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Earnings Season Update

What’s in Today’s Report:

  • Earnings Season Update (Not Great, But Not Bad, Either)
  • What’s Up With Natural Gas?

Futures are flat as concern about the Wuhan coronavirus offset better than expected earnings.

Chinese authorities expanded the quarantine zone around Wuhan to limit the transmission of the disease, and that’s increasing fears of a bigger negative economic impact.

Earnings overnight were solid as TXN beat estimates,  boosting semi-conductors and tech more generally.

Today we get an ECB Announcement, but no change in rates is expected and really markets will just want to hear a dovish tone from new ECB President Lagarde (which should happen).

Away from the ECB,  Jobless Claims (E: 213K) is the key economic report, while earnings season continues to roll on.  Some reports we’re watching today include: PG (E: $1.37) and INTC (E: $1.24).

What the Wuhan Coronavirus Means for Markets

What’s in Today’s Report:

  • What the Wuhan Coronavirus Means for Markets

S&P 500 futures rallied to new record highs overnight amid easing concerns over the deadly virus outbreak in China that weighed on risk assets Tuesday.

Chinese health officials announced plans to both screen for, and contain the Wuhan coronavirus which helped reduce fears that a SARS-like epidemic is developing.

Today, there are a few different potential catalysts for the market that warrant watching. First, there are two economic reports on the housing market: FHFA House Price Index (E: 0.3%) and Existing Home Sales (E: 5.430M) which should show a continued rebound in the sector into the end of 2019.

Second, earnings season is in full swing and investors will continue to sift through the releases closely. Notable corporations reporting today include: JNJ ($1.87), ABT ($0.95), ALLY ($0.95), TXN ($1.02), KMI ($0.26), LVS ($0.80), and RJF ($1.90).

Lastly, any new developments on the spread, or containment of, the Wuhan coronavirus will likely get a reaction from markets as it was the primary focus of traders across asset classes yesterday.

Insight from a Wall Street Legend

What’s in Today’s Report:

  • Insight from a Wall Street Legend
  • Another Tipping Point for the Yield Curve

International markets were mixed overnight and stock futures are slightly lower as investors digest Chinese trade data and look ahead to the start of earnings season.

Final Chinese trade data from 2019 revealed a rise of just 0.5% in exports while imports dropped 2.8% on the year versus double digit gains in each in 2018. The trade figures underscore the detrimental effects of the trade war on the Chinese and broader global economies.

Looking into today’s session, focus will be on the unofficial start to earnings season as several major corporations are due to report, including three big banks: JPM ($2.32), DAL ($1.40), C ($1.82), and WFC ($1.12).

Beyond earnings, there is one key economic report to watch: CPI (E: 0.3%), while two Fed officials are scheduled to speak: Williams (9:00 a.m. ET) and George (E: 1:00 p.m. ET).

Tom Essaye Quoted in MarketWatch on November 7, 2019

“It’s a fair critique of corporate earnings to say that earnings “growth” in 2019 is a bit deceptive as the value is being financially engineered by corporate finance departments, not organic, core-business growth. Companies aren’t making any more money than…” wrote Tom Essaye, president of the Sevens Report, in a Wednesday note to clients. Click here to read the full article.

New York Skyline

Why Markets Are Ignoring Bad Data

What’s in Today’s Report:

  • Why Markets Are Ignoring Bad Economic Data

Futures are slightly higher following a generally quiet night of mixed earnings.

On the earnings front, AMZN missed earnings badly but INTC posted strong numbers and the two are largely offsetting one another.

Regarding U.S./China trade, there is a phone call between the two countries today where China will ask for the December tariff increases to be formally scrapped and the 9/1 tariff increases to be rescinded. If this happens, it’s a positive surprise.

Today the calendar is quiet as we have just one economic report, Consumer Sentiment (E: 96.0) and only a few notable earnings reports, VZ ($1.24) and BUD ($1.36).

So, focus will be on that U.S./China trade call, and if we see the September tariff increases rolled back, that will likely send the S&P 500 to new all-time highs.

Tom Essaye Interviewed with Yahoo Finance on October 24, 2019

Major indexes are mixed today after major companies like Microsoft, Twitter, and Tesla reported earnings. Founder of The Sevens Report Tom Essaye joins Yahoo Finance’s Alexis Christoforous and Brian Sozzi to discuss. Click here to watch the full video.

Tom Essaye Quoted in CCN on October 21, 2019

“If corporate earnings show signs of resilience, especially by the U.S. consumer, then a run to new highs is by no means out of the question” – Tom Essaye, The Sevens Report. Click here to read the full article.

New York Stock Exchange Traders

Tom Essaye Quoted in International Business Times on October 20, 2019

“If corporate earnings show signs of resilience, especially by the U.S. consumer, then a run to new highs is by no means out of the question,” said Tom Essaye, founder of stock market analysis firm, Sevens Report Research, in a note to clients. Click here to read the full article.

New York Traders

Did the Fed Just Restart QE?

What’s in Today’s Report:

  • Did the Fed Just Restart QE?

Stock futures declined overnight after China said it would take countermeasures to the passage of a pro-Hong Kong bill by the U.S. House, further complicating the U.S.-China trade relationship while hopes for a Brexit deal faded.

There were no market-moving economic reports overnight.

Today, there is one key economic report to watch: Retail Sales (E: 0.3%) and two second tiered reports due to be released: Business Inventories (0.3%) and the Housing Market Index (E: 68). There are also two Fed officials scheduled to speak: Evans (9:00 a.m. ET) and Brainard (3:00 p.m. ET) that could potentially move markets.

Investors will also be looking for any further developments on the latest escalation in tensions between the U.S. and China as the trade war remains a major influence on stocks and broader risk assets.

Shifting from macro to micro, the start of earnings season will continue today with BAC ($0.68), PNC ($2.80), ALLY ($0.98), USB ($1.11), and BK ($0.99) all reporting ahead of the bell while NFLX ($1.05), IBM ($2.64) and CSX ($1.01) will release results after the close.

Why Earnings Still Matter

What’s in Today’s Report:

  • Why We Can’t Get Complacent on Earnings
  • Dow Theory Turns Positive

Futures are marginally higher after China cut interest rates, although the cut was less than expected.

China cut its Loan Prime Rate (LPR) by five basis points.  The rate cut was expected but it was supposed to be a 10-15 basis point cut, so the action isn’t as strong as hoped for and Chinese economic growth will remain a concern.

Economic data was sparse overnight as Japanese CPI met expectations at 0.5% yoy.

Today there aren’t any economic reports but there are several Fed speakers, including Bullard who already spoke and was dovish (which isn’t a surprise, he wanted a 50 bps cut this week).  The most important speaker today is Williams (8:15 a.m. ET) as he’s considered part of Fed leadership, and if he advocates for more cuts that’ll be a dovish tailwind on stocks.  Other speakers today include Rosengren (11:20 a.m. ET) and Kaplan (1:00 p.m. ET).

On U.S./China trade, the staffer meeting in preparation for the October meeting will continue, and absent any “real” news today any chatter that’s positive on U.S./China trade and/or dovish will help stocks rally.