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Follow Up to “How Does the Rally Ultimately End?”

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What’s in Today’s Report:

  • Follow Up to “How Does The Rally Ultimately End?”

Futures are modestly higher mostly on momentum from Thursday’s earnings-driven rally.

Alcoa (AA) was the only notable earnings report overnight but like most reports on Thursday, it beat estimates.  While it’s very, very early in earnings season, so far the results are better than feared and that’s driving the rally.

Today is another busy day of economic data, Fed speak, and earnings.  Economically, the three key reports are Retail Sales (E: -0.1%), Empire State Manufacturing Index (E: 25.0), and Consumer Sentiment (E: 74.0).  Markets will want to see stability in the first two, and the focus will be on inflation expectations in the third (they need to stay close to last month’s readings).

On the earnings front, we have three notable reports today:  GS ($9.78), PNC ($3.64), JBHT ($1.77), and we also get two Fed speakers, Bullard (11:45 a.m. ET) and Williams (12:20 p.m. ET), with the latter being the more important of the two.

How Does This Rally Ultimately End?

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What’s in Today’s Report:

  • How Does This Rally Ultimately End?

Futures are solidly higher following slightly underwhelming inflation data and better than expected earnings.

Chinese CPI rose 0.7% vs. (E) 0.8%, implying inflation pressures may be peaking.

On earnings, TSM beat estimates and upped guidance and that’s helping to lift stocks.

Today there are two notable economic reports, Jobless Claims (E: 320K) and PPI (0.5%, 8.7%) and markets will want to see claims continue to fall and PPI remain generally stable.  We also have multiple Fed speakers today including: Bullard (8:35 a.m. ET), Bostic (9:00 a.m. ET), Barkin & Williams (1:00 p.m. ET) and Harker (6:00 p.m. ET).  Their tone will likely be to reinforce that tapering is happening this year (as the market expects) but that shouldn’t move markets.

Finally, on the earnings front, some important results we’ll be watching today include:  TSM ($1.03), BAC ($0.71), WFC ($1.03), C ($1.82), UNH ($4.41), MS ($1.70), WBA ($1.03 and AA ($1.85).  If inflation is better than expected, that will help stocks rally.

Tom Essaye Quoted in Barron’s on September 14, 2021

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The S&P 500 Is Going to Fall, Strategists Say. Even the Optimists Aren’t Very Upbeat.

This [supply constraints] will be a more substantial risk to the rally we’ll need to watch for…wrote Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

The Current Risks to the Rally

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What’s in Today’s Report:

  • The Current Risks to the Rally
  • Weekly Market Preview:  Increasing Headline Volatility?
  • Weekly Economic Cheat Sheet:  How Hot is Inflation and How Much Damage Has COVID Done to the Recovery?

Futures are modestly higher as global markets bounced from Friday’s declines, following a quiet weekend of news.

Tax hike chatter continued to rise over the weekend as Democrats proposed a 26.5% corporate tax (up from the current 21%) and a “top-tier” capital gains tax rate of 28.8% (up from the current 23.8%).

These changes aren’t likely or imminent, but it underscores the market will face tax hike headlines over the coming weeks and months.

There was no notable global economic data overnight.

Today there are no economic reports and no notable Fed speakers, so the focus will be on any more tax hike headlines and on short-term technicals.  Last week stocks were able to rally early in the day and faded in the afternoon.  If that happens again this morning look for downside momentum to pick up a bit and for more moderate declines.

Market Multiple Chart

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What’s in Today’s Report:

  • Market Multiple Chart
  • Why the Rally Has Stalled This Week (Three Reasons)

Futures are moderately lower thanks to more regulatory fears in China and earnings guidance cuts from U.S. companies.

China has warned tech companies about online gaming activities in the latest volley of potential regulations.

United Airlines (UAL) cut guidance as demand for air travel has softened recently due to rising COVID cases, adding to a surprisingly high number of guidance cuts this week.

Today the key event is the ECB Rate Decision (Press Release 7:45 a.m., Press Conference 8:30 a.m.) and markets will be looking to see if the ECB formally announces tapering is coming (it’s possible but not the consensus expectation).  Away from the ECB, we also get Jobless Claims (E: 344K) and numerous Fed speakers today (nine speeches in total) but only Williams (2:00 p.m.) is leadership and we already know what he thinks from his comments yesterday (tapering will start in late 2020 but be gradual).

Updating the Two Big Risks to the Rally

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What’s in Today’s Report:

  • Updating the Two Big Risks to the Rally
  • Weekly Economic Cheat Sheet: Jobs Report Takeaways and ECB Preview

U.S. equity futures are little changed this morning while overseas markets were mixed overnight with Asian stocks outperforming on upbeat Chinese economic data but EU shares drifted lower with focus turning to this week’s ECB meeting.

Economically, Chinese Exports were encouragingly up 25.6% vs. (E) 19.5% y/y in August which supported risk-on money flows in Asian markets however a soft German ZEW Survey is weighing on EU stocks this morning.

Today’s U.S. trading session is lining up to be fairly quiet as there are no economic reports and no Fed officials are scheduled to speak.

There is a 3-Year Treasury Note Auction at 1:00 p.m. ET, however, and weak demand would likely lead to a hawkish reaction across markets with yields moving higher and stocks potentially trading with a defensive tone.

Why Powell’s Speech Caused a Rally

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What’s in Today’s Report:

  • Why Powell’s Speech Caused a Rally
  • Weekly Market Preview:  Will Data Keep the Goldilocks Rally Going?
  • Weekly Economic Cheat Sheet:  Jobs Week (This is the Most Important Jobs Report in Months)

Futures are slightly higher mostly on momentum from Friday’s “dovish Powell” rally, following a quiet weekend.

Fed Chair Powell’s speech on Friday was taken as slightly dovish and that drove the rally in U.S. stocks and it’s carried over globally as we start a new week (all the major foreign markets we monitor are modestly positive).

Economic data was sparse as Euro Zone Economic Sentiment slightly missed expectations (117.5 vs. (E) 118) although that’s not moving markets.

Today there is one economic report, Pending Home Sales (E: 0.3%), but that shouldn’t’ move markets.  Instead, as long as the dual tailwinds of 1) Receding COVID cases in the U.S. and 2) A dovish Fed remain, stocks should be buoyant (although if either idea is contradicted expect some give back of last week’s rally).  Finally, keep in mind this is one of the most popular vacation weeks of the year due to the looming Labor Day weekend, so don’t be surprised by low volumes and some added volatility.

Tom Essaye Quoted in Forbes on August 24, 2021

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S&P 500, Nasdaq Hit New Record Highs As Vaccine Rally Continues—But Here’s What Investors Are Focused On Next

If there’s a reason for the rally, it’s the growing sense that the Fed won’t…market analyst Tom Essaye, author of the Sevens Report, wrote in a Tuesday email. Click here to read the full article.

 

Tom Essaye Quoted in Barron’s on August 23, 2021

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Pfizer Climbs, Exxon Jumps — And What Else Is Happening in the Stock Market Monday

Futures are modestly higher on momentum from Friday’s rally and following mixed…writes Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

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Why Did Stocks Rally?

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What’s in Today’s Report:

  • Why Did Stocks Rally?

Futures are modestly higher thanks to continued momentum from Tuesday’s rebound combined with solid earnings reports.

Earnings overnight were good and importantly companies like CMG and UAL said the increase in COVID cases was not hurting business, which helped reassure markets that the Delta variant isn’t changing consumer’s behavior.

There were no economic reports overnight and there are no economic reports later today, so focus will remain on earnings and COVID trends.  If earnings are solid and commentary remains upbeat, and we don’t get any negative COVID headlines, then the rebound can continue today.

Some earnings we’ll be watching today include (in order of importance):  TXN ($1.82), JNJ ($2.28), KO ($0.57), VZ ($1.29), STX ($2.87), LVS (-$0.19), CSX ($0.37), DFS ($3.58).