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Why Does the Market Think COVID Has Peaked?

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What’s in Today’s Report:

  • Why Does the Market Think COVID Has Peaked?
  • EIA Analysis and Oil Market Update

Futures are slightly lower following a quiet night of news as markets digest this week’s rally.

Chinese shares saw profit taking (Hang Seng down –2%) and that’s weighing on global stocks slightly, but there was no materially negative news out of China overnight.

Economic data was sparse as the German Gfk Consumer Climate slightly missed expectations (-1.2 vs. –1.0) while the Euro Zone money supply met estimates (up 8.1%).

Today we do get two economic reports including Jobless Claims (E: 340K) and revised Q2 GDP (E: 6.6%) but neither number should move markets unless they are major surprises.  Instead, pre-Powell speech positioning will likely dominate markets today (Powell’s speech is tomorrow) and given stocks hit new highs this week, don’t be surprised if there’s some mild profit taking ahead of Powell’s speech tomorrow.  Finally, in the bond markets, there’s a seven year Treasury auction mid-day today, and if the results are soft look for a continued rally in the 10 year yield (and an improving technical outlook for that yield).

 

Thank You!

I wanted to say a heartfelt, “Thank you” to all of you who sent me condolences and well wishes over the past week.

While I wish I could respond to each individual email or call, there have literally been hundreds of them, and if I took on that endeavor I’d have no time to write the Report! I believe that continuing to stay focused on the

markets and helping us to navigate this unprecedented time successfully is the best way I can show you my thanks, and you can count on me to do just that.

Again, thank you all.  You have made this time easier.

Why Did Stocks Drop?

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What’s in Today’s Report:

  • Why Did Stocks Drop?
  • Fed Minutes Takeaways
  • EIA Data Takeaways and Oil Update

There are risk-off money flows across asset classes this morning as investors fear that central banks are poised to tighten policy into a global economic slowdown this fall.

This week’s options expiration is likely amplifying the volatility this morning.

There were no market-moving economic reports or material news developments overnight.

Today, there are two economic reports to watch: Jobless Claims (E: 360K) and the Philadelphia Fed Manufacturing Index (E: 25.0).

No Fed officials are scheduled to speak today but there is a 30-Year TIPS auction at 1:00 p.m. ET that could move bond yields.

Volatility is likely to remain elevated today as we get closer to tomorrow’s options expiration while trader conviction is low given Jackson Hole looming next week as well as the fact that investor sentiment has deteriorated this week.

Editor’s Note:  No Report Tomorrow

There will be no Report tomorrow, as I will be attending a funeral.  Last week, my father, Tim Essaye, Sr., unexpectedly passed away. His funeral and memorial will be held today. 

My dad helped get me on Wall Street when I got out of college and without his support and encouragement, I wouldn’t have had the courage, with my wife Alison pregnant with our first child, to leave a good job and start a new, daily market report.

He was the first subscriber to the Sevens Report.

So, for the first time in the nearly 10 years since I started the Sevens Report, there will be no issue on a trading day, as I will be focused today on celebrating his life with our family and friends.

I apologize for this inconvenience and thank you for your understanding.   

Tom Essaye Quoted in Baystreet on August 16, 2021

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Where Does Wall Street Think Oil Is Heading?

If support holds, which it likely will as long as the news flow regarding COVID does not continue to…Tom Essaye of the Sevens Report has told MarketWatch. Click here to read the full article.

Tom Essaye Quoted in Yahoo Finance on August 14, 2021

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Where Does Wall Street Think Oil Is Heading?

When the July WTI contract managed to close Monday above the July low at $66.41/bbl, it marked that level as…Tom Essaye of the Sevens Report has told MarketWatch. Click here to read the full article.

 

Yield Curve Update (Reflation vs. Stagflation)

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What’s in Today’s Report:

  • Yield Curve Update (Reflation vs. Stagflation)
  • EIA and Oil Market Update

Futures are little changed following a generally quiet night of news.

Economic data was slightly underwhelming as UK Industrial Production (-0.7% vs. (E) 0.3%) and Euro Zone IP (-0.3% vs. (E) -0.2%) both missed estimates, although neither is weighing materially on markets.

Covid headlines remained largely unchanged, although Hawaii is reimposing restrictions on social gatherings.  But, that headline isn’t enough to weigh on markets broadly, as the broad response to rising cases remains mask mandates and increased vaccinations (which aren’t material headwinds on the recovery yet).

Today focus will be on Jobless Claims (E: 378K) and markets will want to see the number continue to gradually decline (but not drop so fast that it makes the Fed taper more quickly).  We also get Final PPI (E: 0.6% m/m, 7.3% y/y) but given yesterday’s CPI wasn’t hotter than expected, PPI shouldn’t move markets.

Tom Essaye Quoted in CNBC on August 9, 2021

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Crude falls on surging Covid cases, following worst week since October for oil

The oil market is likely to remain rangebound here as the physical market is poised to…said Tom Essaye, editor of the Sevens Report. Click here to read the full article.

Tom Essaye Quoted in Market Watch on August 3, 2021

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Oil ends lower, extends drop as COVID spread stokes demand worries

The 2021 oil rally, which has seen WTI and Brent both rise around 48% year-to-date, has been driven…said Tom Essaye, founder of Sevens Report, in a note. Click here to read the full article.

Sevens Report Analyst Quoted in Market Watch on July 29, 2021

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Oil prices extend rise to highest finish in over 2 weeks

When we start to see broader delta fears being to subside…we should see that metric ramp back up and underscore…analysts at Sevens Report Research wrote in Thursday’s newsletter. Click here to read the full article.

Sevens Report Co-Editor Tyler Richey Quoted in Market Watch on July 30, 2021

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Oil prices finish higher to score a 4th-straight monthly gain

July was certainly a rollercoaster in the oil markets, said Tyler Richey, co-editor at Sevens Report Research. Click here to read the full article.

ECB Decision Takeaways (Not Dovish Enough, Again)

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What’s in Today’s Report:

  • ECB Decision Takeaways (No Dovish Enough, Again)
  • Updated Oil Outlook

Futures are moderately higher thanks to solid economic data and better than expected earnings.

The EU flash PMI was stronger than expected at 60.6 vs. (E) 60.0, while good UK Retail Sales (0.5% vs. (E) 0.4%) helped offset the soft UK flash PMI (57.7 vs. (E) 61.9).  But, on an absolute basis the numbers were good, and importantly the economic recovery is still on going and has good momentum.

Earnings were good in aggregate overnight with strong reports from TWTR and SNAP, among others.

Today the key number will be the July Flash Composite PMI (E: 63.4) and markets will want “Goldlocks” data.  Specifically, that means strong activity that implies the rise in COVID cases isn’t hurting the recovery, while at the same time, activity that isn’t so strong it makes the Fed think about tapering sooner than expected, or more forcefully.

Earnings season also continues today, and four reports we’ll be watching include: NEE ($0.67), AXP ($1.64), SLB ($0.25), and HON ($1.94).