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Why Are High Yield Bonds Breaking Down?

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Why Are High Yield Bonds Breaking Down?: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Are High Yield Bonds Breaking Down?
  • More Goldilocks Economic Data

Futures are modestly higher mostly on momentum from Thursday’s rally and following a night of generally solid earnings and economic data.

Economically, the German IFO Business Expectations survey was better than expected (87.3 vs. (E) 86.7) boosting EU economic sentiment.

Earnings were the solid as the majority of companies posted good results (including COF, DECK and others).

Today the key report is September Durable Goods (E: -1.0%) and markets will want to see more in-line data to continue to imply a soft landing and two additional rate cuts in 2024.  We also have one Fed speaker, Collins (11:00 a.m. ET), but she shouldn’t move markets.

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Barron’s Senior Managing Editor and Deputy Editor speak with Tom Essaye

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Semiconductor stocks have cycle-leading characteristics: Sevens Report Editor, Tom Essaye, interviewed on Barron’s Live

Talking Markets with Sevens’ Report Tom Essaye

Barron’s Senior Managing Editor Lauren R. Rublin and Deputy Editor Ben Levisohn speak with Tom Essaye, Founder and President of Sevens Report about the outlook for financial markets, industry sectors, and individual stocks.

Tom Essaye: Absolutely. So the number one message we’re trying to convey in the Sevens Report is for investors to really stay focused on economic growth. And the reason I say that is because if growth can’t hold up, then we have to talk about this rally potentially ending in a very uncomfortable way. And for those of us who have been in the markets for a long time, at least at the start of this century, we’ve seen that happen a few times and it’s very painful. And if you think about investing, those are really the types of markets we want to avoid. So with the Fed cutting rates, we now know that if growth rolls over, they will not be able to cut fast enough to prevent any sort of a slowdown. So to use the analogy, the die has been cast to a point. Now the Fed is cutting and we must see if growth holds up. Everything that’s going on around growth, so how many cuts are they going to have in 2024? What’s going to happen with the election? Is the Chinese stimulus going to be enough? All of those are ancillary issues, but the main issue is growth. Because if growth rolls over, now we have to talk about that being a rally-killing event and those are the big events we want everyone to be able to avoid.

Also, click here to view the full Barron’s interview published on MarketWatch on October 21st, 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.

 

Why Yields Are Suddenly Surging

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Why Yields Are Suddenly Surging: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Rising Yields: Is it Growth, the Fed, or Fiscal Worries?
  • Chart: Market Based Inflation Expectations Hit 4-Month Highs

Futures are under pressure again this morning as the 10-Yr yield continues to edge further beyond 4.20%, the highest readings since July, while traders await more important earnings releases today and into the weekend.

Economically, Taiwan’s Industrial Production index, which includes the nation’s critical semiconductor output, slowed to 11.22% in September from a lower revised 12.54% rise in August signaling a potential slowdown in high-tech, AI-focused chips in H2’24.

Today, there is one economic report due out: Existing Home Sales (E: 3.90 million) but unless it is meaningfully “hot” it should not have a major impact on markets (although a cool report that influences less hawkish money flows would be well received by equity markets).

Additionally, there are two Fed speakers to watch: Bowman (9:00 a.m. ET) and Barkin (12:00 p.m. ET) from which markets will look for a less-hawkish, more accommodative tone than the recent “higher-for-longer” policy rate chatter.

Finally, earnings season continues with several notable companies reporting quarterly results including BA ($-10.34), KO ($0.74), and T ($0.59) before the open, and TSLA ($0.58), IBM ($2.27), and TMUS ($2.34) after the close.

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A market that remains firmly anchored by two key beliefs

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A market that remains firmly anchored by two key beliefs: Sevens Report Analysts Quoted in Investing.com

Why don’t stocks drop on bad news?

As per analysts at Sevens Report, this resilience reflects a market that remains firmly anchored by two key beliefs: economic growth will remain stable, and the Federal Reserve will cut interest rates—conditions that continue to support bullish sentiment despite growing risks.

Additionally, jobless claims surged to summer highs, suggesting some softening in the labor market. “However, that number was inflated by the Boeing strike and by unemployment related to the damage from Hurricane Helene in Florida and North Carolina,” the analysts said.

Sevens Report argues that part of the reason stocks haven’t wavered is that the risks, while real, haven’t yet materialized in ways that challenge the underlying narrative of a soft landing.

“The ‘burden of proof’ remained squarely on the bears,” the analysts said, no single negative development has been powerful enough to shift market sentiment away from expectations for stable growth and falling rates.

Also, click here to view the full article featured on Investing.com published on October 19th, 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.

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.

Semiconductor stocks have cycle-leading characteristics

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Semiconductor stocks have cycle-leading characteristics: Sevens Report Editor, Tom Essaye, Quoted in Barron’s

Tech’s Moment of Truth Has Arrived

As Sevens Report President Tom Essaye notes, “semiconductor stocks have cycle-leading characteristics,” given their volatility and risky balance sheets, meaning they “begin to roll over before most of the rest of the market as traders rotate away to lower-beta, more value-oriented names during times of uncertainty, including economic downturns (but admittedly also “growth scares” such as 2022). So, as we continue to navigate an uncertain market landscape in the second half, the SOX are offering us a ‘canary in the market coal mine’ right now that could, and likely will, offer fair warning before a more meaningful decline in the broader market indexes, such as the S&P 500 , eventually begins to take shape.

Also, click here to view the full Barron’s article published on October 18th, 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.

Hard Landing/Soft Landing Scoreboard (October Update)

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Hard Landing/Soft Landing Scoreboard (October Update): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Hard Landing/Soft Landing Scoreboard (October Update)

Futures are slightly higher thanks to better-than-expected Chinese economic data and more solid tech earnings.

Chinese Retail Sales and Fixed Asset Investment both beat estimates, boosting investor sentiment towards China.

On earnings, NFLX beat estimates and is the second straight big tech company to post solid results.

Today we have one economic report, Housing Starts (1.400M) and several Fed speakers, including Bostic (9:30 a.m. & 12:30 p.m. ET), Kashkari (10:00 a.m. ET) and Waller (12:10 p.m. ET).  With recent data stronger than expectations, if today’s Fed officials (including Waller) reinforce their desire for two rate cuts that will be an incremental positive.

Earnings season also continues to roll on and today we get notable reports from AXP (E: $3.27), PG (E: $1.90) and RF (E: $0.53).

Join thousands 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.

Where SOX Go, Stocks Go: A Cyclical Canary to Watch in the Market Coal Mine

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Where SOX Go, Stocks Go: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Where SOX Go, Stocks Go: A Cyclical Canary to Watch in the Market Coal Mine

Futures are modestly higher thanks to solid earnings and ahead of important central bank decisions and economic data later today.

Taiwan Semiconductor (TSM) beat earnings and is rallying 8% pre-market and that’s boosting tech and futures.

Today will be a busy day on the economic and earnings front, starting with the ECB rate decision, where the ECB is expected to cut rates 25 bps and signal an openness (but not a guarantee) of another rate cut in December.

Economically, there are several potentially important reports today including, in order of importance, Retail Sales (E: 0.3%), Jobless Claims (E: 260K), Philly Fed (E: 3.0) and Industrial Production (E: -0.1%).  With all of today’s data, Goldilocks readings around expectations are the best case for markets.

Finally, earnings season continues to roll along and NFLX (E: $5.09) after the close is the big report today.

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Tom Essaye Interviewed On Yahoo Finance’s Morning Brief

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A slowing economy does not necessarily mean a recession: Tom Essaye Interviewed On Yahoo Finance

Economic, geopolitical risks could be rude awakening for market

“I want everybody to realize that a slowing economy does not necessarily mean a recession, but where stocks are right now, if growth even slows to sort of flat or sub 1%, you could see a 10% drop in the S&P 500, and we wouldn’t even be probably at fair value,” Sevens Report Research founder and president Tom Essaye tells Seana Smith and Brad Smith on the Morning Brief.’

“So look, things are good right now, but I do think the market is complacent to economic slowdown risks.”

Essaye has been “advocating for focusing on quality and lowering volatility” through ETFs, and views geopolitical risks to be a chief concern at the moment.

“And then also there’s going to be a lot of political uncertainty coming out of the election, because we’re all going to be trying to game what policy changes are going to occur. All of these things can combine to sort of fracture this perfect window we’re in in the markets,” Essay explains. “All I’m trying to do is remind investors that, hey, there are risks out there and that… the stock market can go two directions as well.”

Also, click here to view the full interview with Yahoo Finance published on October 15th, 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.

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 Don’t Stocks Drop On Bad News?

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Why Don’t Stocks Drop On Bad News?: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Don’t Stocks Drop On Bad News
  • Weekly Market Preview:  Earnings Are the Key This Week
  • Weekly Economic Cheat Sheet:  Important Growth Data on Thursday

Futures are slightly higher following a quiet weekend of news as investors look ahead to the first busy week of Q3 earnings and more important economic data.

Economically, Chinese exports missed expectations and the latest stimulus announcement underwhelmed, but none of it was bad enough to reverse any more of the recent rally.

This week is full of potentially market moving events from earnings and economic data but they all come later in the week and today should be mostly quiet given it’s the Columbus Day holiday (banks and bond markets closed) and there are no notable economic reports.  We do get a few Fed speakers, however (Kashkari (9:00 a.m. ET & 5:00 p.m. ET), Waller (3:00 p.m. ET)), but they shouldn’t move markets.

Join thousands 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.

Sevens Report’s Tom Essaye also sees technical indicators flashing red

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Sevens Report’s Tom Essaye also sees technical indicators flashing red: Sevens Report Editor, Tom Essaye, Quoted in Barron’s

The Stock Market Is Rising, but So Are the Risks. What to Do Now.

Sevens Report’s Tom Essaye also sees technical indicators flashing red. The Relative Strength Index, or RSI, a momentum indicator used to identify overbought or oversold conditions, has been diverging from the S&P 500 for about six months, turning lower even as the index keeps pushing higher.

“That is a concern because it is a bearish divergence that we have repeatedly seen when lasting market tops are being established, including the early 2022 highs,” Essaye writes. “This same divergence occurred before the market peaks in 2000, 2007, and even the short-lived bear market of 2020. Bottom line, the divergence between the outright price action of the S&P 500 (hitting higher highs) and its weekly RSI indicator (establishing lower highs) is a concerning technical dynamic that warrants attention as it suggests the risks of a more pronounced pullback in the stock market is statistically elevated right now.”

Also, click here to view the full Barron’s article published on October 9th, 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.