Is the “Fed Put” Back?

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What’s in Today’s Report:

  • Is the “Fed Put” Back?

Futures are higher as Tuesday’s “squeezy” rally carried over into international markets overnight thanks to the dovish Fed rhetoric over the last 24 hours and a handful of incremental positive macro developments.

Mnuchin will meet with Chinese officials this weekend and there is growing support by Republican Senators to block Mexican tariffs, both of which are trade war positives.

Economic data overnight was mixed but “goldilocks” as EU composite PMIs were largely better than feared, Eurozone Retail Sales were in line with expectations, while inflation statistics came in light.

Today, focus will be on economic data early with the ADP Employment Report (E: 175K) due out ahead of the bell while the ISM Non-Manufacturing Index (E: 55.8) will print shortly after the open.

There is also one Fed speaker: Bostic (9:45 a.m. ET) and if the general tone remains dovish, this week’s short-squeeze in stocks can continue with the S&P approaching the 2850 area.

However, because the macro backdrop has not materially improved so far this week (again the developments have just been “less bad”), it is unlikely at this point that the move is the beginning of a sustainable, longer term rally.

Tom Essaye Quoted in Newsmax on June 4, 2019

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“The market was blindsided by this — this is not good for the markets,” Tom Essaye, president of Sevens Report Research, told Yahoo Finance. This was shared on Newsmax.com

Read the full article here.

Tom Essaye Quoted in Yahoo Finance on Jun 3, 2019

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“The market was blindsided by this — this is not good for the markets,” Tom Essaye, president of Sevens Report Research, said on Yahoo Finance’s The First Trade.

Click here to read the full article.

Tom Essaye Headshot

Tom Essaye Quoted in ETF Trends on Jun 3, 2019

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Tom Essaye quoted in ETF Trends. “There can be no clearer message than that to the Fed: Rates are too high. This is the bond market’s equivalent of a bullhorn screaming it in Powell’s face.” Click here to read the full article.

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Good, Bad, & Ugly Market Scenarios

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What’s in Today’s Report:

  • Good/Bad/Ugly Scenarios: Likely Market Reactions (Print this Table)

Stock futures are bouncing modestly as investor sentiment improved o/n amid reported progress on one front of the trade war while the markets await Fed comments today.

There were two positive headlines on U.S.-Mexico trade overnight.

First, Republicans in Congress are working to block Trump’s tariff plans and second, the Mexican government has already stepped up border security, showing cooperation on the main demands from the White House.

Meanwhile the RBA cut rates as expected, but the move is adding to the dovish tailwind that has helped markets stabilize so far this week.

Today, there are a few data points to watch: Motor Vehicle Sales (E: 16.9M) and Factory Orders (E: -0.8%), but the markets main focus will be on the Fed as there are several speakers: Williams (8:30 a.m. ET), Powell (9:55 a.m. ET), Brainard (3:45 p.m. ET).

Powell will clearly be the most closely watched, however any further hints at a potential rate cut in the near term will be received positively by the market. Conversely if Bullard’s dovish comments from yesterday are contradicted, stocks could easily turn back negative on the week.

The Four Problems Facing Stocks (Print This List)

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Today’s Report is attached as a PDF.

What’s in Today’s Report:

  • Market Strategy Update:  The Four Problems Facing Stocks And Positive/Negative Outcomes for Each (I’m printing this list).
  • Weekly Market Preview (It’s Going to Be a Busy Week)
  • Weekly Economic Cheat Sheet

Futures are marginally lower following a busy weekend of news, but one that provided no significant surprises.

Global May manufacturing PMIs were mixed but a bit better than feared.  Chinese Manufacturing PMI was 50.2 vs. (E) 50.0, while the EU PMI met estimates at 47.7.  The British PMI was the disappointment at 49.4 vs. (E) 52.0.

On trade, a Mexican delegation is headed to Washington on Wednesday and there were some relatively positive comments from China, but neither situation has improved.

Today the key event will be the May ISM Manufacturing PMI (E: 52.9).  If that number meets expectations, that will alleviate some growth concerns, while a miss will only worsen the growing worries that the economy is rolling over.  From a Fed standpoint, there are two speakers today (Bullard 1:25 p.m. ET, Daly 9:45 p.m. ET) but neither should move markets as they aren’t part of Fed leadership.

Tom Essaye Quoted in CNBC on May 30, 2019

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Tom Essaye quoted in CNBC on May 30, 2019. The “worst case scenario is foreign governments (China/Mexico) simply wait Trump out given we’re 19 months from an election…” click here to read the full article.

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Tom Essaye Quoted in Barron’s on May 31, 2019

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Tom Essaye Quoted in Barron’s on May 31, 2019.

Investors have to consider what  Tom Essaye calls the “worst case scenario.” In this case, the governments of Mexico and China decide to wait until the next election…click here to read the full article.

Tom Essaye Interviewed with Yahoo Finance on May 31, 2019

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Tom Essaye Interviewed with Yahoo Finance on May 31, 2019. A lot of important topics to talk about lately. Watch the full video here.

Tom Essaye Quoted in Axios on May 30, 2019

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Tom Essaye quoted in Axios on May 30, 2019. “The 2019 rally has been driven by 1) A dovish pivot by the Fed (no more hikes), 2) An expected U.S.-China trade deal, 3) Stable U.S. and global economic growth and…” Click here to read the full article.