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Advisor Considerations of the “T+1” Settlement Change

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Advisor Considerations of the “T+1” Settlement Change: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Practice Management Update: Examining the Upcoming Move to T+1 Settlement
  • Long-Term S&P 500 Chart: Greatest Volatility Risk Since January 2022

Futures are flat this morning as economic data was mixed in Europe and global traders await NVDA earnings (tomorrow) to gauge the outlook for AI industry growth.

In Europe, German PPI fell -3.3% vs. (E) -3.1% underscoring that disinflation trends remain underway in the EU while the UK’s CBI Industrial Trends Order Balance dropped -33% vs. (E) -20% adding to global factory sector worries.

Looking into today’s session, there are no economic reports to watch but a handful of Fed speakers on the calendar this morning: Barkin (9:00 a.m. ET), Waller (9:00 a.m. ET), Williams (9:05 a.m. ET), Bostic (9:10 a.m. ET) and Barr (11:45 a.m. ET).

At this point, the higher-for-longer mantra has been absorbed by markets and it would take renewed talk of rate hikes to meaningfully move markets, especially as traders settle in and await tomorrow’s post-bell earnings release from NVDA which is widely viewed as the most important catalyst of this week.

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Short vs. Long Term Market Outlook (Is Falling Inflation & Slowing Growth Good for Stocks?)

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Short vs. Long Term Market Outlook: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Short vs. Long Term Market Outlook (Is Falling Inflation & Slowing Growth Good for Stocks?)
  • EIA Update and Oil Market Analysis

Futures are little changed as market digest Wednesday’s new high amidst more dovish global data.

Japanese GDP (-0.5% vs. (E) -0.4%), Aussie Unemployment (4.1% vs. (E) 3.9%) and Italian HICP (their CPI, 0.9% vs. (E) 1.0% y/y) all pointed towards falling inflation and slowing global growth, which investors welcome (for now).

Today is a busy day full of data and Fed speak.  Broadly speaking, if the data/Fed speak is dovish and Treasury yields drop, it’ll extend the rally.

Notable economic data today includes (in order of importance):  Jobless Claims (E: 219K), Philly Fed (E: 7.8), Industrial Production (E: 0.1%) and Housing Starts (E: 1.435MM).

On the Fed, there are numerous speakers including:  Barr (10:00 a.m. ET), Barkin (10:00 a.m. ET), Harker (10:30 a.m. ET), Mester (12:00 p.m. ET), Bostic (3:50 p.m. ET).  But, unless they all start talking about rate hikes (very unlikely), their commentary shouldn’t move markets.

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Is Gasoline Demand Another Economic Warning Sign?

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Is Gasoline Demand Another Economic Warning Sign? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Is Gasoline Demand Another Economic Warning Sign?
  • Did Earnings Season Change the Market Outlook?

Futures are solidly higher thanks to continued momentum from Thursday’s rally following a quiet night of news.

Economically, UK data was stronger than expected (GDP and Industrial Production beat estimates) but it’s not changing BOE June rate cut assumptions.

Today there is just one notable economic report, the University of Michigan Consumer Sentiment Index (E: 77.0) and the key parts of that release will be the 1-Yr Inflation Expectations (E: 3.2%) and the 5-Yr. Inflation Expectations (E: 3.0%).  If both of those numbers are higher than expected, it’ll be another negative signal on inflation and don’t be surprised if Treasury yields rise in response to them and stocks give back these early gains.

In addition to that one economic report, we also get numerous Fed speakers today including: Bowman (9:00 a.m. ET), Logan (10:00 a.m. ET), Kashkari (10:00 a.m. ET), Goolsbee (12:45 p.m. ET) and Barr (1:30 p.m. ET).  However, unless one of them explicitly advocates for rate hikes, they shouldn’t move markets.

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Gasoline demand is being closely watched as a high-frequency proxy

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Gasoline demand is being closely watched: Sevens Report Co-Editor, Tyler Richey, Quoted in MarketWatch

Recession-wary investors are watching gasoline demand for clues to consumer health

“Gasoline demand is being closely watched as a high-frequency proxy for consumer spending,” said Tyler Richey, co-editor at Sevens Report Research.

In late April, U.S. economic data had been “coming in with a whiff of stagflation and the plunge in consumer demand for fuel amplified those worries,” said Richey.

“Worries that we could see a similar drop off in economic activity amid the onset of the long-discussed post-COVID-stimulus recession were recently reignited by the combination of stagflationary economic data and the high frequency drop off in gasoline demand,” he said.

The nearly 8.8 million bpd “gasoline supplied” figure marked a rebound to top the four-week moving average of 8.53 million bpd, and it was above the 2024 average weekly rate of 8.57 million bpd, according to Richey.

Going forward, “keeping an eye on the weekly gasoline supplied figure as a proxy for consumer demand for gasoline will be critical, especially relative to its four-week moving average to gauge the underlying trend in fuel demand, and compared with prior year’s levels for the corresponding reporting week,” Richey said.

“If we see demand roll over again, expect recession fears to rise and volatility across asset classes pick up, including renewed pressure on oil prices now that the geopolitical fear bid has largely gone stale,” he said.

Also, click here to view the full MarketWatch article published on May 9th, 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.

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What Are The GRANOLAS and Why Are They Attractive?

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What Are The GRANOLAS and Why Are They Attractive? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What Are The GRANOLAS and Why Are They Attractive?
  • EIA Analysis and Oil Market Update

Futures are modestly weaker following a quiet night of news as investors digest the last weeks’ gains.

Economically, Chinese exports (1.5% vs. (E) 1.3%) and imports (8.4% vs. (E) 4.7%) were stronger than expected, offering some optimism for that economy.

Tech earnings continued to be mixed as semiconductor company ARM Holdings (ARM) posted soft guidance and the stock is down 8% pre-market.

Today focus initially will be on the BOE Rate Decision, as no rate cut is expected but the BOE may signal a rate cut is coming in June.  In the U.S., the only notable number is Jobless Claims (E: 212K) and there’s just one Fed speaker today (Daly at 2:00 p.m. ET) and it’ll take a significant surprise from either event to move markets.

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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

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

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