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Is China the Next Japan?

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Is China the Next Japan?: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Is China the Next Japan?

Futures and EU shares are lower as cautious retailer earnings guidance and heavy trade in China overnight are offsetting easing geopolitical tensions following reports that Israel would not strike Iranian oil/energy infrastructure (oil futures are down nearly 5%).

Economically, EU Industrial Production met expectations overnight while a German Economic Sentiment gauge topped estimates, but neither report is materially moving markets this morning.

Today, there is one important economic report to watch: The Empire State Manufacturing Index (E: 0.0), and two Fed officials are scheduled to speak: Daly late morning (11:30 a.m. ET) and Kugler in the early afternoon (1:05 p.m. ET).

Additionally, there are two typically lesser-followed Treasury auctions for 3-Month and 6-Month T-Bills at 11:30 a.m. ET that could shed fresh light on market expectations for Fed policy rates between now and Q2’25 which have swung sharply hawkish over the last two weeks. Strong auction would have dovish implications for the market and be well received by equity investors today.

Finally, earnings season is getting into full swing with several more big banks reporting quarterly results today: BAC ($0.78), C ($1.34), and GS ($6.85) while two members of the Dow Jones Transportation Average: UAL ($3.10) and JBHT ($1.43) are also due to report today.

Bottom line, equity markets have rallied solidly over the last week amid a combination of earnings optimism and soft-landing hopes. If any of the economic data, Fed chatter, or earnings results damage either of those narratives, expect some mild profit taking in equities today, otherwise the path of least resistance is still higher for stocks right now.

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Why Don’t Stocks Drop On Bad News?

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Why Don’t Stocks Drop On Bad News?: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Don’t Stocks Drop On Bad News
  • Weekly Market Preview:  Earnings Are the Key This Week
  • Weekly Economic Cheat Sheet:  Important Growth Data on Thursday

Futures are slightly higher following a quiet weekend of news as investors look ahead to the first busy week of Q3 earnings and more important economic data.

Economically, Chinese exports missed expectations and the latest stimulus announcement underwhelmed, but none of it was bad enough to reverse any more of the recent rally.

This week is full of potentially market moving events from earnings and economic data but they all come later in the week and today should be mostly quiet given it’s the Columbus Day holiday (banks and bond markets closed) and there are no notable economic reports.  We do get a few Fed speakers, however (Kashkari (9:00 a.m. ET & 5:00 p.m. ET), Waller (3:00 p.m. ET)), but they shouldn’t move markets.

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Why Yesterday’s Economic Data Wasn’t That Bad

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Why Yesterday’s Economic Data Wasn’t That Bad: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Yesterday’s Economic Data Wasn’t That Bad

Futures are slightly weaker this morning as Tesla’s “Cyber Cab” event underwhelmed while investors look ahead to the start of earnings season.

Economically, German CPI and UK monthly GDP both met estimates and didn’t provide any negative surprises.

Today investors will be focused on more inflation data via PPI (E: 0.2% m/m, 1.6% y/y) and Core PPI (E: 0.2% m/m, 2.7% y/y) while there are also several Fed speakers including Goolsbee (9:45 a.m. ET), Logan (10:45 a.m. ET) and Bowman (1:10 p.m. ET).  But, barring any major surprises from PPI or those Fed officials, they shouldn’t move markets.

Additionally, focus will now turn towards earnings and that will be one of the dominant forces on markets for the next three weeks.  Key reports today include: JPM ($4.02), BLK ($10.42), WFC ($1.27), FAST ($0.52).

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October MMT Update: Positive News (But Priced In)

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How to Cut Through the Market Noise: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • October Market Multiple Table – Positive News But Priced In

U.S. futures are higher on dovish-leaning comments by the Fed’s Kugler overnight while global shares declined broadly in sympathy with a near-10% drop in Chinese shares after the latest government stimulus efforts disappointed.

Economically, German Industrial Production rose 2.9% vs. (E) 0.8% in August, helping easing EU growth worries while the NFIB Small Business Optimism Index rose to 91.5 but narrowly missed estimates of 91.7.

There are no notable economic reports today, however several Fed officials are scheduled to speak: Bostic (12:45 p.m. ET), Collins (4:00 p.m. ET), and Jefferson (7:30 p.m.). Based on the market’s positive reaction to Kugler’s comments in the pre-market, more dovish commentary has the potential to fuel a further relief rally today while a hawkish tone would likely weigh on stocks.

Finally, there is a 3-Yr Treasury Note auction at 1:00 p.m. ET and given the hawkish money flows in the wake of last week’s ISM data and September jobs report, weak demand at the auction could send yields to new highs and further pressure equity markets.

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Jobs Day

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

What’s in Today’s Report:

  • Jobs Day
  • Key VIX Levels to Watch

Futures are slightly higher following the end to the dockworkers’ strike and as investors wait for the jobs report and the Israeli retaliatory attack on Iran.

The dockworkers’ strike ended Thursday night, removing a potential economic headwind.

Geopolitically, markets are still awaiting the Israeli response to Iran, but reports are pointing to a military or domestic energy target, which is a mild positive (if Israel were to attack Iran’s nuclear facilities it’d be viewed as a major escalation and we’d expect oil to surge further and be a stronger headwind on stocks).

Today focus will be on the jobs report and expectations are as follows: 147K job-adds, 4.2% UE Rate and 3.8% wages (y/y).  As long as the job adds and unemployment rate are relatively close to expectations, we should see a mostly Goldilocks reaction as that implies a soft landing and will keep the Fed on track to cut twice more this year (50 bps).  The biggest risk for the market remains a very weak number.

Finally, there is also one Fed speaker today and he is part of leadership, Williams at 9:00 a.m. ET, but barring a substantial surprise, he shouldn’t move markets.

 

Sevens Report Quarterly Letter Delivered

Our Q3’24 Quarterly Letter was delivered to subscribers. We use our strength (writing about the markets) to help you:

  • Save time (an average of 4-6 hours per quarterly letter)
  • Show you’re on top of markets with impressive, compelling market analysis.

You can view our Q2 ’24 Quarterly Letter here. To learn more about the product (including price) please click this link.

If you’re interested in subscribing, please email: info@sevensreport.com.

Join thousands 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.

What the Iranian Missile Strike Means for Markets

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Economic Implications of the Port Strikes: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What the Iranian Missile Strike Means for Markets
  • ISM Manufacturing Mildly Disappoints
  • JOLTS Top Estimates

Stock futures are lower amid a continued risk-off tone in markets as investors digest negative earnings news and await Israel’s response to Iran’s missile attack on Tuesday.

In corporate news, NKE earnings disappointed as sales fell 10% y/y and guidance was withdrawn ahead of a CEO change, leaving shares down 5% pre-market.

Economically, the Eurozone Unemployment Rate held steady at 6.4% in August, meeting estimates which is having little impact on markets today.

Today, investor focus will be on the ADP Employment Report (E: 121.5K) before the bell as well as a handful of Fed speakers on the schedule through the lunch hour: Hammack (9:00 a.m. ET), Musalem (10:05 a.m. ET), Bowman (11:00 a.m. ET), and Barkin (12:15 p.m. ET).

In addition to the jobs data and Fed chatter, tensions in the Middle East will remain a major focus as further deterioration in the Israel-Iran conflict is likely to weigh further on risk assets and influence flight-to-safety money flows.

Sevens Report Quarterly Letter Delivered

Our Q3’24 Quarterly Letter was delivered to subscribers. We use our strength (writing about the markets) to help you:

  • Save time (an average of 4-6 hours per quarterly letter)
  • Show you’re on top of markets with impressive, compelling market analysis.

You can view our Q2 ’24 Quarterly Letter here. To learn more about the product (including price) please click this link.

If you’re interested in subscribing, please email: info@sevensreport.com.

Join thousands 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.

Why the Next Four Weeks Are So Important

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Investor Sentiment Update: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why the Next Four Weeks Are So Important
  • Weekly Market Preview:  Does Data Stay Goldilocks?
  • Weekly Economic Cheat Sheet:  Jobs Report Friday, ISM PMIs This Week

Futures are slightly lower as markets digest last week’s rally ahead of a busy week of economic data.

Geo-politically, Mid-East tensions rose further as Israel struck Houthi targets in Yemen, expanding its current campaign.  However, for now this is not impacting stocks.

Economically, Chinese manufacturing and non-manufacturing PMIs underwhelmed, raising expectations for even more stimulus (and boosting Chinese stocks).

There are no important economic reports today (they come later this week) so the most important event today is Powell’s speech at 1:55 p.m. ET.  He’s unlikely to say much new (given the FOMC decision was less than two weeks ago) but a dovish reiteration of policy will likely continue to boost markets in the near term.

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Is the VIX Signaling Another Volatility Spike is Coming?

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Is the VIX Signaling Another Volatility Spike is Coming?: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Is the VIX Signaling Another Volatility Spike is Coming?

Futures are sharply higher thanks to strong tech earnings, more Chinese stimulus and more global rate cuts.

Micron (MU up 15% pre-market) beat earnings and raised guidance and that’s helping futures rally this morning.

An FT article promised even more Chinese stimulus is coming and that is boosted Asian markets and U.S. futures.

Today there is potentially important economic data and the key reports are:   Jobless Claims (E: 224.5K), Durable Goods (E: 0.1%) and Final Q2 GDP (E: 3.0%).  In-line to better-than-expected readings will help further fuel this rally while weak data, especially in claims and Durable Goods, will increase hard landing fears (and weigh on stocks).

On the Fed front, there are multiple speakers today with most speaking at a Treasury Market Conference (there were so many that it’d take up the whole pre-seven look if we listed them all). The most notable is Powell (9:20 a.m. ET) but don’t expect any of the comments to move markets as the Fed told markets last week what it’s going to do and until the outlook for another 50 bps of easing changes, Fed speak shouldn’t move markets.

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Tyler Richey of the Sevens Report highlights a market breadth concern

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Tyler Richey of the Sevens Report highlights a market breadth concern and is quoted in MarketWatch

A technical concern suggests upside momentum is fading

Tyler Richey of the Sevens Report highlights a market breadth concern: there are more stocks trading below their 200-day average than their 50-day average.

“In simple terms, a situation where there are more stocks below their 200-day MA than their 50-day is a bearish one as in a healthy market environment, there should consistently be more stocks above their 200-day MAs than 50-day MAs,” Richey says. Another concern is the NYSE advance-decline line declined last week even though the S&P 500 hit record highs.

Also, click here to view the full MarketWatch article published on September 24th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

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.

The threat of significant earnings reports or major economic releases

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The threat of significant earnings reports or major economic releases: Sevens Report Analysts Quoted in Investing.com

What the Fed decision means for markets, beyond the near term

Without the threat of significant earnings reports or major economic releases, investors appear to be operating in an environment that is “1) easing Fed, 2) slowing but ‘OK’ economic data, and 3) generally solid earnings,” Sevens Report said in a recent note.

According to the Sevens Report, if the rate cuts are timely, they could lead to falling yields, strong earnings growth, and positive economic tailwinds. This would likely result in continued upward momentum for stocks, with the potential for the S&P 500 to hit 6,000.

“I say that confidently because the Fed cutting in time would create this macroeconomic outcome: 1) Falling yields, 2) Continued very strong earnings growth, 3) Positive economic tailwinds, 4) The prominent existence of the Fed put and 5) Expectations of accelerating growth in the future,” President of Sevens Report wrote in the note.

Also, click here to view the full Investing.com article published on September 20th, 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.

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.