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Cut Through the Market Noise: The Four Drivers of This Rally

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The Four Drivers of This Rally: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Cut Through the Market Noise:  The Four Drivers of This Rally
  • Why Markets Rallied Despite Friday’s Hot Jobs Report
  • Weekly Market Preview:  Fed Speak, Growth Data and an Important Inflation Update
  • Weekly Economic Cheat Sheet:  Data Focused on Economic Growth and Inflation

Futures are modestly lower as Fed Chair Powell’s 60 Minutes interview is being taken as slightly hawkish.

Powell’s 60 Minutes interview is being framed as hawkish but in reality, Powell didn’t say anything new as this was his main message: Rates cuts are coming sooner than later, but a March cut is unlikely.

Economically, China’s January services PMI missed estimates (52.7 vs. (E) 53.0), reinforcing economic concerns.

Today focus will be on the ISM Services PMI (E: 52.1) and the key here is clear:  This number needs to stay above 50 otherwise we will see growth concerns start to rise.  There is also one Fed speaker today, Bostic (2:00 p.m. ET), but he shouldn’t move markets given Powell’s recent interviews.

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Jobs Day (Updated Jobs Report Preview)

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

What’s in Today’s Report:

  • Jobs Day (Updated Jobs Report Preview)

Futures are solidly higher ahead of today’s jobs report thanks to strong earnings overnight.

META (up 17% pre-market) and AMZN (up 7% pre-market) posted strong earnings while AAPL (down 2% pre-market) underwhelmed, but overall earnings results were good overnight and that’s pushing futures higher.

Today focus will be on the jobs report and expectations are as follows: 187K job adds, 3.8% Unemployment Rate, 0.3%/4.1% wage growth.  Powell pushing back on a March rate cut helped increase the threshold for a “Too Hot” report, so there’s a wider lane for a “Just Right” reading.  But, if job growth remains very strong (so solidly above 200k) and the other details are “Too Hot,” don’t be surprised if yields rise and stocks decline as some investors start to doubt a May rate cut.

Other notable events today include Consumer Sentiment (E: 78.8, 1-Yr inflation expectations: 2.9%) and the last “important” day of earnings, although neither of those should move markets.

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Key Technical Levels to Watch on Fed Day

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Key Technical Levels to Watch: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Key Technical Levels to Watch on Fed Day (Shareable PDF Available)
  • Jobs Report Preview

Stock futures are in the red this morning after mega-cap tech earnings failed to meet overly optimistic estimates (but were not that bad, all things considered), Chinese Manufacturing PMI missed estimates, and French CPI was higher than expected.

On the earnings front, AMD (-11%), GOOGL (-6%), and MSFT (-1%) are all lower in the pre-market despite generally healthy quarterly reports with most earnings and revenue figures topping analysts estimates while some corporate guidance was not as strong as hoped.

Today is lining up to be a very busy day full of catalysts. Starting with the economic data, we get the first look at January labor market data with the ADP Employment Report (E: 130K) while Q4 Employment Cost Index (E: 1.0%) will offer a look at wage pressures from late 2023.

The Treasury will release the official Refunding Announcement details before the open (8:30 a.m. ET) before focus will turn to the Fed with the FOMC Decision (2:00 p.m. ET) and Powell’s press conference (2:30 p.m. ET) in the afternoon.

There are no “Mag7” earnings today, but a few notables to watch include: MA ($3.08), QCOM ($2.37), and MET ($1.95).

Bottom line, equities are on edge in pre-market trade this morning with all of today’s catalysts looming, but, if the Treasury Refunding Announcement supports the bond market (keeps a lid on yields) and the Fed doesn’t not offer a hawkish surprise, we should be able to see markets stabilize. Conversely, any disappointments or hawkish reactions will support further volatility into the back half of the week.

Computer chips

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Jobs Report Preview

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

What’s in Today’s Report:

  • Jobs Report Preview

Futures are rebounding very slightly following better than expected global service PMIs.

The December Chinese Service PMI handily beat estimates (52.9 vs. (E) 51.6) offering an encouraging signal on Chinese growth while the EU and UK services PMIs also slightly best estimates.

On inflation, data was more mixed as French CPI met estimates at 3.7% but rose slightly from last month challenging the disinflation narrative.

Today focus will be on economic data and specifically the labor market via Jobless Claims (E: 218K) and the ADP Employment Report (E: 115K) and the key here remains Goldilocks data that isn’t so strong it reduces rate cut expectations nor so bad it stirs worries about the economy.  Also, we get the December PMI Composite Index (E: 51.0) but barring a major surprise that shouldn’t move markets.

Jobs Report

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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

Futures are little changed following a quiet night of news as markets await the jobs report later this morning.

Economically, the only notable number overnight was German CPI which met expectations, rising 3.2% y/y.

Globally, the yen is falling slightly but global yields are higher as markets digest a potential Bank of Japan rate hike later this month.

Today the jobs report is the key event and expectations are as follows:  180K job adds, 3.9% Unemployment Rate, 0.3% m/m & 4.0% y/y wages.  Keeping things simple, the key to today’s jobs report is whether it refutes the expectation for a March rate cut or reinforces it.  A “Too Hot” number will refute that March rate cut expectation and stocks and bonds will likely drop while a Goldilocks number will reinforce expectations for a March cut and stocks should rally.

Outside of the jobs report, we also get University of Michigan Consumer Sentiment (E: 61.9) and the 1-Year and 5-year Inflation Expectations but barring a major surprise these numbers shouldn’t move markets.

Jobs Day

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Jobs Report Preview

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

What’s in Today’s Report:

  • Jobs Report Preview
  • An Excellent Explanation of the Economic Cycle
  • Oil Update (How Far Could It Fall?)

Futures are little changed despite hawkish commentary from the BOJ and more underwhelming economic data.

BOJ commentary overnight was hawkish and markets now expect a rate hike at the December meeting. And that expectation is pushing global yields slightly higher.

European economic data was again soft as German Industrial Production declined –0.4% vs. (E) 0.5%. This adds to the recent string of soft EU economic reports.

Today focus will remain on economic data and specifically weekly Jobless Claims (E: 222K) and Continuing Claims (1.91 million).  These numbers have been drifting higher lately and Continuing Claims just hit a two-year high.  If we see further upside in these readings today that will add to the growing list of readings that implies the economy is losing momentum and while that may not cause a drop in stocks today, a slowing economy will likely become a headwind in early 2024.

Jobs Report Preview

Annual Discounts on Sevens Report, Alpha, Quarterly Letter, and Technicals.

We’ve been contacted by advisor subscribers who wanted to use the remainder of their 2023 pre-tax research budgets to extend their current subscriptions, upgrade to an annual (and get a month free) or add a new product (Alpha, Quarterly Letter, Technicals).

If you have unused pre-tax research dollars, we offer month-free discounts on all our products. If you would like to extend current subscriptions or save money by upgrading to an annual subscription, please email info@sevensreport.com.

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Tomorrow’s Jobs Report

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Tomorrow’s jobs report: Tom Essaye Quoted in BNN Bloomberg

Stock Futures Slide as Bond Yields Keep Rising

“Tomorrow’s jobs report may be the most important one of the year,” according to Tom Essaye, a former Merrill Lynch trader.

If the report is too hot and the yield on the U.S. 10-year bond moves close to 5 percent. “We could easily see the S&P 500 fall through the 200-day moving average and at that point we could see an acceleration of the declines in stocks,” Essaye wrote in his The Sevens Report newsletter.

Also, click here to view the full BNN Bloomberg article published on October 5th, 2023. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Tomorrow’s Jobs Report

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An Important Jobs Day

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

What’s in Today’s Report:

  • An Important Jobs Day (Jobs Report Preview – Abbreviated Version)

Futures are modestly higher following better than expected economic data overnight and on positioning ahead of today’s important jobs report.

Japanese Household Spending (3.9% vs. (E) 0.6%) and German Manufacturers’ Orders (3.9% vs. (E) 2.1%) both beat estimates. This points to some resilience in the global economy.

Today focus will be on the jobs report and expectations are as follows:  Job Adds: 160K, UE Rate: 3.7%, Wage Growth: 0.3% m/m & 4.3% y/y.  For markets, a job adds figure modestly below expectations with an increase in unemployment and drop in wages should push Treasury yields lower and spur a strong rebound in stocks.

Conversely, if we see a job adds number close to or above 250k, a decline in unemployment or rise in wages, expect higher Treasury yields and lower stock prices.

Outside of the jobs report today we also get Consumer Credit (E: $11.5B) and one Fed speaker, Waller (12:00 p.m. ET), but they shouldn’t move markets.

An Important Jobs Day

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Jobs Report Preview

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

What’s in Today’s Report:

  • Jobs Report Preview (How Bad Would a Too Hot Number Be for Markets?)
  • Why Oil Dropped

Futures are modestly lower on slightly stagflationary foreign economic data while investors digest Wednesday’s bounce and look ahead to tomorrow’s jobs report.

Economically, foreign data hinted at stagflation again as Taiwan and South Korean CPIs rose slightly more than expected while German exports missed estimates (-1.2% vs. (E) – 0.6%).

Today focus will remain on data and Fed speak.  The key economic report is Jobless Claims (E: 210K) and at this point, the higher the better for stocks.  We also have numerous Fed speakers today including Mester, Barkin, Daly, and Barr.  However, none of them are Fed “leadership” so unless they provide surprise comments they shouldn’t move markets.

Jobs Report Preview

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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. 

Jobs Report Preview

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What’s in Today’s Report:

  • Jobs Day

Futures are modestly higher ahead of the jobs report following slightly better than expected final global manufacturing PMIs.

Economic data overnight was better than expected as the Chinese Caixin manufacturing PMI (a private market reading) beat estimates (51.0 vs. (E) 49.3). While EU (43.5 vs. (E) 43.7) & UK (43.0 vs. (E) 42.5) final manufacturing PMIs were no worse than feared.

Today there are two important economic reports that have the potential to move markets.  The first is the jobs report, and expectations are as follows:  170K Job Adds, 3.5% UE Rate, 0.3% m/m & 4.4% y/y Wage Growth).

As we covered in the Jobs Report Preview, “Too Hot” readings in job adds or wages will likely push Treasury yields higher and weigh on stocks.  But, a “Too Cold” job adds number would be a potentially more concerning signal over the medium and longer term, regardless if there’s any short term “bad is good” rally.

The other important economic report today is the ISM Manufacturing Index (E: 46.8) and markets will want to see stability.  The August flash PMIs were ugly and if we see the ISM manufacturing PMI drop from current levels, that will increase hard landing concerns.

Finally, there’s one Fed speaker today, Mester at 9:45 a.m. ET, but she shouldn’t move markets.

Jobs Report Preview

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