Credit Spreads: Are We Seeing Liquidity Tightening?

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What’s in Today’s Report:

  • Credit Spreads: Are We Seeing Liquidity Tightening?

U.S. futures are solidly higher with European equity markets thanks to strong earnings from LVMH and ASML.

Economically, Eurozone Industrial Production fell -1.2% vs. (E) -1.6% m/m in August.

Today, there is one economic release to watch: the Empire State Manufacturing Index (E: -0.9) and a 4-Month Treasury Bill auction at 11:30 a.m. ET that could move short duration yields.

Additionally, today will be a busy day of Fed Speak with Miran (9:30 a.m. & 12:30 p.m. ET), Bostic (12:10 p.m. ET), Waller (1:00 p.m. ET), and Schmid (1:35 p.m. ET) all scheduled to deliver comments over the course of the day.

Finally, investors will remain keenly focused on earnings with quarterly reports due from ASML ($6.36), BAC ($0.94), MS ($2.08), PGR ($5.08), ABT ($1.30), UAL ($2.64), and JBHT ($1.48) today.

 

Volatility Reset or New Volatility Cycle?

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What’s in Today’s Report:

  • “Volatility Reset” or the Start of a New “Volatility Cycle?”
  • Silver Joins Gold at All-Time Highs

Markets are trading with a clear risk-off tone this morning amid a reescalation in trade tensions between the U.S. and China ahead of a slew of big bank earnings releases today.

Economically, the NFIB Small Business Optimism Index fell to 98.8 vs. (E) 100.5 in September but the Employment Subindex favorably rose for a fourth straight month which should help ease some labor market angst.

Looking ahead to today’s session, focus will remain on the trade war, specifically tensions between the U.S. and China, however, there are also two Treasury auctions (for 3-Month and 6-Month Bill at 11:30 a.m. ET) that could impact yields/Fed policy expectations and subsequently move equities.

Additionally, there are two Fed speakers on the calendar today: Bowman (8:45 a.m. ET) and Powell (12:20 p.m. ET). Obviously, any less-dovish tone from Fed Chair Powell has the potential to add pressure to an already fragile and heavy equity market today.

Finally, today marks the unofficial start of Q3 earnings season with several big banks/financials reporting quarterly results including: BLK ($11.25), JPM ($4.83), GS ($10.93), WFC ($1.55), and C ($1.83) as well as other notables: JNJ ($2.77), DPZ ($4.00).

 

Is AI the Only Thing Supporting This Market?

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What’s in Today’s Report:

  • Last Week’s Takeaway: AI Enthusiasm Could Soon Be the Only Thing Holding Up This Market
  • Weekly Economic Cheat Sheet – Fed Surveys in Focus

Stock futures are solidly higher this morning, recovering a good portion of Friday’s losses amid easing trade war fears.

President Trump dialed back Friday’s tariff threats on China with a post on Truth Social saying “Don’t worry about China, it will all be fine,” which is fueling a relief rally today.

Economically, Chinese trade data was strong with exports jumping from 4.4% to 8.3% vs. (E) 6.5% in September.

There are no economic reports in the U.S. today and just one Fed speaker: Paulson (12:55 p.m. ET).

There is one noteworthy “bellwether” earnings release today: FAST ($0.30), however, with bond markets closed in observation of Columbus Day, it is likely to be a quiet day of volatility consolidation.

October Bitcoin & Cryptocurrency Update

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What’s in Today’s Report:

  • Monthly Bitcoin & Crypto Update (October)

U.S. equity futures are flat while most overseas stock markets traded lower overnight as global investors book profits amid historically high valuations and an uncertain macroeconomic outlook given the ongoing government shutdown.

Economically, Japanese PPI held steady at 2.7% vs. (E) 2.5% in September, a slightly “warm” print that supported a modest rally in the yen overnight.

Looking into today’s session, there is one noteworthy private sector economic report to watch today: Consumer Sentiment (E: 54.0, 1-Yr Inflation Expectations: 4.5%) and the results could move markets as the government shutdown has resulted in a prolonged void in official growth/inflation data this week (the better the headline and cooler the inflation outlook, the better for stocks).

Additionally, there are two notable Fed speakers today: Goolsbee (9:45 a.m. ET) and Musalem (1:00 p.m. ET), and the more dovish the commentary, the better for risk assets.

The Latest on AI Bubble Discussions

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What’s in Today’s Report:

  • The Latest on AI Bubble Discussions

Futures are little changed following a generally quiet night of news as there was no progress on resolving the shutdown and as investor attention turns to earnings.

Economically, the only notable report was German exports which declined modestly (down –3.9%).

Today there are no notable economic reports but there are several Fed speakers including, most importantly, Powell (8:30 a.m. ET).  Other Fed speakers today include Bowman (8:35 a.m. & 3:45 p.m. ET), Barr (12:45 p.m. ET), Daly (6:40 p.m. ET).  The key for markets here is clear:  If Powell (and others) reiterate their concern about the labor market and hint at more rate cuts, that should help support stocks amidst this absence of economic data.

Earnings season also kicks off this week, although next week is when results begin in earnest.  Some reports to watch today include: DAL ($1.52), PEP ($2.27), HELE ($0.34), LEVI ($0.31).

October MMT Chart and a Caution Signal From the VIX

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What’s in Today’s Report:

  • October MMT Levels – S&P 500 Chart
  • Technical Observation: VIX vs. SPX Caution Signal

Futures turned higher with Treasuries overnight after the Bank of New Zealand cut policy rates by -50 bp to 2.50% vs. (E) -25 bp, a dovish surprise aimed at spurring growth.

Economically, Taiwan’s CPI remained low at 1.25% y/y while German Industrial Production plunged -4.3% vs. (E) -1.0% but the downbeat data is bolstering dovish central bank policy bets and buoying both bond and equity markets this morning.

Looking ahead to today’s session, the void of government economic data continues and there are no notable private sector releases today which will leave markets continuing to focus on Treasury auctions and Fed speak.

Regarding the first of those two topics, the Treasury will hold a 4-Month Bill auction at 11:30 a.m. ET and a (more important) 10-Yr Note auction at 1:00 p.m. ET.

Regarding the second topic, the Fed’s Musalem (9:20 a.m. ET), Barr (9:30 a.m. & 5:45 p.m. ET), Kashkari (3:15 p.m. & 4:30 p.m. ET), and Goolsbee (7:15 p.m. ET) are all scheduled to speak today.

And finally, the September FOMC meeting minutes will be released at 2:00 p.m. ET, and any evidence that pushes back on the thesis that the Fed will cut two more times in 2025 could send the dollar and yields (potentially sharply) higher and weigh meaningfully on equities.

 

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October Market Multiple Table

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What’s in Today’s Report:

  • October Market Multiple Table Update

Stock futures are trading back to flat after overnight weakness amid mostly quiet news flow.

Economically, German Manufacturing Orders fell -0.8% vs. (E) +1.3% in August but the news is being digested as modestly dovish (market positive) rather than a fresh source of growth concern.

Today, data on International Trade in Goods (E: $-61.0B) and Consumer Credit (E: $13.5B) were due to be released but both are likely to be impacted/delayed due to the government shutdown which will leave focus on Fed speak and Treasury auction results.

On those fronts, it is a relatively busy day with Bostic (10:00 a.m. ET), Bowman (10:05 a.m. ET), Miran (10:30 a.m.), and Kashkari (11:30 a.m. ET) all due to speak over the course of the day before there is a 3-Yr Treasury Note auction at 1:00 p.m. ET. Investors are pricing in a dovish Fed between now and yearend so anything that doesn’t support that outlook could prompt volatility.

Finally, there is one late season earnings release worth noting: MKC ($0.81).

 

Acknowledging the Negative Outcome

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What’s in Today’s Report:

  • Acknowledging the Negative Outcome
  • Weekly Market Preview: Does Fed Commentary Back-up Rate Cut Expectations?
  • Weekly Economic Cheat Sheet: Fed speak the key with no government data this week.

Futures are solidly higher thanks to strength in Japanese stocks following a surprise election outcome and despite no progress on resolving the U.S. government shutdown.

The Nikkei surged more than 4% after the ruling Liberal Democratic Party elected Sanae Takaichi to be the new Prime Minister, a mildly surprising outcome that’s seen as positive for more economic stimulus from the BOJ.

Politically, there was no progress on resolving the U.S. government shutdown over the weekend, although markets are continuing to ignore the shutdown (and likely will for another two weeks or so, should it last that long).

Today there are no economic reports so focus will remain on any progress on resolving the shutdown.  There is also one Fed speaker today, Schmidt at 5:00 P.M. ET, but his comments come after the close and shouldn’t move markets.

Takeaways from OpenAI’s Secondary Offering (More Evidence of An AI Bubble?)

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What’s in Today’s Report:

  • Takeaways from OpenAI’s Secondary Offering (More Evidence of An AI Bubble?)

Futures are slightly higher following another quiet night of news, as there was no notable progress on resolving the government shutdown overnight.

Economic data from Europe was mixed as the EU Services PMI as essentially in-line (51.3 vs. (E) 51.4) and rose since August, while the UK reading was weak, falling to 50.8 vs. (E) 51.9, a solid drop from the 54.2 August level.  That will add to anxiety about the UK economy.

Today there is no jobs report because of the slowdown so all the focus will be on the ISM Services PMI (E: 51.6) and the key for this number is to stay above 50.  If it drops below 50, that will add to slowdown concerns (although don’t be shocked by another “bad is good” rally in the short term).

There are also two Fed speakers today, Logan (1:30 p.m. E.T) and Jefferson (1:40 p.m. ET) but they shouldn’t move markets.

 

When We’ll Know If the Labor Market Is a Problem

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What’s in Today’s Report:

  • When We’ll Know If the Labor Market Is a Problem
  • What the Negative ADP Jobs Report Means for Markets

Futures are marginally higher following a mostly quiet night of news.

Politically, there are reports of back-channel negotiations occurring to end the government shutdown and a prolonged shutdown is not expected, although no resolution is imminent (and that’s still ok from a market standpoint).

Economically, Eurozone Unemployment slightly missed estimates (6.3% vs. (E) 6.2%).

Today there will be no jobless claims because of the shutdown so the key economic reports will be Challenger Job Cuts (E: 86k) and Factory Orders (E: 1.4%) while we also have one Fed speakers, Logan (10:30 a.m. ET).  Given yesterday’s negative ADP report, a spike in Challenger layoffs will create additional anxiety about the labor market (and possibly weigh on stocks more than ADP did initially on Wednesday).