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Tom Essaye Quoted in Market Watch on September 1st, 2022

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What does Friday’s jobs report mean for the market? ‘Too hot’ and stocks could tumble, says market pro.

The labor market needs to show signs that it’s on the path to returning to a state of relative balance, where job openings are roughly the same as the number of people looking for jobs — and if it does not show that, then concerns about a more hawkish-for-longer Fed will rise, and that’s not good for stocks, wrote Tom Essaye, a former Merrill Lynch trader and the founder of the Sevens Report newsletter. Click here to read the full article.

 

A History of Fed Warnings

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What’s in Today’s Report:

  • A History of Fed Warnings
  • Chart: 10-Year Yield in a ”Broadening Triangle” Pattern

Stock futures are enjoying a solid oversold bounce this morning with both Treasury yields and the dollar index pulling back from their recent highs as Powell’s hawkish comments from Jackson Hole continue to be digested.

Eurozone Economic Sentiment dipped to 97.6 vs. (E) 97.7 this month, a 1.5 year low, but the soft survey data is seeing investors dial back some recent hawkish money flows.

Looking into today’s session, it will be a busy morning with two housing market data points due out before the bell: Case-Shiller Home Price Index (E: 1.1%) and FHFA House Price Index (E: 0.9%) before focus will shift to Consumer Confidence (E: 97.4) and JOLTS (10.4M) data at the top of the 10 a.m. hour ET.

Additionally, there are two Fed speakers to watch: Barkin (8:00 a.m. ET) and Williams (11:00 a.m. ET).

Bottom line, stocks became near-term oversold between Friday and yesterday and as long as the dollar and yields remain steady today, and economic data and Fed chatter doesn’t shift policy expectations any more hawkish than they have already repriced, stocks should be able to enjoy a bounce as traders begin to position into the end of the month.

On the charts, the 4,020 area will be a critical support level to watch in the S&P 500 today as a material break below would open the door to a swift drop into the low-to-mid 3,900s.

Sevens Report Analysts Quoted in ETF Trends on August 25th, 2022

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Gold ETFs Could Still Find a Place in a Diversified Portfolio

If the market responds to Powell in a dovish manner that should send inflation expectations even higher, while the dollar and yields should pull back, which would all result in tailwinds on gold. However, a hawkish and ‘growth-insensitive’ Powell would likely send gold back down towards $1,700, potentially by Friday’s close…analysts at Sevens Report Research said in a note. Click here to read the full article.

What Powell’s Speech Means for Markets

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What’s in Today’s Report:

  • What Powell’s Speech Means for Markets
  • Weekly Market Preview:  Are Central Banks Getting More Hawkish?
  • Weekly Economic Cheat Sheet:  How Strong is Growth (Jobs Report on Friday)

Futures are down close to 1% on follow through selling from Friday as hopes of a near term “Fed Pivot” continue to fade in reaction to Powell’s speech last week.

European shares are also sharply lower as tightening expectations for the ECB rose sharply on Friday.  Markets are now pricing in a minimum 50 bps hike next week with a 75 bps hike a real possibility.

There were no notable economic reports overnight.

Markets dropped on Friday as Powell dismissed the idea of an imminent “Fed Pivot,” but the ECB also signaled more hawkish intentions on Friday, and it was the two events that combined to cause the ugly declines.  Today there are no economic reports but there is an important Fed speaker, Brainard (2:15 p.m. ET) and if she echoes Powell’s comments from Friday, expect more losses in stocks.

Tom Essaye Quoted in CNBC on August 18th, 2022

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Bond yields tick lower, cooling off after Fed’s meeting minutes released

Bottom line, the market continues to view virtually all Fed utterances as implying a less-hawkish pivot and Wednesday wasn’t any exception as the FOMC minutes erased the dollar’s earlier gains and cut the rise in Treasury yields as stocks continue to ignore signals from the currency and bond markets that imply the Fed will not be making this hoped for pivot anytime soon, wrote Tom Essaye of The Sevens Report. Click here to read the full article.

What the Bulls Believe (Four Assumptions)

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What’s in Today’s Report:

  • Four Bullish Assumptions Currently in the Market
  • Weekly Market Preview:  All About Powell (Speech on Friday)
  • Weekly Economic Cheat Sheet:  How Solid Is the Economy?  (Important Growth Data This Week)

Futures are sharply lower as markets price in a greater chance of a hawkish speech from Fed Chair Powell this Friday.

Markets are reversing some of the “Fed Pivot” gains of the past few weeks ahead of Chair Powell’s speech in Jackson Hole on Friday, as investors fear the markets’ expectations for the Fed have become too dovish.

Economically, China cut interest rates again to stimulate the economy, although the rate cuts were small and stocks declined anyway, as the Chinese economy continues to face numerous large challenges (Zero COVID policy, drought, property market decline, etc.).

Today there are no Fed speakers and only one notable economic report, the Chicago Fed National Activity Index (E: -0.19), and as has been the case markets will want to see stability in the date to reinforce that the U.S. economy is not moving closer to stagflation.

What’s Changed With the Fed

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What’s in Today’s Report:

  • What’s Changed with the Fed (and What Hasn’t)
  • Technical Update

Futures are moderately lower following mixed economic data and after a WSJ article warned the market was underestimating Fed conviction on rate hikes.

Economically, German PPI surged 37.2% vs. (E) 30.9% y/y on exploding electricity costs while UK Retail Sales fell –3.4% vs. (E) -3.3%.  Both numbers highlight the economic challenges facing the EU and UK.

A WSJ article warned of a “reckoning” for stocks as markets think the Fed is bluffing about further hikes and that’s weighing on sentiment this morning.

Today there are no notable economic reports but there is one Fed speaker, Barkin at 9:00 a.m. ET, and if he echoes this disconnect between Fed intentions and market expectations for rates, that will further pressure stocks today.

What Currencies and Bonds Are Saying About the Fed

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What’s in Today’s Report:

  • Better-Than-Feared WMT and HD Earnings Drive Trading
  • Why Currency and Bond Markets Are Not Signaling a “Less Hawkish” Fed
  • Chart: S&P 500 Quietly Closes at Fresh Highs
  • Economic Takeaways: Housing Starts and Industrial Production

U.S. futures are tracking European shares lower following disappointing economic data out of the EU ahead of today’s release of the July FOMC meeting minutes.

U.K. CPI jumped to a new multi-decade high of 10.1% vs. (E) 9.8% in July while the Q2 Eurozone GDP Flash dipped to 3.9% vs. (E) 4.0%, rekindling concerns about stagflation.

Looking into today’s session, focus will be on economic data early with Retail Sales (E: 0.1%) due out before the bell as well as more retailer earnings including: TGT ($0.71), LOW ($4.63), and TJX ($0.68).

Then there is one Fed speaker, Bowman, at the open (9:30 a.m. ET) before focus will shift to the July FOMC meeting minutes which will be released at 2:00 p.m. ET.

Bottom line, the market will want to see more good earnings and guidance out of the remaining major retailers due to report quarterly results today as well as a not-as-hawkish-as-feared set of Fed minutes released this afternoon, if this latest leg higher in stocks is going to continue. Otherwise, we could be set up for a pullback into the back half of the week as stocks have become near-term overbought without any new meaningfully positive catalysts.

Tom Essaye Quoted in Barron’s on August 12th, 2022

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The S&P 500 Had Its Fourth Straight Winning Week—and What Else Happened in the Stock Market Today

Data released this week suggests that inflation may have peaked, allowing the Federal Reserve to be less aggressive when boosting interest rates…Tom Essaye, founder of Sevens Report Research said Friday that the S&P 500’s current level reflects that growing sentiment. Click here to read the full article.

Did the Markets Achieve Peak Inflation & Peak Hawkishness

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What’s in Today’s Report:

  • Keys to a Bottom Update:  Did the Markets Achieve Peak Inflation & Peak Hawkishness?
  • Weekly Market Update:  Can Stocks Hold the Recent Gains?
  • Weekly Economic Cheat Sheet:  All About Growth This Week (And the Data Needs to be Solid)

Futures are modestly lower after Chinese economic data missed estimates and the Chinese central bank cut rates in response.

Chinese economic data was soft as Industrial Production (3.8% vs. (E) 4.3%) and Retail Sales (2.7% vs. (E) 4.9%) both missed estimates.  In response, China’s central bank announced a surprise 10 bps rate cut, a move that signals economic concern but also doesn’t offer a lot of help (a 10 bps cut won’t make a difference as long as “Zero COVID” is an in-force policy).

Focus today will be on the August Empire Manufacturing Survey (E: 5.0) and specifically the price index within the report.  The sharp drop in that price index kicked off the “peak inflation” rally of the last month, so markets will be looking for continued signals that growth is stable (so a solid headline reading) and inflation is falling (another drop in the price index).

We also get the July Housing Market Index (E: 55.0) and we have one Fed speaker,  Waller (10:50 a.m. ET), but they shouldn’t move markets.