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Sevens Report’s Tom Essaye appeared on Cheddar on December 12, 2018
Sevens Report’s Tom Essaye appeared on Cheddar on December 12, 2018. He breaks down how Trump’s optimism on trade talks, and impacted the markets.
Watch the entire clip here.
FOMC Preview
What’s in Today’s Report:
- FOMC Preview
US stock futures are enjoying a pre-Fed bounce this morning due to positioning and short-covering as stocks remain oversold after the steep losses Friday and Monday.
Despite the bounce in futures, news flows were actually bearish since yesterday’s close as both FDX and MU made cautious comments about slowing global growth in their respective earnings calls and both cut guidance for 2019.
In the US today, there is one economic report due to be released: Existing Home Sales (E: 5.190M) and a “beat” would be well received after the string of soft housing data points of recent, but frankly all eyes will be on the Fed and the report will not materially move markets.
The New York session is likely to be slow in the morning with traders positioning into the Fed. The FOMC Meeting Announcement and Forecasts will hit at 2:00 p.m. ET and then Fed Chair Powell’s press conference is scheduled for 2:30 p.m. ET.
Technical Update: Ugly Breaks
What’s in Today’s Report:
- Technical Update: Ugly Breaks
S&P futures are bouncing this morning but only modestly so relative to yesterday’s sizeable declines in U.S. markets which weighed broadly on global shares overnight (although the losses were not as bad as feared).
Growth concerns remain the primary driver of the recent risk-off money flows and the German Ifo Survey released o/n did not help as the headline missed estimates and Business Expectations hit a four year low.
Oil is notably down almost 3% as concerns have shifted from the supply side to demand side in recent weeks and if that continues, expect further pressure on energy shares today.
Looking into today’s session, there is only one economic report to watch: Housing Starts (E: 1.22M) but if it is a “whiff” like yesterday’s Housing Market Index was, which hit a multi-year low, it could keep growth concerns elevated and prevent a material relief rally.
Aside from the one economic report, the Fed meeting begins today and investor focus is likely to turn ahead to tomorrow’s FOMC Announcement, Forecasts, and Press Conference which is one of the last major catalysts of the year.
A New Headwind on Stocks
What’s in Today’s Report:
- A New Headwind on Stocks (It’s Potentially a Big One)
- It’s Not All Bad – A Legitimate Positive Scenario for Q1 ‘19
- Weekly Market Preview
- Weekly Economic Cheat Sheet
Futures are slightly lower as markets digest Friday’s selloff following a quiet weekend.
There was no notable geo-political (i.e. U.S./China trade) or economic (global growth) news over the weekend, and investors/markets are looking ahead to Wednesday’s FOMC Decision.
Economic data was sparse but EU Core HICP (their CPI) met expectations at 1.0% yoy.
We get two economic numbers this morning via the Empire State Manufacturing Survey (E: 21.0) and Housing Market Index (E: 61.0) but neither should move markets. Investors will be looking ahead to Wednesday’s big FOMC Decision and that should lead to generally quiet trading, barring any surprise headlines or tweets. More broadly, for stocks to bounce in the near term, we need to see leadership from the tech sector, and participation from financials and energy (both of which are very, very oversold).
Political Risks to this Market
What’s in Today’s Report:
- Political Risks to This Market
Futures are sharply lower (about 1%) as bad economic data is furthering worries about a slowdown in global growth.
Chinese Retail Sales (8.1% vs. (E) 9.0%) and Industrial Production (5.4% vs. (E) 5.9%) both badly missed estimates.
In Europe, the flash composite PMIs also missed expectations at 51.3 vs. (E) 52.5.
Geopolitically it was a quiet night although Chinese officials confirmed the reduction of auto tariffs to 15% from 40% (this was already pledged but it is good to see it will be enacted on Jan 1.).
Today it’s all about economic data. The numbers from China and the EU this morning were not good and fears of a global economic slowdown are rising, and we need Retail Sales (E: 0.1%) and Industrial Production (E: 0.3%) to push back on that narrative, otherwise today could be another ugly day.
Dow Theory Just Turned Bearish
What’s in Today’s Report:
- Dow Theory: First Bearish Signal Since July 2015
Futures are enjoying a bounce this morning after top economic officials from the US and China held a conference call o/n regarding the next stages of trade negotiations.
Economically, the German ZEW Survey was mixed as the Current Conditions reading badly missed at 45.3 vs. (E) 55.0 but Business Expectations were not as bad as feared: -17.5 vs. (E) -26.0.
The NFIB Small Business Optimism Index was a disappointment this morning with the headline coming in at 104.8 vs. (E) 107.0, the lowest headline since May.
Looking at the calendar today, the catalyst list is fairly thin as there is only one economic report: PPI (E: 0.0%) however inflation has been an important topic recently and a material “miss” or “beat” could move markets. Meanwhile there are no Fed officials scheduled to speak.
That will leave the primary focus of the market on U.S.-China trade relations including any further developments or details from last night’s “trade call” as well as the Huawei CFO’s bail hearing in Canada.
Bottom line, as long as we see more positive trade headlines, sentiment should improve and trade optimism will likely continue to act as a near term tailwind for markets.
Technical Update (Encouraging Signals)
What’s in Today’s Report:
- Market Technical Update (Encouraging Signals)
- Why Stocks Rebounded Yesterday
- Why the Yield Curve Has Flattened SO Quickly (Blame Oil)
Futures are modestly lower as markets digest yesterday’s late day rally and look ahead to this morning’s jobs report.
Geopolitically, initial reports imply the U.S./China trade talks will continue despite the Huawei CFO arrest, which if confirmed is clearly a positive.
Global economic data was mixed again as Chinese currency reserves beat estimates while German IP missed. But, neither number is moving markets this morning.
Today is all about the jobs report and given sudden uncertainty on Fed policy (will they pause?) this jobs report is now the most important one of the year. Expectations are as follows: Job Adds: (E) 190K, UE Rate: (E) 3.7%, Wages (E) 3.2% yoy), and the best outcome for stocks is a “mild miss” across all three segments.
Away from the jobs report we also get Consumer Sentiment (E: 97.4) and one Fed speakers, Brainard (12:15 p.m. ET).
Why Stocks Dropped (Again)
What’s in Today’s Report:
- Why Stocks Dropped Yesterday
- More Housing Trouble?
- Are “Gassy” MLPs a Buy?
Futures are moderately lower on momentum as Monday’s U.S market declines spilled over globally and international weakness is now weighing on futures.
Economically it was another quiet night as German PPI met expectations at 3.3% while UK Industrial Trends were better than expected (10 vs. (E) -5).
There was no new news on the Fed or U.S./China trade although expectations are rising for a Trump/Xi “truce” at the G-20 and a more dovish tone from the Fed.
Today will be another quiet day, at least based on the calendar, as we have no Fed speakers and just one economic number: Housing Starts (E: 1.24M). Given that, focus will remain on tech and the super cap names specifically. FDN needs to stabilize and bounce to help arrest this short term sell off and that ETF is now at the top of my quote screen, as it’s driving the markets in the very short term.
Was Yesterday an “All Clear?”
What’s in Today’s Report:
- Dusting Off An Old Leading Indicator for Recessions
- Was Yesterday an “All Clear?”
Futures are extending Tuesday’s rally thanks to decent overnight earnings and despite universally disappointing economic data.
FB earnings beat after the bell yesterday and the stock rallied 3% after hours, capping a decent day of earnings.
Economically, Chinese Oct. Manufacturing PMI declined to 50.2 vs. (E) 50.6. Japanese IP and German Retail Sales also missed expectations.
Today focus will remain on earnings. GM ($1.26) is the highlight but if the broad number of results are “ok” that should continue to help sentiment. Economically the ADP Employment Report (E: 178K) and Employment Cost Index (E: 0.7%) are the two key reports, and both need to show “Goldilocks” readings (firm but not strong enough to make the Fed hawkish) for this bounce to continue.