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Market Outlook (After the Bounce)

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What’s in Today’s Report:

  • Market Outlook (After the Bounce)
  • Weekly Economic Cheat Sheet (Important First Looks at January Data)
  • Weekly Market Preview (All About Earnings)

Futures are sharply lower following more disappointing global economic data.

Chinese exports badly missed expectations falling –4.4% vs. (E) 4.8%, further stoking fears of a Chinese economic slowdown.  Data in Europe wasn’t much better, as Euro Zone Industrial Production fell –1.7% vs. (E) 0.5%.

Geopolitically, it was a generally quiet weekend as markets are looking past Trump’s economic threat to Turkey.

There are no notable economic reports today so focus will be on earnings, as the Q4 season officially kicks off with C ($1.55).  The key for this report (and all reports this season) will be the guidance and management commentary – and anything that downplays a slowing global economy will be welcomed by markets.

Tom Essaye Quoted in MarketWatch on January 10, 2019

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Tom Eassye was quote in MarketWatch on January 10, 2019. Read the full article here.

Long Term Entry Point?

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What’s in Today’s Report:

  • Why I’m Buying Some Stock in My IRA Today
  • Weekly Economic Cheat Sheet
  • Weekly Market Preview

Futures are seeing a modest oversold bounce following a generally quiet weekend.

If there is a “reason’ for this modest bounce in futures it was the administration trying to reassure investors over the weekend.  Treasury Secretary Mnuchin tried to calm markets by 1) Stating Trump knows he can’t fire Fed Chair Powell and 2)  Calling the heads of major U.S. banks to ensure there were no liquidity problems (there weren’t).

There was no notable economic data or U.S./China trade updates over the weekend.

Today there are no economic reports and no Fed speakers,  and the markets close early (1:00 p.m. ET).

Sevens Report’s Tom Essaye quoted in Bloomberg on December 2, 2019

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Sevens Report’s Tom Essaye appeared on Cheddar on December 12, 2018

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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

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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

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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

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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

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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

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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.