Tom Essaye Quoted in MoneyWeek on September 21, 2020

This content is for members only

Pullback – Why Stocks Are Down 2%

What’s in Today’s Report:

  • Pullback – Why Stocks Are Dropping and Is This the Start of a Correction?
  • Weekly Market Preview:  Focus on politics and growth.
  • Weekly Economic Cheat Sheet:  Durable Goods and inflation will be in focus this week.

Futures are down more than 2% as an increase in COVID 19 cases in new places (South Korea and Italy), combined with a big Sanders victory in the Nevada Caucus are adding to the growth concerns following Friday’s soft flash PMI.

Politically, Sanders won the Nevada Caucus with more than 40% of the vote, implying his base is bigger than thought, meaning he might be a more formidable opponent to Trump than what the market was previously thinking.

Economic data was sparse as the German Ifo Business Expectations survey beat estimates (93.4 vs. (E ) 92.1), but that number obviously isn’t moving markets.

Today there are no economic reports and just one Fed speaker,  Mester (3:00 p.m. ET), so focus will be on any COVID 19 updates (and anything that hints at a slowing of transmission will help stocks bounce).  From a fundamental support standpoint, 3,219 is 18.5X next year’s earnings so we’ll be interested to see if that can hold in the near term.

Normal Pullback or Something Bigger?

What’s in Today’s Report:

  • Normal Pullback or Something Bigger?
  • Weekly Market Preview
  • Weekly Economic Cheat Sheet (Three Big Reports This Week)

Futures are bouncing modestly following Friday’s selloff.  The weekend was a quiet one from a market standpoint.

The Wuhan virus situation didn’t change (the virus continues to spread) but there are reports that existing anti-viral drugs are helping to treat the disease (a small positive).

Economically, The EU and British manufacturing PMIs slightly beat estimates, but still remain weak on an absolute basis (47.9 and 50.0 respectively).

Today the key economic report is the January ISM Manufacturing PMI (E: 48.7), and following Friday’s bad Chicago PMI, the market needs a decent number to help reassure investors the U.S. economic remains on solid footing.  There’s also one Fed speaker, Bostic at 4:30 p.m. ET, but he shouldn’t move markets.

Regarding any Wuhan headlines, the key remains whether they will add more pressure to global growth.  If we hear about more plant closures/flight & travel restrictions, etc. that will pressure stocks.

If There’s a Pullback, Where Is Support? (Technical Update)

What’s in Today’s Report:

  • If There’s a Pullback in Early 2020, Where Is Support? (Technical Update)

Futures are little changed this morning following another quiet night of news as markets digest the Q4 gains.

On trade, the House of Representatives passed the USMCA, as was widely expected and already priced in.

Economic data was largely in-line as Japanese CPI (0.5%) and German GfK Consumer Climate (9.7 vs. (E) 9.6) both met expectations.

Today focus will remain on economic data, and we have several more notable reports including, in order of importance: Core PCE Price Index (E: 0.2%), Consumer Sentiment (E: 99.2), Final Q3 ‘19 GDP (E: 2.1%).  The Core PCE Price Index, which is the Fed’s preferred measure of inflation, needs to continue to show subdued inflation pressures, as a sudden surge in inflation is the only thing that could get the Fed to become more hawkish.  Finally, today is a quadruple witching options expiration so don’t be shocked if there’s elevated volumes and some volatility into the close.

Tom Essaye Quoted in Newsmax on August 8, 2019

“The worst of it may be over but, I’d be surprised if the pullback is over. I think we’ll go back and likely take a look at some of this week’s lows simply because the issues that have really been…” said Tom Essaye.


Is the Pullback Over?

What’s in Today’s Report:

  • Is the Pullback Over?
  • Weekly Market Preview (Can the rally keep going?)
  • Weekly Economic Cheat Sheet (Chinese data is key this week)

Futures are modestly higher on the avoidance of Mexican tariffs, although trade news was more mixed than good this weekend.

On trade, positively the 5% tariff on Mexican exports to the U.S. was avoided. Negatively, and more importantly, there was no progress on U.S.-China trade at the G-20 Finance Ministers meeting and no U.S.-China trade talks are planned before the G-20 meeting later this month.

Economic data was also mixed as Chinese exports slightly beat estimates but imports badly missed, while British GDP and Industrial Production also underwhelmed.  So, like the trade news from the weekend, there was a positive event, but on the whole the results were more mixed than good.

Today there are no material economic reports so focus will remain on the news wires and any trade related headlines.  Anything that implies renewed talks between the U.S. and China will likely extend this rally and test resistance at 2900 in the S&P 500.

Is the Corporate Bond Bubble Bursting?

What’s in Today’s Report:

  • Pullback Update: Why we think the 2650-2850 trading range is still intact.
  • Is the Corporate Bond Bubble Bursting?

Futures are enjoying a modest oversold bounce following a generally quiet night.

Italy will be in focus today as the European Commission will issue a decision on the resubmitted budget and rejection is likely.  Positively, however, there were some reports Italy would be open to negotiation on the proposed budget, and that helped fuel the bounce this morning.

There were no notable economic reports overnight.

Today should be a generally quiet day as travel picks up for the Thanksgiving holiday.  But, that said, there are three notable economic reports this morning: Durable Goods (E: -2.5%), Jobless Claims (E: 215k), Existing Home Sales (E: 5.21M).  Bottom line, tech remains key in the short term.  If Nasdaq and FDN can bounce, stocks can recoup some of the week’s losses.

Everyone please have a happy and safe Thanksgiving!