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The Rotation Out of Tech Continues

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The Rotation Out of Tech Continues: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • The Rotation Out of Tech Continues

Futures are modestly higher thanks to solid tech earnings and better than expected inflation data from Europe.

DELL and MRVL, both AI linked tech companies, posted solid earnings and guidance and that’s supporting futures.

Economically, EU HICP (their CPI) declined further to 2.8% y/y vs. (E) 2.9%, giving the ECB more room to cut rates.

Today is typically a quiet day in the markets as traders try to get a head start on the three-day weekend, but there is an important inflation report this morning:  The Core PCE Price Index (E: 0.2% m/m, 2.7% y/y).  If that report is better than expected, it’ll boost expectations for a 50-bps rate cut in September (positive for stocks) while a higher-than-expected number will push back against a 50-bps cut (negative for stocks).

Other data today includes the Chicago PMI (E: 46.4) and inflation expectations in University of Michigan Consumer Sentiment (1-Yr Inflation Expectations: 2.9%, 5-Yr. Inflation Expectations: 3.0%) but barring major surprises, neither of those numbers should move markets.

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The market is just sort of drifting around

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The market is just sort of drifting around: Sevens Report Editor, Tom Essaye, Quoted in Barron’s

The S&P 500 Turns Around. Tech Stocks Are Rising Again.

“The market is just sort of drifting around,” Sevens Report Research’s Tom Essaye told Barron’s in a phone interview.

Essaye says Nvidia and the personal consumption expenditures price index on Friday will add some drama to an otherwise empty week ahead of the Labor Day holiday weekend in the U.S.

Also, click here to view the full Barron’s article published on August 27th, 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.

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Is Market Momentum Faltering?

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Is Market Momentum Faltering?: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Is Market Momentum Faltering?
  • Oil Outlook Updated

Futures are slightly higher as better than expected EU inflation metrics offset slightly underwhelming NVDA earnings.

Spanish and German regional CPIs declined more than expected and that’s increasing ECB rate cut expectations and reminding investors of the global rate cutting cycle.

With NVDA results behind us, focus turns back to data and the important reports today include Jobless Claims (E: 232K), Pending Home Sales (E: 1.0%) and Final Q2 GDP (E: 2.8% y/y saar).  Of the three, jobless claims are most likely to move markets as a jump in claims will slightly increase hard landing worries, while a drop will further reinforce soft landing expectations.  There is also one Fed speaker today, Bostic (3:30 p.m. ET), but unless he says he supports a 50 bps cut, he’s unlikely to move markets.

Turning to earnings, NVDA was the highlight of the week but there are still several important reports today that will give us important insight on tech and consumer spending.  Notable reports today include: DELL (E: $1.68), MRVL (E: $0.30), BBY (E: $1.15), DG (E: $1.79), , LULU (E: $2.93),  ULTA (E: $5.49).

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Renewed Rotation Risks (Smart Money Is Getting Defensive)

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Renewed Rotation Risks (Smart Money Is Getting Defensive): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Recent Sector Performance Points to Smart Money Getting Defensive
  • Chart – 10Y-2Y Yield Curve Spread Revisits the Zero-Bound

U.S. equity futures are slightly higher after a mostly quiet night of news as traders look ahead to NVDA earnings.

There was no economic data overnight but the BOJ’s Deputy Governor, Himino, reiterated that policy makers would continue raising rates with the “utmost vigilance,” which supported a modest bid in equity markets and other risk assets overnight.

Looking into today’s session, there are no notable economic reports and just one Fed speaker after the close: Bostic (6:00 p.m. ET).

There is a 5-Yr Treasury Note auction at 1:00 p.m. ET and given the strong performance in the belly of the duration curve since the start of August, traders will be looking for demand to remain solid to confirm the recent drop in yields is sustainable.

Finally, likely the biggest catalyst of the week will come after the close today with NVDA earnings ($0.65) due shortly after the bell. Other notable companies reporting quarterly results today include CRM ($2.35) and HPQ ($0.86) but the main focus will be on NVDA as options traders are pricing in a volatile 10%+ reaction (up or down) to the earnings release and given the stocks heavy weight in the major indexes, a move of that magnitude will have an impact on the broader market in the back half of the week.

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What Powell and Uedas’ Friday Comments Mean for Markets

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What Powell and Uedas’ Friday Comments Mean for Markets: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What Powell and Uedas’ Friday Comments Mean for Markets
  • Weekly Market Preview:  A Big Week for Tech Earnings (Including NVDA on Wednesday)
  • Weekly Economic Cheat Sheet:  A Most Quiet Week But Thursday/Friday Are Important

Futures are slightly higher following a mostly quiet weekend, thanks to momentum from Friday’s rally as investors digest Powell’s promise of coming rate cuts.

Economically, the only notable number overnight was the German Ifo Business Expectations and it slightly beat estimates (86.8 vs. (E) 86.5).

Geopolitically, a cease fire was not reached this weekend between Israel and Hamas although investors remain optimistic that a deal is close.

Today the only notable economic report is July Durable Goods (E: 4.0%) and markets will want to see stability in the data (so close to expectations) to ensure the recent plateau in business spending isn’t becoming a decline.  If Durable Goods is in-line, expect a continuation of the early rally.

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Powell Speech Preview (What’s Expected, Dovish If, Hawkish If Scenarios)

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Powell Speech Preview: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Powell Speech Preview (What’s Expected, Dovish If, Hawkish If Scenarios)

Futures are solidly higher ahead of Fed Chair Powell’s speech thanks to not hawkish commentary from BOJ Governor Ueda.

Ueda stated that rates would continue higher but that increases would be data dependent and in conjunction with monitoring market conditions (meaning the yen spike from last month won’t be repeated, which is a good thing).

Economically, Japanese CPI rose 2.7% y/y, as expected and that’s further reducing hawkish BOJ concerns.

Today focus will be on Fed Chair Powell’s speech (10:00 a.m. ET) and as long as he removes any lingering doubts about a September rate cut, this rally can continue.

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The market is very sensitive to soft labor market data

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The market is very sensitive to soft labor market data: Tom Essaye Quoted in MarketWatch

Revisions to U.S. jobs data due Wednesday have the potential to weigh on the stock market

The 12-month average for job additions over the revision period was 241,000 — a “very strong” figure that implies a solid labor market, noted Tom Essaye, founder of Sevens Report Research. A downward revision of 600,000 would drop the average payrolls gain to 191,000, while a downward revision of 1 million would make what’s been strong jobs data “more middling,” he wrote.

“This matters because the market is very sensitive to soft labor market data and we know that from the recent pop in jobless claims and July jobs report. So, while investors are ok ignoring most disappointing data, they aren’t ignoring soft labor market data and if these revisions are worse than expected, look for it to weigh on stocks today,” Essaye said.

Also, click here to view the full MarketWatch article published on August 21st, 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.

The Concerning Gap Between Stocks, Treasuries and the Yen

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The Concerning Gap Between Stocks, Treasuries and the Yen: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • The Concerning Gap Between Stocks, Treasuries and the Yen
  • Oil Update (Why is Oil Hitting Multi-Month Lows?)

Futures are slightly higher on more Goldilocks economic data.

The EU and UK August flash composite PMIs were better than expected (51.2 vs. (E) 50.7 in the EU and 53.4 vs. (E) 52.9 in the UK) and that’s supporting the global soft landing narrative.

On inflation, EU wages rose less than expected in Q2, reinforcing expectations for a Sept. rate cut from the ECB.

Today focus will be on economic data as today is the most important day of the week from a data standpoint.  Key reports, in order of importance, include Jobless Claims (E: 234K), August Flash Composite PMI (E: 53.3) and Existing Home Sales (E: 3.90 million).  More Goldilocks data (at or close to expectations) should further support the rally and if that’s the case, new highs for the S&P 500 shouldn’t be a shock.

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Watch the BLS Revisions Today

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Watch the BLS Revisions Today: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Something to Watch Today: BLS Revisions
  • How a Fed Mistake Would Impact Commodities
  • VIX Expiration Poses Threat to Short-Volatility Trade – Chart

Futures are slightly higher as traders await job growth revisions from the BLS after a mostly quiet night of news.

Economically, Japanese trade data revealed a deeper than anticipated deficit in July but amid solid import/export growth numbers which importantly helped pause a rally in the yen and reduced pressure on risk assets overnight.

Looking into today’s session, there are no typical economic reports on the calendar, however, the BLS Revisions to Net Payroll Growth for the trailing 12-months through March 2024 will be released at 10:00 a.m. ET and a significant downward revision could rekindle the recession fears initially sparked by the July jobs report which would result in broad market volatility.

In the afternoon, there is a 20-Yr Bond auction at 1:00 p.m. ET which could move yields and influence equity markets before investor focus will turn to the release of the July FOMC Meeting Minutes at 2:00 p.m. ET.

Finally, earnings season continues to wind down but a few notable companies reporting today include: TGT ($2.17), TJX $0.92), ZM ($1.21).

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The Most Important Central Banker This Week (Not Powell)

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The Most Important Central Banker This Week (Not Powell): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • The Most Important Central Banker This Week (Not Powell)

Futures are slightly higher on better than feared tech earnings and more global central bank rate cuts.

Palo Alto Networks (PANW) posted solid guidance and that, along with CSCO results last week, is helping to bolster the outlook for tech and that’s supporting futures.

Sweden’s Riksbank (their central bank) cut rates 25 bps, as expected, and that reminded investors we are in the midst of a global rate cutting campaign (which is a positive).

There are no notable economic reports today but there are two Feds speakers, Bostic (1:35 p.m. ET) and Barr (2:45 p.m. ET) and if they join other colleagues in expressing openness to cutting rates in September, it should be a mild tailwind for stocks.

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