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Was Last Week’s Rally Legitimate?

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Was Last Week’s Rally Legitimate? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Was Last Week’s Rally Legitimate?
  • Weekly Market Preview:  Do Falling Treasury Yields Fuel More Upside in Stocks?
  • Weekly Economic Cheat Sheet:  Is the “Growth Scare” Starting to Appear?

Futures are modestly higher on momentum from last week’s big rally, following a mostly quiet weekend of news.

Economically, Euro Zone Composite PMI met expectations (46.5) while German Manufacturers’ Orders beat (0.2% vs. (E ) -1.1%) but there was a negative revision and overall, the data isn’t moving markets.

Geo-politically, Israeli forces are moving further into Gaza but so far risks of a broadening conflict remain relatively low.

Today there are no notable economic reports and just one Fed speaker, Cook (11:00 a.m. ET), so look for Treasury yields to continue to drive short term trading.  If the 10-year yield continues to decline then the S&P 500 can extend last week’s rally.

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Jobs Report Preview

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Jobs Report Preview: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Jobs Report Preview
  • Post Fed Technical Levels Update

Futures are slightly lower ahead of today’s jobs report following another night of underwhelming earnings.

AAPL (down 3% pre-market) earnings underwhelmed and global shipping giant Maersk (down –6% pre-market) warned of a potentially slowing global economy and that’s modestly weighing on sentiment this morning.

EU and UK economic data overnight was sparse and largely in-line and aren’t moving markets.

Today focus will be on economic data.  Expectations for the jobs report are as follows:  Job Adds 183K, UE Rate: 3.8%, Wages: 0.3% m/m, 4.0% y/y.  Numbers at or below those readings will be welcomed as Goldilocks and likely further pressure Treasury yields (and lift stocks).

Additionally, we also get the ISM Services PMI (E: 53.0) and the key here is the number stay comfortably above 50.  Finally, there is one Fed speaker: Kashkari at 12:45 p.m. ET, but he shouldn’t move markets.

Jobs Report Preview

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Key Levels to Watch on Fed Day (Technical Tear-Sheet)

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What’s in Today’s Report:

  • Key Levels to Watch on Fed Day (Printable/Shareable Tear-Sheet)
  • Economic Data Takeaways – Employment Cost Index, Eurozone CPI, Case-Shiller HPI

Futures are slightly lower as traders digest more weak economic data overseas ahead of today’s Fed decision.

Economically, Manufacturing PMIs in China and the U.K. both disappointed. Both came in under the 50 threshold indicating contraction in the sector in both countries. This is weighing modestly on stocks this morning ahead of the Fed.

Looking into today’s session, focus will be on economic data early. The October ADP Employment Report (E: 150K), JOLTS (E: 9.375 million), and ISM Manufacturing Index (E: 49.0) are all due to be released this morning.

From there, attention will turn to the Fed with the FOMC Meeting Announcement at 2:00 p.m. ET followed by Fed Chair Powell’s press conference at 2:30 p.m. ET. Investors are hoping for a dovish message from the Fed, and if they deliver, a continued relief rally is likely this afternoon.

Lastly, outside of the policy decision and economic data, there are some notable earnings releases today. With: CVS ($2.13) and W ($2.98) releasing results before the open, and PYPL ($1.23), QCOM ($1.80), ABNB ($2.08), MET ($1.99) and AIG ($1.55) reporting after the close.

Key Levels to Watch on Fed Day

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FOMC Preview: Forward Guidance Will Be Critical

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Forward Guidance Will Be Critical: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • FOMC Preview – What’s Expected, Dovish-If, Hawkish-If, Forward Guidance Will Be Critical
  • Chart: 10-Yr Yield Approaches Critical Tipping Point

Futures are cautiously higher thanks to more evidence of disinflation in Europe. While an underwhelming yield curve control policy announcement by the BOJ is digested by global investors.

Economically, Eurozone CPI fell from 4.3% in September to 2.9% in October, well below estimates calling for 3.4% which further supports the narrative that global inflation pressures are easing considerably. Meanwhile, quarterly GDP in the EU disappointed, turning negative at -0.1% vs. (E) 0.0% which is rekindling recession worries in the Eurozone.

Looking into today’s session, there are several economic reports to watch this morning. The Employment Cost Index (E: 1.0%) being the most important for markets. The Case-Shiller Home Price Index (E: 0.7%) and latest Consumer Confidence report will also be released later in the morning (E: 100.0) but are less likely to move markets.

This week’s FOMC meeting gets underway today which will likely mean a familiar sense of Fed paralysis will begin to grip markets ahead of tomorrow’s policy decision, however, there is a 52-Week Treasury Bill auction at 1:00 p.m. ET that could move yields and influence equity market trading in the early afternoon.

Finally, earnings season is winding down but there are a few notable releases today. Starting with CAT ($4.75) and JBLU (-$0.27) reporting ahead of the bell with AMD ($0.68) after the close.

FOMC Preview - Magnifying Glass

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Core PCE Reading Was Inline With Expectations

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Core PCE Reading Was Inline With Expectations: Tom Essaye Quoted in Barron’s

S&P 500 Joins Nasdaq in Correction Territory

Sevens Report Research’s Tom Essaye told Barron’s the core PCE reading was inline with expectations but didn’t eliminate the risk of inflation rebounding.

He added that Amazon and Intel’s earnings didn’t outweigh what has been a bad week overall.

“And, while there’s progress in Washington, markets won’t celebrate the Republicans being able to finally elect a speaker, and there’s still the prospect of a government shutdown looming,” Essaye added.

Also, click here to view the full Barron’s article published on October 28th, 2023. However, to see the Sevens Report’s full comments on the current market environment sign up here.

It’ll be Very Hard for This Market to Rally

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What Can Stop This Selloff?

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What’s in Today’s Report:

  • What Can Stop This Selloff?
  • Weekly Market Preview:  A Very Important Week of Earnings, Fed Decision and Economic Data
  • Weekly Economic Cheat Sheet:  A Busy Week (Jobs Report Friday, ISM PMIs Wed/Fri)

Futures are moderately higher on a small reduction in geo-political tensions and better than expected inflation data.

Geo-politically, Israel moved forces into Gaza over the weekend but the operation isn’t as large as feared (yet) and that’s helping to slightly reduce geopolitical anxiety.

On inflation, Spanish CPI rose 3.5% vs. (E) 3.8%, providing another reminder that global inflation is declining.

This week will be a very busy one as we get a Fed decision and important economic/inflation data, as well as the final “big” week of earnings.  But, it starts slowly as there are no economic reports today, so focus will be on earnings and some important reports today include:  MCD ($3.00), WDC ($-1.87), ON ($1.35), SOFI ($-0.07), ANET ($1.58).

What Can Stop This Selloff?

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Why Tech Is Driving This Selloff

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What’s in Today’s Report:

  • Why Tech Is Driving This Selloff
  • S&P 500 Weekly Chart: Not A Setup You Want To See

Futures are moderately higher on solid tech earnings and optimism there won’t be a government shutdown drama.

On earnings, AMZN and INTC both posted solid numbers (up 6% and 7% after hours respectively). And that’s helping the tech sector and broader market bounce.

Politically, Speaker Johnson publicly supported passing a short term spending bill. This possibly avoids another shutdown drama.

Today focus will be on inflation, namely the Core PCE Price Index (E: 0.3% m/m, 3.7% y/y) and the five-year University of Michigan Inflation Expectations (E: 3.0%).  Lower than expected numbers will remind markets that inflation is falling and depress Treasury yields, and that should extend today’s early rally.  Conversely, if the inflation data is higher than expected, don’t be shocked if these early gains are erased as yields rise.

Why Tech Is Driving This Selloff

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Why Did Stocks Drop to Multi-Month Lows?

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What’s in Today’s Report:

  • Why Did Stocks Drop To Multi-Month Lows? (A New Reason)
  • Will the Election of a Speaker of the House Provide Any Relief for Investors?

Futures are solidly lower and are extending Wednesday’s losses following more disappointing earnings reports.

Earnings results this week have not been good and that continued overnight with disappointing guidance from META, WPP and Canadian Pacific (CP).

Today will be a busy day on both macro and micro economic fronts.

First, there’s an ECB Rate Decision but no hike is expected.  Economically, key reports today include, in order of importance, Jobless Claims (E: 208K), Durable Goods (E: 1.0%), Preliminary Q3 GDP (4.2%) and Pending Home Sales (-1.0%).  As has been the case, “Goldilocks” data that shows solid, but not very strong, activity will be welcomed by markets.

On the earnings front, there are multiple important reports today highlighted by AMZN ($0.58) after the close.  Other notable reports today include: UPS ($1.53), MRK ($1.94), LUV ($0.38), MA ($3.21), INTC ($0.19), and CMG ($10.46).  Bottom line, disappointing earnings are becoming a new headwind on markets and solid results today will help stabilize sentiment (while more disappointing reports will add to headwinds).

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What Would Stop the Bond Market Selloff?

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What’s in Today’s Report:

  • What Would Stop the Bond Market Selloff? (Fundamental and Technical Perspectives)
  • October Flash PMI Takeaways – More Goldilocks Data (Chart)

Stock futures are trading lower as investors digest a mixed start to big tech earnings and a moderate rise in yields.

On the earnings front, GOOGL is down 6.75% this morning as cloud revenue missed estimates. While MSFT is up 3.30% amid a broadly positive quarterly earnings report bolstered by positive AI growth metrics.

Today, focus will be on economic data early with New Home Sales (E: 685K). From there focus will turn to the bond markets as there is a 5-Yr Treasury Note Auction at 1:00 p.m. ET that has the potential to move yields and impact equities (any further retreat in yields will be welcomed by investors).

Fed Chair Powell will be speaking after the close (4:35 p.m. ET). That is likely to result in some hesitation in the afternoon as traders position/hedge ahead of his post-close commentary.

Earnings season remains in full swing as well with quarterly results due from BA (-$3.05), TMO ($5.60), and GD ($2.87) this morning. While tech giants META ($3.62) and IBM ($2.12) report after the close.

What Would Stop the Bond Market Selloff?

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Powell’s Speech Main Takeaway

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The Main Takeaway From Powell’s Speech: Tom Essaye Quoted in Barron’s on MSN

The Stock Rally Won’t Resume Any Time Soon. Here’s Why.

As Sevens Reports Tom Essaye put it, “The main takeaway from Powell’s speech was that in this situation, there’s no way the Fed can get dovish.”
Bulls have pointed to ongoing strength in the labor market as evidence that the economy is still humming, and fodder for the rally. However, as plenty of Federal Reserve watches noted after Chairman Jerome Powell’s remarks last week, the central bank doesn’t appear inclined to let rates fall.

Also, click here to view the full article published by MSN on October 23rd, 2023. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Powell’s Speech

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.

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