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Tom Essaye Quoted in CNBC on July 28, 2020

“To be clear, from an actual policy standpoint, it’s universally expected that the Fed won’t make any changes to 1) Rates…” wrote Tom Essaye, editor of the Sevens Report. Click here to read the full article.

Tom Essaye Quoted in Benzinga on March 16, 2020

Tom Essaye, founder of Sevens Report Research, said the timing of the Fed’s announcement on Sunday when it has a regular meeting scheduled for Wednesday may have spooked the market.

“It implies panic, (what did they know that we didn’t?), although that’s probably not…” Essaye said. Click here to read the full article.

Reasonable Valuation Targets

What’s in Today’s Report:

  • Where Is a Reasonable Valuation for this Market?
  • Two Reasons Gold Is Losing Its Luster

Futures were “limit up” for much of the night following Monday’s rout but have since pulled back to flat as fears of a coronavirus induced recession to continue to grip markets.

Overnight, the German ZEW Survey was dismal with the Current Conditions Index crashing to -43.1 vs. (E) -25.0 underscoring the rapid deterioration in investor sentiment due to the COVID-19 outbreak.

The Fed Meeting has been canceled following Sunday’s intermeeting actions and there are no Fed speakers today.

There are a few notable economic releases to watch this morning, however. In order of importance they are: Retail Sales (E: 0.1%), Industrial Production (E: 0.4%), Business Inventories (E: -0.1%), Housing Market Index (E: 74), and January JOLTS (E: 6.500M).

The first two are especially important as if the data points confirm that economic growth materially slowed in February as a result of the coronavirus outbreak, it could cause more fear-induced selling today as hopes for a swift rebound in growth will continue to fade.

 

Of course, any noteworthy updates on the COVID-19 pandemic, positive or negative, will continue to have a significant influence on the market and volatility is likely to remain elevated.

Market Multiple Support Levels

What’s in Today’s Report:

  • Bottom Line: Market Multiple Support Levels to Watch
  • Durable Goods and Consumer Confidence Takeaways

Futures are trading higher this morning thanks to strong earnings from AAPL and positioning into today’s Fed Announcement while coronavirus fears continue to ease as the mortality rate is importantly holding steady near 2%.

Today is lining up to be a busy day as there are a slew of potential market catalysts on the calendar.

First, there are two economic releases to watch: International Trade in Goods (E: -$66.9B) and Pending Home Sales (E: 0.4%) before the Fed events kick off with the FOMC Meeting Announcement at 2:00 p.m. ET, followed by the Fed Chair Press Conference at 2:30 p.m. ET.

Meanwhile, we are in the peak of Q4’19 earnings season and there are a number of major U.S. corporations reporting results today including: BA ($1.73), T ($0.87), MCD ($1.96), MA ($1.87), GE ($0.18), GD ($3.46), DOW ($0.74), MSFT ($1.32), FB ($2.51), TSLA ($2.03), and PYPL ($0.84).

Bottom line, the Wuhan coronavirus outbreak, disappointing economic data, a hawkish Fed, and negative earnings surprises are all risks that could cause volatility in stocks into the end of the week, however, the market is currently showing resilience in the face of these potentially negative catalysts which leaves the pain trade higher for now.

Yield Curve Update and Fed Meeting Preview

What’s in Today’s Report:

  • Technical Outlook: S&P 500
  • Fed Meeting Preview
  • Yield Curve Update

Futures are slightly higher this morning as the coronavirus outbreak continues to spread but other market influences including key earnings and the Fed  are coming into focus.

Reports show that the number of coronavirus cases has climbed to more than 4,500 and the death toll has topped 100 in China however the mortality rate encouragingly remains ~2%, well below the 10% rate of SARS in the early 2000s.

The number of market catalysts picks up today starting with three economic data points to watch: Durable Goods Orders (E: 0.5%) being the key report to watch while the S&P Case-Shiller HPI (0.4%) and Consumer Confidence (E: 127.8) will also be released.

Additionally, the January FOMC Meeting begins and earnings season remains in full swing. The key report to watch today is AAPL ($4.54) after the closing bell but other notables include: LMT ($4.99), MMM ($2.10), PFE ($0.57), UTX ($1.84), AMD ($0.31), and EBAY ($0.75).

Tom Essaye Quoted in Barron’s on September 18, 2019

“Bottom line for the Fed, if today’s events turn out to be net-hawkish, that will weigh on risk assets as investors remain overly optimistic about an aggressive easing cycle over the coming…” writes The Sevens Report’s Tom Essaye. Click here to read the full article.

Jerome Powell

Fed Preview: What to Expect

What’s in Today’s Report:

  • FOMC Preview

Asian markets rallied modestly overnight after the BOJ met expectations while Brexit angst continues to weigh on EU stocks and U.S. futures as investor focus turns to the Fed.

Economic data did not move markets overnight and trade talks between the U.S. and China don’t begin until later today so there were no material developments on the trade war front.

The FOMC Meeting, which is clearly the biggest event of the week, begins this morning and that will likely lead to a sense of “Fed paralysis” in the markets before tomorrow’s announcement and Powell’s press conference however there are still a few important catalysts to watch today.

Economically, the Fed’s preferred measure of inflation: Core PCE Price Index (E: 0.2%) within the Personal Incomes and Outlays report will be the most important report to watch (it is due out before the bell), but there are a few other releases to watch as well: S&P Case-Shiller HPI (E: 0.2%), Consumer Confidence (E: 125.0), and Pending Home Sales (E: 0.3%).

On the earnings front, we will get second quarter results from: MA ($1.82), PG ($1.06), MO ($ 1.10) before the open, and AAPL ($2.10), AMD ($0.08), ALL ($1.48), CHRW ($1.21) after the bell this afternoon.

The Most Important Week of the Year

What’s in Today’s Report:

  • Fed Week – Why This is the Most Important Fed Decision of the Year
  • Weekly Market Preview – Will the Fed Meet Incredibly Dovish Expectations?
  • Weekly Economic Cheat Sheet – One of the Busiest Weeks of the Year (Jobs Report, Inflation Data, Global PMIs)

Futures are little changed following a quiet weekend as all eyes now turn to the Fed decision on Wednesday.

Former Fed Chair Yellen endorsed a rate cut over the weekend, but did not advocate for sustained easing.   And, this gets right to the heart of this market.  We know the Fed will cut 25 bps this week, but we don’t know if they’ll signal the start of a sustained easing campaign (i.e. 75-100 bps of cuts by year-end) and that’s something the market has already aggressively priced in at these levels.

Economic data was sparse over the weekend although Japanese Retail Sales (0.3% vs. (E) 0.1%) beat estimates.

There was no notable U.S.-China trade news over the weekend and expectations are low for any actual progress at the talks this week.

Today there are no notable economic reports nor any important central bank speak, so focus will remain on earnings (this is the last important week of earnings) and on any U.S.-China trade headlines (although none are expected).

Tom Essaye Quoted in MarketWatch on May 2, 2019

Tom Essaye quoted in MarketWatch on May 2nd 2019. After Powell’s news conference, investors were “left with a market lacking a material, positive catalyst at the moment and one at the top of reasonable valuations…” said Tom. Click here to read the full article.

Curve Steepening: Buy Banks?

What’s in Today’s Report:

  • 10’s-2’s Showing Signs of Life – Good for the Banks?

S&P futures are indicating stocks will open at all-time highs today thanks to strong earnings and Fed optimism after President Trump mentioned rate cuts and QE yesterday.

AAPL beat on earnings and revenue in Q1 but also notably revised guidance solidly higher citing improvement in Chinese markets. The company’s shares are trading up roughly 6% in the pre-market.

Most overseas markets are closed for holidays today and the market’s main focus will be the Fed events this afternoon: FOMC Meeting Announcement (2:00 p.m. ET), Fed Chair Press Conference (2:30 p.m. ET).

There are a however a few important economic reports that could move markets this morning: ADP Employment Report (E: 180K), ISM Manufacturing Index (E: 55.0), and Construction Spending (E: 0.2%).

Bottom line, the market is looking for more dovish rhetoric out of the Fed today and if Powell delivers, another set of closing highs in U.S. stock indexes is likely.