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The Rotation Out of Tech Continues

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The Rotation Out of Tech Continues: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • The Rotation Out of Tech Continues

Futures are modestly higher thanks to solid tech earnings and better than expected inflation data from Europe.

DELL and MRVL, both AI linked tech companies, posted solid earnings and guidance and that’s supporting futures.

Economically, EU HICP (their CPI) declined further to 2.8% y/y vs. (E) 2.9%, giving the ECB more room to cut rates.

Today is typically a quiet day in the markets as traders try to get a head start on the three-day weekend, but there is an important inflation report this morning:  The Core PCE Price Index (E: 0.2% m/m, 2.7% y/y).  If that report is better than expected, it’ll boost expectations for a 50-bps rate cut in September (positive for stocks) while a higher-than-expected number will push back against a 50-bps cut (negative for stocks).

Other data today includes the Chicago PMI (E: 46.4) and inflation expectations in University of Michigan Consumer Sentiment (1-Yr Inflation Expectations: 2.9%, 5-Yr. Inflation Expectations: 3.0%) but barring major surprises, neither of those numbers should move markets.

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It’s not structurally the most important stock in the market

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It’s not structurally the most important stock in the market: Sevens Report Editor, Tom Essaye, Quoted in Barron’s

Why Nvidia Is the Market’s Most Important Stock

“Nvidia is the most important stock because people have decided it’s the most important stock,” Sevens Report Research’s Tom Essaye told Barron’s in a phone interview. “It’s not structurally the most important stock in the market—their business focus is very, very slim. They just happen to be the tip of the spear of what people are convinced will be the next tech revolution.”

AI is important because the market expects AI to boost corporate profitability in the coming decades,” Essaye says. “And the whole second step of this entire thing is the uptake of AI and how it actually makes money. Nvidia is the picks and shovels of the gold mine. But people will only buy the picks and shovels if they can actually find gold, right?”

Also, click here to view the full Barron’s article published on August 27th, 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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Renewed Rotation Risks (Smart Money Is Getting Defensive)

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Renewed Rotation Risks (Smart Money Is Getting Defensive): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Recent Sector Performance Points to Smart Money Getting Defensive
  • Chart – 10Y-2Y Yield Curve Spread Revisits the Zero-Bound

U.S. equity futures are slightly higher after a mostly quiet night of news as traders look ahead to NVDA earnings.

There was no economic data overnight but the BOJ’s Deputy Governor, Himino, reiterated that policy makers would continue raising rates with the “utmost vigilance,” which supported a modest bid in equity markets and other risk assets overnight.

Looking into today’s session, there are no notable economic reports and just one Fed speaker after the close: Bostic (6:00 p.m. ET).

There is a 5-Yr Treasury Note auction at 1:00 p.m. ET and given the strong performance in the belly of the duration curve since the start of August, traders will be looking for demand to remain solid to confirm the recent drop in yields is sustainable.

Finally, likely the biggest catalyst of the week will come after the close today with NVDA earnings ($0.65) due shortly after the bell. Other notable companies reporting quarterly results today include CRM ($2.35) and HPQ ($0.86) but the main focus will be on NVDA as options traders are pricing in a volatile 10%+ reaction (up or down) to the earnings release and given the stocks heavy weight in the major indexes, a move of that magnitude will have an impact on the broader market in the back half of the week.

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Powell Speech Preview (What’s Expected, Dovish If, Hawkish If Scenarios)

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Powell Speech Preview: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Powell Speech Preview (What’s Expected, Dovish If, Hawkish If Scenarios)

Futures are solidly higher ahead of Fed Chair Powell’s speech thanks to not hawkish commentary from BOJ Governor Ueda.

Ueda stated that rates would continue higher but that increases would be data dependent and in conjunction with monitoring market conditions (meaning the yen spike from last month won’t be repeated, which is a good thing).

Economically, Japanese CPI rose 2.7% y/y, as expected and that’s further reducing hawkish BOJ concerns.

Today focus will be on Fed Chair Powell’s speech (10:00 a.m. ET) and as long as he removes any lingering doubts about a September rate cut, this rally can continue.

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An economic downturn resulting from a ‘Fed mistake’

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An economic downturn resulting from a ‘Fed mistake’: Tyler Richey, co-editor at Sevens Report Research

WTI Extends Losses After API Reports Small (Surprise) Crude Build

“An economic downturn resulting from a ‘Fed mistake’ would lead to a bear market in the global energy markets,” Tyler Richey, co-editor at Sevens Report Research, told MarketWatch.

So “if we start to see economic data deteriorate in the coming weeks or months, demand estimates penciled in based on the optimistic hope of a soft landing will fall considerably amid an emerging recessionary reality.”

Also, click here to view the full ZeroHedge article published on August 20th, 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.

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Watch the BLS Revisions Today

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Watch the BLS Revisions Today: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Something to Watch Today: BLS Revisions
  • How a Fed Mistake Would Impact Commodities
  • VIX Expiration Poses Threat to Short-Volatility Trade – Chart

Futures are slightly higher as traders await job growth revisions from the BLS after a mostly quiet night of news.

Economically, Japanese trade data revealed a deeper than anticipated deficit in July but amid solid import/export growth numbers which importantly helped pause a rally in the yen and reduced pressure on risk assets overnight.

Looking into today’s session, there are no typical economic reports on the calendar, however, the BLS Revisions to Net Payroll Growth for the trailing 12-months through March 2024 will be released at 10:00 a.m. ET and a significant downward revision could rekindle the recession fears initially sparked by the July jobs report which would result in broad market volatility.

In the afternoon, there is a 20-Yr Bond auction at 1:00 p.m. ET which could move yields and influence equity markets before investor focus will turn to the release of the July FOMC Meeting Minutes at 2:00 p.m. ET.

Finally, earnings season continues to wind down but a few notable companies reporting today include: TGT ($2.17), TJX $0.92), ZM ($1.21).

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U.S. oil futures fell to new lows for the week

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U.S. oil futures fell to new lows for the week: Sevens Report Co-Editor, Tyler Richey, Quoted in Morningstar

U.S. oil prices end lower for the week as demand fears outweigh Middle East war jitters

U.S. oil futures fell to new lows for the week as Chinese data showed declining imports and refinery input demand suggested that a further slowdown in the Chinese economy will weigh on total global demand, Tyler Richey, co-editor at Sevens Report Research, told MarketWatch. Data from China reportedly showed refinery runs fell 6.1% year over year in July.

That followed a negative International Energy Agency report on Thursday, which mentioned a likely surplus emerging in the physical market in the quarters ahead, and a “lackluster” weekly Energy Information Administration report Wednesday, which showed a surprise build in headline crude stockpiles, Richey noted.

Gains early on this week were geopolitically driven amid heightened tensions between Israel and Iran, said Richey.

Looking ahead, Richey said that “geopolitical tensions remain an influence on the market … with a mild fear bid remaining in place.” However, “recession fears have emerged to be a more important factor for the market as we approach the end of the summer driving season, and any rallies driven by headlines out of the Middle East are likely to be capped in the low $80s.”

A soft economic landing is “continuing to be priced in with oil at current levels but if a hard landing becomes more likely in the weeks or months ahead,” expect oil prices to fall, Richey said – with WTI moving toward the low to mid-$60s “not only possible, but likely.”

Also, click here to view the full MarketWatch article published on Morningstar on August 16th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Oil Inventories

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.

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Updated Market Outlook

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Updated Market Outlook: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Updated Market Outlook
  • Weekly Market Preview:  Will Powell Confirm A September Rate Cut?
  • Weekly Economic Cheat Sheet:  The First Big Number of August (and It Needs to be Goldilocks)

Futures are little changed following a very quiet weekend of news as investors look ahead to more growth data this week and Powell’s speech on Friday.

There was no notable economic data over the weekend or overnight.

Geopolitically, optimism is continuing to build towards a ceasefire between Israel and Hamas and that’s weighing on oil prices, although nothing formal has been announced.

Today there is only one economic number, Leading Indicators (E: -0.3%), and barring a big surprise that shouldn’t move markets.  There is also one Fed speaker, Waller (9:15 a.m. ET), and he is part of Fed leadership so if he strongly hints at a September rate cut, that should be a mild tailwind for stocks and bonds.

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The Right Way to Think About Economic Growth Right Now

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The Right Way to Think About Economic Growth Right Now: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Hard Landing/Soft Landing Scoreboard (The Right Way to Think About the U.S. Economy)

Futures are slightly lower following a mostly quiet night of news as markets digest Thursday’s strong rally.

The only notable economic report overnight was UK retail sales, which rose 0.8% vs. (E) 0.5% and added to Thursday’s haul of solid global data.

Geo-politically, Israel/Hamas ceasefire talks continued and any breakthrough would be a surprise market positive.

Today there are a few notable economic reports including Consumer Sentiment (E: 67.0), 1-Yr Inflation Expectations: (E: 2.9%), 5-Yr. Inflation Expectations (E: 3.0%) and Housing Starts (1.342M).  However, those numbers aren’t that important to growth so barring a major surprise, they shouldn’t move markets and we should mostly see digestion of Thursday’s big rally.

There is also one Fed speaker today, Goolsbee (1:25 p.m. ET), and he’s dovish do don’t be surprised if he openly talks about cutting rates in September.

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A geopolitical fear bid in the oil market

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A geopolitical fear bid in the oil market: Sevens Report Co-Editor, Tyler Richey, Quoted in Morningstar

Oil prices lifted as data shows drop in U.S. crude inventories

Oil has “benefited from some of the risk-on money flows in other asset classes, most notably stocks, as well as still-elevated tensions between Israel and regional enemies Hamas and Hezbollah, keeping a geopolitical fear bid in the market,” wrote analysts at Sevens Report Research in a note.

Also, click here to view the full MarketWatch article published on Morningstar on August 7th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Oil Inventories

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.

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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.