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FOMC Preview

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FOMC Preview: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • FOMC Preview
  • Empire State Manufacturing Index Takeaways
  • Chart: Equal-Weighted S&P 500 Index Hits Fresh Record

Futures are rallying ahead of key data on U.S. consumer spending as rates markets continue to price in better odds of a 50 bp rate cut from the Fed ahead of tomorrow’s FOMC decision.

Economically, the German ZEW Survey disappointed overnight with Economic Sentiment plunging more than 15 points to 3.6 vs. (E) 17.5.

Looking into today’s session, focus will be on economic data early with Retail Sales (E: -0.3%) being the most important release to watch, but Industrial Production (E: 0.1%), and the latest Housing Market Index (E: 40) will also be closely monitored.

There is one Fed official on the calendar to speak today: Logan (10:00 a.m. ET), but her remarks have been pre-recorded and therefore should not move markets with the September FOMC meeting getting underway this morning.

Finally, there is a 20-Yr Treasury Bond auction at 1:00 p.m. ET that should not materially impact markets unless there is a significant discrepancy between the when-issued yield and yield-awarded that shows weak demand (higher yields), as a subsequent rise in yields could pour some cold water on the so-far-dovish money flows ahead of the Fed decision.

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The 10-Year Yield Sits at 5.00%

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The 10-Year Yield Sits at 5.00%: Tom Essaye Quoted in Barron’s

10-Year Treasury Yield Hovers Around Milestone 5% Level, Adding Pressure to Stocks

“The 10-year yield sits at 5.00% as of this writing. And the higher it goes today, the lower stocks will likely fall,” said Tom Essaye, founder of Sevens Report Research. “Today, any progress on electing a Speaker of the House will be welcomed by the markets and likely push yields lower.”

The recent, dramatic march higher in yields has added significant headwinds for stocks. Because higher returns on risk-free government debt tend to dampen demand for riskier bets, such as equities.

Also, click here to view the full Barron’s article published on October 23rd, 2023. However, to see the Sevens Report’s full comments on the current market environment sign up here.

The 10-Year Yield

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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.

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.

Why Did Stocks Drop on Friday?

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Why Did Stocks Drop on Friday? Strengthen your market knowledge with a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Did Stocks Drop on Friday?
  • Weekly Market Preview:  Will the Fed Confirm Market Expectations?
  • Weekly Economic Cheat Sheet:  Important Growth Data Throughout the Week (Could Confirm or Undermine Soft/No Landing Hopes)

Futures are slightly higher as markets bounce following Friday’s declines and after a quiet weekend of news.

The various strikes occurring across the country (writers, UAW) contributed to Friday’s market decline. There was little positive progress over the weekend on resolving either work stoppage.

Geopolitically, President Biden’s National Security Advisor met with China’s foreign minister. The meeting is raising hopes the U.S./China relationship could improve.

Today the only notable economic report is the Housing Market Index (E: 50.0) and that shouldn’t move markets as long as it doesn’t provide a major positive or negative surprise. Barring that, we’d expect pre-Fed positioning to generally drive trading today.

Why Did Stocks Drop

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. 

Labor Market Analysis By Tom Essaye Quoted in Forbes

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Labor Market Analysis – Tom Essaye Quoted in Forbes: Strengthen your market knowledge with a free trial of The Sevens Report.

Weaker-Than-Expected August Job Growth Reported—Labor Market Officially At Pre-Pandemic Levels

In a Wednesday note to clients, which included the labor market analysis, Sevens Report analyst Tom Essaye cautioned against bullish investors celebrating a labor market slowdown as an outright win for stocks, writing the economy is now entering the “difficult” stage of navigating a higher-interest rate environment.

“If the labor market is seeing easing, then now is the time the Fed will have to perfectly execute the ‘soft landing,’ because getting the economy to slow is the ‘easy’ part of monetary policy.” wrote Tom Essaye, founder of the Sevens Report.

Click here to read more of Tom’s labor market analysis.

Forbes Labor Market

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It’s Not How High Rates Go Anymore, It’s How Long They Stay There

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What’s in Today’s Report:

  • It’s Not How High That Matters Anymore, It’s How Long
  • Retail Sales & Empire State Manufacturing Survey Takeaways (Very Mixed Reports)
  • Chart – S&P 500 Violates 50 Day Moving Average for the First Time Since March

Stock futures are little changed this morning as new stimulus efforts by China help offset more negative global economic data and a hawkish leaning RBNZ meeting decision.

Chinese Home Prices fell -0.1% vs. (E) 0.0% prompting a cash injection and stronger currency fix by the PBOC which helped stabilize global risk assets overnight given the recent turmoil in the world’s second largest economy.

In Europe, U.K. Core CPI held steady at 6.9% vs. (E) 6.8% in July solidifying peak rate expectations of 6.0%, however bond yields are retreating modestly from the week’s highs which is helping stocks continue to stabilize today.

Looking into today’s session, we will get two economic reports this morning: Housing Starts (E: 1.455 million), Industrial Production (E: 0.3%) before focus will turn to the release of the July FOMC meeting minutes at 2:00 p.m. ET.

Bottom line, the market wants to see more “Goldilocks” data consistent with a soft economic landing and no evidence in the Fed minutes that suggests a more hawkish policy path than is currently expected (rate cuts beginning H1’24). Otherwise, volatility is likely to remain elevated with equities under pressure.

What the BOC Rate Hike Means for U.S. Interest Rates

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What’s in Today’s Report:

  • What the BOC Rate Hike Means for U.S. Interest Rates

Futures are little changed despite more economic stimulus from China.

The Chinese government cut bank deposit rates and encouraged lending to boost auto sales in the latest effort to stimulate the economy, although the moves were already expected so this isn’t a new, positive surprise.

Economic data was sparse overnight with Japanese and EU GDPs the only notable releases, and neither number moved markets.

Today the only notable economic report is Jobless Claims (E: 235K) and markets will want to see stability in the data (so no sudden jump higher), but more broadly markets remain in a temporary “holding pattern” with the CPI report and Fed decision now both looming less than a week away.

Tom Essaye Quoted in Yahoo News on March 14th, 2023

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US Stocks Shake Off Market Jitters; Bonds Fall: Markets Wrap

Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter, expects that the data will keep the Fed on track to raise rates 25 basis points next week.

“Given the bank troubles, this report isn’t bad enough to put 50 bps back on the table, but if the Fed wants to maintain credibility on inflation, then this report says they have to hike again next week and not signal they are done,” Essaye wrote. Click here to read the full article.

 

How (and Why) We Calculate Real Interest Rates

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What’s in Today’s Report:

  • How (and Why) We Calculate Real Interest Rates

Futures are moderately lower following a disappointing night of earnings.

Thursday night was the first bad night of earnings as SNAP and WHR both posted underwhelming results, while numerous European companies also missed estimates.

Economically, the Japanese CPI ran hot (3.0% vs. (E) 2.9%), like virtually every other inflation indicator this week.

Today there are no economic reports and just one Fed speaker, Williams (9:10 a.m. ET), but he shouldn’t move markets.

Instead, the focus will continue to shift toward earnings and the markets needs some good results to rally today.  Reports we’re watching today include: VZ ($1.28), AXP ($2.38), SLB ($0.55), HCA ($3.89).

Will Inflation Start to Peak This Week?

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What’s in Today’s Report:

  • Updated Market Outlook
  • Weekly Market Preview:  Will Inflation Start to Peak?
  • Weekly Economic Cheat Sheet:  Key Inflation Data This Week

Futures are modestly lower as Chinese inflation stayed high while the Russia/Ukraine war may be intensifying.

Chinese PPI rose 8.3% vs. (E) 8.1% while CPI gained 1.5% vs. (E) 1.4%, underscoring that inflation has not yet peaked in China.

Geo-politically, Russia is poised for a large assault on eastern Ukraine and analysts are anticipating some of the more intense fighting of the war.

Today there are no economic reports but there are several Fed speakers including Bostic (9:30 a.m. ET), Williams (12:00 p.m. ET) and Evans (12:40 p.m. ET) and we expect them to continue the trend of guiding markets towards a 50 bps hike in May and endorsing the idea of 250 basis points of tightening by year-end (but that shouldn’t move markets as that is already well known).