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Follow Up to “How Does the Rally Ultimately End?”

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What’s in Today’s Report:

  • Follow Up to “How Does The Rally Ultimately End?”

Futures are modestly higher mostly on momentum from Thursday’s earnings-driven rally.

Alcoa (AA) was the only notable earnings report overnight but like most reports on Thursday, it beat estimates.  While it’s very, very early in earnings season, so far the results are better than feared and that’s driving the rally.

Today is another busy day of economic data, Fed speak, and earnings.  Economically, the three key reports are Retail Sales (E: -0.1%), Empire State Manufacturing Index (E: 25.0), and Consumer Sentiment (E: 74.0).  Markets will want to see stability in the first two, and the focus will be on inflation expectations in the third (they need to stay close to last month’s readings).

On the earnings front, we have three notable reports today:  GS ($9.78), PNC ($3.64), JBHT ($1.77), and we also get two Fed speakers, Bullard (11:45 a.m. ET) and Williams (12:20 p.m. ET), with the latter being the more important of the two.

How Does This Rally Ultimately End?

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What’s in Today’s Report:

  • How Does This Rally Ultimately End?

Futures are solidly higher following slightly underwhelming inflation data and better than expected earnings.

Chinese CPI rose 0.7% vs. (E) 0.8%, implying inflation pressures may be peaking.

On earnings, TSM beat estimates and upped guidance and that’s helping to lift stocks.

Today there are two notable economic reports, Jobless Claims (E: 320K) and PPI (0.5%, 8.7%) and markets will want to see claims continue to fall and PPI remain generally stable.  We also have multiple Fed speakers today including: Bullard (8:35 a.m. ET), Bostic (9:00 a.m. ET), Barkin & Williams (1:00 p.m. ET) and Harker (6:00 p.m. ET).  Their tone will likely be to reinforce that tapering is happening this year (as the market expects) but that shouldn’t move markets.

Finally, on the earnings front, some important results we’ll be watching today include:  TSM ($1.03), BAC ($0.71), WFC ($1.03), C ($1.82), UNH ($4.41), MS ($1.70), WBA ($1.03 and AA ($1.85).  If inflation is better than expected, that will help stocks rally.

Tom Essaye Interviewed by TD Ameritrade Network on October 11, 2021

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Takeaways From Recent Market Volatility

This week will give insight into when the Fed might start tapering, says Tom Essaye, Founder of The Sevens Report. Click here to watch the full interview.

Tom Essaye Quoted in S&P Global on September 14, 2021

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US debt ceiling fight could cause markets to tumble, delay Fed taper

I think in a market that’s stretched, that doesn’t have a lot of backing at these fundamental levels, if you get some sort of serious scare, it could take 5% to 10% out of the S&P 500 pretty quick…Essaye said. Click here to read the full article.

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 Forbes on August 24, 2021

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S&P 500, Nasdaq Hit New Record Highs As Vaccine Rally Continues—But Here’s What Investors Are Focused On Next

If there’s a reason for the rally, it’s the growing sense that the Fed won’t…market analyst Tom Essaye, author of the Sevens Report, wrote in a Tuesday email. 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.

Using the Yield Curve to Measure Taper Expectations

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What’s in Today’s Report:

  • Using the Yield Curve to Measures Taper Expectations
  • Strong 2-Year Note Auction Implies a Dovish Powell

U.S. stock futures are slightly higher in very quiet trading this morning as investors assess the state of the pandemic against expectations about the Fed’s taper plans ahead of the Jackson Hole Economic Symposium later in the week.

Economically, the German Ifo Survey was slightly soft with the Business Climate headline falling to 99.4 vs. (E) 100.4 and Business Expectations declining to 97.5 vs. (E) 100.0.

Looking into today’s session, there is one economic report ahead of the bell: Durable Goods Orders (E: -0.2%, Core Capital Goods: +0.5%). As has been the case recently, the market will be looking for a report that is good enough to not suggest the recovery is losing momentum but not too strong that it would influence a sooner-than-later taper by the Fed.

As the day goes on, we will hear from one Fed official: Daly who is scheduled to speak at 1:00 p.m. ET however her comments should not move markets will focus already moving ahead to Powell’s speech on Friday.

Finally, there is a 5-Yr Treasury Note auction at 1:00 p.m. ET. If we see strong demand like we saw in yesterday’s 2-Year auction, then that could offer a modest, dovish tailwind to equities as it will suggest expectations for Powell’s speech are shifting more dovish.

Bottom line, there are a few potential market catalysts today, but the odds that the market makes a material move one way or another are low given the sense of Fed paralysis ahead of Powell’s speech on Friday.