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The Rally Is Broadening

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The Rally Is Broadening: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • The Rally Is Broadening
  • SPY vs. RSP Comparison – Bar Chart

Equity futures are higher this morning as traders position into a fairly busy morning of U.S. economic data while Chinese authorities intervened in the currency market to support the yuan which is helping general investor sentiment.

Economically, the German GfK Consumer Climate index was slightly better than feared at -27.4 vs. (E) -27.9 but the release is not materially impacting markets this morning.

Today, focus will be on economic data early with several key reports due to be released including: Durable Goods Orders (E: 1.3%), Case-Shiller Home Price Index (E: 0.2%), and Consumer Confidence (E: 106.7).

There are no Fed officials scheduled to speak today but there is a 5-Yr Treasury Note auction at 1:00 p.m. ET. With the elevated level of market anxiety surrounding Friday’s Core PCE release (when markets will be closed) any surprises via strong or weak demand in the auction could move yields and impact equities.

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Why Didn’t Stocks Rally Last Week? (Despite Good News)

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Why Didn’t Stocks Rally Last Week? (Despite Good News): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Didn’t Stocks Rally Last Week (Despite Good News)
  • Weekly Market Preview:  Is the Tech Rally Finally Exhausted?
  • Weekly Economic Cheat Sheet:  Focus on Inflation This Week

Futures are slightly lower mostly on momentum from Friday’s declines following a very quiet weekend of news.

Economically, the only notable number over the weekend was Chinese CPI, which rose more than expected (0.7% vs. (E) 0.3%) and that’s being seen as a positive as deflation was a growing risk in the Chinese economy.

Focus this week will remain on economic data (both inflation and growth) and tomorrow’s CPI report is the key report for the week.

Today, however, the calendar is sparse as the only notable economic report is New York Fed Inflation Expectations (E: 3.00%) and barring a major overshoot, this number shouldn’t move markets.

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This Relentless Rally Has Gone Far Beyond

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This Relentless Rally Has Gone Far Beyond: Tom Essaye Quoted in Barron’s

The Stock Market Hasn’t Been This Hot in Decades. Is the Rally Justified?

“If we look at the facts, I cannot help but feel as though this relentless rally has gone far beyond either actual improvement in the fundamentals and reasonable expectations of continued improvement,” writes Sevens Report Founder and President Tom Essaye.

As Essaye points out, a price-to-earnings ratio around that level was “previously only reserved for periods of quantitative easing and 0% rates, not quantitative tightening and 5.37% fed funds.”

Also, click here to view the full Barron’s article published on February 27th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

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What’s Changed Since October (And Is It Worth A 25% Rally?)

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What’s Changed Since October: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What’s Changed Since October (And Is It Worth A 25% Rally?)
  • Weekly Market Preview:  Can Data and News Stay Platinumlocks?
  • Weekly Economic Cheat Sheet:  An Important Week for Inflation.

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

Geopolitically, news was mixed over the weekend.  Positively, progress was made in negotiating a Israel/Hamas cease fire and there is hope an agreement can be reached this week.  Negatively, chances of a U.S. government shutdown on March 1st (this Friday) are rising.

There were no notable economic reports overnight.

This will be a busy week of important economic data, earnings and political news (possible government shutdown on Friday) but it starts slowly as the only notable economic report today is New Home Sales (E: 685k) and there is just one Fed speaker, Schmid at 7:40 p.m. ET.  So, focus will remain on the political headlines today and if shutdown chances increase, look for mild pressure on stocks.

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What Could Interrupt This Rally?

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What Could Interrupt This Rally? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What Could Interrupt This Rally?
  • Weekly Market Preview:  Can Inflation and Growth Data Push Stocks Even Higher?
  • Weekly Economic Preview:  CPI Tomorrow, Key Growth Readings Thursday.

Futures are little changed following a mostly quiet weekend of news, although geo-political risks continued to creep higher over the weekend.

Israel is reportedly planning a ground offensive into the southern Palestinian province of Rafah and that’s met with pushback from numerous nations in the region and risks to further reduce any chances for a cease fire.

Today trading should be mostly quiet as the majority of Asian markets are closed for a holiday, but focus will be on the NY Fed Consumer Inflation Expectations (E: 3.00%) and any number below expectations will support Fed rate cut expectations (and support stocks).  We also have three Fed speakers today, Bowman (9:20 a.m. ET), Barkin (12:00 p.m. ET) and Kashkari (1:00 p.m. ET) but they shouldn’t move markets.

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Cut Through the Market Noise: The Four Drivers of This Rally

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The Four Drivers of This Rally: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Cut Through the Market Noise:  The Four Drivers of This Rally
  • Why Markets Rallied Despite Friday’s Hot Jobs Report
  • Weekly Market Preview:  Fed Speak, Growth Data and an Important Inflation Update
  • Weekly Economic Cheat Sheet:  Data Focused on Economic Growth and Inflation

Futures are modestly lower as Fed Chair Powell’s 60 Minutes interview is being taken as slightly hawkish.

Powell’s 60 Minutes interview is being framed as hawkish but in reality, Powell didn’t say anything new as this was his main message: Rates cuts are coming sooner than later, but a March cut is unlikely.

Economically, China’s January services PMI missed estimates (52.7 vs. (E) 53.0), reinforcing economic concerns.

Today focus will be on the ISM Services PMI (E: 52.1) and the key here is clear:  This number needs to stay above 50 otherwise we will see growth concerns start to rise.  There is also one Fed speaker today, Bostic (2:00 p.m. ET), but he shouldn’t move markets given Powell’s recent interviews.

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Time to Chase This Market?

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Time to Chase This Market? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Time to Chase This Market?
  • Weekly Market Preview:  Do Rate Cut Expectations for March Keep Falling? (It Depends on the Data)
  • Weekly Economic Cheat Sheet:  Important inflation report on Friday and important growth report on Wednesday.

Futures are modestly higher on momentum from Friday’s record highs, following a mostly quiet weekend of news and despite more economic stress in China.

Chinese markets continued to collapse (Hang Seng, Shanghai and Shenzen all down 2%-3%) after there was no cut to the 1/5 year Prime Loan Rates, despite clear signs of deflation and contracting economic growth.

Today there is one notable economic report,  Leading Indicators (E: -0.3%), but barring a major surprise it shouldn’t move markets.

Instead, focus will shift to earnings as the next two weeks will be the most important ones of this earnings season.  Some important reports today include:  PG ($1.70), JNJ ($2.27), VZ ($1.07), MMM ($2.31), UAL ($1.61), LOGI ($1.13), GE ($0.90).

Bullish

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Sentiment Update

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Sentiment Update: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Sentiment Update
  • Empire State Manufacturing Index Falls to Pandemic Lows

U.S. futures are tracking global shares lower as the ECB’s Lagarde became the latest to push back on overly dovish policy expectations. While Chinese economic data showed consumer weakness (but industrial strength) and inflation reaccelerated in Europe. This is adding to the recent trend of less-dovish/more-hawkish money flows.

Toay is lining up to be a busy session as there are a slew of economic reports due this morning. Including: Retail Sales (E: 0.4%), Import & Export Prices (E: -0.6%, -0.6%), Industrial Production (E: -0.1%), and the Housing Market Index (E: 38).

There are also several Fed officials scheduled to speak over the course of the session: Barr, Bowman, and Williams.

Earnings will also continue to come in today with several more notable financial companies reporting: SCHW ($0.65), CFG ($0.60), and DFS ($2.50).

Bottom line, trading has taken a more cautious tone this week with heavier price action in stocks. In order for that to ease and risk appetites return to the market today, we will need to see data that is consistent with a still healthy and resilient consumer but not to the point where the Fed would be inclined to delay rate cuts or cut less in 2024. Investors will look for less-hawkish Fed commentary and stable earnings as well. If those developments do not occur the risk of an acceleration lower in stocks this week will rise meaningfully.

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All Of Us In The Markets Are In A Proverbial Canoe

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All Of Us In The Markets Are In A Proverbial Canoe: Tom Essaye Quoted in Courthouse News Service

Markets roar in 2023 as inflation ticks down and Fed eases rate hikes

Tom Essaye of the Sevens Report likened the market in 2023 to rough sailing. “I can’t help but feel as though all of us in the markets are in a proverbial canoe and the investing public is violently leaning to one side of the canoe and then the other, causing it to nearly tip each time,” he wrote in an investor’s note.

Essaye wrote that many believe the Fed will slash interest rates about six times next year, believing inflation will soon “go into some sort of freefall” and the S&P 500 may hit 5,000 points. “But I’ve been in this industry long enough to know that when everyone seems to be leaning on one side of the proverbial canoe, it pays to move to the middle,” he wrote.

Also, click here to view the full Courthouse News Service article published on December 29th, 2023. However, to see the Sevens Report’s full comments on the current market environment sign up here.

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Explaining This Market Surge to Clients

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Explaining This Market Surge to Clients: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Explaining This Market Surge To Clients
  • Weekly Economic Cheat Sheet:  Why Bad Data is Now Bad for Stocks
  • Weekly Market Preview:  Does the Santa Rally Continue into Year-End?

Futures are modestly higher following a generally quiet weekend of news. The markets continue to digest the Fed’s dovish pivot and continued stock and bond rally.

Fed pushback on the market’s rate cut expectations continued over the weekend as Cleveland Fed’s Mester said markets were “a little bit ahead” of themselves expecting cuts in early 2024.

Economically, the only notable number was German Ifo Business Expectations, which slightly missed estimates.

Today the only notable economic number is the Housing Market Index (E:36) and if there’s weakness in this price index it’ll reinforce that broad inflation is continuing to decline and that will be a general positive for stocks and bonds.  Outside of the data, look for Fed officials to continue to push back on market rate cut expectations.  But, other than causing some temporary volatility, that shouldn’t impact markets beyond the short term (and won’t derail this rally).

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