Tom Essaye Quoted in CNBC on March 29, 2019
“Looking forward, there’s been material progress in alleviating the earnings growth and Fed worries that caused the Q4 2018 correction. But it would be a…” Click here to read the full article.
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Updated Equity Market Outlook
What’s in Today’s Report:
- Updated Equity Outlook: A Resilient Market vs. Two Building Headwinds
- Weekly Market Preview (All About Data)
- Weekly Economic Cheat Sheet
Futures are sharply higher following better than expected global PMIs as hope for a global economic rebound stays alive.
China’s “official” Manufacturing PMI rose to 50.5 vs. (E) 49.8 in March, Japan’s Manufacturing PMI rose to 49.2 vs. (E) 48.9, and the UK’s Manufacturing PMI surged to 55.1 vs. (E) 51.2.
The only disappointment in Europe, where the EU Manufacturing PMI slipped to 47.5 vs. (E) 47.6, and inflation also underwhelmed.
Today focus will remain on economic data and the key report today is the ISM Manufacturing Index (E: 54.2). If that number can beat expectations, it will further reinforce the idea of a growth rebound and bonds yields should rise, the dollar should fall, and this morning’s rally should be extended, although I think it’s hard to imagine the S&P 500 moving more than a percent or two ahead from here of earnings season (more on that in the issue). Other reports today include Retail Sales (E: 0.3%) and Construction Spending (E: -0.2%).
Finally, a “head’s up” that today is April Fool’s Day, just in case anyone (in my case most likely my children) tells you something preposterous!
Are Cyclical Sectors Set To Rebound?
What’s in Today’s Report:
- Are Cyclical Sectors Set To Rebound? (They Did Yesterday)
It’s green across the screen this morning but the gains are modest as more positive commentary on U.S./China trade and decent economic data are supporting markets.
On trade, Treasury Secretary Mnuchin said talks have been “productive” but gave no further details.
Economically, German Retail Sales beat estimates rising 0.9% vs. (E) -1.0%, making it two days in a row of better than expected EU data.
In normal times, today the key data point would be the Core PCE Price Index (E: 0.2% m/m, 1.9% y/y) as that’s the Fed’s preferred measure of inflation. And, if it ran hot or cold, it would have an impact on perceived Fed policy. In today’s market, however, it’s take a massive (and almost impossible) move in that price index to change expected Fed policy, so this number likely won’t move markets. Other notable events today include New Home Sales (E: 615k) and one Fed Speaker: Kaplan (10:30 a.m.).
Bottom line, this market remains driven by Treasury yields. They are over extended to the downside and rose slightly yesterday and that helped stocks – and if we see a further rise in yields today ahead of the Chinese PMIs on Sunday, that could boost markets into the weekend.
Tom Essaye Quoted in ETF Daily News on March 27, 2019
“We need global growth to stabilize to help propel stocks higher from here. The currency and bond markets continue to flash large and…” Tom Essaye, founder of The Sevens Report, said in a note. Click here to read the full article.
Another Bad Signal From the Bond Market
What’s in Today’s Report:
- Why Another Bond Auction Caused Yesterday’s Decline
- The Next Catalyst for Markets (Coming This Sunday)
Futures are slightly higher following a positive U.S/China trade article and better than expected EU economic data.
EU Money Supply (M3) rose 4.1% vs. (E) 3.9%, delivering the first upside economic surprise in Europe in some time. And, while M3 isn’t exactly a widely followed report, at this point we’ll take what good data we can get from Europe.
On trade, a Reuters article stated Chinese officials have made new concessions on IP rights and tech transfers which represents an incrementally positive step, although other issues still need to be resolved before there is a an official deal.
Today there are some notable economic reports including Final Q4 ‘18 GDP (E: 2.2%), Jobless Claims (E: 225K), and Pending Home Sales (E: -1.0%) but none of them should move markets unless there are major surprises. Similarly, there are numerous Fed speakers, Quarles (7:15 a.m. ET), Clarida (9:30 a.m. ET), Bowman (10:00 a.m. ET), Bostic (11:30 a.m. ET) and Bullard (6:20 p.m. ET), but again they shouldn’t move markets, either.
So, we’ll be watching bond yields as the key to whether stocks can resume the rally. If bond yields (Treasury yields and Bund yields) can move higher today, then likely so can stocks
Seven “Ifs” Updated
What’s in Today’s Report: Seven “Ifs” Updated (Post FOMC and PMIs)
Stock futures are moderately higher with bond yields while the dollar is steady this morning as the volatility from late last week continues to be digested by global investors.
U.K. Parliament took control of the Brexit process from Prime Minister May late yesterday but the news is not having a material impact on markets so far today and there were no market moving economic releases overnight.
In the U.S. today, several reports on the housing market are due out this morning: Housing Starts (E: 1.201M), S&P CoreLogic Case-Shiller HPI (E: 0.3%), and FHFA House Price Index (E: 0.3%) while Consumer Confidence (E: 132.5) will hit in the first hour of trading.
Additionally, there are two Fed speakers ahead of the bell: Harker (8:00 a.m. ET) and then Rosengren (8:30 a.m. ET).
While a lot of news will hit this morning between the economic data and Fed chatter, the primary focus of the stock market will be bond yields and the curve. If yields continued to fall and the curve flattens further, stocks will have a very hard time staying in positive territory as growth concerns will continue to weigh on sentiment.
Tom Essaye Quoted in Barron’s on March 20, 2019
Tom Essaye Quoted in Barron’s on March 20, 2019. “The single most prominent bullish influence on stocks right now is the dovish Fed, and the run to fresh five-month…” Click here to read full article.
FOMC Preview
What’s in Today’s Report:
- FOMC Preview
U.S. futures are higher this morning as trader focus turns to the Fed meeting while good economic data in Europe helped drive gains in international markets overnight.
U.K. unemployment fell to a multi-decade low of 3.9% in February according to the latest Labour Market report while the Business Expectations component of the German ZEW Survey was –3.6 vs. (E) -11.0 underscoring a less pessimistic outlook on the economy by analysts.
A sense of “Fed paralysis” has already begun to fall over markets this week as the FOMC meeting begins today and trader focus has largely shifted to tomorrow’s announcement and press conference.
As far as catalysts go today, there is one economic report: Factory Orders (E: 0.1%) but the single data point’s influence on the market is likely to be limited with the Fed looming tomorrow.
Tom Essaye Quoted in Barron’s on March 9, 2019
The Dow Is Set to Drop Because Boeing Is Still a Problem
But for now, there’s nothing, and it just might stay that way. “Unless we get a surprise U.S./China trade headline (and chatter there seems to be…” Click here to read the article.
What Caused Last Week’s Rally (And Can It Continue?)
What’s in Today’s Report:
- Justification For Last Week’s Rally?
- Market Internals – Not As Strong As You’d Think
- Weekly Market Preview
- Weekly Economic Cheat Sheet
Futures are only slightly lower despite disappointing U.S./China trade headlines over the weekend and more underwhelming global economic data.
The South China Morning Post reported that a Trump/Xi trade summit (to end the trade war) might not happen until June, later than the current April expectation, as talks on key issues continue to drag out.
Global economic data remained underwhelming as Japanese exports missed expectations, falling –1.2% vs. (E) 0.7%.
Today there is only one economic report, Housing Market Index (E: 63.0), and no Fed speakers (they’re in the blackout period ahead of Wednesday’s meeting) so unless we get a surprise U.S./China trade headline (and chatter there seems to be rising following the weekend) I’d expect digestion of last week’s big rally.