Posts

What the Wuhan Coronavirus Means for Markets

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What’s in Today’s Report:

  • What the Wuhan Coronavirus Means for Markets

S&P 500 futures rallied to new record highs overnight amid easing concerns over the deadly virus outbreak in China that weighed on risk assets Tuesday.

Chinese health officials announced plans to both screen for, and contain the Wuhan coronavirus which helped reduce fears that a SARS-like epidemic is developing.

Today, there are a few different potential catalysts for the market that warrant watching. First, there are two economic reports on the housing market: FHFA House Price Index (E: 0.3%) and Existing Home Sales (E: 5.430M) which should show a continued rebound in the sector into the end of 2019.

Second, earnings season is in full swing and investors will continue to sift through the releases closely. Notable corporations reporting today include: JNJ ($1.87), ABT ($0.95), ALLY ($0.95), TXN ($1.02), KMI ($0.26), LVS ($0.80), and RJF ($1.90).

Lastly, any new developments on the spread, or containment of, the Wuhan coronavirus will likely get a reaction from markets as it was the primary focus of traders across asset classes yesterday.

Tom Essaye Quoted in the Cover Story for Barron’s on January 17, 2020

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“This rally now has a life of its own. I do want to caution that any pullback that occurs (and there will be one) likely will be a bit more painful than before and on the order of 5% to 10%, given how stretched the market has become…” writes Tom Essaye of the Sevens Report newsletter. Click here to read the full article.

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The Two Pillars Supporting Stocks

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What’s in Today’s Report:

  • Staying Focused on the Two Causes of the Rally

U.S. stock futures and European shares are tracking Asian markets lower amid rising concerns about the outbreak of a newly discovered virus in China.

Chinese health officials have confirmed that the recently named “coronavirus” can be spread by human-to-human contact.

And with the Lunar New Year holiday beginning this week, fears of a SARS-like health epidemic are on the rise which saw the Shanghai Composite fall 1.41% overnight.

Looking into today’s session, there are no notable economic reports due to be released and no Fed officials are scheduled to speak.

That will leave investors largely focused on Q4 earnings season with HAL ($0.29) reporting before the bell and NFLX ($0.50), AMTD ($0.76), UAL ($2.64), and COF ($2.38) all releasing results after the close.

Is Anything New Driving the Melt Up?

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What’s in Today’s Report:

  • Is Anything New Driving The Melt Up?

Futures are modestly higher again after Chinese economic data beat expectations.

Chinese Fixed Asset Investment (5.4% vs. (E ) 5.2%, Industrial Production (6.9% vs. (E ) 5.9%, and Retail Sales (8.0% vs. (E ) 7.8%) all beat estimates, raising hopes for a global economic rebound.

Today focus will again be on economic data and earnings, and like yesterday, the stronger the data, the better.  Industrial Production (E: -0.3%) and Consumer Sentiment (E: 99.3) are the two key reports today, while we also get Housing Starts (E: 1.373M).

On the earnings front, industrial results have been mixed this week so the market will want to see solid results from SLB ($0.37), FAST ($0.31) and JBHT ($1.55).

Finally, there are two Fed Speakers today: Harker (9:00 a.m. ET) and Quarles (12:45 p.m. ET), but neither should move markets.

What The Actual Phase One Deal Means for Markets

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What’s in Today’s Report:

  • What The Actual Phase One Deal Means for Markets
  • January Economic Breaker Panel
  • EIA Analysis and Oil Update

Futures are modestly higher following a quiet night of news as markets continued to digest that the actual text of the phase one trade deal largely meet expectations.

Economic data was sparse as the only report was German CPI and it met estimates at 1.5% yoy.

Today focus will be on economic data and earnings, as there are several important economic reports including (in order of importance):  Retail Sales (E: 0.3%), Philly Fed (E: 3.4), Jobless Claims (E: 214K), and Housing Market Index (E: 75). There is also one Fed speaker, Bowman (10:00 a.m. ET), but he shouldn’t move markets.

On the earnings front, results have been mixed so far this week, and focus will turn more towards earnings now that phase one is a done deal. Some important reports we’ll be watching today include: MS ($0.98), SCHW ($0.64), BK ($0.99), TSM ($0.72), CSX ($0.97), PPG ($1.35).

Jobs Report Preview (All About Wages)

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What’s in Today’s Report:

  • Jobs Report Preview (All About Wages)
  • Oil Update (EIA Analysis)

Futures are modestly higher as U.S./Iran tensions continue to recede.

There was no new geopolitical news overnight, and the rockets that hit the “Green Zone” in Iraq into the closing bell on Wednesday were a small, isolated event.  As such, futures are essentially recouping that late-day dip.

Economic data was again mixed as German IP was better than expected, while German exports missed estimates.

Today there is one notable economic reports, Jobless Claims (E: 219K), and markets will want to see a continued decline that effectively reverses the Thanksgiving spike.

There are also numerous Fed speakers today including, in order of importance, Clarida (8:00 a.m. ET), Williams (11:30 a.m. ET), Kashkari (9:30 a.m. ET), Barkin (12:45 p.m. ET), Evans (1:20 p.m. ET).  Broadly, markets expect a continued reiteration of the message that the Fed isn’t raising rates until inflation is sustainably higher.

Market Multiple Update

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What’s in Today’s Report:

  • U.S.-Iran Update
  • Market Multiple Update: Initial 2020 Edition

Global stocks plunged overnight on reports of an Iranian missile strike against U.S. military bases in Iraq. Risk assets have since recovered however as there were no U.S. casualties reported and Iran said the attacks “concluded” Tehran’s retaliation for the assassination of General Soleimani.

In Europe, German Manufacturers’ Orders were –1.3% vs. (E) 0.2% but the easing geopolitical tensions between the U.S. and Iran are supporting modest gains in EU markets.

Looking into today’s session, geopolitics will likely dominate trading but as long as tensions continue to ease between the U.S. and Iran, stocks will likely be able to trade with an upside bias.

As far as other catalysts go, there is one economic report to watch: ADP Employment Report (E: 157K), one Fed official scheduled to speak: Brainard (10:00 a.m. ET) and a 10-Yr T-Note Auction at 1:00 p.m. ET.

What Rising Geo-Political Tensions Mean for Markets

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What’s in Today’s Report:

  • What the Spike In Geo-Political Tensions Means for Markets
  • What’s the Worst Case Geo-Political Scenario With Iran?

Futures are sharply lower following a spike in geopolitical tensions after a U.S. military strike killed a high ranking Iranian general.

A U.S. missile strike killed Iranian general Suleimani, who was the head of the Iranian military and arguably the second (and definitely the third) most important man in Iran.  Iran has vowed a response and oil spiked 4% on the news.

Today focus will be on any Iranian military response, and obviously a further escalation in tensions will be negative for markets.

Away from geopolitics, we also get an important economic report, the ISM Manufacturing PMI (E: 49.1) and several Fed speakers including Barkin (11:05 a.m. ET), Brainard & Evans (1:15 p.m. ET), Kaplan (3:30 p.m. ET) and the FOMC Minutes (2:00 p.m. ET).

Tom Essaye Quoted in Yahoo Finance on January 2, 2020

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“The whole infrastructure of the market is changing, for all of us, especially traders, dealing with this extreme short-term volatility is something we all have to get more used to. And, we have to somehow assimilate that into our trading plans and figure out how…” said veteran trader and Sevens Report Research founder Tom Essaye on Yahoo Finance’s “The First Trade.” Click here to read the full article.

Stock Market Algorithm

Tom Essaye Interviewed with Yahoo Finance on December 31, 2019

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Tom Essaye interviewed with Brian Sozzi and Jared Blikre from Yahoo Finance. Click here to watch the full interview.

Tom Essaye Interviewed with Yahoo Finance