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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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Jobs Day

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

What’s in Today’s Report:

  • Jobs Day
  • Key VIX Levels to Watch

Futures are slightly higher following the end to the dockworkers’ strike and as investors wait for the jobs report and the Israeli retaliatory attack on Iran.

The dockworkers’ strike ended Thursday night, removing a potential economic headwind.

Geopolitically, markets are still awaiting the Israeli response to Iran, but reports are pointing to a military or domestic energy target, which is a mild positive (if Israel were to attack Iran’s nuclear facilities it’d be viewed as a major escalation and we’d expect oil to surge further and be a stronger headwind on stocks).

Today focus will be on the jobs report and expectations are as follows: 147K job-adds, 4.2% UE Rate and 3.8% wages (y/y).  As long as the job adds and unemployment rate are relatively close to expectations, we should see a mostly Goldilocks reaction as that implies a soft landing and will keep the Fed on track to cut twice more this year (50 bps).  The biggest risk for the market remains a very weak number.

Finally, there is also one Fed speaker today and he is part of leadership, Williams at 9:00 a.m. ET, but barring a substantial surprise, he shouldn’t move markets.

 

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.

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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.

Understanding Why the Fed Cut 50 bps

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Understanding Why the Fed Cut 50 bps: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Understanding Why the Fed Cut 50 bps
  • Weekly Market Preview:  Can Momentum Keep Pushing Markets Higher?
  • Weekly Economic Cheat Sheet:  Focus Turns Back to Growth

Futures are slightly higher following a mostly quiet weekend of news and despite soft economic data overnight.

Economically, the EU flash PMIs were weaker than expected as manufacturing declined to 44.8 vs. (E) 45.7 while services nearly broke 50 (falling to 50.5 vs. (E) 52.3).

Geopolitically, Israeli strikes against Hezbollah continued but for now, markets are ignoring the escalation.

Today brings the two most important economic reports of the week vis the Flash Manufacturing PMI (E: 48.5) and Flash Services PMI (E: 55.3).  Numbers that meet or modestly exceed estimates should keep last week’s rally going while very disappointing readings will modestly increase growth concerns.

There are also several Fed speakers today including Bostic (8:00 a.m. ET), Goolsbee (10:15 a.m. ET) and Kashkari (1:00 p.m. ET).

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What the Fed Decision Means for Markets (Near Term vs. Longer Term)

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What the Fed Decision Means for Markets (Near Term vs. Longer Term): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What the Fed Decision Means for Markets (Near Term vs. Longer Term)

Futures are sharply higher (up nearly 2%) as the Fed’s rate cut sparked a large global stock market rally (most major global indices are 1% – 2% higher).

Economically, there were no notable reports overnight.

Geopolitically, concerns are rising about a direct Israel/Hezbollah war, although investors are ignoring those increased risks, for now.

Today will be another busy day as there are two prominent central bank meetings and important economic data.  First, there is a BOE Rate Decision (E: No change) this morning but, more importantly, there’s a Bank of Japan rate decision late tonight.  The BOJ isn’t expected to raise rates but if they do (like in July) that could inject volatility into the markets (like it did in July).

Economically, there are two especially notable reports today, Jobless Claims (E: 230K) and Philly Fed (E: 2.0), while we also get Existing Home Sales (E: 3.90 million) and Leading Indicators (E: -0.3%).  With the Fed now having cut 50 bps, the stronger the data, the better, as it’ll increase soft landing expectations.

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Fed-Day Technical Tear Sheet (Negative Divergence from Fundamentals)

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Fed-Day Technical Tear Sheet (Negative Divergence from Fundamentals): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Fed-Day Technical Tear-Sheet: Market Technicals Are Diverging Negatively from Still Optimistic Fundamentals
  • Economic Takeaways: Retail Sales and Industrial Production Top Estimates

Stock futures are trading tentatively higher as investors digest mostly as-expected inflation data out of Europe overnight and look ahead to today’s Fed decision.

Economically, Eurozone CPI met estimates at 2.2% y/y in August while the Core figure was also as-expected at an unchanged 2.8% y/y last month.

Today, focus will be on the one notable economic data point due to be released: Housing Starts (1.300M) but it is unlikely to materially move markets with the Fed decision looming this afternoon.

The FOMC Announcement will hit the wires at 2:00 p.m. ET followed by Fed Chair Powell’s Press Conference at 2:30 p.m. ET. The consensus expectation is a 25 bp rate cut will be delivered but market-based policy rate expectations are pricing in a 65% chance of a 50 bp rate cut as of this morning.

Bottom line, whether the Fed delivers a 25 bp or 50 bp rate cut today is less important than the guidance provided on future cuts as the market wants to see the framework laid out for a fairly aggressive rate cutting path in the months ahead to shore up soft-landing hopes. So projections and Powell’s speech will be critical for the market reaction late in the session.

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Wednesday’s CPI inflation report has the door open to a half-percentage-point reduction

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Wednesday’s CPI inflation report: Sevens Report Founder Tom Essaye Quoted in Morningstar

The stock market is falling after CPI report. Investors may fear Fed mistake.

Tom Essaye, founder of Sevens Report Research – said that if Wednesday’s CPI inflation report came in weaker than expected and left the door open to a half-percentage-point reduction on Sept. 18, that would be “better for markets” and “generally welcome” news.

Also, click here to view the full MarketWatch article published on Morningstar on September 11th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Oil Inventories

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The Fed could fall behind the curve as real interest rates continue to rise.=

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The Fed could fall behind the curve: Sevens Report Analysts Quoted in Investing.com

The Fed may be further behind the curve

“If we excluded housing from Core CPI, yesterday’s Core CPI reading would have increased just 0.1%,” they explained, downplaying fears of a significant inflation resurgence.

Despite this, the inflation data has reduced the likelihood of a 50-basis-point rate cut by the Fed.

The real risk, according to Sevens, is that the Fed could fall behind the curve as real interest rates continue to rise.

“Real interest rates are now putting more pressure on the economy than they have at any point during the Fed’s tightening cycle,” Sevens stated.

Also, click here to view the full Investing.com article published on September 12th, 2024. 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.

How to Explain This Market To Clients (September Update)

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How to Explain This Market To Clients: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • How to Explain This Market To Clients (September Update)
  • Weekly Market Preview:  Two Key Central Bank Decisions (Fed on Wednesday, BOJ on Thursday)
  • Weekly Economic Cheat Sheet:  Important Growth Updates This Week

Futures are little changed despite more negative Chinese economic data as investors look ahead to the Fed decision on Wednesday.

August Chinese economic data disappointed as Industrial Production (4.5% vs. (E) 4.7% and Retail Sales (2.1% vs. (E) 2.7%) both missed estimates, raising more concerns about Chinese growth (and global growth more broadly).

Politically, there was another assassination attempt on Trump, although the event shouldn’t alter the current race.

This week will be both busy and important for this rally, but it starts slowly as the only notable number today is the September Empire Manufacturing Index (-4.1).  An in-line to slightly better than expected number would be the best-case scenario for markets today.

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