Is the S&P 500 “The Market” Anymore?

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What’s in Today’s Report:

  • Is the S&P 500 “The Market” Anymore?

Stock futures are trading at record highs this morning amid renewed stimulus hopes and soft economic data overseas.

Late yesterday, Treasury Secretary Mnuchin urged Congress to pass new stimulus funding and expressed willingness to sit down with Congressional Democrats to work towards a deal.

German Retail Sales were -0.9% vs. (E) +0.5% in July bolstering the case that more stimulus is needed globally.

Today, we will get an initial look at labor market data for the month of August via the ADP Employment Report (E: 850K) which could move markets if there is a material surprise (either way) in the headline. Data on Factory Orders for July (E: 5.8%) will also be released this morning.

There are multiple Fed speakers today including: Williams (10:00 a.m. ET), Mester (12:00 p.m. ET), Kashkari (3:00 p.m. ET), and Daly (6:00 p.m. ET), from which the market will look for additional signals that the FOMC will remain very accommodative for the foreseeable future.

Finally, the next stimulus package has jumped back into the forefront of the market’s focus so any developments regarding progress towards a deal will be well-received by risk assets including stocks while concerns of an ongoing stalemate will be a headwind.

Tailwinds for the Residential Housing Sector

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What’s in Today’s Report:

  • Is Residential Housing the Big Winner In All of This?

Stock futures are flat and overseas equities were little changed overnight as investors digest the recent run to fresh record highs in the S&P amid very quiet news flow.

Internationally, Germany extended a “crisis job support program” which has helped keep millions employed since Q1 lockdowns. The extension is bolstering sentiment globally and helping EU shares modestly outperform today.

There were no notable or market-moving economic reports overnight.

Looking into today’s session, there is one economic report to watch ahead of the bell: Durable Goods Orders (E: 4.3%) and one Fed official scheduled to speak shortly after the open: Barkin (10:00 a.m. ET).

The limited number of catalysts today will likely leave stocks to trade with a sense of “Powell paralysis” ahead of the Fed Chair’s speech during the Economic Policy Symposium tomorrow morning however markets will remain sensitive to any further vaccine headlines or stimulus bill developments.

Tom Essaye Quoted in MarketWatch on August 24, 2020

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“What does that mean for us? It means stay long stocks in longer-dated accounts, and make sure…” Sevens Report Research founder Tom Essaye recently explained to Yahoo Finance.

Warren Buffett

Tom Essaye Quoted in Forbes on August 24, 2020

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“While the early use authorization for plasma is clearly a positive, from a market standpoint a vaccine remains a true…” says Tom Essaye, editor of the Sevens Report. Click here to read the full article.

Tom Essaye Quoted in Barron’s on August 24, 2020

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”Futures are moderately higher on Covid-19 treatment optimism following the FDA’s authorization of plasma treatment…” wrote The Sevens Report’s Tom Essaye before the open. Click here to read the full article.

Tom Essaye Interviewed with TD Ameritrade Network on August 24, 2020

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Tom Essaye interviewed with Ben Lichtenstein from TD Ameritrade Network to discuss consumer-oriented earnings, treasury, stocks, and more…Click here to watch the full interview.

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.