Posts

How to Explain Any Pullbacks to Clients

/in , /by

What’s in Today’s Report:

  • How to Explain Any Pullbacks to Clients (Why Too Hot or Too Cold Data Is a Negative for Markets)
  • Weekly Market Preview:  Can Goldilocks Data Continue to Support Stocks?
  • Weekly Economic Cheat Sheet:  All About Jobs (Jobs Report Friday, Claims Thursday, ADP Wednesday, JOLTS Tomorrow)

Futures are little changed following mixed global economic and inflation readings.

In China, the July PMIs were mixed as manufacturing was slightly better (49.3 vs. (E) 49.2) while services were worse (51.5 vs. (E) 52.9) and the result is markets will still want more stimulus from Chinese officials.

On inflation, EU flash core HICP (their CPI) rose 5.5% y/y vs. (E) 5.4% y/y, hinting at stickier than expected inflation.

This will be a busy week of data and earnings, but it starts slowly as there’s just one notable economic report today, the Chicago PMI (E: 43.5) and only a few notable earnings: ANET ($1.43), ZI ($0.23), WDC ($-2.01).  So, barring any major negative earnings announcements, we’d expect generally quiet trading ahead of an increase in activity starting tomorrow.

Why Taxes Caused Yesterday’s Selloff, August 18, 2017

/in /by

Cut through the noise and understand what’s truly driving markets, as this new political and economic reality evolves. Get your free two-week trial of The Sevens Report: Everything you need to know about the market in your inbox by 7am, in 7 minutes or less.

If there was one “reason” for the sell-off yesterday, it was taxes—specifically, the dying dream of tax cuts and a profit repatriation holiday.

That’s why the Cohn headline spooked stocks. It’s not that markets particularly love Gary Cohn. Instead, he’s important because he’s viewed as a key figure in pushing tax cuts through in early 2018, an expectation that market has held on to (until, perhaps, yesterday).

If Cohn resigns, then the prospects for tax cuts (and almost more importantly, the foreign profit repatriation holiday) dim… significantly.

The declining expectations for tax cuts and profit repatriation hit tech especially hard yesterday and it combined with the underwhelming CSCO/NTAP earnings to push that sector sharply lower—and falling tech dragged the whole market down yesterday afternoon.

Now, going forward, clearly there’s been some damage done on the charts (the S&P 500 closed at a one-month low), and momentum indicators are showing warning signs.

And, those warning signs are appearing at a particularly dangerous time for markets (in the short term) as late August is particularly favorable for “air pockets” to form in the markets given that a lot of desks are minimally staffed due to summer vacation. Point being, I don’t think we’re done with the uptick in volatility yet—again due mostly to the calendar.

However, Nasdaq, SOXX and FDN all remain above last week’s lows. So, while Thursday’s trading was clearly painful, I’m not ready to get materially more defensive just yet (although clearly we’re watching those indicators very, very closely going forward).

The Sevens Report is the daily market cheat sheet our subscribers use to keep up on markets, seize opportunities, avoid risks and get more assets. Start your no obligation two-week trial today.