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The Yield Curve May Un-Invert Soon. Why That’s Not Good (Historically)

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The Yield Curve May Un-Invert Soon. Why That’s Not Good (Historically): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • The Yield Curve May Un-Invert Soon. Why That’s Not Good (Historically)
  • How the Post CPI “Rest of the Market” Rally Is Accelerating

Futures are moderately lower thanks to significant weakness in tech stocks.

Semi-conductor chip stocks are lower this morning on a trifecta of negative news including soft ASML guidance, reports of tighter chip restrictions with China and bellicose rhetoric from Trump on Taiwan in a recent interview.

Focus will remain on economic data today and the most important report is Industrial Production (E: 0.3%) while we also get Housing Starts (1.305M).  As Tuesday showed, markets still want Goldilocks economic reports, meaning they aren’t too strong but don’t point to economic weakness, either.  We also have two Fed speakers, Barkin (9:00 a.m. ET) and Waller (9:35 a.m. ET), but unless one of them floats the possibility of a third rate cut in 2024, they shouldn’t move markets.

Finally, earnings season continues to roll on and some notable reports today include: ASML ($3.87), JNJ ($2.82), and UAL ($3.97).

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The performance gap between tech and the rest of the market

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The performance gap between tech and the rest of the market: Tom Essaye Quoted in Forbes

Why A Magnificent 7 Breather Could Be A Good Thing For The Stock Market

“The performance gap between tech and the rest of the market is so wide that it’s reasonable to expect continued closing of that gap as markets more fully embrace the idea of the start of a rate cutting cycle,” summarized Sevens Report founder Tom Essaye, noting in the “near term” non-tech sectors may mount a catchup rally. Essaye is referring to Thursday’s strong inflation data which bolstered calls for the Federal Reserve to soon lower interest rates, which broadly help most equities but tend to favor certain rate-sensitive sectors like real estate.

Also, click here to view the full Forbes article published on July 12th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Lastly, 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.

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July MMT Chart and Powell Testimony Takeaways

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July MMT Chart and Powell Testimony Takeaways: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Powell Testimony Takeaways – Underappreciated Growth Risks
  • July MMT Chart – All Scenario Targets Hit New Highs

Futures are higher again this morning amid firming Fed rate cut bets after Powell’s first day of semiannual testimony on Capitol Hill while inflation data was mixed overnight.

Economically, inflation data in Asia was mixed as Chinese CPI fell to 0.2% vs. (E) 0.4% y/y but Japanese PPI rose from an upwardly revised 2.6% in May to 2.9% in June.

There are no notable economic reports in the U.S. today which will leave markets primarily focused on Fed Chair Powell’s second day of Congressional testimony, this time before the House Financial Services Committee.

There are two additional Fed speakers this afternoon, Goolsbee and Bowman at 2:30 p.m. ET while Cook speaks later this evening, well after the close (7:30 p.m. ET).

Finally, there is a 10-Yr Treasury Note auction at 1:00 p.m. ET. Yesterday’s 3-Yr Note auction saw solid demand, however there is some uncertainty about demand for longer duration Treasuries right now, and weak results at today’s auction could send those yields higher which has the potential to trigger some profit taking in equities.

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The Economy: Landing or Crashing?

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The Economy: Landing or Crashing? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • The Economy:  Landing or Crashing?
  • Weekly Market Preview:  Will A September Rate Cut Become a Guarantee This Week?
  • Weekly Economic Data:  Inflation Back in Focus (CPI This Week)

Futures are little changed despite positive geo-political news over the weekend.

In France, the “far-right” National Rally party underperformed expectations and will not be the majority party, reducing the chances of radical French policy changes.

In the Middle East, chatter surrounding a cease-fire between Israel and Hamas continues to get louder and a deal could be announced soon.  That news is weighing on oil this morning.

This week will be an important one with two days of Powell testimony, the CPI report and the start of the Q2 earnings season, but today will be relatively quiet as there are no economic reports today and no Fed speakers.

Sevens Report Quarterly Letter

Our Q2 ’24 Quarterly Letter was delivered to subscribers last Monday, complete with compliance backup and citations. We’re already receiving feedback about how it is saving advisors time and helping them communicate with their clients in this volatile environment!

You can view our Q1 ’24 Quarterly Letter here.

To learn more about the product (including price) please click this link.

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This number reinforces expectations for a September rate cut

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Expectations for a September rate cut: Sevens Report Editor, Tom Essaye, Quoted in Barron’s

Stocks Give Back Gains. Bond Yields Spike.

Sevens Report Research’s Tom Essaye told Barron’s the report was more of a “Goldilocks” number, meaning it was “just right.” He cited rising new orders, a leading indicator, and declines in prices that indicate easing inflation pressures.

“In the short term, this number reinforces expectations for a September rate cut (which is positive) but at the same time, and beyond the short term, it does keep alive concerns that the economy is weaker than people think and we continue to think that’s the biggest risk to the rally as we start the second half of 2024,” says Essaye.

Also, click here to view the full Barron’s article published on July 1st, 2024. 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 RallyIf 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.

Jobs Report Preview

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

What’s in Today’s Report:

  • Jobs Report Preview
  • JOLTS Report Takeaways

Futures are slightly higher as Powell’s dovish comments continue to be digested amid more Goldilocks economic data overnight.

In Asia, Australian Retail Sales rose 0.6% vs. (E) 0.3% but China’s Services PMI dropped to 51.2 vs. (E) 53.4.

In Europe, the Eurozone Composite PMI fell to 50.9 vs. (E) 50.8 while the EU PPI fell -4.2% y/y vs. (E) -4.1%, both of which are helping bonds remain stable ahead of multiple important economic releases in the U.S. today.

Looking into today’s session we will first get more labor market data with the ADP Report (E: 161K) and Jobless Claims (E: 233K) releases before the open. The market is looking for as-expected numbers and any signs of material weakness or data that is “too hot” could trigger some profit taking in thin holiday trading with stock indices sitting on record highs.

At the top of the 10:00 a.m. hour Wall Street time, the ISM Services Index (E: 53.0) and Factory Orders (E: 0.2%) reports will be released. The ISM will be the release to watch with investors again looking for stability in the headline but also a favorable move lower in the prices subindex to help confirm the disinflation trend has indeed resumed.

There is also one Fed speaker today: Williams (7:00 a.m. ET) and the FOMC Minutes will be released at 2:00 p.m. ET which is after the NYSE’s early close (1:00 p.m. ET) ahead of the 4th of July holiday tomorrow.

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Is Q2 Sector Performance Warning About Growth?

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Is Q2 Sector Performance Warning About Growth? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Is the Second Quarter Market Performance Warning About Economic Growth?
  • Trading Color – NVDA Declines Mask Broad Market Gains to Start the Week
  • Chart – Equal Weigh S&P 500 Unchanged From Early March

Futures are modestly higher this morning as mega-cap tech recovers some of yesterday’s losses in the pre-market with NVDA up over 3% amid an otherwise quiet night of news.

There were no notable economic reports or market moving catalysts overnight.

Today, investor focus will be on a combination of economic data, Fed speak, and a key Treasury auction

Economically, we will get Case-Shiller Home Price Index (E: 7.0%), the FHFA House Price Index (E: 6.7%), and Consumer Confidence (E: 100.0) releases this morning and there are two Fed speakers: Bowman (7:00 a.m. & 2:15 p.m. ET), Cook (12:00 p.m. ET).

In the afternoon, traders will await the results of a 2-Yr Treasury Note auction at 1:00 p.m. ET. Strong demand (lower yields) will reaffirm the dovish shift in Fed policy expectations this month while weak demand (rising yields) could rekindle higher-for-longer policy rate worries and spark risk-off money flows.

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Summer’s Finally Here – Investing in the Kids

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Summer’s Finally Here – Investing in the Kids: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Summer’s Finally Here – Investing in the Kids
  • EIA Analysis and Oil Market Update

Futures are modestly lower as global economic data missed estimates and further pointed towards a slowing of growth.

The Euro Zone flash PMI dropped to 50.8 vs. (E) 52.4 and UK Flash PMI fell to 51.7 vs. (E) 53.3 and those soft readings are increasing global growth concerns and that’s weighing on futures.

Economic data will again be in focus today and, by far, the most important report is the June Flash Composite PMI (E: 51.6) and given the softness in economic data this week, the stronger this number, the better.

Other notable economic reports today include Existing Home Sales (E: 4.10 million) and Leading Indicators (E: -0.3%) but it’ll take big surprises for them to move markets.

Finally, today is a “Quadruple Witching” options expiration so there may be higher than normal volumes and greater than normal volatility into the close.

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I expect the rest of the week to be very quiet

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I expect the rest of the week to be very quiet: Sevens Report Editor, Tom Essaye, Quoted in Barron’s

S&P 500, Nasdaq Hit New Records

“It essentially will kind of kill the week, to be honest, because anybody that can take Thursday and Friday off just got basically almost a week off,” Sevens Report Research’s Tom Essaye told Barron’s. “There will be plenty of people who will do that. So I expect the rest of the week to be very quiet.”

A wave of Federal Reserve speakers did little to shift the market. Investors know that interest rate cuts will depend on the data in the coming months. Essaye says it will take a surprise from economic data such as jobless claims to wake up the market this week.

“There’s really quite a confluence of data that’s starting to point to some labor market easing. In everyone’s concern that the economy is going to slow, that’s been the missing piece,” Essaye says.

Also, click here to view the full Barron’s article published on June 19th, 2024. 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 RallyIf 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.

Oil has recovered from its early June pullback to test seven-week highs

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Oil has recovered from its early June pullback to test seven-week highs: Sevens Report Co-Editor, Tyler Richey, Quoted in Morningstar

Oil prices settle at highest since April on brighter demand prospects

Oil has recovered from its early June pullback to test seven-week highs on “price-supportive rhetoric” from the Organization of the Petroleum Exporting Countries and its allies, said Tyler Richey, co-editor at Sevens Report Research.

The initial “knee-jerk selloff” reaction to the June 2 decision by OPEC+ to phase out voluntary oil-production cuts after the third quarter was “largely reversed and seen as overdone,” Richey told MarketWatch. OPEC+ leadership “confirmed that they will remain flexible and only reduce their voluntary output cuts if market conditions warranted, and clarified increasing production is not necessarily a base-case expectation right now,” he said.

“Evidence of strong domestic demand at the start of the U.S. summer driving season, rising geopolitical tensions overseas and renewed hopes for a perfectly executed [economic] soft landing” by the Federal Reserve have also contributed to oil’s price rebound, Richey said.

Also, click here to view the full MarketWatch article published on Morningstar on June 18th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Oil Inventories

Lastly, 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.