What More Tariffs Mean for Markets (Lower Market Multiple)

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What’s in Today’s Report:

  • What the Tariff Threat Means for Markets (Lower Market Multiple)
  • Jobs Report Preview

Futures are modestly lower following a steep global sell-off as markets digest Thursday’s tariff threat and the “less dovish than hoped for” Fed, ahead of the jobs report.

Chinese authorities threated retaliation should the tariffs go into effect on September 1st, further escalating trade tensions, although no specifics were given.

Economically, Euro Zone retail sales beat estimates, although revisions were negative so it wasn’t a strong beat.

Today the big event is the Employment Situation Report, and expectations are as follows:  Jobs: 156K, UE Rate: 3.6%, Wages: 0.2%).  The last thing this market needs at this point is a “Too Hot” number that reduces expected Fed rate cuts, or a “Too Cold” number that increases worries about economic growth.  So, from a stock standpoint, the best case in a jobs number between 150k-200k (the higher the better) with tame wage growth and stable unemployment.  If we get that “Goldilocks” number it’ll help markets stabilize.

Sevens Report Quoted in MarketWatch on July 31, 2019

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The seven-week stretch of falling crude supplies is the longest since the 10-week decline from the week ended Nov. 17, 2017 to Jan. 19, 2018, according to an analysis of EIA data provided Sevens Report Research. Click here to read the full MarketWatch article.

Man in an Oil rig

Short and Long Term Implications of the Fed Meeting

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What’s in Today’s Report:

  • Short and Long Term Implications of the Fed’s “Hawkish” Decision
  • The sector winners (and the biggest loser) after the Fed decision
  • Oil/Energy market update

Futures are bouncing marginally as markets digest the Fed’s “hawkish cut” rate decision.

Economic data overnight was not as bad as feared, although it wasn’t good, either.  EU (46.5 vs. (E) 46.4), British (48.0 vs. (E) 47.7) and Chinese (49.9 vs. (E) 49.5) July manufacturing PMIs all beat estimates, although they also remain below 50, signaling contraction.

Today we have an important economic report, ISM Manufacturing Index (E: 51.9) and we also get weekly Jobless Claims (E: 213K), and those numbers (especially the former) could move markets.  But, beyond the data, and following the Fed’s “hawkish” decision, the keys to focus on will be the U.S. Dollar and the Treasury yield curve.  If the dollar continues to grind higher and the yield curve flattens, that will be another headwind on stocks.  Yesterday’s lows in the S&P 500 at 2959 are an important support level to watch if this market rolls over mid-day.

Reading the Rate Cut

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What’s in Today’s Report:

  • How the Bond Market Will Tell Us Whether the Fed Rate Cut is Preventative or “Too Late”
  • Key Levels to Watch in Gold Today

Futures are tentatively higher ahead of the Fed this morning as AAPL earnings beat (shares up 4%+), economic data was mixed, and there were no real trade war updates o/n.

Economically, China’s CFLP Manufacturing PMI was slightly better than feared at 49.7 but importantly still below 50 pointing to contraction while EU data remained “Goldilocks” with in-line growth metrics but soft inflation readings.

Today, investors will clearly be keenly focused on the Fed but there are some other catalysts to watch. On the earnings front, GE ($0.12) reports before the bell while QCOM ($0.75) results will be released after the close.

Economically, the first look at July jobs data will hit this morning with the ADP Employment Report (E: 155K) and then Q2 Employment Cost Index (E: 0.7%) will be released shortly after.

Turning to the Fed, the FOMC Announcement will print at 2:00 p.m. ET, (E: -25 bp cut to 2.00-2.25%) and Powell’s Press Conference follows at 2:30 p.m. ET. The market has high expectations for the Fed today and even a mildly hawkish disappointment could trigger significant volatility as valuations remain as stretched as they have been in years.

Fed Preview: What to Expect

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What’s in Today’s Report:

  • FOMC Preview

Asian markets rallied modestly overnight after the BOJ met expectations while Brexit angst continues to weigh on EU stocks and U.S. futures as investor focus turns to the Fed.

Economic data did not move markets overnight and trade talks between the U.S. and China don’t begin until later today so there were no material developments on the trade war front.

The FOMC Meeting, which is clearly the biggest event of the week, begins this morning and that will likely lead to a sense of “Fed paralysis” in the markets before tomorrow’s announcement and Powell’s press conference however there are still a few important catalysts to watch today.

Economically, the Fed’s preferred measure of inflation: Core PCE Price Index (E: 0.2%) within the Personal Incomes and Outlays report will be the most important report to watch (it is due out before the bell), but there are a few other releases to watch as well: S&P Case-Shiller HPI (E: 0.2%), Consumer Confidence (E: 125.0), and Pending Home Sales (E: 0.3%).

On the earnings front, we will get second quarter results from: MA ($1.82), PG ($1.06), MO ($ 1.10) before the open, and AAPL ($2.10), AMD ($0.08), ALL ($1.48), CHRW ($1.21) after the bell this afternoon.

The Most Important Week of the Year

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What’s in Today’s Report:

  • Fed Week – Why This is the Most Important Fed Decision of the Year
  • Weekly Market Preview – Will the Fed Meet Incredibly Dovish Expectations?
  • Weekly Economic Cheat Sheet – One of the Busiest Weeks of the Year (Jobs Report, Inflation Data, Global PMIs)

Futures are little changed following a quiet weekend as all eyes now turn to the Fed decision on Wednesday.

Former Fed Chair Yellen endorsed a rate cut over the weekend, but did not advocate for sustained easing.   And, this gets right to the heart of this market.  We know the Fed will cut 25 bps this week, but we don’t know if they’ll signal the start of a sustained easing campaign (i.e. 75-100 bps of cuts by year-end) and that’s something the market has already aggressively priced in at these levels.

Economic data was sparse over the weekend although Japanese Retail Sales (0.3% vs. (E) 0.1%) beat estimates.

There was no notable U.S.-China trade news over the weekend and expectations are low for any actual progress at the talks this week.

Today there are no notable economic reports nor any important central bank speak, so focus will remain on earnings (this is the last important week of earnings) and on any U.S.-China trade headlines (although none are expected).

What the ECB Decision Means for Markets (Slightly Disappointing)

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What’s in Today’s Report:

  • What the Slightly Disappointing ECB Decision Means for Markets

Futures are modestly higher thanks to better than expected earnings.

Earnings after Thursday’s close were solid as GOOGL, INTC and SBUX all beat estimates and rallied after hours.  The results are offsetting Wednesday’s underwhelming results.

There were no notable economic reports overnight and no new U.S./China trade news, so markets are continuing to digest a slightly disappointing ECB meeting and focus has now turned to the Fed meting this coming Wednesday.

Today there is only one economic report, Initial Q2 GDP (E: 1.9%), which might have more of an impact on markets than usual given Wednesday’s Fed meeting, especially if it’s a big surprise in either direction (very strong or very weak).  If it’s a strong number, that will weaken the case for sustained Fed easing (which the market has priced in) and if it’s a weak number, it’ll strengthen the case for sustained Fed easing (so stocks will likely rally on a “bad is good” reaction).

Tyler Richey Quoted in MarketWatch on July 24, 2019

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The six-week stretch of falling crude supplies is the longest since the 10-week decline from the week ended Nov. 17, 2017 to Jan. 19, 2018, according to an analysis of EIA data provided by Tyler Richey, co-editor at Sevens Report Research. Click here to read the full article.

Oil Tanks

Tom Essaye Quoted in The Bulletin on July 22, 2019

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Investors look ahead to earnings

“We will start to get results from some of the big multi-national industrials and tech firms, which should shed more light on the effects of the trade war…” Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter, wrote in a note to clients. Click here to read the full article.

Road

What Falling RV Sales Mean for the Economy

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What’s in Today’s Report:

  • What Falling RV Sales Mean for the Economy (Not Necessarily What You Think)
  • Oil/Energy Market Update

Futures are flat following a busy night of earnings as investors look ahead to the ECB decision later this morning.

Economic data again disappointed as the German IFO Business Expectations missed estimates (92.2 vs. (E) 94.0).

There was an earnings deluge overnight and results, on balance, were slightly negative although the Q2 earnings season remains better than feared.

Today the most important event is the ECB Decision and we get the announcement at 7:45 a.m. and the press conference at 8:30 a.m.  The key for this meeting is how definitive the ECB will be on more rate cuts and QE.

If they cut rates and announce the start of a new QE plan, that’ll be a dovish surprise (good for stocks), if they effectively promise a rate cut and more QE at the September meeting, that will meet expectations (not a big market reaction) and if they merely state both moves are possibilities if growth slows further, that will be a hawkish disappointment (stocks likely will fall).

Outside of the ECB we get two notable economic reports via Durable Goods Orders (E: 0.7%) and Jobless Claims (E: 210K).