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Why Stocks Dropped Yesterday

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What’s in Today’s Report:

  • Why Stocks Dropped Yesterday

Futures are weaker this morning but off session lows as investors digest underwhelming earnings from AI-sensitive SMCI and AMD ahead of key economic data today.

Economically, the Eurozone’s Final Composite PMI firmed to 52.5 vs. (E) 52.2 in October from 51.2 in September which is helping to ease concerns about a global economic slowdown.

Today, focus will be on economic data early with the ADP Employment Report (E: 28K), Flash Composite PMI (E: 54.8), and ISM Services PMI (E: 51.0) all due to be released by 10:00 a.m. ET.

There are no Fed officials scheduled to speak today but there is a 4-Week Treasury Bill auction at 11:30 a.m. ET that could shed light on investor expectations for a December rate cut.

Earnings season continues as well today with notable companies reporting including: NVO ($0.77), MCD ($3.35), HUM ($2.91), HOOD ($0.51), APP ($2.37), IONQ ($-0.44), and QCOM ($2.33).

 

New Sevens Report Special Report Coming Next Wednesday: How Bad Is the U.S. Debt Situation?

We’re continuing our Sevens Report Special Report series, and in the latest release, we’ll be taking an in-depth look at one of the most important, and popular, topics among investors: The U.S. debt situation.

We’ve all heard the warnings: The U.S. debt situation is unsustainable and a long-term threat to the markets and the economy. Well, your clients and prospects have heard these warnings too, so we wanted to produce an in-depth special report that takes an independent, fact-based look at the U.S. debt situation.

In this Sevens Report Special Report we: 1) Take a comprehensive look at the U.S. $37.4 trillion debt burden, 2) Explore historical comparisons to rising and declining empires, 3) Examine the implications of the looming $9.2 trillion “maturity wall” and 4) Evaluate threats to dollar dominance.

Like previous Sevens Report Special Reports, this report will both be branded as Sevens Report Research and as a “white labeled” version, allowing you to brand this robust and in-depth report as your own using your firm’s logo and other marketing materials. Both versions are included with a purchase.

Bottom line, the U.S. debt situation will be a major long-term influence on markets and investor portfolios, and the level of interest in U.S. debt, especially among more sophisticated investors, is high.

This special report can not only help explain the situation and put it in proper context, but also differentiate you from the competition by showing you’re focused on both the near-term and long-term risks to clients’ wealth. Please email info@sevensreport.com to learn more or to pre-order this special report.

 

Bull Market Warning From Dow Theory

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Bull Market Warning From Dow Theory: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Dow Theory Update: Transports Rolling Over (Charts Included)
  • Flash PMI Takeaways – Signs of Weakness
  • Has Gold Bottomed Yet (Probably Not)

Futures are higher on well-received guidance from “Mag-7” member TSLA (+11% pre-market) and U.S. semiconductor giant TXN (+7% pre-market) while economic data in Europe topped estimates overnight.

Economically, Australian CPI was “warm” at 1.0% vs. (E) 0.8% in Q1 which is supporting a modest rise in the aussie dollar while the German Ifo Survey’s Business Expectations Index firmed to 89.9 vs. (E) 88.9 helping bolster European shares.

Today, there is one economic report to watch: Durable Goods Orders (E: 2.3%) and markets will be looking for a “goldilocks,” as-expected number as either a “hot” print would initiate a hawkish reaction while a “cold” print would rekindle growth concerns.

There are no Fed speakers today, but the Treasury will hold a 5-Yr Note auction at 1:00 p.m. ET which once again could move yields. A weak auction would send yields towards 5% which is another threat to this week’s robust relief rally.

Earnings season also continues to ramp up with BA (-$1.43), T ($0.53), and GD ($2.89) reporting results ahead of the open while META ($4.32), IBM ($1.59), F ($0.42), and CMG ($11.63) will report after the close. META will be the most important to watch as the results could either bolster this strong week-to-date rally that’s been led by tech, or de-rail it and send stocks back towards the Q2 lows.

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Today focus will be on the ISM Manufacturing PMI

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Today focus will be on the ISM Manufacturing PMI: Tom Essaye Quoted in Barron’s

Stocks Waver After S&P, Nasdaq End February at Record Levels

Today focus will be on the ISM Manufacturing PMI (E: 49.5) not just because of the headline reading (can it break above 50?) but also because of the price index,” writes Sevens Report Research’s Tom Essaye. “The price index jumped to the highest level since April last month and if that increase continues, it’ll likely be modestly positive for yields and negative for stocks.”

Also, click here to view the full Barron’s article published on March 1st, 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 Rally

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Why the Tech Sector Is Like a Modern Day Gold Rush

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Why the Tech Sector Is Like a Modern Day Gold Rush: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why the Tech Sector Is Like a Modern Day Gold Rush
  • Chart: Rising Market-Based Inflation Expectations Bolster Gold Prices

U.S. futures are modestly lower this morning as Chinese economic concerns are offsetting a cool EU inflation print.

A sizeable new wave of Chinese stimulus actions failed to soothe investor worries about the economy overnight, underwhelming investors as China’s Service PMI unexpectedly fell to 52.5 vs. (E) 52.9 in February.

In Europe, financial news flow was better as the EU Composite PMI rose to 49.2 vs. (E) 48.9 while PPI fell a steep -0.9% vs. (E) -0.1% helping to ease some recent worries about a resurgence in price pressures.

Looking into today’s session there are three domestic economic reports to watch: Composite PMI (E: 51.4), Factory Orders (E: -3.0%), and the ISM Services Index (E: 53.0). The ISM print will be the most important as investors will be looking for continued strength in consumer spending but steady or easing price indices to underscore disinflation has not stalled/reversed.

There are no Fed officials scheduled to speak today and with Powell’s testimony looming tomorrow a slow churn in markets or modest continuation lower could play out today as short term traders book profits from the most recent run to record highs.

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Market Multiple Table: February Update

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

What’s in Today’s Report:

  • Market Multiple Table – February Update (Shareable PDF)
  • ISM Services PMI Takeaways: Prices Subindex Surges

U.S. equity futures are little changed as Treasuries stabilize following a 30 basis point spike in yields over the last two sessions while global markets were mixed overnight.

Chinese stocks rallied 4% overnight amid government intervention to stem recent losses while European shares edged up on better than feared Retail Sales and a very strong German Manufacturing Orders Report (+ 8.9%).

Looking into today’s session, there are no economic reports but there is a busy afternoon of Fed speak with Mester (12:00 p.m. ET), Kashkari (1:00 p.m. ET), Collins (2:00 p.m. ET), and Harker (7:00 p.m. ET) all scheduled to deliver commentary. The market will want to hear a less hawkish tone than Powell’s from last week and the weekend in order for Treasuries to continue to stabilize and stocks resume the rally.

Additionally, there is a 3-Yr Treasury Note auction at 1:00 p.m. ET and the outcome could move bond markets and influence equity market trading this afternoon.

Finally, earnings season is beginning to slowdown but there are a few notable quarterly releases today including: SNAP ($0.06), F ($0.13), and CMG ($9.73).

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A Volatile Start to 2024, But Don’t Read Too Much Into It

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A Volatile Start to 2024, But Don’t Read Too Much Into It: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • A Volatile Start to 2024, But Don’t Read Too Much Into It
  • SPDR Reveals Nearly 5% Divergence Between Best and Worst Sectors Yesterday
  • Chart – S&P Global Manufacturing PMI Remains in Contraction Territory

Stock futures are modestly lower and Treasury yields are extending their early 2024 gains as some of the dominant money flows from late last year continue to unwind to start 2024.

Economically, Germany’s Unemployment Rate held steady, as expected, at 5.9% in December which is not moving markets.

Today, trader focus will be on two key economic reports in early trade with the ISM Manufacturing Index (E: 47.2) and JOLTS (E: 8.75 million) report both due out shortly after the opening bell. Motor Vehicle Sales (E: 15.4 million) will also be released today.

Additionally, there is one Fed speaker: Barkin (8:00 a.m. ET) that will be closely watched ahead of the release of the December FOMC Meeting Minutes this afternoon (2:00 p.m. ET).

Bottom line, start-of-year portfolio rebalancing is likely to continue to dominate the tape today, however, if economic data comes in “Goldilocks” and the Fed Minutes don’t derail the market’s dovish policy expectations for 2023, stocks and bonds should both be able to stabilize as calendar-driven volatility begins to subside.

A Volatile Start

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Three Pillars of the Rally Updated

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Three Pillars of the Rally Updated: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Three Pillars of the Rally Updated (An Important Change to Watch)
  • Weekly Economic Cheat Sheet – Friday’s Flash Composite PMI in Focus

Futures are steady after a mostly quiet weekend of financial news and thinning volumes coming into the holiday-shortened Thanksgiving trading week.

Geopolitically, Iran-backed Houthi rebels seized a cargo ship in the Red Sea. This is rekindling a fear bid in global energy markets as seaborne oil cargoes are viewed as “at risk.” The rise in oil prices is modestly pressuring Treasuries this morning (yields up slightly).

Economically, German PPI met estimates of -11.0% Y/Y in October further solidifying the global peak-inflation argument.

Looking into today’s session, there is just one economic report on the calendar with Leading Indicators (E: -0.6%) due out shortly after the open and there is just one Fed speaker midday: Barkin (12:00 p.m. ET).

One potential catalyst that could shake up markets today is the 20-Year Treasury Bond auction at 1:00 p.m. ET as weak results could trigger a rebound in yields. Especially given fading attendance this week and subsequently less liquid market conditions across asset classes.

Three Pillars

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What the Fed Decision Means for Markets

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What the Fed Decision Means for Markets: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What the Fed Decision Means for Markets
  • EIA Analysis and Oil Market Update

Futures are moderately higher on momentum from Wednesday’s post-Fed rally while earnings and data were solid overnight.

Economically, Euro Zone Manufacturing PMI was slightly better than expected (43.1 vs. (E ) 43.0).

On earnings, reports were good overnight with solid reports from ALL, CLX, PYPL, QCOM and others.

Today focus will be on economic data and a big earnings report after the close.  Economically, the two notable reports are Jobless Claims (E: 213K) and Unit Labor Costs (E: 0.7%).  Of the two, Unit Labor Costs are the more important number and markets will want to see an in-line or lower reading to imply receding inflation risks.

On the earnings front, there are a lot of reports today, but the highlight is clearly AAPL ($1.39) which reports after the close.  Other notable earnings include SQ ($0.47) and SBUX ($0.97).

Bottom line, if the market gets more Goldilocks data and solid earnings, this relief rally can continue. But if yields start to rise, don’t be shocked if there’s a reversal.

What the Fed Decision Means for Markets

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How to Explain the Israel-Hamas Conflict to Clients

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How to Explain the Israel-Hamas Conflict to Clients: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • How to Explain the Israel-Hamas Conflict to Clients (How It Matters to Markets)
  • Empire State Manufacturing Index Takeaways (More Goldilocks Data)

Stock futures are modestly lower this morning as Treasury yields are rising back towards cycle highs. This is on news that President Biden will travel to Israel tomorrow to try and ease tensions in the region.

Economic data was largely shrugged off overnight. There were more signs of disinflation as wage pressures eased in the latest U.K. Labour Report. While New Zealand’s latest CPI report undershot estimates at 5.6% vs. (E) 5.9% year-over-year.

Today is lining up to be a busy session news-wise as we get several economic reports in the U.S. including: Retail Sales (E: 0.3%), Industrial Production (E: 0.0%), Business Inventories (E: 0.3%), and the Housing Market Index (E: 45). Investors will want to see more Goldilocks data supporting both peak-Fed-hawkishness and prospects for a soft economic landing in order for stocks to continue to rally.

There are also multiple Fed speakers to watch: Williams, Bowman, Barkin, and Kashkari. Markets will be looking for more commentary that suggests the FOMC is done with rate hikes for the cycle.

Finally, earnings season continues to ramp up with: BAC ($0.80), GS ($5.32), JNJ ($2.52), and LMT ($6.66) reporting results before the bell. While UAL ($3.40) and JBHT ($1.87) will report after the close. A drop-off in earnings is not priced into markets at these levels so investors will be looking for positive quarterly results and upbeat guidance.

How to Explain the Israel-Hamas Conflict to Clients

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What the Near Government Shutdown Means for Markets

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Government Shutdown Means for Markets: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What the Near Government Shutdown Means for Markets (Higher Yields)
  • ISM Manufacturing Index Takeaways – Better Than Feared

Futures are little changed this morning. More evidence of cooling inflation was offset by global central bankers continuing to threaten more rate hikes.

Economically, Swiss CPI came in at 1.7% vs. (E) 1.8% y/y in September. The Core figure fell to 1.3% from 1.5% previously which was the latest report to confirm the ongoing trend of global disinflation.

The RBA held policy rates steady at 4.10% overnight. But joined the growing chorus of ECB and Fed officials who have reiterated future hikes on the table. Global yields edged higher in early trade which is keeping a lid on equity futures this morning.

Looking into today’s session, we will receive data on Motor Vehicle Sales (E: 15.3 million). But more importantly, jobs week kicks off with today’s JOLTS release which is expected to show 8.9 million job openings.

An inline or modestly lower-than-expected JOLTS headline would be welcomed as it would help dial back some of the recent hawkish money flows. While an unexpected increase could spark a continued rise in yields, adding pressure to equity markets.

Finally, there is a 52-Wk Treasury Bill auction at 11:30 a.m. ET and while we typically do not monitor Bill auctions too closely, stocks came for sale and yields rose right at 11:30 a.m. yesterday. When the results of a 3-Month and 6-Month Bill auction hit the wires with higher yields than previous (hawkish). So if we see weak demand and higher yields in the late morning auction today, that could be a drag on equities and other risk assets.

What the Near Government Shutdown Means for Markets (Higher Yields)

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