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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.

Tom Essaye Quoted in Yahoo Finance on August 19, 2021

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Stocks in Choppy Trading Ahead of Big Options Day: Markets Wrap

This week’s options expiration is likely amplifying the volatility…wrote Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter. Click here to read the full article.

Powell Speech Preview

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What’s in Today’s Report:

  • Powell Speech Preview

Futures are modestly higher as markets bounce back from Thursday’s declines ahead of Powell’s speech.

There were no new developments in Afghanistan overnight as evacuations continued.  The tragedy temporarily hit stocks but it won’t be an ongoing influence on markets.

Expectations for more stimulus from China rose overnight as chatter regarding a Reserve Ration cut grew louder and this, combined with some pre-Powell positioning, are the main reasons futures are higher.

Today the key event is obviously the Powell speech (10:00 a.m. ET) but as a reminder, he won’t announce anything specific regarding tapering (that will come at the Sept 22nd Fed meeting).  Instead, the key will be how much Powell discusses the Delta variant as an economic headwind (the more he mentions it, the more dovish the speech will be taken) and if he reaffirms the Fed is getting close to being able to taper QE (which will mean before year-end).

Outside of Powell, the Core PCE Price Index (E: 0.3% m/m, 3.6% y/y) is the key economic report this morning but as long as it’s much higher than expectations, it won’t move markets.

Why Does the Market Think COVID Has Peaked?

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What’s in Today’s Report:

  • Why Does the Market Think COVID Has Peaked?
  • EIA Analysis and Oil Market Update

Futures are slightly lower following a quiet night of news as markets digest this week’s rally.

Chinese shares saw profit taking (Hang Seng down –2%) and that’s weighing on global stocks slightly, but there was no materially negative news out of China overnight.

Economic data was sparse as the German Gfk Consumer Climate slightly missed expectations (-1.2 vs. –1.0) while the Euro Zone money supply met estimates (up 8.1%).

Today we do get two economic reports including Jobless Claims (E: 340K) and revised Q2 GDP (E: 6.6%) but neither number should move markets unless they are major surprises.  Instead, pre-Powell speech positioning will likely dominate markets today (Powell’s speech is tomorrow) and given stocks hit new highs this week, don’t be surprised if there’s some mild profit taking ahead of Powell’s speech tomorrow.  Finally, in the bond markets, there’s a seven year Treasury auction mid-day today, and if the results are soft look for a continued rally in the 10 year yield (and an improving technical outlook for that yield).

 

Thank You!

I wanted to say a heartfelt, “Thank you” to all of you who sent me condolences and well wishes over the past week.

While I wish I could respond to each individual email or call, there have literally been hundreds of them, and if I took on that endeavor I’d have no time to write the Report! I believe that continuing to stay focused on the

markets and helping us to navigate this unprecedented time successfully is the best way I can show you my thanks, and you can count on me to do just that.

Again, thank you all.  You have made this time easier.

Why Negative Headlines Still Aren’t Hurting Stocks

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What’s in Today’s Report:

  • Why Negative Headlines Still Aren’t Hurting Stocks (Three Reasons)
  • Weekly Market Preview:  Can Good Earnings Continue to Offset Negative Macro Headlines?
  • Weekly Market Cheat Sheet:  Flash PMIs and Powell’s speech Friday are the highlights.

Futures are modestly higher on momentum from Friday’s rally and following mixed (but not bad) global PMIs.

Economic data was mixed as the EU August flash composite PMI was solid (59.5 vs. (E ) 59.7) although the UK  PMI (55.3 vs. (E ) 58.4) missed expectations, as did the Japanese and Australian readings.  But, in aggregate, the numbers were good enough to show the global economic recovery is still on going (and that helped stocks rally this morning).

There was improvement on the COVID front as new cases in China continued to plunge with daily new cases falling to zero in many local precincts and that’s raising hopes the current COVID wave in China is subsiding.

Today focus will be on the August Flash Composite PMI (E: 59.5) and markets will want to see solid data (so close to last month’s reading and close to expectations).  If it’s a bad miss, that will likely weigh on stocks.  We also get Existing Home Sales (E: 5.83M) but that shouldn’t move markets.