Why Doesn’t the Market Care There’s No Stimulus?

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What’s in Today’s Report:

  • Why Doesn’t This Market Care That There’s No Stimulus?
  • Weekly Market Preview:  Watching Washington and the Data
  • Weekly Economic Cheat Sheet:  August Flash PMIs on Friday – Can the Data Hold Up?

Futures are marginally higher following some potentially positive headlines from Washington over the weekend.

Speaker Pelosi is calling the House back into session to address Postal Service funding (this was a major sticking point in the larger stimulus bill).  The hope is that if there’s a compromise on that issue, the larger stimulus bill becomes much easier to pass.

There was no notable economic data overnight.

Today’s focus will be on Washington and specifically if there’s any hint that negotiations may re-open on the larger stimulus bill.  If that’s the case, then we’ll likely see new all-time highs today in the S&P 500.

Economically, the Empire Manufacturing Index (E: 17.0) is the key report today, and the market will want to see continued progress from July (especially because the stimulus payments have stopped).  We also get the  Housing Market Index (E: 72), although that shouldn’t move markets.

Tom Essaye Quoted in FinTech Zoom on August 13, 2020

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“The market nonetheless needs, and really a lot expects, a precise stimulus invoice to be signed…” wrote Tom Essaye, editor of the Sevens Report. Click here to read the full article.

Tom Essaye Quoted in Barron’s on August 11, 2020

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”In a televised meeting, Russian President, Vladimir Putin, stated that Moscow’s Gamaleya Institute successfully developed a ‘safe and effective’…” writes The Sevens Reports Tom Essaye. Click here to read the full article.

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Tom Essaye Quoted in CNBC on August 12, 2020

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“The market still wants, and very much expects, an actual stimulus bill to be signed. Looking forward, stimulus bill negotiations will…” wrote Tom Essaye, editor of the Sevens Report. Click here to read the full article.

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Is Inflation Coming Back? (It Better Not Be)

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What’s in Today’s Report:

  • Is Inflation Coming Back?  (It Better Not Be)
  • An Inquiry on Gold

Futures are modestly lower following a night of disappointing economic data and more signs coronavirus is rebounding in Europe.

Chinese Industrial Production (4.8% vs. (E) 5.1%) and Retail Sales (-1.1% vs. (E) 0.3%) both missed estimates, while EU Flash GDP met very low estimates (-12.1%).

Britain added France to its list of quarantine countries, underscoring the steady rebound of coronavirus in Europe (although levels of the virus in Europe are still very low compared to the U.S.).

Today there are three notable economic reports:  Retail Sales (E: 1.8%), Industrial Production (E: 3.0%) and Consumer Sentiment (E: 71.9).  Consumer Sentiment is the most important number because it’s the most recent, although solid numbers in retail sales and IP will help reinforce the idea that economic recovery is still on-going (and hasn’t paused) and will help limit any downside in equities today.  There’s also one Fed speaker today, Kaplan at 10:00 a.m. ET, but he shouldn’t move markets.

The Vaccine Playbook

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What’s in Today’s Report:

  • The Vaccine Playbook

S&P 500 futures are approaching record highs this morning amid news that Russia has approved a COVID-19 vaccine while investors remain optimistic for a U.S. stimulus deal.

In a televised meeting, Russian President, Vladimir Putin, stated that Moscow’s Gamaleya Institute successfully developed a “safe and effective” coronavirus vaccine ready to move to a Phase 3 trial, sparking risk-on money flows.

Economically, both the German ZEW Survey and the NFIB Small Business Optimism Index largely met estimates and importantly did not alter the narrative that the broader global economic recovery remains underway.

Today, there is one economic report: PPI (E: 0.3%) and one Fed official is scheduled to speak: Daly (12:00 p.m. ET) but neither should move markets as investors will be keenly focused on the details surrounding the Russian coronavirus vaccine as well as any new progress towards a deal on the next U.S. stimulus bill.

Stimulus Update (Are the Executive Orders Positive for Stocks?)

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What’s in Today’s Report:

  • Stimulus Update – Are The Executive Orders Positive for Stocks?
  • Is It Time to Chase This Market?
  • Weekly Economic Cheat Sheet (Jobless Claims Remain the Key)
  • Weekly Market Preview (What’s Next in the Stimulus Saga)

Futures are little changed as markets look past President Trump’s executive orders on economic stimulus following an otherwise quiet weekend.

With stimulus talks again at an impasse, President Trump issued several executive orders over the weekend to provide economic stimulus, including $300/week in federal unemployment and a payroll tax deferral.

But, for a multitude of reasons (legal and otherwise) none of these actions will have any immediate economic impact, so the market still expects a stimulus bill to be passed (but now in the coming weeks, not immediately).

Today there’s one labor market number, JOLTS (E: 5.288M), but that shouldn’t move markets, and instead focus will be on stimulus.  Today, the key is that both the Democrats and Republicans signal they are going to continue negotiations on the stimulus bill.  If the rhetoric implies the talks have stalled completely, that that will likely pressure stocks.

Tom Essaye Quoted in International Business Times on August 5, 2020

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“The bottom line is that if we do see real disappointment in stimulus or the vaccine, then a 10% correction is the likely best-case scenario…” said Tom Essaye of The Sevens Report, in a note. Click here to read the full article.

Jobs Report Preview (Recovery On/Recovery Pause/Recovery Stall)

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What’s in Today’s Report:

  • Jobs Report Preview:  Recovery On/Recovery Pause/Recovery Stall

Futures are moderately lower following lack of progress on the stimulus bill, combined with further escalation of U.S./China tech tensions.

Markets were hoping for a stimulus deal by today, but there’s been no progress on negotiations for two days.  So while the market still fully expects a deal by next week, there is disappointment that it likely won’t get done by the end of this week.

U.S./China geo-political tensions continue to rise as President Trump issued an executive order banning U.S. transactions with the parent companies of TikTok and WeChat.

Focus today will be on the Employment Situation report and expectations are as follows:   Job Adds: (E) 2.0M, Unemployment Rate: (E) 10.5%.

Bottom line, the strong economic data from earlier this week has made this jobs report more important than it was going to be, as this morning’s number now has the chance to signal the economic recovery is still on (a positive for stocks) or increase concern it’s stalling (which will be a headwind on equities, especially at these levels).

Tom Essaye Quoted in ETF Trends on August 5, 2020

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“The bottom line is that if we do see the real disappointment in the stimulus or the vaccine, then a 10% correction is the likely…” said Tom Essaye of The Sevens Report, in a note. Click here to read the full article.