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Why Yields Are Suddenly Surging

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Why Yields Are Suddenly Surging: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Rising Yields: Is it Growth, the Fed, or Fiscal Worries?
  • Chart: Market Based Inflation Expectations Hit 4-Month Highs

Futures are under pressure again this morning as the 10-Yr yield continues to edge further beyond 4.20%, the highest readings since July, while traders await more important earnings releases today and into the weekend.

Economically, Taiwan’s Industrial Production index, which includes the nation’s critical semiconductor output, slowed to 11.22% in September from a lower revised 12.54% rise in August signaling a potential slowdown in high-tech, AI-focused chips in H2’24.

Today, there is one economic report due out: Existing Home Sales (E: 3.90 million) but unless it is meaningfully “hot” it should not have a major impact on markets (although a cool report that influences less hawkish money flows would be well received by equity markets).

Additionally, there are two Fed speakers to watch: Bowman (9:00 a.m. ET) and Barkin (12:00 p.m. ET) from which markets will look for a less-hawkish, more accommodative tone than the recent “higher-for-longer” policy rate chatter.

Finally, earnings season continues with several notable companies reporting quarterly results including BA ($-10.34), KO ($0.74), and T ($0.59) before the open, and TSLA ($0.58), IBM ($2.27), and TMUS ($2.34) after the close.

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Why Are Utilities the Best-Performing Sector YTD?

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Why Are Utilities the Best-Performing Sector YTD?: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Are Utilities the Best Performing Sector YTD?
  • Chart: 10-Yr Yields Test 3-Month Highs – A Renewed Headwind for Stocks

U.S. stock futures are extending yesterday’s losses in premarket trade this morning, led lower by small-caps as Treasury yields continue to test multi-month highs amid a higher-for-longer Fed policy outlook.

Economically, the only notable release overnight was Hong Kong’s CPI which picked up modestly in September, rising to 0.1% from 0.0% in August (2.2% y/y), but that is not moving markets today.

There are no notable economic reports today and just one Fed speaker on the calendar: Harker (10:00 a.m. ET).

The light economic calendar will leave trader focus on earnings with: VZ ($1.18), MMM ($1.93), GM ($2.50), GE ($1.13), LMT ($6.47), and FCX ($0.40) all reporting quarterly results before the bell while STX ($1.50) and TXN ($1.36), both of which are tech-proxies, will report after the closing bell.

Beyond earnings, Treasury yields will also be in focus today as the sharp, double-digit rise in the 10-Yr yield presented a significant headwind on broader equity markets yesterday. If yields continue higher, expect stocks to have a hard time stabilizing today.

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Why Didn’t Stocks Rally More Last Week?

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Why Didn’t Stocks Rally More Last Week?: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Didn’t Stocks Rally More Last Week?
  • Weekly Market Preview: Earnings Are the Key This Week
  • Weekly Economic Cheat Sheet: The First Major October Datapoint

Futures are slightly lower to start the week despite more Chinese stimulus and better than expected EU inflation data.

The PBOC announced another larger than expected rate cut, continuing to add stimulus to the Chinese economy.

Economically, German PPI declined more than expected (-1.4% vs. (E) -1.2%), increasing ECB rate cut expectations.

Today there is only one notable economic report, Leading Indicators (E: -0.3%) but there are several Fed speakers: Logan (8:55 a.m. ET), Kashkari (1:00 p.m. ET), Schmid (5:05 p.m. ET).  If the data is in-line and the Fed speakers reinforce two remaining rate cuts in 2024, that should support markets (it’s the Goldilocks set up).

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A soft landing remains, by far, the most likely outcome for the economy

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A soft landing remains, by far, the most likely outcome for the economy: Sevens Report Analysts Quoted in Courthousenews.com

Dow Jones, S&P hit fresh highs in wake of good retail data

“A soft landing remains, by far, the most likely outcome for the economy as important economic data strengthened across multiple fronts over the past month,” Tom Essaye of the Sevens Report wrote in an investor’s note on Friday morning.

“Now, to be clear, this doesn’t mean that a hard landing can’t happen (or won’t happen), but it is not happening right now and there are few conclusive signals that it’s going to happen, at least at this point,” he continued.

Also, click here to view the full article on Courthousenews.com published on October 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.

Hard Landing/Soft Landing Scoreboard (October Update)

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Hard Landing/Soft Landing Scoreboard (October Update): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Hard Landing/Soft Landing Scoreboard (October Update)

Futures are slightly higher thanks to better-than-expected Chinese economic data and more solid tech earnings.

Chinese Retail Sales and Fixed Asset Investment both beat estimates, boosting investor sentiment towards China.

On earnings, NFLX beat estimates and is the second straight big tech company to post solid results.

Today we have one economic report, Housing Starts (1.400M) and several Fed speakers, including Bostic (9:30 a.m. & 12:30 p.m. ET), Kashkari (10:00 a.m. ET) and Waller (12:10 p.m. ET).  With recent data stronger than expectations, if today’s Fed officials (including Waller) reinforce their desire for two rate cuts that will be an incremental positive.

Earnings season also continues to roll on and today we get notable reports from AXP (E: $3.27), PG (E: $1.90) and RF (E: $0.53).

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Where SOX Go, Stocks Go: A Cyclical Canary to Watch in the Market Coal Mine

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Where SOX Go, Stocks Go: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Where SOX Go, Stocks Go: A Cyclical Canary to Watch in the Market Coal Mine

Futures are modestly higher thanks to solid earnings and ahead of important central bank decisions and economic data later today.

Taiwan Semiconductor (TSM) beat earnings and is rallying 8% pre-market and that’s boosting tech and futures.

Today will be a busy day on the economic and earnings front, starting with the ECB rate decision, where the ECB is expected to cut rates 25 bps and signal an openness (but not a guarantee) of another rate cut in December.

Economically, there are several potentially important reports today including, in order of importance, Retail Sales (E: 0.3%), Jobless Claims (E: 260K), Philly Fed (E: 3.0) and Industrial Production (E: -0.1%).  With all of today’s data, Goldilocks readings around expectations are the best case for markets.

Finally, earnings season continues to roll along and NFLX (E: $5.09) after the close is the big report today.

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Earnings Offer Mixed Economic Signals

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Earnings Offer Mixed Economic Signals: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Earnings Giving a More Mixed Economic View (Although It’s Still Early)
  • Empire State Manufacturing Index Takeaways
  • Insight from Oil’s Early Week Collapse

U.S. futures are steady as yesterday’s pullback is digested while overseas markets were mostly lower overnight after ASML’s downbeat guidance weighed on global tech shares and LVMH earnings rekindled concerns about consumers.

Economically, UK Core CPI favorably fell 0.4% to 3.2% vs. (E) 3.5% in September, bolstering BoE rate cut bets.

Today, there is one second-tiered inflation report to watch: Import & Export Prices (E: -0.3%, -0.4%), but barring a big surprise one way or another it is not likely to move markets.

Additionally, there is a 4-Month Treasury Bill auction at 11:30 a.m. ET. A strong auction would be received as dovish and help stocks and other risk assets stabilize in the midst of increasingly hawkish Fed policy expectations in recent weeks.

There are no Fed officials scheduled to speak today but earnings season continues to pick up with results being released by several big financials: MS ($1.57), CFG ($0.79), SYF ($1.77), DFS ($3.29) and a few more economically-sensitive companies PPG ($2.15), CSX ($0.48).

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Tom Essaye Interviewed On Yahoo Finance’s Morning Brief

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A slowing economy does not necessarily mean a recession: Tom Essaye Interviewed On Yahoo Finance

Economic, geopolitical risks could be rude awakening for market

“I want everybody to realize that a slowing economy does not necessarily mean a recession, but where stocks are right now, if growth even slows to sort of flat or sub 1%, you could see a 10% drop in the S&P 500, and we wouldn’t even be probably at fair value,” Sevens Report Research founder and president Tom Essaye tells Seana Smith and Brad Smith on the Morning Brief.’

“So look, things are good right now, but I do think the market is complacent to economic slowdown risks.”

Essaye has been “advocating for focusing on quality and lowering volatility” through ETFs, and views geopolitical risks to be a chief concern at the moment.

“And then also there’s going to be a lot of political uncertainty coming out of the election, because we’re all going to be trying to game what policy changes are going to occur. All of these things can combine to sort of fracture this perfect window we’re in in the markets,” Essay explains. “All I’m trying to do is remind investors that, hey, there are risks out there and that… the stock market can go two directions as well.”

Also, click here to view the full interview with Yahoo Finance published on October 15th, 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.

 

Is China the Next Japan?

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Is China the Next Japan?: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Is China the Next Japan?

Futures and EU shares are lower as cautious retailer earnings guidance and heavy trade in China overnight are offsetting easing geopolitical tensions following reports that Israel would not strike Iranian oil/energy infrastructure (oil futures are down nearly 5%).

Economically, EU Industrial Production met expectations overnight while a German Economic Sentiment gauge topped estimates, but neither report is materially moving markets this morning.

Today, there is one important economic report to watch: The Empire State Manufacturing Index (E: 0.0), and two Fed officials are scheduled to speak: Daly late morning (11:30 a.m. ET) and Kugler in the early afternoon (1:05 p.m. ET).

Additionally, there are two typically lesser-followed Treasury auctions for 3-Month and 6-Month T-Bills at 11:30 a.m. ET that could shed fresh light on market expectations for Fed policy rates between now and Q2’25 which have swung sharply hawkish over the last two weeks. Strong auction would have dovish implications for the market and be well received by equity investors today.

Finally, earnings season is getting into full swing with several more big banks reporting quarterly results today: BAC ($0.78), C ($1.34), and GS ($6.85) while two members of the Dow Jones Transportation Average: UAL ($3.10) and JBHT ($1.43) are also due to report today.

Bottom line, equity markets have rallied solidly over the last week amid a combination of earnings optimism and soft-landing hopes. If any of the economic data, Fed chatter, or earnings results damage either of those narratives, expect some mild profit taking in equities today, otherwise the path of least resistance is still higher for stocks right now.

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October MMT Chart: Record Targets Amid a Cautious Divergence

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October MMT Chart: Record Targets Amid a Cautious Divergence: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • October MMT Update – Scenario Targets Hit Fresh Records
  • A Concerning Technical Divergence Has Emerged on the Weekly S&P 500 Chart

Futures are mildly lower as the DOJ said it was considering a breakup of GOOGL following a monopoly ruling which dragged down tech stocks overnight while international news was mixed.

Chinese equities retreated 7% on the session amid ongoing stimulus uncertainty, prompting the government to announce a press event for Saturday to address fiscal policy.

Looking into today’s session, there are no notable economic reports to watch, leaving focus on the September FOMC meeting minutes which are due to be released at 2:00 p.m. ET.

There are a slew of Fed speakers today including: Bostic (8:00 a.m. ET), Logan (9:15 a.m. ET), Goolsbee (10:30 a.m. ET), Barkin (12:15 p.m. ET), Jefferson (12:30 p.m. ET), Collins (5:00 p.m. ET), and Daly (6:00 p.m. ET).

A less-dovish tone from Fed speakers over the course of the last week contributed to the uptick in broad market volatility, so more of the same could pressure markets again today while any hint of another 50 bp rate cut in November could spark a dovish wave of risk-on money flows (unlikely, however, after Friday’s jobs report).

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