Why Stocks Have Rallied

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What’s in Today’s Report:

  • Why Stocks Have Rallied (FOMO)
  • An Important Gap Between Stocks and Bonds
  • EIA Analysis and Oil Market Update

Futures are slightly lower following a quiet night as markets digest more mixed economic data following the big three day rally.

Chinese economic data was mixed as Industrial Production missed estimates (5.3% vs. (E) 5.5%) while Fixed Asset Investment slightly beat and Retail Sales met expectations.

Geo-politically it was a quiet night as there were no updates to U.S./China trade.

Today focus will be on economic data via the Jobless Claims (E: 225K), Import Export Prices (E: 0.3%, 0.2%) and New Home Sales (E: 620K), as well as testimony before Congress by Treasury Secretary Mnuchin.  Finally, there’s a GE guidance update later this morning, and if that’s particularly soft, that could hit stocks.

Tom Essaye Appeared on WPTV on March 12, 2019

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“If you think about it from a total cost stand point, eliminating the subsidized loans will hurt borrowers in so much as it will cost them more over the time of the loan,” said Tom Essaye, President of Sevens Report Research. Click here to watch the full interview.

Economic Breaker Panel: March Update

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What’s in Today’s Report:

  • What’s Next for Brexit
  • Economic Breaker Panel – March Update
  • Another (Potentially Bearish) Copper Development

Stock futures are marginally higher this morning after a very quiet night of news while no major international market moved more than 1% overnight.

Asian shares declined modestly after a report that Japanese Machine Orders fell –5.4% in January vs. (E) -1.9%.

In Europe, EU Industrial Production beat expectations (1.4% vs. E: 1.0%) while focus remains on today’s “hard Brexit” vote in the U.K. (which is very unlikely to pass).

Looking into today’s U.S. session, focus will be on economic data early with two reports due ahead of the bell: Durable Goods Orders (E: -0.8%), PPI (E: 0.2%), and one shortly after the open: Construction Spending (E: 0.3%).

There are no Fed officials speaking today so investor focus will shift to the “hard Brexit” vote but it is very unlikely to pass which will result in another vote to delay the Brexit date tomorrow. This scenario is priced in however and should not materially move markets.

Leading Indicators

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What’s in Today’s Report:

  • Some Leading Indicators of the 2018 Correction Are Teetering Again

U.S. futures are up small while Asian markets were notably higher overnight as the indexes continued to play “catch up” to the big gains in the US since mid-day Friday while EU markets are flat as investors eye today’s Brexit vote.

News that the EU made some last minute concessions to the Brexit agreement ahead of today’s vote in Parliament was seen as a positive o/n but a deal still remains unlikely.

The NFIB Small Business Optimism Index was 101.7 vs. (E) 102.5 in February but encouragingly some of the forward looking details did improve.

The two primary catalysts in the U.S. today both hit before the open with CPI (E: 0.2%) at 8:30 a.m. ET and then the Fed’s Brainard speaks at 8:45 a.m. ET. Focus will then return to today’s Brexit vote and while a “deal” is not likely, it will be the lack of a delay to the deadline that would hit the pound and risk assets globally.

Seven Ifs Updated

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What’s in Today’s Report:

  • Seven “Ifs” That Will Move This Market Updated (Not Much Progress)
  • Weekly Market Preview (All About China)
  • Weekly Economic Cheat Sheet (Important Numbers This Week, Starting Today)

Futures are slightly higher following a generally busy weekend of economic, geo-political and Fed related news.

Economic data was mixed as CN New Yuan Loans slightly missed estimates (885 bln vs. (E) 950bln), as did German IP (-0.8% vs. (E) 0.5%) while German exports beat estimates.

On trade, the Trump/Xi summit appears to have been delayed till April, although a trade deal is still expected so this delay isn’t a negative for markets, yet.

Fed Chair Powell was on 60 Minutes Sunday night but didn’t say anything new so it’s having no impact on markets.

Today markets will be focused on the Retail Sales (E: 0.0%) report, in part because Powell specifically cited it as something he’d be watching in the 60 Minutes interview.  The key to this number, as always, is the “Control” group which is retail sales less gas, autos and building materials, and the market estimate is 0.7%.  A beat of that estimate will provide a boost of confidence for the economy, while a miss will exacerbate fears of a potential slowdown.

Why The Dovish ECB Isn’t Good For Stocks

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What’s in Today’s Report:

  • Why The Dovish ECB Decision Isn’t Good for Stocks

Futures are modestly lower following more disappointing economic data.

Chinese exports badly missed expectations at –20.7% vs. (E) -6.5%, although that number was likely skewed by the Lunar New Year, so it’s not as bad as it looks.  German Manufacturers’ Orders also missed (-2.6% vs. (E) 0.5%).  So, the data overnight is just adding to the growth worries that came from the ECB projections yesterday and that’s why stocks are down again.

Today the key will be the Employment Situation Report.  Estimates are:  Jobs: 178K, UE: 3.9%, Wages: 3.4% yoy), and thankfully the range for a “Just Right” number is wide, as we said in our Jobs Report Preview.  But, given the recent soft global economic data, while the range for a “Just Right” number is wide, the penalty for a number being “Too Cold” and causing growth concerns or “Too Hot” and resulting in a hawkish Fed will be extreme, and if either one of those outcomes occur, it’ll likely be a painful day in stocks.

Outside of the jobs report we also get Housing Starts (E: 1.17M) and two Fed Speakers:  Daly (10:00 a.m. ET) and Powell (10:00 p.m. ET).

Tom Essaye Quoted in Barron’s on March 6, 2019

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Chinese authorities have aggressively flooded the economy with cash since the start of the year. At this week’s National People’s Congress, the government also announced tax…Click here to to read the entire article.

Tom Essaye Quoted in Bloomberg on March 6, 2019

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“The outlook for China has been steadily improving for the past two months, and this MSCI announcement is another tailwind. Clearly this isn’t a risk-free trade and a lot can still…”

Click here to read the article.

Tyler Richey of Sevens Report was Quoted in The Wall Street Journal on March 3, 2019

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Tyler Richey, co-editor at Sevens Report in Palm Beach Gardens, Fla., said President Trump’s Twitter post last week saying oil prices were “getting too high,” and telling OPEC not to reduce production too much, will continue to work as a bearish counterweight to OPEC. “Trump’s tweet targeting OPEC+ policies from last week is still simmering…” Click here to read the full article.

 

 

 

ECB Preview (Why It’s Important For U.S. Stocks)

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What’s in Today’s Report:

  • ECB Preview (This is more important to U.S. stocks than it seems)
  • Jobs Report Preview

Futures are drifting slightly lower following a quiet night as markets await the ECB decision later this morning.

Economic data generally met expectations overnight as Euro Zone Q4 GDP was 1.1% vs. (E) 1.2% while Chinese FX reserves were in line at $3.09T.

Today the key event will be the ECB Decision at 7:45 a.m. ET and then the ECB Press Conference at 8:30 a.m. ET.  For this to meet dovish expectations (and not be a disappointment for stocks) we’ll need to see 1) An extension of the promise not to raise rates until 2020 and 2) A strong hint more TLTROs are coming.  This decision will have direct impacts on Treasuries and stocks (more inside the report).

Away from the ECB we also get Jobless Claims (E: 223K) and Q4 Productivity and Costs (E: 1.6%, 1.8%) plus there’s one Fed speaker:  Brainard (12:15 p.m. ET).