This [supply constraints] will be a more substantial risk to the rally we’ll need to watch for…wrote Tom Essaye, founder of Sevens Report Research. Click here to read the full article.
I think in a market that’s stretched, that doesn’t have a lot of backing at these fundamental levels, if you get some sort of serious scare, it could take 5% to 10% out of the S&P 500 pretty quick…Essaye said. Click here to read the full article.
What’s in Today’s Report:
Futures are modestly lower as markets digest Wednesday’s rally following a quiet night of news.
Economically, the only notable report was Euro Zone exports, which beat expectations (1.0% vs. (E) -0.8%).
Politics remained in focus as centrist Democrats stopped the progress of a drug price control bill, highlighting the division in the party (this is an incremental positive as markets would prefer there are no policy changes at all this year).
Today focus will be on economic data, as markets will want to see stability in two reports, Jobless Claims (E: 315K) and Philadelphia Fed Manufacturing Index (E: 19.2), and not too big of a decline in August Retail Sales (E: -0.8%). If we get another round of better than expected macro data, then stocks can extend yesterday’s gains.
What’s in Today’s Report:
Futures are bouncing today while most international markets declined overnight amid stagflationary economic data.
Chinese Industrial Production, FAI, and Retail Sales data all missed estimates with the latter underwhelming by the largest margin which weighed on risk assets overnight, sparking renewed concerns about the pace of the global recovery.
Meanwhile, in Europe, CPI in the U.K. jumped from 2.0% to 3.2% in August, the largest monthly increase since 1997 which rekindled concerns about global inflation pressures despite yesterday’s soft CPI print in the U.S.
Today, focus will be on economic data early with the Empire State Manufacturing Index (E: 18.6), Import & Export Prices (E: 0.3%, 0.5%) and Industrial Production (E: 0.5%) all due out by mid-morning.
Investors will be looking for good growth (but not “too hot”) and fading inflation pressures (specifically in the Empire release as it is a September data point). Otherwise, more signs of stagflation, like we saw in the data overnight, could cause further selling across risk assets including stocks today.
What’s in Today’s Report:
Stock futures are trading cautiously higher this morning while international markets were mixed overnight ahead of key U.S. inflation data.
Economically, the NFIB Small Business Optimism Index for August rose to 100.1 vs. (E) 99.0 which is helping U.S. equity markets edge higher in pre-market trade.
Today, there are no Treasury auctions or Fed officials scheduled to speak which will leave markets focused on the one major economic report today: CPI (E: 0.4%, 5.3%).
If the CPI report supports the transitory inflation narrative and suggests that price pressures have already peaked, stocks are likely going to be able to further stabilize after yesterday’s bounce. However, a “hot” print could easily trigger a wave of hawkish money flows and pressure the major indexes back down to fresh multi-week lows today.
And though that seems like another big leg higher for the S&P 500, it is only an additional 9% beyond the current record highs, something that is definitely within reason…Tom Essaye said, founder of Sevens Report Research. Click here to read the full article.
What’s in Today’s Report:
Futures are modestly higher as global markets bounced from Friday’s declines, following a quiet weekend of news.
Tax hike chatter continued to rise over the weekend as Democrats proposed a 26.5% corporate tax (up from the current 21%) and a “top-tier” capital gains tax rate of 28.8% (up from the current 23.8%).
These changes aren’t likely or imminent, but it underscores the market will face tax hike headlines over the coming weeks and months.
There was no notable global economic data overnight.
Today there are no economic reports and no notable Fed speakers, so the focus will be on any more tax hike headlines and on short-term technicals. Last week stocks were able to rally early in the day and faded in the afternoon. If that happens again this morning look for downside momentum to pick up a bit and for more moderate declines.
What’s in Today’s Report:
Futures are modestly higher following potentially positive news out of China.
First, on the geopolitical front, Biden and Xi held a call on Thursday night where they discussed avoiding conflict. Second, Chinese regulators clarified they just slowed video game approvals, not halted them and that’s helping Chinese tech and internet stocks to rally.
On COVID, Biden’s mask mandates are getting a lot of headlines but they won’t have any direct market implications.
Today’s focus will be on PPI (E: 0.6%, 8.3%), which will give us the latest insights into inflation and if the number is materially higher than estimates, it will likely cause some mild volatility. We also have one Fed speaker, Mester at 9:00 a.m. ET, and markets will look for confirmation that the Fed will start tapering QE this year, but it will be gradual.
What’s in Today’s Report:
Futures are moderately lower thanks to more regulatory fears in China and earnings guidance cuts from U.S. companies.
China has warned tech companies about online gaming activities in the latest volley of potential regulations.
United Airlines (UAL) cut guidance as demand for air travel has softened recently due to rising COVID cases, adding to a surprisingly high number of guidance cuts this week.
Today the key event is the ECB Rate Decision (Press Release 7:45 a.m., Press Conference 8:30 a.m.) and markets will be looking to see if the ECB formally announces tapering is coming (it’s possible but not the consensus expectation). Away from the ECB, we also get Jobless Claims (E: 344K) and numerous Fed speakers today (nine speeches in total) but only Williams (2:00 p.m.) is leadership and we already know what he thinks from his comments yesterday (tapering will start in late 2020 but be gradual).
What’s in Today’s Report:
Stock futures are trading modestly lower while most overseas markets declined overnight amid lingering concerns about the Delta variant’s impact on growth as well as the threat of a hawkish shift in tone from the ECB this week.
Economically, Japanese Q2 GDP was revised up to 1.9% vs. (E) 1.6% y/y which helped the Nikkei buck the trend and rally nearly 1% overnight.
Today, there are a few potential market-moving catalysts beginning with the July JOLTS report (E 10.0M). Then there are two Fed speakers to watch: Williams (1:10 p.m. ET) and Kaplan (6:00 p.m. ET). Finally, there is also a 10-Year Treasury Note Auction at 1:00 p.m. ET.
Bottom line, markets have become more “on edge” this week as the balance between economic growth trends and subsequent Fed policy outlook has become less certain.
So any combination of economic data deteriorating, the outlook for Fed policy getting more hawkish, or interest rates accelerating too quickly will continue to weigh on equities and other risk assets this week.