How Bad Is the Damage?

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What’s in Today’s Report:

  • How Bad Is the Damage?
  • Weekly Market Preview (Coronavirus Growth Rate Remains Key)
  • Weekly Economic Cheat Sheet (Jobs Report/Global PMIs)

Futures are slightly higher (and well off overnight lows) as markets continue to digest last week’s rally and evaluate the latest coronavirus infection data.

President Trump extended social distancing guidelines until April 30th, which was generally in-line with expectations.

Coronavirus infection numbers were mixed over the weekend, as evidence builds that the growth rate in Italy has peaked, while NY/NJ/CT (and possibly New Orleans/California) remain hot spots here in the U.S.

There is one notable economic report today, Pending Home Sales (E: -1.6%), but focus will shift towards corporate commentary as markets try and assess the level of earnings and economic damage that’s occurred over the past six weeks.

What to Make of This Rally

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What’s in Today’s Report:

  • What To Make Of The Rally.
  • Coronavirus Update – Is Italy Peaking?

Futures are sharply lower (down about 2%) following a generally quiet night as markets digest the big three day rally.

The U.S. passed China in total number of coronavirus cases on Thursday, although there is some hope emerging that the spread of the virus is peaking in Italy.

Politically, there was no notable news overnight and passage of the stimulus bill will happen later today.

Today the key event is the passage of the stimulus bill in the House, but that is universally expected.  Outside of that, the key economic report will be Consumer Sentiment (E: 92.0), because that will give us some preliminary insight into how bad consumer spending might be in the coming months.  We also get the Fed’s preferred measure of inflation,  Core PCE Price Index (E: 1.8%), but at this point that number will be ignored as no one is worried about high inflation right now.

How Much Will The Stimulus Help?

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What’s in Today’s Report:

  • How Much Will the Stimulus Help?
  • Cash is King

Futures are down around 1% despite the Senate passing the stimulus bill, as markets digest the past two day’s rally.

The Senate passed the stimulus bill last night and the House has indicated it will pass the bill tomorrow, removing any lingering uncertainty.

Economic data was disappointing as German GfK Consumer Climate missed estimates (2.7 vs. (E) 7.7), as did British Retail Sales (-0.3% vs. (E) 0.2%).

Today there are two important events, both of which come early in the day.

First, Fed Chair Powell will appear on the Today Show at 7:05 a.m. ET, and while he won’t reveal any new policies, markets will be watching for a generally positive tone.

Second, the most important economic number of the week comes this morning via weekly jobless claims, which are estimated to be 1 million.  That is a figure I never thought I would see, considering claims peaked below 700k at the depths of the financial crisis.  If claims blast through that 1 MM estimate and move towards 2 MM that could be a headwind, while anything below 1MM will be a mild positive.

Was That The Bottom? If Not, How Long Can the Bounce Last?

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What’s in Today’s Report:

  • Was That The Bottom?  If Not, How Long Can The Bounce Last?
  • Gold Update – Can The Rally Continue?
  • March Flash PMIs:  Not As Bad As Feared (Although Still Bad)

Futures were modestly higher all morning but have since turned slightly negative, as the White House and Senate agreed on the stimulus bill and it is expected to be signed into law in the next day or so.

The details of the stimulus bill met expectations so much of this was priced in yesterday, but importantly, the bill is large enough to provide a limited “bridge” to the economy.

Economic data was sparse and the only notable report was the German Ifo Survey, where Business Expectations missed estimates, falling to 79.7 vs. (E) 82.0.

Today there is one traditionally notable economic report, Durable Goods (E: -0.6%), but it’s a February report so the market will largely ignore it.  We also get FHFA House Price Index (E: 0.4%) but that won’t move markets, either.

So, focus will remain on Washington to ensure there are no last minute hiccups on the stimulus bill, and on the virus count, where there are some potential rays of hope (more on that tomorrow).

Additional Fed QE Takeaways

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What’s in Today’s Report:

  • Additional Fed QE Takeaways

Futures are limit up this morning and money flows were decidedly risk-on overnight as several sources, including individual Senators, suggested that the near $2T stimulus package will be passed today.

Additionally, the spread of the coronavirus showed signs of slowing in the last 24 hours while economically, global Flash PMI data was not as bad as feared overnight with manufacturing components universally topping estimates.

Today, there are two economic reports due to be released: PMI Composite Flash (E: 44.2) and New Home Sales (E: 743K), and one Fed official scheduled to speak: Bullard (9:45 a.m. ET). There is also a 2-Yr Treasury Note Auction at 1:00 p.m. ET.

With two of the three “keys to market stabilization” either accomplished (Fed stimulus) or in progress (slowing spread of the virus), all eyes will remain on Capitol Hill today. And if the massive economic stimulus package passes a vote in the Senate, expect a relief rally to follow as investor sentiment should become decidedly less gloomy.

We’ve Reached a Tipping Point

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What’s in Today’s Report:

  • We’ve Reached an Important Tipping Point
  • Weekly Market Preview:  More Progress Towards a Bottom?
  • Weekly Economic Cheat Sheet:  Important March Data This Week

Futures are down around 3%, but off the overnight lows of –5%, as the coronavirus case count increased sharply over the weekend in the U.S. while Congress failed to make much progress on the stimulus bill.

The stimulus bill has swelled to an expected $2 trillion (which is a market positive) but it failed to clear a procedural vote in the Senate and Democrats and Republicans are still far apart on details.

But, the market does still expect passage of the bill early this week (futures would be much lower if markets doubted that the bill will pass).

There are no notable economic reports today and as such, all eyes will be on Washington.  Signs of progress on the stimulus bill will result in rallies, while negative headlines will send stocks lower.  As a reference, markets expect passage of the stimulus bill by the middle of this week (at the latest).

Tom Essaye Quoted in UPI.com on March 18, 2020

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Tom Essaye, founder of The Sevens Report, said the volatility in the market is not yet over and said the market changes await events such as final approval of the stimulus package.

“We also need to see more progress on the pharma side of things and above all else…” Essaye said. Click here to read the full article.

Tom Essaye Quoted in MSN on March 19, 2020

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“Volatility is not over yet,” said Tom Essaye, founder of The Sevens Report, in a note. He pointed out the administration’s stimulus packages need congressional approval. “We also need to see more progress on the pharma…” Click here to read the full article.

New York Stock Exchange

Tom Essaye Quoted in CNBC on March 19, 2020

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“Looking ahead, the path of least resistance is decidedly lower right now and the lower-for-longer dynamic appears to be one that…” Tom Essaye, co-founder of The Sevens Report, said Wednesday. Click here to read the full article.

Oil worker

Corporate Bond Market Update

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What’s in Today’s Report:

  • Corporate Bond Market Update

Futures are sharply higher this morning as global governments move forward with more economic stimulus.

The Senate formally released the third economic stimulus bill, valued over 1 trillion (and likely rising).  While not a done deal yet, the speed at which Washington is operating has quickened this week and markets are reacting positively to that change.

On the coronavirus front, all of California is now under a “stay at home” order as cases continue to rise.

Today all eyes will remain on Washington and any positive commentary on the stimulus bill will further help stocks, while signs of a political battle will likely reverse these early gains.  Economically, there’s one report,  Existing Home Sales (E: 5.50M) and today is a “Quad Witch” quarterly options expiration so watch for big volumes on the close.