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Did the Fed Decision Weaken the Bull Market?

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Did the Fed Decision Weaken the Bull Market?: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Four Reasons the Fed Decision Caused Such a Big Selloff
  • Did the Fed Decision Weaken the Bull Market?

Futures are seeing a bounce following yesterday’s steep selloff despite more negative news overnight.

Politically, government shutdown risks spiked on Thursday after support for the stop-gap funding bill collapsed and a government shutdown on Friday is becoming more likely.

On earnings, Micron (MU) posted disappointing guidance and the stock is down –15% pre-open.

Today is another busy day of economic data and policy decisions.   The Bank of England has a rate decision (E: 25 bps cut) while there are numerous U.S. economic reports including, in order of importance,  Jobless Claims (E: 232K), Philly Fed (E: 2.5), Final Q3 GDP (E: 2.8%) and Existing Home Sales (E: 4.05 million).  The market needs Goldilocks data to help it hold this early bounce and any data that’s “Too Hot” (meaning much stronger than expected) will only increase hawkish Fed worries, push yields higher and likely hit stocks, again.

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Who’s Right on the Consumer? WMT (Positive) or TGT (Negative)

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Who’s Right on the Consumer?: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Who’s Right on the Consumer?  WMT (Positive) or TGT (Negative)

Futures are little changed on disappointing NVDA earnings and after further escalation in the Russia/Ukraine war.

NVDA beat earnings estimates ($0.81 vs. (E) $0.74) but guidance disappointed at only 6.8% FQ4 revenue growth vs. (E) 11.75% and the stock is down 2% pre-market.

Geo-politically, Russia fired a non-nuclear ICBM into Ukraine for the first time, further escalating the conflict.

Today focus will turn back towards economic data as there are three notable reports (ranked in order or importance):  Jobless Claims (E: 219K), Philly Fed (E: 7.0) and Existing Home Sales (E: 3.90 million).  Given elevated Treasury yields, in-line to slightly soft data will be best for markets, as it reinforces a soft landing and would slightly boost December rate cut expectations.

There are also several Fed officials speaking today, including Hammack (8:45 a.m.), Goolsbee (12:25 p.m. ET) and Barr (4:40 p.m. ET) although they are unlikely to move markets (the Fed outlook is pretty known at this point and the looming jobs report will likely decide if we get a rate cut in December, or not).

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What Yesterday’s Rate Cut Means for Markets

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What Yesterday’s Rate Cut Means for Markets: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What Yesterday’s Rate Cut Means for Markets

Futures are slightly lower mostly on digestion of the week’s news and after Chinese stimulus only met expectations.

China announced a 1.4 trillion-yuan fiscal stimulus program (so government spending) although that only met expectations and is seeing a mild “sell the news” reaction.

Today the calendar is relatively quiet (especially considering what a busy week it’s been already) but there is still one notable economic release, the University of Michigan Consumer Sentiment (E: 70.8) and, contained in that report, the One-Year Inflation Expectations (E: 2.7%).  Markets will want to see both numbers hit expectations and not be “Too Hot” (especially for inflation expectations).

We also have two Fed speakers today, Bowman (11:00 a.m. ET) and Musalem (2:30 p.m. ET), but given the Fed decision yesterday they shouldn’t move markets.

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Election Roadmap

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Election Roadmap: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Election Roadmap
  • Detailing our Four-Part Election Coverage
  • Weekly Market Preview:  Election and Fed Decision
  • Weekly Economic Cheat Sheet:  All About the Fed.

Futures are slightly higher despite a tightening election and a spike in oil prices.

Politically, the race tightened over the weekend as the Des Moines Register’s final Presidential poll shockingly had Harris up three points in the state, underscoring that the election will be closer than current market expectations.

Oil is 3% higher after OPEC+ delayed a production increase by one month (although it’s not seen as a material policy shift).

Today there are no notable economic reports nor any Fed speakers so last-minute election outlook changes will be the driver of markets, although with the race so close it’s likely markets mostly chop sideways ahead of the election results on Wednesday (hopefully).

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Unhealthy Price Action and Revisiting Credit Spreads

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Unhealthy Price Action and Revisiting Credit Spreads: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Tech Update – An Unhealthy Start to a Critical Two Weeks
  • What Credit Spreads Are Saying About the Economy and Markets
  • JOLTS Data Takeaways – Available Jobs Fall Below Previous Cycle Peak (2019)

Equities are mixed in pre-market trade as earnings dominate early money flows.

Tech-heavy Nasdaq futures are outperforming and holding overnight gains thanks to solid earnings from GOOG helping to offset disappointing guidance from AMD while CAT earnings are weighing on Dow futures. S&P 500 futures are little changed.

Economically, the Eurozone’s Q3 GDP Flash firmed to +0.4% vs. (E) +0.2% largely thanks to growth in Germany which is easing concerns about the health of the EU economy and that is ultimately resulting in a favorable pullback in the recently strong dollar.

Today, focus will be on economic data early with the ADP Employment Report (E: 115K), and Q3 GDP Report (E: 3.0%) both due out before the bell while Pending Home Sales (E: 1.0%) will be released shortly after the open.

There are no Fed speakers today as they remain in their “blackout period” ahead of next week’s FOMC meeting which will leave traders watching for more earnings. Notable companies reporting today include: LLY ($1.52), CAT ($5.33), and HUM ($3.48) before the open, and  MSFT ($3.08), META ($5.17), and ALL ($2.20) after the close.

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A market that remains firmly anchored by two key beliefs

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A market that remains firmly anchored by two key beliefs: Sevens Report Analysts Quoted in Investing.com

Why don’t stocks drop on bad news?

As per analysts at Sevens Report, this resilience reflects a market that remains firmly anchored by two key beliefs: economic growth will remain stable, and the Federal Reserve will cut interest rates—conditions that continue to support bullish sentiment despite growing risks.

Additionally, jobless claims surged to summer highs, suggesting some softening in the labor market. “However, that number was inflated by the Boeing strike and by unemployment related to the damage from Hurricane Helene in Florida and North Carolina,” the analysts said.

Sevens Report argues that part of the reason stocks haven’t wavered is that the risks, while real, haven’t yet materialized in ways that challenge the underlying narrative of a soft landing.

“The ‘burden of proof’ remained squarely on the bears,” the analysts said, no single negative development has been powerful enough to shift market sentiment away from expectations for stable growth and falling rates.

Also, click here to view the full article featured on Investing.com published on October 19th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

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.

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

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

Why Don’t Stocks Drop On Bad News?

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Why Don’t Stocks Drop On Bad News?: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Don’t Stocks Drop On Bad News
  • Weekly Market Preview:  Earnings Are the Key This Week
  • Weekly Economic Cheat Sheet:  Important Growth Data on Thursday

Futures are slightly higher following a quiet weekend of news as investors look ahead to the first busy week of Q3 earnings and more important economic data.

Economically, Chinese exports missed expectations and the latest stimulus announcement underwhelmed, but none of it was bad enough to reverse any more of the recent rally.

This week is full of potentially market moving events from earnings and economic data but they all come later in the week and today should be mostly quiet given it’s the Columbus Day holiday (banks and bond markets closed) and there are no notable economic reports.  We do get a few Fed speakers, however (Kashkari (9:00 a.m. ET & 5:00 p.m. ET), Waller (3:00 p.m. ET)), but they shouldn’t move markets.

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Sevens Report’s Tom Essaye also sees technical indicators flashing red

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Sevens Report’s Tom Essaye also sees technical indicators flashing red: Sevens Report Editor, Tom Essaye, Quoted in Barron’s

The Stock Market Is Rising, but So Are the Risks. What to Do Now.

Sevens Report’s Tom Essaye also sees technical indicators flashing red. The Relative Strength Index, or RSI, a momentum indicator used to identify overbought or oversold conditions, has been diverging from the S&P 500 for about six months, turning lower even as the index keeps pushing higher.

“That is a concern because it is a bearish divergence that we have repeatedly seen when lasting market tops are being established, including the early 2022 highs,” Essaye writes. “This same divergence occurred before the market peaks in 2000, 2007, and even the short-lived bear market of 2020. Bottom line, the divergence between the outright price action of the S&P 500 (hitting higher highs) and its weekly RSI indicator (establishing lower highs) is a concerning technical dynamic that warrants attention as it suggests the risks of a more pronounced pullback in the stock market is statistically elevated right now.”

Also, click here to view the full Barron’s article published on October 9th, 2024. 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 RallyIf 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.

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

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

Why Yesterday’s Economic Data Wasn’t That Bad

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Why Yesterday’s Economic Data Wasn’t That Bad: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Yesterday’s Economic Data Wasn’t That Bad

Futures are slightly weaker this morning as Tesla’s “Cyber Cab” event underwhelmed while investors look ahead to the start of earnings season.

Economically, German CPI and UK monthly GDP both met estimates and didn’t provide any negative surprises.

Today investors will be focused on more inflation data via PPI (E: 0.2% m/m, 1.6% y/y) and Core PPI (E: 0.2% m/m, 2.7% y/y) while there are also several Fed speakers including Goolsbee (9:45 a.m. ET), Logan (10:45 a.m. ET) and Bowman (1:10 p.m. ET).  But, barring any major surprises from PPI or those Fed officials, they shouldn’t move markets.

Additionally, focus will now turn towards earnings and that will be one of the dominant forces on markets for the next three weeks.  Key reports today include: JPM ($4.02), BLK ($10.42), WFC ($1.27), FAST ($0.52).

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Are Emerging Markets Finally A Buy?

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Are Emerging Markets Finally A Buy?: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Are Emerging Markets Finally A Buy?
  • FOMC Minutes:  Did They Reinforce Rate Cut Expectations?

Futures are slightly lower mostly on digestion of Wednesday’s rally and as markets look ahead to today’s important economic data (CPI and claims).

Economically, Germany updated the last several retail sales reports and the net change was slightly better than expected, although that’s not moving markets.

Today focus will be on economic data as we get two potentially market moving reports:  CPI (E: 0.1% m/m, 2.3% y/y) / Core CPI (E: 0.2% m/m, 3.2% y/y) and Jobless Claims (E: 226K).  Goldilocks data, meaning an in-line CPI/Core CPI report and stable jobless claims, will keep soft landing hopes strong and likely boost stocks later today.

We also have several Fed speakers today including Cook (9:15 a.m. ET), Barkin (10:30 a.m. ET) and Williams (11:00 a.m. ET) but none of them should move markets.

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