The New Market Dynamic (Lockdowns and Stimulus)

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What’s in Today’s Report:

  • Navigating the New Market Dynamic (Lockdowns and Stimulus)
  • Weekly Economic Cheat Sheet:  The Key Number is Today’s Flash PMI
  • Weekly Market Preview:  Lockdowns vs. Vaccine Optimism, Round 2.

Futures are moderately higher as the Astra-Zenica vaccine accountment is helping to offset still surging COVID cases and more economic lockdowns.

Astra-Zenica (AZN) announced its COVID-19 vaccine was 70% effective against the disease, but 90% effective when given in two doses (making it essentially on par with the Pfizer and Moderna vaccines).

Economically, flash November PMIs were mixed as the EU PMI missed estimates, while the UK PMI beat expectations, but both numbers declined from the October levels, reflecting the lockdown-related headwinds on the economy.

Today the key number is the November Flash Composite PMI (E: 55.6).  Markets will want to see stability in that number, but if it’s a bad miss then markets will grow more nervous about a potential “double dip” recession in early 2021, and that will hit markets regardless of the AZN vaccine news.

Are Lockdowns Starting to Outweigh Vaccine Optimism?

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What’s in Today’s Report:

  • Are Lockdowns Starting to Outweigh Vaccine Optimism?
  • EIA and Oil Outlook (Updated)
  • Why Are Treasury Auctions Suddenly Going Badly?  (And What It Could Mean for Markets)

Futures are modestly lower on momentum from Wednesday’s COVID/lockdown related late day fade.

Negative COVID headlines/increased economic lockdowns (especially in NYC and LA County) are starting to offset vaccine optimism, and that’s weighing on stocks.

Economic data was sparse overnight, but Australian Unemployment met expectations, as did UK Industrial Trends.

Today, with lockdowns increasing and near term economic anxiety rising, Jobless Claims (E: 710K) and the Philadelphia Fed Manufacturing Index (E: 24.5) will be two important reports, and markets will want to see stability in both to show the economic recovery is not losing momentum.  If those two readings are weak, expect more selling.

We also get Existing Home Sales (E: 6.47M) and there are two Fed speakers, Mester (8:30 a.m. ET) and Bowman (12:35 p.m. ET), but none of that should move markets.

Growth vs. Value: A Closer Look

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What’s in Today’s Report:

  • Value Sectors vs. Growth Sectors – A Closer Look
  • Retail Sales and Industrial Production Data Takeaways

Stock futures are trading modestly higher this morning as investors continue to digest the latest vaccine news against still elevated coronavirus cases and new lockdowns across parts of the U.S.

Economically, the only report overnight was Eurozone HICP from October which met estimates at 0.2% M/M and did not materially impact markets.

Today, there is just one economic release to watch ahead of the bell: Housing Starts and Permits (E: 1.46M, 1.56M) before the “Fed speak” picks up again after the open with Evans (10:00 a.m. ET), Williams (12:15 p.m. ET), Bullard (1:20 p.m. ET), Kaplan (6:00 p.m. ET) and Bostic (7:00 p.m. ET) all due to speak over the course of the day.

Beyond data and Fed chatter, investors will continue to watch the fluid macro backdrop of the broader markets which includes vaccine developments, coronavirus case counts, lockdown policies, and any clues as to the time frame and size of the next relief package from Congress.

Tom Essaye Quoted in Bloomberg on November 13, 2020

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“Because the market is so catalyst driven, there’s going to be volatility in this…” said Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter. Click here to read the full article.

Tom Essaye Quoted in Courthouse News Service on November 13, 2020q

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The residual rancor from the presidential election nevertheless has bled into hopes for a fourth stimulus package, according to Tom Essaye of the Sevens Report. He added that “the looming Georgia [Senate] runoffs complicate…” Click here to read the full article.

Tom Essaye Interviewed with Yahoo Finance on November 13, 2020

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Stocks extended gains Friday afternoon as the three major averages ended the week on a high note. Tom Essaye, Sevens Report Research Founder joined Yahoo Finance’s Jared Blikre, Seana Smith, and Adam Shapiro to break down market actions on Yahoo Finance Live. Click here to watch the full interview.

New Market Catalysts

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What’s in Today’s Report:

  • New Market Catalysts (Election/Vaccine Are Priced In)

Stock futures are trading moderately lower this morning as yesterday’s rally to fresh record highs is digested while coronavirus cases continue to rise in the U.S.

There were over 160K new COVID-19 cases reported in the U.S. alone yesterday, the second highest daily increase on record which is tempering some of the vaccine optimism that drove yesterday’s gains.

The economic calendar picks up today as there are several notable economic reports due to be released: Retail Sales (E: 0.4%), Industrial Production (E: 0.9%), and Housing Market Index (E: 85). The market will want to see those data points continue to meet or beat expectations to confirm the recovery remains robust and any disappointment in the numbers could weigh further on stocks.

There is also a slew of Fed officials scheduled to speak today: Powell (1:00 p.m. ET), Bostic (1:00 p.m. ET), Daly (1:25 p.m. ET), Williams (2:00 p.m. ET), Rosengren (2:35 p.m. ET), and Barkin (3:00 p.m. ET). Markets will be most interested in Powell’s remarks but more broadly investors expect the Fed to remain very dovish for the foreseeable future so any signs of the contrary could trigger further profit taking in stocks.

 

Updated Market Outlook (Near Term Pain for Long Term Gain)

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What’s in Today’s Report:

  • Updated Market Outlook:  Near Term Pain for Long Term Gain?
  • Weekly Market Preview:  Economic Data and More Vaccine Optimism (MRNA)
  • Weekly Economic Cheat Sheet:  November Data Key This Week (Empire/Philly/Jobless Claims)

Futures are moderately higher despite a continued surge in COVID cases and more partial lockdowns, as markets look beyond the short term and focus on vaccine optimism.

The weekend brought more partial lockdowns in Michigan and Washington, but that was countered by Dr. Fauchi saying he thought the U.S. could be back to normal by April given the current and future vaccines.  That positive vaccine outlook is insulating the market, so far, from the negatives of surging COVID cases and lack of fiscal stimulus.

Chinese economic data was solid as Industrial Production and Retail Sales both beat estimates and generally the Chinese economy continues to recover (which is positive for emerging markets specifically).

For today (and all week), markets will be on “Moderna Watch” as MRNA could release vaccine results any minute, and positive Phase 3 results will obviously be an additional tailwind on stocks.

Economically, the key number today is the Empire State Manufacturing Index (E: 13.5).  This is the first datapoint from November, so markets will want to see stability, especially in the face of growing partial lockdowns.  Finally, there are two Fed speakers, Daly (1:45 p.m. ET) and Clarida (2:00 p.m. ET), but neither should move markets.

Economic Breaker Panel (November Update)

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What’s in Today’s Report:

  • Economic Breaker Panel (November Update)
  • The Two Reasons Stocks Dropped Yesterday
  • EIA Analysis and Oil Update

Futures are moderately higher as markets bounce from Thursday’s declines following a night of strong earnings.

DIS, CSCO and AMAT all posted stronger than expected earnings, and commentary was upbeat (especially from CSCO) and that’s helping to offset COVID concerns.

Economic data was slightly better than estimates as Euro Zone flash GDP and Exports both slightly beat estimates.

Today we have two economic report, PPI (E: 0.2%) and Consumer Sentiment (E: 82.0) and two Fed speakers, Williams (7:00 a.m. ET) and Bullard (8:30 a.m. ET) but none of that should move markets unless there’s a big surprise lurking.

Instead, focus will remain on any new lockdowns in the U.S. and on stimulus negotiation updates.  Incremental updates yesterday were negative on both topics, and if that happens again don’t be surprised to see these early gains given back (although it’s important to remember that the longer term outlook for COVID got materially better this week – it’s just going to be a bit bumpy in the near term).

Tom Essaye Quoted in SPGlobal on November 9, 2020

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“While there will be some discussion about how many people will take the vaccine, and some consternation that it’s a two-dose vaccine that takes 28…” Tom Essaye, founder of the Sevens Report, wrote in a Nov. 9 note. Click here to read the full article.