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Did the Fed Just Restart QE?

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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

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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.

Tom Essaye Appeared on TD Ameritrade Network on August 29, 2019

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Tom Essaye appeared in Mid-Day Movers by TD Ameritrade Network discussing equities, what’s driving the markets right now, earnings and more…Click here to watch the full interview.

TD Ameritrade Video Shot

Tom Essaye Quoted in The Bulletin on July 22, 2019

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Investors look ahead to earnings

“We will start to get results from some of the big multi-national industrials and tech firms, which should shed more light on the effects of the trade war…” Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter, wrote in a note to clients. Click here to read the full article.

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Tom Essaye Interviewed with TD Ameritrade on July 22, 2019

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Tom Essaye sat down with Jill Malandrino to discuss the macro picture of the market, earnings season, what the market is expecting, Federal rate cut and more. Watch the full interview below..

Tom Essaye Interview with TD Ameritrade

Fed Expectations and Earnings

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What’s in Today’s Report:

  • Weekly Market Preview (Fed Expectations and Earnings)
  • Weekly Economic Cheat Sheet (July Flash PMIs this week).

Futures are slightly higher on positive U.S.-China trade headlines following an otherwise quiet weekend.

Tech firms will meet today with administration officials to discuss the Huawei tech ban, while multiple reports stated China will increase soybean purchases and a face to face meeting between Chinese & U.S. officials could occur soon.

Fed policy expectations continue to shift back to a 25 basis point rate cut next week as hope for a 50 basis point cut continues to recede.

Today there are no economic reports and no Fed speakers as we enter the “quiet period” ahead of next Wednesday’s rate decision.  So, there’s not much on the calendar today that could cause volatility, although headlines from the tech company/administration meeting today on Huawei is something to watch, as any hints at relaxing of the ban will be a mild positive for stocks.  Earnings are sparse today as well although I’ll be watching Whirlpool (WHR $3.80) results after the close for any insight into the state of the U.S. consumer.

Tom Essaye Quoted in Invezz on July 17, 2019

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“Looking at this earnings season, the key question is: Will trade uncertainty cause businesses to pull back on spending and investment enough so that it begins to weigh on earnings?” Tom Essaye, founder of the Sevens Report, said in a note. Click here to read the full article.

Economic Breaker Panel: July Update

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What’s in Today’s Report:

  • Economic Breaker Panel – July Update

Futures are trading modestly higher this morning as investors digest the mixed set of corporate earnings releases so far this week after an otherwise quiet night of macro news.

Eurozone inflation was 1.3% vs. (E) 1.2% year/year in June, but the slightly firmer than expected print was not enough to alter the outlook for ECB policy (the euro is flat).

Today, there is one economic report to watch: Housing Starts (E: 1.260M) and one Fed official scheduled to speak: George (12:30 ET).

With news-flow considerably slower today than yesterday, investor focus will remain on earnings as the reporting season continues to pick up.

Notable releases today include: BAC ($0.70), PNC ($2.83), USB ($1.07), BK ($0.94) before the open, and NFLX ($0.56), IBM ($3.06), EBAY ($0.62), AA (-$0.34), KMI ($0.23) after the close.

Curve Steepening: Buy Banks?

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What’s in Today’s Report:

  • 10’s-2’s Showing Signs of Life – Good for the Banks?

S&P futures are indicating stocks will open at all-time highs today thanks to strong earnings and Fed optimism after President Trump mentioned rate cuts and QE yesterday.

AAPL beat on earnings and revenue in Q1 but also notably revised guidance solidly higher citing improvement in Chinese markets. The company’s shares are trading up roughly 6% in the pre-market.

Most overseas markets are closed for holidays today and the market’s main focus will be the Fed events this afternoon: FOMC Meeting Announcement (2:00 p.m. ET), Fed Chair Press Conference (2:30 p.m. ET).

There are a however a few important economic reports that could move markets this morning: ADP Employment Report (E: 180K), ISM Manufacturing Index (E: 55.0), and Construction Spending (E: 0.2%).

Bottom line, the market is looking for more dovish rhetoric out of the Fed today and if Powell delivers, another set of closing highs in U.S. stock indexes is likely.

Tom Essaye Interviewed with Fox Business on April 15, 2019

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Sevens Report founder Tom Essaye says the market can still rally despite disappointing bank earnings. Watch the full clip here.