AI Bubble Watch: Part 2

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What’s in Today’s Report:

  • AI Bubble Watch: Part 2

Futures are slightly higher following more mixed trade news.

Japanese stocks rallied after an announcement that the U.S. would “fix” an issue of tariff stacking that would result in some tariff reduction.

On gold, the U.S. may apply tariffs to Swiss gold imports, possibly disrupting to global physical gold trade.

Economically, there were no notable reports overnight.

There are no notable economic reports today but there are two Fed speakers, Musalem (10:20 a.m. ET) and Bowman, and if they join the growing “dovish” camp and hint at a September rate cut, that should help support markets.

 

Sector Winners from a Steepening Yield Curve

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What’s in Today’s Report:

  • Sector Winners from a Steepening Yield Curve

Futures are solidly higher following better than expected tariff news overnight.

President Trump announced semiconductor chip tariffs but included broad exemptions that will dramatically lessen the practical impact of those tariffs.  Investors are now hopefully we’ll get a similar set up for pharma tariffs.

Today focus will turn back to economic data and the most important report today is Jobless Claims (E: 220K).  Given last Friday’s awful jobs report, if we see a jump in claims, it’ll increase concerns the labor market is weakening.  An in-line to slightly better than expected number would be the best case for markets this morning.

Other data today includes Productivity & Costs (E: 1.9%, 2.1%) and Consumer Credit (E: $7.5B) while we also have one Fed speaker, Bostic (10:00 a.m. ET), although those events are unlikely to move markets.

 

MMT Chart: A “Relatively” Different Look at Stocks

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What’s in Today’s Report:

  • August MMT Chart Update: A “Relatively” Different Look at Stocks
  • ISM Services Index – A Fresh “Whiff” of Stagflation
  • Stagflation Risks Set Gold Up for Run to Record Highs

Futures are tracking global markets higher this morning as investors shrug off both the ISM Services Index from yesterday, which carried a whiff of stagflation, and soft earnings from semiconductor giants AMD (-7%) and SMCI (-17%) after the close yesterday.

Economically, EU Retail Sales rose 3.1% vs. (E) 2.6% which is serving to tamp down worries about the health of the global economy.

Looking ahead to today’s session, there are no noteworthy economic reports due to be released.

However, the Treasury will hold a 4-Month Bill auction at 11:30 a.m. ET and a 10-Yr Note auction at 1:00 p.m. ET and investors will look for the recent trend of healthy demand metrics to continue, despite the sharp drop in yields since Friday’s dismal jobs report.

Additionally, there are a few Fed officials scheduled to speak who could shed light on the prospects of a September rate cut (which is increasingly expected) including Cook & Collins (2:00 p.m. ET) and Daly (3:10 p.m. ET).

Finally, earnings season continues with MCD ($3.15), UBER ($0.62), SHOP ($0.20), DIS ($1.47), NRG ($1.54), ABNB ($0.93), and ET ($0.32) all reporting quarterly results today.

For now, investors are overlooking the soft semiconductor earnings from late yesterday, however, any Q2 results that challenge the idea that the consumer remains resilient and healthy in 2025, could add to recession worries and pressure stocks again today.

 

Market Multiple Table: August Update

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What’s in Today’s Report:

  • August Market Multiple Table: How Much Deterioration Has Occurred?

U.S. futures are higher thanks to good economic data overseas and solid tech earnings with PLTR up 6% premarket after topping estimates and raising guidance.

Economically, China’s Services PMI unexpectedly rose from 50.6 to 52.6 vs. (E) 50.4, helping ease global growth concerns which surged following Friday’s downbeat U.S. jobs report.

Today, focus will be on economic data early with International Trade in Goods (E: $-61.5B) and the ISM Services PMI (E: 51.5) due to be released.

From there, focus will turn to the bond market as the Treasury will hold 4-Week & 52-Week Bill auctions at 11:30 a.m. ET and a 3-Yr Note auction at 1:00 p.m. ET, all of which could shed light on investors’ outlook for Fed policy rates in the near-term.

Finally, earnings season continues with PFE ($0.58), CAT ($4.88), BP ($0.68), AMD ($0.28), AMGN ($5.26), SMCI ($0.35), and AFL ($1.71). Near all-time highs, this market will want to see continued strength in both Q2 results, as well as forward guidance in order for the rebound from last week’s pullback to gain momentum.

 

What the Bad Jobs Report Means for Markets

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What’s in Today’s Report:

  • What the Bad Jobs Report Means for Markets
  • Weekly Market Preview:  Do Stagflation Fears Keep Rising?
  • Weekly Economic Cheat Sheet:  ISM Services the Key Report This Week (Needs to Stay Above 50)

Futures are seeing a moderate bounce following Friday’s declines and after a mostly quiet weekend of news.

On trade, there was potentially positive news over the weekend as Swiss officials implied a trade deal with the U.S. was close, which would reduce tariffs.

There were no notable economic reports overnight.

Today there are no economic reports so focus will remain on trade, and any announcement of trade deals that reduce tariffs will be a mild tailwind on the markets.

Finally, earnings season has mostly wrapped up but there are some remaining notable companies reporting including: BRK.B ($5.24), W ($0.27), ON ($0.54), TSN ($0.72), PLTR ($0.08), MELI ($12.01), AXON ($0.08).

 

How To Navigate An “AI Bubble” (If One Exists)

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What’s in Today’s Report:

  • How To Navigate An “AI Bubble” (If One Exists)

Futures are sharply lower following sweeping tariff announcements by the administration overnight.

The Trump administration made numerous reciprocal tariff announcements and while the vast majority of them were previously reported, the sheer volume of tariffs is weighing on sentiment.

Focus today will be on economic data and specifically the jobs report and ISM Manufacturing PMIs.  Expectations for the jobs report are: 110K Job-Adds, 4.2% UE Rate and 3.7% y/y Wages) while the ISM Manufacturing Index expectation is 49.5.

Given the early, tariff related weakness in stocks, a “Too Cold” jobs report or ISM Manufacturing PMI could accelerate the selling as they would compound worries that high tariffs will hurt future growth.  So, solid numbers from both are needed to push back on this morning’s tariff anxiety.

Finally, on earnings, today is the last meaningful day and some reports we’re watching include: BRK.B ($5.24), XOM ($1.49), CVX ($1.66), D ($0.69), CL ($0.89), KMB ($1.68).

 

Fed Takeaways and Jobs Report Preview

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What’s in Today’s Report:

  • What the Fed Decision Means for Markets
  • FOMC Takeaways
  • Jobs Report Preview
  • Weekly EIA Data Takeaways and Oil Market Update

Futures are solidly higher as traders digest the largely benign July Fed decision amidst solid earnings and guidance from tech giants MSFT and META, which are trading higher by 8%+ and 12%+ in pre-market trade, respectively.

Today, focus will be on more key economic data early with Jobless Claims (E: 225K), and the Core PCE Price Index (E: 0.3% m/m, 2.7% y/y) being the key numbers to watch while the monthly Chicago PMI (E: 42.0) will also be released.

In the wake of the Fed decision yesterday, the Treasury’s 4-Week & 8-Week T-Bill auctions at 11:30 a.m. ET today could shed some light on market expectations for Fed policy rates between now and the end of the third quarter (the more dovish, the better).

Finally, earnings season continues in full force with multiple major global corporations reporting Q2 results today including CVS ($1.47), ABBV ($2.89), MA ($4.05), AAPL ($1.42), AMZN ($1.33), MSTR ($-0.12), COIN ($1.18), KKR ($1.03), and SO ($0.93). Strong mega-cap tech earnings have become largely expected rather than appreciated by this market so any disappointment in corporate news could spark a wave of profit taking into the end of the month.

 

Credit Spreads Are More Elevated Than You Think

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What’s in Today’s Report:

  • Credit Spreads: More Elevated Than You Think
  • Case-Shiller Home Price Index Points to Cooling Inflation
  • JOLTS Decline But Top Estimates

Futures are modestly higher this morning as traders digest yesterday’s pullback ahead of today’s Fed decision.

Economically, Eurozone GDP rose +1.4% y/y vs. (E) +1.2% which is supporting the tentative risk-on price action this morning.

Today, focus will be on economic data early with the ADP Employment Report (E: 75K), Advanced Q2 GDP (E: 2.5%),  and Pending Home Sales (E: 0.2%) all due to be released.

Attention will then turn to the Fed meeting with the FOMC Announcement at 2:00 p.m. ET and Fed Chair Powell’s Press Conference at 2:30 p.m. ET with traders most focused on the prospects of a September rate cut.

Finally, earnings season continues as well and the following companies results have the potential to move markets, particularly the Mag-7 names reporting today: KHC ($0.64), HUM ($6.32), META ($5.83), MSFT ($3.35), CVNA ($1.10), QCOM ($2.72), ADP ($2.22), HOOD ($0.31).

 

FOMC Preview: Wildcard to Watch

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What’s in Today’s Report:

  • FOMC Preview: What’s Expected, Hawkish Scenario, Dovish Scenario
  • Fed Meeting Wildcard to Watch: Dovish Dissents

U.S. equity futures are tracking European shares higher this morning amid continued optimism surrounding the U.S.-EU trade deal and resilient earnings ahead of the Fed decision.

There were no noteworthy economic reports overnight which will leave focus on earnings and U.S. economic data today as the July Fed meeting gets underway in Washington.

Today’s economic calendar is a fairly busy one with several potential market-moving reports due to be released including: Consumer Confidence (E: 95.8), JOLTS (E: 7.4 million), Case-Shiller Home Price Index (E: 2.9%), and International Trade in Goods (E: $-99.0B).

Looking at earnings, the Q2 reporting season continues with notable companies releasing results today including: UNH ($4.84), SOFI ($0.06), BA ($-1.54), PG ($1.43), V ($2.86), MRK ($2.01), SBUX ($0.64).

Bottom line, investors will continue to look for resilient, yet not “too hot” economic data trends and upbeat earnings and guidance in order for stocks to hold yesterday’s record highs, however a familiar sense of “Fed Paralysis” is likely to grip markets ahead of tomorrow’s critical Fed decision.

 

What Could Go Wrong? (Four Candidates)

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What’s in Today’s Report:

  • What Could Go Wrong?  (Four Candidates)
  • Weekly Market Preview:  A Busy and Important Week of Fed Decisions, Earnings and Economic Data
  • Weekly Economic Cheat Sheet:  Jobs Report and ISM Manufacturing PMIs Friday Are the Highlights

Futures are modestly higher on the announcement of a U.S./EU trade deal and further delay in tariff increases for China.

The U.S. and EU agreed to a trade deal this week with details that are largely in-line with market expectations at the end of last week.

The U.S. and China agreed to a 90-day extension of their tariff pause to continue to work on a larger trade deal.

This will be a busy and important week from an economic standpoint, but it starts quietly as there are no reports today.

Similarly on earnings, this is the most important week of the year with earnings looming from major tech firms (MSFT/META/AAPL/AMZN) but it starts quietly.  Some reports we’re watching today include: WM ($1.88), WHR ($1.54), WELL ($1.22).