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Tom Essaye Quoted in The Wall Street Journal on August 27, 2019

“The staples are actually poised to be in a pretty good spot,” said Tom Essaye, founder of the Sevens Report. He said he thinks positive but slowing economic growth could continue to benefit the group. Click here to read the full article.

Identifying Potential Positive Surprises

What’s in Today’s Report:

  • Identifying Potential Positive Surprises
  • EIA/Oil Analysis

Futures are sharply higher on more positive U.S./China trade “chatter” and political resolution in Italy.

Chinese officials made general comments about not wanting to further escalate the trade war and won’t retaliate to the recent tariffs, and that’s helping sentiment.  But, to be clear, no actual progress has occurred – just vague rhetoric, and as far as we can tell the phone call between the two delegations has not occurred yet (remember it was loosely scheduled for Tuesday).  Point being, things haven’t improved as much as the two day rally would imply.

Economic data was decent as German unemployment met expectations while EU Economic Sentiment was better than expected (103.1 vs. (E) 102.5).  Regarding Italy, the country will avoid new elections, and while that’s not a sustainable positive catalyst for markets, it does, for now, remove another potential headwind.

Attendance and volumes will continue to decrease into the long weekend, but focus will remain on any trade related headlines.  Economically, the notable reports today include Q2 Revised GDP (E: 2.0%), Jobless Claims (E: 213K) and Pending Home Sales (E: -0.3%) although none of those should move markets.

Bottom line, if Treasury yields are stable, stocks can hold these early gains, although we continue to caution this rally is being driven by month-end positioning more than any actual, positive progress on the headwinds facing this market.

Why the Falling Yuan Isn’t That Big of a Threat

What’s in Today’s Report:

  • Why The Falling Yuan Isn’t That Big of a Threat

Futures are solidly higher thanks to continued momentum following Thursday’s positive close.

Stocks were short term oversold and due for a bounce, but if there’s a “reason” behind the early rally it was a Washington Post article stating the Trump administration is getting concerned about future economic growth, which might lead to a trade deal.

There were no notable economic reports overnight.

Today the calendar is more quiet as we only have two economic reports, Housing Starts (E: 1.260M) and Consumer Sentiment (E: 97.5).  But, the Huawei waiver deadline is Monday the 19th so if there are going to be waivers given, it could happen literally at any minute (generous waivers will supercharge today’s early rally if they come).

Tom Essaye was Quoted in InvestmentNews on August 5, 2019

Wall Street reactions to China trade escalation marked by fear, uncertainty

“It’s not good, obviously. I think that it really surprised a lot of people and I think it underscores that this is not a problem that’s going to be solved in the near-term…” said Tom Essaye, a former trader who founded “The Sevens Report” newsletter. Click here to read the full article.

Graph

G-20 Preview (What It Will Mean for Stocks)

What’s in Today’s Report:

  • G-20 Preview (What’s Expected, Bullish If, Bearish If, and Market Reactions)
  • Oil Update – A Bullish Inventory Number (And a Major Gasoline Supply Disruption)

Futures are marginally higher again and this morning is largely a repeat of Wednesday morning as a news article that is positive on U.S.—China trade in tone, yet offers no new information, is causing a mild rally.

The South China Morning Post (a government media source) posted an article stating the U.S. and China will reach a temporary trade “truce” at the G-20.

Economic data was sparse and is not moving markets.

Today we do get some notable economic reports, including Final Q1 GDP (E: 3.1%), Jobless Claims (E: 218K) and Pending Home Sales (E: 0.6%).

The GDP report will get the most attention but the claims data is the most important release today, but that said none of these reports should move markets.  Instead, we will continue to be glued to the scrolling ticker for any reports or updates on what’s expected at the G-20, as that event continues to hover like a cloud over all markets this week.

Digging Deeper into the Yield Curve

What’s in Today’s Report:

  • Digging Deeper into the Yield Curve

S&P futures are rebounding solidly this morning after Secretary Mnuchin reiterated that a U.S.-China trade deal is 90% complete while oil prices surge ahead of weekly data.

WTI crude oil futures are up nearly 2% after the API reported a weekly supply draw of over 7M bbls late on Tuesday which nearly tripled expectations (-2.6M bbls).

Economically, the German GfK Consumer Climate headline fell to 9.8 vs. (E) 10.0 in July, underscoring investor concerns about the EU economy.

After Mnuchin’s comments this morning, market focus has returned to the trade war and investors will be looking for any additional commentary out of Washington regarding the upcoming meeting between Trump and Xi or any other details on trade.

There are no Fed speakers today but there are two economic reports to watch that could potentially move markets, especially given the less dovish Fed speak yesterday: Durable Goods Orders (E: -0.1%) and International Trade in Goods (E: -$71.5B).

FOMC Takeaways (Dovish Gamechanger?)

What’s in Today’s Report:

  • Fed Takeaways
  • EIA Analysis and Oil Update

Stock futures are rallying towards all-time highs and gold is up nearly 3% while the dollar and bond yields continued to decline overnight as global investors cheered the dovish Fed and rising prospects of a U.S.-China trade deal.

There were no notable economic, central bank, or trade war headlines since yesterday’s close.

Geopolitically, Iran claimed it shot down a U.S. spy drone overnight which triggered a fear bid in global oil prices. WTI is up nearly 3% on the news.

Looking into today’s session, there are two economic numbers due out ahead of the bell: Jobless Claims (E: 219K) and the Philadelphia Fed Survey (E: 11.0) but neither should materially move markets while no Fed officials are scheduled to speak.

Momentum is clearly higher for stocks right now and investor optimism surrounding this week’s dovish central bank developments and improving prospects for a U.S.-China trade deal very well may help drive the S&P to fresh all-time highs today.

Tom Essaye Quoted in MoneyWeek on June 14, 2019

“You had a market that became very pessimistic and then all of a sudden we had the Fed’s dovish rhetoric and no…” says Tom Essaye. Click here to read the full MoneyWeek article.

Federal Reserve

Why Are Stocks So Resilient (And Can It Last?)

What’s in Today’s Report:

  • Why Are Stocks So Resilient (And Can It Last?)
  • Last Week’s Key Event (It Wasn’t Mexican Tariffs)
  • Weekly Market Preview (Four Big Events This Week, Not Just the Fed)
  • Weekly Economic Cheat Sheet (All About the Fed)

Futures are fractionally higher following a weekend full of  articles on trade and the Fed but none of them shifted the current market outlook.

There were multiple stories on U.S./China trade and they were mixed (some positive, some negative).  The bottom line remains that the best hope for the G-20 summit is a resumption of negotiations and promises of no new tariffs.

There was no notable economic data over the weekend.

The Fed meeting is just over 48 hours away so barring any major surprises on U.S./China trade, markets should be relatively calm into that meeting.

But, that said, there is an important economic report today, Empire Manufacturing (E: 10.0), which will give us the first look at economic activity in June and this report could confirm or deny the U.S. economy is again losing positive momentum, although it’ll take a big miss or beat vs. expectation to materially move stocks.

Tom Essaye Quoted in MarketWatch on June 13, 2019

Tom Essaye, founder of the Sevens Report Research, partly credited expectations for further economic supportive measures from China for the market’s gains. “Chinese Vice Premier Hu called for more stimulus…” Click here to read the full article.