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Why Have Stocks Dropped?

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Why Have Stocks Dropped? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Have Stocks Dropped (And Are the Reasons Legitimate?)
  • Weekly Market Preview:  Focus Turns to Earnings (And They Need To Be Good)
  • Weekly Economic Cheat Sheet:  Important Growth and Inflation Updates

Futures are solidly lower following a further increase in geopolitical tensions and a lack of domestic political progress over the weekend.

Attacks on Israel from Lebanon increased over the weekend, raising fears of a two-front conflict.

Domestically, political gridlock continued as nine Republicans are now running for Speaker. But it’s not clear any of them have enough support to actually become Speaker.

Today the calendar is quiet as there’s just one notable economic report, the Chicago Fed National Activity Index (E: 0.05), so focus will remain on yields.  The 10-year yield sits at 5.00% as of this writing, and the higher it goes today, the lower stocks will likely fall.  Any progress on electing a Speaker of the House will be welcomed by the markets and likely push yields lower.

On the earnings front, we get a lot of important reports later this week, including MSFT, AMZN, KO, VZ, META, and others. But they come on Tues/Wed/Thurs and today there are just two reports to watch:  CLF ($ 0.46) and LOGI ($0.60).

Why Have Stocks Dropped

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Tom Essaye Quoted in Barron’s on August 30th, 2023

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U.S. Stock Futures Waver After Rally With More Jobs Data in Focus

“There are no Fed speakers today, so investors will be looking for more evidence that supports a continued pause in the Fed’s rate hiking cycle (or peak rates already being in) and ultimately a soft landing,” said Tom Essaye, founder of Sevens Report Research. “Anything that contradicts that narrative will be a headwind on equities and other risk assets today.”

Click here to read the full article.

Tom Essaye Quoted in Yahoo Finance on August 22nd, 2023

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Stocks Fail to Catch a Bid Before Nvidia’s Results: Markets Wrap

The surge in US yields has been the primary reason stocks have declined over the past several weeks, with investors “pushing out” the date of expected rate cuts as they begin to accept the Fed may keep rates “higher for longer,” according to Tom Essaye, founder of “The Sevens Report” newsletter. “It’s not the height of rates that matters as much as how long they stay high,” Essaye noted. “If we see Powell hint at higher for longer on Friday, we will need to brace for more equity market volatility.”

Click here to read the full article.

Tom Essaye Quoted in Forbes on June 20th, 2023

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Dow Tanks 250 Points—And Some Experts Warn More Pain May Be On Deck

At that price, the S&P is aggressively pricing in a lot of good things occurring and virtually zero negative surprises, Sevens Report analyst Tom Essaye wrote Tuesday. Click here to read the full article.

How Far Can Stocks Run (New Technical Targets)

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What’s in Today’s Report:

  • How Far Can Stocks Run? (New Technical Targets)
  • Why Did the Dollar and Treasury Yields Fall So Hard?

Futures are modestly higher on continued momentum from Thursday’s CPI report and as Chinese officials further signaled changes to their “Zero COVID” policy.

China made more than 20 changes to COVID policies overnight, all of which relaxed COVID rules and further signaled a departure from “Zero COVID.”

Economic data was mixed as German CPI met expectations at 10.4%, while UK GDP and Industrial Production were slightly better than expected.

Today the only notable number is Consumer Sentiment (E: 59.6) and specifically the Five-Year Inflation Expectations Index.  If that number falls further away from 3.0% (and drops to or below 2.7%) that will further fuel the idea that inflation pressures are receding, and stocks should extend the rally.

Tom Essaye Quoted in Financial Post on April 5, 2022

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Treasuries Retreat While U.S. Stocks Decline: Markets Wrap

Stocks are vulnerable to disappointment once again given the recent rally, so any deterioration in the Russia/Ukraine situation, spike in oil and hints of stagflation (high inflation/lagging growth) will hit stocks, and a 10% air pocket shouldn’t shock anyone…Tom Essaye, a former Merrill Lynch trader who founded The Sevens Report newsletter, said in a note. Click here to read the full article.

Tom Essaye Quoted in Big News Network on March 31, 2022

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Above 4,600 in the S&P 500, markets have now traded through most fundamental bounds of valuation, and for this rally to continue, we’ll need to see real actual positive events…Tom Essaye of the Sevens Report. Click here to read the full article.

 

Tom Essaye Quoted in Baystreet on August 16, 2021

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Where Does Wall Street Think Oil Is Heading?

If support holds, which it likely will as long as the news flow regarding COVID does not continue to…Tom Essaye of the Sevens Report has told MarketWatch. Click here to read the full article.

Tom Essaye Quoted in Yahoo Finance on August 14, 2021

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Where Does Wall Street Think Oil Is Heading?

When the July WTI contract managed to close Monday above the July low at $66.41/bbl, it marked that level as…Tom Essaye of the Sevens Report has told MarketWatch. Click here to read the full article.

 

Seven Macro Catalysts

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What’s in Today’s Report:

  • Seven “If’s” That Will Move This Market

Money flows are decidedly risk-on this morning thanks to renewed optimism about U.S.–China trade negotiations after an otherwise very quiet weekend.

Late yesterday, President Trump officially delayed the March 1st tariff deadline sending US stock futures up 10-15 points at the electronic open and shares in mainland China up over 5%.

There were no notable economic reports or other market moving catalysts overnight.

Looking into today’s Wall Street session, there are two economic reports due out this morning: Chicago Fed National Activity Index (E: 0.13) and Dallas Fed Manufacturing Survey (E: 3.0). These two releases are not usually watched closely by investors but they were especially bad in late 2019 and contributed to the heavy selling in December, so if they “whiff” again, we could see stocks come for sale.

There are no Fed officials scheduled to speak today which will leave the market primarily focused on any new developments or details regarding trade negotiations with China. Note that the March 1st deadline was delayed indefinitely and there were no other material developments regarding trade over the weekend so investors will be looking for any further indication on the next steps towards a deal.