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What’s Changed Since October (And Is It Worth A 25% Rally?)

What’s Changed Since October: Start a free trial of The Sevens Report.


What’s in Today’s Report:

  • What’s Changed Since October (And Is It Worth A 25% Rally?)
  • Weekly Market Preview:  Can Data and News Stay Platinumlocks?
  • Weekly Economic Cheat Sheet:  An Important Week for Inflation.

Futures are little changed following a generally quiet weekend of news.

Geopolitically, news was mixed over the weekend.  Positively, progress was made in negotiating a Israel/Hamas cease fire and there is hope an agreement can be reached this week.  Negatively, chances of a U.S. government shutdown on March 1st (this Friday) are rising.

There were no notable economic reports overnight.

This will be a busy week of important economic data, earnings and political news (possible government shutdown on Friday) but it starts slowly as the only notable economic report today is New Home Sales (E: 685k) and there is just one Fed speaker, Schmid at 7:40 p.m. ET.  So, focus will remain on the political headlines today and if shutdown chances increase, look for mild pressure on stocks.


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Growth Data Becomes Even More Important

Growth Data Becomes Even More Important: Tom Essaye Quoted in Barron’s


The Dow Had Its Biggest Drop Since 2023. It Was Almost Worse.

Sevens Report Research’s Tom Essaye told Barron’s in a phone interview that while the report didn’t show an uptick in inflation, it did dial back expectations for a market that’s been pricing in rate cuts sooner rather than later.

Essaye adds that Thursday’s growth data becomes even more important because the bullish thesis is built on a belief the central bank cuts rates and growth stays stable.

He notes recent data is starting to imply a leveling off after months of quick disinflation.

“I think now the focus then turns to growth,” Essaye says. “And if you get, all of a sudden, some disappointing growth numbers, now you’re going to have some stagflation worries, and you’re gonna see this thing unwind, I think, kind of quick.”

Also, click here to view the full Barron’s article published on February 13th, 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 Rally

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What is the “Short Vol” Trade and How Is It Impacting Markets?

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What’s in Today’s Report:

  • What is the “Short Vol” Trade and How Is It Impacting Markets?
  • An Important Trading Range to Watch
  • EIA Analysis:  A Bearish Report for Oil

Futures are slightly higher despite soft economic data and more earning guidance cuts.

UK monthly GDP declined –0.3% and the UK officially entered recession, although that’s also boosting rate cut expectations.

On earnings, both CSCO and DE cut guidance and both stocks are solidly lower pre-market.

Today is a very busy day of economic data and the data will likely determine if stocks extend yesterday’s rebound or give some of it back.

The key reports are, in order of importance:  Retail Sales (E: -0.1%), Jobless Claims (E: 219k), Philly Fed (E: -9.0), Empire Manufacturing Index (E: -12.5) and Industrial Production (E: 0.2%).  For Empire and Philly Fed, the price indices will be closely watched and if they show further substantial gains, expect that to push yields higher on inflation concerns.

There are also two Fed speakers today,  Waller (1:15 p.m. ET) and Bostic (7:00 p.m. ET), and Waller could move markets as he is part of Fed leadership.


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Was Yesterday the Start of a Pullback?

Was Yesterday the Start of a Pullback? Start a free trial of The Sevens Report.


What’s in Today’s Report:

  • Was Yesterday’s Hot CPI the Start of a Pullback? (Four Issues to Address)
  • VIX Chart Shows Options Trading Amplified Yesterday’s Selloff
  • CPI Takeaways

Stock futures are rebounding back from yesterday’s steep post-CPI selloff thanks to some “cooler” inflation data in the U.K. overnight and better than expected factory data out of Europe. The 10-Yr yield is stable, just below 4.30%.

Economically, the Q4 Eurozone GDP Flash met estimates at a tepid 0.1% y/y but EU Industrial Production jumped 2.6% vs. (E) -0.3% in December easing some ongoing growth worries.

U.K. PPI also favorably declined across the board which is offsetting the nation’s slightly higher than expected CPI data.

Looking into today’s session, there are no notable economic reports but two Fed officials who happen to be scheduled to speak at the open and close: Goolsbee (9:30 a.m. ET), Barr (4:00 p.m. ET).

Goolsbee is notably an FOMC voting member who leans towards the dovish camp and could potentially add support for a relief rally today after yesterday’s sharp decline. VIX futures expiration could also impact money flows in early trade.


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European Shares Edged Up On Better Than Feared Retail Sales

European Shares Edged Up: Tom Essaye Quoted in Barron’s


European Stocks Drift Higher

“European shares edged up on better than feared Retail Sales and a very strong German Manufacturing Orders Report,” said Tom Essaye, founder of Sevens Report Research.

Also, click here to view the full Barron’s article published on February 6th, 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

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.

Commercial Real Estate Primer Part Two: Risks, Opportunities & Indicators to Watch

Commercial Real Estate Primer Part Two: Start a free trial of The Sevens Report.


What’s in Today’s Report:

  • Commercial Real Estate Primer Part Two:  Risks, Opportunities & Indicators to Watch

Futures are slightly higher following better than expected Chinese economic data and in-line inflation readings from Europe.

China’s new yuan loans were stronger than expected (4.92B yuan vs. (E ) 4.5B yuan) providing some anecdotal evidence that stimulus is starting to work.

On inflation, German CPI met expectations at German CPI met expectations, rising 2.9% y/y.

Today the key event is the annual revisions to the CPI data, which hits at 8:30 a.m. ET.  Usually this is a relative non-event, but last year there were substantial upward revisions that resulted in more rate hikes.  Point being, this can change the inflation outlook (positively or negatively) and it has the potential to move markets.  Any downward revision to the 2023 CPI data should be positive for markets (yields lower/stocks higher) while any upward revisions should be negative (yields higher/stocks lower).


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Time to Chase This Market?

Time to Chase This Market? Start a free trial of The Sevens Report.


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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CPI Preview: Good, Bad, and Ugly

CPI Preview: Good, Bad, and Ugly: Start a free trial of The Sevens Report.


What’s in Today’s Report:

  • CPI Preview: Good, Bad, & Ugly
  • Chart: S&P 500 in Typical Holding Pattern – Two Levels to Watch
  • NFIB Small Business Optimism Index – Inflation Concerns and Declining Earnings

There is a cautious bid in equity futures today as the 10-Yr yield hovers just under 4%. This is following an importantly steady inflation print in Europe and dovish leaning ECB chatter.

Economically, Norwegian CPI rose 4.8% in December, unchanged from November. Which is just below estimates of 4.9% which is a favorable development following last week’s concerning uptick in German CPI.

ECB Vice President Luis de Guindos was mildly dovish in a speech overnight, citing the possibility that the economy fell into a technical recession in late 2023 which could support the case for a more accommodating policy stance and that is helping keep yields in check this morning.

Looking into today’s session, there are no notable economic reports but one Fed speaker on the schedule who could move markets: Williams (3:15 p.m. ET).

In the early afternoon, three is a 10-Yr Treasury Note auction (1:00 p.m. ET) and investors will want to see more evidence of strong demand as was seen in yesterday’s 3-Yr auction as weak demand could send the benchmark yield up through 4% creating a renewed headwind for equity markets.


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Why Is the Fed Thinking About Cutting Rates?

Why Is the Fed Thinking About Cutting Rates? Start a free trial of The Sevens Report.


What’s in Today’s Report:

  • Why Is the Fed Thinking About Cutting Rates?

Futures are bouncing modestly following Wednesday afternoon’s drop thanks to solid earnings and merger news.

Micron (MU) posted strong earnings and guidance (stock up 5% pre-market). That’s helping to counter the negative earnings news from Wednesday.

Merger activity is also helping stocks bounce as Paramount (PARA) is said to be in talks to buy Warner (WBD). That news is also helping sentiment this morning.

Today focus will be on economic data and the two most important reports are Jobless Claims (E: 210K) and the Philadelphia Fed Manufacturing Survey (E: -3.0).  With the Fed having dovishly pivoted, data needs to be in-line with expectations. Otherwise, growth worries will rise and pressure stocks.  We also get the final Q3 GDP (E: 5.2%) but that’s very old data at this point and shouldn’t move markets.

Jobs Report Preview

Annual Discounts on Sevens Report, Alpha, Quarterly Letter, and Technicals.

We’ve been contacted by advisor subscribers who wanted to use the remainder of their 2023 pre-tax research budgets to extend their current subscriptions, upgrade to an annual (and get a month free) or add a new product (Alpha, Quarterly Letter, Technicals).

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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Explaining This Market Surge to Clients

Explaining This Market Surge to Clients: Start a free trial of The Sevens Report.


What’s in Today’s Report:

  • Explaining This Market Surge To Clients
  • Weekly Economic Cheat Sheet:  Why Bad Data is Now Bad for Stocks
  • Weekly Market Preview:  Does the Santa Rally Continue into Year-End?

Futures are modestly higher following a generally quiet weekend of news. The markets continue to digest the Fed’s dovish pivot and continued stock and bond rally.

Fed pushback on the market’s rate cut expectations continued over the weekend as Cleveland Fed’s Mester said markets were “a little bit ahead” of themselves expecting cuts in early 2024.

Economically, the only notable number was German Ifo Business Expectations, which slightly missed estimates.

Today the only notable economic number is the Housing Market Index (E:36) and if there’s weakness in this price index it’ll reinforce that broad inflation is continuing to decline and that will be a general positive for stocks and bonds.  Outside of the data, look for Fed officials to continue to push back on market rate cut expectations.  But, other than causing some temporary volatility, that shouldn’t impact markets beyond the short term (and won’t derail this rally).

Annual Discounts on Sevens Report, Alpha, Quarterly Letter, and Technicals.

We’ve been contacted by advisor subscribers who wanted to use the remainder of their 2023 pre-tax research budgets to extend their current subscriptions, upgrade to an annual (and get a month free) or add a new product (Alpha, Quarterly Letter, Technicals).

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.


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.