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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.

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The Market Has So Aggressively Priced In A Dovish Fed

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The Market Has So Aggressively Priced In A Dovish Fed: Tom Essaye Quoted in MarketWatch on MSN

November jobs report likely to show a solid 190,000 increase, with unemployment staying at 3.9%

As a result, market participants will be much more sensitive to a hotter-than-expected number than to a softer-than-expected figure, said Tom Essaye, founder of Sevens Report Research, in a Thursday note.

That means the threshold for “too hot” figures — including payrolls, the unemployment rate and wages — that cause a pullback in both stocks and bonds is lower than it’s been all year because the market has so aggressively priced in a dovish Fed, he wrote.

“So, there’s less of a margin for error if the jobs report is stronger than expectations.”

Also, click here to view the full article published by MSN on December 8th, 2023. 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.

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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 Are GLP-1 Drugs and Why Do They Matter to Markets?

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What Are GLP-1 Drugs and Why Do They Matter to Markets? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What Are GLP-1 Drugs and Why Do They Matter to Markets?

U.S. equity futures are trading lower this morning as a credit downgrade of China’s debt is overshadowing mostly good Composite PMI data overseas.

Overnight, Moody’s cut their outlook for Chinese debt to negative. This weighed on Asian shares and EM stocks, as well as domestic equity futures.

Economically, China’s Composite PMI favorably rose to 51.6 vs. (E) 50.1 in November. While the Eurozone Composite PMI remained in contraction, but notably firmed to 47.6 vs. (E) 47.1 last month.

Two key economic reports to watch today: JOLTS (E: 9.4 million job openings) and the ISM Services Index (E: 52.4). Investors will want to see more evidence that supports a soft landing in the data.

Finally, there is one Fed economist speaking today: Gibson (10:00 a.m. ET) but his comments should not materially move markets.

What Are GLP-1 Drugs and Why Do They Matter to Markets?

Annual Discounts on Sevens Report, Alpha, Quarterly Letter, and Technicals.

We’ve recently been contacted by advisor subscribers who wanted to use the remainder of their 2023 pre-tax research budgets to extend their current subscriptions, upgrade to an annual (and get a month free) or add a new product (Alpha, Quarterly Letter, Technicals).

If you have unused pre-tax research dollars, we offer month-free discounts on all our products. If you would like to extend current subscriptions or save money by upgrading to an annual subscription (across any Sevens Report product), please email info@sevensreport.com.

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.

EIA Data Changes: Impact on Oil Inventories

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EIA Data Changes: Impact on Oil Inventories: Tyler Richey Quoted in Morningstar

Why the U.S. government is changing the way it collects data on the oil market

It appears that previous data collection processes had “‘loopholes’. Which allowed certain condensates and ‘other oils’ to not be reported in inventories. But now will require them to report in total oil inventory figures,” he said.

Looking through the changes to the EIA’s data collection process, Tyler Richey, co-editor at Sevens Report Research, said it was “not very clear exactly how the data will be affected.”

The simplest takeaway is that the next effect of this change should result in oil inventories being higher than they previously were, said Richey.

The EIA in March explained the difference in its estimates of supply. As disposition had increased in its U.S. crude-oil balances it was studying the growing difference. It identified ways in which it has been “overstating disposition and understating supply.”

Also, click here to view the full MarketWatch article published on Morningstar on November 15th, 2023. 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.

Tom Essaye Quoted in Morningstar on August 13th, 2023

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A stumbling stock market faces a crucial summer test. Here’s what will decide the bull’s fate.

“This scenario would essentially undermine the three pillars of the rally, and as such investors should expect a substantial decline in stocks, even considering the recent pullback,” Tom Essaye said in a note last week. “In fact, a decline of much more than 10% would be likely in this scenario, as it would undermine most of the rationale for the gains in stocks since June (and perhaps all of 2023).”

Click here to read the full article.

Sevens Report Co-Editor, Tyler Richey, Quoted in Market Watch on July 31st, 2023

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Stocks could sink into a bear-market recession, says technician. Here are five signals on when it likely starts.

“We continue to respect the rally and acknowledge the trend in equities is still higher, but we remain ‘patient bears’ with regard to stocks given the deeply inverted yield curve,” Tyler Richey, co-editor at Sevens Report Research wrote in a Monday report.

“We view the fact that most Treasury spreads have inverted to levels not seen since the early 1980s as a clear warning sign that the more than 500 basis points of Fed rate hikes in less than 18 months was way too much for the economy to weather,” noted Richey. 

Click here to read the full article.

Tom Essaye Quoted in Barron’s on July 3rd, 2023

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Stocks Tick Lower to Start Holiday-Shortened Session

“At this point, and with yields this high, markets need to see solid data and that means the ISM Manufacturing PMI moving closer towards 50 and beating expectations,” Sevens Report Research’s Tom Essaye writes. Click here to read the full article.

Tom Essaye Quoted in Barron’s on June 22nd, 2023

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Weekly Jobless Claims Flat at 264,000

A further rise in claims could bring into question whether or not the labor market is suddenly beginning to deteriorate meaningfully, wrote Tom Essaye, president of Sevens Report Research, prior to the economic data release. Click here to read the full article.

Analysts at Sevens Report Quoted in MarketWatch on April 6th, 2023

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Oil tallies a third straight weekly gain after OPEC+ production cuts

“Bottom line, the fundamental dynamics of the oil market changed this week with OPEC+’s announced production cut, which they said was geared towards regaining control of the markets and spooking speculators out of the market,” said analysts at Sevens Report Research, in a Thursday note. Click here to read the full article.

Why Have RSP and SPY Diverged?

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What’s in Today’s Report:

  • Why Have RSP and SPY Diverged?

Futures are little changed following a mostly quiet night as markets digest the actions by large banks to shore up FRC.

Positively, banks borrowed $165 billion from the Fed via the discount window and the new BTFP this week and that importantly shows banks are using the Fed’s programs to shore up liquidity.

On inflation, core EU HICP met expectations at 5.6% y/y, although that’s an increase from the previous 5.3% gain.

Today focus will remain on any banking headlines and economic data, but as long as there are no surprises from either (meaning KRE is stable) then stocks can digest this week’s volatility and hold yesterday’s gains.

Economically, notable reports today include Industrial Production (E: 0.4%), Consumer Sentiment (E: 67.0) and Leading Indicators (E: -0.2%), but again it’ll take a substantial surprise from them to move markets.