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Market Multiple Support Levels

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What’s in Today’s Report:

  • Bottom Line: Market Multiple Support Levels to Watch
  • Durable Goods and Consumer Confidence Takeaways

Futures are trading higher this morning thanks to strong earnings from AAPL and positioning into today’s Fed Announcement while coronavirus fears continue to ease as the mortality rate is importantly holding steady near 2%.

Today is lining up to be a busy day as there are a slew of potential market catalysts on the calendar.

First, there are two economic releases to watch: International Trade in Goods (E: -$66.9B) and Pending Home Sales (E: 0.4%) before the Fed events kick off with the FOMC Meeting Announcement at 2:00 p.m. ET, followed by the Fed Chair Press Conference at 2:30 p.m. ET.

Meanwhile, we are in the peak of Q4’19 earnings season and there are a number of major U.S. corporations reporting results today including: BA ($1.73), T ($0.87), MCD ($1.96), MA ($1.87), GE ($0.18), GD ($3.46), DOW ($0.74), MSFT ($1.32), FB ($2.51), TSLA ($2.03), and PYPL ($0.84).

Bottom line, the Wuhan coronavirus outbreak, disappointing economic data, a hawkish Fed, and negative earnings surprises are all risks that could cause volatility in stocks into the end of the week, however, the market is currently showing resilience in the face of these potentially negative catalysts which leaves the pain trade higher for now.

Why The Fed Was More Bullish Than It Seems

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What’s in Today’s Report:

  • Why The Fed Meeting Was More Bullish Than It Seems
  • Why the UK Election Matters to You (Good/Bad/Ugly Preview)
  • EIA Update – Where Will Oil Go?

Futures are slightly higher following a generally quiet night as markets digest yesterday’s Fed meeting and wait on important trade news and the results of the UK election.

Today is a big day in the U.S./China trade as Trump is meeting with senior advisors to decide the fate of the 12/15 tariff increases.  It’s widely expected they will be delayed and if they are not, that will be a negative shock for markets.

Economic data was again mixed as Euro Zone IP missed (-0.5% vs. (E) -0.3%) while German CPI met expectations.

Today will be a busy day.  First, regarding the trade meeting, it’s unclear if a formal announcement will be made on the decision, but it could come at any time so markets will be watching the tape closely.  Additionally, there is also an ECB Meeting this morning and it’s new ECB President Lagarde’s first press conference.  Finally, we should know the results of the UK election by this evening, and the key number for the Torys is 335 seats.  Stocks will like any result above that number.

On the economic front, the only notable report is Jobless Claims (E: 213K).

Economic Breaker Panel: December Update

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What’s in Today’s Report:

  • Economic Breaker Panel: December Update

Stock futures are flat and international markets were little changed overnight amid very quiet newswires while investors look ahead to today’s Fed decision.

Economically, the Japanese PPI release was the only report out overnight and the headline met expectations at 0.2% which did not move markets.

In the energy market, oil futures are down nearly 1% after the API reported an inventory build of +1.4MM bbls vs. (E) -2.8MM ahead of today’s EIA report.

Today, the focus will be on the Fed decision with the Meeting Announcement at 2:00 p.m. ET and the Fed Chair Press Conference following shortly after at 2:30 p.m. ET.

Any significant market moves before the Fed are unlikely but there is one economic report to watch: CPI (E: 0.2%), and the EIA report at 10:30 a.m. ET could trigger a reaction in the energy market which could affect sector trading.

Beyond those catalysts, the trade war remains the single biggest influence on this market right now so investors will be looking for any incremental developments regarding the Dec. 15 tariff plans or news on a phase one trade deal.

Tom Essaye Quoted in MarketWatch on October 30, 2019

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“If the Fed clearly signals that this cut is the last cut for sometime, then I’d expect it a pretty nasty reaction from stocks as markets want more rate cuts…” wrote Tom Essaye, president of the Sevens Report, in a Tuesday note to clients. Click here to read the full article.

Jerome Powell_MarketWatch

Reading the Rate Cut

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What’s in Today’s Report:

  • How the Bond Market Will Tell Us Whether the Fed Rate Cut is Preventative or “Too Late”
  • Key Levels to Watch in Gold Today

Futures are tentatively higher ahead of the Fed this morning as AAPL earnings beat (shares up 4%+), economic data was mixed, and there were no real trade war updates o/n.

Economically, China’s CFLP Manufacturing PMI was slightly better than feared at 49.7 but importantly still below 50 pointing to contraction while EU data remained “Goldilocks” with in-line growth metrics but soft inflation readings.

Today, investors will clearly be keenly focused on the Fed but there are some other catalysts to watch. On the earnings front, GE ($0.12) reports before the bell while QCOM ($0.75) results will be released after the close.

Economically, the first look at July jobs data will hit this morning with the ADP Employment Report (E: 155K) and then Q2 Employment Cost Index (E: 0.7%) will be released shortly after.

Turning to the Fed, the FOMC Announcement will print at 2:00 p.m. ET, (E: -25 bp cut to 2.00-2.25%) and Powell’s Press Conference follows at 2:30 p.m. ET. The market has high expectations for the Fed today and even a mildly hawkish disappointment could trigger significant volatility as valuations remain as stretched as they have been in years.

Tom Essaye Quoted in Barron’s on June 18, 2019

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“Today will likely be dominated by pre-Fed positioning and trading should be quiet, although there’s always the chance we get a U.S.—China trade…” writes Tom Essaye. Click here to read the full Barron’s article.

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Perspective on Yesterday’s Rally

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What’s in Today’s Report:

  • Perspective on Yesterday’s Bullish Catalysts (Draghi’s QE reference, Trump’s tweet)
  • Is ECB QE Bullish for European Stocks?

Futures are little changed following a quiet night as markets digest yesterday’s events (Draghi dovish, Trump’s positive U.S./China tweet) ahead of the Fed later today.

In contrast to the suddenly positive mood on the Street, economic data again was disappointing.  German PPI missed expectations (1.9% yoy vs. (E) 2.2% yoy) as did British Industrial Trends (-15 vs. (E) -12), but neither number is moving markets.

Today is clearly all about the FOMC Decision at 2:00 p.m. ET.  There’s virtually zero chance of a rate cut at this meeting, so the keys to watch will be 1) Whether the word “patient” is removed from the end of the second paragraph (signaling a looming rate cut) and do 2) The dots show no rate hikes in 2020 and 3) A cut in 2019.

If the answer to each of these is “yes” the meeting will be dovish and likely extend the rally. If the answer is “no” to all three it’ll be hawkish and stocks will get hit, and if we get a mixed bag, the reaction from markets shouldn’t be too drastic.

 

Sevens Report Quarterly Letter

Next week is the final week of the quarter, and we’ve already begun working on the Q2’19 Sevens Report Quarterly Letter.

The Q2 Quarterly Letter will be delivered to subscribers on July 1st.

Volatility returned and investors are now facing multiple risks including: 1) Trade uncertainty, 2) Worries about economic growth, 3) Geopolitical concerns and 4) Shifting Fed policy.

Investors I speak with want to hear from their advisor in this environment. That’s why we’re producing the letter on the 1st business day of the quarter, because we want you to be able to impress clients by sending them your quarterly letter before your competition (and with little-to-no work from you).

FOMC Preview (Will the Fed Confirm the Rally?)

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What’s in Today’s Report:

  • FOMC Preview – Will the Fed Confirm the Rally?

Futures are modestly higher as stocks rally off dovish comments by ECB President Draghi and again ignore more ugly economic data.

In a speech Draghi said the APP (the EU QE program) had a lot more “room” implying it could be re-started, and that helped global equities rally modestly.

Economic data, meanwhile, was again ugly.  German ZEW Business Expectations collapsed to –21.1 vs. (E) -9.3 while Euro Zone exports missed estimates at –2.5% vs. (E) -1.2%.

Today will likely be dominated by pre-Fed positioning and trading should be quiet, although there’s always the chance we get a U.S. – China trade update as the G-20 draws closer.  Economically there is just one report, Housing Starts (E: 1.240M), and it shouldn’t move markets.

Seven “Ifs” Updated

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What’s in Today’s Report: Seven “Ifs” Updated (Post FOMC and PMIs)

Stock futures are moderately higher with bond yields while the dollar is steady this morning as the volatility from late last week continues to be digested by global investors.

U.K. Parliament took control of the Brexit process from Prime Minister May late yesterday but the news is not having a material impact on markets so far today and there were no market moving economic releases overnight.

In the U.S. today, several reports on the housing market are due out this morning: Housing Starts (E: 1.201M), S&P CoreLogic Case-Shiller HPI (E: 0.3%), and FHFA House Price Index (E: 0.3%) while Consumer Confidence (E: 132.5) will hit in the first hour of trading.

Additionally, there are two Fed speakers ahead of the bell: Harker (8:00 a.m. ET) and then Rosengren (8:30 a.m. ET).

While a lot of news will hit this morning between the economic data and Fed chatter, the primary focus of the stock market will be bond yields and the curve. If yields continued to fall and the curve flattens further, stocks will have a very hard time staying in positive territory as growth concerns will continue to weigh on sentiment.

Tom Essaye Quoted in Benzinga on March 20, 2019

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What Is The Value Of The FOMC Minutes? Tom Essaye Quoted in Benzinga to share his view on the recent Fed meeting and it’s effect on markets. “This Fed meeting is critically important for markets because…” Click here to read the full article.