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Was Last Week’s Rally Legitimate?

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Was Last Week’s Rally Legitimate? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Was Last Week’s Rally Legitimate?
  • Weekly Market Preview:  Do Falling Treasury Yields Fuel More Upside in Stocks?
  • Weekly Economic Cheat Sheet:  Is the “Growth Scare” Starting to Appear?

Futures are modestly higher on momentum from last week’s big rally, following a mostly quiet weekend of news.

Economically, Euro Zone Composite PMI met expectations (46.5) while German Manufacturers’ Orders beat (0.2% vs. (E ) -1.1%) but there was a negative revision and overall, the data isn’t moving markets.

Geo-politically, Israeli forces are moving further into Gaza but so far risks of a broadening conflict remain relatively low.

Today there are no notable economic reports and just one Fed speaker, Cook (11:00 a.m. ET), so look for Treasury yields to continue to drive short term trading.  If the 10-year yield continues to decline then the S&P 500 can extend last week’s rally.

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Israel Moved Forces Into Gaza

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Israel Moved Forces Into Gaza: Tom Essaye Quoted in Barron’s

Stocks Bounce Back From Dreadful Week

“Geo-politically, Israel moved forces into Gaza over the weekend but the operation is not as large as feared (yet) and that’s helping to slightly reduce geopolitical anxiety,” writes Sevens Report Research’s Tom Essaye.

Aside from a stacked slate of earnings reports headlined by Apple (ticker: AAPL) this week, traders will be watching developments in the Israel-Hamas war and Wednesday’s interest-rate decision from the Federal Reserve.

Also, click here to view the full Barron’s article by Connor Smith published on October 30th, 2023. 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 Rally

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Key Levels to Watch on Fed Day (Technical Tear-Sheet)

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What’s in Today’s Report:

  • Key Levels to Watch on Fed Day (Printable/Shareable Tear-Sheet)
  • Economic Data Takeaways – Employment Cost Index, Eurozone CPI, Case-Shiller HPI

Futures are slightly lower as traders digest more weak economic data overseas ahead of today’s Fed decision.

Economically, Manufacturing PMIs in China and the U.K. both disappointed. Both came in under the 50 threshold indicating contraction in the sector in both countries. This is weighing modestly on stocks this morning ahead of the Fed.

Looking into today’s session, focus will be on economic data early. The October ADP Employment Report (E: 150K), JOLTS (E: 9.375 million), and ISM Manufacturing Index (E: 49.0) are all due to be released this morning.

From there, attention will turn to the Fed with the FOMC Meeting Announcement at 2:00 p.m. ET followed by Fed Chair Powell’s press conference at 2:30 p.m. ET. Investors are hoping for a dovish message from the Fed, and if they deliver, a continued relief rally is likely this afternoon.

Lastly, outside of the policy decision and economic data, there are some notable earnings releases today. With: CVS ($2.13) and W ($2.98) releasing results before the open, and PYPL ($1.23), QCOM ($1.80), ABNB ($2.08), MET ($1.99) and AIG ($1.55) reporting after the close.

Key Levels to Watch on Fed Day

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Is Another Crash Imminent?

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Is Another Crash Imminent? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Is Another Crash Imminent?
  • Chart – M2 Money Supply Still Up Massively Despite QT
  • The Recent Gold Rally and Inflation Expectations

Stock futures are rebounding modestly this morning amid further stabilization in the Treasury market as big tech earnings come into focus while economic data overseas disappointed overnight.

The Eurozone PMI Composite Flash came in at 46.5. vs. (E) 47.4 with a softer than expected Services sub-index which added to existing recession worries in the EU overnight. And that soft data is contributing to the steady bond market this morning.

Looking into the U.S. session, there is one economic report to watch: PMI Composite Flash (E: 49.4), and as has been the case, a release that supports a soft-landing scenario (easing growth and falling price measures) will support stocks while a “hot” report that sends yields back higher will be a negative.

There are no Fed speakers today but there is a “policy-sensitive” 2-Yr Treasury Note auction at 1:00 p.m. ET.  If demand is weak, that could put upward pressure on yields and reintroduce a headwind on equities and other risk assets as big tech earnings come into focus this week.

Earnings Update

Earnings season continues to ramp up this week with: KO ($0.69), VZ ($1.17), GE ($0.56), MMM ($2.34), and SYF ($1.44) reporting before the bell. While MSFT ($2.65), GOOGL ($1.45), and V ($2.23) will release results after the close.

Investors will want to see some better than expected results from the big tech names as they have been responsible for most of the 2023 stock market gains. Any disappointment will almost certainly mean new lows in the major indices this week.

Is Another Crash Imminent

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It’ll be Very Hard for This Market to Rally

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It’ll be Very Hard for This Market to Rally: Tom Essaye Quoted in Barron’s

Dow Falls Nearly 250 Points. 10-Year Nears 5%.

Stocks tumbled and bond yields rose Thursday after Federal Reserve Chair Jerome Powell paved the way for keeping rates steady.

“Treasury yields are doing exactly what we’d expect given Powell essentially said rates won’t go any higher, but they will stay higher for longer and the economy is strong,” Sevens Report Research’s Tom Essaye told Barron’s.

 “It’ll be very hard for this market to meaningfully rally with yields this high. But, barring a major geo-political positive surprise or great earnings season.”

Also, click here to view the full Barron’s article published on October 19th, 2023. 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 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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Why Did Stocks Rally After the Jobs Report?

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What’s in Today’s Report:

  • Why Did Stocks Rally After the Jobs Report?
  • What to Make of This Market (Updated Near and Medium-Term Outlook)
  • Weekly Economic Cheat Sheet:  Inflation in Focus This Week (CPI Thursday is Very Important)
  • Weekly Market Preview:  Will Rising Oil Prices Become Another Headwind?

Futures are moderately lower on rising geo-political tensions following the Hamas attack on Israel over the weekend.

The human tragedy and geo-political implications aside, from a market standpoint the attack matters because rising geo-political tensions mean higher oil prices (up 3% currently) and the higher oil goes, the stronger the additional headwind on stocks and bonds.

Today there are no notable economic reports but there are several Fed speakers, including Logan, Barr, and Jefferson, although they shouldn’t move markets.  So, oil will likely be the driver of asset prices today and the higher oil goes, the stronger the headwind on stocks.

Why Did Stocks Rally After the Jobs Report?

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Why Are Yields Rising?

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What’s in Today’s Report:

  • Why Are Yields Rising?
  • What the Removal of Speaker McCarthy Means for Markets (We Didn’t Need This Right Now)
  • JOLTS Data Takeaways
  • OPEC+ (JMMC) Meeting Preview

U.S. stock futures are rebounding from overnight losses as European markets turn positive following mixed economic data while yields are stabilizing after this week’s rapid rise.

Markets are continuing to digest the implications of the removal of McCarthy as Speaker of the House. Yields were initially higher overnight, likely on worries of a more pronounced threat of a government shutdown next month. They have since stabilized and are only little changed in morning trade, helping support steady stock futures in the pre-market.

Economically, the September EU Composite PMI came in at 48.7 vs. (E) 48.4, while Retail Sales fell -1.2% vs. (E) -0.2% in August and PPI fell a steep -11.5% vs. (E) -11.7%. On balance, the data was not a reason for the ECB to become more hawkish. Which is helping global bond markets (and equities) stabilize this morning.

Today, focus will be on economic data early with the ADP Employment Report (E: 150K), ISM Services Index (E: 53.5), and Factory Orders (E: 0.2%). The “hot” JOLTS headline roiled markets yesterday so markets are likely to welcome any cooling labor market indicators and look for easing price measures in the ISM release as those developments could help bonds bounce back and stocks recover some of this week’s losses.

Later, the focus will turn to central bank speak with several Fed officials scheduled to speak including: O’Neill Paese, Schmidt, Bowman, and Goolsbee. A lot of hawkish rhetoric has been digested in recent sessions. So any more dovish-leaning commentary would also be welcomed by stocks and other risk assets.

Why Are Yields Rising

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Seeing the Forest for the Trees in Today’s Market

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Seeing the Forest for the Trees in Today’s Market: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Seeing the Forest for the Trees in Today’s Market
  • Weekly Market Preview:  Do Expectations for a Soft-Landing Shift This Week?
  • Weekly Economic Cheat Sheet:  An Important Week:  ISM PMIs and the Jobs Report Friday

Futures are little changed as Congress passed a short-term funding bill and avoided a shutdown while global manufacturing data largely met expectations.

The House passed the Senate’s “continuing resolution” to fund the government over the weekend, avoiding a shutdown.  However, funding only lasts until November 17th.

The Chinese Sept. Manufacturing PMI rose to 50.2 vs. (E) 50.0 while EU and UK readings were in-line with estimates.

Today focus will be on economic data and Fed speak.  The key report today is the ISM Manufacturing PMI (E: 47.8) and markets will want to see this number move closer to 50 and hint at an end to the manufacturing recession.  A further drop from here would be an incremental negative.  On the Fed, we hear from Powell & Harker at 11:00 a.m. and Williams at 1:30 p.m. and any hints from them that the Fed is likely done with rate hikes will be welcomed by markets.

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Gold’s Outlook Following The Federal Reserve’s Decision

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Gold’s Outlook: Sevens Report Analysts Quoted in MarketWatch

Gold gains for a 4th straight session to settle at a more than 2-week high

Gold futures posted a modest gain on Tuesday to mark another settlement at their highest in over two weeks, a day ahead of the Federal Reserve’s decision on interest rates.

“A hawkish decision would be decidedly bearish for gold…while a dovish surprise would support a run beyond $2,000” for gold, said analysts at Sevens Report Research, in Tuesday’s newsletter.

December gold climbed by 30 cents, or less than 0.1%, to settle at $1,953.70 an ounce on Comex.

Also, click here to view the full MarketWatch article published on September 19th, 2023. However, to see the Sevens Report’s full comments on economic data & inflation sign up here.

Gold's Outlook

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What the Hawkish Fed Decision Means for Markets

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Hawkish Fed Decision: Strengthen your market knowledge with a free trial of The Sevens Report.

What’s in Today’s Report:

  • What the Hawkish Fed Decision Means for Markets
  • Key Levels to Watch:  Post-Fed Takeaways
  • EIA Analysis and Oil Market Update

Futures are moderately lower on momentum from Wednesday’s late sell-off. As the Fed’s hawkish statement and projections weighed on global markets overnight.

The Norges Bank (Central Bank of Norway) hiked rates by 25 bps and signaled another hike in December. This wasn’t expected and added to hawkish central bank anxiety.

Economically there were no notable reports overnight.

Today will be another busy day and the first important event is the Bank of England Rate Decision (E: 25 bps hike).  If the BOE hikes 25 bps and strongly signals another hike is coming, that will be incrementally hawkish and likely add to global selling pressure.

Looking at economic data, there are two important reports today: Jobless Claims (E: 225K) and Philly Fed (E: 0.5).  Especially after yesterday’s declines, markets will want to see stable data, because if data is “Too Hot” it’ll push Treasury yields higher and weigh on stocks and if data is suddenly very bad it’ll increase stagflation concerns.  We also get Existing Home Sales (E: 4.10M) but that number shouldn’t move markets.

 

Hawkish Fed

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