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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.

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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.

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October MMT Chart: Record Targets Amid a Cautious Divergence

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October MMT Chart: Record Targets Amid a Cautious Divergence: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • October MMT Update – Scenario Targets Hit Fresh Records
  • A Concerning Technical Divergence Has Emerged on the Weekly S&P 500 Chart

Futures are mildly lower as the DOJ said it was considering a breakup of GOOGL following a monopoly ruling which dragged down tech stocks overnight while international news was mixed.

Chinese equities retreated 7% on the session amid ongoing stimulus uncertainty, prompting the government to announce a press event for Saturday to address fiscal policy.

Looking into today’s session, there are no notable economic reports to watch, leaving focus on the September FOMC meeting minutes which are due to be released at 2:00 p.m. ET.

There are a slew of Fed speakers today including: Bostic (8:00 a.m. ET), Logan (9:15 a.m. ET), Goolsbee (10:30 a.m. ET), Barkin (12:15 p.m. ET), Jefferson (12:30 p.m. ET), Collins (5:00 p.m. ET), and Daly (6:00 p.m. ET).

A less-dovish tone from Fed speakers over the course of the last week contributed to the uptick in broad market volatility, so more of the same could pressure markets again today while any hint of another 50 bp rate cut in November could spark a dovish wave of risk-on money flows (unlikely, however, after Friday’s jobs report).

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October MMT Update: Positive News (But Priced In)

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How to Cut Through the Market Noise: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • October Market Multiple Table – Positive News But Priced In

U.S. futures are higher on dovish-leaning comments by the Fed’s Kugler overnight while global shares declined broadly in sympathy with a near-10% drop in Chinese shares after the latest government stimulus efforts disappointed.

Economically, German Industrial Production rose 2.9% vs. (E) 0.8% in August, helping easing EU growth worries while the NFIB Small Business Optimism Index rose to 91.5 but narrowly missed estimates of 91.7.

There are no notable economic reports today, however several Fed officials are scheduled to speak: Bostic (12:45 p.m. ET), Collins (4:00 p.m. ET), and Jefferson (7:30 p.m.). Based on the market’s positive reaction to Kugler’s comments in the pre-market, more dovish commentary has the potential to fuel a further relief rally today while a hawkish tone would likely weigh on stocks.

Finally, there is a 3-Yr Treasury Note auction at 1:00 p.m. ET and given the hawkish money flows in the wake of last week’s ISM data and September jobs report, weak demand at the auction could send yields to new highs and further pressure equity markets.

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How to Cut Through the Market Noise

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How to Cut Through the Market Noise: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • How to Cut Through the Market Noise
  • Weekly Market Preview:  Inflation and Earnings
  • Weekly Economic Cheat Sheet:  CPI on Thursday is the Key Report

Futures are moderately lower following underwhelming economic data and as investors continue to wait for the Israeli response to Iran.

Economically, German Manufacturers’ Orders and Euro Zone retail sales both missed estimates.

Geopolitically, investors are still awaiting the Israeli response strike to Iran and that lingering uncertainty is further boosting oil and weighing on futures.

Today the calendar is quiet as there is just one economic report, Consumer Credit (E: $13.5B) and two Fed speakers, Bowman (1:00 p.m. ET) and Kaskari (1:50 p.m. ET) but none of that should move markets.  Instead, focus will be on geo-politics as investors anxiously await the Israeli response strikes on Iran and whether they hit key infrastructure (nuclear sites, energy sites) or not will determine the impact on markets.

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Jobs Report Preview (Important for Fed Rate Cut Expectations)

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

What’s in Today’s Report:

  • Jobs Report Preview (Important for Fed Rate Cut Expectations)
  • EIA Analysis and Oil Market Update

Futures are modestly lower on continued elevated geo-political tensions and following mixed economic data.

Geopolitically, markets await the response from Israel to Tuesday’s attack and recent reports are stating it will be more aggressive than in April (increasing escalation risks).

Economically, EU and UK Service PMIs were mixed but both stayed above 50 (and economic positive).

Today focus will remain on economic data and the two key reports are Jobless Claims (E: 225K) and the ISM Services PMI (E: 51.5).  If the reports are close to in-line with expectations, look for a bounce in stocks as that will imply a still solid economy (soft landing) with looming Fed rate cuts (50 bps between now and year-end).

Regarding geopolitics, Israel’s response attack could come at any minute and the key here is whether it’s an aggressive attack on key Iranian military or oil infrastructure, or not.  If so, that could lead to further escalation (negative for the market).  If not, we likely have a repeat of April (where the situation cools down).  Regardless, watch oil.  If it spikes numerous percent (say 3% or more) that will reflect real, elevated geo-political tensions.

Sevens Report Quarterly Letter Delivered

Our Q3’24 Quarterly Letter was delivered to subscribers. We use our strength (writing about the markets) to help you:

  • Save time (an average of 4-6 hours per quarterly letter)
  • Show you’re on top of markets with impressive, compelling market analysis.

You can view our Q2 ’24 Quarterly Letter here. To learn more about the product (including price) please click this link.

If you’re interested in subscribing, please email: info@sevensreport.com.

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.

Futures contracts tied to the index are telling a different story

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Futures contracts tied to the index are telling a different story: Tom Essaye Quoted in Market Watch

Why Wall Street’s ‘fear gauge’ could spike again around the election

But futures contracts tied to the index are telling a different story, and it’s one worth paying attention to, according to Tom Essaye, founder of Sevens Report Research.

The October VIX contract is trading at a premium to the November contract, an unusual development known to futures traders as “backwardation.” Typically, the VIX futures curve exhibits a smooth upward slope. But for most of this year, there has been a kink along this part of the curve.

According to Essaye, the inversion is notable not so much for its degree — the October contract was just 0.3 points above its September sibling as of early Thursday — but for its staying power. This segment of the curve has been in backwardation since the October contract started trading in February.

Also, click here to view the full MarketWatch article published on September 26th, 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.

What the Iranian Missile Strike Means for Markets

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Economic Implications of the Port Strikes: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What the Iranian Missile Strike Means for Markets
  • ISM Manufacturing Mildly Disappoints
  • JOLTS Top Estimates

Stock futures are lower amid a continued risk-off tone in markets as investors digest negative earnings news and await Israel’s response to Iran’s missile attack on Tuesday.

In corporate news, NKE earnings disappointed as sales fell 10% y/y and guidance was withdrawn ahead of a CEO change, leaving shares down 5% pre-market.

Economically, the Eurozone Unemployment Rate held steady at 6.4% in August, meeting estimates which is having little impact on markets today.

Today, investor focus will be on the ADP Employment Report (E: 121.5K) before the bell as well as a handful of Fed speakers on the schedule through the lunch hour: Hammack (9:00 a.m. ET), Musalem (10:05 a.m. ET), Bowman (11:00 a.m. ET), and Barkin (12:15 p.m. ET).

In addition to the jobs data and Fed chatter, tensions in the Middle East will remain a major focus as further deterioration in the Israel-Iran conflict is likely to weigh further on risk assets and influence flight-to-safety money flows.

Sevens Report Quarterly Letter Delivered

Our Q3’24 Quarterly Letter was delivered to subscribers. We use our strength (writing about the markets) to help you:

  • Save time (an average of 4-6 hours per quarterly letter)
  • Show you’re on top of markets with impressive, compelling market analysis.

You can view our Q2 ’24 Quarterly Letter here. To learn more about the product (including price) please click this link.

If you’re interested in subscribing, please email: info@sevensreport.com.

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.

Economic Implications of the Port Strikes

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Economic Implications of the Port Strikes: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Will the Port Strike Increase Hard Landing Chances
  • Fed Chair Powell’s Commentary Takeaways (Less-Dovish)

Futures are little changed this morning as investors weigh a favorable decline in EU inflation against news that a dockworkers strike has commenced at East Coast ports.

Economically, the Eurozone Manufacturing PMI fell to 45.0 vs. (E) 44.8 while the EU HICP Flash (their CPI) fell 0.4% to 1.8% vs. (E) 2.0% in September. The sub-2% headline was notably the first below-ECB-target print since 2021.

Looking into today’s session, there are several domestic economic data points that will be in focus including, in order of importance: The ISM Manufacturing PMI (E: 47.0), JOLTS (E: 7.7 million), and Construction Spending (E: -0.3%).

Additionally, there is one Fed speaker on the calendar for the late morning: Bostic (11:00 a.m. ET).

Bottom line, investors will be assessing what the market implications of the East Coast port strike will be as the situation develops today while also looking for more “goldilocks” economic data and a less-hawkish tone from Fed officials in order for the early week stock market gains to hold.

 

Sevens Report Quarterly Letter Delivered Today

Our Q3’24 Quarterly Letter will be delivered to subscribers today. We use our strength (writing about the markets) to help you:

  • Save time (an average of 4-6 hours per quarterly letter)
  • Show you’re on top of markets with impressive, compelling market analysis.

You can view our Q2 ’24 Quarterly Letter here. To learn more about the product (including price) please click this link.

If you’re interested in subscribing, please email: info@sevensreport.com.

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.

Investor Sentiment Update

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Investor Sentiment Update: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Sentiment Update: Investors Aren’t Wildly Bullish, But They Are Complacent
  • August Durable Goods Come in Better-Than-Feared
  • Jobless Claims Point to Further Resilience in the Labor Market

U.S. stock futures are slightly lower this morning as more positive stimulus news out of China is being offset by a stronger yen following Japanese election results.

The PBOC cut 7-day reverse repo rates to 1.5% from 1.7% as well as lowered bank reserve ratios by another 50 bp which sent stocks in Asia solidly higher with some regional benchmarks advancing the most since 2008.

In Japan, Shigeru Ishiba’s election victory to become the nation’s next Prime Minister spurred a more than 1% rally in the yen as he is a monetary policy hawk. The yen strength is weighing on the global carry trade, specifically U.S. tech stocks in the pre-market.

Looking into today’s session, the most important potential catalysts hits before the bell with the Fed’s preferred inflation gauge, Core PCE (E: 0.2% m/m, 2.7% y/y) due out at 8:30 a.m. ET.

Additionally, the latest Consumer Sentiment Report (E: 69.0, 1-Yr Inflation Expectations: 2.7%) will be released at 10:00 a.m. ET and there is one Fed speaker in the early afternoon: Bowman (1:15 p.m.) but Fed speak has been benign this week and is likely to stay that way today.

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