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What is Evergrande and Why Isn’t It Causing More Problems?

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What’s in Today’s Report:

  • What is Evergrande and Why Isn’t It Causing More Problems?

Futures are modestly lower on more negative China headlines following an otherwise quiet night.

Chinese authorities have extended anti-pollution directives to multiple cities and that’s causing a sharp drop in some industrial commodities (iron ore specifically) which is weighing on resource stocks in Europe.

Economically, UK Retail Sales missed estimates falling –0.9% vs. (E) 0.5% although the report isn’t moving markets.

Focus today will be on Consumer Sentiment (E: 72.0) and specifically inflation expectations, and if they spike higher (as we saw in the Fed survey earlier this week) don’t be surprised if there’s additional downward pressure on stocks.  Also, today is a “Quadruple Witching” options expiration which could mean big volumes and increased volatility into the close.

Tom Essaye Quoted in Barron’s on September 14, 2021

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The S&P 500 Is Going to Fall, Strategists Say. Even the Optimists Aren’t Very Upbeat.

This [supply constraints] will be a more substantial risk to the rally we’ll need to watch for…wrote Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

Tom Essaye Quoted in S&P Global on September 14, 2021

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US debt ceiling fight could cause markets to tumble, delay Fed taper

I think in a market that’s stretched, that doesn’t have a lot of backing at these fundamental levels, if you get some sort of serious scare, it could take 5% to 10% out of the S&P 500 pretty quick…Essaye said. Click here to read the full article.

End of the (Mild) Pullback?

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What’s in Today’s Report:

  • End of the (Mild) Pullback?
  • EIA Update and Oil Market Update (Breakout)

Futures are modestly lower as markets digest Wednesday’s rally following a quiet night of news.

Economically, the only notable report was Euro Zone exports, which beat expectations (1.0% vs. (E) -0.8%).

Politics remained in focus as centrist Democrats stopped the progress of a drug price control bill, highlighting the division in the party (this is an incremental positive as markets would prefer there are no policy changes at all this year).

Today focus will be on economic data, as markets will want to see stability in two reports, Jobless Claims (E: 315K) and Philadelphia Fed Manufacturing Index (E: 19.2), and not too big of a decline in August Retail Sales (E: -0.8%).  If we get another round of better than expected macro data, then stocks can extend yesterday’s gains.

Inflation Expectations

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What’s in Today’s Report:

  • Inflation Expectations

Stock futures are trading cautiously higher this morning while international markets were mixed overnight ahead of key U.S. inflation data.

Economically, the NFIB Small Business Optimism Index for August rose to 100.1 vs. (E) 99.0 which is helping U.S. equity markets edge higher in pre-market trade.

Today, there are no Treasury auctions or Fed officials scheduled to speak which will leave markets focused on the one major economic report today: CPI (E: 0.4%, 5.3%).

If the CPI report supports the transitory inflation narrative and suggests that price pressures have already peaked, stocks are likely going to be able to further stabilize after yesterday’s bounce. However, a “hot” print could easily trigger a wave of hawkish money flows and pressure the major indexes back down to fresh multi-week lows today.

The Current Risks to the Rally

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What’s in Today’s Report:

  • The Current Risks to the Rally
  • Weekly Market Preview:  Increasing Headline Volatility?
  • Weekly Economic Cheat Sheet:  How Hot is Inflation and How Much Damage Has COVID Done to the Recovery?

Futures are modestly higher as global markets bounced from Friday’s declines, following a quiet weekend of news.

Tax hike chatter continued to rise over the weekend as Democrats proposed a 26.5% corporate tax (up from the current 21%) and a “top-tier” capital gains tax rate of 28.8% (up from the current 23.8%).

These changes aren’t likely or imminent, but it underscores the market will face tax hike headlines over the coming weeks and months.

There was no notable global economic data overnight.

Today there are no economic reports and no notable Fed speakers, so the focus will be on any more tax hike headlines and on short-term technicals.  Last week stocks were able to rally early in the day and faded in the afternoon.  If that happens again this morning look for downside momentum to pick up a bit and for more moderate declines.

Tom Essaye Quoted in Barron’s on September 3, 2021

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DocuSign Rises, Yext Falls —And What Else Is Happening in the Stock Market Friday

Today the Employment Situation report is the key event…wrote Tom Essaye, founder of Sevens Report Research before the report hit the wires. Click here to read the full article.

Updating the Two Big Risks to the Rally

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What’s in Today’s Report:

  • Updating the Two Big Risks to the Rally
  • Weekly Economic Cheat Sheet: Jobs Report Takeaways and ECB Preview

U.S. equity futures are little changed this morning while overseas markets were mixed overnight with Asian stocks outperforming on upbeat Chinese economic data but EU shares drifted lower with focus turning to this week’s ECB meeting.

Economically, Chinese Exports were encouragingly up 25.6% vs. (E) 19.5% y/y in August which supported risk-on money flows in Asian markets however a soft German ZEW Survey is weighing on EU stocks this morning.

Today’s U.S. trading session is lining up to be fairly quiet as there are no economic reports and no Fed officials are scheduled to speak.

There is a 3-Year Treasury Note Auction at 1:00 p.m. ET, however, and weak demand would likely lead to a hawkish reaction across markets with yields moving higher and stocks potentially trading with a defensive tone.

Jobs Day (Slight Shift in Expectations)

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What’s in Today’s Report:

  • Jobs Day (Slightly Shift in Expectations)
  • Washington Update  –  Why Manchin’s Op-Ed is Important

Futures are modestly higher as markets ignored disappointing economic data ahead of today’s jobs report.

Global PMIs were disappointing as the Chinese Services PMI dropped to 46.7 vs. (E) 52.3 while the EU (59.0 vs. (E) 59.5) and UK (54.8 vs. (E) 55.0) Composite PMIs both slightly missed estimates

Japanese stocks surged 2% after PM Suga resigned, igniting speculation the government will unleash more stimulus.

Today the Employment Situation report is the key event, and the expectations are as follows: Job Adds: 740K, UE Rate: 5.2%, Wages: 3.9% yoy.  Because of the soft ADP report, the “whisper number” is slightly underwhelming vs. expectations (say around 500k), so the market may be a bit more sensitive if the actual jobs report is slightly stronger than expectations (it may cause a mild decline in stocks, but nothing major).

We also get the ISM Services PMI (E: 62.0) and markets will want to see stability in that PMI.

Tom Essaye Quoted in Market Watch on August 30, 2021

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Gold futures end lower, but prices hold above $1,800 to start week

The fundamentals are cautiously bullish for gold as a dovish taper outlook could…said analysts at Sevens Report Research, in Monday’s newsletter. Click here to read the full article.