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What a Difference a Year Can Make

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What’s in Today’s Report:

  • What A Difference a Year Can Make:  December 26th 2018 vs. December 26th 2019

Futures are marginally higher following a good report on retail sales by Mastercard.  Trading is quiet, however, as most of Europe, Hong Kong and Australia are closed for Boxing Day.

Mastercard (MA) posted preliminary estimates for 2019 holiday spending and they appear stronger than expectations, and that’s helping send futures higher.

There was no “Christmas surprise” from North Korea although a missile launch is still expected in the coming days (but even if it happens, it shouldn’t impact markets much).

The only notable number out today is Jobless Claims (E: 223K), and we’ll want to see the continued unwind of the Thanksgiving spike higher in claims that occurred two weeks ago.

Has Healthcare Finally Broken Out?

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What’s in Today’s Report:

  • Has Healthcare Finally Broken Out?

U.S. stock futures are trading higher and most overseas markets rallied overnight thanks to another wave of optimism for a “phase one” trade deal as traders look ahead to a busy morning of domestic economic releases.

This time it was President Trump who said the U.S. and China were in the “final throes of a very important deal” late yesterday, stoking more risk-on money flows overnight.

Today, attendance will noticeably thin out ahead of the Thanksgiving holiday and volumes are expected to be light.

But, there are several important economic reports due out today: Durable Goods Orders (E: -0.7%), GDP (1.9%), Jobless Claims (E: 219K), and Core PCE Price Index (E: 0.2%).

A rebounding economy is largely priced into stocks at these lofty levels so any significant disappointments out of this morning’s data could trigger some profit taking into the Thanksgiving holiday.

Aside from the economic data, there are no Fed officials scheduled to speak today which will leave investors focused on any new chatter on the trade war as it remains the single biggest influence on markets right now.

Tom Essaye Quoted in MSN.com on November 25, 2019

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“The market still expects a phase one deal that (most importantly) removes the threat of any further escalation in the trade war. But unless there is a material positive surprise, phase one is not going to include material existing tariff reductions…” said Tom Essaye, the founder of The Sevens Report, in a note.  Click here to read the full article.

New York Stock Exchange

What’s Priced Into Stocks Now?

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What’s in Today’s Report:

  • What’s Priced into Stocks At These Levels?
  • Weekly Market Preview:  More Trade Updates Coming
  • Weekly Economic Cheat Sheet:  Key Data on Friday

Futures are modestly lower this morning thanks to disappointing U.S./China trade news and underwhelming economic data.

President Trump threw more cold water on the idea of existing tariff reduction over the weekend saying that the tariff reduction story was “over-reported.”

Economically, Chinese New Yuan Loans rose 12.4% vs. (E) 12.5%, while British IP & Q3 GDP slightly missed estimates.

Today should be relatively quiet as there are no economic reports today and no Fed speakers due to the Veteran’s Day holiday.  The bond market is also closed.

However, any trade news/commentary could cause larger than normal volatility given expected holiday trading volumes, so we’ll be watching the tape closely.

Bond Yield Breakout

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What’s in Today’s Report:

  • Did Global Bond Yields Finally Breakout?

Futures are slightly lower following a quiet night as markets digest Thursday’s “tariff reduction” headlines while economic data continued to show mild improvement.  There was no new trade news overnight.

Economically, Chinese and German exports slightly beat estimates (Chinese exports down –0.9% vs. (E) -3.9%), German exports up 1.5% vs. (E) 0.3%) in another sign that global growth may be stabilizing.

Today there is just one economic report, Consumer Sentiment (E 96.0) and three Fed speakers, Daly (11:45 a.m. ET), Williams (8:00 p.m. ET) and Brainard (8:45 p.m. ET) but none of that should move markets as U.S./China trade is totally dominating the market narrative right now.

Given that, any confirmation of immediate tariff reduction with a phase one agreement will extend the rally in stocks and yields, while any contradiction of yesterday’s tariff reduction headlines will weigh on markets.

Tom Essaye Quoted in MarketWatch on November 6, 2019

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Whether or not the performance of these cyclical stocks trading at cheap valuations can continue to lead the market depends on whether faith in an accelerating economy is correct. Tom Essaye, president of the Sevens Report, is not ready to endorse this view just yet. “In the last few days there have been hints of stabilization in the growth data, but just hints…” he wrote in a Tuesday note to clients. Click here to read the full article.

Tom Essaye Quoted in CNBC on October 29, 2019

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“People had aggressively pushed cyclicals higher over the past two weeks. But in order for that to work out beyond the short term, we need to see…” said Tom Essaye, founder of the Sevens Report. Click here to read the full article.

New York Stock Exchange traders

Is Brexit Clarity a Bullish Gamechanger?

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What’s in Today’s Report:

  • Is Brexit Clarity a Bullish Gamechanger?

Futures are little changed following mixed Chinese economic data.

Chinese GDP missed estimates at 6.0% vs. (E) 6.1%, while Retail Sales met expectations at 7.8% and Industrial Production beat (5.8% vs. (E) 4.9%).  In sum, the data is slightly underwhelming but isn’t changing expectations for global growth.

Looking forward to today, there are no economic reports but there are a lot of Fed speakers including (in order of importance):  Clarida (11:30 a.m. ET), George (10:00 a.m. ET), Kaplan (9:00 & 11 a.m. ET), Kashkari (10:30 a.m. ET).  But, none of them should say anything too surprising and they shouldn’t move markets.

So, markets will stay focused on earnings and Brexit headlines.  Regarding Brexit, a vote on the new Brexit deal will happen Saturday in Parliament, and at this point passage looks to be a 50/50 chance.  So, there’s more drama yet in the three plus year Brexit saga.

Tom Essaye Quoted in MarketWatch on September 30, 2019

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“On Saturday, the Treasury Department stated it’s not considering blocking Chinese companies from listing on U.S. exchanges ‘at this time,’ refuting the Bloomberg story from Friday, which caused the declines in stocks…” wrote Tom Essaye, president of the Sevens Report, in a note to clients. Click here to read the full article.

IT person in front on multiple screens

Tom Essaye Quoted in Yahoo Finance on September 20, 2019

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Stocks quickly rolled over Thursday after the comments came to light, finishing near the lows of the session. As Sevens Report Research founder Tom Essaye wrote to clients, the algos that scan the internet for headlines took control after Pillsbury’s comments. The machines were right to…Click here to read the full article.

Trump and Xi Jinping