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Why Tech Is Driving This Selloff

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Why Tech Is Driving This Selloff: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Tech Is Driving This Selloff
  • S&P 500 Weekly Chart: Not A Setup You Want To See

Futures are moderately higher on solid tech earnings and optimism there won’t be a government shutdown drama.

On earnings, AMZN and INTC both posted solid numbers (up 6% and 7% after hours respectively). And that’s helping the tech sector and broader market bounce.

Politically, Speaker Johnson publicly supported passing a short term spending bill. This possibly avoids another shutdown drama.

Today focus will be on inflation, namely the Core PCE Price Index (E: 0.3% m/m, 3.7% y/y) and the five-year University of Michigan Inflation Expectations (E: 3.0%).  Lower than expected numbers will remind markets that inflation is falling and depress Treasury yields, and that should extend today’s early rally.  Conversely, if the inflation data is higher than expected, don’t be shocked if these early gains are erased as yields rise.

Why Tech Is Driving This Selloff

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Why Did Stocks Drop to Multi-Month Lows?

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Why Did Stocks Drop to Multi-Month Lows? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Did Stocks Drop To Multi-Month Lows? (A New Reason)
  • Will the Election of a Speaker of the House Provide Any Relief for Investors?

Futures are solidly lower and are extending Wednesday’s losses following more disappointing earnings reports.

Earnings results this week have not been good and that continued overnight with disappointing guidance from META, WPP and Canadian Pacific (CP).

Today will be a busy day on both macro and micro economic fronts.

First, there’s an ECB Rate Decision but no hike is expected.  Economically, key reports today include, in order of importance, Jobless Claims (E: 208K), Durable Goods (E: 1.0%), Preliminary Q3 GDP (4.2%) and Pending Home Sales (-1.0%).  As has been the case, “Goldilocks” data that shows solid, but not very strong, activity will be welcomed by markets.

On the earnings front, there are multiple important reports today highlighted by AMZN ($0.58) after the close.  Other notable reports today include: UPS ($1.53), MRK ($1.94), LUV ($0.38), MA ($3.21), INTC ($0.19), and CMG ($10.46).  Bottom line, disappointing earnings are becoming a new headwind on markets and solid results today will help stabilize sentiment (while more disappointing reports will add to headwinds).

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What Would Stop the Bond Market Selloff?

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What Would Stop the Bond Market Selloff? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What Would Stop the Bond Market Selloff? (Fundamental and Technical Perspectives)
  • October Flash PMI Takeaways – More Goldilocks Data (Chart)

Stock futures are trading lower as investors digest a mixed start to big tech earnings and a moderate rise in yields.

On the earnings front, GOOGL is down 6.75% this morning as cloud revenue missed estimates. While MSFT is up 3.30% amid a broadly positive quarterly earnings report bolstered by positive AI growth metrics.

Today, focus will be on economic data early with New Home Sales (E: 685K). From there focus will turn to the bond markets as there is a 5-Yr Treasury Note Auction at 1:00 p.m. ET that has the potential to move yields and impact equities (any further retreat in yields will be welcomed by investors).

Fed Chair Powell will be speaking after the close (4:35 p.m. ET). That is likely to result in some hesitation in the afternoon as traders position/hedge ahead of his post-close commentary.

Earnings season remains in full swing as well with quarterly results due from BA (-$3.05), TMO ($5.60), and GD ($2.87) this morning. While tech giants META ($3.62) and IBM ($2.12) report after the close.

What Would Stop the Bond Market Selloff?

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Powell’s Speech Main Takeaway

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The Main Takeaway From Powell’s Speech: Tom Essaye Quoted in Barron’s on MSN

The Stock Rally Won’t Resume Any Time Soon. Here’s Why.

As Sevens Reports Tom Essaye put it, “The main takeaway from Powell’s speech was that in this situation, there’s no way the Fed can get dovish.”
Bulls have pointed to ongoing strength in the labor market as evidence that the economy is still humming, and fodder for the rally. However, as plenty of Federal Reserve watches noted after Chairman Jerome Powell’s remarks last week, the central bank doesn’t appear inclined to let rates fall.

Also, click here to view the full article published by MSN on October 23rd, 2023. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Powell’s Speech

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We Get a Lot of Important Reports Later This Week

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A Lot of Important Reports: Tom Essaye Quoted in Barron’s

Stocks Fall as 10-Year Yields Touches 5%

Sevens Report Research’s Tom Essaye writes that the economic calendar is quiet on Monday, so yields will continue to be in focus. He thinks the higher yields go, the lower stocks will fall.

“Today, any progress on electing a Speaker of the House will be welcomed by the markets and likely push yields lower,” Essaye writes. “On the earnings front, we get a lot of important reports later this week.”

Also, click here to view the full Barron’s article published on October 23rd, 2023. However, to see the Sevens Report’s full comments on the current market environment sign up here.

It’ll be Very Hard for This Market to Rally

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Is Another Crash Imminent?

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Is Another Crash Imminent? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Is Another Crash Imminent?
  • Chart – M2 Money Supply Still Up Massively Despite QT
  • The Recent Gold Rally and Inflation Expectations

Stock futures are rebounding modestly this morning amid further stabilization in the Treasury market as big tech earnings come into focus while economic data overseas disappointed overnight.

The Eurozone PMI Composite Flash came in at 46.5. vs. (E) 47.4 with a softer than expected Services sub-index which added to existing recession worries in the EU overnight. And that soft data is contributing to the steady bond market this morning.

Looking into the U.S. session, there is one economic report to watch: PMI Composite Flash (E: 49.4), and as has been the case, a release that supports a soft-landing scenario (easing growth and falling price measures) will support stocks while a “hot” report that sends yields back higher will be a negative.

There are no Fed speakers today but there is a “policy-sensitive” 2-Yr Treasury Note auction at 1:00 p.m. ET.  If demand is weak, that could put upward pressure on yields and reintroduce a headwind on equities and other risk assets as big tech earnings come into focus this week.

Earnings Update

Earnings season continues to ramp up this week with: KO ($0.69), VZ ($1.17), GE ($0.56), MMM ($2.34), and SYF ($1.44) reporting before the bell. While MSFT ($2.65), GOOGL ($1.45), and V ($2.23) will release results after the close.

Investors will want to see some better than expected results from the big tech names as they have been responsible for most of the 2023 stock market gains. Any disappointment will almost certainly mean new lows in the major indices this week.

Is Another Crash Imminent

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Powell Speech Preview

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Powell Speech Preview (Good, Bad & Ugly): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Powell Speech Preview:  Good, Bad & Ugly
  • EIA Update and Oil Market Analysis

Futures are slightly higher following a quiet night of news as investors await Fed Chair Powell’s speech later today.

Earnings overnight were mixed with TSLA (down 5% after hours) missing estimates while NFLX (up 14% after hours) posted strong results.

Today will be a very busy day of data and Fed speak.  The key event today is Powell’s speech at noon, and to keep things simple, if Powell repeats the sentiment that the spike in Treasury yields has done the Fed’s job for it and, as such, another rate hike is unlikely, that should be positive for stocks and bonds.  If he does not repeat that sentiment and leaves the door open for another hike in 2023, that will be a negative.

Outside of Powell, we get several important economic reports today including:  Jobless Claims (E: 211K), Philadelphia Fed Manufacturing (E: -7.0) and Existing Home Sales (E: 3.900M) and markets will want to see Goldilocks data to support a bounce.

Back to the Fed, there are multiple speakers today other than Powell, including Jefferson (9:00 a.m. ET), Goolsbee (1:20 p.m. ET), Barr (1:30 p.m. ET), Bostic (4:00 p.m. ET); Harker (5:30 p.m. ET) and Logan (7:00 p.m. ET) although their comments will be overshadowed by Powell, so they shouldn’t move markets.

Finally, earnings continue and important reports today include:  T ($0.63), TSM (1.16), AAL (0.26), WAL ($1.91) and CSX ($0.42).

Powell Speech Preview

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Yields Are Rising – Tom Essaye Quoted in Barron’s

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Yields Are Rising: Tom Essaye Quoted in Barron’s

Stocks Gain as Concerns About Conflict in Middle East Ease

Sevens Report Research’s Tom Essaye told Barron’s that reports President Joe Biden is weighing a visit to Israel have sent stocks higher and oil prices lower. WTI crude oil futures were down 0.7%, to $86.93 a barrel.

“Yields are higher but that’s likely by nervous investors reversing ‘fear based’ positions. That came last week as a result of the Israel/Hamas conflict,” Essaye wrote. “Point being, yields are rising as investors get more comfortable with the geo-political environment.”

Also, click here to view the full Barron’s article published on October 16th, 2023. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Yields Are Rising

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An Invasion of Gaza by Israel Remains Imminent

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An invasion of Gaza: Tom Essaye Quoted in Barron’s

Stocks Are Rising Ahead of Big Week for Earnings

The Dow Jones Industrial Average was up 215 points, or 0.6%, shortly after the market opened on Monday. The S&P 500 was up 0.5%. The Nasdaq Composite rose 0.4%.

“Futures are slightly higher as the weekend brought no major changes to the current macro-economic set up,” wrote Sevens Report Research’s Tom Essaye earlier Monday morning. “Geopolitically, an invasion of Gaza by Israel remains imminent but so far the conflict hasn’t expanded regionally and oil is little changed as a result.”

Also, click here to view the full Barron’s article published on October 16th, 2023. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Israel Readies For A Potential Invasion

If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

How to Explain the Israel-Hamas Conflict to Clients

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How to Explain the Israel-Hamas Conflict to Clients: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • How to Explain the Israel-Hamas Conflict to Clients (How It Matters to Markets)
  • Empire State Manufacturing Index Takeaways (More Goldilocks Data)

Stock futures are modestly lower this morning as Treasury yields are rising back towards cycle highs. This is on news that President Biden will travel to Israel tomorrow to try and ease tensions in the region.

Economic data was largely shrugged off overnight. There were more signs of disinflation as wage pressures eased in the latest U.K. Labour Report. While New Zealand’s latest CPI report undershot estimates at 5.6% vs. (E) 5.9% year-over-year.

Today is lining up to be a busy session news-wise as we get several economic reports in the U.S. including: Retail Sales (E: 0.3%), Industrial Production (E: 0.0%), Business Inventories (E: 0.3%), and the Housing Market Index (E: 45). Investors will want to see more Goldilocks data supporting both peak-Fed-hawkishness and prospects for a soft economic landing in order for stocks to continue to rally.

There are also multiple Fed speakers to watch: Williams, Bowman, Barkin, and Kashkari. Markets will be looking for more commentary that suggests the FOMC is done with rate hikes for the cycle.

Finally, earnings season continues to ramp up with: BAC ($0.80), GS ($5.32), JNJ ($2.52), and LMT ($6.66) reporting results before the bell. While UAL ($3.40) and JBHT ($1.87) will report after the close. A drop-off in earnings is not priced into markets at these levels so investors will be looking for positive quarterly results and upbeat guidance.

How to Explain the Israel-Hamas Conflict to Clients

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.