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Where Do We Stand With Tariffs?

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Where Do We Stand With Tariffs?: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Where Do We Stand With Tariffs?
  • Weekly Market Preview: Tariff Threats Remain Centerstage
  • Weekly Economic Cheat Sheet: Stagflation Risks Turn Investor Focus to Fed Meeting Minutes

Stock futures are higher despite a rise in global bond yields thanks to growing fiscal concerns in Europe and hawkish commentary from the Fed’s Waller over the long weekend.

Economically, U.K. jobs data from January was solid while the German ZEW Survey was better than expected which added upside pressure to global yields overnight.

Looking into today’s session, there are two economic reports to watch this morning: Empire State Manufacturing Index (E: -0.5) and the Housing Market Index (E: 47.0) as well as two Fed speakers on the calendar Daly (10:20 a.m. ET) and Barr (1:00 p.m. ET).

Finally, there is a 52-Week Treasury Bill auction at 1:00 p.m. ET that could impact yields and move equity markets and earning season continues with a few noteworthy companies due to report quarterly results today including: BIDU ($1.78), MDT ($1.36), OXY ($0.67).

Bottom line, investors will want to see more “Goldilocks” data to contradict last week’s “whiff of stagflation,” and a less hawkish tone from Fed officials. Additionally, stabilizing yields and solid earnings would offer added tailwinds for equity markets at the start of the holiday-shortened trading week.

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Discretionary demand for driving fuels, which remains near a 52-week low right now.

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Discretionary demand for driving fuels, which remains near a 52-week low right now.: Tyler Richey Quoted in Morningstar

Oil prices drop on rise in U.S. supplies as tariffs threaten to dent Chinese demand

Refinery utilization rose by 1 percentage point to 84.5%, EIA data showed. The uptick was likely in reaction to a “weather-driven rise in demand for heating oil last week,” which also helps explain the sizeable increase in distillate stockpiles, which include heating oil, said Tyler Richey, co-editor at Sevens Report Research.

However, the trends in the weekly data suggest that demand for oil and refined products has been weak so far in 2025, “and [is] potentially poised to get weaker,” he said. “That is especially true regarding discretionary demand for driving fuels, which remains near a 52-week low right now.”

“If we don’t begin to see signs of firming inflation” with gasoline supplied rising back towards 9 million barrels per day or higher in the weeks ahead, then “WTI futures dropping back below $70 [per] barrel will become rather likely,” said Richey.

Also, click here to view the full MarketWatch article published on Morningstar on February 5th, 2025. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Oil Inventories

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Earnings and economic growth are still solid

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Earnings and economic growth are still solid: Sevens Report Analysts Quoted in Investing.com

Are tariffs a gamechanger for the S&P 500?

While the tariffs add another headwind for equities, Sevens Report argues that they do not warrant an immediate reduction in equity exposure.

“Earnings and economic growth (the two most important foundational forces for stocks) are still solid,” the analysts wrote. However, they caution that “the factors that push stocks higher are being weakened or eliminated one-by-one,” while downside risks are mounting.

“These tariffs potentially undermine that positive price action from the ‘rest’ of the market and could weigh on other sectors while DeepSeek weighs on tech,” the analysts noted.

“Most still believe this is all a negotiation and that the tariffs won’t be on for long (and that’s still probably right),” the report states. However, with AI uncertainty and elevated valuations already straining investor sentiment, Sevens Report warns that “the recipe is coming together for a solid and extended pullback.”

Also, click here to view the full article published on February 3rd, 2025. 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.

This accelerated approach has generated 3.5% annualized alpha

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This accelerated approach has generated 3.5% annualized alpha: Sevens Report Analysts Quoted in Investing.com

Analyst explains 2 sector rotation strategies with proven outperformance

According to Sevens, this accelerated approach has generated 3.5% annualized alpha versus the S&P 500.

The second strategy called the Cheapskate Sector Strategy, involves buying the sector with the lowest price-to-earnings ratio from the previous year.

Sevens notes that the contrarian approach, while more psychologically challenging, has historically paid off, delivering an annualized return of 12.6% over 34 years. It has outperformed the S&P 500 in 20 of those years, with a 59% win rate. For 2025, Energy is the cheapest sector in the S&P 500 based on trailing P/E.

Sevens Report notes that while these strategies don’t work every year, their long-term success rates exceed those of most active managers.

Also, click here to view the full article published on January 31st, 2025. 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.

Were Tariff Fears Exaggerated? (No. Two Reasons Why)

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Were Tariff Fears Exaggerated? (No. Two Reasons Why): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Were Tariff Fears Exaggerated? (No. Two Reasons Why)

Futures are slightly lower following a major central bank rate hike and despite better-than-expected economic data.

The Bank of Japan raised interest rates 25 bps, as expected, and signaled further rate hikes are coming (also as expected).

Economically, Euro Zone and UK Manufacturing PMIs slightly beat estimates but both remained in contraction territory.

Today we get the most important economic reports of the week via the January Flash Manufacturing PMI (E: 48.9) and Flash Services PMI (E: 56.7) and again, markets will want to see in-line to slightly soft data.  Stronger than expected readings would likely boost yields and pressure stocks.  Other economic reports today include Existing Home Sales (E: 4.16 million) and Consumer Sentiment (E: 73.2).

Turning to earnings, the key report I’m watching today is AXP ($3.03) as that will give us insight into consumer spending and the stronger the report, the better.

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What Happens to Markets If the Bond Vigilantes Return?

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What Happens to Markets If the Bond Vigilantes Return?: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What Happens to Markets If the Bond Vigilantes Return?
  • What Happens to Markets If the Bond Vigilantes Don’t Return?

Futures are slightly lower mostly on digestion of the recent rally and following a mostly quiet night of news.

Economically, the only notable number was UK CBI Industrial Trends, which were slightly better than expected (-34% vs. (E) -40%).

Politically, President Trump conducted an interview with Sean Hannity overnight but nothing new was revealed.

Today we get our first notable economic report of the week via Jobless Claims (E: 218K) and the case remains that Goldilocks data (so in-line to slightly weak) is the best case scenario for stocks, as it implies solid growth but won’t further reduce rate cut expectations.

On earnings, the reporting season continues to gain steam and some reports we’re watching today include GE ($1.02), AAL ($0.64), FCX ($0.25), TXN ($1.19), ISRG( $1.77).

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Some of the biggest gains in the bull market

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Some of the biggest gains in the bull market: Tyler Richey Quoted in Business Insider

Oracles of Wall Street: 11 pros who nailed 2024’s top trends

Building on Sevens Report founder Tom Essaye’s bullish fundamental outlook, Richey compiled the technical indicators he watches and concluded in February that the index could hit 6,000 by the end of 2024.

For example, the S&P 500’s relative strength index, which measures price momentum, had stayed in “overbought” territory for three weeks at the time. When that has happened in the past, it’s meant that the trend could continue for several months, Richey said. Investor sentiment was also bullish but not over-extended. And the yield curve was still inverted despite no sign of recession.

“Some of the biggest gains in the bull market — statistically, it’s measurable that they occur during yield curve inversions such as the late ’90s and 2006-2007,” he said.

Going into 2025, however, Richey sees signs that the rally could face hurdles if a negative catalyst comes along.

“Looking ahead, the collection of market indicators and cyclical signals we monitor suggest all the pieces are in place for this bull market to end in the weeks or months ahead and for a cyclical bear market to begin,” Richey said in an email. But he added that: “There is nothing in the current fundamental backdrop that suggests a bear market in stocks is a sure thing or even likely for that matter.”

Also, click here to view the full Business Insider article published on December 18th, 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.

Can Stocks Go Back-to-Back-to-Back?

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Can Stocks Go Back-to-Back-to-Back?: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Can Stocks Go Back-to-Back-to-Back?
  • Why CPI Was An Important Positive for Markets
  • EIA Analysis and Oil Market Update

Futures are modestly higher thanks mostly to solid earnings and guidance from Taiwan Semiconductor (TSM).

For AI related tech companies, guidance will be key this earnings season and TSM posted better than expected revenue guidance and the stock is up 5% pre-market.

Economic data overnight largely met expectations.

Today will be a busy day of notable economic data and earnings.  On the economy, we get several important reports today including, in order of importance, Retail Sales (E: 0.5%), Jobless Claims (E: 214K), Philly Fed (E: -8.0) and the Housing Market Index (E: 46).  As has been the case, data that meets or slightly misses expectations is the “best” case for markets (while very strong data will boost yields and pressure stocks).

On earnings, the Q4 reporting season is just starting to ramp up and some important results we’re watching today include BAC ($0.77), MS ($1.65), UNH ($6.71), JBHT ($1.63).

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MMT Chart: Bearish Revisions and Building Technical Risks

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MMT Chart: Bearish Revisions and Building Technical Risks: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • MMT Chart – Bearish Revisions and Building Technical Risks
  • PPI Takeaways – Favorably, No Hawkish Surprise

Futures are higher with European shares led by U.K. stocks thanks to more “cooler-than-feared” inflation data released overnight.

Economically, U.K. Core CPI fell 0.3% to 3.2% vs. (E) 3.4% in December, favorably matching a 3+ year low. In the wake of yesterday’s lower than expected U.S. PPI report, we are seeing some recent hawkish money flows unwind and a tentative risk-on tone in the pre-market.

Today is lining up to be very busy with arguably the most important economic data of the week due out before the bell: CPI (E: 0.3% m/m, 2.9% y/y) and Core CPI (E: 0.2% m/m, 3.3% y/y). The Empire State Manufacturing Index will also be released at 8:30 a.m. ET (E: 1.0).

Fed speak also picks up materially today with multiple speakers scheduled to offer commentary over the course of the session including: Barkin (8:00 a.m. ET), Kashkari (10:00 a.m. ET), Williams (11:00 a.m. ET), and Goolsbee (11:00 a.m. ET).

Finally, today is the unofficial start to earnings season as well with big banks due to release Q4 results this morning. Noteworthy financial behemoths reporting before the bell include: JPM ($4.02), C ($1.25), BLK ($11.44), WFC ($1.34), and GS ($7.99).

Bottom line, in order for stocks to continue to stabilize near current levels, investors will want to see “cool” CPI data, less hawkish Fed speak, and solid big bank earnings. If any of those catalysts disappoint, there is a strong risk the 2025 stock market lows are retested today.

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Market Multiple Table: January Update

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Market Multiple Table: January Update: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Market Multiple Table – January Update

Futures are higher with global stock markets thanks to easing tariff policy worries and fading geopolitical angst.

After the close yesterday, Bloomberg reported Trump’s economic team is planning gradual tariff increases (2%-5% per month) rather than large, one-time hikes which is easing worries about the immediate impact on both growth and inflation.

Geopolitically, the WSJ reported Israel and Hamas are working on a ceasefire deal that could be finalized as soon as today. If successful, the deal would favorably remove a lingering source of market uncertainty.

Looking into today’s session, trader focus will be on inflation data early with the December PPI report due before the open (E: 0.3% m/m, 3.3% y/y). A “cooler” than expected report would likely trigger a continued relief rally in equity markets amid stabilizing bond yields.

There are no other notable economic reports today, but two Fed officials are scheduled to speak: Schmid (10:00 a.m. ET) and Williams (3:00 p.m. ET), and because hawkish money flows have been a major source of volatility in equities recently, their commentary has the potential to move markets today. A more dovish-leaning tone from both would be the most favorable outcome for equities today.

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