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2025 Market Risks: Pullback Causers vs. Rally Killers

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Why Did Stocks Drop Last Week?: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • 2025 Market Risks: Pullback Causers vs. Rally Killers

Futures are lower with EU shares as escalating geopolitical tensions are driving risk-off money flows this morning.

Overnight, Russian President Putin approved a doctrine that lowered the threshold for the use of nuclear weapons and shortly thereafter, Ukraine reportedly launched their first long-range ballistic missile attack on targets in Russia prompting risk-off/safe-haven money flows.

Economically, Eurozone HICP (CPI equivalent) was inline in October with a headline of 2.0% y/y and 2.7% y/y Core which did not materially move markets amid the geopolitical developments.

Today, the fluid geopolitical situation in between Russia and Ukraine will be in focus as the uncertainties surrounding the next steps in the conflict will likely drive risk-aversion until some degree of clarity emerges.

Domestically, there is one economic report due to be released: Housing Starts (1.3M) and two Fed speakers to watch: Goolsbee (12:25 p.m. ET) and Schmid (1:10 p.m. ET). Barring a big surprise in the data or any meaningfully dovish or hawkish changes in rhetoric, the data and Fed speakers will not likely move markets materially.

Finally, on the earnings front we will get quarterly results from WMT ($0.53), LOW ($2.81) and MDT ($1.24) today.

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Why Did Stocks Drop Last Week?

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Why Did Stocks Drop Last Week?: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Did Stocks Drop Last Week?
  • Weekly Market Preview:  Focus on Treasury Secretary, NVDA earnings and economic growth (Thursday/Friday).
  • Weekly Economic Cheat Sheet:  Important Growth Data Late This Week

Futures are little changed following a quiet weekend of news as markets continue to digest last week’s rise in Treasury yields, and the return of political surprises (via Trump’s cabinet announcements).

There were no notable economic reports overnight.

Politically, the major remaining cabinet pick from Trump is Treasury Secretary and it should come early this week (and another unorthodox choice would further roil markets).

Today the calendar is quiet as there is just one economic report, Housing Market Index (E: 43), and one Fed speaker, Goolsbee (10:00 a.m. ET).  So, focus will be on Trump’s cabinet (again, the more traditional choice for Treasury, the better for markets) and on the 10-year yield.  If it keeps rising, that will be a continued headwind on stocks.

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The bullish thesis for stocks is stronger now

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The bullish thesis for stocks is stronger now: Tom Essaye Quoted in Market Watch

The market has passed four key tests, newsletter writer says

Tom Essaye, founder and president of the Sevens Report, says the bullish thesis for stocks is stronger now because all of the tests set up two weeks ago were passed.

The major economic reports of the past two weeks were solid, with the payrolls disappointment largely explained by hurricanes and strikes;

The Fed remains committed to cutting rates;

Earnings were more mixed than excellent but still haven’t changed estimates for S&P 500 earnings per share next year very much;

And Republicans have large enough majorities to push through pro-growth legislative changes.

“While the bullish thesis passed the tests of the past two weeks, do not confuse this with a market that cannot go down,” he says. “There are real risks to this rally that we cannot ignore over the medium/longer term, although investors could ignore them unless forced not to between now and year-end.” A move to 6,200 on the S&P 500 before the end of the year is “entirely possible” as he said the market will likely favor value, cyclical sectors and the equal-weight S&P 500 over the market-weighted index.

Also, click here to view the full MarketWatch article published on November 11th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

I’d expect some digestion of the move or a mild drift higher

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I’d expect some digestion of the move or a mild drift higher: Tom Essaye Quoted in Blockworks

In a surprise to no one, Fed cuts rates by 25bps

It’s the same crucial sentence we’ve seen before, which shouldn’t shock markets. And, as a result of no surprises, stocks should see at least a mild extension of their Trump-fueled rally, according to Sevens Report Research founder Tom Essaye.

“Given yesterday’s strong rally, I’d expect some digestion of the move or a mild drift higher,” Essaye said. “However, this outcome should keep expectations for a rally into year-end in place, led by cyclical sectors — industrials, financials, small caps [and] energy — with tech and defensives lagging.”

Also, click here to view the full Blockwork article published on November 7th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

Equities surged as a Republican sweep is the likely election outcome

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Equities surged as a Republican sweep is the likely election outcome: Tom Essaye Quoted in Morningstar

Dow soars as these areas are ‘likely market winners’ of potential Republican sweep

Equities surged as “a Republican sweep is the likely election outcome,” Tom Essaye, the founder and president of Sevens Report Research, said in a note Wednesday. “This likely ‘green lights’ a solid year-end rally as long as growth and the Fed perform as expected.”

The note described the Republican agenda as favoring “pro-growth policies,” citing tax cuts, deregulation, “a focus on domestic industries and negotiating better trade relationships.”

Essaye pointed to several exchange-traded funds as “the likely market winners from this policy stance,” including the Vanguard Value ETF VTV, which invests in large-cap value stocks in the U.S., and the small-cap equities-focused iShares Russell 2000 ETF IWM.

Also, click here to view the full MarketWatch article published in Morningstar on November 6th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Oil Inventories

If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

Market Multiple Table: How High Can This Market Go?

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Market Multiple Table: How High Can Stocks Go?: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Market Multiple Table: How High Can This Market Go?

Stock futures are modestly lower with the dollar index at a multi-year high and the 10-Yr yield holding above 4.40%, a multi-month high, as traders look ahead to the CPI report.

Economically, Japanese PPI notably jumped from 2.8% to 3.4% y/y in October which raised inflation concerns in Asian markets.

Today, trader focus will almost exclusively be on the latest U.S. inflation data due out before the bell: CPI (E: 0.2% m/m, 2.6% y/y), Core CPI (E: 0.3% m/m, 3.3% y/y). A “hotter” than anticipated print will likely trigger hawkish money flows, pushing the dollar index and Treasury yields to new highs which would weigh on stocks while an as-expected or “cool” print would be well-received.

Additionally, there are several Fed speakers on the calendar who could move markets: Logan (9:45 a.m. ET),  Musalem (1:00 p.m. ET), and Schmid (1:30 p.m. ET).

Lastly, earnings season continues to slow down but a few notable companies reporting quarterly results today include: HUT (-$0.24), NU ($0.10), and CSCO ($0.87).

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Contrarian Opportunity in Chinese Tech (3 ETFs)

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Contrarian Opportunity in Chinese Tech (3 ETFs): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Can Singles’ Day and Stimulus Offset Concerns in Chinese Stocks?

Futures are lower this morning as global equity markets take a breather and digest the sizeable post-election gains.

Economically, German CPI held steady at 2.0% last month while the ZEW Survey disappointed. In the U.S., the NFIB Small Business Optimism Index rose to 93.7 vs. (E) 91.7 but the solid release is having little impact on futures in pre-market trading.

There are no further economic reports today, but the Treasury will hold 3M and 6M Bill auctions at 11:30 a.m. ET that could move yields (Treasuries were closed for Veterans Day yesterday so how bonds trade this morning could move stocks).

Turning to the Fed, the speaker circuit is picking back up in the wake of last week’s FOMC meeting with several officials scheduled to speak today including: Waller (10:00 a.m. ET), Barkin (10:15 a.m. ET), Kashkari (2:00 p.m. ET), and Harker (5:00 p.m. ET).

Finally, a few notable companies reporting earnings today include: HD ($3.65), SHOP ($0.37), and OXY ($0.81). The former two could shed light on the health of the U.S. consumer and therefore have the potential to move the broader equity markets but a continued digestion, or potentially some profit taking, in the wake of the huge post-election advance before tomorrow’s CPI release is fairly likely today.

Join thousands of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

Why the Bullish Thesis Got Stronger

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Why the Bullish Thesis Got Stronger: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why the Bullish Thesis Got Stronger
  • Weekly Market Preview: Does the S&P 500 Breakthrough 6,000?
  • Weekly Economic Cheat Sheet: CPI on Wednesday, Important Growth Data on Thursday

Futures are modestly higher on post-election momentum and following a very quiet weekend of news.

Parts of the Trump administration are starting to come into view, most notably that Scott Bessent is looking most likely to become Treasury Secretary and the market views that as bullish.

Economically, there were no notable reports overnight.

Today is Veteran’s Day so trading should be quiet as there are no economic reports or Fed speakers, while the bond market is closed.  However, there are important updates this week on inflation (CPI on Wednesday) and growth (numerous reports on Thursday/Friday) so the week will get busier.

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What Yesterday’s Rate Cut Means for Markets

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What Yesterday’s Rate Cut Means for Markets: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What Yesterday’s Rate Cut Means for Markets

Futures are slightly lower mostly on digestion of the week’s news and after Chinese stimulus only met expectations.

China announced a 1.4 trillion-yuan fiscal stimulus program (so government spending) although that only met expectations and is seeing a mild “sell the news” reaction.

Today the calendar is relatively quiet (especially considering what a busy week it’s been already) but there is still one notable economic release, the University of Michigan Consumer Sentiment (E: 70.8) and, contained in that report, the One-Year Inflation Expectations (E: 2.7%).  Markets will want to see both numbers hit expectations and not be “Too Hot” (especially for inflation expectations).

We also have two Fed speakers today, Bowman (11:00 a.m. ET) and Musalem (2:30 p.m. ET), but given the Fed decision yesterday they shouldn’t move markets.

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FOMC Preview

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

What’s in Today’s Report:

  • FOMC Preview
  • EIA Data Takeaways – Oil Market Fundamentals Continue to Deteriorate

Futures are slightly higher this morning as markets are largely holding yesterday’s sizeable post-election gains with trader focus shifting to today’s Fed decision.

Economically, data was mostly solid overnight as Chinese exports jumped +12.7% y/y in October (+2.4% in September) while EU Retail Sales were inline with estimates, up 0.5% last month.

Today is lining up to be a critical day for markets as traders assess the big week-to-date gains. Early focus will be on economic data with two notable releases due before the open: Jobless Claims (E: 221K) and Productivity & Costs (E: 2.5%, 1.0%).

From there, markets are likely to turn sideways as traders position into the afternoon Fed events beginning with the FOMC Announcement at 2:00 p.m. ET, followed up by Fed Chair Powell’s press conference 2:30 p.m. ET. Anything other than the expected 25 basis point rate cut and steady forward guidance will almost certainly move markets today.

Finally, there are no big tech or major industrial earnings today but there are a few noteworthy companies due to report quarterly results today including: GOLD ($0.33), WBD ($-0.05), HAL ($0.75), SQ ($0.87), and ABNB ($2.17). However, to be clear, the Fed is the catalyst to watch today.

Join thousands of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.