“Oil squeezed higher last week on tensions in the Middle East, but with so much uncertainty regarding the trade war and global economy, the demand…” says Tyler Richey, co-editor at Sevens Report Research. Click here to read the full article.
What’s in Today’s Report:
S&P futures are rebounding solidly this morning after Secretary Mnuchin reiterated that a U.S.-China trade deal is 90% complete while oil prices surge ahead of weekly data.
WTI crude oil futures are up nearly 2% after the API reported a weekly supply draw of over 7M bbls late on Tuesday which nearly tripled expectations (-2.6M bbls).
Economically, the German GfK Consumer Climate headline fell to 9.8 vs. (E) 10.0 in July, underscoring investor concerns about the EU economy.
After Mnuchin’s comments this morning, market focus has returned to the trade war and investors will be looking for any additional commentary out of Washington regarding the upcoming meeting between Trump and Xi or any other details on trade.
There are no Fed speakers today but there are two economic reports to watch that could potentially move markets, especially given the less dovish Fed speak yesterday: Durable Goods Orders (E: -0.1%) and International Trade in Goods (E: -$71.5B).
What’s in Today’s Report:
Futures are down slightly as the recent run to new highs in the S&P 500 is digested after a quiet start to the week.
Trade optimism faded modestly overnight amid several less encouraging news articles while there were no notable economic data releases overseas.
Today is lining up to be a busy day as there are a lot of potential market catalysts to watch ahead of the G20 this weekend.
On the economic data front, there are several housing numbers due out: Case-Shiller HPI (E: 0.2%), FHFA House Price Index (E: 0.2%) and New Home Sales (E: 680K) as well as Consumer Confidence (E: 132.0).
There are also multiple Fed speakers: Williams (8:45 a.m. ET), Bostic (12:00 p.m. ET), Powell (1:00 p.m. ET), and Bullard (6:30 p.m. ET). Powell will clearly be the most important to watch, however it remains very unlikely that his tone changes much (or at all) from last week’s FOMC press conference.
There is also a 2 Year T-Note Auction (1:00 p.m. ET) and if demand is soft (so yields rise) that could pressure stocks as it would show the market is dialing back expectations for a very dovish Fed in the back half of 2019.
Lastly there are a few companies reporting earnings today, but the FDX report after the close will be the key to watch as the release could offer insight (positive or negative) into the latest influence that U.S.-China trade tensions have had on global trade.
What’s in Today’s Report:
Futures are modestly higher following a generally quiet weekend as markets look ahead to the Trump/Xi meeting at the G-20 later this week.
News from the weekend focused on geo-political tensions between the U.S. and Iran but for now that situation isn’t impacting markets outside of oil (which is higher again).
The only notable economic report was German Ifo Business Expectations and it slightly missed estimates (94.2 vs. (E) 94.6).
There are no economic reports today nor are there any Fed speakers, so markets will be driven by any headlines on U.S./China trade (leaks about the upcoming Trump/Xi meeting) or Iran/U.S. tensions (the U.S. is anticipated to announce major new sanctions against Iran).
What’s in Today’s Report:
S&P futures are slightly lower as this week’s dovish rally to new all-time highs is digested amid further escalations between the U.S. and Iran while economic data was mixed.
The U.S. reportedly called off a retaliatory strike against Iran “at the last minute” overnight which is weighing on investor sentiment but supporting oil prices (Brent +1.60%).
Flash PMIs were mixed o/n with Asian data slightly underwhelming while European data slightly beat expectations. But none of the releases were too far from estimates so the data is not materially affecting markets this morning as investors remain focused on this week’s dovish shift in central bank policies and look ahead to the G20.
Today, there are two economic releases to watch: Flash Composite PMI (E: 50.9) and Existing Home Sales (E: 5.28M). It will be important for the former to remain soft to keep the “Fed Put” alive, but not so bad that the data stokes fears that the Fed is “too far behind the curve.”
Speaking of the Fed, Brainard and Mester speak on a panel together at 12:00 p.m. ET and Daly is scheduled to speak at 12:30 p.m. ET. Given the market’s significant dovish shift in policy expectations this week, investors will be watching closely for any further clues as to when the Fed plans to cut (July?) or by how much (25 or 50 bp?).
As of June 20, oil prices have settled a bit lower after an uptick following a larger-than-expected drawdown of U.S. crude stockpiles in early June. That drawdown “helped ease some of the supply side concerns in the energy market…but U.S. supply data is a secondary influence on the market…” according to Tyler Richey, co-editor at Sevens Report Research. Click here to read the full article.
What’s in Today’s Report:
Stock futures are rallying towards all-time highs and gold is up nearly 3% while the dollar and bond yields continued to decline overnight as global investors cheered the dovish Fed and rising prospects of a U.S.-China trade deal.
There were no notable economic, central bank, or trade war headlines since yesterday’s close.
Geopolitically, Iran claimed it shot down a U.S. spy drone overnight which triggered a fear bid in global oil prices. WTI is up nearly 3% on the news.
Looking into today’s session, there are two economic numbers due out ahead of the bell: Jobless Claims (E: 219K) and the Philadelphia Fed Survey (E: 11.0) but neither should materially move markets while no Fed officials are scheduled to speak.
Momentum is clearly higher for stocks right now and investor optimism surrounding this week’s dovish central bank developments and improving prospects for a U.S.-China trade deal very well may help drive the S&P to fresh all-time highs today.
“Today will likely be dominated by pre-Fed positioning and trading should be quiet, although there’s always the chance we get a U.S.—China trade…” writes Tom Essaye. Click here to read the full Barron’s article.
What’s in Today’s Report:
Futures are little changed following a quiet night as markets digest yesterday’s events (Draghi dovish, Trump’s positive U.S./China tweet) ahead of the Fed later today.
In contrast to the suddenly positive mood on the Street, economic data again was disappointing. German PPI missed expectations (1.9% yoy vs. (E) 2.2% yoy) as did British Industrial Trends (-15 vs. (E) -12), but neither number is moving markets.
Today is clearly all about the FOMC Decision at 2:00 p.m. ET. There’s virtually zero chance of a rate cut at this meeting, so the keys to watch will be 1) Whether the word “patient” is removed from the end of the second paragraph (signaling a looming rate cut) and do 2) The dots show no rate hikes in 2020 and 3) A cut in 2019.
If the answer to each of these is “yes” the meeting will be dovish and likely extend the rally. If the answer is “no” to all three it’ll be hawkish and stocks will get hit, and if we get a mixed bag, the reaction from markets shouldn’t be too drastic.
Sevens Report Quarterly Letter
Next week is the final week of the quarter, and we’ve already begun working on the Q2’19 Sevens Report Quarterly Letter.
The Q2 Quarterly Letter will be delivered to subscribers on July 1st.
Volatility returned and investors are now facing multiple risks including: 1) Trade uncertainty, 2) Worries about economic growth, 3) Geopolitical concerns and 4) Shifting Fed policy.
Investors I speak with want to hear from their advisor in this environment. That’s why we’re producing the letter on the 1st business day of the quarter, because we want you to be able to impress clients by sending them your quarterly letter before your competition (and with little-to-no work from you).
“You had a market that became very pessimistic and then all of a sudden we had the Fed’s dovish rhetoric and no…” says Tom Essaye. Click here to read the full MoneyWeek article.
