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The Real Problem for this Market (Not Growth)

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The Real Problem for this Market (Not Growth): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • The Real Problem for this Market (Not Growth)
  • Weekly Market Preview:  Does Weak Inflation Data Make a 50 bps Cut More Likely?
  • Weekly Economic Cheat Sheet:  CPI Wednesday is the key report.

Futures are seeing a strong bounce following a generally quiet weekend of news.

There was no specific positive headline that’s rallying futures and instead we’re seeing mostly technical dip buying.

Economically, Japanese Q2 GDP missed estimates (2.9% vs. (E ) 3.1% and that’s pushing back on BOJ rate hike expectations, which is a mild positive (the yen is down 1%).

This week focus turns back to inflation and that includes today’s NY Fed Inflation Expectations (E: 3.0%).  If they fall more than expected, it’ll further boost expectations for a 50-bps cut (and help support stocks).  The other notable economic report is Consumer Credit (E: $12.5B) and there is another important tech earnings report after the close (ORCL (E: $1.33)).  Solid guidance from ORCL would be a welcomed positive for investors right now.

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Technical Update (Ahead of Jobs Report)

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Technical Update (Ahead of Jobs Report): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Technical Update (Ahead of Jobs Report)
  • Abbreviated Jobs Report Preview
  • EIA and Oil Market Analysis (Will Oil Keep Falling?)

Futures are sharply lower on more disappointing AI related tech earnings and ahead of today’s jobs report.

Broadcom (AVGO) posted disappointing guidance and became the latest AI related tech company to produce underwhelming results and that’s weighing on futures.

Economic, data was mildly disappointing overnight as German IP missed estimates while EU GDP was revised lower.

Today focus will be on the jobs report and expectations are as follows:  Job Adds (160k), Unemployment Rate (4.2%), Wages (0.3% m/m, 3.7% y/y).  The mood in the markets has soured this week and investors are nervous about a disappointing jobs number. If that happens, look for an intense decline in stocks as hard landing chances rise.  However, if the report is “Just Right” a solid relief rally (S&P 500 up 1% or more) should materialize, especially if the Fed speakers today point to a 50-bps cut.

In addition to the jobs report, as mentioned, there are two important Fed speakers today:  Williams (8:45 a.m. ET) and Waller (11:00 a.m. ET).  If they hint at a 50-bps cut, that will help support markets regardless of the jobs report.

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Market participants were also rotating out of this year’s winners

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Market participants were also rotating out of this year’s winners: Sevens Report Editor, Tom Essaye, Quoted in Barron’s

Technology and Energy Stocks Are Hit Hard

Sevens Report Research’s Tom Essaye told Barron’s that while the latest ISM manufacturing survey was weak, market participants were also rotating out of this year’s winners and turning to some underperforming sectors.

“The market was pretty resilient the last couple weeks on light volumes, and now people are coming back in, looking forward, and reasonably surmising that markets could be more volatile in the next couple of months, and probably just taking a little bit off the table,” he says.

“For the first time in years, the market would welcome a number as hot as could be,” Essaye says. “If you get more weakening in the labor market, then a hard landing becomes much more probable. And that’s obviously not priced in at all.”

Also, click here to view the full Barron’s article published on September 3rd, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

It’ll be Very Hard for This Market to RallyIf 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.

Jobs Report Preview (A Significant Change)

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Jobs Report Preview (A Significant Change): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Jobs Report Preview (A Significant Change)

Futures are little changed following a quiet night of news and ahead of more important economic reports.

On earnings, HPE became the latest tech company to post solid but “not as good as hoped for” earnings (the stock is down 3% pre-market).

Economically, the only notable report beat estimates as German Manufacturers’ Orders rose 2.9% vs. (E) 1.8%.

Today focus will remain on economic data and the key reports are (in order of importance):  ADP Employment Report (E: 140K), Jobless Claims (E: 230K), ISM Services PMI (E: 51.1) and Unit Labor Costs (E: 0.8%).   From a market reaction standpoint, bad data is now bad for the markets (given growth concerns), so the stronger these numbers, the better for stocks.

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Demand worries linked to the threat of a slowdown in global growth

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Demand worries linked to the threat of a slowdown in global growth: Tom Essaye Quoted in Forbes

Nvidia Stock Plunges 10% Amid Broader Stock Losses As Rocky September Kicks Off

“Demand worries linked to the threat of a slowdown in global growth are acting as the biggest influence on the oil market right now,” remarked Sevens Report analyst Tom Essaye in a Tuesday note to clients.

Also, click here to view the full Forbes article published on September 3rd, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Lastly, 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.

Revisiting the Yield Curve

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Revisiting the Yield Curve: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Stocks Dropped
  • Another Month, Another VIX Squeeze
  • Revisiting the Yield Curve Reversion
  • ISM Manufacturing Index Takeaways

Stock futures are lower again this morning as global equity markets sold off overnight following the tech-led declines in the U.S. yesterday amid mixed economic data overseas.

Economically, China’s Composite PMI was unchanged at 51.2 in August but the Services Index fell to 51.6 vs. (E) 52.1 while the EU Composite PMI rose to 51.0 vs. (E) 51.2.

Looking into today’s session, there are several economic reports due to be released including: JOLTS (E: 8.1 million), Factory Orders (E: 4.6%), and Monthly Motor Vehicle Sales (E: 15.4 million).

There are no Fed officials scheduled to speak today however a few late season earnings reports are due out including: DLTR (E: $1.03) and HPE (E: $0.47) which could have an impact on markets today.

Bottom line, markets began September with heavy selling pressure and broad risk-off money flows yesterday, and for stocks to stabilize here investors will need to see support at 5,500 in the S&P 500 hold today, otherwise more downside is likely ahead of the jobs report Friday.

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Why This Market Is So Resilient (Again)

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Why This Market Is So Resilient (Again): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why This Market Is So Resilient (Again)
  • Weekly Economic Preview – Labor Market Data in Focus

Futures are lower in sympathy with most global equity markets this morning as investors digest fresh economic data at the start of a historically volatile calendar month.

The Eurozone Manufacturing PMI was better than feared at 45.8 vs. (E) 45.6, but the sub-50 reading reminded investors the global factory sector remains deep in contraction and growth risks remain elevated.

Looking into today’s session, there are no Fed speakers on the calendar but there is one potentially market-moving economic report to start the week: the ISM Manufacturing PMI (E: 47.8). Investors will want to see evidence of stabilization in the factory sector and easing price pressures in the details of the report, otherwise growth concerns could result in renewed volatility.

There are no other major potential catalysts today, however, the Treasury will hold 3-Month and 6-Month Bill auctions at 11:30 a.m. ET and the yields awarded could shed new light on Fed policy plans in the months ahead, and in turn, impact equity markets (higher yields would weigh on stocks and other risk assets).

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The Rotation Out of Tech Continues

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The Rotation Out of Tech Continues: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • The Rotation Out of Tech Continues

Futures are modestly higher thanks to solid tech earnings and better than expected inflation data from Europe.

DELL and MRVL, both AI linked tech companies, posted solid earnings and guidance and that’s supporting futures.

Economically, EU HICP (their CPI) declined further to 2.8% y/y vs. (E) 2.9%, giving the ECB more room to cut rates.

Today is typically a quiet day in the markets as traders try to get a head start on the three-day weekend, but there is an important inflation report this morning:  The Core PCE Price Index (E: 0.2% m/m, 2.7% y/y).  If that report is better than expected, it’ll boost expectations for a 50-bps rate cut in September (positive for stocks) while a higher-than-expected number will push back against a 50-bps cut (negative for stocks).

Other data today includes the Chicago PMI (E: 46.4) and inflation expectations in University of Michigan Consumer Sentiment (1-Yr Inflation Expectations: 2.9%, 5-Yr. Inflation Expectations: 3.0%) but barring major surprises, neither of those numbers should move markets.

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Is Market Momentum Faltering?

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Is Market Momentum Faltering?: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Is Market Momentum Faltering?
  • Oil Outlook Updated

Futures are slightly higher as better than expected EU inflation metrics offset slightly underwhelming NVDA earnings.

Spanish and German regional CPIs declined more than expected and that’s increasing ECB rate cut expectations and reminding investors of the global rate cutting cycle.

With NVDA results behind us, focus turns back to data and the important reports today include Jobless Claims (E: 232K), Pending Home Sales (E: 1.0%) and Final Q2 GDP (E: 2.8% y/y saar).  Of the three, jobless claims are most likely to move markets as a jump in claims will slightly increase hard landing worries, while a drop will further reinforce soft landing expectations.  There is also one Fed speaker today, Bostic (3:30 p.m. ET), but unless he says he supports a 50 bps cut, he’s unlikely to move markets.

Turning to earnings, NVDA was the highlight of the week but there are still several important reports today that will give us important insight on tech and consumer spending.  Notable reports today include: DELL (E: $1.68), MRVL (E: $0.30), BBY (E: $1.15), DG (E: $1.79), , LULU (E: $2.93),  ULTA (E: $5.49).

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Renewed Rotation Risks (Smart Money Is Getting Defensive)

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Renewed Rotation Risks (Smart Money Is Getting Defensive): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Recent Sector Performance Points to Smart Money Getting Defensive
  • Chart – 10Y-2Y Yield Curve Spread Revisits the Zero-Bound

U.S. equity futures are slightly higher after a mostly quiet night of news as traders look ahead to NVDA earnings.

There was no economic data overnight but the BOJ’s Deputy Governor, Himino, reiterated that policy makers would continue raising rates with the “utmost vigilance,” which supported a modest bid in equity markets and other risk assets overnight.

Looking into today’s session, there are no notable economic reports and just one Fed speaker after the close: Bostic (6:00 p.m. ET).

There is a 5-Yr Treasury Note auction at 1:00 p.m. ET and given the strong performance in the belly of the duration curve since the start of August, traders will be looking for demand to remain solid to confirm the recent drop in yields is sustainable.

Finally, likely the biggest catalyst of the week will come after the close today with NVDA earnings ($0.65) due shortly after the bell. Other notable companies reporting quarterly results today include CRM ($2.35) and HPQ ($0.86) but the main focus will be on NVDA as options traders are pricing in a volatile 10%+ reaction (up or down) to the earnings release and given the stocks heavy weight in the major indexes, a move of that magnitude will have an impact on the broader market in the back half of the week.

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