Is Brexit Clarity a Bullish Gamechanger?

What’s in Today’s Report:

  • Is Brexit Clarity a Bullish Gamechanger?

Futures are little changed following mixed Chinese economic data.

Chinese GDP missed estimates at 6.0% vs. (E) 6.1%, while Retail Sales met expectations at 7.8% and Industrial Production beat (5.8% vs. (E) 4.9%).  In sum, the data is slightly underwhelming but isn’t changing expectations for global growth.

Looking forward to today, there are no economic reports but there are a lot of Fed speakers including (in order of importance):  Clarida (11:30 a.m. ET), George (10:00 a.m. ET), Kaplan (9:00 & 11 a.m. ET), Kashkari (10:30 a.m. ET).  But, none of them should say anything too surprising and they shouldn’t move markets.

So, markets will stay focused on earnings and Brexit headlines.  Regarding Brexit, a vote on the new Brexit deal will happen Saturday in Parliament, and at this point passage looks to be a 50/50 chance.  So, there’s more drama yet in the three plus year Brexit saga.

Tom Essaye Quoted in Benzinga on October 16, 2019

Tom Essaye, founder of Sevens Report Research, said this week there are three reasons why the S&P 500 won’t be breaking out above its summer highs in the 3,027 range unless investors see better trade news:

The Phase I deal provided no relief from current trade war tariffs and it contained no provisions that would boost global growth from current levels. The December tariff increases are still in play, so the Phase I deal didn’t even eliminate market uncertainty over whether things could get worse from here.

Economic Breaker Panel: How We Know the Fed is Still Too Tight

What’s in Today’s Report:

  • Economic Breaker Panel:  How We Know the Fed is Still Too Tight

Futures are modestly higher following news of a new Brexit agreement.

The EU and Britain have agreed to a new Brexit deal that solves the Northern Ireland border issue.  However, it remains unclear if the deal can get through Parliament, and remember that Parliament killed the last Brexit agreement between Britain and the EU

Economically, British Retail Sales slightly missed estimates (flat vs. (E) 0.2%) but that’s not moving markets.

Today focus will be on earnings (some notable reports include MS: $1.10, PM: $1.35 and UNP: $2.29).

Additionally, there are several economic reports including (in order of importance): Philly Fed (E: 7.1), Industrial Production (E: -0.2%), Jobless Claims (E: 210k) and Housing Starts (E: 1.3M).  Broadly speaking, the stronger the data, the better for stocks.

Did the Fed Just Restart QE?

What’s in Today’s Report:

  • Did the Fed Just Restart QE?

Stock futures declined overnight after China said it would take countermeasures to the passage of a pro-Hong Kong bill by the U.S. House, further complicating the U.S.-China trade relationship while hopes for a Brexit deal faded.

There were no market-moving economic reports overnight.

Today, there is one key economic report to watch: Retail Sales (E: 0.3%) and two second tiered reports due to be released: Business Inventories (0.3%) and the Housing Market Index (E: 68). There are also two Fed officials scheduled to speak: Evans (9:00 a.m. ET) and Brainard (3:00 p.m. ET) that could potentially move markets.

Investors will also be looking for any further developments on the latest escalation in tensions between the U.S. and China as the trade war remains a major influence on stocks and broader risk assets.

Shifting from macro to micro, the start of earnings season will continue today with BAC ($0.68), PNC ($2.80), ALLY ($0.98), USB ($1.11), and BK ($0.99) all reporting ahead of the bell while NFLX ($1.05), IBM ($2.64) and CSX ($1.01) will release results after the close.

Earnings Season Technical Preview

What’s in Today’s Report:

  • Earnings Season Technical Preview
  • Empire State Manufacturing Survey Takeaways (Released a Day Early)

Stock futures have pulled back from overnight highs after China requested the U.S. reconsider $50B in tariffs just as investor focus had shifted from the trade war to earnings.

Economically, the Business Expectations component of the German ZEW Survey was not as bad as feared (-22.8 vs. E: -29.4) which is bolstering EU shares this morning.

There are no economic reports today however there are two Fed speakers to watch: Bostic (9:00 a.m. ET) and Daly (3:30 p.m. ET), while there are a slew of companies due to report quarterly results today as earnings season gets underway.

Notable corporations reporting earnings today include: JPM ($2.44), C ($1.96), GS ($5.03), WFC ($1.15), UNH ($3.75), and JNJ ($2.00) ahead of the open and UAL ($3.93) and JBHT ($1.44) after the bell.

What the U.S./China Trade Deal Means for Markets

What’s in Today’s Report:

  • What the U.S./China Trade Deal Means for Markets
  • Weekly Market Preview (All About Earnings)
  • Weekly Economic Cheat Sheet (Important Growth Data This Week)

Futures are modestly lower following reports that China wants “more talks” before signing phase one of Friday’s “deal.”

More broadly, there is some disappointment with Friday’s announcement as it does not provide material tariff relief or trade clarity (more on that in the issue).

Economically, Chinese exports missed estimates falling –3.2% vs. (E) -3.0% and that’s also weighing on sentiment as markets still need global growth to stabilize.

Today is the Columbus Day holiday so there are no economic reports or Fed speakers while banks and the bond markets are closed.  Given that, we can expect any U.S./China trade related headlines to again drive markets until the focus shifts to earnings tomorrow.

Trade Truce

What’s in Today’s Report:

  • Is A Trade Truce a Bullish Gamechanger?  No.  Here’s Why.

It’s green on the screen and futures are 1% higher as optimism for a U.S./China trade truce surged after the close.

President Trump said talks went “very well” yesterday and will meet Liu He in the White House at 2:45 p.m. today and a trade “truce” with no more additional tariffs is expected.

Economically, the only notable number was German CPI, which met expectations at 1.2% yoy.

Markets will be focused on any trade headlines as that’s clearly the most important topic today.  From a timing standpoint, I’d expect some sort of announcement on the outcome of the negotiations between lunchtime and the close, as Trump is meeting with He at 2:45 p.m.  At this point, a trade truce with some elimination of pending tariff increases is fully expected and anything less would be a disappointment.

Away from trade, we get Import & Export Prices (E: -0.1%, 0.0%) as well as Consumer Sentiment (E: 92.0), but unless the later is very bad, neither number should move markets.  There are also several Fed speakers today including Kashkari (8:00 a.m. ET), Rosengren (1:15 p.m. ET) and Kaplan (3:00 p.m. ET) but none of them should move markets.

Tom Essaye Interviewed with TD Ameritrade Network on October 10, 2019

Tom Essaye Interviewed with TD Ameritrade Network on October 10, 2019, discussing the upcoming U.S.-China trade negotiations, stock market, what will be the effects of no trade truce, sectors that will benefit with tariff reductions and more…Watch the full interview here.

Tom Essaye Interviewing with Oliver Renick

If There’s No Trade Deal Should We Rotate to Value?

What’s in Today’s Report:

  • If There’s No U.S./China Trade Deal, Should We Rotate to Value?  No.  Here’s Why.
  • EIA/Oil Market Update

Futures are flat following conflicting U.S./China trade headlines as the “noise” on this topic reaches a peak as senior-level talks begin today.

Positively, the Trump administration appears ready to grant permanent waivers for U.S. companies to send non-sensitive components to Huawei.

Negatively, the South China Morning Post said the lower-level talks earlier this week didn’t go well.

The U.S./China headlines will dominate markets today and tomorrow.  Broadly speaking, a trade “truce” that results in no more additional tariffs (and hopefully removes the tariffs expected to go into effect) is still the market expectation.  Regarding the conflicting headlines, the easiest way to cut through the noise is this: If the Chinese delegation leaves before Friday night, that’s bad.  If they leave after, that’s good.

Tom Essaye Quoted in CNBC on October 8, 2019

Senator Warren has been a vocal – and frequent – critic of not only banks but large corporations more broadly. Looking at the potential economic impact of a Warren presidency on the broader market, Sevens Report founder Tom Essaye wrote that “it is a very reasonable statement that if Warren were elected…it would be negative for the stock market in the extreme.” Click here to read the full article.