A Busy and Important Week for Markets

What’s in Today’s Report:

  • There Are Still Risks to the Rally
  • Weekly Market Preview:  How Strong is the Economic Recovery?
  • Weekly Economic Cheat Sheet:  A Busy and Important Week

Futures are modestly lower following a quiet weekend as markets digest last week’s rally.

Chinese November PMIs were solid (manufacturing PMI 52.1 vs. (E) 51.5 and Services PMI 56.4 vs. (E) 56.2) implying the economic recovery is on going, which is a general positive for global growth.

Coronavirus cases and the amount/intensity of lockdowns appear to be leveling off in the near term, although at very elevated and stringent levels (and there are fears of a post-Thanksgiving spike in infections over the coming weeks).

Today there is just one economic report, Pending Home Sales (E: 2.0%) and no Fed speakers, so we can expect markets to focus on any headlines regarding the two key macro variables:  Stimulus (when and how much?) and Lockdowns (will there be more?).

Tom Essaye Quoted in NBC10Philadelphia on November 10, 2020

“Negative COVID headlines/increased economic lockdowns (especially in NYC and LA County) are starting to offset vaccine optimism, and…” wrote Tom Essaye, founder of The Sevens Report. Click here to read the full article.

Tom Essaye Quoted in NBC10Boston on November 19, 2020

“Negative COVID headlines/increased economic lockdowns (especially in NYC and LA County) are starting to offset vaccine optimism…” wrote Tom Essaye, founder of The Sevens Report. Click here to read the full article.

The Case for Banks

What’s in Today’s Report:

  • The Case for Banks

Stock futures have pulled back from overnight highs as yesterday’s run to fresh record levels is digested amid concerning coronavirus trends and fading vaccine optimism.

COVID-19 related hospitalizations reportedly hit a new high for the 15th consecutive day yesterday while deaths spiked to the highest level since May, rekindling concerns that more lockdowns may be implemented.

Today’s economic calendar is very busy with several notable and potentially market moving reports due to be released including: Durable Goods Orders (E: 0.9%), Q3 GDP (33.1%), Jobless Claims (E: 730K), New Home Sales (E: 970K), Consumer Sentiment (E: 77.7), and the Core PCE Price Index (E: 1.4%).

Beyond the morning data dump, there are no Fed speakers but the most recent FOMC Meeting Minutes will print at 2:00 p.m. ET and any hawkish hints in the release could weigh on this seemingly tentative run to new records, especially given thin volumes and low attendance this week.

Finally, additional negative news regarding the second wave of the coronavirus outbreak, including new or extended lockdown measures, could trigger more profit taking into the Thanksgiving holiday.

Tom Essaye Quoted in The Market Herald on November 20, 2020

“Negative Covid headlines/increased economic lockdowns (especially in NYC and LA County) are starting to offset vaccine optimism, and that’s…” Tom Essaye, founder of The Sevens Report, said. Click here to read the full article.

Tom Essaye Quoted in ETF Trends on November 19, 2020

“Negative COVID headlines/increased economic lockdowns (especially in NYC and LA County) are starting to offset vaccine optimism…” wrote Tom Essaye, founder of The Sevens Report. Click here to read the full article.

Tom Essaye Quoted in CNBC on November 18, 2020

“Negative COVID headlines/increased economic lockdowns (especially in NYC and LA County) are starting to offset…” wrote Tom Essaye, founder of The Sevens Report. Click here to read the full article.

Yellen and Stimulus Expectations

What’s in Today’s Report:

  • Is Yellen as Treasury Secretary Another Bullish Tailwind?
  • Great (Stimulus) Expectations
  • Gold Breakdown

 

U.S. equity futures are trading higher this morning after President Trump instructed his administration to begin working with Biden’s transition team, easing concerns of a drawn-out, contested election.

Economically, German data was mixed with GDP beating estimates but the Ifo Survey came in light causing some mild underperformance in the DAX today.

On the calendar today, there are few economic releases to watch: Case-Shiller House Price Index (E: 0.6%), FHFA House Price Index (E: 0.7%), and Consumer Confidence (E: 98.0) with the latter having the greatest potential impact on stocks.

There are also several Fed speakers today: Bullard (11:00 a.m. ET), Williams (12:00 p.m. ET) and Clarida (12:45 p.m. ET) but the very dovish tone has been very consistent recently and none of the speakers should materially move markets.

Given the calendar and the expected drop of in attendance/volumes ahead of Thanksgiving, today is expected to be fairly quiet with focus remaining on vaccine developments, stimulus outlook, and COVID-19/lockdown news.

The New Market Dynamic (Lockdowns and Stimulus)

What’s in Today’s Report:

  • Navigating the New Market Dynamic (Lockdowns and Stimulus)
  • Weekly Economic Cheat Sheet:  The Key Number is Today’s Flash PMI
  • Weekly Market Preview:  Lockdowns vs. Vaccine Optimism, Round 2.

Futures are moderately higher as the Astra-Zenica vaccine accountment is helping to offset still surging COVID cases and more economic lockdowns.

Astra-Zenica (AZN) announced its COVID-19 vaccine was 70% effective against the disease, but 90% effective when given in two doses (making it essentially on par with the Pfizer and Moderna vaccines).

Economically, flash November PMIs were mixed as the EU PMI missed estimates, while the UK PMI beat expectations, but both numbers declined from the October levels, reflecting the lockdown-related headwinds on the economy.

Today the key number is the November Flash Composite PMI (E: 55.6).  Markets will want to see stability in that number, but if it’s a bad miss then markets will grow more nervous about a potential “double dip” recession in early 2021, and that will hit markets regardless of the AZN vaccine news.

Are Lockdowns Starting to Outweigh Vaccine Optimism?

What’s in Today’s Report:

  • Are Lockdowns Starting to Outweigh Vaccine Optimism?
  • EIA and Oil Outlook (Updated)
  • Why Are Treasury Auctions Suddenly Going Badly?  (And What It Could Mean for Markets)

Futures are modestly lower on momentum from Wednesday’s COVID/lockdown related late day fade.

Negative COVID headlines/increased economic lockdowns (especially in NYC and LA County) are starting to offset vaccine optimism, and that’s weighing on stocks.

Economic data was sparse overnight, but Australian Unemployment met expectations, as did UK Industrial Trends.

Today, with lockdowns increasing and near term economic anxiety rising, Jobless Claims (E: 710K) and the Philadelphia Fed Manufacturing Index (E: 24.5) will be two important reports, and markets will want to see stability in both to show the economic recovery is not losing momentum.  If those two readings are weak, expect more selling.

We also get Existing Home Sales (E: 6.47M) and there are two Fed speakers, Mester (8:30 a.m. ET) and Bowman (12:35 p.m. ET), but none of that should move markets.