A Familiar Question: 1998 or 2000?

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What’s in Today’s Report:

  • Stimulus Negotiations Update
  • A Familiar Question: 1998 or 2000? (Yield Curve Update)

Stock futures are flat after wavering between gains and losses overnight as investors hold out hope for a last minute stimulus bill while COVID-19 cases continued to rise around the globe.

There were no notable economic releases overnight and no major data points are due to be released today.

Looking into today’s session the lack of economic data will leave investors interested in Fed chatter with several officials speaking over the course of the day: Brainard (8:50 a.m. ET), Mester (10:00 a.m. ET), Kaplan, Daly, & Kashkari (12:00 p.m. ET), Barkin (1 p.m. ET).

Earnings will also continue to be closely watched with multiple notable reports due to be released today: VZ ($1.22), WGO ($0.90), AN ($1.63), TSLA ($0.58), CMG ($3.44), CSX ($0.93), and DFS ($1.63).

While the aforementioned factors will continue to be monitored by investors today, stimulus remains by far the most important influence on markets right now and any progress towards a sizeable, market friendly deal that is actually passable in the near term could trigger a big rally in stocks. Conversely, if talks fall apart and the timeline for a deal is pushed back, we could see stocks begin a potentially steep pullback on the news.

Asset Allocations (Long and Short Term)

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What’s in Today’s Report:

  • Thoughts on Asset Allocations (Short and Long Term)

Stock futures are trading higher this morning amid cautious optimism for a last-minute stimulus deal.

There were no market-moving economic reports overnight however updates from Washington suggest that Speaker Pelosi and Treasury Secretary Mnuchin are continuing to make progress towards a deal ahead of today’s deadline.

Looking into today’s session, there is one economic report ahead of the bell: Housing Starts (1.451M), and a few Fed speakers: Quarles (10:50 a.m. ET), Evans (1:00 p.m. ET), Brainard (3:00 p.m. ET), and Bostic (5:00 p.m. ET).

Earnings season is continuing to pick up with several notable corporations releasing Q3 results today: LMT ($6.07), PM ($1.35), PG ($1.43), SYF ($3.47), TRV ($2.94), NFLX ($2.12), SNAP (-$0.05), and TXN ($1.26).

Bottom line, the economic data and Fed chatter likely won’t move markets today and while earnings could influence the price action in specific sectors, investor focus is almost exclusively on Washington and today’s deadline to reach a stimulus deal. So, reports of progress towards a deal will be supportive of stocks recovering from yesterday’s declines while news that the two sides remain far apart on certain issues could see stocks fall to fresh multi-week lows.

Tom Essaye Quoted in Barron’s on October 16, 2020

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“While we think the time to rotate is growing closer, we do not agree this Fastly guidance cut is a canary in the…” writes Tom Essaye, author of The Seven Report newsletter. Click here to read the full article.

A Market Blind Spot

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What’s in Today’s Report:

  • A Market Blind Spot To Watch
  • Weekly Market Preview:  Earnings In Focus This Week
  • Weekly Economic Cheat Sheet:  More Evidence of a Plateau? (Global Flash PMIs Friday)

Futures are sharply higher thanks to better than expected global economic data following a generally quiet weekend.

Chinese economic data beat estimates as IP (6.9% vs. (E) 5.8%) and Retail Sales (3.3% vs. (E) 1.6%) handily beat estimates, while GDP slightly missed but was still solid at 4.9%.

The U.S. political outlook was unchanged over the weekend, with the market assuming a Biden Presidency and Blue Wave on Nov 3rd (and subsequent stimulus not just in 2020 but also 2021).

Today there is one notable economic report, Housing Market Index (E: 83) and two important Fed speakers, Powell (8:00 a.m. ET) and Clarida (11:45 a.m. ET) but at this point expected monetary policy is well known so I don’t expect their comments will move markets.

So, we expect stimulus headlines to again drive the market in the very short term.  There is not an expectation of stimulus before the election, so if there’s any positive movement on that in the next few days, that will help stocks extend the rally.

Tom Essaye Interviewed with Yahoo Finance on October 16, 2020

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“I think we have become fixated with stimulus,” Sevens Report Research founder Tom Essaye said on Yahoo Finance’s The First Trade. “The numbers are so big now…” Click here to watch the full interview.

Sevens Report Quoted in MarketWatch on October 16, 2020

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“The not-too distant memory of negative oil prices still stings traders across the space as the threat of another supply chain crunch would rise exponentially with…” analysts wrote in the latest newsletter from Sevens Report Research. Click here to read the full article.

Tom Essaye Quoted in CNBC on October 16, 2020

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“The combination of no stimulus, fading economic momentum, and the threat of rising coronavirus cases…” said Tom Essaye, founder of The Sevens Report, in a note to clients. Click here to read the full article.

Sevens Report – October Economic Breaker Panel

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What’s in Today’s Report:

  • October Economic Breaker Panel:  How Long Can the Economic Plateau Last?

Futures are sharply lower as surging coronavirus cases in Europe are sparking fears of another self-imposed economic slowdown.

New lockdowns were announced across Europe, with some of the toughest measures coming in London and Paris.

Today there are several important economic reports, including Jobless Claims (E: 833K), Empire State Manufacturing (E: 14.5) and Philly Fed (E: 14.5).  Markets will want to see jobless claims get below 800k to show the labor market is improving, while Empire and Philly provide the first look at October economic data and markets will want to see stability.  With futures down sharply, any disappointment in the economic data could exacerbate the losses.

We also get multiple Fed speakers today, Bostic (9:00 a.m. ET), Kaplan (11:00 a.m. ET), Quarles (11:00 a.m. ET) plus some notable earnings, TSM ($0.92), WBA ($0.96), MS ($1.26), but I don’t think any of that will move markets unless there’s a big surprise lurking.

Tom Essaye Interviewed with BNN Bloomberg on October 13, 2020

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Tom Essaye, founder and president at Sevens Report Research, interviewed with BNN Bloomberg on October 10, 2020. He says the velocity with which the U.S. stock market has been…Click here to watch the full interview.

Three Sectors to Watch if Biden Wins

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What’s in Today’s Report:

  • Three Sectors to Watch if Biden Wins

Stock futures pulled back overnight on news that JNJ halted a phase 3 trial for a COVID-19 vaccine due to an adverse reaction in one of the volunteers, however, futures have since stabilized and are only modestly lower this morning.

Economically, Chinese trade data showed that exports continued to rise in September, up from 9.5% to 9.9% pointing to an ongoing recovery in the Chinese economy.

Today, there is one economic release due ahead of the bell: CPI (E: 0.2%) and one Fed speaker late this evening: Daly (8:00 p.m. ET) but neither is expected to materially move markets given the other market influences on the calendar today.

The first of which is the start of Q3 earnings season with several big names scheduled to release results including: JPM ($2.35), C ($1.01), DAL (-$3.10), JNJ ($1.99), FAST ($0.37), FRB ($1.38), and BLK ($7.46).

Additionally, today is Amazon’s “Prime Day” so online shopping activity will be significantly elevated but if initial reports suggest a weaker than anticipated consumer turnout, the disappointment could weigh on stocks.

Apple is also set to unveil the latest iPhone models at a product launch and given the weight the stock carries in the major indexes, a good event will be good for markets while an underwhelming event could see a good portion of yesterday’s gains given back.