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Tom Essaye Quoted in Barron’s on August 11th, 2023

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Stocks Eked Out a Very Small Gain, Snapped Their Losing Streak

“The market already assumes continued disinflation, so the fact that inflation declined modestly in July just met existing (and already priced in) expectations,” Sevens Report Research founder Tom Essaye told Barron’s. “And, much of the gains in the morning were technical, on a rebound from Wednesday’s drop and an anticipation of the CPI report. But, when it failed to provide a new, positive catalyst, we saw trade exit positions as this market needs something new and positive to rally, not just confirmation of what we already assume and have priced in.”

Click here to read the full article.

Tom Essaye Quoted in Barron’s on August 9th, 2023

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Stocks Pause Ahead of Inflation Data

“The Italian government clarified that a windfall tax on bank profits would be capped, sparking a relief rally in European financials and general risk-on trade in global markets,” Tom Essaye writes. “There are no notable economic reports and no Fed officials are scheduled to speak today which is setting the session up to be fairly quiet as traders await tomorrow’s CPI release.” Click here to read the full article.

What Can Push Stocks Higher from Here?

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What’s in Today’s Report:

  • What Can Push Stocks Higher from Here? (Four Candidates)
  • Weekly Market Preview:  Do the Three Pillars of the Rally Get Further Reinforced?
  • Weekly Economic Cheat Sheet:  Focus on Growth Data this Week (Not Inflation).

Futures are drifting modestly higher following a quiet weekend of news, as markets digest the uptick in volatility so far in August.

Concerns about the Chinese economy grew this morning after real estate firm Country Garden suspended trading in select offshore bonds, reminding investors of Chinese property market volatility from years ago and reinforcing that recession risks in China are real.

There was no notable economic data overnight.

Today there are no notable economic reports so focus will remain on Treasury yields ahead of important economic data and earnings later this week. Generally speaking, the more calm the movement in yields (so no big rallies and no big declines) the better for stocks.

Hard Landing/Soft Landing Scoreboard Update

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What’s in Today’s Report:

  • Hard Landing/Soft Landing Scoreboard Update

Futures are little changed as markets digest Thursday’s failed rally amidst more conflicting economic data.

Chinese money supply growth missed estimates and again underscored existing recession risks and that modestly weighed on sentiment.

UK economic data was better than expected, however, with  GDP (0.2% vs. (E) 0.0%) and manufacturing (2.4% vs. (E) 0.2%) both beating estimates.

Today focus will remain on inflation, as we get headline PPI (E: 0.2% m/m, 0.7% y/y) and Core PPI (E: 0.2% m/m, 2.3% y/y) along with the University of Michigan inflation readings within Consumer Sentiment (E: 71.3).  As CPI showed, an in-line inflation number that shows on going and modest disinflation won’t spark a rally, as that’s already priced in, but it will help support stocks around current levels.  A hotter than expected number, however, will likely spark another market decline.

Tom Essaye Quoted in Barron’s on August 9th, 2023

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Stocks Pause Ahead of Inflation Data

“The Italian government clarified that a windfall tax on bank profits would be capped, sparking a relief rally in European financials and general risk-on trade in global markets,” Essaye writes. “There are no notable economic reports and no Fed officials are scheduled to speak today which is setting the session up to be fairly quiet as traders await tomorrow’s CPI release.” Click here to read the full article.

Tom Essaye Quoted in Barron’s on August 3rd, 2023

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Treasury Yields Keep Climbing

“The stronger-than-expected ADP jobs report pushed the dollar and long-dated Treasury yields higher on Wednesday, as the bond market continues to price in more resilient growth and/or inflation,” Tom Essaye, founder of the Sevens Report, wrote Thursday.

Click here to read the full article.

Tom Essaye Quoted in Forbes on August 2nd, 2023

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Stocks Slide After Debt Downgrade Even As Experts Dismiss ‘Little’ Impact On Markets

Sevens Report analyst Tom Essaye explained in a Wednesday note that the credit downgrade by Fitch “should have a limited near-term impact”. Click here to read the full article.

What’s Causing the Increased Volatility in Stocks?

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What’s in Today’s Report:

  • What’s Causing the Increased Volatility in Stocks?
  • Weekly Market Preview:  Do the Three Pillars of the Rally Stay Intact?
  • Weekly Economic Cheat Sheet:  Key Inflation Data This Week (CPI on Thursday)

Futures are rebounding modestly from last week’s declines following a quiet weekend of news and ahead of an important week of inflation data.

Economically, the only notable number was German Industrial Production, which fell more than expected (-1.5% vs. (E.) -0.5%) and again underscored growing recession risks in Europe.

Today the key economic report is the Manheim Used Vehicle Value Index (9:00 a.m. ET) as this is viewed as an anecdotal reading on inflation, and markets will want to see a further decline in car prices.

We also get Consumer Credit (E: $13.00B) and there are two Fed speakers, Harker (8:15 a.m. ET) and Bowman (8:30 a.m. ET), and markets will want to see those events reinforce the Goldilocks narrative (solid consumer spending and the Fed basically done with rate hikes).

Jobs Day

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What’s in Today’s Report:

  • Jobs Report Preview (Abbreviated Version)

Futures are slightly higher thanks to good AMZN earnings and solid EU economic data.

AMZN and AAPL, the last two big earnings reports for Q2, were mixed but generally fine. AMZN posted strong results (stock up 8%) while AAPL’s numbers were slightly underwhelming, but nothing terrible (stock down 1%).

Economically, EU data was solid as German Manufacturers’ Orders and EU Retail Sales beat estimates.

Today focus will be on the jobs report and estimates are as follows:  Job Adds, 200k.  Unemployment Rate, 3.6%.  Wages, 0.3% m/m, 4.2% y/y.  The key for markets today is the reaction of the 10-year yield to the jobs report.  If the jobs report is “Too Hot” then 10-year Treasury yield will rise and it’ll likely pressure stocks.  Conversely, if we get a Goldilocks number, then the 10-year yield should fall modestly and stocks can extend this early rally.

What Caused Yesterday’s Selloff? (It Wasn’t the Fitch Downgrade)

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What’s in Today’s Report:

  • What Caused Yesterday’s Selloff? (It Wasn’t the Fitch Downgrade)
  • Jobs Report Preview
  • EIA Analysis and Oil Market Update

Futures are modestly lower following Wednesday’s selloff on more disappointing earnings and mixed economic data.

Economically, the EU Composite PMI slightly missed estimates (48.6 vs. (E) 48.9) as recession worries creep higher.

Tech earnings underwhelmed again, with disappointing results from QCOM and PYPL (both stocks down 7%-ish).

Today will be a busy day of data and earnings.  First, the BOE is set to hike rates 50 bps, but markets will want to see if they signal this is the last hike of the cycle.

Turning to the U.S., there are several important economic reports today including: Jobless Claims (E: 225K), ISM Services PMI (E: 53.0) and Unit Labor Costs (E: 2.6%).  Investors need Goldilocks economic data to help stabilize stocks, and if these reports are stronger than expected, look for Treasury yields to rise and for stocks to fall (like what happened yesterday).

Finally, on earnings, we get results from two of the biggest stocks in the market after the close:  AAPL ($1.19) and AMZN ($0.34).