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Tom Essaye Quoted in Barron’s on December 18, 2020

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Jobs Report Preview

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Jobs Day

What’s in Today’s Report:

  • Trade Update – What’s the Latest?
  • Key Levels to Watch in the Dollar and 10 Year Yield
  • OPEC Update – Positive or Negative for Oil?

Futures are modestly higher again as markets ignore more soft economic data and instead focus on incrementally positive U.S./China trade headlines.

China reduced import tariffs on U.S. soybeans and pork and that’s being interpreted as a mild positive in the negotiations, and that’s the reason futures are higher.

Economic data again disappointed as Japanese Household Spending and German IP (-1.7% vs. (E) 0.2%) both missed.

Today the key event on the calendar is the jobs report, (E: Jobs: 180K, UE Rate: 3.6%, Wages: 0.3%) and again the stronger the number, the better.  We also get Consumer Sentiment (E: 96.8) this morning, and given the focus on consumer spending, that number is more important than usual.  Like the jobs report, the stronger the number, the better for stocks.

Finally, regarding trade, Larry Kudlow will speak on CNBC at 9:30 so we’ll likely get another non-specific, yet positive, update on the U.S./China trade “mood music,” so don’t be surprised if you see a temporary pop in stocks right at the open.

New Earnings Risks

What’s in Today’s Report:

  • Why the Stronger Dollar and Commodity Prices Matter to Stocks
  • Housing Market Data Update
  • More Evidence a Rate Cut Might Be Coming

S&P futures have turned negative in pre-market trading as bond yields continue to bleed lower with the benchmark 10-yr yield hitting fresh lows in the mid-2.30% range overnight.

Economically, Chinese Industrial Profits were down -14.0% YTD, falling from -1.9% in December.

The Reserve Bank of New Zealand was the latest central bank to turn decidedly dovish overnight citing concerns about the global economy while Brexit angst also persists amid new votes in Parliament today.

The list of catalysts in the Wall Street session is a short one today with only one economic report due out: International Trade (E: -$57.4B) and just one Fed speaker later in the evening: George (7:00 p.m. ET).

That will again leave the market primarily focused on the bond market and to a lesser degree the dollar. Recession fears are front and center right now with Fed funds futures pricing in more than 80% odds of a rate cut in the next 10 months as of this writing.

Bottom line, without a rebound in yields and at least a steady dollar (a pullback would be more favorable) then it will be very difficult for stocks to mount any sort of rally today.

Tyler Richey, co-editor of Sevens Report Quoted in MarketWatch

Tyler Richey, co-editor of Sevens Report Quoted in MarketWatch on February 4, 2019.

“There have been a lot of shifting pieces in the oil market to start 2019 as a dovish [Federal Reserve], and subsequently weaker dollar, sanctions on Venezuela, and…” Read the full article here.

Weekly Market Outlook

What’s in Today’s Report:

  • Weekly Market Outlook

Futures are marginally higher this morning and global markets were mostly flat overnight after a very quiet and uneventful holiday weekend as focus turns to data this week.

Economically, Eurozone PPI was solid at 4.0% YoY, but most of the rise was due to energy prices and core inflation levels remain slow but steady in the EU.

Energy prices are notably higher this morning due to Tropical Storm Gordon’s near term threat to Gulf oil operations.

Today, focus will be on economic data early: ISM Manufacturing Index (E: 57.6) and Construction Spending (E: 0.4%) while there are no Fed speakers scheduled to speak.

Beyond data, investors will largely be focused on trade relations this week, more so with China but negotiations with Canada will also be important.

The dollar has been a good, inverse indicator for investor sentiment towards trade and it is handily higher this morning. If the dollar strength continues, it will be hard for stocks to continue last week’s gains this week.

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Valuation Update (New Target)

What’s in Today’s Report:

  • Valuation Update

Futures are slightly higher this morning after a very quiet night as global shares are edging higher after yesterday’s run to new all-time highs in several major US indexes.

Trade concerns continue to ease after yesterday’s favorable developments between the US and Mexico, leading to a further pullback in the dollar which has been the most significant tailwind for stocks over the last week.

Looking ahead to today’s session, there are a few notable economic reports due out: International Trade in Goods (E: -$69.4B), S&P Case-Shiller HPI (E: 0.2%), and Consumer Confidence (E: 126.8) but there are no Fed officials scheduled to speak.

Economic data aside, progress on trade and the subsequent decline in the dollar index have been the primary bullish influences on stocks right now, so as long as the trade situation doesn’t deteriorate today, and the dollar doesn’t materially rally, stocks should be able to continue towards new highs.

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New Highs

What’s in Today’s Report:

  • Why Stocks Hit New Highs
  • Weekly Market Preview
  • Weekly Economic Cheat Sheet

Futures are extending Friday’s gains following efforts by Chinese authorities to further strengthen the yuan.

The yuan strengthened to a one month high vs. the dollar as Chinese officials re-introduced the “Counter Cyclical Factor” in setting the daily value of the yuan.  That “factor” is widely seen as an intent to ensure yuan strength and avoid a potential breach of 7.00.  And, that support of the yuan is a potential macro positive.

The only notable econ report was German IFO Business sentiment, which beat estimates at 106.4 vs. (E) 105.4.

Today there are no notable economic reports and no important Fed speakers, so focus will remain on any trade headlines (a new trade deal with NAFTA seems imminent and that should be a mild positive on sentiment and stocks).

To read the full report Go Here

The Key to a Weaker Dollar (And Higher Stock Prices)

What’s in Today’s Report:

  • The Key to a Weaker Dollar (And Higher Stock Prices)

Futures are modestly higher following a generally quiet night of news.

U.S./China trade talks ended with no specific future date to resume negotiations, but the tone from the meeting was constructive and that’s helping sentiment.

Economically it was a quiet night as Japanese CPI slightly missed estimates while German GDP met expectations.

Today the key event to watch is the Powell speech from Jackson Hole (10:00 a.m.).  But, while that clearly has the potential to move markets, it’s widely expected that Powell will stick to the script and repeat much of what the Fed has said recently (pointing to a September rate hike and then quarterly hikes thereafter).

In addition to Powell, we also get Durable Goods Orders (E: -0.8%), but barring major surprises from either one, we can expect typically slow Friday in August trading.

Read the full report here: Go Here