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High Yield Debt Spreads – Sevens Report Co-Editor Quoted

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High yield debt spreads: Sevens Report Analysts Quoted in MarketWatch

This credit gauge shows investors still have risk appetite, despite recession fears

“High yield debt spreads are still not showing any degree of concern for either default or economic risk right now, and that supports the case for continued strength in risk assets in the near-to-medium term, despite lingering recession concerns based on the inverted yield curve,” Tyler Richey, co-editor at Sevens Report Research, wrote in a recent note.

Also, click here to view the full MarketWatch article published on September 22nd, 2023. However, to see the Sevens Report’s full comments on the current market environment sign up here.

High-yield debt spreads

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Hard Landing vs. Soft Landing Scoreboard

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Hard Landing vs. Soft Landing Scoreboard: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Hard Landing vs. Soft Landing Scoreboard
  • Chart: 10-Yr Yield Quickly Approaching Last Week’s “Hawkish Technical Target”

Stock futures are lower and there is a modest fear bid in Treasuries this morning. This is amid renewed worries about China’s property sector and growing angst about a potential government shutdown in the U.S.

After one of China’s largest property developers, Evergrande, missed a debt payment, multiple former executives were arrested overnight adding to worries about the embattled sector and the Chinese economy more broadly.

Also, multiple ratings agencies have offered negative warnings regarding the impact of a government shutdown on U.S. debt as the deadline for Congress to reach a deal on spending is just days away. Any progress towards a deal will be a modest positive for risk assets today.

Looking further into today’s session, there are several economic reports to watch this morning including: Case-Shiller Home Price Index (E: 0.6%), New Home Sales (E: 699K), and Consumer Confidence (E: 105.9). To stabilize, markets will want to see more Goldilocks data showing stable but slowing growth and demand metrics and no signs of rising price pressures.

In the afternoon, there is a 2-Yr Treasury Note auction at 1:00 p.m. ET, the first since the hawkish Fed meeting so the results very well could move yields and impact stocks today. Finally, there is one Fed speaker: Bowman (1:30 p.m. ET), and if “higher for longer” is reiterated, that could weigh on risk assets.

Hard Landing vs. Soft Landing Scoreboard

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The Outlook for Stocks

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The Outlook for Stocks: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Has the Outlook for Stocks Really Turned More Negative?
  • Weekly Market Preview:  Will Treasury Yields Keep Rising?
  • Weekly Economic Cheat Sheet:  Key Inflation Data This Week

Futures are slightly lower as negative Chinese real estate news offset the end of the Writers Guild of America strike.

Also, Chinese property firm Evergrande hit a setback in its restructuring deal. And that’s increasing liquidation chances (which would weigh on the Chinese economy).

Positively, the WGA struck a deal with Hollywood studios and ended their strike. Although two other major strikes remain in place (SAG-AFTRA and the UAW).

Today should be a generally quiet day in the markets from a news and volume standpoint, as it’s the Yom Kippur holiday and there are only two notable events on the calendar:  Chicago Fed National Activity Index (E: 0.15) and a speech by Fed member Kashkari (6:00 p.m. ET).  So, we should continue to expect Treasury yields to drive trading today, and if yields move steadily higher (as they are this morning) then that likely will weigh further on stocks.

the Outlook for Stocks

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Potential Bearish Gamechangers?

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Potential Bearish Gamechangers: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Are Strikes and Government Shutdowns Potential Bearish Gamechangers?

Futures are bouncing slightly after the BOJ rate decision met expectations while economic data was “ok” overnight.

The BOJ made no change to policy and President Ueda was not hawkish in his comments, easing a bit of the hawkish anxiety that’s weighed on markets this week.

Economically, the EU flash composite PMI beat estimates (47.1 vs. (E) 46.5) although it’s still in contraction territory.

Today focus will be on the flash PMIs and expectations are as follows:  Flash Manufacturing PMI (E: 47.8), Flash Service PMI (E: 50.2).  Markets need a Goldilocks number of a solid (but not great) headline readings, and stable price indices.  If we get the opposite (weak headline and higher price indices) that’ll be another stagflation signal and expect the selling to continue.

We also have two Fed speakers today, Cook (8:50 a.m. ET) and Daly (1:00 p.m. ET), but neither should move markets.

Potential Bearish Gamechangers

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Gold’s Outlook Following The Federal Reserve’s Decision

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Gold’s Outlook: Sevens Report Analysts Quoted in MarketWatch

Gold gains for a 4th straight session to settle at a more than 2-week high

Gold futures posted a modest gain on Tuesday to mark another settlement at their highest in over two weeks, a day ahead of the Federal Reserve’s decision on interest rates.

“A hawkish decision would be decidedly bearish for gold…while a dovish surprise would support a run beyond $2,000” for gold, said analysts at Sevens Report Research, in Tuesday’s newsletter.

December gold climbed by 30 cents, or less than 0.1%, to settle at $1,953.70 an ounce on Comex.

Also, click here to view the full MarketWatch article published on September 19th, 2023. However, to see the Sevens Report’s full comments on economic data & inflation sign up here.

Gold's Outlook

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Key Levels to Watch on Fed Day

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Key Levels to Watch on Fed Day: Strengthen your market knowledge with a free trial of The Sevens Report.

What’s in Today’s Report:

  • Key Technical Levels to Watch on Fed Day – Print or Share These Charts
  • Is Canadian CPI a Warning on Inflation?

U.S. equity futures are rising alongside European shares this morning. Resulting from a dovish market reaction to a “cooler than feared” inflation print in the U.K. overnight.

Headline CPI in the U.K. dropped to 6.7% vs. (E) 7.1% in August while Core fell to 6.2% vs. (E) 6.8%. The data was a clear surprise and has resulted in rates markets lowering odds of a BoE rate hike tomorrow to 50% from near 100% previously, supporting risk-on money flows this morning.

There are no economic reports or Treasury auctions today. This will likely leave markets in a state of “Fed Paralysis” until the FOMC Announcement (2:00 p.m. ET) and Fed Chair Powell’s press conference (2:30 p.m. ET).

Also, to request a one-page PDF “tear sheet” of the charts on Page 2 of today’s Report, complete with price level explanations, email info@sevensreport.com.

Key Levels to Watch

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FOMC Preview: How Long Will Rates Stay High?

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FOMC Preview: Strengthen your market knowledge with a free trial of The Sevens Report.

What’s in Today’s Report:

  • FOMC Preview – How Long Will Rates Stay High?
  • VIX Chart – Is Volatility About to Surge

S&P futures are modestly higher this morning after a favorable dip in EU inflation statistics and upward revisions to global growth forecasts while oil continues to climb towards $100/barrel.

The Eurozone’s Narrow Core HICP (their CPI equivalent) met estimates at 5.3% in August, down from 5.5% in July. The OECD raised their global growth forecast from 2.7% to 3.0%, primarily thanks to strength in the U.S. and Japan while growth estimates for Europe and China were reduced. However, the net increase in the global growth outlook was received as a mild positive this morning.

Looking into the U.S. session, there is just one economic report: Housing Starts and Permits (E: 1.435M, 1.440M). As long as there are no big surprises in the release, markets should fall into a holding pattern as the September FOMC meeting begins in Washington.

However, there is a 20-Yr Treasury Bond auction at 1:00 p.m. ET, and if the outcome moves rates materially, stocks could react amid last-minute positioning ahead of tomorrow’s Fed decision.

Fed Preview

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Economic Data & Inflation: Tom Essaye Quoted in Barron’s

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Economic Data & Inflation: Tom Essaye Quoted in Barron’s

Stock Markets Pause Ahead of Next Week’s Fed Decision

Firstly, “Today focus will be on economic data and if data is ‘Goldilocks’ like we saw on Thursday, expect a continuation of yesterday’s rally.” “Conversely, if the data shows inflation hot or growth slowing, don’t be surprised if markets give back most of yesterday’s rally,” writes Sevens Report Research’s Tom Essaye.

The United Auto Workers also began a partial strike on Friday. Uncertainty surrounding the impact of the strike could weigh on markets.

Also, click here to view the full Barron’s article published on September 15th, 2023. However, to see Tom’s full comments on economic data & inflation sign up here.

Economic data

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Stocks Pop in Relief Rally

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Stocks Pop in Relief Rally: Tom Essaye Quoted in Barron’s

Stocks Pop in Relief Rally

Sevens Report Research’s Tom Essaye told Barron’s he believes the market is experiencing a form of a relief rally.

He noted a wave of key catalysts for stocks has passed without significant negative surprises. This included the consumer price index on Wednesday and data on producer prices and retail sales on Thursday.

“Specifically for today, the ECB signaling it’s done with rate hikes combined with Goldilocks economic data to boost stocks and it’s just been building throughout the day,” Essaye says. “Essentially, it’s a similar dynamic to what we saw in June and July. Where markets are optimistic on growth (so more confident of a no/soft landing) and we see the ‘rest’ of the market outperform vs. tech.”

Also, click here to view the full Barron’s article published on September 14th, 2023. However, to see Tom’s full comments on the current market environment sign up here.

Stocks Pop

If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

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China Stimulus: Tom Essaye Quoted in Barron’s

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China Stimulus: Tom Essaye Quoted in Barron’s

China Stimulus Helps Asian Stocks Trade Higher

Worries over a slowdown in China have rattled global markets in recent months, with stimulus from Beijing doing little to stem the bleeding in stocks. However, the latest move to shore up the country’s economy seems to have been received more positively.

“China cut bank reserve requirements by 25 basis points in the latest step to help support the Chinese economy. And there are signs these measures are starting to have an impact,” said Tom Essaye, founder of Sevens Report Research.

Also, click here to view the full Barron’s article published on September 14th, 2023. However, to see Tom’s full comments on the current market environment sign up here.

If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.