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Updated Market Multiple Targets: S&P 500 Chart

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Updated Market Multiple Targets: S&P 500 Chart: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • S&P 500 Market Multiple Targets Chart – February Update (Shareable PDF)

Stock futures are little changed amid a stable bond market as investors await another busy day of Fed commentary and another key Treasury auction.

Economically, German Industrial Production was better than feared at -3.1% vs. (E) -3.9% Y/Y in December, but the still negative headline is not helping ongoing concerns for a potential recession in Europe this year.

Looking into the U.S. session today, there are two economic reports on the calendar: International Trade in Goods and Services (E: -$62.2B) and Consumer Credit (E: $16.2B). Neither release should move markets but a meaningful rise in Consumer Credit could stoke concerns about a potential rise in delinquencies and weigh on stocks.

Beyond the data, we have another very busy day of Fed speak with Kugler (11:00 a.m. ET), Collins (11:30 a.m. ET), Barkin (12:00 p.m. ET), and Bowman (2:00 p.m. ET) all due to speak around mid-day. Markets have largely absorbed the hawkish shift in tone of the last week but if there is any more dovish-leaning chatter today, it could support a continued rally in equity markets and further stabilize bonds.

Finally, there is a 10-Yr Treasury Note auction at 1:00 p.m. ET and if demand is as strong as it was in yesterday’s 3-Yr Note auction, that could be another bullish catalyst for both stocks and bonds in the afternoon.

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Jobs Day (Updated Jobs Report Preview)

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Jobs Day: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Jobs Day (Updated Jobs Report Preview)

Futures are solidly higher ahead of today’s jobs report thanks to strong earnings overnight.

META (up 17% pre-market) and AMZN (up 7% pre-market) posted strong earnings while AAPL (down 2% pre-market) underwhelmed, but overall earnings results were good overnight and that’s pushing futures higher.

Today focus will be on the jobs report and expectations are as follows: 187K job adds, 3.8% Unemployment Rate, 0.3%/4.1% wage growth.  Powell pushing back on a March rate cut helped increase the threshold for a “Too Hot” report, so there’s a wider lane for a “Just Right” reading.  But, if job growth remains very strong (so solidly above 200k) and the other details are “Too Hot,” don’t be surprised if yields rise and stocks decline as some investors start to doubt a May rate cut.

Other notable events today include Consumer Sentiment (E: 78.8, 1-Yr inflation expectations: 2.9%) and the last “important” day of earnings, although neither of those should move markets.

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Key Technical Levels to Watch on Fed Day

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Key Technical Levels to Watch: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Key Technical Levels to Watch on Fed Day (Shareable PDF Available)
  • Jobs Report Preview

Stock futures are in the red this morning after mega-cap tech earnings failed to meet overly optimistic estimates (but were not that bad, all things considered), Chinese Manufacturing PMI missed estimates, and French CPI was higher than expected.

On the earnings front, AMD (-11%), GOOGL (-6%), and MSFT (-1%) are all lower in the pre-market despite generally healthy quarterly reports with most earnings and revenue figures topping analysts estimates while some corporate guidance was not as strong as hoped.

Today is lining up to be a very busy day full of catalysts. Starting with the economic data, we get the first look at January labor market data with the ADP Employment Report (E: 130K) while Q4 Employment Cost Index (E: 1.0%) will offer a look at wage pressures from late 2023.

The Treasury will release the official Refunding Announcement details before the open (8:30 a.m. ET) before focus will turn to the Fed with the FOMC Decision (2:00 p.m. ET) and Powell’s press conference (2:30 p.m. ET) in the afternoon.

There are no “Mag7” earnings today, but a few notables to watch include: MA ($3.08), QCOM ($2.37), and MET ($1.95).

Bottom line, equities are on edge in pre-market trade this morning with all of today’s catalysts looming, but, if the Treasury Refunding Announcement supports the bond market (keeps a lid on yields) and the Fed doesn’t not offer a hawkish surprise, we should be able to see markets stabilize. Conversely, any disappointments or hawkish reactions will support further volatility into the back half of the week.

Computer chips

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Five Bullish Market Assumptions Updated

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Five Bullish Market Assumptions Updated: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Five Bullish Market Assumptions Updated (Are They Still True?)
  • Weekly Market Preview:  Important Updates on Fed Rate Cuts and Economic Growth
  • Weekly Economic Cheat Sheet:  Fed Meeting Wednesday, ISM and Jobs Report Friday

Futures are little changed following an increase in geo-political tensions over the weekend and ahead of the first really busy week of 2024.

Three U.S. soldiers were killed in an attack in Jordan by Iranian backed militants and that’s further escalating tensions in the region and oil rallied in response.

There were no economic reports overnight.

This is the first truly busy week of 2024 as we have a Fed decision on Wednesday and a jobs report on Friday and it’s the most important week of earnings season.  But, the week starts slowly as there are no economic reports today and minimal earnings.  So, focus will remain on geo-politics and 1) Any additional attacks on U.S. soldiers in the region or 2) Information about a U.S. retaliatory strike could push oil higher and weigh on stocks.

Earnings Today:  WHR ($ 3.64), SOFI (E: $0.00), CLF ($-0.07).

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What Earnings Are Saying

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What’s in Today’s Report:

  • What Earnings Are Saying About Current Economic Growth

Futures are modestly lower following a night of underwhelming earnings results.

INTC (stock down 10% premarket) gave soft guidance while V and TMUS (stocks down –3% each) posted underwhelming results.

Economically, German GfK Consumer Climate missed expectations (-29.7 vs. (E) -24.5) but that’s not moving markets.

Today focus will be on the Core PCE Price Index (E: 0.2% M/M, 3.0% Y/Y) and this number needs to meet or be lower than expectations to help support the stock rally.  If Core PCE prints solidly above expectations look for higher yields and lower stock prices.  The other notable economic number today is Pending Home Sales (E: 1.3%) but that shouldn’t move markets.

On the earnings front, the key report today is AXP ($2.65) and specifically we’ll be watching for is their commentary on consumer spending (the more positive, the better for markets).  Other notable earnings include CL ($0.85) and NSC ($2.90).

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China Cut Reserve Requirements

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What’s in Today’s Report:

  • China Cut Reserve Requirements.  Does that Improve Risk/Reward?

Futures are little changed following a mixed night of earnings and ahead of the ECB rate decision.

Earnings were mixed overnight with cautious TSLA guidance (TSLA down –7% pre-market). This is offsetting other solid tech results from IBM, NOW and others.

Today focus will remain on rates, data and earnings.  The key event today is the ECB meeting there is little to no chance of a rate hike or cut.  Instead, the key will be insight into when the ECB expects the first rate cut.  If it’s before the summer, that’s dovish/bullish.  If it’s after the summer that’s hawkish/bearish.

Turning to the data, there are several notable reports today. Including (in order of importance) Advanced Q4 GDP (E: 2.0%), Jobless Claims (E: 200K), Durable Goods (E: 1.0%) and New Home Sales (E: 650K). “Goldilocks” data that meets expectations is the best outcome for stocks.

Finally, earnings season rolls on and important reports today include: AAL ($0.06), LUV ($0.11), VLO ($2.95), SHW ($1.80), INTC ($0.48), V ($2.33), TMUS ($1.90), COF ($2.50).

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Why Are Chinese Stocks So Weak? (And Is There an Opportunity?)

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Why Are Chinese Stocks So Weak? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Are Chinese Stocks So Weak? (And Is There an Opportunity?)
  • Chart: Leading Economic Indicators Remain Deeply Negative

U.S. futures are flat amid mixed trade overseas as European shares pulled back modestly after a weak ECB Lending Survey while Asian shares bounced solidly amid news China is planning a $278B “market rescue package” aimed at stabilizing the nation’s volatile capital market environment.

Looking into today’s session, there is one regional Fed survey release: Richmond Fed Manufacturing Index (E: -15). And while the Richmond release is less popular than other regional Fed reports, it will be more closely monitored today after both the Empire and Philly Fed surveys badly disappointed last week.

December M2 Money Supply will also be released at 1:00 p.m. ET which could move markets in early afternoon trade (especially if there is a sharp and unexpected contraction in money supply).

There are no Fed officials scheduled to speak today but there is a 2-Yr Treasury Note auction at 1:00 p.m. ET that could offer fresh insight into market expectation for Fed policy outlook. A weak auction sending yields higher, would be a negative catalyst for stocks today.

Finally earnings season is continuing to pick up with: VZ ($1.07), MMM ($2.31), GE ($0.90), PG ($1.70), JNJ ($2.27), and SYF ($0.96) reporting before the open, and NFLX ($2.20) and TXN ($1.46) releasing results after the close.

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Time to Chase This Market?

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What’s in Today’s Report:

  • Time to Chase This Market?
  • Weekly Market Preview:  Do Rate Cut Expectations for March Keep Falling? (It Depends on the Data)
  • Weekly Economic Cheat Sheet:  Important inflation report on Friday and important growth report on Wednesday.

Futures are modestly higher on momentum from Friday’s record highs, following a mostly quiet weekend of news and despite more economic stress in China.

Chinese markets continued to collapse (Hang Seng, Shanghai and Shenzen all down 2%-3%) after there was no cut to the 1/5 year Prime Loan Rates, despite clear signs of deflation and contracting economic growth.

Today there is one notable economic report,  Leading Indicators (E: -0.3%), but barring a major surprise it shouldn’t move markets.

Instead, focus will shift to earnings as the next two weeks will be the most important ones of this earnings season.  Some important reports today include:  PG ($1.70), JNJ ($2.27), VZ ($1.07), MMM ($2.31), UAL ($1.61), LOGI ($1.13), GE ($0.90).

Bullish

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Two Differences In 2024 That Could Be Negative For Equity Markets

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2 Differences In 2024: Sevens Report Analysts Quoted in Investing.com

Sevens Research sees 2 differences in 2024 that could be negative for equity markets

In its latest daily note, Sevens Report Research said there are two important differences for investors to consider in 2024.

“The market has priced in six Fed rate cuts and year-end 2024 fed funds below 4%,” analysts said.

“If we see the 10-year Treasury yield continue to fall to the low 3% or sub 3% range, that’s not going to be a major tailwind for stocks. Because that won’t be forecasting a dovish Fed, it’ll be forecasting slowing growth,” analysts explained. “And those falling yields will then become a harbinger of a potential economic slowdown and not the welcomed signal of a Fed that’s finally turning dovish.”

The second difference is that earnings results won’t have low expectations to excuse poor performance.

“Consensus S&P 500 earnings growth is nearly 10% year over year. Well above the longer-term averages of around 5%-ish annual growth. And keep in mind, at 4,800 the S&P 500 is trading over 19.5X that $245 earnings estimate, which means there’s little room for disappointment from a valuation perspective,” analysts explained. “Bottom line, ‘ok’ earnings won’t be good enough and we got a preview of that in the Q3 numbers.”

Also, click here to view the full Investing.com article published on December 27th, 2023. However, to see the Sevens Report’s full comments on the current market environment sign up here.

 

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Happy New Year

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Happy New Year: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Happy New Year

Futures are little changed following a quiet night of news and ahead of the final trading day of the year.

Economically there was more evidence of global disinflation overnight as South Korea’s Core CPI fell to 2.8% vs. (E) 2.9% while Spain’s Core CPI also declined to 3.8% from 4.5%.

Geo-politically, there were no significant events overnight and the number of ships transiting the Suez Canal is rising again although tensions remain high.

Today there is one economic report, the Chicago PMI (E: 50.0), but barring a massive drop that shouldn’t move markets and we’d expect a mostly quiet trading on the final day of a good year in the markets and ahead of a long weekend.   From all of us at Sevens Report Research please have a happy and safe New Year.

Sevens Report Q4 ’23 Quarterly Letter

The Q4 2023 Quarterly Letter will be delivered to advisor subscribers on Tuesday, January 2nd.

The S&P 500 will end 2023 close to all-time highs but the Santa rally has left many investors complacent towards risks in 2024.  Showing clients and prospects a balanced view of markets is an opportunity to differentiate yourself from your competition and strengthen client relationships!

We will deliver the letter on the first business day of the quarter because we want you to be able to send your quarterly letter before your competition (and with little to no work from you).

You can view our Q3 ’23 Quarterly Letter here.

To learn more about the product (including price) please click this link, and if you’re interested in subscribing please email info@sevensreport.com.

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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, please email info@sevensreport.com.

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