Tom Essaye Quoted in MarketWatch on January 17, 2020

“Nothing in phase one will specifically add much to global [economic] growth…” wrote Tom Essaye, president of the Sevens Report in a Thursday note to clients. Click here to read the full article.

President Trump and Chinese Vice Premier Liu

Tom Essaye Quoted in CNBC on December 23, 2019

“Stocks are grinding relentlessly higher into year-end on continued momentum from the positive resolution of four key events: A phase one trade deal, a dovish Fed…” Tom Essaye, founder of Sevens Report, said in a note on Monday.

New York Stock Exchange Floor

If There’s a Pullback, Where Is Support? (Technical Update)

What’s in Today’s Report:

  • If There’s a Pullback in Early 2020, Where Is Support? (Technical Update)

Futures are little changed this morning following another quiet night of news as markets digest the Q4 gains.

On trade, the House of Representatives passed the USMCA, as was widely expected and already priced in.

Economic data was largely in-line as Japanese CPI (0.5%) and German GfK Consumer Climate (9.7 vs. (E) 9.6) both met expectations.

Today focus will remain on economic data, and we have several more notable reports including, in order of importance: Core PCE Price Index (E: 0.2%), Consumer Sentiment (E: 99.2), Final Q3 ‘19 GDP (E: 2.1%).  The Core PCE Price Index, which is the Fed’s preferred measure of inflation, needs to continue to show subdued inflation pressures, as a sudden surge in inflation is the only thing that could get the Fed to become more hawkish.  Finally, today is a quadruple witching options expiration so don’t be shocked if there’s elevated volumes and some volatility into the close.

Is the Trade Deal a Bullish Gamechanger?

What’s in Today’s Report:

  • Is the U.S./China Trade Deal a Bullish Gamechanger?
  • Sector Winners from the Trade Deal

It’s green on the screen as global stocks surged overnight following the agreement on phase one of the U.S./China trade deal, while the landslide Tory victory in the UK elections added fuel to the bullish fire.

Regarding the UKL election, it was a bullish surprise.  The Tory party won 361 seats, well over the 335 expected, and the big majority almost guarantees a quick passage of the Brexit agreement.

On trade, there’s been no new news since yesterday afternoon as markets wait for official details of the deal, although rumors of a signing ceremony this afternoon with the Chinese ambassador hit the tape earlier this morning.

Today the market will be focused on getting the actual text of the trade deal, and that will dominate the market’s attention.  But, we also have an important economic number out this morning, Retail Sales (E: 0.5%), and if it confirms the U.S. consumer remains incredibly strong (which it should) that will likely add to the bullish mood in markets.

No Trade Deal?

What’s in Today’s Report:

  • What Happens If There Isn’t a Trade Deal

Futures are rebounding modestly this morning mostly thanks to a positive trade article by Bloomberg overnight.

The article said Trump’s comments about having no deadline for a China trade deal yesterday, which sent stocks tumbling, were “off the cuff” and that a deal is still likely.

Meanwhile, Service PMI data in China and Europe beat expectations and U.S. legal sanctions against Chinese nationals for human rights violations are not expected to affect trade negotiations.

Looking into today’s session, there are two key economic reports to watch: the ADP Employment Report (E: 156K) and the ISM Non-Manufacturing Index (E: 54.5). And based on the market’s negative response to the soft ISM report on Monday, the has the potential to move stocks.

There is also one Fed official speaking today: Quarles (10:00 a.m. ET), but Fed policy is largely on the back burner right now as no changes in interest rates are expected anytime soon which will leave the market primarily focused on any new developments in the trade war.

Tom Essaye Quoted in Benzinga on October 16, 2019

Tom Essaye, founder of Sevens Report Research, said this week there are three reasons why the S&P 500 won’t be breaking out above its summer highs in the 3,027 range unless investors see better trade news:

The Phase I deal provided no relief from current trade war tariffs and it contained no provisions that would boost global growth from current levels. The December tariff increases are still in play, so the Phase I deal didn’t even eliminate market uncertainty over whether things could get worse from here.

What a Trade Deal Means for the Rally

What’s in Today’s Report:

  • What a U.S. – China Trade Deal Means for the Rally

Futures are down modestly and international shares were broadly lower overnight as the recent rally in global stocks is being digested after a mostly quiet start to the week.

The German GfK Consumer Climate report was in-line with estimates at 10.8 for the month of March which offers at least some mild hope for an EU economic rebound in Q1.

Today, investors are going to be primarily focused on Fed Chair Powell’s testimony before Congress that begins at 10:00 a.m. ET with his prepared remarks due to be released at 9:45 a.m. ET.

While Powell cannot take a much more dovish tone than he already has so far in 2019, it is important he at the very least stays as dovish, as any hawkish shifts in rhetoric could spook markets, especially given how far stocks have rallied in recent weeks.

There are a handful of economic releases that are also due out this morning that could move markets: Housing Starts (E: 1.255M), S&P CoreLogic Case-Shiller HPI (E: 0.4%), FHFA House Price Index (E: 0.4%), and Consumer Confidence (E: 125.0).