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).

 

What the Government Shutdown Means for Markets

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What’s in Today’s Report:

  • What the Government Shutdown Means for Markets
  • JOLTS & Case Shiller HPI Takeaways

Markets are trading with a risk-off tone this morning as stock futures are lower, bonds are steady and gold broke out to record highs above $3,900 after the government shutdown for the first time since 2018 at midnight.

Economically, the final Eurozone Manufacturing PMI for September edged up to 49.8 vs. (E) 49.5 while the EU’s Core CPI Flash met estimates at 2.3% y/y but the data is not materially impacting markets with the government shutdown news dominating headlines.

While the implications of the government shutdown will remain top of news, there are multiple important economic reports today including the ADP Employment Report (E: 50K), ISM Manufacturing PMI (E: 49.0), and Construction Spending (E: -0.1%). There is also one Fed official scheduled to speak: Barkin (12:15 p.m. ET).

Some late season earnings to watch include reports from CAG ($0.33) and RPM ($1.87), however, the government shutdown is likely to continue to dominate the newswires today so any signs of progress towards some sort of spending agreement in Congress would likely spark a relief rally while rising political tensions that could prolong the shutdown could prompt further losses in risk assets.

 

The Sector Winner from a “Run-Hot” Economy

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What’s in Today’s Report:

  • The Sector Winner From a “Run-Hot” Economy
  • Pending Home Sales Takeaways

Futures are lower and bonds are rallying modestly amid the growing threat of a government shutdown this week.

Economically, China’s official Manufacturing PMI edged up 0.4 points to 49.8 vs. (E) 49.6 in September.

Today kicks off jobs week with the August JOLTS report (E: 7.100 million) due out shortly after the bell. The closer the headline is to estimates, the better as a too-hot or too-cold print could weigh on already shaky markets amid the government shutdown worries.

Additionally, Consumer Confidence (E: 96.0), the Case-Shiller Home Price Index (E: -0.2%), the FHFA House Price Index (E: 6.7%), and Chicago PMI (E: 43.5) will all be released today.

There are a handful of Fed speakers today: Collins (9:00 a.m. ET), Goolsbee (1:30 p.m. ET), and Logan (7:10 p.m. ET), and the more dovish their tone, the better for markets as two more rate cuts in 2025 are still largely priced in.

Finally, there are a few late-season earnings releases to watch: PAYX ($1.21), UNFI ($-0.22), NKE ($0.28).

 

Why the Bullish Argument Got Slightly Weaker Last Week

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What’s in Today’s Report:

  • Why the Bullish Argument Got Slightly Weaker Last Week
  • Weekly Market Preview:  Does Goldilocks Data Keep the Rally Going?
  • Weekly Economic Cheat Sheet:  The “Big Three” Monthly Economic Reports this Week

Futures are solidly higher following a quiet weekend and despite no progress on averting a government shutdown.

Chances of a partial government shutdown starting Wednesday are rising and if that occurs, the biggest impact for markets will be via delayed data (possibly including Friday’s jobs report).

There were no material economic reports overnight.

Today focus will be on any progress on averting a shutdown (a shutdown wouldn’t be a material market negative, but it’s definitely something the market could do without).

Economically, the only notable report is Pending Home Sales (E: 0.2%) while there are several Fed speakers:  Hammack (8:00 a.m. ET), Musalem & Williams (1:30 p.m. ET).  Bottom line, solid data and dovish Fed speak is what the market needs not just today, but all week, to rebound from last week’s declines.

 

Technical Trends in the Economic Data

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What’s in Today’s Report:

  • Technical Trends in the Economic Data

Futures are little changed following a flurry of new tariff announcements overnight.

The administration announced several new tariffs on specific industries, most notably pharmaceuticals and semiconductors.

While the tariff headlines appear negative, the announcements include provisions to reduce the practical impact, they aren’t materially impacting markets.

Today focus will be on further dissecting the tariff announcements (as long as there are “outs” for companies, the announcements won’t be direct negative influences on markets) but also on inflation, as we get the Core PCE Price Index (E: 0.2% m/m, 2.9% y/y), and the inflation expectations in Consumer Sentiment (1-Yr Inflation Expectations: 4.8%, 5-Yr. Inflation Expectations: 3.0%).  Markets need inflation data to stay stable to continue to support rate cut hopes, so in-line to slightly soft numbers will be welcomed by markets (and a hot number would be a negative headwind).

Turning to the Fed, there are two speakers today:  Barkin (9:00 a.m. ET) and Bowman (1:00 p.m. ET) but they shouldn’t move markets.

 

A Surprising Sentiment Update

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What’s in Today’s Report:

  • A Surprising Sentiment Update

Futures are little changed following a generally quiet night of news and ahead of several economic reports today.

Economically, there were no notable reports overnight.

After two quiet days in the market, today brings a busy calendar of economic data and Fed speak.

Economically, there are numerous reports today including, in order of importance,  Jobless Claims (E: 238K), Durable Goods (E: -0.5%). Final Q2 GDP (E: 3.3%) and Existing Home Sales (E: 3.95 million).  With the Fed now cutting rates, the stronger the data, the better (especially for jobless claims).

Turning to the Fed, there’s a parade of speakers today but none of them are Fed leadership.  Nonetheless, their general tone on future rate cuts will matter and the more dovish the commentary, the better.  Speakers today include: Goolsbee (8:20 a.m. ET), Schmid (9:00 a.m. ET), Bowman (10:00 a.m. ET), Barr (1:00 p.m. ET), Logan (1:40 p.m. ET) and Daly (3:30 p.m. ET).

Finally, earnings continue and some notable reports today include: ACN ($2.98), JBL ($2.81), COST ($5.82).