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

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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?

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EIA Data Changes: Impact on Oil Inventories

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

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Tom Essaye Quoted in Morningstar on August 13th, 2023

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

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

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

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

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?

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.

Why Stocks Are Falling (It’s Not Just the Fed)

What’s in Today’s Report:

  • Why Stocks Are Falling (It’s Not Just the Fed)

Futures are sharply lower on momentum from Thursday’s selling as investors further digest the hawkish ECB decision and yesterday’s lackluster economic data.

Despite weaker stock prices this morning, economic data overnight was mildly encouraging.  EU and UK December flash PMIs both slightly beat estimates while the EU HICP wasn’t any worse than feared at 10.1% y/y.

Today there are two important economic reports, the Flash Manufacturing PMI (E: 47.7) and Flash Services PMI (E: 46.5) and markets will need to see those data points show 1) Resilient activity and 2) Declining price pressures (more dis-inflation) if they are going to help stocks stabilize.  We also get one Fed speaker, Daly (12:00 p.m. ET), but she shouldn’t move markets.

Finally, today is a Quadruple Witching options expiration and it could cause some intense volatility as many traders had been positioned for a year-end rally, and as those hopes are being dashed, some book-squaring is likely in order.  Point being, don’t be surprised by an uptick in volatility this afternoon and into the close.

What the Latest Fed Speak Means for Markets (Updated)

What’s in Today’s Report:

  • What the Latest Fed Speak Means for Markets (Updated for Powell, the ECB, and RBA).

Futures are sharply higher on encouraging Chinese inflation data and a drop in the U.S. Dollar.

Chinese PPI (2.3% vs. (E) 2.8% y/y) and CPI (2.3% vs. (E) 3.2% y/y) both declined from last month and came in under expectations, providing more evidence that the global economy has hit “peak inflation.”

The encouraging Chinese inflation data combined with yesterday’s hawkish ECB is pushing the dollar 1% lower.

Today there are no notable economic reports but there are several Fed speakers, including Evans (10:00 a.m. ET), Waller (12:00 p.m. ET) and George (12:00 p.m. ET).  If they sound optimistic on inflation, that will help extend this morning’s rally.