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Demand worries linked to the threat of a slowdown in global growth

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Demand worries linked to the threat of a slowdown in global growth: Tom Essaye Quoted in Forbes

Nvidia Stock Plunges 10% Amid Broader Stock Losses As Rocky September Kicks Off

“Demand worries linked to the threat of a slowdown in global growth are acting as the biggest influence on the oil market right now,” remarked Sevens Report analyst Tom Essaye in a Tuesday note to clients.

Also, click here to view the full Forbes article published on September 3rd, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

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Why This Market Is So Resilient (Again)

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Why This Market Is So Resilient (Again): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why This Market Is So Resilient (Again)
  • Weekly Economic Preview – Labor Market Data in Focus

Futures are lower in sympathy with most global equity markets this morning as investors digest fresh economic data at the start of a historically volatile calendar month.

The Eurozone Manufacturing PMI was better than feared at 45.8 vs. (E) 45.6, but the sub-50 reading reminded investors the global factory sector remains deep in contraction and growth risks remain elevated.

Looking into today’s session, there are no Fed speakers on the calendar but there is one potentially market-moving economic report to start the week: the ISM Manufacturing PMI (E: 47.8). Investors will want to see evidence of stabilization in the factory sector and easing price pressures in the details of the report, otherwise growth concerns could result in renewed volatility.

There are no other major potential catalysts today, however, the Treasury will hold 3-Month and 6-Month Bill auctions at 11:30 a.m. ET and the yields awarded could shed new light on Fed policy plans in the months ahead, and in turn, impact equity markets (higher yields would weigh on stocks and other risk assets).

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The Rotation Out of Tech Continues

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The Rotation Out of Tech Continues: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • The Rotation Out of Tech Continues

Futures are modestly higher thanks to solid tech earnings and better than expected inflation data from Europe.

DELL and MRVL, both AI linked tech companies, posted solid earnings and guidance and that’s supporting futures.

Economically, EU HICP (their CPI) declined further to 2.8% y/y vs. (E) 2.9%, giving the ECB more room to cut rates.

Today is typically a quiet day in the markets as traders try to get a head start on the three-day weekend, but there is an important inflation report this morning:  The Core PCE Price Index (E: 0.2% m/m, 2.7% y/y).  If that report is better than expected, it’ll boost expectations for a 50-bps rate cut in September (positive for stocks) while a higher-than-expected number will push back against a 50-bps cut (negative for stocks).

Other data today includes the Chicago PMI (E: 46.4) and inflation expectations in University of Michigan Consumer Sentiment (1-Yr Inflation Expectations: 2.9%, 5-Yr. Inflation Expectations: 3.0%) but barring major surprises, neither of those numbers should move markets.

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Renewed Rotation Risks (Smart Money Is Getting Defensive)

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What’s in Today’s Report:

  • Recent Sector Performance Points to Smart Money Getting Defensive
  • Chart – 10Y-2Y Yield Curve Spread Revisits the Zero-Bound

U.S. equity futures are slightly higher after a mostly quiet night of news as traders look ahead to NVDA earnings.

There was no economic data overnight but the BOJ’s Deputy Governor, Himino, reiterated that policy makers would continue raising rates with the “utmost vigilance,” which supported a modest bid in equity markets and other risk assets overnight.

Looking into today’s session, there are no notable economic reports and just one Fed speaker after the close: Bostic (6:00 p.m. ET).

There is a 5-Yr Treasury Note auction at 1:00 p.m. ET and given the strong performance in the belly of the duration curve since the start of August, traders will be looking for demand to remain solid to confirm the recent drop in yields is sustainable.

Finally, likely the biggest catalyst of the week will come after the close today with NVDA earnings ($0.65) due shortly after the bell. Other notable companies reporting quarterly results today include CRM ($2.35) and HPQ ($0.86) but the main focus will be on NVDA as options traders are pricing in a volatile 10%+ reaction (up or down) to the earnings release and given the stocks heavy weight in the major indexes, a move of that magnitude will have an impact on the broader market in the back half of the week.

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What Powell and Uedas’ Friday Comments Mean for Markets

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What’s in Today’s Report:

  • What Powell and Uedas’ Friday Comments Mean for Markets
  • Weekly Market Preview:  A Big Week for Tech Earnings (Including NVDA on Wednesday)
  • Weekly Economic Cheat Sheet:  A Most Quiet Week But Thursday/Friday Are Important

Futures are slightly higher following a mostly quiet weekend, thanks to momentum from Friday’s rally as investors digest Powell’s promise of coming rate cuts.

Economically, the only notable number overnight was the German Ifo Business Expectations and it slightly beat estimates (86.8 vs. (E) 86.5).

Geopolitically, a cease fire was not reached this weekend between Israel and Hamas although investors remain optimistic that a deal is close.

Today the only notable economic report is July Durable Goods (E: 4.0%) and markets will want to see stability in the data (so close to expectations) to ensure the recent plateau in business spending isn’t becoming a decline.  If Durable Goods is in-line, expect a continuation of the early rally.

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Powell Speech Preview (What’s Expected, Dovish If, Hawkish If Scenarios)

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Powell Speech Preview: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Powell Speech Preview (What’s Expected, Dovish If, Hawkish If Scenarios)

Futures are solidly higher ahead of Fed Chair Powell’s speech thanks to not hawkish commentary from BOJ Governor Ueda.

Ueda stated that rates would continue higher but that increases would be data dependent and in conjunction with monitoring market conditions (meaning the yen spike from last month won’t be repeated, which is a good thing).

Economically, Japanese CPI rose 2.7% y/y, as expected and that’s further reducing hawkish BOJ concerns.

Today focus will be on Fed Chair Powell’s speech (10:00 a.m. ET) and as long as he removes any lingering doubts about a September rate cut, this rally can continue.

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The Concerning Gap Between Stocks, Treasuries and the Yen

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What’s in Today’s Report:

  • The Concerning Gap Between Stocks, Treasuries and the Yen
  • Oil Update (Why is Oil Hitting Multi-Month Lows?)

Futures are slightly higher on more Goldilocks economic data.

The EU and UK August flash composite PMIs were better than expected (51.2 vs. (E) 50.7 in the EU and 53.4 vs. (E) 52.9 in the UK) and that’s supporting the global soft landing narrative.

On inflation, EU wages rose less than expected in Q2, reinforcing expectations for a Sept. rate cut from the ECB.

Today focus will be on economic data as today is the most important day of the week from a data standpoint.  Key reports, in order of importance, include Jobless Claims (E: 234K), August Flash Composite PMI (E: 53.3) and Existing Home Sales (E: 3.90 million).  More Goldilocks data (at or close to expectations) should further support the rally and if that’s the case, new highs for the S&P 500 shouldn’t be a shock.

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Watch the BLS Revisions Today

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What’s in Today’s Report:

  • Something to Watch Today: BLS Revisions
  • How a Fed Mistake Would Impact Commodities
  • VIX Expiration Poses Threat to Short-Volatility Trade – Chart

Futures are slightly higher as traders await job growth revisions from the BLS after a mostly quiet night of news.

Economically, Japanese trade data revealed a deeper than anticipated deficit in July but amid solid import/export growth numbers which importantly helped pause a rally in the yen and reduced pressure on risk assets overnight.

Looking into today’s session, there are no typical economic reports on the calendar, however, the BLS Revisions to Net Payroll Growth for the trailing 12-months through March 2024 will be released at 10:00 a.m. ET and a significant downward revision could rekindle the recession fears initially sparked by the July jobs report which would result in broad market volatility.

In the afternoon, there is a 20-Yr Bond auction at 1:00 p.m. ET which could move yields and influence equity markets before investor focus will turn to the release of the July FOMC Meeting Minutes at 2:00 p.m. ET.

Finally, earnings season continues to wind down but a few notable companies reporting today include: TGT ($2.17), TJX $0.92), ZM ($1.21).

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The Most Important Central Banker This Week (Not Powell)

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What’s in Today’s Report:

  • The Most Important Central Banker This Week (Not Powell)

Futures are slightly higher on better than feared tech earnings and more global central bank rate cuts.

Palo Alto Networks (PANW) posted solid guidance and that, along with CSCO results last week, is helping to bolster the outlook for tech and that’s supporting futures.

Sweden’s Riksbank (their central bank) cut rates 25 bps, as expected, and that reminded investors we are in the midst of a global rate cutting campaign (which is a positive).

There are no notable economic reports today but there are two Feds speakers, Bostic (1:35 p.m. ET) and Barr (2:45 p.m. ET) and if they join other colleagues in expressing openness to cutting rates in September, it should be a mild tailwind for stocks.

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The Right Way to Think About Economic Growth Right Now

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What’s in Today’s Report:

  • Hard Landing/Soft Landing Scoreboard (The Right Way to Think About the U.S. Economy)

Futures are slightly lower following a mostly quiet night of news as markets digest Thursday’s strong rally.

The only notable economic report overnight was UK retail sales, which rose 0.8% vs. (E) 0.5% and added to Thursday’s haul of solid global data.

Geo-politically, Israel/Hamas ceasefire talks continued and any breakthrough would be a surprise market positive.

Today there are a few notable economic reports including Consumer Sentiment (E: 67.0), 1-Yr Inflation Expectations: (E: 2.9%), 5-Yr. Inflation Expectations (E: 3.0%) and Housing Starts (1.342M).  However, those numbers aren’t that important to growth so barring a major surprise, they shouldn’t move markets and we should mostly see digestion of Thursday’s big rally.

There is also one Fed speaker today, Goolsbee (1:25 p.m. ET), and he’s dovish do don’t be surprised if he openly talks about cutting rates in September.

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