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Were Tariff Fears Exaggerated? (No. Two Reasons Why)

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Were Tariff Fears Exaggerated? (No. Two Reasons Why): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Were Tariff Fears Exaggerated? (No. Two Reasons Why)

Futures are slightly lower following a major central bank rate hike and despite better-than-expected economic data.

The Bank of Japan raised interest rates 25 bps, as expected, and signaled further rate hikes are coming (also as expected).

Economically, Euro Zone and UK Manufacturing PMIs slightly beat estimates but both remained in contraction territory.

Today we get the most important economic reports of the week via the January Flash Manufacturing PMI (E: 48.9) and Flash Services PMI (E: 56.7) and again, markets will want to see in-line to slightly soft data.  Stronger than expected readings would likely boost yields and pressure stocks.  Other economic reports today include Existing Home Sales (E: 4.16 million) and Consumer Sentiment (E: 73.2).

Turning to earnings, the key report I’m watching today is AXP ($3.03) as that will give us insight into consumer spending and the stronger the report, the better.

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What Happens to Markets If the Bond Vigilantes Return?

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What Happens to Markets If the Bond Vigilantes Return?: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What Happens to Markets If the Bond Vigilantes Return?
  • What Happens to Markets If the Bond Vigilantes Don’t Return?

Futures are slightly lower mostly on digestion of the recent rally and following a mostly quiet night of news.

Economically, the only notable number was UK CBI Industrial Trends, which were slightly better than expected (-34% vs. (E) -40%).

Politically, President Trump conducted an interview with Sean Hannity overnight but nothing new was revealed.

Today we get our first notable economic report of the week via Jobless Claims (E: 218K) and the case remains that Goldilocks data (so in-line to slightly weak) is the best case scenario for stocks, as it implies solid growth but won’t further reduce rate cut expectations.

On earnings, the reporting season continues to gain steam and some reports we’re watching today include GE ($1.02), AAL ($0.64), FCX ($0.25), TXN ($1.19), ISRG( $1.77).

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Bond Vigilantes Are Back (Part 1)

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Bond Vigilantes Are Back (Part 1): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • The Bond Vigilantes Are Back (They’re Just Not Here Yet) – Part One

U.S. futures are higher with global markets this morning amid a continued relief rally after Trump focused on AI and energy initiatives instead of tariffs on his first day.

Economically, New Zealand CPI came in as expected at 0.5% in Q4 which helped ease global inflation worries.

Today there is just one, second-tiered economic report due to be released: Leading Indicators (E: -0.1%) which is unlikely to move markets.

The Treasury will hold a 4-Month Bill auction at 11:30 a.m. ET and a 20-Year Bond auction at 1:00 p.m. ET. Investors will want to see more strong demand for both short duration and longer duration Treasuries to keep yields from rising again.

Finally, earnings season continues today with PG ($1.87), JNJ ($2.01), ABT ($1.34), KMI ($0.33), DFS ($3.15), and AA ($0.91) all releasing quarterly reports. Generally strong top and bottom line results would be an added tailwind to stocks.

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Some of the biggest gains in the bull market

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Some of the biggest gains in the bull market: Tyler Richey Quoted in Business Insider

Oracles of Wall Street: 11 pros who nailed 2024’s top trends

Building on Sevens Report founder Tom Essaye’s bullish fundamental outlook, Richey compiled the technical indicators he watches and concluded in February that the index could hit 6,000 by the end of 2024.

For example, the S&P 500’s relative strength index, which measures price momentum, had stayed in “overbought” territory for three weeks at the time. When that has happened in the past, it’s meant that the trend could continue for several months, Richey said. Investor sentiment was also bullish but not over-extended. And the yield curve was still inverted despite no sign of recession.

“Some of the biggest gains in the bull market — statistically, it’s measurable that they occur during yield curve inversions such as the late ’90s and 2006-2007,” he said.

Going into 2025, however, Richey sees signs that the rally could face hurdles if a negative catalyst comes along.

“Looking ahead, the collection of market indicators and cyclical signals we monitor suggest all the pieces are in place for this bull market to end in the weeks or months ahead and for a cyclical bear market to begin,” Richey said in an email. But he added that: “There is nothing in the current fundamental backdrop that suggests a bear market in stocks is a sure thing or even likely for that matter.”

Also, click here to view the full Business Insider article published on December 18th, 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.

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MMT Chart: Bearish Revisions and Building Technical Risks

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MMT Chart: Bearish Revisions and Building Technical Risks: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • MMT Chart – Bearish Revisions and Building Technical Risks
  • PPI Takeaways – Favorably, No Hawkish Surprise

Futures are higher with European shares led by U.K. stocks thanks to more “cooler-than-feared” inflation data released overnight.

Economically, U.K. Core CPI fell 0.3% to 3.2% vs. (E) 3.4% in December, favorably matching a 3+ year low. In the wake of yesterday’s lower than expected U.S. PPI report, we are seeing some recent hawkish money flows unwind and a tentative risk-on tone in the pre-market.

Today is lining up to be very busy with arguably the most important economic data of the week due out before the bell: CPI (E: 0.3% m/m, 2.9% y/y) and Core CPI (E: 0.2% m/m, 3.3% y/y). The Empire State Manufacturing Index will also be released at 8:30 a.m. ET (E: 1.0).

Fed speak also picks up materially today with multiple speakers scheduled to offer commentary over the course of the session including: Barkin (8:00 a.m. ET), Kashkari (10:00 a.m. ET), Williams (11:00 a.m. ET), and Goolsbee (11:00 a.m. ET).

Finally, today is the unofficial start to earnings season as well with big banks due to release Q4 results this morning. Noteworthy financial behemoths reporting before the bell include: JPM ($4.02), C ($1.25), BLK ($11.44), WFC ($1.34), and GS ($7.99).

Bottom line, in order for stocks to continue to stabilize near current levels, investors will want to see “cool” CPI data, less hawkish Fed speak, and solid big bank earnings. If any of those catalysts disappoint, there is a strong risk the 2025 stock market lows are retested today.

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Market Multiple Table: January Update

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

What’s in Today’s Report:

  • Market Multiple Table – January Update

Futures are higher with global stock markets thanks to easing tariff policy worries and fading geopolitical angst.

After the close yesterday, Bloomberg reported Trump’s economic team is planning gradual tariff increases (2%-5% per month) rather than large, one-time hikes which is easing worries about the immediate impact on both growth and inflation.

Geopolitically, the WSJ reported Israel and Hamas are working on a ceasefire deal that could be finalized as soon as today. If successful, the deal would favorably remove a lingering source of market uncertainty.

Looking into today’s session, trader focus will be on inflation data early with the December PPI report due before the open (E: 0.3% m/m, 3.3% y/y). A “cooler” than expected report would likely trigger a continued relief rally in equity markets amid stabilizing bond yields.

There are no other notable economic reports today, but two Fed officials are scheduled to speak: Schmid (10:00 a.m. ET) and Williams (3:00 p.m. ET), and because hawkish money flows have been a major source of volatility in equities recently, their commentary has the potential to move markets today. A more dovish-leaning tone from both would be the most favorable outcome for equities today.

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Friday’s nonfarm payrolls is the “first big report of the year”

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Friday’s nonfarm payrolls is the “first big report of the year”: Tom Essaye Quoted in Forbes

December Jobs Report: Labor Market Grew Faster Than Expected As Unemployment Clocks In At 4.1%

Friday’s nonfarm payrolls is the “first big report of the year” for the U.S. economy, according to Sevens Report founder Tom Essaye, noting the jobs update is “even more important than it would normally be” given the fork in the road for U.S. monetary policy.

Also, click here to view the full Forbes article published on January 10th, 2025. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Lastly, 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.

To Pause or Not to Pause? That Is the Fed Question

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To Pause or Not to Pause? That Is the Fed Question: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • To Pause or Not to Pause? That is the Fed Question
  • Weekly Market Preview – Could Inflation Data Reintroduce Rate Hike Possibilities?
  • Weekly Economic Cheat Sheet – Wednesday’s CPI Report in Focus

Futures are tracking global equity markets lower this morning with rate-sensitive small caps and tech shares leading declines as bond yields continue higher on the back of Friday’s “hot” jobs report and new highs in the price of oil.

There were no economic reports overnight, however, the U.S. announced new curbs on AI-chip exports (specifically NVDA chips) which is pressuring mega-cap tech stocks in pre-market trade.

Today, there are a limited number of market catalysts as there are no noteworthy U.S. economic reports on the calendar and no Fed officials are scheduled to speak.

There are two Treasury auctions at 11:30 a.m. ET today (for 3-Month and 6-Month Bills) and given the hawkish reaction to Friday’s jobs data, their outcomes could impact stocks. Bottom line, if Treasury yields hold pre-market levels with the 10-Yr and 30-Yr both approaching 5%, stocks will have a very difficult time stabilizing today.

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Jobs Day (Abbreviated Jobs Report Preview)

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Jobs Day (Abbreviated Jobs Report Preview): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Jobs Day (Abbreviated Jobs Report Preview)
  • Are the Global Bond Markets Punishing the UK?

Futures are little changed as none of the economic data or central bank speak of the past 48 hours was impactful, so investors are focused on today’s jobs report it’s potential to move markets, especially if it’s “Too Hot.”

Economically, Euro Zone retail sales missed expectations, adding another lack luster data point to the growing list.

Today the major event is the jobs report and stakes for stocks are clear:  If this report is “Too Hot” and boosts fears the Fed has paused rate cuts, it’ll cause yields to rise and hit stocks, potentially hard.

Expectations for the report are as follows: 164K Job-Adds, 4.2% Unemployment Rate, 4.0% y/y Wage Growth.   An in-line to slightly weak number vs. expectations is the best-case scenario for markets this morning:

In addition to the jobs report we also get Consumer Sentiment (E: 74.5) and some notable earnings from DAL ($1.76), WBA ($0.37) and STZ ($3.34), but today is really all about the jobs report.

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Year-end positioning and lackluster trading volumes

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Year-end positioning and lackluster trading volumes: Sevens Report Editor, Tom Essaye, Quoted in Barron’s

Trump Is Already Rattling the Stock Market. Buckle Up.

Sevens Report President Tom Essaye believes year-end positioning and lackluster trading volumes—issues that will ease after New Year’s—are the real culprits behind the declines. 

“None of these events are big enough to derail this market, but they are a near-constant reminder of the drama Trump can manufacture (either directly or indirectly) on seemingly mundane functions of the government,” Essaye wrote.

“Altering or reducing the H-1B visa program reflects a further isolationism that investors fear would hurt the U.S. tech industry in the long run,” Essaye wrote. “And while that fear is a bit of a stretch, amidst large tech outperformance and thin volumes into year-end, it’s creating another reason to book profits.”

Also, click here to view the full Barron’s article published on December 31st, 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.

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.