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Why High Growth Tech Is Still a Risk to the Market

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What’s in Today’s Report:

  • Bottom Line:  Why High Growth Tech Is Still a Risk to the Market
  • Weekly Market Preview:  Watch Treasuries and ARKK
  • Weekly Economic Cheat Sheet:  January Data Coming into Focus

Stock futures are sharply lower today as global bond yields surge to multiyear highs on tighter monetary policy expectations.

The 2-Yr T-Note yield topped 1% this morning with a rise of 7 basis points which is weighing on high valuation tech names, sending Nasdaq futures down roughly 2%.

Today, there are two economic reports to watch: Empire State Manufacturing Index (E: 26.0) and the Housing Market Index (E: 84). The market will be looking for decent numbers that don’t imply the recovery is losing momentum but not data that is “too hot” and could cause further rate hike fears. There are no Fed speakers today.

The Treasury will hold auctions for both 3-month and 6-month T-Bills at 11:30 a.m. ET today which typically does not warrant much attention, but given the increasing concerns about rate hikes this morning, the outcomes of the auctions could shed additional light on bond traders’ rate outlook and therefore move markets (soft auctions and a further rise in yields would be a stiffening headwind on tech stocks).

Finally, earning season is continuing to get underway with a few notable companies releasing results: GS ($12.10), PNC ($3.61), JBHT ($1.99).

Tom Essaye Quoted in Bloomberg Quint on January 4, 2022

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U.S. Stocks Start 2022 at Record; Treasuries Fall: Markets Wrap

Bottom line, the outlook is positive for stocks, but the removal of stimulus…wrote Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter. Click here to read the full article.

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Tom Essaye Quoted in Barron’s on December 3, 2021

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The Dow Fell, November’s Jobs Report Missed—and What Else Happened in the Stock Market Today

Initially, the stock market took the jobs report as good news. Any result above 200,000 but not wildly above expectations..wrote Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

Tom Essaye Quoted in Aljazeera on December 6, 2021

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Stocks surge as Omicron worries abate following volatile week

That’s a set up where stocks can continue to rally, although I think we all need…wrote Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter. Click here to read the full article.

Omicron and Fed Tapering

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What’s in Today’s Report:

  • Omicron and Fed Tapering
  • Omicron Update (Some Incremental Information)

Stock futures are down more than 1%, tracking global equities lower while the 10-year yield is down more than 10 basis points on renewed omicron variant concerns.

In an interview with the FT, MRNA’s CEO said the scientists he had spoken with expect a material decline in the efficacy of current vaccines against the new omicron variant of the coronavirus due to the high number of mutations and that is weighing heavily on risk assets this morning.

Today, there are a few economic reports due out: Case-Shiller Home Price Index (E: 1.1%), FHFA House Price Index (E: 1.0%), and Consumer Confidence (E: 110.7), but all of the data was gathered well before the omicron news emerged and therefore will not have a major impact on markets given the keen focus on COVID in recent days.

Fed Chair Powell will join Treasury Secretary Yellen in testifying before the Senate this morning at 10:00 a.m. ET and any indication that the Fed may change course regarding policy plans as a result of omicron could move markets. There is one other Fed speaker today: Williams (10:30 a.m. ET).

Bottom line, this is once again a COVID-driven market and any negative headlines about vaccine effectiveness or the severity of omicron infections could cause more risk off money flows as the odds of new lockdowns in parts of the world would rise as a result.

Near-Term Macro Calm (But Risks Building for 2022)

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What’s in Today’s Report:

  • Near Term Macro Calm (But Risks Building for 2022)
  • Weekly Market Preview (Risks of An Accelerated Taper?)
  • Weekly Economic Cheat Sheet (Key Inflation Data This Week)

Futures are little changed following a quiet weekend outside of the passage of the physical infrastructure bill.

On Friday the House passed the physical infrastructure bill but it’s only $550 billion of new spending over 10 years, and that’s not going to have a big impact on the economy.

The broader $1.75 trillion spending bill remains under debate as Democrat infighting continues, but a deal is expected by year-end.

Today there are no economic reports, but there are numerous Fed speakers and the market will be looking for insight into the possibility of an accelerated taper beyond December.  Powell (10:30 a.m.) is the headliner today but he’s only making opening remarks and shouldn’t offer any insights on policy.  Vice Chair Clarida (9:00 a.m.) will speak on policy, so his interview is probably the most important one to watch today.  Other Fed speakers include Montgomery (10:00 a.m.), Harker (12:00 p.m.) and Evans (1:50 p.m.) but they shouldn’t move markets.

Tom Essaye Quoted in Yahoo Finance on October 18, 2021

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U.S. Stocks Extend Rebound as Oil Pares Back Gains: Markets Wrap

The issues that caused the pullback have quieted over the past two weeks, which has…wrote Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter. Click here to read the full article.

Tom Essaye Interviewed on Yahoo Finance Live on October 19, 2021

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The market reacting positively to earnings isn’t because they’re ‘so great’: Sevens Report Research Pres.

Tom Essaye, Sevens Report Research Founder and President, joins Yahoo Finance Live to discuss the market reaction to earnings season thus far, outlook on inflation… Click here to see the full interview.

Tom Essaye Quoted in Yahoo Finance on October 6, 2021

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4 Catalysts That Could Send The Stock Market Higher Or Lower From Here

Right now, the current market valuation assumes that tax increases are relatively small and that companies bear most of the…Tom Essay said. Click here to read the full article.

Dow Theory Update

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What’s in Today’s Report:

  • Dow Theory Update

Futures are modestly lower to start the fourth quarter as House Democrats failed to pass infrastructure legislation, while economic data was better than expected.

House Democrats remain divided about the size of the infrastructure and reconciliation bills, and the Debt Ceiling can’t be increased until a compromise is found.

EU and UK global final PMIs slightly beat estimates while EU Core HICP (their CPI) was slightly hot (1.9% yoy vs. (E) 1.8% yoy), implying the global recovery remains on track and that inflation pressures are still firm.

Today’s focus will be on important economic reports.  First, the Core PCE Price Index (E: 0.2%, 3.6%) is the Fed’s preferred measure of inflation and if it’s much hotter than expectations, that will push yields higher and be another headwind on stocks.  Also, the ISM Manufacturing PMI (E: 59.8) gets released and markets will want to see stability there.  We also get Consumer Sentiment (E: 71.0) and the inflation expectations component will be closely watched.  Finally, there are two Fed speakers today, Harker (11:00 a.m. ET) and Mester (1:00 p.m. ET) but neither should move markets.

 

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