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Two “Smart Market” Recession Signals to Watch For

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Two “Smart Market” Recession Signals to Watch For: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Follow-Up Thoughts on the Yield Curve Reversion Process – Two Signals to Watch For
  • PPI Takeaways – Will Falling Inflation Flip from a Tailwind to a Headwind?
  • NFIB Small Business Optimism Index Echoes HD Sales Concerns

U.S. stock futures are flat as traders digest yesterday’s sizeable rally ahead of today’s critical CPI release.

Overseas, the Reserve Bank of New Zealand unexpectedly cut rates overnight citing recession concerns in H2’24 while the EU GDP Flash met estimates at 0.6% y/y helping push back on imminent recession fears.

Today, market focus will be on the key U.S. inflation data due ahead of the bell: CPI (E: 0.2% m/m, 3.0% y/y), Core CPI (E: 0.2% m/m, 3.2% y/y). A “cool” release will be welcomed and likely support an extension of the week-to-date gains while a “hot” print would be negative for risk assets.

There are no Fed speakers today, however there is a 4-Week Treasury Bill auction at 11:30 a.m. ET which normally wouldn’t pique investors interest, but this one lines up with the September Fed meeting and could shed light on the market’s policy rate expectations.

Finally, earnings season continues to wind down with a few noteworthy companies reporting today including: CAH (E: $1.72), UBS (E: $0.12), TCEHY (E: $0.61), CSCO (E: $0.85).

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How Worried Should We Be About This Market?

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How Worried Should We Be About This Market?: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • How Worried Should We Be About This Market?
  • Weekly Market Preview:  Important Updates on Economic Growth and Earnings
  • Weekly Economic Cheat Sheet:  Stagflation or Not?  (CPI Wednesday, Retail Sales Thursday)

Futures are slightly higher following a quiet weekend of news as investors digested last week’s early swoon and strong rebound, ahead of important updates this week on inflation and economic growth.

Geo-political tensions remained elevated as the world waits for the Iran/Hezbollah retaliation on Israel and expectations for an attack any day remain high.

There was no notable economic overnight and investors’ focus is on Wednesday’s CPI and Thursday’s Retail Sales.

Today is a quiet day on the calendar as there are no notable economic reports and no important Fed speakers.  But, this week provides important updates on inflation and economic growth and the stakes are high:  If inflation cools further and growth is solid, stocks can extend the rally.  If inflation isn’t cool and growth disappoints, brace for stagflation worries (and more volatility).

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Market Multiple Table: Chart

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Market Multiple Table: Chart: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Market Multiple Table Chart (Scenario Targets Compress)
  • The Most Important Financial Asset in the World (Right Now)

Futures are slightly lower following a generally quiet night of news as markets digest Wednesday’s failed rally.

Japan remains at the center of global markets and the “Summary of Opinions” (think of it as the BOJ minutes) showed officials discussed further rate hikes but also that the BOJ is, for now, on hold (and that’s a mild positive).

Geopolitically, tensions between Israel and Iran/Hezbollah remain elevated and a retaliation is expected any day.

Today focus will be on Weekly Jobless Claims (E: 240K) and a better-than-expected number (so under 240k) will help incrementally ease slowdown fears.  Conversely, if claims jump above 250k, expect recession worries to rise further and stocks to react accordingly (lower).

There is also one Fed speaker, Barkin at 3:00 p.m. ET, but he shouldn’t move markets.

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The market collapse was driven by both fundamental and technical factors

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The market collapse was driven by both fundamental and technical factors: Sevens Report Quoted in Investing.com

These are key indicators to watch for signs the pullback is ending

According to Sevens Report, the market collapse was driven by both fundamental and technical factors.

Fundamentally, economic data has finally forced investors to acknowledge the economy’s loss of momentum.

“Namely, that the economy is losing momentum and an economic hard landing, while not yet likely, is possible.”

“This market needs some solid economic data and the sooner, the better, because that will push back on premature recession concerns and remind investors that while growth is slowing, it’s not collapsing,” Sevens Report said in the note.

Also, click here to view the full article published on August 6th, 2024. However, to see the Sevens Report’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.

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Mega-cap tech remains king

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Mega-cap tech remains king: Sevens Report Co-Editor, Tyler Richey, Quoted in S&P Global

Magnificent 7 stocks stumble, boosting peak views

All seven stocks were largely rebounding Aug. 6 as “mega-cap tech remains king” within the larger technology sector, said Tyler Richey, a co-editor with Sevens Report Research.

“The relative resilience by the Magnificent Seven suggests that investor demand for tech exposure remains concentrated in those seven mega-cap names … while the rest of the space is seeing some technical cracks emerge as bullish conviction for the rest of tech is starting to fade,” said Richey.

Richey said he expects these mega-cap tech stocks to attempt to revisit their all-time high soon, as these stocks tend to be favored by portfolios looking for long exposure in the market at times of high cyclical risks.

“As long as the market is pricing in gradual rate cuts in the quarters ahead, optimism in support of the soft landing narrative would likely see mega-cap tech continue to lead the market as the Mag-7 names account for a significant amount of the expected S&P 500 earnings growth in the quarters ahead,” Richey said.

Also, click here to view the full article published in S&P Global on August 6th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Lastly, 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.

Market Multiple Table: All About Growth

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Market Multiple Table: All About Growth: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Market Multiple Table – All About Growth
  • Chart – Semiconductor Stocks Bounce, But Long Term Technicals Deteriorate

Stock futures are tracking global equity markets higher as traders shrug off an earnings miss from AI-proxy SMCI (stock down 14% pre-market) and instead focus on a pullback in the yen and sharp drop in the VIX.

Economically, German Industrial Production rose 1.4% vs. (E) 1.0%, further easing global recession worries.

Today, there is one second-tiered economic report due to be released in the afternoon: Consumer Credit (E: $10.0B) but the data is unlikely to move markets.

There are no Fed officials scheduled to speak today but there is a 10-Yr Treasury Note auction at 1:00 p.m. ET. Auction results that are strong could bolster recession worries while a weak auction could rekindle “higher for longer” policy rate worries.

Finally, earnings season continues to wind down with only a few notable reports today including: DIS ($1.20), CVS ($1.74), LYFT ($0.19).

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The bond market is now signaling a real chance of a greater-than-expected economic slowdown

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The bond market is now signaling a real chance of a greater-than-expected economic slowdown : Sevens Report Editor, Tom Essaye, Quoted in Barron’s

Traders Seek Refuge in Bonds Amid Market Volatility

“The bond market is now signaling a real chance of a greater-than-expected economic slowdown and falling yields are no longer a positive for markets. Going forward, the sooner Treasury yields can stabilize (ideally with the 10 year close to 4%) the better for markets,” wrote Sevens Report’s Tom Essaye in a note.

Also, click here to view the full Barron’s article published on August 5th, 2024. 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 RallyIf 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.

What Makes This Stop? (Key Indicators to Watch)

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What Makes This Stop? (Key Indicators to Watch): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What Makes This Stop? (Seven Indicators to Watch)
  • Chart – VIX Spikes to Pandemic Highs

There is a sense of stability in global markets this morning as the yen and VIX, two major sources of the recent volatility, are both pulling back amid easing recession fears.

Economically, German Manufacturing Orders rose a solid 3.9% vs. (E) 0.8%, helping to offset EU Retail Sales which fell -0.3% vs. (E) +0.1%.

Today, there is one economic report: International Trade (E: -$72.5B) but the data shouldn’t move markets while there are no Fed officials scheduled to speak.

Looking ahead to mid-day, the Treasury will hold a 52-Week Bill auction at 11:30 a.m. ET and a 3-Yr Note auction at 1:00 p.m. ET. Investors will be watching the auction results closely to gauge Treasury demand, and if the auctions are weak, that could see some of the recession fears from the last few sessions ease further and allow stocks to recover a good portion of the losses.

Finally, earnings season is starting to wind down but there are a few notable companies releasing results today including: UBER (E: $0.31) ahead of the bell and SMCI (E: $8.10) and ABNB (E: $0.92) after the close.

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The biggest question facing investors today remains ‘Is It Different This Time?

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The biggest question facing investors today remains ‘Is It Different This Time?: Sevens Report Editor, Tom Essaye, Quoted in Barron’s

The Stock Market Doesn’t Look Like the Dot-Com Bubble. It’s Something Worse.

No, that’s not the real worry. The S&P 500 is. It smacks of 2007 all over again. From last July until now, the index has traded with an 85% correlation to July 2006 though July 2007, according to Sevens Report’s Tom Essaye.

Essaye went so far as to describe the resemblance of this market to the 2007 market as “concerning to say the least.” And he touched on the uncertainty that investors are facing.

“The biggest question facing investors today remains ‘Is It Different This Time?’” he wrote

Also, click here to view the full Barron’s article published on July 31st, 2024. 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 RallyIf 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.

Is the Yen Carry Trade Become A Headwind on Markets?

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Is the Yen Carry Trade Become A Headwind on Markets?: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Is the Yen Carry Trade Become A Headwind on Markets?

Futures are seeing a solid bounce following a mostly quiet night of news as investors look ahead to (hopefully) another good inflation report.

Earnings remained broadly mixed overnight (some good, some bad) but none of the results are impacting markets.

There was no notable economic data or geo-political events overnight.

Today the focus will be on the Core PCE Price Index (E: 0.1% m/m, 2.5% y/y) and if this number is better than expected (or even dead in-line with expectations) that will remind investors that rate cuts are coming soon (September) and that should help extend this early rebound in stocks and bonds.

Earnings roll on although next week is, by far, the most important week of the season.  Reports we’re watching today include:  BMY (E: $1.64), MMM (E: $1.66) and CNC  (E: $2.42).

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