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Rotate Out of Growth and Into Value

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What’s in Today’s Report:

  • Is It Finally Time to Rotate Out of Growth and into Value?

Futures are sharply higher thanks to a positive article on a Gilead drug  effectively treating coronavirus.

GILD’s drug Remdesivir has been effective in reducing symptoms in a very small (125 people) study at a Chicago hospital, but the news is sending stocks higher. For those interested, a link to the article is here.

Economically, Chinese data was weaker than expected as Q1 GDP fell –6.8% vs. (E) -6.0%.

There are no notable economic reports today so focus will remain on any additional coronavirus information, along with earnings.  Some reports we’re watching today include: PG ($1.11), SLB ($0.25), CFG ($1.61).

The History of Bear Market Rallies

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What’s in Today’s Report:

  • A Look into the History of Bear Market Rallies
  • Economic Data Breakdown
  • EIA Analysis and Oil Update

Futures are cautiously higher this morning but international markets were mostly lower overnight as investors weigh the effectiveness of COVID-19 containment strategies against their longer term impact on the global economy.

Economically, Eurozone Industrial Production was the only release overnight (-0.1% vs. E: -0.1%) but it was a February number and therefor largely dismissed by the markets.

This morning, focus will be on what will likely be the most important economic release of the week: Jobless Claims (E: 5.50M) as a larger than expected number of claims will point to further deterioration in the labor market while a smaller number will suggest the government stimulus efforts are beginning to work in supporting the U.S. jobs market.

There are two other economic reports to watch: Housing Starts (E: 1.32M) and the Philadelphia Fed Business Outlook Survey (E: -29.5) while no Fed officials are scheduled to speak.

Beyond economic data, investors will be sifting through more Q1 earnings releases including results from: BLK ($6.69), ABT ($0.58), TSM ($0.66), and BK ($0.90), as well as any new developments on the broader COVID-19 situation.

Economic Breaker Panel: April Update

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What’s in Today’s Report:

  • Sevens Report Economic Breaker Panel – April Update

Futures are decidedly lower with global markets this morning as optimism for a V-shaped economic recovery fades ahead of key economic data and more important earnings today.

Additionally, Trump cut funding to the WHO, raising tensions with China while WTI crude oil prices fell to fresh 18-year lows, below $20/barrel, overnight as a complete lack of demand continues to weigh on the broader energy markets right now.

Looking into today’s session, it is lining up to be a busy one from a potential catalyst standing.

First, there are several important economic reports due to be released including: Retail Sales (E: -7.0%), Empire State Manufacturing Survey (E: -35.0), Industrial Production (E: -4.2%), and the Housing Market Index (E: 60) while there is one Fed official schedule to speak: Bostic (1:00 p.m. ET).

Earnings will also be a major focus today with Q1 results due out from: BAC ($0.65), C ($1.83), GS ($2.83), PNC ($2.24), USB ($0.87), PGR ($1.44), and BBBY ($0.21).

Stocks have become near-term overbought over the last few weeks so any notably negative news flow regarding economic data, earnings, or the coronavirus pandemic could cause a potentially volatile wave of profit taking.

Earnings Season Preview

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What’s in Today’s Report:

  • Five Keys to the Q1 2020 Earnings Season
  • Oil Futures Point to Mid-Summer Economic Recovery

Futures are higher with most overseas markets today as COVID-19 case growth continues to slow in the U.S., economic data was better than feared overnight and investor focus is shifting ahead to Q1 earnings season.

In March, Chinese exports fell -6.6% vs. (E) -15.0% and imports were down -0.9% vs. (E) -8.0% suggesting the economic fallout from the coronavirus pandemic may be less than initially feared.

Today, there is one lesser followed economic report: Import and Export Prices (E: 3.1%, -2.0%), and two Fed officials are scheduled to speak: Bullard (11:05 a.m. ET) and Evans (12:30 p.m. ET).

But, the market’s main focus will be the start of Q1 earnings season, which is going to be extremely important as the corporate results and forecasts will provide much needed context on the outlook for 2020 EPS expectations in the coming weeks. Today, JPM ($2.49), WFC ($0.61), JNJ ($2.08), and FAST ($0.34) all report before the bell while JBHT ($2.22) will release results after the close.

Is Inflation The Next Big Thing? (How to be Positioned)

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What’s in Today’s Report:

  • Is Inflation The Next Big Thing? (How to be Positioned)
  • OPEC Meeting Preview:  Bullish If/Bearish If

Futures are modestly lower following a generally quiet night as markets digest this weeks’ gains ahead of jobless claims and the Powell speech.

On the coronavirus front, news was again positive as Austria and Denmark became the first European countries to begin to lift coronavirus restrictions.

Economic data overnight was better than feared as German exports and British IP both beat estimates.

Today focus will be on Jobless Claims (E: 5 MM) and the Powell speech  (10:00 a.m. ET).  For claims, it’d be a positive surprise if they declined from last week’s number and that’d add to the good news from this week, while a spike towards 10MM would be a modest negative vs. expectations.

For the Powell speech, markets just want reassurance that the Fed is committed to doing whatever it takes to ensure orderly operation of markets, which is what we should get.

Sevens Report Co-editor Tyler Richey Quoted in MarketWatch on

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There was a “follow through short-squeeze” in gold prices early Tuesday following Monday’s sharp gain, but that morning squeeze gave way to retracement “as gold became…” said Tyler Richey, co-editor at Sevens Report Research. Click here to read the full article.

Gold

Market Multiple Table Update

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What’s in Today’s Report:

  • Market Multiple Table Update
  • Oil Rig Counts Continue to Plunge

Futures are solidly higher this morning, tracking overnight gains in most international equity markets amid optimism that global efforts to contain COVID-19 are working.

Coronavirus “hot spots” such as Italy and New York City are reporting early statistics that show “lock down” measures are working to contain the outbreak as the number of new cases is slowing while death rates are stabilizing.

German Industrial Production was the only notable economic report overnight and it was better than feared in February (0.3% vs. E: -0.8%), helping support the risk-on money flows today.

Looking into today’s session, there are two economic reports due to be released today: JOLTS (E: 6.638M) in the morning and Consumer Credit (E: $14.2B) in the afternoon, however investor focus will remain almost exclusively on coronavirus headlines as hope that the outbreak is being contained is the primary reason for this week’s stock rally.

The Most Important Two Weeks Since ’08

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What’s in Today’s Report:

  • Why the Next Two Weeks Are the Most Important Since 2008
  • Weekly Market Preview:  Can the Coronavirus Peak?
  • Weekly Economic Cheat Sheet:  Jobless Claims and Consumer Sentiment Key This Week

Futures are sharply higher on new hopes the coronavirus growth rate may be peaking in some of the world’s hardest hit countries.

New York, and the U.S. more broadly, saw signs of progress  as coronavirus deaths in NY were down for the first time, as was total new coronavirus cases in the U.S.

Globally there was also progress, as Italy, Spain and Germany potentially have also seen their peak in the virus growth rate.

Today there are no economic reports so focus will remain on coronavirus headlines, and if we get another day of fewer deaths and fewer new cases, confidence will start to build that the worst is behind us.  Fingers crossed.

Technical Update (Important Support and Resistance)

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What’s in Today’s Report:

  • Technical Update (Important Support and Resistance)
  • Jobs Report Preview (It’s Going to be Ugly)

Futures are moderately lower as markets digest Thursday’s rally ahead of today’s jobs report.

Economically, global service PMIs were worse than expected and the drops were historic.  The EU service PMI plunged to 26.4 vs. (E) 28.4, down from 52.6 in Feb.

The Chinese service PMI rebounded strongly in March, rising to 43.0 from 26.5, confirming that their economy is seeing a strong bounce back in activity.  This is mildly encouraging because the Chinese data implies that once the coronavirus pandemic has passed (against sooner than later) we should see a strong bounce back in the economy.

Today focus will be on the jobs report, and the estimate are as follows: Jobs:  -150K, UE:  3.9%,  Wages:  0.2%.  But, the “worst case” estimate we saw was for -1.25 million jobs, so don’t be shocked if the number is much worse than the estimate.  Also, we get the March ISM Non-Manufacturing PMI (E: 43.0).  If that can beat that low estimate, that will be a small moral victory.

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.