rally should continue. Finally, earnings season continues and some reports we’ll be watching today include: ON (0.97), F (0.49), WM ($1.86).

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Futures contracts tied to the index are telling a different story

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Futures contracts tied to the index are telling a different story: Tom Essaye Quoted in Market Watch

Why Wall Street’s ‘fear gauge’ could spike again around the election

But futures contracts tied to the index are telling a different story, and it’s one worth paying attention to, according to Tom Essaye, founder of Sevens Report Research.

The October VIX contract is trading at a premium to the November contract, an unusual development known to futures traders as “backwardation.” Typically, the VIX futures curve exhibits a smooth upward slope. But for most of this year, there has been a kink along this part of the curve.

According to Essaye, the inversion is notable not so much for its degree — the October contract was just 0.3 points above its September sibling as of early Thursday — but for its staying power. This segment of the curve has been in backwardation since the October contract started trading in February.

Also, click here to view the full MarketWatch article published on September 26th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

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The Fed could fall behind the curve as real interest rates continue to rise.=

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The Fed could fall behind the curve: Sevens Report Analysts Quoted in Investing.com

The Fed may be further behind the curve

“If we excluded housing from Core CPI, yesterday’s Core CPI reading would have increased just 0.1%,” they explained, downplaying fears of a significant inflation resurgence.

Despite this, the inflation data has reduced the likelihood of a 50-basis-point rate cut by the Fed.

The real risk, according to Sevens, is that the Fed could fall behind the curve as real interest rates continue to rise.

“Real interest rates are now putting more pressure on the economy than they have at any point during the Fed’s tightening cycle,” Sevens stated.

Also, click here to view the full Investing.com article published on September 12th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

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.

What CPI Means for Markets (Fed Further Behind Curve?)

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What CPI Means for Markets (Fed Further Behind Curve?): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What CPI Means for Markets (Fed Further Behind Curve?)

Futures are modestly higher mostly on momentum from Wednesday’s impressive reversal and following encouraging Japanese inflation data.

Economically, the only notable number overnight was Japanese PPI and it rose 2.5% vs. (E) 2.8%. That may take some pressure off the BOJ to hike rates and also weigh on the yen and the Nikkei rose 3% in response.

Today the focus will remain on economic data and rate cuts via the ECB Rate Decision first (E: 25 bps cut) and later Jobless Claims (E: 230K) and PPI (E: 0.2% m/m, 1.8% y/y).  If data can meet expectations and the ECB cuts rates and signals more cuts coming, yesterday’s rally can (and likely will) continue.

There are also two notable earnings reports today via Kroger (KR $0.91) and Adobe (ADBE $4.53).  KR will give us insight into consumer spending (especially on essentials) while ADBE will be the latest tech company to post results (and the stronger the guidance, the better for the broader tech sector).

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Oil futures appropriately popped in the wake of the release

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 Oil futures appropriately popped in the wake of the release: Sevens Report Co-Editor, Tyler Richey, Quoted in Morningstar

Oil prices climb as U.S. data show crude supplies down a fourth straight week

Wednesday’s EIA report was “solid and oil futures appropriately popped in the wake of the release,” said Tyler Richey, co-editor at Sevens Report Research.

Still, the “trend of strong consumer demand has faltered in July,” underscored by the fact the four-week moving average of gasoline supplied remains about 30,000 barrels per day off the early July year-to-date highs, he told MarketWatch.

Going forward, the “energy bulls will want to see more evidence of strong and persistent consumer demand in order for oil to hold above key technical support at $76.50 because recession worries are on the rise and volatility is picking up, both of which are typically headwinds for the price of oil,” said Richey.

Also, click here to view the full MarketWatch article published on Morningstar on July 24th, 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.

These are all contributing to the recent rebound in the oil market

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These are all contributing to the recent rebound in the oil market: Tyler Richey Quoted in MarketWatch

Oil futures end higher as demand prospects improve

“Price-supportive OPEC+ rhetoric, evidence of strong domestic demand at the start of the U.S. summer driving season, rising geopolitical tensions overseas, and renewed hopes for a perfectly executed soft landing by the [Federal Reserve] are all contributing to the recent rebound in the oil market,” said Tyler Richey, co-editor at Sevens Report Research.

“Sentiment is fragile, however, and if we see any headlines that contradict any of those factors that have supported the latest rally, or even just an uptick in broad market volatility into the end of the quarter, we could see oil markets correct back towards the mid-$70-a-barrel range,” he told MarketWatch.

Also, click here to view the full MarketWatch article published on June 18th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

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.

Market Multiple Table: Pushing Justifiable Valuations

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Market Multiple Table: Pushing Justifiable Valuations: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • June Market Multiple Table – Pushing the Edge of Justifiable Valuations
  • Empire State Manufacturing Survey Takeaways
  • Chart – NVDA Tests Near-Term Uptrend

Futures are little changed as ongoing strength in technology shares offsets weakness in small caps in pre-market trade after mixed economic data overnight.

Economically, the German ZEW Survey missed estimates while the EU’s Narrow Core HICP (Core CPI equivalent) was inline with the May Flash of 2.9%, which was up from 2.7% in April.

Today, focus will be on economic data early with Retail Sales (E: 0.3%) and Industrial Production (E: 0.3%) both due to be released. Investors will be looking for signs of healthy consumer spending but not a figure that is “too hot” (hawkish policy concerns) or “too cold” (growth worries) while steady factory sector data would be welcomed but not as impactful for markets today.

There is also a long list of Fed speakers today. In chronological order, we will hear from: Barkin (10:00 a.m. ET), Collins (11:40 a.m. ET), Musalem (1:00 p.m. ET), Logan (1:00 p.m. ET) and Goolsbee (2:00 p.m. ET).

Finally, there is a 20-Yr Treasury Bond auction at 1:00 p.m. ET and weak demand could send yields higher and weigh on equities in afternoon trade.

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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.

How to Explain Inflation Base Effects to Clients and Prospects

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What’s in Today’s Report:

  • How to Explain Inflation to Clients and Prospects
  • JOLTS Return to Pre-Covid Trend Path, But Is That Enough for the Fed?
  • ISM Manufacturing Index Takeaways – Another “Goldilocks” Report
  • The Yield Curve Will Return to Zero, How It Gets There is What Matters Most (Chart)

Stock futures are trading lower with global risk assets after a U.S. credit downgrade late yesterday.

Fitch Ratings downgraded the U.S. from its top rating AAA to AA+ yesterday, citing the massive fiscal deficit, but the downgrade should not result in any forced selling of Treasuries and therefore should have a limited near-term impact on yields and markets more broadly.

Looking into today’s session, focus will be on the U.S. credit downgrade as investors digest the potential implications on fixed income markets and re-assess valuations of risk assets, but we also get the first look at July jobs data in the form of the ADP Employment Report (E: 185K) ahead of the bell. If the data comes in “too hot” or “too cold” market volatility may pick up this morning. Motor Vehicle Sales will also be released (E: 15.6 million) but that data should not move markets.

There are no Fed speakers or notable Treasury auctions today, so beyond the early jobs data investors will continue to focus on Q2 earnings season with CVS ($2.12), KHC ($0.74), and PSX ($3.54) releasing results before the open while PYPL ($1.16), QCOM ($1.63) and MET ($1.85) will report after the close.

 

Sevens Report Technicals – Five Recessionary Bear Market Signals to Watch

The biggest risk to equity markets right now is a hard economic landing developing in H2’23 or sometime in 2024. Using modern market history as a guide, stock market rallies following yield curve inversions are typically reversed entirely during subsequent recessions (so all of the 2023 gains are at risk, and then some).

So, in this week’s edition of Sevens Report Technicals we included a list of Five Recessionary Bear Market Signals to Watch, which includes specific levels to monitor in various asset classes that will help us realize the onset of a looming recession in real time.

The feedback on Sevens Report Technicals has been overwhelmingly positive since its launch in May. One subscriber recently wrote in: “Having been in the business for 36 years and retired for 16, I truly believe this is the best report I have ever seen. The way you organize it and the info I glean from it helps my trading. I really look forward to each Monday’s report.”

To access this week’s edition of Sevens Report Technicals, please send an email to info@sevensreport.com to start a risk-free subscription. We offer a 30-day money back guarantee, so you risk nothing to see for yourself how Sevens Report Technicals can help you and your business.