Sevens Report’s Tom Essaye quoted in Barron’s on December 13, 2018
Tom Essaye quoted in Barron’s on December 13, 2018. Read the full article here.
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Sevens Report’s Tom Essaye appeared on Cheddar on December 12, 2018
Sevens Report’s Tom Essaye appeared on Cheddar on December 12, 2018. He breaks down how Trump’s optimism on trade talks, and impacted the markets.
Watch the entire clip here.
Bounce Coming?
What’s in Today’s Report:
- Why We Could Be Close to a Bounce
Futures are modestly lower following the surprise resignation of Defense Secretary Mattis.
Mattis was seen as a stabilizing force in the administration, so his resignation is an incremental negative on general sentiment and that’s pressuring stocks this morning.
Economically, Q3 British GDP met expectations at 0.6%.
Today there is a lot of important economic data including (in order of importance): Durable Goods (E: 1.4%), Core PCE Price Index (E: 0.2%), Final Q3 GDP (E: 3.5%) and Consumer Sentiment (E: 97.5). The key numbers will be the Core PCE Price Index (it needs to stay around 2.00%) and Durable Goods (they need to be stable) as they can give us a stock positive “Goldilocks” outcome.
Additionally, Fed Governor Williams will by on CNBC at 10:00 a.m., and if he’s dovish that might help stocks rally.
Finally, today is quadruple witching options expiration.
Political Risks to this Market
What’s in Today’s Report:
- Political Risks to This Market
Futures are sharply lower (about 1%) as bad economic data is furthering worries about a slowdown in global growth.
Chinese Retail Sales (8.1% vs. (E) 9.0%) and Industrial Production (5.4% vs. (E) 5.9%) both badly missed estimates.
In Europe, the flash composite PMIs also missed expectations at 51.3 vs. (E) 52.5.
Geopolitically it was a quiet night although Chinese officials confirmed the reduction of auto tariffs to 15% from 40% (this was already pledged but it is good to see it will be enacted on Jan 1.).
Today it’s all about economic data. The numbers from China and the EU this morning were not good and fears of a global economic slowdown are rising, and we need Retail Sales (E: 0.1%) and Industrial Production (E: 0.3%) to push back on that narrative, otherwise today could be another ugly day.
Dow Theory Just Turned Bearish
What’s in Today’s Report:
- Dow Theory: First Bearish Signal Since July 2015
Futures are enjoying a bounce this morning after top economic officials from the US and China held a conference call o/n regarding the next stages of trade negotiations.
Economically, the German ZEW Survey was mixed as the Current Conditions reading badly missed at 45.3 vs. (E) 55.0 but Business Expectations were not as bad as feared: -17.5 vs. (E) -26.0.
The NFIB Small Business Optimism Index was a disappointment this morning with the headline coming in at 104.8 vs. (E) 107.0, the lowest headline since May.
Looking at the calendar today, the catalyst list is fairly thin as there is only one economic report: PPI (E: 0.0%) however inflation has been an important topic recently and a material “miss” or “beat” could move markets. Meanwhile there are no Fed officials scheduled to speak.
That will leave the primary focus of the market on U.S.-China trade relations including any further developments or details from last night’s “trade call” as well as the Huawei CFO’s bail hearing in Canada.
Bottom line, as long as we see more positive trade headlines, sentiment should improve and trade optimism will likely continue to act as a near term tailwind for markets.
Why Markets Dropped and How We Find Stability
What’s in Today’s Report:
- Why Stocks Dropped (New Reason) and How Markets Stabilize
- Weekly Market Preview
- Weekly Economic Cheat Sheet (CPI Wed. and lots of data Friday)
Futures and global markets are modestly lower due to momentum from Friday’s sell off.
News over the weekend was actually net positive as U.S./Chinese officials implied the Huawei CFO arrest was separate from trade, while China signaled it will begin buying U.S. soybeans and energy again.
Economically, Chinese exports missed estimates (5.4% vs. (E) 10.0%), although that number is very “noisy” and it’s not moving markets this morning (the Chinese economic data this Friday is more important than the trade balance).
There’s only one economic report today, JOLTS (E: 7.0M), and no Fed speakers so focus will remain on geo-political headlines (trade) and we should continue to expect more volatility. That said, the market is now deeply oversold in the short term, and if tech can stabilize and rally early, markets can bounce.
Technical Update (Encouraging Signals)
What’s in Today’s Report:
- Market Technical Update (Encouraging Signals)
- Why Stocks Rebounded Yesterday
- Why the Yield Curve Has Flattened SO Quickly (Blame Oil)
Futures are modestly lower as markets digest yesterday’s late day rally and look ahead to this morning’s jobs report.
Geopolitically, initial reports imply the U.S./China trade talks will continue despite the Huawei CFO arrest, which if confirmed is clearly a positive.
Global economic data was mixed again as Chinese currency reserves beat estimates while German IP missed. But, neither number is moving markets this morning.
Today is all about the jobs report and given sudden uncertainty on Fed policy (will they pause?) this jobs report is now the most important one of the year. Expectations are as follows: Job Adds: (E) 190K, UE Rate: (E) 3.7%, Wages (E) 3.2% yoy), and the best outcome for stocks is a “mild miss” across all three segments.
Away from the jobs report we also get Consumer Sentiment (E: 97.4) and one Fed speakers, Brainard (12:15 p.m. ET).
Why Markets Are Dropping Again
What’s in Today’s Report:
- Why Markets Are Dropping Again (And Why We Don’t Think It’s a Bearish Gamechanger)
- What Needs to Happen in the Short Term for Markets to Stabilize
- Jobs Report Preview
- Bond Market Analysis (Yield Curve)
Futures are sharply lower as the arrest of the Huawei CFO in Canada has added to uncertainty on U.S./China trade, while oil is down sharply due to OPEC disappointment.
Huawei (Huawei is a giant Chinese telecom company) CFO Meng Wanzhou was arrested in Canada overnight and that is perceived as potentially complicating U.S./China trade.
Further adding to the downward pressure in markets is a 3% drop in oil, as Saudi Arabia proposed a 1 million barrel production cut, less than the 1.3 million barrel expectation.
Focus today will be on geo-political headlines, specifically any further reaction to the Huawei CFO arrest and anything that minimizes the situation will help stocks.
Away from geo-politics, we get several important economic reports including: ADP Employment Report (E: 175K), Jobless Claims (E: 225K), Productivity and Costs (E: 2.3%, 1.1%) and ISM Non-Manufacturing index (E: 59.0). But, even if the reports are all “Goldilocks” today’s price action will still be driven by geo-political headlines and, to a lesser extent, oil (it needs to stabilize).
Sevens Report’s Tom Essaye quoted in USA TODAY on December 4, 2018
Sevens Report’s Tom Essaye quoted in USA TODAY on December 4, 2018. Read the full article here.
OPEC’s Catch-22
What’s in Today’s Report:
- OPEC’s Catch-22 Explained
- ISM Manufacturing PMI Analysis
Futures are modestly lower as the Trump-Xi “trade truce” continues to be digested this morning while the yield curve flattened further overnight, underscoring growth concerns.
The major underlying story this morning is the yield curve as the 2’s-10s spread compressed to new lows overnight (13bp) and the 2’s-5’s actually inverted.
Economically, EU PPI was 4.9% vs. (E) 4.5% in Oct. but the recent plunge in energy prices has investors largely shrugging off the “hot” print.
Today is likely to be a fairly quiet day ahead of tomorrow’s National Day of Mourning for President George H.W. Bush although there are two potential catalysts to watch: Motor Vehicle Sales (E: 17.2M) and New York Fed President Williams speaks shortly after the open (10:00 a.m. ET).