“The two most beat-up sectors in the August pullback (energy and financials) both rebounded hard yesterday and…” wrote Tom Essay, president of the Sevens Report, in a Tuesday note. Click here to read the full article.
Tom Essaye of Sevens Report Research discusses the importance of rebuilding the Bahamas for multiple reasons. Click here to watch the full video.
What’s in Today’s Report:
Stock futures are flat while most international markets rallied overnight thanks to incremental progress on trade amid a continuation of the recent rotation into cyclicals.
There were no notable economic reports overnight.
China announced tariff exemptions for multiple U.S. imports o/n which is an incremental positive as both sides have made modest concessions in recent weeks.
The rotation from momentum to cyclicals is continuing overseas, a theme that will remain in focus today. Remember that because of the heavy weighting of big tech stocks in the major indexes, this rotation could remain a headwind on the broader stock market in the near term.
Today, there is one economic report to watch: PPI (E: 0.1%) and no Fed officials are scheduled to speak.
There is a 10-Yr Treasury Note Auction at 1:00 p.m. ET and depending on the reaction from the bond market, there could be an impact on stocks however investor focus has largely shifted forward to the ECB tomorrow which will likely keep stocks largely paralyzed for the next 24 hours.
What’s in Today’s Report:
U.S. stock futures are suffering mild losses this morning as investors digest yesterday’s more pronounced sector-rotation money flows amid mixed economic data with focus turning to central bank events over the next week.
Chinese CPI and PPI were slightly firmer than expected in August, while French and Italian Industrial Production figures were underwhelming.
In the U.S., the NFIB Small Business Optimism Index was a mild disappointment at 103.1 vs. (E) 103.5 mostly due to declining growth expectations.
The mixed economic data, however, was not enough to materially affect investor sentiment and therefore is only having a modest impact on price action this morning.
Today, there is just one economic report to watch: July JOLTS (E: 7.311M) and there are no Fed officials speaking as they are in their “blackout period” ahead of next week’s FOMC meeting.
That will leave investors focused on the recently emerging “rotation trade,” and due to the heavyweight that tech stocks carry in the major indexes, if big tech names remain under pressure today, that will likely be a drag on the broader market.
What’s in Today’s Report:
Futures are marginally higher following a generally quiet weekend as markets continue to digest some (very) mild progress on U.S./China trade.
Economic data was mixed as Chinese exports missed expectations (-1.0% vs. (E) 2.5%) while German exports (0.7% vs. (E) -0.5%) and British Industrial Production (0.3% vs. (E) 0.1%) both beat expectations.
But, the reports aren’t moving markets as focus is on central banks this week (specifically the ECB on Thursday).
Today there are no notable economic reports nor are there any Fed speakers (they are entering the “blackout” period ahead of next Wednesday’s meeting) so we’ll be watching for any trade related headlines, and any continued improvement in the “tone” of relations will continue to support stocks.
What’s in Today’s Report:
Futures are marginally higher mostly on momentum from yesterday’s rally, although a small reserve rate cut in China is also helping global stocks rally.
Economic data continued to underwhelm, as Japanese Household Spending (0.8% vs. (E) 1.0%) and German Industrial Production (-0.6% vs. (E) 0.4%) both missed estimates.
Today focus will be on two key events, the Jobs Report (E: Jobs: 160K, Unemployment: 3.7%, Wages: 0.3%) and a speech by Fed Chair Powell (12:30 p.m. ET). Short term momentum in the markets is clearly higher right now, so to extend this week’s rally, both events just need to be “Goldilocks” in so much as the job number hits our “Just Right” range, while Powell simply leaves the door open to more accommodation in September, and beyond.
What’s in Today’s Report:
Futures are sharply higher after the U.S. and China confirmed trade talks will occur in early October (better late than never from a market standpoint).
The talks will be high level, with the three key principles (Liu He, Lighthizer and Mnuchin) all attending.
Economically, the only notable number was German Manufacturers’ Orders, which badly missed expectations, falling –2.7% vs. (E) -1.5%. But that soft report was ignored on the kneejerk optimism of more U.S./China trade talks.
Focus today will turn back towards data now that we have a confirmation of future U.S./China trade talks, and the key reports today are (in order of importance): ISM Non-Manufacturing Index (E: 54.0), ADP Employment Report (E: 150K) and Jobless Claims (E: 215K).
As has been the case since the Fed’s “hawkish cut,” good economic data will be positive for stocks, although at these levels the S&P 500 is trading well above the recent trading range, despite a lack of any actual progress in fundamentals.
“Going forward, stabilization in the U.S./China trade war is now the most important key to broader market stabilization,” said Tom Essaye, founder of The Sevens Report, in a note. Click here to read the full article.
What’s in Today’s Report:
Stock futures are solidly higher this morning after Hong Kong’s Carrie Lam announced the withdraw of the extradition bill that was the major catalyst for the recent protests. The news sparked a near 4% rally in the Hang Seng Index.
Composite PMI data for August was also better than expected with the Chinese figure rising to 51.6 from 50.9 while the EU headline firmed to 53.5 from 53.2 in July helping ease concerns about the health of the global economy.
Looking into today’ session, there are two economic data points to watch: Motor Vehicle Sales (E: 16.8M) and International Trade (E: -$53.5B) however investors will be primarily focused on the very busy schedule of Fed speakers: Williams (9:30 a.m. ET), Kaplan (10:00 a.m. ET), Bowman and Bullard (12:30 p.m. ET), Kashkari (1:00 p.m. ET), and Evans (3:15 p.m. ET).
Investors will be looking for any further insight into how accommodative the Fed will be in the coming months, specifically how likely a 50 bp cut at this month’s meeting is (current expectations are low, so a dovish surprise would be well received by stocks).
Beyond the Fed speak, the trade war is still the major influence on the broader markets right now and investors continue to wait for updates on the next round of trade talks that are supposed to take place in the coming days.
“The trade war remains the market’s main focus and with new tariffs going into effect over the [past] weekend, investor sentiment towards U.S.-China relations are continuing to deteriorate…” Tyler Richey, co-editor at Sevens Report Research, told MarketWatch. Click here to read the full article.
