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Market Multiple Table: December Update

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

What’s in Today’s Report:

  • Market Multiple Table – December Update (Unbranded Copy Available)
  • Chart – 10-Yr Yield Violates Long-Term Uptrend, 2023 Lows in Focus

Stock futures are slightly higher and bond yields are falling modestly this morning. This is as traders digest a dovish BOJ decision and largely in-line Eurozone inflation report.

The Bank of Japan left their benchmark policy rate unchanged at -0.10%. With no hint of a January rate hike sending the yen down >1% and the Nikkei up nearly 1.5% overnight.

Economically, the Eurozone HICP Narrow-Core inflation rate favorably fell from 4.2% to 3.6% last month, meeting estimates.

Looking at today’s potential market catalysts, there is one economic report to watch: Housing Starts (E: 1.360 million), and two Fed officials are to speak: Bostic (12:30 p.m. ET) and Goolsbee (6:00 p.m. ET).

Lastly, as long as the housing market data is not a big shock, the release shouldn’t move markets this morning while Bostic’s comments will be closely watched to see if he joins Daly and others from the Fed in acknowledging concerns about the labor market (which would add a dovish tailwind).

multiple

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Explaining This Market Surge to Clients

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Explaining This Market Surge to Clients: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Explaining This Market Surge To Clients
  • Weekly Economic Cheat Sheet:  Why Bad Data is Now Bad for Stocks
  • Weekly Market Preview:  Does the Santa Rally Continue into Year-End?

Futures are modestly higher following a generally quiet weekend of news. The markets continue to digest the Fed’s dovish pivot and continued stock and bond rally.

Fed pushback on the market’s rate cut expectations continued over the weekend as Cleveland Fed’s Mester said markets were “a little bit ahead” of themselves expecting cuts in early 2024.

Economically, the only notable number was German Ifo Business Expectations, which slightly missed estimates.

Today the only notable economic number is the Housing Market Index (E:36) and if there’s weakness in this price index it’ll reinforce that broad inflation is continuing to decline and that will be a general positive for stocks and bonds.  Outside of the data, look for Fed officials to continue to push back on market rate cut expectations.  But, other than causing some temporary volatility, that shouldn’t impact markets beyond the short term (and won’t derail this rally).

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Why This Isn’t A Risk-Less Market (Despite The Fed Being Dovish)

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Why This Isn’t A Risk-Less Market: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why This Isn’t A Risk-Less Market (Despite The Fed Being Dovish)
  • Understanding Why the Dollar Is Plunging

Futures are modestly higher following mixed global economic data and as investors continued to digest Wednesday’s dovish Fed decision.

Global data was mixed, but not bad, and as such isn’t increasing global slowdown fears.  In Europe, the EU flash composite PMI missed estimates (47.0 vs. (E) 48.0) while the UK reading beat (51.7 vs. (E )51.0).  In China,

Retail Sales and Industrial Production were better than feared.

Today focus will be on economic data as we get the first look at December activity and for the rally to continue, the data needs to be Goldilocks (so close to expectations).  The key reports today are, in order of importance:    Dec. Flash Manufacturing PMI (E: 49.2), Dec. Flash Service PMI (E: 50.6), Nov. Industrial Production (E: 0.3%), Dec. Empire Manufacturing Index (E: 3.7).

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Is the Dovish Fed Decision A Bullish Gamechanger?

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Is the Dovish Fed Decision A Bullish Gamechanger? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Is the Dovish Fed Decision A Bullish Gamechanger?
  • What Sectors and Assets Benefit Most from the Surprisingly Dovish Fed?

Futures are modestly higher on continued momentum from yesterday’s surprisingly dovish Fed decision.

Global investors aggressively embraced the idea of global rate cuts as the 10-year yield fell below 4% overnight.

On earnings, they’ve been soft this week and that continued with disappointing ADBE results (stock down 5% pre-market) although that’s not impacting the markets more broadly.

The busy week continues today with a BOE Rate Decision (E: No Change) and an ECB Rate Decision (E: No Change) and markets expect no rate cuts but dovish tones from both central banks.  If that’s the reality, it’ll just add more fuel to the dovish rally.

Economically, the key reports today are Jobless Claims (E: 223k) and Retail Sales (E: -0.1%).  The Fed’s dovish pivot will overshadow these reports unless they show a sudden deterioration (so spike in claims and drop in retail sales) and barring those results, they shouldn’t move markets.

Bullish

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Why the Bar for the Fed to Be Hawkish Is High

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Why the Bar for the Fed to Be Hawkish Is High: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why the Bar for the Fed to Be Hawkish Is High
  • What the CPI Report Means for Markets

Futures are slightly higher despite soft economic data, as markets await the Fed decision later this afternoon.

Economically, data from the UK and the EU was bad and is slightly increasing growth concerns.   UK monthly GDP  and UK & EU Industrial Production all missed estimates.

Chinese growth concerns also rose as China declared industrial development as the #1 economic priority, potentially signaling less economic stimulus in 2024.

Today focus will be on the FOMC decision (2:00 p.m. ET, No change to rates expected) and the keys are the 2024 dot (does it show 50 bps of cuts?) and whether Powell slams the door on the idea of rate cuts (or leaves it slightly open).  In addition to the Fed, we also get another important inflation reading via PPI (E: 0.1% 1.0%). A further decline will be peripherally positive for markets.

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West Texas Intermediate Crude Tested Critical 2023 Support

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Oil Futures Finished Higher: Sevens Report Co-Editor, Tyler Richey, Quoted in MarketWatch

Oil futures end modestly higher after posting 7 consecutive weekly declines

Gains for the session came from a “combination of near-term oversold conditions in the futures market” after West Texas Intermediate crude tested critical 2023 support in the upper $60s last week, said Tyler Richey, co-editor at Sevens Report Research.

Oil futures finished higher on Monday after posting seven consecutive weekly declines.

Generally improving investor sentiment and risk-on money flows across other asset classes have also provided support to oil, he said. 

Also, click here to view the full MarketWatch article published on December 11th, 2023. However, to see the Sevens Report’s full comments on the current market environment sign up here.

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The Market Has So Aggressively Priced In A Dovish Fed

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The Market Has So Aggressively Priced In A Dovish Fed: Tom Essaye Quoted in MarketWatch on MSN

November jobs report likely to show a solid 190,000 increase, with unemployment staying at 3.9%

As a result, market participants will be much more sensitive to a hotter-than-expected number than to a softer-than-expected figure, said Tom Essaye, founder of Sevens Report Research, in a Thursday note.

That means the threshold for “too hot” figures — including payrolls, the unemployment rate and wages — that cause a pullback in both stocks and bonds is lower than it’s been all year because the market has so aggressively priced in a dovish Fed, he wrote.

“So, there’s less of a margin for error if the jobs report is stronger than expectations.”

Also, click here to view the full article published by MSN on December 8th, 2023. However, to see the Sevens Report’s full comments on the current market environment sign up here.

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Catalyst #1 – CPI Preview: Good, Bad & Ugly

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CPI Preview: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • CPI Preview:  Good, Bad & Ugly
  • Weekly Market Preview:  The Last Busy Week of 2023 (Inflation Update, Fed Decision & Growth Reports)
  • Weekly Economic Cheat Sheet:  Inflation Tomorrow, Fed Decision Wednesday, Economic Growth Updates Thurs/Fri

Futures are slightly lower on digestion of the multi-week rally following a quiet weekend and ahead of a the last catalyst-filled week of 2023.

Economically, there was no notable data overnight. Investors are focused on the looming reports this week (CPI tomorrow, Fed Wednesday, growth data Thurs/Fri).

On Japan, a Bloomberg article pushed back on the expectation for rate hikes and Japanese stocks are rallying 1%.

This is the last potentially busy week of 2023 but it starts slowly as the only notable report today is the N.Y. Fed 1 Year Consumer Inflation Expectations (3.6%).  If expectations drop sharply (possibly below 3.0%) that could provide a mild boost to stocks. But with key events looming Tuesday-Friday, the bar to move stocks and bonds today is pretty high.

CPI Preview

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Jobs Day

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Jobs Day: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Jobs Day

Futures are little changed following a quiet night of news as markets await the jobs report later this morning.

Economically, the only notable number overnight was German CPI which met expectations, rising 3.2% y/y.

Globally, the yen is falling slightly but global yields are higher as markets digest a potential Bank of Japan rate hike later this month.

Today the jobs report is the key event and expectations are as follows:  180K job adds, 3.9% Unemployment Rate, 0.3% m/m & 4.0% y/y wages.  Keeping things simple, the key to today’s jobs report is whether it refutes the expectation for a March rate cut or reinforces it.  A “Too Hot” number will refute that March rate cut expectation and stocks and bonds will likely drop while a Goldilocks number will reinforce expectations for a March cut and stocks should rally.

Outside of the jobs report, we also get University of Michigan Consumer Sentiment (E: 61.9) and the 1-Year and 5-year Inflation Expectations but barring a major surprise these numbers shouldn’t move markets.

Jobs Day

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The OPEC+ Decision Was A Clear Disappointment

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The OPEC+ Decision Was A Clear Disappointment: Tyler Richey Quoted in Morningstar

Oil prices stretch loss to a 4th session in a row to settle at lowest since July

“The OPEC+ decision was a clear disappointment last week due to both the underwhelming amount of additional [oil] output curbs and the voluntary nature of the 2024 policy cuts,” said Tyler Richey, co-editor at Sevens Report Research.

“The market didn’t buy it, however, as the bears are pressing OPEC+ for more clarity on the long-term outlook for policy plans and reassurance that the group is willing to do ‘whatever it takes’ to keep oil near or above $80/barrel,” Richey told MarketWatch on Tuesday.

“Looking ahead, the price action in oil has become increasingly heavy, and if there is not some sort of positive or bullish market catalyst ahead, we are likely to see a test of the 2023 lows in the $67/barrel area” for WTI, analysts at Sevens Report Research wrote in a Tuesday note.

Also, click here to view the full MarketWatch article published on Morningstar on December 5th, 2023. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Oil Inventories

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