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Valuation Update (Cheap, Fairly Valued, or Still Expensive?)

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What’s in Today’s Report:

  • Market Valuation Update:  Cheap, Fairly Valued, or Still Expensive?
  • Oil Update (Weekly Inventory Data)

Futures are seeing a moderate rally/bounce as the Fed acted, again, and oil bounced on comments from Trump.

The Fed said it will exclude Treasury holdings and deposits from certain leverage ratios (that essentially allows banks to lend more money which should help the economy).

On oil, Trump said he expected a Russia/Saudi oil deal within “days” but gave no specifics as to how that might happen (although it would be a positive if it does).

Today the key report is Jobless Claims (E: 3.350M), although we also get Motor Vehicle Sales (E: 14.3M) and International Trade (E: -$39.5B).

But, in reality, the real driver of markets right now is coronavirus headlines.  They were more positive in tone last week, but have turned more negative this week and that’s why stocks dropped so hard yesterday.  Any good news on 1) A pharma solution (vaccine/antibody treatment/trials) or 2) Slowing of the spread will help make this early bounce more sustainable.

Q2 Sector Trading Outlook

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What’s in Today’s Report:

  • Growth and Defensives vs. Value and Cyclicals (Q1 Review, Q2 Outlook)
  • Volatility in Perspective (Chart)
  • Chinese Manufacturing PMI Takeaways

Stock futures are sharply lower with most global equities this morning after President Trump warned of “painful” weeks ahead in the fight against the coronavirus outbreak, stating that deaths could approach 250K in the U.S. alone.

Economically, manufacturing PMI data was mixed o/n with the Chinese numbers surprising to the upside while the EU data largely missed estimates which is contributing to the risk-off money flows this morning.

Today, the ADP Employment Report (E: -180K) kicks off jobs week before we will get two more economic releases after the open: ISM Manufacturing Index (E: 44.5) and Construction Spending (E: 0.6%). Additionally, Boston Fed President, Eric Rosengren, is scheduled to speak at 2:00 p.m. ET.

All of those catalysts have the potential to move markets as we begin a new quarter today however the coronavirus outbreak remains, by far, the single most important influence on stocks right now and investors will be watching any press briefings from the White House or developments regarding treatments or data on the growth rate of new cases themselves which, according to our Sevens Report U.S. Coronavirus Daily Growth Rate Tracker, is favorably continuing to slow towards a one-month low this week.

Sevens Report Co-editor Tyler Richey Quoted in MarketWatch on

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“With the global economy slowing to a standstill and consumer demand for refined products…” said Tyler Richey, co-editor at Sevens Report Research. Click here to read the full article.

Oil Rig

Tom Essaye Interviewed with TD Ameritrade

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Tom Essaye interviewed with Ben Lichtenstein from TD Ameritrade. Click here to read the full article.

Oil Rig Counts and the Energy Market Crash

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What’s in Today’s Report:

  • Why Did Stocks Rally 3% Yesterday?
  • U.S. Oil Rig Counts Plunged Last Week – Here’s Why that Won’t Stop the Oil Crash… Yet

U.S. stock futures are hanging on to modest gains while international markets were mixed overnight as global equities are poised to close out their worst quarter since 2008.

The growth rate of new COVID-19 cases in the U.S. encouragingly slowed to a one month low of just 13% yesterday.

Economically, data out of China, Japan, and the EU was all better-than-feared, helping drive the tentative risk on money flows this morning.

Today, there are two economic reports to watch: S&P CoreLogic Case-Shiller HPI (E: 0.4%) and Consumer Confidence (E: 111.0) while no Fed officials are scheduled to speak.

The Consumer Confidence report could move markets in early trade however investor focus will largely remain on the coronavirus outbreak statistics and ongoing government response to the pandemic while end of quarter book squaring could lead to an uptick in volatility over the course of the day. Near term momentum continues to favor the bulls though and the path of least resistance remains higher right now as the relief rally continues.

How Bad Is the Damage?

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What’s in Today’s Report:

  • How Bad Is the Damage?
  • Weekly Market Preview (Coronavirus Growth Rate Remains Key)
  • Weekly Economic Cheat Sheet (Jobs Report/Global PMIs)

Futures are slightly higher (and well off overnight lows) as markets continue to digest last week’s rally and evaluate the latest coronavirus infection data.

President Trump extended social distancing guidelines until April 30th, which was generally in-line with expectations.

Coronavirus infection numbers were mixed over the weekend, as evidence builds that the growth rate in Italy has peaked, while NY/NJ/CT (and possibly New Orleans/California) remain hot spots here in the U.S.

There is one notable economic report today, Pending Home Sales (E: -1.6%), but focus will shift towards corporate commentary as markets try and assess the level of earnings and economic damage that’s occurred over the past six weeks.

What to Make of This Rally

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What’s in Today’s Report:

  • What To Make Of The Rally.
  • Coronavirus Update – Is Italy Peaking?

Futures are sharply lower (down about 2%) following a generally quiet night as markets digest the big three day rally.

The U.S. passed China in total number of coronavirus cases on Thursday, although there is some hope emerging that the spread of the virus is peaking in Italy.

Politically, there was no notable news overnight and passage of the stimulus bill will happen later today.

Today the key event is the passage of the stimulus bill in the House, but that is universally expected.  Outside of that, the key economic report will be Consumer Sentiment (E: 92.0), because that will give us some preliminary insight into how bad consumer spending might be in the coming months.  We also get the Fed’s preferred measure of inflation,  Core PCE Price Index (E: 1.8%), but at this point that number will be ignored as no one is worried about high inflation right now.

How Much Will The Stimulus Help?

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What’s in Today’s Report:

  • How Much Will the Stimulus Help?
  • Cash is King

Futures are down around 1% despite the Senate passing the stimulus bill, as markets digest the past two day’s rally.

The Senate passed the stimulus bill last night and the House has indicated it will pass the bill tomorrow, removing any lingering uncertainty.

Economic data was disappointing as German GfK Consumer Climate missed estimates (2.7 vs. (E) 7.7), as did British Retail Sales (-0.3% vs. (E) 0.2%).

Today there are two important events, both of which come early in the day.

First, Fed Chair Powell will appear on the Today Show at 7:05 a.m. ET, and while he won’t reveal any new policies, markets will be watching for a generally positive tone.

Second, the most important economic number of the week comes this morning via weekly jobless claims, which are estimated to be 1 million.  That is a figure I never thought I would see, considering claims peaked below 700k at the depths of the financial crisis.  If claims blast through that 1 MM estimate and move towards 2 MM that could be a headwind, while anything below 1MM will be a mild positive.

We’ve Reached a Tipping Point

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What’s in Today’s Report:

  • We’ve Reached an Important Tipping Point
  • Weekly Market Preview:  More Progress Towards a Bottom?
  • Weekly Economic Cheat Sheet:  Important March Data This Week

Futures are down around 3%, but off the overnight lows of –5%, as the coronavirus case count increased sharply over the weekend in the U.S. while Congress failed to make much progress on the stimulus bill.

The stimulus bill has swelled to an expected $2 trillion (which is a market positive) but it failed to clear a procedural vote in the Senate and Democrats and Republicans are still far apart on details.

But, the market does still expect passage of the bill early this week (futures would be much lower if markets doubted that the bill will pass).

There are no notable economic reports today and as such, all eyes will be on Washington.  Signs of progress on the stimulus bill will result in rallies, while negative headlines will send stocks lower.  As a reference, markets expect passage of the stimulus bill by the middle of this week (at the latest).

Tom Essaye Quoted in UPI.com on March 18, 2020

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Tom Essaye, founder of The Sevens Report, said the volatility in the market is not yet over and said the market changes await events such as final approval of the stimulus package.

“We also need to see more progress on the pharma side of things and above all else…” Essaye said. Click here to read the full article.