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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.

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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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Why the Bar for the Fed to Be Hawkish Is High

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Why the Bar for the Fed to Be Hawkish Is High: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why the Bar for the Fed to Be Hawkish Is High
  • What the CPI Report Means for Markets

Futures are slightly higher despite soft economic data, as markets await the Fed decision later this afternoon.

Economically, data from the UK and the EU was bad and is slightly increasing growth concerns.   UK monthly GDP  and UK & EU Industrial Production all missed estimates.

Chinese growth concerns also rose as China declared industrial development as the #1 economic priority, potentially signaling less economic stimulus in 2024.

Today focus will be on the FOMC decision (2:00 p.m. ET, No change to rates expected) and the keys are the 2024 dot (does it show 50 bps of cuts?) and whether Powell slams the door on the idea of rate cuts (or leaves it slightly open).  In addition to the Fed, we also get another important inflation reading via PPI (E: 0.1% 1.0%). A further decline will be peripherally positive for markets.

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The Market Has So Aggressively Priced In A Dovish Fed

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The Market Has So Aggressively Priced In A Dovish Fed: Tom Essaye Quoted in MarketWatch on MSN

November jobs report likely to show a solid 190,000 increase, with unemployment staying at 3.9%

As a result, market participants will be much more sensitive to a hotter-than-expected number than to a softer-than-expected figure, said Tom Essaye, founder of Sevens Report Research, in a Thursday note.

That means the threshold for “too hot” figures — including payrolls, the unemployment rate and wages — that cause a pullback in both stocks and bonds is lower than it’s been all year because the market has so aggressively priced in a dovish Fed, he wrote.

“So, there’s less of a margin for error if the jobs report is stronger than expectations.”

Also, click here to view the full article published by MSN on December 8th, 2023. However, to see the Sevens Report’s full comments on the current market environment sign up here.

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Expect General Digestion of Last Week’s Rally

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Expect General Digestion of Last Week’s Rally: Tom Essaye Quoted in Barron’s

Stock Futures Slip as Investors Look Ahead to Jobs Report

“It’d take a major beat or miss to move markets, so we should expect continued general digestion of last week’s rally,” said Tom Essaye, founder of Sevens Report Research.

Investors will want to see signs that the economy is no longer running hot—inflation and growth moderating sufficiently to support the lowering of borrowing costs.

But markets also don’t want to see signs of undue weakness, which could suggest that the economy is slowing to a worrying degree.

Also, click here to view the full Barron’s article published on December 4th, 2023. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Expect General Digestion of Last Week’s Rally

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.

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What Are GLP-1 Drugs and Why Do They Matter to Markets?

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What Are GLP-1 Drugs and Why Do They Matter to Markets? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What Are GLP-1 Drugs and Why Do They Matter to Markets?

U.S. equity futures are trading lower this morning as a credit downgrade of China’s debt is overshadowing mostly good Composite PMI data overseas.

Overnight, Moody’s cut their outlook for Chinese debt to negative. This weighed on Asian shares and EM stocks, as well as domestic equity futures.

Economically, China’s Composite PMI favorably rose to 51.6 vs. (E) 50.1 in November. While the Eurozone Composite PMI remained in contraction, but notably firmed to 47.6 vs. (E) 47.1 last month.

Two key economic reports to watch today: JOLTS (E: 9.4 million job openings) and the ISM Services Index (E: 52.4). Investors will want to see more evidence that supports a soft landing in the data.

Finally, there is one Fed economist speaking today: Gibson (10:00 a.m. ET) but his comments should not materially move markets.

What Are GLP-1 Drugs and Why Do They Matter to Markets?

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Bullish or Bearish? My Analysis

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Bullish or Bearish? My Analysis.: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Bullish or Bearish?  My Analysis.
  • EIA and OPEC Analysis

Futures are slightly higher following more encouraging inflation readings and despite underwhelming Chinese economic data.

EU HICP (their CPI) rose less than expected (3.6% vs. (E) 3.9%) furthering the idea the ECB is done with rate hikes.

Economically, Chinese Nov. PMIs disappointed as both the manufacturing and composite PMIs missed estimates.

Focus now turns to economic data as today and tomorrow contain the week’s most important economic reports.  Today, the Core PCE Price Index (E: 0.2%, 3.5%) is the key report and anything that shows a greater than expected decline in inflation will likely spur a rally.

Other notable data today includes Jobless Claims (E: 219K) and Pending Home Sales Index (E: -2.0%) and we also have one Fed speaker: Williams (9:15 p.m. ET).  Again, data that is “Goldilocks” on growth combined with commentary from Fed officials that imply rate hikes are done should continue to support stocks.

Bullish or Bearish?  My Analysis.

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