What Makes a Vaccine a Bullish Gamechanger?

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What’s in Today’s Report:

  • What Makes a Vaccine a Bullish Gamechanger?

Stock futures are rallying this morning suggesting that the S&P 500 will open at a fresh record high today while global shares rose overnight on easing geopolitical tensions.

Late yesterday, high-level officials from the U.S. and China including Secretary Mnuchin and Vice Premier Liu He held a “constructive” virtual meeting during which both sides reiterated commitment to the Phase-One trade deal.

Economic data largely met expectations overnight and did not materially affect markets with a focus on improving relations between the U.S. and China.

Looking into today’s session, the focus will remain on the apparent progress on trade between the U.S. and China however there are a few additional catalysts to watch.

Economically, we will get three reports on the housing market: Case-Shiller House Price Index (E: 0.1%), FHFA House Price Index (E: 0.3%), and New Home Sales (E: 774K) but Consumer Confidence (E: 93.0) will be the most important release to watch (it hits shortly after the bell at 10 a.m. ET).

There is also one Fed speaker late in the day: Daly (3:25 p.m. ET). Beyond that, the market will remain sensitive to any news regarding the Congressional stalemate over the stimulus bill and any new progress will be well received by markets.

The Current Market Equation (How Investors Justify New All Time Highs)

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What’s in Today’s Report:

  • The Current Market Equation (How Investors Justify New All Time Highs)
  • Weekly Market Preview:  More Dovish Commitments from the Fed This Week?
  • Weekly Economic Cheat Sheet:  Important Inflation Data on Friday.

Futures are moderately higher on COVID-19 treatment optimism following the FDA’s authorization of plasma treatment for severely ill COVID patients.

President Trump announced on Sunday that the FDA has granted “Early Use Authorization” (EUA) for use of plasma from recovered COVID patients on severely ill patients.  The EUA will increase the availability of this treatment.

While the EUA for plasma is clearly a positive, from a market standpoint a vaccine remains a true “silver bullet” that could super charge a rally.  So, while positive, the plasma news is not a bullish gamechanger (although it does add to the feeling of FOMO (fear of mission out)).

Outside of the plasma news it was a quiet weekend, as there was no economic data nor any progress on stimulus.

Today will be a generally quiet day as there are no economic reports and no notable Fed speakers (the Jackson Hole conference is later in the week), so focus will remain on COVID treatment optimism.

An Important Chart (Valuation & Asset Inflation)

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What’s in Today’s Report:

  • What Buffet’s Favorite Measure of Valuation Can Tell Us About Asset Inflation
  • FOMC Minutes:  Why They Weren’t “Hawkish”
  • EIA:  Oil Market Outlook

Futures are marginally lower mostly on continued momentum from Wednesday’s late-day market decline.

It was a quiet night of news and “Fed disappointment” is the most used excuse for the decline in stocks, although the FOMC Minutes largely met expectations (more on that in the report).

Stimulus chatter about a “skinny” stimulus bill (worth $500/bln) continues to grow.  If that becomes reality, it will be a big disappointment (remember markets have priced in a $1.5T bill).

Today the key reports will be Jobless Claims (E: 963K) and Philadelphia Fed Survey (E: 21.5), and the point here is clear:  Markets will want to see continued improvement in the data in August, reflecting the fact that the loss of stimulus isn’t causing the economic recovery to slow or pause.   Finally, there’s one Fed speaker today, Daly (1:00 p.m. ET), but he shouldn’t move markets.

Earnings Season Takeaways in the COVID Era

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What’s in Today’s Report:

  • In the Era of COVID, How Can We Use Earnings to Generate Market Insights?

Stock futures are trading modestly higher this morning as investors digest yesterday’s new record highs in the S&P after a mostly quiet night of news.

Traders remain optimistic for a stimulus deal however there were no positive developments overnight while economic data was sparse and did not move markets.

Looking into today’s session, there are no economic reports to watch and the calendar is fairly quiet in the morning.

Potential market catalysts do pick up in the afternoon as the Treasury will hold a 20-Yr Bond auction at 1:00 p.m. ET which has the potential to move rates, the yield curve and ultimately impact equity markets.

Later in the afternoon, the minutes from the most recent Fed meeting will be released at 2:00 p.m. ET before Richmond Fed President Barkin speaks at 3:00 p.m. ET.

The market’s primary focus right now however remains the stimulus package and with rising chatter about potential concessions in the front half of the week, the prospects for a deal have improved. And any additional positive news regarding a stimulus deal should help the market continue to grind to new record levels.

Tom Essaye Quoted in KITV Island News on August 18, 2020

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“There are clearly a lot of similarities between the market dynamics in the late 90s and current market dynamics. And, for those of us that…” said Tom Essaye, editor of The Sevens Report investing newsletter. Click here to read the full article.

Why the Post Office Drama Matters to Markets

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What’s in Today’s Report:

  • Why the Post Office Drama Matters to Markets
  • Empire State Manufacturing Survey Takeaways

S&P 500 futures are slightly higher, trading within 10 points of their record high this morning after a mostly quiet night of news.

U.S.-China tensions remain elevated following the Commerce Department’s new tighter restrictions on Chinese telecom giant, Huawei Technologies, but for now the impact on the broad markets has been limited.

There were no notable economic reports overnight and no material developments regarding the next coronavirus relief bill.

Today is lining up to be another relatively slow day in the markets as there is only one economic report: Housing Starts (E: 1.240M) and there are no Fed officials scheduled to speak. The quiet calendar will leave investors largely focused on the status of the stimulus bill negotiations in Congress which remain in a stalemate.

The Vaccine Playbook

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What’s in Today’s Report:

  • The Vaccine Playbook

S&P 500 futures are approaching record highs this morning amid news that Russia has approved a COVID-19 vaccine while investors remain optimistic for a U.S. stimulus deal.

In a televised meeting, Russian President, Vladimir Putin, stated that Moscow’s Gamaleya Institute successfully developed a “safe and effective” coronavirus vaccine ready to move to a Phase 3 trial, sparking risk-on money flows.

Economically, both the German ZEW Survey and the NFIB Small Business Optimism Index largely met estimates and importantly did not alter the narrative that the broader global economic recovery remains underway.

Today, there is one economic report: PPI (E: 0.3%) and one Fed official is scheduled to speak: Daly (12:00 p.m. ET) but neither should move markets as investors will be keenly focused on the details surrounding the Russian coronavirus vaccine as well as any new progress towards a deal on the next U.S. stimulus bill.

Stimulus Update (Are the Executive Orders Positive for Stocks?)

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What’s in Today’s Report:

  • Stimulus Update – Are The Executive Orders Positive for Stocks?
  • Is It Time to Chase This Market?
  • Weekly Economic Cheat Sheet (Jobless Claims Remain the Key)
  • Weekly Market Preview (What’s Next in the Stimulus Saga)

Futures are little changed as markets look past President Trump’s executive orders on economic stimulus following an otherwise quiet weekend.

With stimulus talks again at an impasse, President Trump issued several executive orders over the weekend to provide economic stimulus, including $300/week in federal unemployment and a payroll tax deferral.

But, for a multitude of reasons (legal and otherwise) none of these actions will have any immediate economic impact, so the market still expects a stimulus bill to be passed (but now in the coming weeks, not immediately).

Today there’s one labor market number, JOLTS (E: 5.288M), but that shouldn’t move markets, and instead focus will be on stimulus.  Today, the key is that both the Democrats and Republicans signal they are going to continue negotiations on the stimulus bill.  If the rhetoric implies the talks have stalled completely, that that will likely pressure stocks.

Market Multiple Table: August Update

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What’s in Today’s Report:

  • Market Multiple Table: August Update

Futures are rallying on optimistic comments from Secretary Mnuchin about a new stimulus deal being reached by the end of the week as well as upbeat economic data.

Composite PMIs were mostly in line with expectations overnight but EU Retail Sales notably rose 1.3% vs. (E) 0.2% Y/Y in June, a recovery to pre-pandemic levels that is rekindling hopes for a V-shaped economic recovery.

This morning, investor focus will be on economic data early as we get the first look at July jobs data via the ADP Employment Report (E: 1.888M) ahead of the bell while International Trade (E: -$50.3B) and the ISM Non-Manufacturing Index (E: 55.0) will both be released after the open.

Earnings season is still in full swing as well with several companies due to report Q2 results today including: CVS ($1.93), MRNA (-$0.36), HUM ($10.34), ROKU (-$0.55), MET ($0.96), ADT ($0.27).

Beyond economic data and earnings, the market’s main focus is clearly the stimulus bill and any news of further progress will be a tailwind for stocks while any new “roadblocks” will likely trigger some risk-off money flows across asset classes.

What the Fed Decision Means for Markets (Positive but not a Silver Bullet)

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What’s in Today’s Report:

  • What the Fed Decision Means for Markets (Positive, But Not a Silver Bullet)

Futures are lower following disappointing headlines on U.S. stimulus progress, combined with profit taking ahead of multiple important market catalysts coming today.

U.S. stimulus bill talks were said to be at an “impasse” late Wednesday, and that’s weighing on sentiment (although this drama is to be expected, as we cautioned last week, and a deal is still very much expected by mid- August).

Economically, German Q2 GDP missed estimates (-10.1% vs. (E) -9.4%), which is a reminder just how much damage was inflicted on the global economy in Q2.

As mentioned, one of the reasons futures are weaker this morning is book squaring ahead of several important economic and earnings events today.

First, the most important economic report of the day is Jobless Claims (E: 1.38M).  We address this more in the Report, but there are growing signs the U.S. economic recovery is pausing or stalling, and that’s not priced into stocks above 3200 in the S&P 500.  If we see another notable increase in weekly claims (say through 1.5M) that will amplify fears the recovery is stalling and likely weigh on stocks.

Then, on the earnings front, we get four of the most important stocks in the market announcing results after the close: AMZN (E: $1.75), AAPL (E: $1.99), FB (E: $1.44), GOOGL (E: $8.43).  The earnings results will be “fine” but these stocks have had huge runs, and if they disappoint vs. elevated expectations, just due to these stocks weights in the S&P 500, it could pressure markets after hours.

Finally, today we will get the initial look at Q2 GDP, and it will be historic as it’s estimated to be -35% seasonally adjusted annual rate (remember GDP is usually around 2% saar).  I never in my life thought we’d see such a number, and I hope we don’t ever see it again.  But, today history will be made as the worst GDP print ever.