Posts

What the Trade Truce Means for Markets

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What’s in Today’s Report:

  • What The U.S./China Trade Truce Means for Markets
  • Four Keys to A Bottom Updated:  Getting Closer, but Not There Yet
  • Weekly Market Preview
  • Weekly Economic Cheat Sheet (All About Growth and Jobs)

Futures and global markets are surging (up more than 1%) as Trump and Xi agreed to U.S./China trade war truce.

As was generally expected, the U.S. will not raise tariffs on China to start 2019 and both sides have agreed to a three month negotiation period.

Economic data was good as EU and UK Manufacturing PMIs both beat estimates

Today there is one important economic report, the November ISM Manufacturing PMI (E: 57.2) and it needs to be a “Goldilocks” reading to help fuel this early rally.  We also get three Fed speakers (Williams (9;15 a.m. ET), Brainard (10:30 a.m. ET), Kaplan (1:00 p.m. ET)) but none of them should move markets.

Bottom line, tech and industrials are the key sectors to watch today, and outperformance from both will be needed for stocks to hold these big, early gains.

Trump/Xi Meeting Preview

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What’s in Today’s Report:

  • G-20 Preview:  The Good, the Expected & the Ugly

Futures are modestly lower on positioning ahead of the G-20 and due to disappointing foreign economic data.

Regarding the G-20, there was no new news overnight, and the expectation remains for a trade war “truce.”

Economic data was disappointing.  Chinese Nov. Manufacturing PMI dropped to 50.0 vs. (E) 50.2, the lowest since mid-2016.  EU inflation also underwhelmed as the core flash HICP rose 1.0% y/y vs. (E) 1.1% y/y.  So, despite some decent data this week, “ROW” (rest of world) economic activity remains underwhelming.

There are no economic reports today and just one Fed speaker, Williams (1:00 p.m. ET), but he won’t move markets.  So, markets should be in a general holding pattern ahead of the G-20 and I’d expect a quiet day.  That said, there has been a constant flow of headlines on the potential outcome of the Trump/Xi meeting, so we’ll continue to watch the headlines for any headline surprises that could cause volatility.

Sevens Report’s Tom Essaye appeared in Yahoo Finance on November 23, 2018

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Sevens Report’s Tom Essaye appeared in Yahoo Finance on November 23, 2018. His take on oil, market volatility, stocks and more. Watch the entire clip here.

Is Flat the New Inverted?

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What’s in Today’s Report:

  • Is Flat the New Inverted?

Futures are trading slightly lower this morning on an uptick in trade war fears following an otherwise quiet night.

After the close yesterday, the WSJ ran an interview with Trump where he said he was ready to move forward with increasing tariff rates (from 10% to 25%) in early 2019 and delaying the hike per China’s request was “highly unlikely.”

Today, there are a few potential catalysts on the schedule. Economically, there are three reports due out: S&P CoreLogic Case-Shiller HPI (E: 0.3%), FHFA HPI (E: 0.3%) and Consumer Confidence (E: 136.5).

Meanwhile on the Fed front, Clarida speaks ahead of the open (7:45 a.m. ET) while Bostic, George, and Evans speak on a panel in NY this afternoon (2:30 p.m. ET).

With Powell’s speech later this week still a major focus of the market, the Fed chatter will be watched closely while the market will remain very sensitive to any further rhetoric on the trade front (the other big event being the G20) after Trump’s comments yesterday afternoon.

Sevens Report’s Tom Essaye quoted in Nasdaq on November 20, 2018

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Sevens Report’s Tom Essaye quoted in Nasdaq on November 20, 2018. Read the full article here.

Sevens Report’s Tom Essaye quoted in CNBC on November 21, 2018

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Sevens Report’s Tom Essaye quoted in CNBC on November 21, 2018. Read the full article here.

 

Sevens Report’s Tom Essaye quoted in MarketWatch on November 21, 2018

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Sevens Report’s Tom Essaye quoted in MarketWatch on November 21, 2018. Read the full article here.

 

 

Is the Corporate Bond Bubble Bursting?

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What’s in Today’s Report:

  • Pullback Update: Why we think the 2650-2850 trading range is still intact.
  • Is the Corporate Bond Bubble Bursting?

Futures are enjoying a modest oversold bounce following a generally quiet night.

Italy will be in focus today as the European Commission will issue a decision on the resubmitted budget and rejection is likely.  Positively, however, there were some reports Italy would be open to negotiation on the proposed budget, and that helped fuel the bounce this morning.

There were no notable economic reports overnight.

Today should be a generally quiet day as travel picks up for the Thanksgiving holiday.  But, that said, there are three notable economic reports this morning: Durable Goods (E: -2.5%), Jobless Claims (E: 215k), Existing Home Sales (E: 5.21M).  Bottom line, tech remains key in the short term.  If Nasdaq and FDN can bounce, stocks can recoup some of the week’s losses.

Everyone please have a happy and safe Thanksgiving!

Four Keys to a Bottom (Some Progress Achieved)

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What’s in Today’s Report:

  • Four Keys to a Bottom – Some Progress Achieved
  • Weekly Market Preview (Busy Despite the Holiday)
  • Weekly Economic Cheat Sheet (All About Flash PMIs and Housing).

Futures are marginally lower following a very quiet weekend as markets digest the Thursday/Friday rally.

There were no new developments on the Fed or U.S./China trade over the weekend so markets will start this week looking for something to further the recent positive momentum on both topics.

Economically, Japanese exports slightly missed estimates at 8.2% vs. (E) 9.0% but that’s not moving markets.

As mentioned, markets will be looking daily for any comments that reinforce the dovish comments from Fed Vice Chair Clarida on Friday and apparent improvement in U.S./China trade (Trump was positive on this Friday afternoon).  But that said, today should be pretty quiet as there is just on economic report, Housing Market Index (E: 68.00), and one Fed speaker, Williams (9:40 a.m. ET, 10:45 a.m. ET, 3:15 a.m. ET).

Technical Update

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What’s in Today’s Report:

  • Technical Update
  • Economic Data Recap
  • EIA Analysis and Oil Update

US futures are down roughly 0.5% this morning thanks to soft earnings after the close yesterday, most notably by NVDA (the company’s shares fell nearly 20% overnight). Otherwise it was a relatively quiet night of news.

Oil is up over 1% this morning on optimism surrounding a potential OPEC-cut, but serious technical damage has been done on the charts this week, and right now, the medium term outlook is neutral at best for energy.

Economically, the only data point released overnight was Eurozone HICP which matched estimates at 2.2% y/y and is not materially affecting the euro or longer term outlook for the ECB.

Today, there is one important economic report to watch: Industrial Production (E: 0.2%) and two Fed speakers: Clarida before the open (8:30 a.m. ET) and Evans just before lunch (11:30 a.m. ET).

Otherwise, focus will be on tech shares today as if the bad earnings from NVDA weigh on the sector more broadly, then stocks will have a hard time extending yesterday’s bounce.

On the charts, yesterday’s close of 2730 in the S&P is an important level to watch as a close above would be a positive development for the near term technical outlook.