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Why Stocks Dropped (Two Main Reasons)

Why Stocks Dropped (Two Main Reasons): Start a free trial of The Sevens Report.


What’s in Today’s Report:

  • Why Stocks Dropped (Two Main Reasons)
  • Jobs Day (Abbreviated Jobs Report Preview)

Futures are modestly higher following “ok” earnings from major tech firms overnight and ahead of the jobs report.

AMZN and INTC posted solid earnings while AAPL results were only mildly disappointing and the cumulative reports are boosting futures this morning.

Economically, the UK manufacturing PMI dropped to 49.9 vs. (E) 50.3, keeping BOE rate cut expectations elevated.

Today focus will be on economic data, starting with the jobs report and expectations are as follows:  106K Job-Adds, 4.1% UE Rate, 4.0% y/y Wage Growth.  The jobs report isn’t the only important report today, however, as we also get the October ISM Manufacturing PMI (E: 47.6).

Bottom line, both numbers need to come in close to expectations to help stocks extend this morning’s early bounce.  Data this week has been a bit “hot” and it’s pushed Treasury yields higher and Fed rate cut expectations lower and that’s weighed on stocks.  In-line reports this morning would be Goldilocks and would reverse that trend (and further fuel this morning’s bounce).


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Semiconductor stocks have cycle-leading characteristics

Semiconductor stocks have cycle-leading characteristics: Sevens Report Editor, Tom Essaye, Quoted in Barron’s


Tech’s Moment of Truth Has Arrived

As Sevens Report President Tom Essaye notes, “semiconductor stocks have cycle-leading characteristics,” given their volatility and risky balance sheets, meaning they “begin to roll over before most of the rest of the market as traders rotate away to lower-beta, more value-oriented names during times of uncertainty, including economic downturns (but admittedly also “growth scares” such as 2022). So, as we continue to navigate an uncertain market landscape in the second half, the SOX are offering us a ‘canary in the market coal mine’ right now that could, and likely will, offer fair warning before a more meaningful decline in the broader market indexes, such as the S&P 500 , eventually begins to take shape.

Also, click here to view the full Barron’s article published on October 18th, 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.

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Why Don’t Stocks Drop On Bad News?

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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The port strike could disrupt the data

The port strike could disrupt the data: Tom Essaye Quoted in Forbes


Could Dock Worker Strike Spike Inflation? Experts Are Split.

Sevens Report analyst Tom Essaye wrote Tuesday to clients any strike-related inflation uptick is ultimately just a “temporary disruption” and shouldn’t impact the view of the broader inflation picture.

“The port strike could disrupt the data, essentially creating a smoke screen for the Fed when trying to stick the soft landing,” wrote Essaye.

Also, click here to view the full Forbes article published on October 1st, 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.


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The threat of significant earnings reports or major economic releases

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.


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Markets are currently facing “tectonic risks”

Markets are currently facing “tectonic risks”: Sevens Report Analysts Quoted in Investing.com


Markets are currently facing ‘tectonic risks’, strategists warn

The latest Sevens Report issued a warning, stating that markets are currently facing “tectonic risks” that could pose significant threats over time.

Sevens acknowledged a sense of disbelief among some investors who were surprised by the resilience of stocks, despite mounting political uncertainty and a clearly slowing economy.

According to Sevens, while there are visible warning signs—including rising unemployment, weak manufacturing data, and negative bank guidance—the overall news isn’t “bad enough yet to cause a sustainable decline in stocks.”

However, they pointed out that the macro risks are real, with political uncertainty (particularly around potential elections), economic ambiguity (whether there will be a soft or hard landing), and geopolitical tensions (including Russia/Ukraine and the situation in Taiwan) looming large.

However, “potential risks and anecdotal negatives, while all legitimate, and not yet enough to distract investors from positive factors in this market,” they wrote.

They believe factors such as the anticipation of Federal Reserve rate cuts, expected earnings growth, and sustained enthusiasm around artificial intelligence have been supporting the market.

The analysts stated that “the burden of proof remains with the bears” as these positive elements keep stocks buoyant for now.

However, the report emphasized that while markets could “grind higher” in the short term, with the potential for the S&P 500 to hit new highs, they remain exposed to “dramatic negative shocks” that could result in a significant 10%-20% decline.

“Bottom line, the risks currently facing this market (economic growth, earnings, geopolitics) are tectonic risks. They don’t present themselves all at once or in a flash, they evolve over time until they become sustainable and that’s when bear markets occur,” said Sevens.

Also, click here to view the full Investing.com article published on September 16th, 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.

The GulfCoast is where roughly half of the nation’s refined products are produced

The GulfCoast is where roughly half of the nation’s refined products are produced: Sevens Report Analysts Quoted in Morningstar


Oil futures fall to fresh lows for the year after disappointing China data

Meanwhile, Francine is expected to be upgraded to a hurricane before it makes landfall on the southern Louisiana coast Wednesday. The GulfCoast is where “roughly half of the nation’s refined products are produced and a good portion of crude is lifted from the ground,” analysts at Sevens Report Research wrote in Tuesday’s newsletter.

Also, click here to view the full MarketWatch article published on Morningstar on September 10th, 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.


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Is Oil’s Collapse an Anecdotal Warning Sign?

Is Oil’s Collapse an Anecdotal Warning Sign? Start a free trial of The Sevens Report.


What’s in Today’s Report:

  • More Problems With Expectations (This Time Companies)
  • Is Oil’s Collapse an Anecdotal Warning Sign?

Futures are tracking most overseas equity markets lower as investors assess global growth concerns and look ahead to today’s critical U.S. inflation data.

Economically, U.K. data was weak as monthly GDP fell to 0.5% vs. (E) 0.6%, Industrial Production was down -0.8% vs. (E) +0.2% and monthly trade data showed both imports and exports slowed -4.6% and -10.8%, respectively in July.

Looking ahead to today’s session, the most important potential market catalyst is U.S. inflation data: CPI (E: 0.2% m/m, 2.6% y/y) and Core CPI (E: 0.2% m/m, 3.2% y/y). A “cool” CPI report should bolster hopes for a 50 bp rate cut next week, and in turn, support stocks while a “hot” print could pour cold water on this week’s tentative rebound in equity markets.

There are no Fed officials scheduled to speak today however there is a 10-Yr Treasury Note auction at 1:00 p.m. ET that could shed additional light on investor expectations for inflation, growth, and Fed policy going forward. A weak auction outcome would be negative for stocks while solid demand for the 10-Yr Notes should support a continuation of this week’s rally.


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It’s not structurally the most important stock in the market

It’s not structurally the most important stock in the market: Sevens Report Editor, Tom Essaye, Quoted in Barron’s


Why Nvidia Is the Market’s Most Important Stock

“Nvidia is the most important stock because people have decided it’s the most important stock,” Sevens Report Research’s Tom Essaye told Barron’s in a phone interview. “It’s not structurally the most important stock in the market—their business focus is very, very slim. They just happen to be the tip of the spear of what people are convinced will be the next tech revolution.”

AI is important because the market expects AI to boost corporate profitability in the coming decades,” Essaye says. “And the whole second step of this entire thing is the uptake of AI and how it actually makes money. Nvidia is the picks and shovels of the gold mine. But people will only buy the picks and shovels if they can actually find gold, right?”

Also, click here to view the full Barron’s article published on August 27th, 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.

Tech Weakness Amid Bullish Investor Sentiment

Tech Weakness Amid Bullish Investor Sentiment: Start a free trial of The Sevens Report.


What’s in Today’s Report:

  • Why Was Tech So Weak Yesterday?
  • How Bullish Is Investor Sentiment? (Very Bullish)
  • Chart – A Concerning Pattern in the SOX

U.S. stock futures are little changed this morning after a mostly quiet night of news as investors look ahead to NVDA earnings tomorrow.

Economically, German GDP rose to 0.0% vs. (E) -0.1% while the German GfK Consumer Climate Index fell to -22.0 vs. (E) -17.9, both of which are reinforcing growth concerns for the Eurozone right now.

Today, there are multiple economic releases to watch including the Case-Shiller Home Price Index (E: 6.9%), FHFA House Price Index (E: 5.7%), Consumer Confidence (E: 100.1), and the Richmond Fed Manufacturing Index (E: -14.0). Most of the releases are “second tiered” and lesser followed reports but investors will still want to see evidence of stabilizing growth and disinflation trends continuing.

There are no Fed officials scheduled to speak today but there is a 2-Yr Treasury Note auction at 1:00 p.m. ET that could shed light on investor expectations for Fed policy in the months ahead in the wake of Powell’s Jackson Hole commentary. An auction with demand that is “too strong” could rekindle recession fears while an auction that is “too weak” could trigger hawkish money flows.


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