Updated Market Outlook Post Pullback

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What’s in Today’s Report:

  • Putting the Pullback In Context (We’ve Seen Something Similar Twice This Year)
  • Weekly Market Preview (All About Earnings and Data)
  • Weekly Economic Cheat Sheet (Market Needs a Confidence Boost)

Futures are moderately lower following a generally quiet weekend, as markets digest Friday’s bounce.

Nothing outright negative occurred over the weekend to cause the resumption of selling. But, there was no improvement in any macro headwinds either and as such markets are digesting Friday’s gains.

There were no notable economic reports overnight.

Today focus will turn towards economic data and we get two important reports: Retail Sales (E: 0.6%) and Oct. Empire Manufacturing Survey (E: 19.3).  Strong readings will give the market a needed boost of confidence as they’ll remind investors the economic remains strong.

On the earnings front, activity picks up starting tomorrow but there are two notable reports today:  BAC (E: $0.62), SCHW (E: $0.64).

Tyler Richey on Barrons, October 12, 2018

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Winter Is Coming and Natural Gas Supplies Are Already Short

Supplies in storage “have fallen out of the five-year maximum-minimum range as stockpiles did not build as fast as most analysts had expected this summer,” says Tyler Richey, co-editor of commodity research provider of Sevens Report. “The last time inventories tested the lower end of that five-year range was at the beginning of the year, when futures spiked to a more than one-year high.”

Read the full article from Barrons here

Tyler Richey’s take on Natural Gas Supplies on MarketWatch, October 12, 2018

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Natural-gas supplies may come up short this winter

Tyler Richey, co-editor of commodity research provider for Sevens Report on MarketWatch. His take on this topic, “Supplies in storage “have fallen out of the five-year maximum-minimum range as stockpiles did not build as fast as most analysts had expected this summer.”

Read the full article here.

Is This the Fed’s Fault?

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What’s in Today’s Report:

  • Selloff Update (Some Positive News Yesterday)
  • If This The Fed’s Fault?
  • Two Economic Canaries in the Coal Mine

Futures are rebounding as global markets bounce following solid economic data and confirmation of the Trump/Xi meeting at the G-20.

Economic data was solid overnight as Chinese exports beat estimates, rising 14.5% vs. (E) 8.2%, while Eurozone Industrial Production rose 1% vs. (E) 0.5%.  Both numbers are helping to improve sentiment.

Today we get bank earnings and JPM already released results and beat estimates, while we wait for WFC (E: $1.17) at 8:00 a.m.    Economically we get Consumer Sentiment (E: 99.5) and there are two Fed speakers, Evans (9:30 a.m. ET) and Bostic (12:30 p.m. ET) but none of that should move markets.

Instead, we can expect markets to continued to digest the recent pullback.  The tech sector showed some hints of stabilization yesterday but it’ll need to rally if we’re going to get a material bounce in stocks today.  Bigger picture, strong earnings from industrial and multi-nationals (which won’t be possible till next week at the earliest) remains the “fix” to this market pullback.

Tom Essaye on Bloomberg Radio – October 10, 2018

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Get Used to More Volatility

Tom Essaye, Founder of The Sevens Report, joined Bryan Curtis and David Ingles on Daybreak Asia, reacting to today’s U.S. equity sell off. To listen to the entire clip go here

 

Sell Off: Why It Happened and What’s Next

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What’s in Today’s Report:

  • Sell Off Takeaways: Why We Don’t View It as a Bearish Gamechanger (Yet).
  • Technical Update:  Key Support Levels to Watch
  • Why Didn’t Bond Rally Yesterday? (Important)

Futures are sharply lower as global markets dropped following the Wednesday rout in U.S. stocks.

Nothing new occurred overnight to cause the additional selling this morning and this is all momentum driven.

There was no notable economic data or geo-political news out overnight and the sell-off itself was the focus of most of the financial media.

Today the key event is the Core CPI report (E : 0.2% m/m, 2.3% y/y) out this morning.  This release is even more important than before because if it prints “hot” (core CPI above .4% m/m) that will add to the concern that the Fed is going to get more hawkish and that will add another source of pressure on stocks, which we obviously don’t need right now.  Conversely, if this number is inline of a little light, that could provide a catalyst for markets to try and stabilize.

Another Breaker Tripped

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What’s in Today’s Report:

  • Sevens Report Economic Breaker Panel – October Update: A Macro Breaker Flipped

US stock futures are slightly lower this morning as EU shares are declining on renewed concerns about Italy’s budget despite mostly good economic data overnight.

The Italian Parliamentary Budget Office raised doubts about the government’s growth forecast of 1.5% in 2019 which would ultimately mean a larger budget deficit than previously expected, and that has triggered risk-off money flows this morning.

Economically speaking however, Industrial Production data across Europe was generally better than expected and revisions were mostly positive. While that is currently being overshadowed by the Italian budget drama, it is a positive for the medium term outlook for EU markets.

Today, we get our first of two notable inflation figures this week: PPI (E: 0.2%) as well as Wholesale Trade (E: 0.8%) and there are two Fed speakers to watch: Evans over the lunch hour (12:15 p.m. ET) and Bostic after the close (6:00 p.m. ET).

Otherwise, focus will remain on bond yields and tech shares. For stocks to continue to stabilize or turn higher this week, we will need to see the former hold steady or even pullback slightly and the latter once again outperform.

Rotation to Value

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What’s in Today’s Report:

  • More Evidence of the Rotation to Value

US futures are lower again this morning and most overseas markets declined overnight thanks to a continued rise in bond yields and concerns about global economic growth.

The IMF reduced global growth expectations for 2018 from 3.9% to 3.7% citing the escalating trade tensions between the US and China as a potentially significant headwind.

The NFIB Small Business Optimism Index eased to 107.9 vs. (E) 108.0 last month, but remains near a record high.

With the NFIB already out, there are no additional economic reports in the US today but there are two Fed speakers to watch, one shortly after the open: Evans (10:00 a.m. ET) and one later this evening: Williams (9:15 p.m.ET).

That will leave investor focus on the pace of rising bond yields and tech weakness. And unless we see some moderation in the bond rout and some stabilization in tech, it will be hard for stocks to move meaningfully higher today.

Start of a Pullback? Two Factors to Watch

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What’s in Today’s Report:

  • Start of a Pullback?  Two Factors to Watch
  • Weekly Market Preview (All About CPI and Earnings)
  • Weekly Economic Cheat Sheet

Futures and most global markets are moderately lower thanks to further deterioration in U.S./China relations.

Secretary of State Pompeo met with his Chinese counterpart and the tone of the meeting was less than friendly, reminding markets of deteriorating U.S./China relations.

Chinese econ data was solid as the Caixin Service PMI rose to 53.1 vs. (E) 51.5.  But, Chinese officials cut bank reserve requirements again, a sign the economy is still struggling.

Today the calendar is quiet due to the Columbus Day holiday, and as such there are no economic reports today or Fed speakers, and the bond market is closed.  That said, we could still see volatility and once again tech is a leading indicator for the market.  If tech breaks last week’s lows (7,715) look for selling to accelerate.

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Higher Rate Playbook

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What’s in Today’s Report:

  • Higher Rate Playbook Revisited
  • Was Yesterday a Reversal?

Futures are flat following a generally quiet night as markets look ahead to this morning’s jobs report.

Economic data and earnings overnight were solid as Samsung posted good numbers while German Manufacturers’ Orders handily beat expectations (2.0% vs. (E) 0.2%).

There was no notable trade news or European political news (Italy) out overnight.

Today the focus will be on the jobs report, and expectations are – Jobs: 180k, Unemployment: 3.8%, Wages: 0.3% m/m, 2.9% y/y.

The key is the wage number, and if it prints a 3.0% yoy gain, look for Treasuries and the dollar to rally.  A rally in the dollar to the mid 96 level and the 10 year yield moving into the mid to high 3.20% range will likely pressure stocks again.

Outside of the jobs report, there are two Fed speakers, Kaplan (12:30 p.m. ET) and Bostic (12:30 p.m. ET) but neither should move markets.

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