Investors should prepare for more volatility over the coming days…according to Tom Essaye, a former Merrill Lynch trader who writes the “Sevens Report” newsletter. Click here to read the full article.
What’s in Today’s Report:
Stock futures are rebounding from yesterday’s sharp losses this morning as bond yields pullback with the 10-year dipping below 1.50% overnight, easing valuation concerns.
Regarding Evergrande, the company’s stock rallied 15% overnight as the developer announced the partial sale of a regional bank stake that will result in $1.5B in cash.
Looking into today’s session there is one economic report: Pending Home Sales Index (E: 0.9%) but it should not move markets.
That will leave traders focused on a busy day of Fed chatter: Harker (9:00 a.m. ET), Powell (11:45 a.m. ET), Daly (1:00 p.m. ET), Bostic (2:00 p.m. ET), and Williams (5:00 p.m. ET).
Bottom line, the bond market has been a major driver of equity flows this week and if yields continue to pullback as they did overnight, then a rebound in the major stock indexes is likely however a retest of yesterday’s highs would result in another uptick in volatility.
The “risk-off money flows” that are hitting the U.S. stock market on Tuesday also dragged crude and other…Tyler Richey, co-editor at Sevens Report Research, told MarketWatch. Click here to read the full article.
What’s in Today’s Report:
U.S. equity futures are decidedly lower this morning as Treasury yields continue this week’s surge higher. The 10-year note yield topped 1.52% in overnight trading which is weighing heavily on high valuation tech names today.
From a catalyst standpoint, today is lining up to be a busy day with a slew of economic data due to be released: International Trade in Goods (E: -$87.0B), Case-Shiller Home Price Index (E: 1.6%), FHFA Home Price Index (E: 1.5%), and Consumer Confidence (E: 114.8).
Of those releases, the market will be most interested in whether or not Consumer Confidence can stabilize following the disappointing August print.
There is a 7-Year Treasury Note action at 1:00 p.m. ET and given how much bonds are influencing stocks so far this week, the results could impact equity markets (strong demand would help stabilize stocks, weak demand would likely see losses extended).
Finally, there are multiple Fed speakers today including: Evans (9:00 a.m. ET), Powell (10:00 a.m. ET), Bullard (1:40 & 7:00 p.m. ET), and Bostic (3:00 p.m. ET). Focus will clearly be on Powell and any insight he may provide regarding inflation expectations and the Fed’s plans to react.
Bottom line, the stock market is being driven by the bond market this week and if we see bonds continue to drop (yields spike higher) then that will result in further underperformance by growth stocks and drag the broader market lower while stabilization in yields would likely allow for a rebound.
Sevens Report Q3 Quarterly Letter Coming October 1st.
The Q3 2021 Quarterly Letter will be delivered to advisor subscribers on Friday, October 1st.
With Fed tapering, Washington budget battles and possible tax hikes looming, Q4 could be the most volatile of the year. Our quarterly letter will help you set the right expectations for clients so they aren’t blindsided by any market volatility.
What’s in Today’s Report:
Futures are slightly higher following a quiet weekend as the market’s focus turns to politics this week.
Democrats must pass a “Continuing Resolution” by Thursday to avoid a government shutdown, and while markets expect it will pass, there was little actual progress on that front over the past several days.
Economic data was sparse overnight and isn’t moving markets.
Today we get Durable Goods (E: 0.6%) and there are two Fed speakers, Evans at 8:00 a.m. ET and Williams at 9:00 a.m. ET & 12:00 p.m. ET, but really the market’s focus will be on Washington. Despite the lack of progress from Democrats so far on passing a “Continuing Resolution” to fund the government before the deadline on Thursday night, markets fully expect that “CR” will pass by then. But, if it becomes apparent it not might not pass by then, that will cause more stock market volatility.
The losses quickly spread to broader markets as experts started warning its default could…market analyst Tom Essaye, author of the Sevens Report, wrote in a note last week. Click here to read the full article.
What’s in Today’s Report:
Futures are modestly lower as markets digested the rally of the past two days, following underwhelming economic data and earnings overnight.
Nike (NKE) became the latest major company to cut guidance on margin concerns and supply chain issues and the stock dropped nearly 5% after hours.
Japanese flash manufacturing PMI missed estimates at 51.2 vs. (E) 52.0 mirroring the loss of momentum from global flash PMIs.
Today focus will remain on China headlines (although Evergrande is fading as a major market influence) and on multiple Fed speakers: Mester (8:45 a.m. ET), Powell, Bowman, Clarida, George (10:00 a.m. ET), and Bostic (12:00 p.m. ET). Finally, we also get New Home Sales (E: 708K) but that shouldn’t move markets.
What’s in Today’s Report:
Futures are moderately higher as the rally continued overnight as China injected more liquidity into their economy.
Chinese officials injected another 17 billion yuan into the economy to prevent any liquidity issues, as it’s now clear that Chinese officials won’t allow a disorderly default (and that’s really all global markets care about).
Economic data disappointed as both the EZ and UK flash composite PMIs missed expectations (EZ PMIs fell to 56.1 vs. (E) 58.9 while UK PMI dropped to 54.1 vs. (E) 54.7).
Focus today will be on economic data, specifically the Flash Composite PMI (E: 55.5) and Jobless Claims (E: 309K). Markets will want to see both numbers confirm what the Philly Fed and Empire survey implied last week, namely that the surge in COVID cases was a temporary and limited headwind on the economy. If that’s the case the rebound in stocks should continue.
What’s in Today’s Report:
Stock futures are extending yesterday’s late session bounce while most overseas markets stabilized overnight amid easing concerns about China’s property sector and positioning into the Fed.
According to Bloomberg, S&P Global Ratings said Evergrande is “on the brink of default” but that a contagion effect impacting other developers is unlikely at this time and that the Chinese government would intervene if necessary which eased some concerns surrounding the issue.
Looking into today’s session, trader focus will be shifting towards the September FOMC meeting, which begins this morning, and that could influence a sense of Fed paralysis if broad market volatility continues to ease.
Economically, there is one report today: Housing Starts and Permits (E: 1.575M, 1.610M) but given all of the other market influences right now, it is not likely to move equities. Finally, there is a 20-Yr Treasury Bond auction at 1:00 p.m. ET which could impact bond yields and potentially influence price action in stocks but again, it is unlikely with the Fed looming tomorrow.
Bottom line, the pieces are falling into place for the market to stabilize today as yesterday’s volatility is digested and focus shifts to the Fed. On the charts, a break above yesterday’s open near 4,400 in the S&P could trigger some follow-through buying while a failure to do so would leave the door open to another surge in volatility in the sessions ahead.
What’s in Today’s Report:
Futures are sharply lower on momentum from Friday’s declines, following a quiet weekend of news.
The reasons for the drop this morning are the same as last week: China concerns (Evergrande, regulation, COVID), Fed tapering, and possible tax hikes, but nothing new occurred on any of those fronts this weekend to justify this mornings’ declines (meaning this is more about momentum than actual fundamental deterioration).
On taxes, headlines were actually slightly positive as Axios reported Senator Manchin wants to delay any increased spending/tax hikes until 2022.
Today the calendar is quiet as the only economic report is the Housing Market Index (E: 75), so pre-Fed positioning and momentum will drive trading today. Ideally, we’d like to see stocks open deeply lower and then rally throughout the day (which would be the opposite of what we saw last week and imply a near-term bottom may be in).