What the Moody’s Downgrade Means for Markets (Two Important Charts)

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What’s in Today’s Report:

  • What the Moody’s Downgrade Means for Markets
  • Two Important Charts: Interest Expense and Deficits

Futures are modestly lower this morning as the S&P 500’s six-day rally is being digested amid a steadying Treasury market after the Moody’s downgrade of the U.S. last week.

There were positive trade war headlines out of Japan, Vietnam, and India overnight helping global stocks rally while economically, German PPI favorably fell -0.9% vs. (E) -0.5%.

Looking into today’s session, there are no notable economic reports in the U.S., however the Treasury will hold a 6-week Bill auction at 11:30 a.m. ET which could shed light on the market’s near-term Fed policy expectations, but barring any big surprise, the auction is not likely to move markets.

There are a handful of Fed speakers today including: Barkin & Bostic just ahead of the bell (9:00 a.m. ET), and Musalem in the early afternoon (1:00 p.m. ET). A “higher-for-longer” shift in Fed policy outlook has been priced in recently, so any dovish commentary out of the Fed officials would be well received.

Finally, some late season earnings will continue to be released today including: HD ($3.59), PANW ($0.41), TOL ($2.86).

Are Markets Giving An “All Clear” Signal?

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What’s in Today’s Report:

  • Are Markets Giving An “All Clear” Signal?
  • Weekly Market Preview:  Can This Rebound Hold?
  • Weekly Economic Cheat Sheet:  The First National Numbers for May (This Thursday)

Futures are lower (down more than 1%) following the Moody’s downgrade of U.S. debt Friday afternoon.

The Moody’s downgrade wasn’t dramatic news (S&P and Fitch downgraded U.S. debt years ago) but it is pushing the 10 year yield higher and that’s weighing on futures.

Economically, Chinese economic data underwhelmed (Retail Sales and Industrial Production missed estimates).

Today focus will be on economic data and Fed speak.  Economically, Leading Indicators (E: -0.7%) is the most notable report while we have several Feds speakers including: Williams & Bostic (8:30 a.m. ET), Jefferson (9:45 a.m. ET) and Logan (1:15 p.m. ET).  If they echo Powell from last week and are somewhat dismissive of near-term rate cuts, that could add to the headwinds on stocks today.

Highlighting the Value of International Diversification

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What’s in Today’s Report:

  • Highlighting the Value of International Diversification

Futures are extending Thursday’s rally mostly on momentum, following a quiet night of news.

Economically, the only notable report was Italian CPI which, like other recent EU inflation metrics, was better than expected (2.0% vs. 2.1% y/y) and is helping EU shares extend the recent rally as well.

Today there are several economic reports including Housing Starts (1.362M), Import & Export Prices (E: -0.3% m/m, -0.3% m/m) and Consumer Sentiment (E: 53.0, 1-Yr Inflation Expectations: 6.6%).  But, the focus will really be on inflation as the cool CPI and PPI this week have been the most important positives for this market.  If the University of Michigan 5-Year Inflation Expectations don’t rise from last month (4.4% y/y), that will be an additional positive for stocks as it will further push back on inflation fears.

Finally, there are two Fed speakers today, Barkin (6:40 p.m. ET) and Daly (8:40 p.m. ET), but they shouldn’t move markets.

Understanding the New Bullish Argument

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What’s in Today’s Report:

  • Understanding the New Bullish Argument

Futures are moderately weaker on digestion of the recent rally following a mostly quiet night of news.

There were no notable trade headlines overnight but President Trump did say they were “close” to a nuclear deal with Iran and that is pressuring oil (down 3%). Today there is a lot of potentially important economic data including, in order of importance:   Retail Sales (E: 0.1%), Jobless Claims (E: 229K), PPI (E: 0.2% m/m, 2.4% y/y), Philly Fed (E: -10.0) and Empire Manufacturing (-7.5).  Put simply, the stronger the growth data the better for stocks (pushes back against recession fears) and the lower the PPI reading, the better for stocks (pushes back against inflation fears).

There are two Fed speakers today including Powell (8:40 a.m. ET) and Barr (2:05 p.m. ET) but they commentary is expected to focus on regulation so it shouldn’t move markets.

Finally, there are some notable retail earnings to watch today: WMT ($0.57), BABA ($1.48), DE ($5.68).

May MMT Chart

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What’s in Today’s Report:

  • May MMT Chart
  • CPI Takeaways

Futures are flat after a mostly quiet night of news that included benign inflation data overseas while traders digest the fastest recovery from YTD losses since the 1980s.

Economically, April inflation data was mixed overnight as Japanese PPI fell to 4.0% vs. (E) 3.8% y/y while German CPI met estimates at 2.1% y/y last month.

There are no notable economic reports today but two Fed officials are scheduled to speak: Jefferson (9:10 a.m. ET) and Daly (5:40 p.m. ET). Neither are likely to move markets, however Fed policy expectations have shifted more hawkish in recent weeks so any dovish leaning comments could support a continued move higher in equities today.

On that same vein, there is a 4-Month Treasury Bill auction at 11:30 a.m. ET. Those Bills will mature around the time of the September Fed meeting, so strong demand would be dovish for markets while weak demand could spark hawkish money flows and result in some profit taking in risk assets.

Finally, there are a few more late season earnings releases due out today including SONY ($0.12) and CSCO ($0.75) but given optimism for new AI-chip deals overseas, neither report should be able to derail this week’s rally.

May Market Multiple Table Update

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What’s in Today’s Report:

  • May Market Multiple Table Update

Stock futures are lower as traders digest yesterday’s sizeable risk-on rally but U.S. futures are off their overnight lows thanks to better than expected global economic data as market focus shifts to today’s CPI release in the U.S.

The Economic Sentiment Index of the German ZEW Survey jumped from -14.0 to +25.2 vs. (E) 0.0 while the U.S. NFIB Small Business Optimism Index came in at 95.8 vs. (E) 94.7.

Looking into today’s session, trader focus will be on inflation data with CPI (E: 0.3% m/m, 2.4% y/y) as well as the Core CPI figure (E: 0.3% m/m, 2.8% y/y) due to be released before the bell.

If the inflation report is inline with estimates or “cooler-than-feared,” expect yesterday’s big stock market gains to hold or for stocks to even extend the already sizeable WTD rally on bullish momentum.

Finally, a few noteworthy earnings releases today include: JD ($0.99), HMC ($0.72), and SE ($0.61), however the bulk of the Q1 reporting season is behind us and the market impact should be limited.

Where is the Trump Put Now?

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What’s in Today’s Report:

  • Where is the Trump Put Now?
  • Weekly Market Preview:  Stagflation Update (Real Risk or Not?)
  • Weekly Economic Cheat Sheet:  CPI Tuesday, Key Growth Data on Thursday

Futures are surging (up more than 2%) on larger than expected tariff reduction between the U.S. and China.

The U.S. reduced tariffs on Chinese imports to 30% while China cut tariffs on U.S. imports to just 10%, significantly de-escalating the global trade war.

The tariff reduction will be in effect for 90 days while negotiations occur on a longer-term trade solution.

There are no notable economic reports today and just one Fed speaker, Kugler at 10:25 a.m. ET and she shouldn’t move markets.  So, markets will be driven by trade commentary and the tone around the U.S./China de-escalation.  Given upward momentum, more trade happy talk will help extend the rally.

 

Why Stocks Rallied Yesterday (It’s Not the U.S./U.K. Trade Deal)

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What’s in Today’s Report:

  • Why Stocks Rallied Yesterday (It’s Not the U.S./U.K. Trade Deal)
  • Trump vs. Powell

Futures are modestly higher and are extending Thursday’s rally on more trade optimism.

Multiple media outlets boosted expectations for tariff relief at this weekend’s U.S./China meeting in Geneva.

Bloomberg and other media outlets are expecting tariffs on Chinese imports to be reduced to 50% or 60% (from the current 145%).

Today there are no notable economic reports but there are several Fed speakers including (in order of importance): Williams (11:30 a.m. ET), Waller (11:30 a.m. ET), Barkin (8:30 a.m. ET) and Goolsbee (10:00 a.m. ET).  However, unless Williams is hawkish, their comments shouldn’t move markets.

Instead, trade anticipation should drive trading today and specifically any “chatter” about expectations for this weekend’s U.S./China trade meeting in Geneva (more optimism will push stocks higher while any negative commentary will pressure them).

What the Fed Decision Means for Markets

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What’s in Today’s Report:

  • What the Fed Decision Means for Markets

Futures are moderately higher on more trade optimism.

President Trump posted on social media that he would announce a new trade deal this morning (likely with the UK) and this is driving optimism for more tariff relief.

Economically, the only notable report was German Industrial Production, which beat estimates (3.0% vs. (E) 2.7%).

Today focus will remain on economic data and specifically Jobless Claims (E: 232K), as investors will want to see claims decline from last week’s spike.  If claims continue to rise, that will increase economic anxiety (and likely pressure stocks).  Other economic events today include a BOE Rate Decision (E: 25 bps cut) and U.S. Unit Labor Costs (E: 5.2%), which are an important measure of inflation (and again, the lower this number, the better).

On earnings, the season is virtually over but there are a few notable reports today:  SHOP ($0.17), COP ($2.06),  COIN ($2.04), MELI ($7.67), AFRM ($-0.08).

Monthly Bitcoin & Crypto Update

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What’s in Today’s Report:

  • Monthly Bitcoin & Crypto Update

Futures are higher on news the U.S. and China will hold preliminary trade talks in Switzerland Saturday which offset soft tech earnings from SMCI as focus turns to the Fed.

Economically, German Manufacturing Orders jumped 3.6% vs. (E) 1.0% while EU Retail Sales fell -0.1% vs. (E) 0.0%.

Looking ahead to the U.S. session, there is one economic report this afternoon: Consumer Credit (E: $10.0B), but the data is unlikely to move markets given the afternoon Fed decision.

Trader focus will be on any trade headlines this morning before attention turns to the Fed with the FOMC Announcement (2:00 p.m. ET), and Fed Chair Press Conference (2:30 p.m. ET) mid-afternoon.

There are some more late season earnings releases to watch that could move markets in pre-market/after-hours trade including: UBER ($0.51), DIS ($1.18), GOLD ($0.29), CVNA ($0.75), OXY ($0.73), and CLF ($-0.78).

Bottom line, focus is on the Fed today and while no change in the policy rate is expected, traders will be scrutinizing the meeting statement for any changes regarding economic uncertainty or hints on when the FOMC may lower rates next during Powell’s press conference. The more dovish the language and commentary, the better for equities today.