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Key Technical Levels to Watch on Fed Day

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Key Technical Levels to Watch: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Key Technical Levels to Watch on Fed Day (Shareable PDF Available)
  • Jobs Report Preview

Stock futures are in the red this morning after mega-cap tech earnings failed to meet overly optimistic estimates (but were not that bad, all things considered), Chinese Manufacturing PMI missed estimates, and French CPI was higher than expected.

On the earnings front, AMD (-11%), GOOGL (-6%), and MSFT (-1%) are all lower in the pre-market despite generally healthy quarterly reports with most earnings and revenue figures topping analysts estimates while some corporate guidance was not as strong as hoped.

Today is lining up to be a very busy day full of catalysts. Starting with the economic data, we get the first look at January labor market data with the ADP Employment Report (E: 130K) while Q4 Employment Cost Index (E: 1.0%) will offer a look at wage pressures from late 2023.

The Treasury will release the official Refunding Announcement details before the open (8:30 a.m. ET) before focus will turn to the Fed with the FOMC Decision (2:00 p.m. ET) and Powell’s press conference (2:30 p.m. ET) in the afternoon.

There are no “Mag7” earnings today, but a few notables to watch include: MA ($3.08), QCOM ($2.37), and MET ($1.95).

Bottom line, equities are on edge in pre-market trade this morning with all of today’s catalysts looming, but, if the Treasury Refunding Announcement supports the bond market (keeps a lid on yields) and the Fed doesn’t not offer a hawkish surprise, we should be able to see markets stabilize. Conversely, any disappointments or hawkish reactions will support further volatility into the back half of the week.

Computer chips

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Fed Meeting Preview

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Fed Meeting Preview: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why the Treasury Refunding Estimate Moved Markets
  • FOMC Meeting Preview

U.S. futures are slightly lower as yesterday’s late session rally is digested ahead of the Fed and key earnings reports.

Economically, Australian Retail Sales data from December missed (-2.7% vs. E: -0.6%) but the EU GDP Flash was slightly better than feared at 0.1% vs. (E) 0.0% Y/Y in Q4.

Today there are multiple economic reports beginning with housing market statistics ahead of the open: Case-Shiller Home Price Index (E: 0.4%) and FHFA House Price Index (E: 0.3%). Some moderation in home prices would be welcomed ahead of the Fed today.

After the open, two more closely followed releases on the health of the consumer: Consumer Confidence (E: 112.5) and state of the labor market: JOLTS (E: 8.70 million) will be released. With the FOMC meeting beginning today and some mega-cap tech names reporting earnings after the close, it will take a big surprise in the data to materially move markets this morning.

Regarding earnings, we have entered the peak of the reporting season with several notables reporting this morning: GM ($1.08), UPS ($2.44), and SYY ($0.88) while some of the biggest tech names, MSFT ($2.76) and GOOGL ($1.60) will report after the close. AMD ($0.77), and SBUX ($0.93) are two other notable releases to watch.

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Five Bullish Market Assumptions Updated

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Five Bullish Market Assumptions Updated: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Five Bullish Market Assumptions Updated (Are They Still True?)
  • Weekly Market Preview:  Important Updates on Fed Rate Cuts and Economic Growth
  • Weekly Economic Cheat Sheet:  Fed Meeting Wednesday, ISM and Jobs Report Friday

Futures are little changed following an increase in geo-political tensions over the weekend and ahead of the first really busy week of 2024.

Three U.S. soldiers were killed in an attack in Jordan by Iranian backed militants and that’s further escalating tensions in the region and oil rallied in response.

There were no economic reports overnight.

This is the first truly busy week of 2024 as we have a Fed decision on Wednesday and a jobs report on Friday and it’s the most important week of earnings season.  But, the week starts slowly as there are no economic reports today and minimal earnings.  So, focus will remain on geo-politics and 1) Any additional attacks on U.S. soldiers in the region or 2) Information about a U.S. retaliatory strike could push oil higher and weigh on stocks.

Earnings Today:  WHR ($ 3.64), SOFI (E: $0.00), CLF ($-0.07).

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Important (and still undecided) Questions About Economic Growth

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Markets Have Priced In The Dovish Pivot: Tom Essaye Quoted in Blockworks

Bitcoin inches higher after outperforming stocks this year

“Looking forward, we can expect markets to get back to ‘normal’ next week as we start a new year and answer some pretty important (and still undecided) questions about economic growth, actual vs. expected Fed policy, and earnings,” Tom Essaye, founder of Sevens Report Research, said. 

Also, click here to view the full Blockworks article published on December 29th, 2023. However, to see the Sevens Report’s full comments on the current market environment sign up here.

To strengthen your market knowledge take a free trial of The Sevens Report.

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All Of Us In The Markets Are In A Proverbial Canoe

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All Of Us In The Markets Are In A Proverbial Canoe: Tom Essaye Quoted in Courthouse News Service

Markets roar in 2023 as inflation ticks down and Fed eases rate hikes

Tom Essaye of the Sevens Report likened the market in 2023 to rough sailing. “I can’t help but feel as though all of us in the markets are in a proverbial canoe and the investing public is violently leaning to one side of the canoe and then the other, causing it to nearly tip each time,” he wrote in an investor’s note.

Essaye wrote that many believe the Fed will slash interest rates about six times next year, believing inflation will soon “go into some sort of freefall” and the S&P 500 may hit 5,000 points. “But I’ve been in this industry long enough to know that when everyone seems to be leaning on one side of the proverbial canoe, it pays to move to the middle,” he wrote.

Also, click here to view the full Courthouse News Service article published on December 29th, 2023. However, to see the Sevens Report’s full comments on the current market environment sign up here.

To strengthen your market knowledge take a free trial of The Sevens Report.

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Two Important Differences in 2024

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Why Last Week’s Price Action is Important for 2024: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Two Important Differences in 2024

Futures are little changed following a generally quiet night of news as there was no notable economic data or significant market moving events.

Chinese industrial profits rose 29.5% in November, accelerating substantially from the 2.7% gain in October and offering some anecdotal optimism about future growth.

Geo-political tensions remained elevated in the Mid-East following increased attacks on U.S. troops in the region, but no specific escalation occurred overnight.

Today the most notable event is a five-year Treasury bond auction and markets will want to see strong demand (like we saw at yesterday’s two-year auction) to keep rates drifting lower and dovish Fed/lower rates momentum in place through year-end.

Sevens Report Q4 ’23 Quarterly Letter

The Q4 2023 Quarterly Letter will be delivered to advisor subscribers on Tuesday, January 2nd.

The S&P 500 will end 2023 close to all-time highs but the Santa rally has left many investors complacent towards risks in 2024.  Showing clients and prospects a balanced view of markets is an opportunity to differentiate yourself from your competition and strengthen client relationships!

We will deliver the letter on the first business day of the quarter because we want you to be able to send your quarterly letter before your competition (and with little to no work from you).

You can view our Q3 ’23 Quarterly Letter here.

To learn more about the product (including price) please click this link, and if you’re interested in subscribing please email info@sevensreport.com.

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Why Last Week’s Price Action is Important for 2024

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Why Last Week’s Price Action is Important for 2024: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Last Week’s Price Action Is Important for 2024.

Futures are slightly higher following a mostly quiet holiday weekend and on more signs inflation is falling globally.

Singapore’s CPI dropped to 3.6% vs. (E) 3.9% yoy and down handily from 4.7% in October, providing more evidence that inflation is declining globally.

Geo-politically, U.S./Iran tensions rose after U.S. forces struck Iranian backed militants in Iraq, although oil (the best geo-political barometer) is little changed on the news.

Today will be a quiet day as most European markets and Hong Kong are closed, but there are two notable housing reports we’ll be watching: Case-Shiller Home Price Index (E: 0.06% m/m, 5.0% y/y) and the FHFA House Price Index (E: 0.5%).  Declines is housing prices is part of the reason investors remain convinced CPI will continue to fall in early 2024 so these home price metrics need to show declines in housing prices, otherwise investors may be too optimistic on falling CPI and Fed rate cuts in the new year.

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Five Measurable Similarities to 2006/2007

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Five Measurable Similarities to 2006/2007: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Five Measurable Similarities to 2006/2007: A Market Cycle Update

Futures are little changed ahead of the holiday weekend as poor Nike (NKE) earnings weigh on sentiment.

Earnings this week haven’t been great and that continued overnight as Nike (NKE) missed on revenues and cut revenue guidance. The stock is down –12% pre-market.

Economically, UK data was mixed as quarterly GDP declined (-0.1% vs. (E) 0.0%) while retail sales were strong.

Otherwise, the focus will remain on economic data and the key report today is the November Core PCE Price Index (E: 0.2% m/m, 3.4% y/y), which is the Fed’s preferred inflation metric.  It is expected to show declines in the pace of headline and core inflation from October and if that happens, it should support stocks and bonds and reinforce rate cut expectations.

Other notable data today includes Durable Goods (E: 2.4%), New Home Sales (E: 690K) and Consumer Sentiment (E: 69.4, 1-Yr inflation: 3.1%). But barring a major surprise from them, they shouldn’t move markets.

Meanwhile the bond market closes at 2:00 p.m. today with the looming holiday weekend. So, we expect activity to quiet considerably in the markets as the trading day goes on.

Finally, from all of us at Sevens Report Research, please have a happy and safe holiday weekend.

Five Measurable Similarities

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Why Is the Fed Thinking About Cutting Rates?

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Why Is the Fed Thinking About Cutting Rates? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Is the Fed Thinking About Cutting Rates?

Futures are bouncing modestly following Wednesday afternoon’s drop thanks to solid earnings and merger news.

Micron (MU) posted strong earnings and guidance (stock up 5% pre-market). That’s helping to counter the negative earnings news from Wednesday.

Merger activity is also helping stocks bounce as Paramount (PARA) is said to be in talks to buy Warner (WBD). That news is also helping sentiment this morning.

Today focus will be on economic data and the two most important reports are Jobless Claims (E: 210K) and the Philadelphia Fed Manufacturing Survey (E: -3.0).  With the Fed having dovishly pivoted, data needs to be in-line with expectations. Otherwise, growth worries will rise and pressure stocks.  We also get the final Q3 GDP (E: 5.2%) but that’s very old data at this point and shouldn’t move markets.

Jobs Report Preview

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Is the Dovish Fed Decision A Bullish Gamechanger?

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Is the Dovish Fed Decision A Bullish Gamechanger? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Is the Dovish Fed Decision A Bullish Gamechanger?
  • What Sectors and Assets Benefit Most from the Surprisingly Dovish Fed?

Futures are modestly higher on continued momentum from yesterday’s surprisingly dovish Fed decision.

Global investors aggressively embraced the idea of global rate cuts as the 10-year yield fell below 4% overnight.

On earnings, they’ve been soft this week and that continued with disappointing ADBE results (stock down 5% pre-market) although that’s not impacting the markets more broadly.

The busy week continues today with a BOE Rate Decision (E: No Change) and an ECB Rate Decision (E: No Change) and markets expect no rate cuts but dovish tones from both central banks.  If that’s the reality, it’ll just add more fuel to the dovish rally.

Economically, the key reports today are Jobless Claims (E: 223k) and Retail Sales (E: -0.1%).  The Fed’s dovish pivot will overshadow these reports unless they show a sudden deterioration (so spike in claims and drop in retail sales) and barring those results, they shouldn’t move markets.

Bullish

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