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Is Another Crash Imminent?

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Is Another Crash Imminent? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Is Another Crash Imminent?
  • Chart – M2 Money Supply Still Up Massively Despite QT
  • The Recent Gold Rally and Inflation Expectations

Stock futures are rebounding modestly this morning amid further stabilization in the Treasury market as big tech earnings come into focus while economic data overseas disappointed overnight.

The Eurozone PMI Composite Flash came in at 46.5. vs. (E) 47.4 with a softer than expected Services sub-index which added to existing recession worries in the EU overnight. And that soft data is contributing to the steady bond market this morning.

Looking into the U.S. session, there is one economic report to watch: PMI Composite Flash (E: 49.4), and as has been the case, a release that supports a soft-landing scenario (easing growth and falling price measures) will support stocks while a “hot” report that sends yields back higher will be a negative.

There are no Fed speakers today but there is a “policy-sensitive” 2-Yr Treasury Note auction at 1:00 p.m. ET.  If demand is weak, that could put upward pressure on yields and reintroduce a headwind on equities and other risk assets as big tech earnings come into focus this week.

Earnings Update

Earnings season continues to ramp up this week with: KO ($0.69), VZ ($1.17), GE ($0.56), MMM ($2.34), and SYF ($1.44) reporting before the bell. While MSFT ($2.65), GOOGL ($1.45), and V ($2.23) will release results after the close.

Investors will want to see some better than expected results from the big tech names as they have been responsible for most of the 2023 stock market gains. Any disappointment will almost certainly mean new lows in the major indices this week.

Is Another Crash Imminent

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Trading Today Will be Dominated by Politics, Geopolitics, and Yields

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Trading Today Will be Dominated by Politics, Geopolitics, and Yields: Tom Essaye Quoted in Barron’s

Stocks Continue Falling Following Powell Remarks

The 10-year Treasury yield ticked lower to 4.949% after threatening to hit 5% for the first time since 2007.

Sevens Reports Research’s Tom Essaye notes that although two Federal Reserve officials are set to speak publicly today. He doesn’t expect either to move markets following Powell’s comments on Thursday.

“So, trading today will be dominated by politics, geopolitics, and yields,” he writes. “Any progress on finding a Speaker of the House will be welcomed by markets (regardless of whether it’s Jordan, McHenry or anyone else), and calming of tensions in the Middle East will similarly be welcomed by markets as would a decline in the 10-year yield. Meanwhile, the opposite of any of those will likely add more headwinds to stocks.”

Also, click here to view the full Barron’s article published on October 21st, 2023. 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 Have Stocks Dropped?

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What’s in Today’s Report:

  • Why Have Stocks Dropped (And Are the Reasons Legitimate?)
  • Weekly Market Preview:  Focus Turns to Earnings (And They Need To Be Good)
  • Weekly Economic Cheat Sheet:  Important Growth and Inflation Updates

Futures are solidly lower following a further increase in geopolitical tensions and a lack of domestic political progress over the weekend.

Attacks on Israel from Lebanon increased over the weekend, raising fears of a two-front conflict.

Domestically, political gridlock continued as nine Republicans are now running for Speaker. But it’s not clear any of them have enough support to actually become Speaker.

Today the calendar is quiet as there’s just one notable economic report, the Chicago Fed National Activity Index (E: 0.05), so focus will remain on yields.  The 10-year yield sits at 5.00% as of this writing, and the higher it goes today, the lower stocks will likely fall.  Any progress on electing a Speaker of the House will be welcomed by the markets and likely push yields lower.

On the earnings front, we get a lot of important reports later this week, including MSFT, AMZN, KO, VZ, META, and others. But they come on Tues/Wed/Thurs and today there are just two reports to watch:  CLF ($ 0.46) and LOGI ($0.60).

Why Have Stocks Dropped

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It’ll be Very Hard for This Market to Rally

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It’ll be Very Hard for This Market to Rally: Tom Essaye Quoted in Barron’s

Dow Falls Nearly 250 Points. 10-Year Nears 5%.

Stocks tumbled and bond yields rose Thursday after Federal Reserve Chair Jerome Powell paved the way for keeping rates steady.

“Treasury yields are doing exactly what we’d expect given Powell essentially said rates won’t go any higher, but they will stay higher for longer and the economy is strong,” Sevens Report Research’s Tom Essaye told Barron’s.

 “It’ll be very hard for this market to meaningfully rally with yields this high. But, barring a major geo-political positive surprise or great earnings season.”

Also, click here to view the full Barron’s article published on October 19th, 2023. 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

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.

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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.

Why Didn’t Powells’ Comments Cause A Rally?

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Why Didn’t Powells’ Comments Cause A Rally? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Didn’t Powells’ Comments Cause A Rally?

Futures are modestly lower as global economic data pointed to slowing growth and falling inflation pressures.

German PPI declined more than expected (-0.2% vs. (E) 0.4%). While UK Retail Sales were weak (-0.9% vs. (E) -0.1%) pointing to slowing growth and lower inflation.

Politically, there remains no end in sight to Republicans’ efforts to elect a Speaker, as Jim Jordan is expected to seek a third round of voting (one he is likely to lose, again).

Today there are no economic reports but there are two Fed speakers, Harker (9:00 a.m. ET) and Mester (12:15 p.m. ET), although given Powell’s comments yesterday neither should move markets.

So, trading today will be dominated by politics, geopolitics and yields.  Any progress on finding a Speaker of the House will be welcomed by market (regardless of whether it’s Jordan, McHenry or anyone else), any calming of tensions in the Middle East will similarly be welcomed by markets as would a decline in the 10-year yield.  Meanwhile, the opposite of any of those will likely add more headwinds to stocks.

Why Didn’t Powells’ Comments Cause A Rally?

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Powell Speech Preview

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Powell Speech Preview (Good, Bad & Ugly): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Powell Speech Preview:  Good, Bad & Ugly
  • EIA Update and Oil Market Analysis

Futures are slightly higher following a quiet night of news as investors await Fed Chair Powell’s speech later today.

Earnings overnight were mixed with TSLA (down 5% after hours) missing estimates while NFLX (up 14% after hours) posted strong results.

Today will be a very busy day of data and Fed speak.  The key event today is Powell’s speech at noon, and to keep things simple, if Powell repeats the sentiment that the spike in Treasury yields has done the Fed’s job for it and, as such, another rate hike is unlikely, that should be positive for stocks and bonds.  If he does not repeat that sentiment and leaves the door open for another hike in 2023, that will be a negative.

Outside of Powell, we get several important economic reports today including:  Jobless Claims (E: 211K), Philadelphia Fed Manufacturing (E: -7.0) and Existing Home Sales (E: 3.900M) and markets will want to see Goldilocks data to support a bounce.

Back to the Fed, there are multiple speakers today other than Powell, including Jefferson (9:00 a.m. ET), Goolsbee (1:20 p.m. ET), Barr (1:30 p.m. ET), Bostic (4:00 p.m. ET); Harker (5:30 p.m. ET) and Logan (7:00 p.m. ET) although their comments will be overshadowed by Powell, so they shouldn’t move markets.

Finally, earnings continue and important reports today include:  T ($0.63), TSM (1.16), AAL (0.26), WAL ($1.91) and CSX ($0.42).

Powell Speech Preview

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Why Markets Are Resilient Despite Geopolitical Risks

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Why Markets Are Resilient Despite Geopolitical Risks: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Markets Are Resilient Despite Geopolitical Risks
  • Weekly Market Preview:  Will Powell Signal Rate Hikes Are Over?
  • Weekly Economic Cheat Sheet:  Can Economic Growth Stay Strong?

Futures are slightly higher as the weekend brought no major changes to the current macroeconomic set up.

Geo-politically, an invasion of Gaza by Israel remains imminent but so far the conflict hasn’t expanded regionally and oil is little changed as a result.

Economically, inflation in India declined –0.25% vs. (E) 0.50%, reinforcing that inflation is declining globally.

Today focus will be on the October Empire Manufacturing Survey (E: -5.0) and markets will want to see “Goldilocks” data that largely meets expectations combined with declines in the price indices.  We also get one Fed speaker today, Harker (10:30 a.m. ET & 4:30 p.m. ET), and one notable earnings report, SCHW ($0.75), but barring any major surprises they shouldn’t move markets.

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Seeing the Forest for the Trees in Today’s Market

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Seeing the Forest for the Trees in Today’s Market: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Seeing the Forest for the Trees in Today’s Market
  • Weekly Market Preview:  Do Expectations for a Soft-Landing Shift This Week?
  • Weekly Economic Cheat Sheet:  An Important Week:  ISM PMIs and the Jobs Report Friday

Futures are little changed as Congress passed a short-term funding bill and avoided a shutdown while global manufacturing data largely met expectations.

The House passed the Senate’s “continuing resolution” to fund the government over the weekend, avoiding a shutdown.  However, funding only lasts until November 17th.

The Chinese Sept. Manufacturing PMI rose to 50.2 vs. (E) 50.0 while EU and UK readings were in-line with estimates.

Today focus will be on economic data and Fed speak.  The key report today is the ISM Manufacturing PMI (E: 47.8) and markets will want to see this number move closer to 50 and hint at an end to the manufacturing recession.  A further drop from here would be an incremental negative.  On the Fed, we hear from Powell & Harker at 11:00 a.m. and Williams at 1:30 p.m. and any hints from them that the Fed is likely done with rate hikes will be welcomed by markets.

Sevens Report Quarterly Letter Delivered Today

Our Q3 ’23 Quarterly Letter will be released today.

We use our strength (writing about the markets) to help you:

  • Save time (an average of 4-6 hours per quarterly letter)
  • Show you’re on top of markets with impressive, compelling market analysis

Also, you can view our Q2 ’23 Quarterly Letter here

To learn more about the product (including price) please click this link.

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CPI remains the most important monthly economic metric

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CPI remains the most important monthly economic metric: Tom Essaye Quoted in MorningStar

Dow turns higher as Apple falls ahead of its iPhone event, with inflation data looming

“CPI remains the most important monthly economic metric for the simple reason that if CPI does not continue to decline, markets will have to price in a more hawkish Fed, and that would be a headwind on stocks,” said Tom Essaye, founder and president of Sevens Report Research, in a note Tuesday.

“Sensitivity to this report will be especially high tomorrow because there have been anecdotal signs that inflation may be leveling off or bouncing back,” he said.

A “good” CPI report would show core inflation, which excludes energy and food prices, rose 0.2% or less in August, according to Essaye. Economists polled by the Wall Street Journal have forecast that core CPI increased 0.2% last month and 4.3% year over year.

“A continued drop in core CPI will help to calm concerns that inflation is bouncing back, and that could trigger a solid drop in Treasury yields and a good relief rally in stocks,” said Essaye.

Also, click here to view the full Morningstar article published on September 12th, 2023. However, to see Tom’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.

Tom Essaye Quoted in Barron’s on August 30th, 2023

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U.S. Stock Futures Waver After Rally With More Jobs Data in Focus

“There are no Fed speakers today, so investors will be looking for more evidence that supports a continued pause in the Fed’s rate hiking cycle (or peak rates already being in) and ultimately a soft landing,” said Tom Essaye, founder of Sevens Report Research. “Anything that contradicts that narrative will be a headwind on equities and other risk assets today.”

Click here to read the full article.