Posts

Updating the Two Big Risks to the Rally

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What’s in Today’s Report:

  • Updating the Two Big Risks to the Rally
  • Weekly Economic Cheat Sheet: Jobs Report Takeaways and ECB Preview

U.S. equity futures are little changed this morning while overseas markets were mixed overnight with Asian stocks outperforming on upbeat Chinese economic data but EU shares drifted lower with focus turning to this week’s ECB meeting.

Economically, Chinese Exports were encouragingly up 25.6% vs. (E) 19.5% y/y in August which supported risk-on money flows in Asian markets however a soft German ZEW Survey is weighing on EU stocks this morning.

Today’s U.S. trading session is lining up to be fairly quiet as there are no economic reports and no Fed officials are scheduled to speak.

There is a 3-Year Treasury Note Auction at 1:00 p.m. ET, however, and weak demand would likely lead to a hawkish reaction across markets with yields moving higher and stocks potentially trading with a defensive tone.

Jobs Day (Slight Shift in Expectations)

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What’s in Today’s Report:

  • Jobs Day (Slightly Shift in Expectations)
  • Washington Update  –  Why Manchin’s Op-Ed is Important

Futures are modestly higher as markets ignored disappointing economic data ahead of today’s jobs report.

Global PMIs were disappointing as the Chinese Services PMI dropped to 46.7 vs. (E) 52.3 while the EU (59.0 vs. (E) 59.5) and UK (54.8 vs. (E) 55.0) Composite PMIs both slightly missed estimates

Japanese stocks surged 2% after PM Suga resigned, igniting speculation the government will unleash more stimulus.

Today the Employment Situation report is the key event, and the expectations are as follows: Job Adds: 740K, UE Rate: 5.2%, Wages: 3.9% yoy.  Because of the soft ADP report, the “whisper number” is slightly underwhelming vs. expectations (say around 500k), so the market may be a bit more sensitive if the actual jobs report is slightly stronger than expectations (it may cause a mild decline in stocks, but nothing major).

We also get the ISM Services PMI (E: 62.0) and markets will want to see stability in that PMI.

Tom Essaye Quoted in Market Watch on August 30, 2021

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Gold futures end lower, but prices hold above $1,800 to start week

The fundamentals are cautiously bullish for gold as a dovish taper outlook could…said analysts at Sevens Report Research, in Monday’s newsletter. Click here to read the full article.

 

 

Economic Breaker Panel: August Update

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What’s in Today’s Report:

  • Sevens Report Economic Breaker Panel – August Update
  • Consumer Confidence Data Points to Stagflation – Chart

Futures are trading near record highs this morning after mostly disappointing economic data helped reinforce dovish expectations for global central bank policy overnight.

Economically, a private Manufacturing PMI in China showed factory activity fell into contraction last month while European PMI data underwhelmed versus estimates and German Retail sales fell 5.1% vs. (E) -0.9% in July.

Looking into the U.S. session, focus will be one economic data early with the ADP Employment Report (E: 500K) due out ahead of the bell and then the ISM Manufacturing Index (E: 59.0) and Construction Spending (E: 0.3%) reports due shortly after the open.

There are no Fed speakers or Treasury auctions today so the biggest driver of markets will likely be the reaction to the economic data and what it means for Fed policy expectations. The biggest risk to the rally into the end of the week is data that is “too hot” and causes a hawkish shift to a currently very accommodative Fed policy outlook.

Infrastructure Update

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What’s in Today’s Report:

  • Infrastructure Update
  • Hurricane Ida and Energy Markets

Stock futures are trading at all-time highs this morning as dovish, risk-on money flows continue into the end of the month following mixed economic data overseas.

Economically, China’s Manufacturing PMI fell to 50.1 vs. (E) 50.2 in August while inflation data in Europe was slightly firmer than estimates but the outlook for global central bank policy remains notably accommodative and that is a positive for equities and other risk assets.

Today, there are two reports on the housing market in the US: Case-Shiller Home Price Index (E: 1.7%) and FHFA House Price Index (E: 1.8%) before the more important Consumer Confidence (E: 123.0) report is released shortly after the open.

Beyond those economic data points, there are no other material catalysts as no Fed officials are scheduled to speak and there are no Treasury auctions this afternoon.

Bottom line, momentum remains positive for stocks into the end of the month however a soft Consumer Confidence number or negative COVID headline could serve as an excuse for profit taking and cause a reversal of the early morning gains today.

Tom Essaye Quoted in The Detroit News on August 25, 2021

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For Fed taper, forget when it starts. It’s the end that matters.

The key for markets is how quickly the Fed removes the accommodation, because that…said Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter. Click here to read the full article.

Tom Essaye Quoted in Barron’s on August 25, 2021

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Dick’s Soars, Nordstrom Drops — And What Else Is Happening in the Stock Market Wednesday

The odds that the market makes a material move one way or another are…writes Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

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Tom Essaye Quoted in Bloomberg on August 25, 2021

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For Fed Taper, Forget When It Starts. The End Matters More

The key for markets is how quickly the Fed removes the accommodation, because that dictates…said Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter. Click here to read the full article.

Tom Essaye Quoted in Bloomberg on August 24, 2021

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U.S. Stocks Top Record as Strong Earnings Continue: Markets Wrap

How the Fed tapers is the next major variable for this market…wrote Tom Essaye, a former Merrill Lynch trader who founded The Sevens Report newsletter. Click here to read the full article.

Tom Essaye Quoted in Forbes on August 20, 2021

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U.S.-Listed Chinese Stocks Have Lost Another $150 Billion In Market Value This Week As Beijing Targets ‘Excessive’ Wealth

In a matter of weeks, China has introduced harsh regulations targeting wide swaths of its…Tom Essaye, author of the Sevens Report, wrote in a recent note. Click here to read the full article.