Tom Essaye Quoted in Barron’s on April 2, 2019
“Futures are flat and international shares were mildly higher overnight as yesterday’s sizeable rally in the U.S. was…” Click here to read the full article.
Bigger Picture on Economic Data
What’s in Today’s Report:
- Bigger Picture on Economic Data
Futures are solidly higher this morning, tracking gains in international markets led by Chinese shares thanks to strong economic data and more progress on trade.
Several news outlets reported overnight that up to 90% of a trade deal is done as China’s vice premier Liu He travels to D.C. to continue mid-high level trade talks today.
Economically, the Caixin Chinese Service PMI beat expectations jumping to 54.4 in March, a 14 month high, while the EU Service PMI rose to 53.3 vs. (E) 52.7. Both releases helped ease concerns about recently underwhelming economic data.
Looking into today’s session, there are a few catalysts to watch for. First, the ADP Employment Report (E: 165K) will be releases ahead of the open, kicking off “jobs week” in the U.S. and then the ISM Non-Manufacturing Index (E: 58.0) will hit shortly after the bell. Investors will look for both of these numbers to track the encouraging releases overseas last night.
Additionally, there is one Fed speaker before the open: Bostic (8:30 a.m. ET) and Kashkari will speak after the close (5:00 p.m. ET). Lastly, with U.S.-China trade optimism driving a good portion of the pre-market gains, any news out of Washington will have the potential to materially move markets today.
Economic Data Takeaways
What’s in Today’s Report:
- Bottom Line – “Pump the Breaks”
- Retail Sales and ISM Manufacturing Takeaways
Futures are flat and international shares were mildly higher overnight as yesterday’s sizeable rally in the U.S. was digested amid a slight pullback in bond yields.
The Reserve Bank of Australia was the latest central bank to note downside risks in the global economy overnight.
Economically, Eurozone PPI was a mild miss: 0.1% vs. (E) 0.2% in February but inflation has been subdued and the report does not change the outlook for ECB policy.
Today, Motor Vehicle Sales (E: 16.8M) will begin to come in over the course of the morning while there is one notable economic report ahead of the open: Durable Goods Orders (E: -1.8%). There are no Fed speakers today.
With a lack of material catalysts between now and Friday’s jobs report, macro focus will be on U.S. – China trade negotiations and the bond market. If Treasury yields revisit last week’s lows, stocks will have a hard time holding the strong gains of the last few sessions, so watch bonds closely.
Tom Essaye Quoted in CNBC on March 29, 2019
“Looking forward, there’s been material progress in alleviating the earnings growth and Fed worries that caused the Q4 2018 correction. But it would be a…” Click here to read the full article.
Updated Equity Market Outlook
What’s in Today’s Report:
- Updated Equity Outlook: A Resilient Market vs. Two Building Headwinds
- Weekly Market Preview (All About Data)
- Weekly Economic Cheat Sheet
Futures are sharply higher following better than expected global PMIs as hope for a global economic rebound stays alive.
China’s “official” Manufacturing PMI rose to 50.5 vs. (E) 49.8 in March, Japan’s Manufacturing PMI rose to 49.2 vs. (E) 48.9, and the UK’s Manufacturing PMI surged to 55.1 vs. (E) 51.2.
The only disappointment in Europe, where the EU Manufacturing PMI slipped to 47.5 vs. (E) 47.6, and inflation also underwhelmed.
Today focus will remain on economic data and the key report today is the ISM Manufacturing Index (E: 54.2). If that number can beat expectations, it will further reinforce the idea of a growth rebound and bonds yields should rise, the dollar should fall, and this morning’s rally should be extended, although I think it’s hard to imagine the S&P 500 moving more than a percent or two ahead from here of earnings season (more on that in the issue). Other reports today include Retail Sales (E: 0.3%) and Construction Spending (E: -0.2%).
Finally, a “head’s up” that today is April Fool’s Day, just in case anyone (in my case most likely my children) tells you something preposterous!
Are Cyclical Sectors Set To Rebound?
What’s in Today’s Report:
- Are Cyclical Sectors Set To Rebound? (They Did Yesterday)
It’s green across the screen this morning but the gains are modest as more positive commentary on U.S./China trade and decent economic data are supporting markets.
On trade, Treasury Secretary Mnuchin said talks have been “productive” but gave no further details.
Economically, German Retail Sales beat estimates rising 0.9% vs. (E) -1.0%, making it two days in a row of better than expected EU data.
In normal times, today the key data point would be the Core PCE Price Index (E: 0.2% m/m, 1.9% y/y) as that’s the Fed’s preferred measure of inflation. And, if it ran hot or cold, it would have an impact on perceived Fed policy. In today’s market, however, it’s take a massive (and almost impossible) move in that price index to change expected Fed policy, so this number likely won’t move markets. Other notable events today include New Home Sales (E: 615k) and one Fed Speaker: Kaplan (10:30 a.m.).
Bottom line, this market remains driven by Treasury yields. They are over extended to the downside and rose slightly yesterday and that helped stocks – and if we see a further rise in yields today ahead of the Chinese PMIs on Sunday, that could boost markets into the weekend.
Tom Essaye Quoted in ETF Daily News on March 27, 2019
“We need global growth to stabilize to help propel stocks higher from here. The currency and bond markets continue to flash large and…” Tom Essaye, founder of The Sevens Report, said in a note. Click here to read the full article.
Another Bad Signal From the Bond Market
What’s in Today’s Report:
- Why Another Bond Auction Caused Yesterday’s Decline
- The Next Catalyst for Markets (Coming This Sunday)
Futures are slightly higher following a positive U.S/China trade article and better than expected EU economic data.
EU Money Supply (M3) rose 4.1% vs. (E) 3.9%, delivering the first upside economic surprise in Europe in some time. And, while M3 isn’t exactly a widely followed report, at this point we’ll take what good data we can get from Europe.
On trade, a Reuters article stated Chinese officials have made new concessions on IP rights and tech transfers which represents an incrementally positive step, although other issues still need to be resolved before there is a an official deal.
Today there are some notable economic reports including Final Q4 ‘18 GDP (E: 2.2%), Jobless Claims (E: 225K), and Pending Home Sales (E: -1.0%) but none of them should move markets unless there are major surprises. Similarly, there are numerous Fed speakers, Quarles (7:15 a.m. ET), Clarida (9:30 a.m. ET), Bowman (10:00 a.m. ET), Bostic (11:30 a.m. ET) and Bullard (6:20 p.m. ET), but again they shouldn’t move markets, either.
So, we’ll be watching bond yields as the key to whether stocks can resume the rally. If bond yields (Treasury yields and Bund yields) can move higher today, then likely so can stocks
Tom Essaye Quoted in CNBC on March 27, 2019
“We need global growth to stabilize to help propel stocks higher from here. The currency and bond markets continue to flash large and…” Click here to read the full article.
New Earnings Risks
What’s in Today’s Report:
- Why the Stronger Dollar and Commodity Prices Matter to Stocks
- Housing Market Data Update
- More Evidence a Rate Cut Might Be Coming
S&P futures have turned negative in pre-market trading as bond yields continue to bleed lower with the benchmark 10-yr yield hitting fresh lows in the mid-2.30% range overnight.
Economically, Chinese Industrial Profits were down -14.0% YTD, falling from -1.9% in December.
The Reserve Bank of New Zealand was the latest central bank to turn decidedly dovish overnight citing concerns about the global economy while Brexit angst also persists amid new votes in Parliament today.
The list of catalysts in the Wall Street session is a short one today with only one economic report due out: International Trade (E: -$57.4B) and just one Fed speaker later in the evening: George (7:00 p.m. ET).
That will again leave the market primarily focused on the bond market and to a lesser degree the dollar. Recession fears are front and center right now with Fed funds futures pricing in more than 80% odds of a rate cut in the next 10 months as of this writing.
Bottom line, without a rebound in yields and at least a steady dollar (a pullback would be more favorable) then it will be very difficult for stocks to mount any sort of rally today.