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Government Shutdowns Impact

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Government Shutdowns Impact: Tom Essaye Quoted in Forbes

Government Shutdown Would Slow U.S. Economy

Sevens Report’s Tom Essaye wrote to clients last week despite the “ominous” nature of the term, government shutdowns “don’t impact enough people or last long enough to have a lasting macroeconomic impact,”.

Also, click here to view the full Forbes article published on September 27th, 2023. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Government Shutdowns Impact:

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What’s the VIX Saying About This Market?

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What’s the VIX Saying About This Market? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What’s the VIX Saying About This Market?

Futures are solidly higher as Thursday’s bounce extended overnight following additional reminders that global disinflation is still on going.

The EU Flash HICP (their CPI) rose 4.3% vs. (E) 4.6% and Core HICP increased 4.5% vs. (E) 4.8%, sending an important reminder that disinflation is still on going.

There was no material progress in avoiding a government shutdown overnight (which at this point is likely).

Today focus will be on the Core PCE Price Index (E: 0.2% m/m, 3.9% y/y) and put simply, if that number meets or is below expectations, then this bounce back rally should continue.  If the Core PCE Price Index is higher than expectations, don’t be shocked if stocks give back these early gains.  Finally, there is one Fed speaker today, Williams at 12:45 p.m. ET, but he shouldn’t move markets.

What's the VIX Saying

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Why This Market Is Still All About the Data

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Why This Market Is Still All About the Data: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why This Market Is Still All About the Data
  • EIA and Oil Market Analysis (How Far Can the Rally Go?)

Futures are slightly higher as encouraging inflation data from Europe was partially offset by ongoing government shutdown and labor strike worries.

Spanish Core CPI rose 5.8% vs. (E) 6.1% and importantly reminded markets that disinflation was still occurring.

Politically, a government shutdown looks increasingly likely while the UAW again threatened to expand the strike.

Today will be a busy day as there are important economic reports and notable Fed speak to watch.  Economically, the key report is Jobless Claims (E: 211K) and markets need this number to move higher to ease tight labor market concerns.  We also get the final look at Q2 GDP (E: 2.3%) but that shouldn’t move markets.

On the Fed, Powell speaks at 4:00 p.m. ET and while he’s not expected to address policy, there will be Q&A.  Other speakers today include Goolsbee (9:00 a.m. ET), Cook (1:00 p.m.), and Barkin (7:00 p.m.).

Why This Market Is Still All About the Data

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Why Did Stocks Drop Yesterday?

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Why Did Stocks Drop Yesterday? Start a free trial of The Sevens Report.

What’s in Today’s Report:

    • Bottom Line – Why Did Stocks Drop Yesterday?
    • Chart: S&P 500 Tests Key Support
    • Economic Takeaways: Case-Shiller Home Price Index & Consumer Confidence
    • Philadelphia Fed Service PMI Turns Negative, Price Readings Elevated (Stagflation)

    Stock futures are bouncing back modestly and bonds are stable this morning. This is amid improvement in Chinese economic data while data in Europe was less encouraging.

    Economically, Chinese Industrial Profits were down -11.7% y/y in August. But that was up from -15.5% y/y in July suggesting government stimulus efforts may be stabilizing the economy. The property development sector remains a major source of uncertainty.

    Meanwhile, in Europe, Eurozone M3 Money Supply declined more than expected, down -1.3% vs. (E) -1.0%. Which underscores tightening financial conditions in the EU amid aggressive policy measures by the ECB.

    Today, the calendar is fairly light as there is just one economic report to watch this morning: Durable Goods Orders (E: -0.3%) and no Fed officials are scheduled to speak.

    In the afternoon there is a 5-Yr Treasury Note auction at 1:00 p.m.. ET, and as usual, if there is any meaningful move in yields, it could impact equity markets (stable or easing yields would be welcomed by equity bulls, new highs would pressure stocks and other risk assets).

Sevens Report Q3 ’23 Quarterly Letter Coming October 2nd.

The Q3 2023 Quarterly Letter will be delivered to advisor subscribers on Monday, October 2nd.

The S&P 500 just hit the lowest level since March amid concerns about Fed rate hikes, a rebound in inflation and a possible recession.

Now is the perfect time to provide a value-add market update for clients and ensure they have the right expectations heading into the fourth quarter.

We will deliver the letter on the first business day of the quarter because we want you to be able to send your quarterly letter before your competition (and with little to no work from you).

You can view our Q2 ’23 Quarterly Letter here.

To learn more about the product (including price) please click this link. To subscribe please email: info@sevensreport.com.

Why stocks dropped yesterday

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High Yield Debt Spreads – Sevens Report Co-Editor Quoted

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High yield debt spreads: Sevens Report Analysts Quoted in MarketWatch

This credit gauge shows investors still have risk appetite, despite recession fears

“High yield debt spreads are still not showing any degree of concern for either default or economic risk right now, and that supports the case for continued strength in risk assets in the near-to-medium term, despite lingering recession concerns based on the inverted yield curve,” Tyler Richey, co-editor at Sevens Report Research, wrote in a recent note.

Also, click here to view the full MarketWatch article published on September 22nd, 2023. However, to see the Sevens Report’s full comments on the current market environment sign up here.

High-yield debt spreads

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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Hard Landing vs. Soft Landing Scoreboard

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Hard Landing vs. Soft Landing Scoreboard: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Hard Landing vs. Soft Landing Scoreboard
  • Chart: 10-Yr Yield Quickly Approaching Last Week’s “Hawkish Technical Target”

Stock futures are lower and there is a modest fear bid in Treasuries this morning. This is amid renewed worries about China’s property sector and growing angst about a potential government shutdown in the U.S.

After one of China’s largest property developers, Evergrande, missed a debt payment, multiple former executives were arrested overnight adding to worries about the embattled sector and the Chinese economy more broadly.

Also, multiple ratings agencies have offered negative warnings regarding the impact of a government shutdown on U.S. debt as the deadline for Congress to reach a deal on spending is just days away. Any progress towards a deal will be a modest positive for risk assets today.

Looking further into today’s session, there are several economic reports to watch this morning including: Case-Shiller Home Price Index (E: 0.6%), New Home Sales (E: 699K), and Consumer Confidence (E: 105.9). To stabilize, markets will want to see more Goldilocks data showing stable but slowing growth and demand metrics and no signs of rising price pressures.

In the afternoon, there is a 2-Yr Treasury Note auction at 1:00 p.m. ET, the first since the hawkish Fed meeting so the results very well could move yields and impact stocks today. Finally, there is one Fed speaker: Bowman (1:30 p.m. ET), and if “higher for longer” is reiterated, that could weigh on risk assets.

Hard Landing vs. Soft Landing Scoreboard

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The Outlook for Stocks

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The Outlook for Stocks: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Has the Outlook for Stocks Really Turned More Negative?
  • Weekly Market Preview:  Will Treasury Yields Keep Rising?
  • Weekly Economic Cheat Sheet:  Key Inflation Data This Week

Futures are slightly lower as negative Chinese real estate news offset the end of the Writers Guild of America strike.

Also, Chinese property firm Evergrande hit a setback in its restructuring deal. And that’s increasing liquidation chances (which would weigh on the Chinese economy).

Positively, the WGA struck a deal with Hollywood studios and ended their strike. Although two other major strikes remain in place (SAG-AFTRA and the UAW).

Today should be a generally quiet day in the markets from a news and volume standpoint, as it’s the Yom Kippur holiday and there are only two notable events on the calendar:  Chicago Fed National Activity Index (E: 0.15) and a speech by Fed member Kashkari (6:00 p.m. ET).  So, we should continue to expect Treasury yields to drive trading today, and if yields move steadily higher (as they are this morning) then that likely will weigh further on stocks.

the Outlook for Stocks

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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

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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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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Key Levels to Watch on Fed Day

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Key Levels to Watch on Fed Day: Strengthen your market knowledge with a free trial of The Sevens Report.

What’s in Today’s Report:

  • Key Technical Levels to Watch on Fed Day – Print or Share These Charts
  • Is Canadian CPI a Warning on Inflation?

U.S. equity futures are rising alongside European shares this morning. Resulting from a dovish market reaction to a “cooler than feared” inflation print in the U.K. overnight.

Headline CPI in the U.K. dropped to 6.7% vs. (E) 7.1% in August while Core fell to 6.2% vs. (E) 6.8%. The data was a clear surprise and has resulted in rates markets lowering odds of a BoE rate hike tomorrow to 50% from near 100% previously, supporting risk-on money flows this morning.

There are no economic reports or Treasury auctions today. This will likely leave markets in a state of “Fed Paralysis” until the FOMC Announcement (2:00 p.m. ET) and Fed Chair Powell’s press conference (2:30 p.m. ET).

Also, to request a one-page PDF “tear sheet” of the charts on Page 2 of today’s Report, complete with price level explanations, email info@sevensreport.com.

Key Levels to Watch

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