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Five Bullish Market Assumptions Updated

Five Bullish Market Assumptions Updated: Start a free trial of The Sevens Report.


What’s in Today’s Report:

  • Five Bullish Market Assumptions Updated (Are They Still True?)
  • Weekly Market Preview:  Important Updates on Fed Rate Cuts and Economic Growth
  • Weekly Economic Cheat Sheet:  Fed Meeting Wednesday, ISM and Jobs Report Friday

Futures are little changed following an increase in geo-political tensions over the weekend and ahead of the first really busy week of 2024.

Three U.S. soldiers were killed in an attack in Jordan by Iranian backed militants and that’s further escalating tensions in the region and oil rallied in response.

There were no economic reports overnight.

This is the first truly busy week of 2024 as we have a Fed decision on Wednesday and a jobs report on Friday and it’s the most important week of earnings season.  But, the week starts slowly as there are no economic reports today and minimal earnings.  So, focus will remain on geo-politics and 1) Any additional attacks on U.S. soldiers in the region or 2) Information about a U.S. retaliatory strike could push oil higher and weigh on stocks.

Earnings Today:  WHR ($ 3.64), SOFI (E: $0.00), CLF ($-0.07).


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What Earnings Are Saying

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What’s in Today’s Report:

  • What Earnings Are Saying About Current Economic Growth

Futures are modestly lower following a night of underwhelming earnings results.

INTC (stock down 10% premarket) gave soft guidance while V and TMUS (stocks down –3% each) posted underwhelming results.

Economically, German GfK Consumer Climate missed expectations (-29.7 vs. (E) -24.5) but that’s not moving markets.

Today focus will be on the Core PCE Price Index (E: 0.2% M/M, 3.0% Y/Y) and this number needs to meet or be lower than expectations to help support the stock rally.  If Core PCE prints solidly above expectations look for higher yields and lower stock prices.  The other notable economic number today is Pending Home Sales (E: 1.3%) but that shouldn’t move markets.

On the earnings front, the key report today is AXP ($2.65) and specifically we’ll be watching for is their commentary on consumer spending (the more positive, the better for markets).  Other notable earnings include CL ($0.85) and NSC ($2.90).


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Why Are Chinese Stocks So Weak? (And Is There an Opportunity?)

Why Are Chinese Stocks So Weak? Start a free trial of The Sevens Report.


What’s in Today’s Report:

  • Why Are Chinese Stocks So Weak? (And Is There an Opportunity?)
  • Chart: Leading Economic Indicators Remain Deeply Negative

U.S. futures are flat amid mixed trade overseas as European shares pulled back modestly after a weak ECB Lending Survey while Asian shares bounced solidly amid news China is planning a $278B “market rescue package” aimed at stabilizing the nation’s volatile capital market environment.

Looking into today’s session, there is one regional Fed survey release: Richmond Fed Manufacturing Index (E: -15). And while the Richmond release is less popular than other regional Fed reports, it will be more closely monitored today after both the Empire and Philly Fed surveys badly disappointed last week.

December M2 Money Supply will also be released at 1:00 p.m. ET which could move markets in early afternoon trade (especially if there is a sharp and unexpected contraction in money supply).

There are no Fed officials scheduled to speak today but there is a 2-Yr Treasury Note auction at 1:00 p.m. ET that could offer fresh insight into market expectation for Fed policy outlook. A weak auction sending yields higher, would be a negative catalyst for stocks today.

Finally earnings season is continuing to pick up with: VZ ($1.07), MMM ($2.31), GE ($0.90), PG ($1.70), JNJ ($2.27), and SYF ($0.96) reporting before the open, and NFLX ($2.20) and TXN ($1.46) releasing results after the close.


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Market Multiple Table Chart

Market Multiple Table Chart: Start a free trial of The Sevens Report.


What’s in Today’s Report:

  • Market Multiple Table Chart
  • EIA and Oil Market Analysis

Futures are slightly higher ahead of this morning’s CPI report after another dovish pivot by a global central bank and despite an potential uptick in geo-political tensions.

South Korea’s central bank made a dovish pivot and added to the idea global central banks are turning dovish.

Geopolitically, expectations are rising for a joint U.S./U.K strike on Houthi’s attacking ships in the Red Sea.

Today focus will be on CPI and expectations are as follows: Headline CPI (0.2% m/m, 3.2% y/y) and Core CPI (E: 0.2% m/m, 3.8% y/y).  The key here is that we see continued declines in at least one of the two metrics as that will likely be enough to keep investors believing in disinflation and March rate cuts.  If both metrics rise from last month, looking for an increase in volatility.

The other notable events today include Jobless Claims (E: 209K) and one Fed speaker, Barkin (12:40 p.m. ET) although they shouldn’t move markets barring a major surprise.

multiple


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CPI Preview: Good, Bad, and Ugly

CPI Preview: Good, Bad, and Ugly: Start a free trial of The Sevens Report.


What’s in Today’s Report:

  • CPI Preview: Good, Bad, & Ugly
  • Chart: S&P 500 in Typical Holding Pattern – Two Levels to Watch
  • NFIB Small Business Optimism Index – Inflation Concerns and Declining Earnings

There is a cautious bid in equity futures today as the 10-Yr yield hovers just under 4%. This is following an importantly steady inflation print in Europe and dovish leaning ECB chatter.

Economically, Norwegian CPI rose 4.8% in December, unchanged from November. Which is just below estimates of 4.9% which is a favorable development following last week’s concerning uptick in German CPI.

ECB Vice President Luis de Guindos was mildly dovish in a speech overnight, citing the possibility that the economy fell into a technical recession in late 2023 which could support the case for a more accommodating policy stance and that is helping keep yields in check this morning.

Looking into today’s session, there are no notable economic reports but one Fed speaker on the schedule who could move markets: Williams (3:15 p.m. ET).

In the early afternoon, three is a 10-Yr Treasury Note auction (1:00 p.m. ET) and investors will want to see more evidence of strong demand as was seen in yesterday’s 3-Yr auction as weak demand could send the benchmark yield up through 4% creating a renewed headwind for equity markets.


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The Timing Of Rate Cuts Is A Big One

Markets Have Priced In The Dovish Pivot: Tom Essaye Quoted in Yahoo Finance


3 important things pros say you should watch out for in the stock market for 2024

Tom Essaye, founder of Sevens Report Research: “I agree the timing of rate cuts is a big one that people are focused on, but there are two others I think are equally as important.

First is earnings. Reports recently haven’t been good, and if disinflation turns into a headwind for corporate profits, that could be a surprise in early 2024 because markets have priced in solid earnings growth in 2024.

Second, what if the slowdown is worse than feared? For anyone who has been through previous Fed rate cut cycles, they usually don’t end well for stocks. Yes, it’s possible that this time is different and I agree there are unique circumstances coming from the pandemic, but the complacency towards a gradual slowdown is something that we need to watch early in the New Year.”

Also, click here to view the full Yahoo Finance article published on December 29th, 2023. However, to see the Sevens Report’s full comments on the current market environment sign up here.

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


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A Volatile Start to 2024, But Don’t Read Too Much Into It

A Volatile Start to 2024, But Don’t Read Too Much Into It: Start a free trial of The Sevens Report.


What’s in Today’s Report:

  • A Volatile Start to 2024, But Don’t Read Too Much Into It
  • SPDR Reveals Nearly 5% Divergence Between Best and Worst Sectors Yesterday
  • Chart – S&P Global Manufacturing PMI Remains in Contraction Territory

Stock futures are modestly lower and Treasury yields are extending their early 2024 gains as some of the dominant money flows from late last year continue to unwind to start 2024.

Economically, Germany’s Unemployment Rate held steady, as expected, at 5.9% in December which is not moving markets.

Today, trader focus will be on two key economic reports in early trade with the ISM Manufacturing Index (E: 47.2) and JOLTS (E: 8.75 million) report both due out shortly after the opening bell. Motor Vehicle Sales (E: 15.4 million) will also be released today.

Additionally, there is one Fed speaker: Barkin (8:00 a.m. ET) that will be closely watched ahead of the release of the December FOMC Meeting Minutes this afternoon (2:00 p.m. ET).

Bottom line, start-of-year portfolio rebalancing is likely to continue to dominate the tape today, however, if economic data comes in “Goldilocks” and the Fed Minutes don’t derail the market’s dovish policy expectations for 2023, stocks and bonds should both be able to stabilize as calendar-driven volatility begins to subside.

A Volatile Start


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Futures Are Slightly Higher

Futures Are Slightly Higher: Tom Essaye Quoted in Barron’s


How Likely Is a Santa Claus Rally Looking?

“Futures are slightly higher following a mostly quiet holiday weekend and on more signs inflation is falling globally, Tom Essaye, founder of the Sevens Report, wrote Tuesday.

So far though, Tuesday is giving investors hope that the year will end on a high note.

Tuesday marks the first day of trading for the last week of the year, and investors are hoping to finish 2023 off strong.

Also, click here to view the full Barron’s article published on December 26th, 2023. 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 Rally

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Two Important Differences in 2024

Why Last Week’s Price Action is Important for 2024: Start a free trial of The Sevens Report.


What’s in Today’s Report:

  • Two Important Differences in 2024

Futures are little changed following a generally quiet night of news as there was no notable economic data or significant market moving events.

Chinese industrial profits rose 29.5% in November, accelerating substantially from the 2.7% gain in October and offering some anecdotal optimism about future growth.

Geo-political tensions remained elevated in the Mid-East following increased attacks on U.S. troops in the region, but no specific escalation occurred overnight.

Today the most notable event is a five-year Treasury bond auction and markets will want to see strong demand (like we saw at yesterday’s two-year auction) to keep rates drifting lower and dovish Fed/lower rates momentum in place through year-end.

Sevens Report Q4 ’23 Quarterly Letter

The Q4 2023 Quarterly Letter will be delivered to advisor subscribers on Tuesday, January 2nd.

The S&P 500 will end 2023 close to all-time highs but the Santa rally has left many investors complacent towards risks in 2024.  Showing clients and prospects a balanced view of markets is an opportunity to differentiate yourself from your competition and strengthen client relationships!

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 Q3 ’23 Quarterly Letter here.

To learn more about the product (including price) please click this link, and if you’re interested in subscribing please email info@sevensreport.com.

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Why Last Week’s Price Action is Important for 2024

Why Last Week’s Price Action is Important for 2024: Start a free trial of The Sevens Report.


What’s in Today’s Report:

  • Why Last Week’s Price Action Is Important for 2024.

Futures are slightly higher following a mostly quiet holiday weekend and on more signs inflation is falling globally.

Singapore’s CPI dropped to 3.6% vs. (E) 3.9% yoy and down handily from 4.7% in October, providing more evidence that inflation is declining globally.

Geo-politically, U.S./Iran tensions rose after U.S. forces struck Iranian backed militants in Iraq, although oil (the best geo-political barometer) is little changed on the news.

Today will be a quiet day as most European markets and Hong Kong are closed, but there are two notable housing reports we’ll be watching: Case-Shiller Home Price Index (E: 0.06% m/m, 5.0% y/y) and the FHFA House Price Index (E: 0.5%).  Declines is housing prices is part of the reason investors remain convinced CPI will continue to fall in early 2024 so these home price metrics need to show declines in housing prices, otherwise investors may be too optimistic on falling CPI and Fed rate cuts in the new year.

Annual Discounts on Sevens Report, Alpha, Quarterly Letter, and Technicals.

If you have unused pre-tax research dollars, we offer month-free discounts on all our products. If you would like to extend current subscriptions or save money by upgrading to an annual subscription, please email info@sevensreport.com.


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