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Where Do We Stand With Tariffs?

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Where Do We Stand With Tariffs?: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Where Do We Stand With Tariffs?
  • Weekly Market Preview: Tariff Threats Remain Centerstage
  • Weekly Economic Cheat Sheet: Stagflation Risks Turn Investor Focus to Fed Meeting Minutes

Stock futures are higher despite a rise in global bond yields thanks to growing fiscal concerns in Europe and hawkish commentary from the Fed’s Waller over the long weekend.

Economically, U.K. jobs data from January was solid while the German ZEW Survey was better than expected which added upside pressure to global yields overnight.

Looking into today’s session, there are two economic reports to watch this morning: Empire State Manufacturing Index (E: -0.5) and the Housing Market Index (E: 47.0) as well as two Fed speakers on the calendar Daly (10:20 a.m. ET) and Barr (1:00 p.m. ET).

Finally, there is a 52-Week Treasury Bill auction at 1:00 p.m. ET that could impact yields and move equity markets and earning season continues with a few noteworthy companies due to report quarterly results today including: BIDU ($1.78), MDT ($1.36), OXY ($0.67).

Bottom line, investors will want to see more “Goldilocks” data to contradict last week’s “whiff of stagflation,” and a less hawkish tone from Fed officials. Additionally, stabilizing yields and solid earnings would offer added tailwinds for equity markets at the start of the holiday-shortened trading week.

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What Yesterday’s Hot CPI Means for Markets

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What Yesterday’s Hot CPI Means for Markets: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What Yesterday’s Hot CPI Means for Markets

Futures are little changed following a night of mixed economic data and as markets await more details on reciprocal tariffs.

Investors are waiting to learn which countries and what products will be subject to reciprocal tariffs and until that happens (maybe today or Thursday) that uncertainty will be a market headwind.

Economically, UK and EU data was slightly better than expected (UK GDP and Euro Zone IP both beat estimates).

Obviously tariff news could be market moving if we get any specifics on reciprocal tariffs but beyond that, focus will remain on economic data and due to yesterday’s hot CPI, PPI (E: 0.3% m/m, 3.2% y/y) will be the most important report today.  PPI is viewed as a loose leading indicator for CPI, so if PPI runs “hot” look for another rise in Treasury yields and a headwind on stocks.  The other notable economic report today is Jobless Claims (E: 217K) and markets will want to see more Goldilocks readings (so slightly above expectations).

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MMT Chart: S&P Reaches Technical Tipping Point

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MMT Chart: S&P Reaches Technical Tipping Point: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • MMT Chart: Steady Targets Amid Rising Technical Risks
  • Powell Testimony Takeaways – Policy on “Hold” for Now
  • NFIB Shows Fading Optimism Among Small Business Owners

Futures are mixed but little changed and bond yields are flat ahead of today’s critical U.S. CPI release.

Economically, Italian Industrial Production fell -3.1% vs. (E) -0.2% in December which served as a reminder that Europe continues to face significant growth risks.

Traders will be keenly focused on the January CPI (E: 0.3% m/m, 2.9% y/y), and Core CPI (E: 0.3% m/m, 3.2% y/y) release before the bell this morning before focus turns back to Capitol Hill for Powell’s second day of semiannual testimony (10:00 a.m. ET).

A “hot” inflation print is a considerable risk to equities and other risk assets here as hawkish money flows could result in heavy market declines today.

Looking ahead to the afternoon, there is a 10-Yr Treasury Note auction at 1:00 p.m. ET and two additional Fed speakers to watch today: Bostic (12:00 p.m. ET), Waller (5:05 p.m. ET), however CPI and Powell will be the primary market-focus over the course of the session.

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Discretionary demand for driving fuels, which remains near a 52-week low right now.

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Discretionary demand for driving fuels, which remains near a 52-week low right now.: Tyler Richey Quoted in Morningstar

Oil prices drop on rise in U.S. supplies as tariffs threaten to dent Chinese demand

Refinery utilization rose by 1 percentage point to 84.5%, EIA data showed. The uptick was likely in reaction to a “weather-driven rise in demand for heating oil last week,” which also helps explain the sizeable increase in distillate stockpiles, which include heating oil, said Tyler Richey, co-editor at Sevens Report Research.

However, the trends in the weekly data suggest that demand for oil and refined products has been weak so far in 2025, “and [is] potentially poised to get weaker,” he said. “That is especially true regarding discretionary demand for driving fuels, which remains near a 52-week low right now.”

“If we don’t begin to see signs of firming inflation” with gasoline supplied rising back towards 9 million barrels per day or higher in the weeks ahead, then “WTI futures dropping back below $70 [per] barrel will become rather likely,” said Richey.

Also, click here to view the full MarketWatch article published on Morningstar on February 5th, 2025. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Oil Inventories

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Expectation for continued rate cuts this year is an important support

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Expectation for continued rate cuts this year is an important support: Tom Essaye Quoted in MarketWatch Featured on Yahoo Finance

Jobs report and Trump’s trade war hold keys to outlook for stocks

The expectation for continued rate cuts this year is an important support for the bull market, Tom Essaye, founder and president at The Sevens Report Research, wrote in a Thursday note.

Also, click here to view the full MarketWatch article featured on Yahoo Finance published on February 3rd, 2025. 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.

Tom Essaye Interviewed On Schwab Network

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Tom Essaye Interviewed On Schwab Network

A.I. Enterprise Monetization in Focus, AAPL’s ‘Upside Surprise’

A.I. companies were the name of the markets in 2024, now Tom Essaye says they need to prove they can make money.

Also, click here to view the full interview with Schwab Network published on February 3rd, 2025. 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.

Trade War 2.0 Primer (Needed Context)

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Trade War 2.0 Primer (Needed Context): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • U.S. Trade Primer (Needed Context for Trade War 2.0)
  • Chart – JOLTS Drop Consistent With Cooling Labor Market

Futures are lower thanks to lingering trade war jitters and soft earnings from two big tech companies late yesterday.

GOOGL (-7%) missed estimates on revenue due to a slowdown in their cloud business while AMD (-9%) offered weak forward guidance, both of which are weighing on tech today, dragging stock futures lower in pre-market trade.

Today, there are two potentially market moving economic reports to watch; the ADP Employment Report (E: 150K) and the ISM Services PMI (E: 54.0). investors will once again be looking for Goldilocks data with steady but cooling jobs data and positive but slowing growth in the service sector. Any “hot” numbers will likely weigh on stocks today.

Additionally, there are several Fed officials scheduled to speak today including: Barkin (9:00 a.m. ET), Goolsbee (1:00 p.m. ET), and Bowman (3:00 p.m. ET) while earnings season continues with Q4 reports due out from UBER ($0.50), DIS ($1.44), TM ($4.36), F ($0.34), QCOM ($2.97), and MCK ($8.11).

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Earnings and economic growth are still solid

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Earnings and economic growth are still solid: Sevens Report Analysts Quoted in Investing.com

Are tariffs a gamechanger for the S&P 500?

While the tariffs add another headwind for equities, Sevens Report argues that they do not warrant an immediate reduction in equity exposure.

“Earnings and economic growth (the two most important foundational forces for stocks) are still solid,” the analysts wrote. However, they caution that “the factors that push stocks higher are being weakened or eliminated one-by-one,” while downside risks are mounting.

“These tariffs potentially undermine that positive price action from the ‘rest’ of the market and could weigh on other sectors while DeepSeek weighs on tech,” the analysts noted.

“Most still believe this is all a negotiation and that the tariffs won’t be on for long (and that’s still probably right),” the report states. However, with AI uncertainty and elevated valuations already straining investor sentiment, Sevens Report warns that “the recipe is coming together for a solid and extended pullback.”

Also, click here to view the full article published on February 3rd, 2025. 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.

This accelerated approach has generated 3.5% annualized alpha

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This accelerated approach has generated 3.5% annualized alpha: Sevens Report Analysts Quoted in Investing.com

Analyst explains 2 sector rotation strategies with proven outperformance

According to Sevens, this accelerated approach has generated 3.5% annualized alpha versus the S&P 500.

The second strategy called the Cheapskate Sector Strategy, involves buying the sector with the lowest price-to-earnings ratio from the previous year.

Sevens notes that the contrarian approach, while more psychologically challenging, has historically paid off, delivering an annualized return of 12.6% over 34 years. It has outperformed the S&P 500 in 20 of those years, with a 59% win rate. For 2025, Energy is the cheapest sector in the S&P 500 based on trailing P/E.

Sevens Report notes that while these strategies don’t work every year, their long-term success rates exceed those of most active managers.

Also, click here to view the full article published on January 31st, 2025. 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.

Two Sector Rotation Strategies With Proven Outperformance

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Two Sector Rotation Strategies With Proven Outperformance: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Two Sector Rotation Strategies With Proven Outperformance
  • Dueling Political Influences on Oil Prices

Futures are modestly higher on more solid tech earnings and as markets are in a “show me” mode on tariff threats.

Apple (AAPL) beat earnings overnight and the stock is up 3% pre-market and that’s helping push futures higher.

On tariffs, markets remain skeptical tariffs will be implemented against Canada and Mexico tomorrow and if they are, they’ll be largely ineffectual.

Today focus will be squarely on the Core PCE Price Index (E: 0.2% m/m, 2.6% y/y).  This is the Fed’s favorite measure of inflation and markets will want to see an in-line to weaker number to keep rate cut expectations intact.  If this number is above expectations, however, look for yields to jump and for that to likely hit stocks.

In addition to the core PCE Price Index we do have one Fed speaker today (Bowman at 8:30 a.m. ET) and some more notable earnings (XOM ($1.58), ABBV ($2.13), CL ($0.89)) but they’re unlikely to move markets.

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