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Evidence of Some Deterioration in the Fundamentals

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Deterioration in the Fundamentals: Strengthen your market knowledge with a free trial of The Sevens Report.

What’s in Today’s Report:

  • Market Multiple Table:  Evidence of Some Deterioration in the Fundamentals

Futures are modestly lower on another negative AAPL article and more mixed economic data.

AAPL shares fell another 3% pre-market as Bloomberg also reported certain Chinese government agencies would be banned from using foreign made phones.

Economically, Chinese exports were no worse than feared (-8.8%). However, German Industrial Production missed estimates (-0.8% vs. (E) -0.2%) as global recession fears crept higher.

Today focus will be on economic data and Fed speak.  The two key reports to watch are Jobless Claims (E: 238K) and Unit Labor Costs (E: 1.7%).  Markets will want to see the former rise more than expected (but not too much more) and the later be less than expectations.  The opposite (low claims and high Unit Labor Costs) will push Treasuries higher and weigh further on stocks.

Turning to the Fed, New York Fed President Williams speaks at 3:30 ET. Since he’s part of Fed leadership, we’ll pay attention and markets will hope he hints that rate hikes are done.  Bostic also speaks at 3:45 ET but his message will likely be predictably dovish, and as such it won’t move markets.

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How to Explain Any Pullbacks to Clients

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What’s in Today’s Report:

  • How to Explain Any Pullbacks to Clients (Why Too Hot or Too Cold Data Is a Negative for Markets)
  • Weekly Market Preview:  Can Goldilocks Data Continue to Support Stocks?
  • Weekly Economic Cheat Sheet:  All About Jobs (Jobs Report Friday, Claims Thursday, ADP Wednesday, JOLTS Tomorrow)

Futures are little changed following mixed global economic and inflation readings.

In China, the July PMIs were mixed as manufacturing was slightly better (49.3 vs. (E) 49.2) while services were worse (51.5 vs. (E) 52.9) and the result is markets will still want more stimulus from Chinese officials.

On inflation, EU flash core HICP (their CPI) rose 5.5% y/y vs. (E) 5.4% y/y, hinting at stickier than expected inflation.

This will be a busy week of data and earnings, but it starts slowly as there’s just one notable economic report today, the Chicago PMI (E: 43.5) and only a few notable earnings: ANET ($1.43), ZI ($0.23), WDC ($-2.01).  So, barring any major negative earnings announcements, we’d expect generally quiet trading ahead of an increase in activity starting tomorrow.

Tom Essaye Quoted in Forbes on March 30th, 2023

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Dow Jumps 200 Points As Lack Of ‘Drama’ Spurs Gains

“To say a lot has transpired in the markets over the past three weeks would be an understatement,” Sevens Report analyst Tom Essaye wrote in a Thursday note to clients. Click here to read the full article.

Does Dow Theory Outperform? (Yes)

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What’s in Today’s Report:

  • A Good Question on Dow Theory Returns Over the Years

Stock futures are little changed this morning while bond yields are moving higher with the 2-Yr Note yield notably trading above 4% as banking fears continue to ease although markets still remain on edge.

There were no market moving economic reports overnight and news wires were generally quiet.

Looking into today’s session, there are several economic reports due to be released in the U.S. including: International Trade in Goods (E: -$90.0B), Case-Shiller Home Price Index (E: 3.7%), FHFA House Price Index (E: -0.2%), and Consumer Confidence (E: 101.0).

Shortly after the open, the Fed’s Barr will testify before the Senate beginning at 10:00 a.m. ET regarding the recent banking turmoil and state of the financial industry. Any negative comments or developments during the testimony that weighs on bank shares will very likely drag down the broader market.

Looking to the afternoon, there is a 5-Yr Treasury Note auction at 1:00 p.m. ET that could impact the broader bond market and move stocks.

Tom Essaye Quoted in Forbes on March 14th, 2023

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‘Head Fake Rally’? Dow Jumps 400 Points On Bank Stocks’ $37 Billion Recovery

Sevens Report analyst Tom Essaye warned in a Tuesday note that the most recent market gains could be little more than a “head fake rally,” explaining that the Federal Reserve’s actions to protect depositors at Silicon Valley Bank and Signature Bank could actually cause inflation to linger even longer. Click here to read the full article.

Sevens Report Quoted in MorningStar on September 2nd, 2022

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EMEA Morning Briefing: Stocks Seen Higher But Caution Likely Ahead of U.S. Jobs Report

The jobs report once again carries risks for stocks because if it runs ‘too hot,’ that will increase the prospects of more hikes and, more importantly, delay when markets expect rates will be cut, Sevens Report said. Click here to read the full article.

When Could the Selling Stop?

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What’s in Today’s Report:

  • When Could the Selling Stop?
  • Weekly Economic Cheat Sheet

Stock futures are solidly higher this morning, rebounding from last week’s more than 5% selloff while global markets stabilized following a mostly quiet weekend.

President Biden and St. Louis Fed President, Jim Bullard, both downplayed the threat of a severe recession on Monday which is helping drive risk-on money flows this morning while there were no market-moving economic reports overnight.

From a catalyst standpoint, there is just one economic report today: Existing Home Sales (E: 5.40M) and two Fed officials are scheduled to speak: Mester (12:00 p.m. ET) and Barkin (3:30 p.m. ET).

Bottom line, for this morning’s relief rally to continue today the market will need to see stable price action in bond markets, economic data meet or beat expectations and Fed officials to maintain an optimistic tone as that could see the S&P 500 test near term resistance between 3,780 and 3,840.

Tom Essaye Quoted in Forbes on September 28, 2021

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Dow Sinks 500 Points As Spiking Treasury Yields Drive Forceful Tech Stock Sell-Off

Yields on the 10-year Treasury shot up 3.5 basis points on Tuesday to their…market analyst Tom Essaye, president of Sevens Report Research, said in a note. Click here to read the full article.

Tom Essaye Quoted in Barron’s on July 21, 2021

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Chipotle Rises, Netflix Falls, and the Dow Continues Rebounding

Futures are modestly higher thanks to continued momentum from Tuesday’s…writes Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

Tom Essaye Quoted in Marketplace on May 26, 2021

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The Dow at 125: Why it endures

That can tend to let the Dow be more volatile. It can also be skewed more by one stock, it gives you a glimpse of the economy that other indexes don’t. And the fact that companies…said Tom Essaye, president of Sevens Report Research. Click here to read the full article.