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Small Cracks in the Three Pillars of the Rally?

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Small Cracks in the Three Pillars of the Rally? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Small Cracks in the Three Pillars of the Rally?
  • Weekly Market Preview:  Can the Ideas of A Dovish Fed and Economic Soft-Landing Power Stocks to 2023 Highs?
  • Weekly Economic Preview:  Key Inflation and Growth Data This Week

Futures are slightly lower after a mostly quiet weekend as Chinese growth worries offset geo-political positives.

Chinese industrial profit growth slowed to 2.7% in Oct vs. 11.9% in Sept and that data combined with news of a quickly spreading respiratory illness in China is weighing on growth expectations.

Geo-politically, the Israel-Hamas cease fire will likely be extended several days and that’s easing geo-political tensions and oil is falling as a result (down more than 1%).

This week contains several potentially important catalysts on inflation and economic growth, but they come later in the week. So, focus today will be on holiday spending commentary and New Home Sales (E: 721k).  Positive commentary on spending and Goldilocks data would help support stocks.

Three Pillars of the Rally?

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Hard vs. Soft Landing Scoreboard Update

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Hard vs. Soft Landing Scoreboard Update: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Hard vs. Soft Landing Scoreboard Update
  • Continuing Claims Hit 2-Year High: Chart
  • Philly Fed Survey Takeaways – More Signs of Stagflation
  • Industrial Production Confirms Slowdown in Factor Sector

Stock futures are modestly higher this morning as soft U.K. consumer spending data. Combined with an as-expected drop in EU inflation are supporting a continued bid in bond markets.

Economically, U.K. Retail Sales fell -0.3% vs. (E) +0.3%. As the Eurozone HICP (their CPI equivalent) met estimates across the board, falling significantly from 4.3% to 2.9% y/y. Positively the “Narrow Core” figure eased to 4.2% from 4.5%.

Looking into today’s session, there is just one economic report to watch: Housing Starts (E: 1.35 million) and barring a big surprise, the release should not move markets.

There are a handful of Fed officials speaking today with Barr & Collins, Daly, Goolsbee, and Collins again all on the schedule. If the Fed speakers stick to the same narrative (less hawkish) expect more of the same sideways, digestive trading in equities today with the threat of a continued move higher based on bullish market momentum.

Hard vs. Soft Landing Scoreboard Update

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Was the CPI a Bullish Gamechanger?

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Was the CPI a Bullish Gamechanger? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Was the CPI Report a Bullish Gamechanger?
  • CPI Data Analysis and Takeaways

Stock futures are extending the November gains this morning and Treasuries are steady after more cool inflation readings in Europe and stabilizing economic data in China.

Economically, Chinese FAI and Industrial Production figures met estimates while Retail Sales importantly accelerated to 7.6% vs. (E) 7.0% in October up from 5.5% in September.

In Europe, CPI data from the U.K., France, and Italy all met estimates or came in “cooler” than expected. This bolsters the view that global central banks are done with rate hikes, fueling risk-on money flows today.

Today, there are several economic reports to watch early: PPI (E: 0.1% m/m, 2.0% y/y), Empire State Manufacturing Index (E: -3.0), and Retail Sales (E: -0.3%). The market will be looking for more signs of cooling inflation in the PPI release. And no major surprises either way in the Empire and Retail Sales releases as the market is still vulnerable to data that is “too hot” (risks of more Fed tightening) or “too cold” (risks of a “hard landing”).

There are also two Fed speakers today: Barr (9:30 a.m. ET) and Barkin (3:30 p.m. ET) but neither are expected to move markets.

Was the CPI Report a Bullish Gamechanger?

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Investors Are Searching For What’s Next

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Investors Are Searching For What’s Next: Tom Essaye Quoted in Morningstar

Dow edges higher as stock-market bulls look to build on momentum after best week of 2023

U.S. stocks edged higher Monday, with bulls hoping to build on upside momentum. This is after the best week of 2023 for major indexes.

Investors are “searching for ‘what’s next’ and that could be either 1) A growth scare or 2) A resumption of the soft landing and disinflation narrative that push stocks higher this summer,” Tom Essaye, founder of Sevens Report Research, said in a note. “We will all find out together via the data.”

Also, click here to view the full Morningstar article published on November 6th, 2023. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Oil Futures

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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November Market Multiple Levels Chart: S&P 500

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

What’s in Today’s Report:

  • November Market Multiple Levels Chart – S&P 500 (Printable/Sharable PDF)
  • Manheim Used Vehicle Value Index Falls 4% Y/Y – Chart

Stock futures are flat as Treasury yields edge higher following a mostly quiet night of new with Powell’s morning commentary coming in to focus.

Economically, German CPI was unchanged in October at 3.8% y/y, meeting estimates, while Eurozone Retail Sales were not as bad as feared, falling -2.9% vs. (E) -3.2%.

Looking into today’s session, there are no market-moving economic reports in the U.S. today, but the Treasury will hold a 10-Yr Note auction at 1:00 p.m. ET that could move bond markets. And if we see yields begin to creep higher after the auction, that will act as a strengthening headwind for equity markets.

Outside of the Treasury auction, focus will be on Fed speak starting with Powell this morning before Williams, Barr, and Jefferson speak after the lunch hour.

Earnings continue to wind down but there are two notable companies reporting today: DIS ($0.68), LYFT ($0.13).

Bottom line, a lot of the November rally in stocks has been based on a dovish shift in Fed policy expectations and if either the Treasury auction or commentary from Fed officials suggest markets have become too dovish, stocks are likely to give back some of the recent gains.

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What Can Stop This Selloff?

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What Can Stop This Selloff? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What Can Stop This Selloff?
  • Weekly Market Preview:  A Very Important Week of Earnings, Fed Decision and Economic Data
  • Weekly Economic Cheat Sheet:  A Busy Week (Jobs Report Friday, ISM PMIs Wed/Fri)

Futures are moderately higher on a small reduction in geo-political tensions and better than expected inflation data.

Geo-politically, Israel moved forces into Gaza over the weekend but the operation isn’t as large as feared (yet) and that’s helping to slightly reduce geopolitical anxiety.

On inflation, Spanish CPI rose 3.5% vs. (E) 3.8%, providing another reminder that global inflation is declining.

This week will be a very busy one as we get a Fed decision and important economic/inflation data, as well as the final “big” week of earnings.  But, it starts slowly as there are no economic reports today, so focus will be on earnings and some important reports today include:  MCD ($3.00), WDC ($-1.87), ON ($1.35), SOFI ($-0.07), ANET ($1.58).

What Can Stop This Selloff?

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Trading Today Will be Dominated by Politics, Geopolitics, and Yields

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Trading Today Will be Dominated by Politics, Geopolitics, and Yields: Tom Essaye Quoted in Barron’s

Stocks Continue Falling Following Powell Remarks

The 10-year Treasury yield ticked lower to 4.949% after threatening to hit 5% for the first time since 2007.

Sevens Reports Research’s Tom Essaye notes that although two Federal Reserve officials are set to speak publicly today. He doesn’t expect either to move markets following Powell’s comments on Thursday.

“So, trading today will be dominated by politics, geopolitics, and yields,” he writes. “Any progress on finding a Speaker of the House will be welcomed by markets (regardless of whether it’s Jordan, McHenry or anyone else), and calming of tensions in the Middle East will similarly be welcomed by markets as would a decline in the 10-year yield. Meanwhile, the opposite of any of those will likely add more headwinds to stocks.”

Also, click here to view the full Barron’s article published on October 21st, 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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Why Have Stocks Dropped?

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Why Have Stocks Dropped? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Have Stocks Dropped (And Are the Reasons Legitimate?)
  • Weekly Market Preview:  Focus Turns to Earnings (And They Need To Be Good)
  • Weekly Economic Cheat Sheet:  Important Growth and Inflation Updates

Futures are solidly lower following a further increase in geopolitical tensions and a lack of domestic political progress over the weekend.

Attacks on Israel from Lebanon increased over the weekend, raising fears of a two-front conflict.

Domestically, political gridlock continued as nine Republicans are now running for Speaker. But it’s not clear any of them have enough support to actually become Speaker.

Today the calendar is quiet as there’s just one notable economic report, the Chicago Fed National Activity Index (E: 0.05), so focus will remain on yields.  The 10-year yield sits at 5.00% as of this writing, and the higher it goes today, the lower stocks will likely fall.  Any progress on electing a Speaker of the House will be welcomed by the markets and likely push yields lower.

On the earnings front, we get a lot of important reports later this week, including MSFT, AMZN, KO, VZ, META, and others. But they come on Tues/Wed/Thurs and today there are just two reports to watch:  CLF ($ 0.46) and LOGI ($0.60).

Why Have Stocks Dropped

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Discussing the Latest Canada and US Jobs Data

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US Jobs Data: Tom Essaye Interviewed on BNN Bloomberg

Ultimately the path of inflation will hold the answer on rate hikes, over jobs data: Chief economist

Jimmy Jean, chief economist and strategist at Desjardins, Gennadiy Goldberg, head of U.S. rates strategy at TD Securities, and Tom Essaye, president of Sevens Report Research, join BNN Bloomberg to discuss the latest Canada and US jobs data, and whether the central banks might hike again.

Also, click here to view the full BNN Bloomberg video interview published on October 9th, 2023. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Discuss the Latest Canada and US Jobs Data

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Copper Could Recover And Signal A Relief Rally

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Copper Could Recover: Tom Essaye Quoted in Barron’s

Copper Prices Have Tumbled. Is a Global Recession Coming?

That’s why, for copper, “there is key 2023 support between $3.57 and $3.62 [per pound] that will be in focus near term,” wrote Sevens Report’s Tom Essaye. “If it holds, copper could recover and signal a relief rally developing in risk assets more broadly but a violation would be a negative signal for global markets.” 

Also, click here to view the full Barron’s article on stock futures are bouncing published on September 28th, 2023. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Copper Could Recover

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.