Posts

We’ve Reached a Tipping Point

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What’s in Today’s Report:

  • We’ve Reached an Important Tipping Point
  • Weekly Market Preview:  More Progress Towards a Bottom?
  • Weekly Economic Cheat Sheet:  Important March Data This Week

Futures are down around 3%, but off the overnight lows of –5%, as the coronavirus case count increased sharply over the weekend in the U.S. while Congress failed to make much progress on the stimulus bill.

The stimulus bill has swelled to an expected $2 trillion (which is a market positive) but it failed to clear a procedural vote in the Senate and Democrats and Republicans are still far apart on details.

But, the market does still expect passage of the bill early this week (futures would be much lower if markets doubted that the bill will pass).

There are no notable economic reports today and as such, all eyes will be on Washington.  Signs of progress on the stimulus bill will result in rallies, while negative headlines will send stocks lower.  As a reference, markets expect passage of the stimulus bill by the middle of this week (at the latest).

Tom Essaye Quoted in UPI.com on March 18, 2020

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Tom Essaye, founder of The Sevens Report, said the volatility in the market is not yet over and said the market changes await events such as final approval of the stimulus package.

“We also need to see more progress on the pharma side of things and above all else…” Essaye said. Click here to read the full article.

Tom Essaye Quoted in MSN on March 19, 2020

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“Volatility is not over yet,” said Tom Essaye, founder of The Sevens Report, in a note. He pointed out the administration’s stimulus packages need congressional approval. “We also need to see more progress on the pharma…” Click here to read the full article.

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Tom Essaye Quoted in CNBC on March 19, 2020

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“Looking ahead, the path of least resistance is decidedly lower right now and the lower-for-longer dynamic appears to be one that…” Tom Essaye, co-founder of The Sevens Report, said Wednesday. Click here to read the full article.

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Corporate Bond Market Update

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What’s in Today’s Report:

  • Corporate Bond Market Update

Futures are sharply higher this morning as global governments move forward with more economic stimulus.

The Senate formally released the third economic stimulus bill, valued over 1 trillion (and likely rising).  While not a done deal yet, the speed at which Washington is operating has quickened this week and markets are reacting positively to that change.

On the coronavirus front, all of California is now under a “stay at home” order as cases continue to rise.

Today all eyes will remain on Washington and any positive commentary on the stimulus bill will further help stocks, while signs of a political battle will likely reverse these early gains.  Economically, there’s one report,  Existing Home Sales (E: 5.50M) and today is a “Quad Witch” quarterly options expiration so watch for big volumes on the close.

Tom Essaye Quoted in CNBC on March 17, 2020

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“Volatility is not over yet,” said Tom Essaye, founder of The Sevens Report, in a note. He pointed out the administration’s stimulus packages need congressional approval. “We also need to see more progress…” Click here to read the full article.

Tom Essaye Quoted in Benzinga on March 16, 2020

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Tom Essaye, founder of Sevens Report Research, said the timing of the Fed’s announcement on Sunday when it has a regular meeting scheduled for Wednesday may have spooked the market.

“It implies panic, (what did they know that we didn’t?), although that’s probably not…” Essaye said. Click here to read the full article.

Why The Fed Needs To Do More

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What’s in Today’s Report:

  • Why The Fed Needs to Do More
  • Is It Time to Go To Cash?

Futures are down just under 2% which is an improvement as they were nearly down limit at the lows overnight, so there’s been a good rebound.

On the stimulus front, governments continue to act.  Stimulus bill 2 was passed last night and the ECB dramatically increased its QE program by 750 bln euros. and will buy government bonds, corporates and commercial paper. Australia also launched its first ever QE program.  All these measures are helping markets and sentiment.

All eyes today will be on Washington for signs of progress on stimulus bill three, and the sooner it passes, the better.  From an economic standpoint, Jobless Claims (E: 220K) are the key report and we’re expecting a big increase, while Philadelphia Fed (E: 14.0) will also be important as we want to see more March data.

Reasonable Valuation Targets

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What’s in Today’s Report:

  • Where Is a Reasonable Valuation for this Market?
  • Two Reasons Gold Is Losing Its Luster

Futures were “limit up” for much of the night following Monday’s rout but have since pulled back to flat as fears of a coronavirus induced recession to continue to grip markets.

Overnight, the German ZEW Survey was dismal with the Current Conditions Index crashing to -43.1 vs. (E) -25.0 underscoring the rapid deterioration in investor sentiment due to the COVID-19 outbreak.

The Fed Meeting has been canceled following Sunday’s intermeeting actions and there are no Fed speakers today.

There are a few notable economic releases to watch this morning, however. In order of importance they are: Retail Sales (E: 0.1%), Industrial Production (E: 0.4%), Business Inventories (E: -0.1%), Housing Market Index (E: 74), and January JOLTS (E: 6.500M).

The first two are especially important as if the data points confirm that economic growth materially slowed in February as a result of the coronavirus outbreak, it could cause more fear-induced selling today as hopes for a swift rebound in growth will continue to fade.

 

Of course, any noteworthy updates on the COVID-19 pandemic, positive or negative, will continue to have a significant influence on the market and volatility is likely to remain elevated.

Tom Essaye Quoted in Barron’s on March 13, 2020

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Tom Essaye, founder of Sevens Report Research, thinks most of Friday morning’s rally can be attributed to a “typical oversold bounce,” though he does note there are hopes global governments will unveil economic stimulus plans over the weekend. That began to take form as Germany announced such a fiscal stimulus package. And on a more positive note, Thursday’s drop could be a sign of investor capitulation, according to Essaye…Click here to read the subscribe.

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