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Sentiment Update: A Somewhat Shocking Discovery

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Sentiment Update: A Somewhat Shocking Discovery: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Sentiment Update: A Somewhat Shocking Discovery

Futures are little changed following slightly disappointing economic data overnight.

EU and UK flash PMIs underwhelmed as the EU Services PMI declined to 50.7 vs. (51.5) while the UK Manufacturing PMI dropped to 46.4 vs. (E) 48.5, underscoring the economic headwinds facing the EU and UK.

Today focus will stay on economic data and the two key reports are the Flash Manufacturing PMI (E: 51.3) and Flash Services PMI (E: 53.0).  Markets will want to see in-line to slightly weak readings but most importantly, no big jumps in the price indices like we saw in Empire and Philly earlier this week.

Other notable events today include Existing Home Sales (E: 4.16 million) and Consumer Sentiment (E: 68.0) as well as two Fed speakers:  Jefferson (11:30 a.m. ET) and Daly (11:30 a.m. ET).

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What the January Barometer Says for Markets in 2025

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What the January Barometer Says for Markets in 2025: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What the January Barometer Says for Markets in 2025

Futures are slightly lower as markets digest lingering tariff uncertainty and despite better than expected economic data.

The only notable economic report overnight was Euro Zone Flash GDP and it beat estimates, rising 0.1% vs. (E) 0.0%.

On tariffs, the lack of detail and action on reciprocal tariffs was a relief but a “tariff cliff” has formed on or around April 1st and that uncertainty will stay a market headwind.

Tariff headlines should theoretically slow down for the next few weeks given the various trade studies that need to occur before tariff announcements in March/April, so focus will turn back towards data and there are two notable reports today:   Retail Sales (E: -0.1%) and Industrial Production (E: 0.3%).  As has been the case, Goldilocks data that’s at or slightly under expectations remains the best case for stocks as it implies solid growth but won’t make the Fed less dovish.

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

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Were Tariff Fears Exaggerated? (No. Two Reasons Why)

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What’s in Today’s Report:

  • Were Tariff Fears Exaggerated? (No. Two Reasons Why)

Futures are slightly lower following a major central bank rate hike and despite better-than-expected economic data.

The Bank of Japan raised interest rates 25 bps, as expected, and signaled further rate hikes are coming (also as expected).

Economically, Euro Zone and UK Manufacturing PMIs slightly beat estimates but both remained in contraction territory.

Today we get the most important economic reports of the week via the January Flash Manufacturing PMI (E: 48.9) and Flash Services PMI (E: 56.7) and again, markets will want to see in-line to slightly soft data.  Stronger than expected readings would likely boost yields and pressure stocks.  Other economic reports today include Existing Home Sales (E: 4.16 million) and Consumer Sentiment (E: 73.2).

Turning to earnings, the key report I’m watching today is AXP ($3.03) as that will give us insight into consumer spending and the stronger the report, the better.

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Bond Vigilantes Are Back (Part 1)

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Bond Vigilantes Are Back (Part 1): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • The Bond Vigilantes Are Back (They’re Just Not Here Yet) – Part One

U.S. futures are higher with global markets this morning amid a continued relief rally after Trump focused on AI and energy initiatives instead of tariffs on his first day.

Economically, New Zealand CPI came in as expected at 0.5% in Q4 which helped ease global inflation worries.

Today there is just one, second-tiered economic report due to be released: Leading Indicators (E: -0.1%) which is unlikely to move markets.

The Treasury will hold a 4-Month Bill auction at 11:30 a.m. ET and a 20-Year Bond auction at 1:00 p.m. ET. Investors will want to see more strong demand for both short duration and longer duration Treasuries to keep yields from rising again.

Finally, earnings season continues today with PG ($1.87), JNJ ($2.01), ABT ($1.34), KMI ($0.33), DFS ($3.15), and AA ($0.91) all releasing quarterly reports. Generally strong top and bottom line results would be an added tailwind to stocks.

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The oil market seems more preoccupied

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The oil market seems more preoccupied: Tyler Richey Quoted in Morningstar

Oil prices end higher as traders weigh demand prospects, supply risks

The oil market seems more “preoccupied with the threat of an imminent physical-market deficit leading to regional supply shortages than easing geopolitical headwinds,” said Tyler Richey, co-editor at Sevens Report Research.

Prices showed little reaction to news Wednesday of an Israel-Hamas cease-fire deal that will go into effect on Sunday. In recent months and quarters, the “simmering geopolitical fear bid under oil prices steadily lost significance over time” as global oil markets were never materially impacted, said Richey.

Also, click here to view the full MarketWatch article published in Morningstar on January 15th, 2025. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Oil Inventories

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Market Multiple Table: January Update

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

What’s in Today’s Report:

  • Market Multiple Table – January Update

Futures are higher with global stock markets thanks to easing tariff policy worries and fading geopolitical angst.

After the close yesterday, Bloomberg reported Trump’s economic team is planning gradual tariff increases (2%-5% per month) rather than large, one-time hikes which is easing worries about the immediate impact on both growth and inflation.

Geopolitically, the WSJ reported Israel and Hamas are working on a ceasefire deal that could be finalized as soon as today. If successful, the deal would favorably remove a lingering source of market uncertainty.

Looking into today’s session, trader focus will be on inflation data early with the December PPI report due before the open (E: 0.3% m/m, 3.3% y/y). A “cooler” than expected report would likely trigger a continued relief rally in equity markets amid stabilizing bond yields.

There are no other notable economic reports today, but two Fed officials are scheduled to speak: Schmid (10:00 a.m. ET) and Williams (3:00 p.m. ET), and because hawkish money flows have been a major source of volatility in equities recently, their commentary has the potential to move markets today. A more dovish-leaning tone from both would be the most favorable outcome for equities today.

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Year-end positioning and lackluster trading volumes

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Year-end positioning and lackluster trading volumes: Sevens Report Editor, Tom Essaye, Quoted in Barron’s

Trump Is Already Rattling the Stock Market. Buckle Up.

Sevens Report President Tom Essaye believes year-end positioning and lackluster trading volumes—issues that will ease after New Year’s—are the real culprits behind the declines. 

“None of these events are big enough to derail this market, but they are a near-constant reminder of the drama Trump can manufacture (either directly or indirectly) on seemingly mundane functions of the government,” Essaye wrote.

“Altering or reducing the H-1B visa program reflects a further isolationism that investors fear would hurt the U.S. tech industry in the long run,” Essaye wrote. “And while that fear is a bit of a stretch, amidst large tech outperformance and thin volumes into year-end, it’s creating another reason to book profits.”

Also, click here to view the full Barron’s article published on December 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.

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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.

 

Why Have Stocks Dropped?

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Why Have Stocks Dropped?: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Have Stocks Dropped?
  • Weekly Market Preview:  Can Goldilocks Data Fuel A Rebound?
  • Weekly Economic Cheat Sheet:  Friday’s Jobs Report is the First Big Report of 2025.

Futures are extending Friday’s rally thanks to a rebound in political optimism and despite more mixed global economic data.

Mike Johnson was relatively easily re-elected Speaker of the House on Friday, providing a needed positive political event for markets and boosting pro-growth policy hopes.

Economically, global data remained lack luster as the UK Services PMI missed expectations (51.1 vs. (E) 51.4.).

Today focus will turn back to data with Factory Orders (E: -0.3%) and the December Services PMI (E: 58.5) and the more Goldilocks the readings, the more they’ll fuel this early bounce.  There is also one Fed speaker, Cook (9:15 a.m. ET), but she shouldn’t move markets.

Sevens Report Quarterly Letter

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A Higher Bar for the Bulls in 2025

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A Higher Bar for the Bulls in 2025: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • A Higher Bar for the Bulls in 2025
  • Weekly Market Preview: Focus on Politics (Does Johnson Get Re-elected as Speaker?)
  • Weekly Economic Cheat Sheet: Another Slow Week But Important Reports Thursday and Friday

Futures are slightly weaker following a mostly quiet weekend of news and ahead of another holiday shortened trading week.

Economically, the only notable report was Spanish CPI, which came in hotter than expected at 2.8% y/y vs. (E) 2.6% y/y, reinforcing some fears of sticky inflation.

Politically, the first major event for the new U.S. Congress comes this Friday via the Speaker of the House election (markets will want to see current Speaker Johson re-elected).

Given the mid-week holiday this week is another relatively quiet one on the data front but there are some notable reports to watch today including Chicago PMI (E: 42.7), Pending Home Sales (E: 0.7%).  As is the case for the foreseeable future, anything Goldilocks (so in-line to slightly softer) is the preferred outcome for markets.

 

Sevens Report Q4 ’24 Quarterly Letter Coming Thursday. 

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2024 was a great year, but there is a lot of uncertainty looming for markets in 2025, from politics, the Fed, economic growth and earnings.

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Sentiment Update: Bullish Enthusiasm Reduced, But Not Eliminated

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Sentiment Update: Bullish Enthusiasm Reduced, But Not Eliminated: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Sentiment Update: Bullish Enthusiasm Reduced, But Not Eliminated

Futures are modestly lower, again in quiet trading, on disappointing Chinese economic data.

Chinese industrial profits declined –7.3%, contracting for the fourth consecutive month and reminding investors that while there’s been a lot of stimulus from Chinese officials, it will take time to impact the economy.

In Japan, economic data was better than expected as retail sales and industrial production beat estimates.

Today there are no notable economic reports and trading should be quiet.  That said, the 10-year yield will remain an influence on stocks.  The higher the yield goes, the more it’ll pressure stocks.

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