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As you see people reducing tech exposure, you’re getting the whole gamut being sold

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As you see people reducing tech exposure, you’re getting the whole gamut being sold: Sevens Report Editor, Tom Essaye, Quoted in Barron’s

Why the Dow and Nasdaq Are Going in Different Directions

Sevens Report Research’s Tom Essaye told Barron’s that earnings this week in the tech space haven’t been good. Netflix was the latest nail in the coffin ahead of major big tech players next week.

“As you see people reducing tech exposure, you’re getting the whole gamut being sold,” Essaye says. “And we know that’s really what’s happening, because the Dow is up on the day. And the S&P 500, if you were to pull tech out, wouldn’t be doing that bad.”

Also, click here to view the full Barron’s article published on April 19th, 2024. 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 RallyIf 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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Nvidia Has Been The ‘Poster Child’ Of AI Enthusiasm

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Nvidia Has Been The ‘Poster Child’ Of AI Enthusiasm: Tom Essaye Quoted in Bloomberg Featured on Yahoo Finance

Tech Up in Late Hours on Nvidia’s Bullish Outlook: Markets Wrap

“Nvidia has been the ‘poster child’ of AI enthusiasm because NVDA makes the type of semiconductor chips that power generative AI and demand for those chips has gone through the roof,” said Tom Essaye, founder of The Sevens Report. “The AI-driven rally in the ‘Mag Seven’ is largely justified by the fact that they’re making a lot more money than they were previously.”

While Nvidia is the proverbial “picks and shovels” of the “AI gold rush”, other big-tech companies such as Microsoft Corp., Meta Platforms Inc., Alphabet Inc., Amazon.com Inc. and Apple Inc. have also seen large stock rallies as investors expect these companies to harness the power of generative AI to boost profits, Essaye noted.

“Has the AI mania gone too far and are we looking at a bubble situation?” Essaye said. “Based on what most of us think about typical bubbles, the answer is ‘no’ they are not in a bubble.”

Also, click here to view the full Bloomberg article featured on Yahoo Finance published on February 21st, 2024. However, to see the Sevens Report’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.

What Earnings Are Saying

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What Earnings Are Saying: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What Earnings Are Saying About Current Economic Growth

Futures are modestly lower following a night of underwhelming earnings results.

INTC (stock down 10% premarket) gave soft guidance while V and TMUS (stocks down –3% each) posted underwhelming results.

Economically, German GfK Consumer Climate missed expectations (-29.7 vs. (E) -24.5) but that’s not moving markets.

Today focus will be on the Core PCE Price Index (E: 0.2% M/M, 3.0% Y/Y) and this number needs to meet or be lower than expectations to help support the stock rally.  If Core PCE prints solidly above expectations look for higher yields and lower stock prices.  The other notable economic number today is Pending Home Sales (E: 1.3%) but that shouldn’t move markets.

On the earnings front, the key report today is AXP ($2.65) and specifically we’ll be watching for is their commentary on consumer spending (the more positive, the better for markets).  Other notable earnings include CL ($0.85) and NSC ($2.90).

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.

What Is “R Star” and Why Is It Important?

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What’s in Today’s Report:

  • What is “R*” and Why Is It Important?
  • Palo Alto Shares Rip Higher by 15%, Sparking Tech Rally – Chart

Stock futures are higher this morning with mega-cap tech shares extending this week’s strong advance following news that SoftBank’s Arm semiconductor unit has filed for the largest U.S. IPO in 2 years after the close yesterday while traders await NVDA earnings tomorrow.

Overseas, the PBOC set the strongest yuan fixing on record overnight which has helped the currency stabilize and that is contributing to risk-on money flows this morning.

There were no other market moving headlines overnight and no notable economic reports were released.

Looking into today’s session, there is one economic report due out in the U.S. this morning: Existing Home Sales (E: 4.160 million) but it is unlikely to impact markets with traders primarily focused on tech so far this week.

There are two Fed speakers today: Barkin (7:15 a.m. ET) and Goolsbee (2:30 p.m. ET) and their commentary could move markets as markets look ahead to Fed Chair Powell’s remarks from Jackson Hole on Friday. Anything that sparks a further rise in Treasury yields could pour cold water on this week’s tech rally which is basically entirely responsible for the week-to-date gains in the broader equity markets.

CPI Preview (Good, Bad & Ugly)

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What’s in Today’s Report:

  • CPI Preview (Good, Bad & Ugly)

Futures are little changed despite solid tech earnings and more Chinese stimulus, as markets await the CPI report at 8:30 a.m. ET.

ORCL posted solid earnings and rallied 5% overnight and that’s adding to overall tech and market momentum.

Chinese authorities cut the reverse repo rate to 1.9% from 2.0%, and that move increased market expectations for future additional stimulus.

Today focus will be on the CPI report and expectations are as follows: 0.2% m/m, 4.1% y/y, Core CPI (E: 0.4% m/m, 5.3% y/y).  Additionally, “Super Core” CPI (which is core CPI less housing) will also be in focus and markets will want to see a drop to (or ideally below) 5.2% y/y.

Bottom line, markets need CPI to confirm accelerating disinflation to continue to rally, while a sticky inflation number will result in real market disappointment (although the looming FOMC decision should keep any market moves more muted than they otherwise would have been).

Moment of Truth: Does the Fed Signal a Pause?

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What’s in Today’s Report:

  • Moment of Truth:  Does the Fed Signal a Pause?
  • Weekly Market Preview:  Important New Insight into the Hard vs. Soft Landing Debate
  • Weekly Economic Cheat Sheet:  ISM Manufacturing Today, Services Wednesday, Jobs Report Friday (It’s a Very Busy and Important Week)

Futures are little changed as markets digest the FRC seizure and asset sale to JPM and look ahead to this week’s FOMC decision and important economic data.

First Republic (FRC) failed over the weekend and was seized by the FDIC.  Assets were then sold to JPM who will effectively absorb the bank.  FRC’s failure was widely expected, and as such it’s not a new negative on markets.

Economically, the Chinese April manufacturing PMI missed expectations and fell back below 50 (49.2 vs. (E) 51.4.).

Today there is only one notable economic report, the April ISM Manufacturing PMI (E: 46.8), and markets will want to see stability in the data (so no further declines).

On the banks, again FRC’s failure was priced in last week, so it’s not a new negative on markets.  The key now is seeing if any other regional banks with large uninsured deposits come under pressure, so as we said last week, we’ll be watching WAL, CMA and ZION over the coming days.

Jobs Report Preview

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What’s in Today’s Report:

  • Jobs Report Preview

Futures are moderately lower following a disappointing night of tech earnings and more hot inflation data.

AAPL, AMZN, and GOOGL all reported earnings overnight and the results underwhelmed.  Each stock is down between 2% and 5% pre-market.

Economically, EU PPI rose 1.1% vs. (E) -0.7% and became the third inflation number this week to hint at a rebound.

Focus today will be on the Employment Situation Report and expectations are as follows: Job Adds 185K, UE Rate 3.6%, Wages 0.3% m/m, 4.5% y/y).  Financial media focus will be on the headline job adds number but thanks to Powell’s less hawkish speech it’ll take a big number (300k or more) to be “Too Hot.”  Instead, focus on wages as they are directly related to services inflation, which remains sticky.  If wages are strong, that’ll be a negative.  The other notable economic report today is the ISM Services Index (E: 49.6) and markets will want to see stability in the data (no not worse than expectations).

Tom Essaye Quoted in MarketWatch on January 24th, 2023

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Tech rally is ‘biggest game of chicken between the Fed and the market I’ve ever seen’: analyst

“We are now witnessing the biggest game of ‘Chicken’ between the Fed (who says rates are going to above 5%) and the market (who thinks the Fed cuts rates at least twice this year) that I’ve ever seen,” said Tom Essaye, founder of Sevens Report Research, in a Tuesday newsletter. Click here to read the full article.

Why Is Tech/Growth Rallying So Hard?

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What’s in Today’s Report:

  • Why Is Tech/Growth Rallying So Hard?
  • Leading Indicators – Data Takeaways
  • Chart: Dollar Index Approaches Key Long-Term Technical Support

Futures are slightly lower as yesterday’s gains are digested while focus shifts to the start of big tech earnings.

Economically, Flash PMI data was mixed overnight with the broader Eurozone figure topping estimates but the U.K. headline badly missing expectations. The Solid Eurozone data is helping shore up recently more hawkish policy expectations for the ECB and that is weighing on EU shares this morning.

Today, the U.S. Composite PMI Flash will be in focus right after the opening bell. The report is comprised of two parts: the PMI Manufacturing Flash (E: 46.5) and the PMI Services Flash (E: 45.5) and investors will want to see some degree of stabilization in the data.

There are no Fed speakers today however the Treasury will hold a 2-Yr Note auction at 1:00 p.m. ET and the results could shed light on the market’s latest policy expectations ahead of next week’s Fed meeting, and weak demand (higher yields out of the auction) could weigh on stocks.

Finally, earnings season is continuing to pick up with: JNJ ($2.22), VZ ($1.21), MMM ($2.34), UNP ($2.75), and TRV ($3.50) reporting before the bell while the big report will be MSFT  ($2.29) after the bell. COF ($3.81) will also report after the close.

Is Tech Still An Anchor on the S&P 500?

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What’s in Today’s Report:

  • Is Tech Still An Anchor on the S&P 500?

Futures are slightly higher following a better night of earnings and more encouraging inflation data.

Earnings from NFLX and PPG were solid after yesterday’s close and that’s helping to slightly bolster sentiment.

On inflation, Japanese CPI was slightly better than estimates (4.0% y/y vs. (E) 4.1%) and that will help to reduce hawkish expectations for the BOJ.

Today there’s just one economic report, Existing Home Sales (E: 3.97 million) and that shouldn’t move markets.  So, focus will be on Fed speak and we get two speakers today: Harker (9:00 a.m. ET) and Waller (1:00 p.m. ET).  If they reiterate the desire for Fed Funds to get above 5%, despite the recent progress on inflation, that will be a mild headwind on stocks.

On earnings, two notable results to watch today are ALLY ($0.98) and STT ($2.00).