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It’s Different This Time…Until It’s Not (Like 2000 and 2007)

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It’s Different This Time… Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • It’s Different This Time… Until It’s Not (Like ’00 and ’07)
  • Chart – Visualizing Where We Are in the Market Cycle

Stock futures are trading with a slight bias to the downside as inflation data overseas showed an uptick in price pressures ahead of the latest Fed minutes release today.

Economically, Hong Kong CPI rose to 2.7% vs. (E) 2.1% in October marking the first “warm” inflation print in months. There were several one-off factors influencing the increase in price pressures but the “hot print” was a reminder that the global inflation fight is not officially over just yet.

Looking into today’s session, there is one economic report to watch: Existing Home Sales (E: 3.91 million) and if it comes in strong, that could weigh on Treasuries (yields higher) and in turn pour some cold water on stocks.

There is another Treasury auction today at 1:00 p.m. ET, but this one is for 10-Yr TIPS and will likely receive less attention than yesterday’s 20-Yr Bond auction, limiting its market impact.

From there focus will turn to the release of the minutes from the November FOMC meeting at 2:00 p.m. ET. Any language that is more hawkish than the currently very dovish shift in policy expectations could also trigger a pullback in equities in thinning holiday week trading today.

Finally, although earnings season is effectively over, there is one notable release today as NVDA ($3.18), one of the “Magnificent Seven” mega-cap tech stocks that have led the market higher in 2023, will report results after the close.

It's Different This Time... Until It's Not (Like 2000 and 2007)

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Trading Today Will be Dominated by Politics, Geopolitics, and Yields

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Trading Today Will be Dominated by Politics, Geopolitics, and Yields: Tom Essaye Quoted in Barron’s

Stocks Continue Falling Following Powell Remarks

The 10-year Treasury yield ticked lower to 4.949% after threatening to hit 5% for the first time since 2007.

Sevens Reports Research’s Tom Essaye notes that although two Federal Reserve officials are set to speak publicly today. He doesn’t expect either to move markets following Powell’s comments on Thursday.

“So, trading today will be dominated by politics, geopolitics, and yields,” he writes. “Any progress on finding a Speaker of the House will be welcomed by markets (regardless of whether it’s Jordan, McHenry or anyone else), and calming of tensions in the Middle East will similarly be welcomed by markets as would a decline in the 10-year yield. Meanwhile, the opposite of any of those will likely add more headwinds to stocks.”

Also, click here to view the full Barron’s article published on October 21st, 2023. 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 Rally

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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 (And Are the Reasons Legitimate?)
  • Weekly Market Preview:  Focus Turns to Earnings (And They Need To Be Good)
  • Weekly Economic Cheat Sheet:  Important Growth and Inflation Updates

Futures are solidly lower following a further increase in geopolitical tensions and a lack of domestic political progress over the weekend.

Attacks on Israel from Lebanon increased over the weekend, raising fears of a two-front conflict.

Domestically, political gridlock continued as nine Republicans are now running for Speaker. But it’s not clear any of them have enough support to actually become Speaker.

Today the calendar is quiet as there’s just one notable economic report, the Chicago Fed National Activity Index (E: 0.05), so focus will remain on yields.  The 10-year yield sits at 5.00% as of this writing, and the higher it goes today, the lower stocks will likely fall.  Any progress on electing a Speaker of the House will be welcomed by the markets and likely push yields lower.

On the earnings front, we get a lot of important reports later this week, including MSFT, AMZN, KO, VZ, META, and others. But they come on Tues/Wed/Thurs and today there are just two reports to watch:  CLF ($ 0.46) and LOGI ($0.60).

Why Have Stocks Dropped

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Utilities, Staples and Healthcare

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Utilities, Staples and Healthcare: Tom Essaye Quoted in Morningstar

Defensive stocks have traded poorly this year, but this strategist says they are in a sweet spot | Morningstar

A ‘growth scare’ will push Treasury yields lower and increase demand for safe-haven assets in equities: Sevens Report Research

U.S. stocks in the underperforming defensive sectors may be due for a comeback in the coming months as fears of an economic slowdown will push Treasury yields lower and increase demand for safe-haven assets in equities, according to Sevens Report Research.

“I do believe that we will have an economic growth scare in the coming months. That doesn’t mean I’m saying we’ll have a recession, but I do believe we have a growth scare looming and as such, I will begin to ‘nibble’ on utilities, staples and healthcare on the long side starting today, and I’ll rotate out of cyclicals as they’ve benefitted from solid growth and higher rates,” said Tom Essaye, the founder and the president of Sevens Report Research, in a Tuesday note.

Also, click here to view the full Morningstar article published on October 10th, 2023. 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.

Seeing the Forest for the Trees in Today’s Market

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Seeing the Forest for the Trees in Today’s Market: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Seeing the Forest for the Trees in Today’s Market
  • Weekly Market Preview:  Do Expectations for a Soft-Landing Shift This Week?
  • Weekly Economic Cheat Sheet:  An Important Week:  ISM PMIs and the Jobs Report Friday

Futures are little changed as Congress passed a short-term funding bill and avoided a shutdown while global manufacturing data largely met expectations.

The House passed the Senate’s “continuing resolution” to fund the government over the weekend, avoiding a shutdown.  However, funding only lasts until November 17th.

The Chinese Sept. Manufacturing PMI rose to 50.2 vs. (E) 50.0 while EU and UK readings were in-line with estimates.

Today focus will be on economic data and Fed speak.  The key report today is the ISM Manufacturing PMI (E: 47.8) and markets will want to see this number move closer to 50 and hint at an end to the manufacturing recession.  A further drop from here would be an incremental negative.  On the Fed, we hear from Powell & Harker at 11:00 a.m. and Williams at 1:30 p.m. and any hints from them that the Fed is likely done with rate hikes will be welcomed by markets.

Sevens Report Quarterly Letter Delivered Today

Our Q3 ’23 Quarterly Letter will be released today.

We use our strength (writing about the markets) to help you:

  • Save time (an average of 4-6 hours per quarterly letter)
  • Show you’re on top of markets with impressive, compelling market analysis

Also, you can view our Q2 ’23 Quarterly Letter here

To learn more about the product (including price) please click this link.

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China Stimulus: Tom Essaye Quoted in Barron’s

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China Stimulus: Tom Essaye Quoted in Barron’s

China Stimulus Helps Asian Stocks Trade Higher

Worries over a slowdown in China have rattled global markets in recent months, with stimulus from Beijing doing little to stem the bleeding in stocks. However, the latest move to shore up the country’s economy seems to have been received more positively.

“China cut bank reserve requirements by 25 basis points in the latest step to help support the Chinese economy. And there are signs these measures are starting to have an impact,” said Tom Essaye, founder of Sevens Report Research.

Also, click here to view the full Barron’s article published on September 14th, 2023. However, to see Tom’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.

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 Did Stocks Drop on Friday?

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Why Did Stocks Drop on Friday? Strengthen your market knowledge with a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Did Stocks Drop on Friday?
  • Weekly Market Preview:  Will the Fed Confirm Market Expectations?
  • Weekly Economic Cheat Sheet:  Important Growth Data Throughout the Week (Could Confirm or Undermine Soft/No Landing Hopes)

Futures are slightly higher as markets bounce following Friday’s declines and after a quiet weekend of news.

The various strikes occurring across the country (writers, UAW) contributed to Friday’s market decline. There was little positive progress over the weekend on resolving either work stoppage.

Geopolitically, President Biden’s National Security Advisor met with China’s foreign minister. The meeting is raising hopes the U.S./China relationship could improve.

Today the only notable economic report is the Housing Market Index (E: 50.0) and that shouldn’t move markets as long as it doesn’t provide a major positive or negative surprise. Barring that, we’d expect pre-Fed positioning to generally drive trading today.

Why Did Stocks Drop

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CPI’s Influence on Market Dynamics: A Closer Look

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CPI’s Influence on Market Dynamics: Tom Essaye Quoted by BNN Bloomberg

Nasdaq 100 Drops 1 per cent as Apple slides after event

CPI is really key because if it halts its downward trend, markets will have to price in a more hawkish Fed. And that would be a headwind on stocks, said Tom Essaye, a former Merrill Lynch trader who founded The Sevens Report newsletter.

Lastly, “Put in a more familiar way, CPI impacts two of the three pillars of the rally: disinflation and expectation the Fed is done with rate hikes,” Essaye noted.

Also, click here to view the full BNN Bloomberg article published on September 12th, 2023. However, to see Tom’s full discussion on CPI’s influence on markets sign up here.

CPI's Influence - BNN

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Oil Market Analysis: Potential Pullback Amidst Upward Trend

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Global Oil Demand & Market Analysis: Sevens Report Analysts Quoted in MorningStar

Oil prices extend rise on supply worries

“On balance, the absence of sizable downward revisions to global oil demand over the next two years, despite recession risks, helped the oil market power on to new highs. Futures have become overextended to the upside and are in technically overbought territory on the daily time frame charts, leaving the market susceptible to a profit-taking pullback in what is otherwise a still clearly upwardly trending energy market,” analysts at Sevens Report Research said in a note.

A hot consumer-price index reading Wednesday morning or a bearish weekly supply report from the Energy Information Administration could serve as a catalyst for a pullback,” they wrote.

Also, click here to view the full Morningstar article published on September 13th, 2023. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Global Oil - Morningstar

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.

Evidence of Some Deterioration in the Fundamentals

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Deterioration in the Fundamentals: Strengthen your market knowledge with a free trial of The Sevens Report.

What’s in Today’s Report:

  • Market Multiple Table:  Evidence of Some Deterioration in the Fundamentals

Futures are modestly lower on another negative AAPL article and more mixed economic data.

AAPL shares fell another 3% pre-market as Bloomberg also reported certain Chinese government agencies would be banned from using foreign made phones.

Economically, Chinese exports were no worse than feared (-8.8%). However, German Industrial Production missed estimates (-0.8% vs. (E) -0.2%) as global recession fears crept higher.

Today focus will be on economic data and Fed speak.  The two key reports to watch are Jobless Claims (E: 238K) and Unit Labor Costs (E: 1.7%).  Markets will want to see the former rise more than expected (but not too much more) and the later be less than expectations.  The opposite (low claims and high Unit Labor Costs) will push Treasuries higher and weigh further on stocks.

Turning to the Fed, New York Fed President Williams speaks at 3:30 ET. Since he’s part of Fed leadership, we’ll pay attention and markets will hope he hints that rate hikes are done.  Bostic also speaks at 3:45 ET but his message will likely be predictably dovish, and as such it won’t move markets.

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