Posts

Did Things Get Better Last Week?

What’s in Today’s Report:

  • Bottom Line: Did Things Get Better Last Week?

Stock futures are in the red this morning and international markets were mostly lower overnight thanks to on-going trade tensions and more political drama in Europe.

The latest set of U.S. tariffs on Chinese goods went into effect over the weekend as expected however there were no updates regarding this month’s scheduled trade talks which is weighing on risk assets this morning.

Brexit concerns continue to simmer as the odds of a no-deal exit from the EU creep higher ahead of the October deadline but for now, the situation is largely isolated to Europe and not having a significant impact on U.S. equity markets.

Economic data was mixed overnight but there were no material, market moving surprises.

Today, there are two economic reports to watch: ISM/PMI Manufacturing Indexes (E: 49.9) and Construction Spending (E: 0.3%) while the Fed’s Rosengren is scheduled to speak shortly after the close (5:00 p.m. ET).

Investor focus will primarily remain on the trade war however, so any positive headlines regarding the planned, in-person negotiations this month will be well received while a continued lack of clarity on the topic will be a headwind for stocks.

Updated Market Multiples

What’s in Today’s Report:

  • Market Multiple Table Updated

Futures are drifting higher this morning, tracking gains in overseas markets as the recent rally in global equities is digested amid a much quieter macro backdrop this week.

Sentiment towards the trade war has been improving since Friday as the Trump administration appears increasingly concerned with the impact of tariffs on the U.S. economy, and that is continuing to act as a mild tailwind on stocks.

There were no material economic reports or other market-moving headlines overnight.

Looking into today’s session, there are no economic reports in the U.S. however there are two more Fed officials scheduled to speak before Powell’s Jackson Hole speech on Friday: Daly (4:30 p.m. ET) and Quarles (6:00 p.m. ET).

If Daly and Quarles have a similar tone to Rosengren from yesterday, which was “less dovish” that could weigh on stocks in the after-hours session (both speakers are after the bell) as expectations for Powell to deliver a more well-defined, dovish policy outlook on Friday will be dialed back.

The Trade War and Market Multiples

What’s in Today’s Report:

  • Tariff Update – What Does It Mean for Multiples
  • The “Doctor” Doesn’t Lie

The trade war continues to dominate the markets as the designation of China as a currency manipulator by the U.S. Treasury caused a sharp selloff in stock futures last night. But the PBOC intervened to “fix” the yuan back below $7/CNY which helped global markets stabilize overnight.

German Manufacturers’ Orders jumped 2.5% vs. (E) 0.6% in June but the details showed a continuation of soft demand in the Eurozone, offsetting the headline strength.

The trade war, and any further developments on the topic, will remain the market’s main focus today however there are a few other potential catalysts to watch.

Economically, the June JOLTS Report (E: 7.293M) will be released mid-morning and then shortly after lunch, there is a 3-Yr Treasury Note Auction (1:00 p.m. ET) which will be important because Treasury auctions have been moving the stock market lately.

Lastly, there is one Fed speaker: Bullard at 1:05 p.m. ET and investors will be listening closely for any clues as to what the Fed’s policy plans are into the end of the year.

Tom Essaye Quoted in The Bulletin on July 22, 2019

Investors look ahead to earnings

“We will start to get results from some of the big multi-national industrials and tech firms, which should shed more light on the effects of the trade war…” Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter, wrote in a note to clients. Click here to read the full article.

Road

Tom Essaye Quoted in SwissInfo.ch on July 22, 2019

Tech Shares Lead Gains Before Earnings; Oil Rises: Markets Wrap

“We will start to get results from some of the big multi-national industrials and tech firms, which should shed more light on the effects of…” Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter, wrote in a note to clients. Click here to read the full article.

subway station

Tom Essaye Quoted in Bloomberg on July 21, 201

“We will start to get results from some of the big multi-national industrials and tech firms, which should shed more light on the effects of the trade war…” Tom Essaye who founded “The Sevens Report” newsletter, wrote in a note to clients. Click here to read the full article.

Graph

Tyler Richey Quoted in Yahoo Finance on June 25, 2019

“Oil squeezed higher last week on tensions in the Middle East, but with so much uncertainty regarding the trade war and global economy, the demand…” says Tyler Richey, co-editor at Sevens Report Research. Click here to read the full article.

Man at Oil Rig

Tom Essaye Quoted in Yahoo Finance on June 12, 2019

The Sevens Report’s Tom Essaye said this week that the trade war is one of several key uncertainties creating volatility in the market. A major divide seems to exist between market expectations for three…Click here to read the full article.

Market Scenario Update (Good/Bad/Ugly)

What’s in Today’s Report:

  • How Good Was Last Week? (Good/Bad/Ugly Scenario Update)

It is a risk-on morning with U.S. stock futures tracking international equity markets higher after China announced a new wave of stimulus measures overnight.

The PBOC explained that the program would support infrastructure investment through special bond issuance which helped mainland China shares rally 2.6% on the session.

Economically, the NFIB Small Business Optimism Index was 105.0 vs. (E) 102.0. in May despite the elevated trade tensions, which helped S&P futures extend pre-market gains during the last hour.

Today, the calendar is relatively quiet although there is one inflation figure due out ahead of the open: PPI (E: 0.1%) and even though it is a lesser followed report, a “hot” print could still cause an uptick in volatility after the melt up we have seen over the last week.

There are no Fed officials scheduled to speak today which will leave investors looking for any further updates on the trade war, but even though the market is near-term overbought, no news is good news as sentiment is very positive and momentum alone could help stocks continue higher today.

Economic Breaker Panel Update

What’s in Today’s Report:

  • Economic Breaker Panel: May Update

U.S. stock futures are flat as investors look ahead to today’s release of the FOMC Minutes while most overseas markets bounced o/n in sympathy with the U.S. rally yesterday, although trade tensions remain elevated.

A NYT article released late yesterday revealed a modest escalation in the “tech war” as the U.S. will likely add several Chinese surveillance companies to the same “blacklist” that Huawei is on. This is an incremental negative as the odds of the broader “trade war” being resolved in the near-term continue to fall amid escalations in the U.S.-China “tech war.”

There are no major economic reports today but the calendar is relatively busy with the EIA Petroleum Status Report  due out at 10:30 a.m. ET (oil has traded with a sluggish tone this week and a selloff could drag stocks lower), while the main focus of the session will be on the release of the FOMC Meeting Minutes at 2:00 p.m. ET.

Additionally, there are multiple Fed speakers on the calendar: Williams (10:00 a.m. ET), Bostic (10:10 a.m. ET), and Kaplan (10:15 a.m. ET), however it is unlikely any of them move markets ahead of the Minutes.