Not As Bad As Feared, But How Much Better Are Fundamentals?

What’s in Today’s Report:

  • Fundamentals:  Not As Bad As Feared, But How Much Better Are They?
  • Weekly Market Preview:  Can the S&P 500 Hold This Recent Bounce?
  • Weekly Economic Cheat Sheet:  Friday’s CPI is the Key Report This Week

Futures are solidly higher thanks to positive news from China.

The economic reopening in China progressed over the weekend as COVID cases continued to decline, authorities relaxed more restrictions in Beijing, and none of the fifty largest cities in China have intense restrictions in place.

Also in China, the WSJ reported authorities may soon end their probe into Didi, and that might also signal an end to the government crackdown on Chinese tech stocks (if so that’d be a major positive for Chinese tech names and a peripheral positive for tech stocks more broadly).

Today there are no notable economic reports or Fed speakers, so it should be a generally quiet day of news.  Across the pond, UK Prime Minister Johnson faces a “no confidence” vote in Parliament, but he’s expected to survive it (if he doesn’t, that could be a surprise negative for stocks today but again that is unlikely).

Jobs Day

What’s in Today’s Report:

  • Jobs Day
  • Why the ADP Report Helped Stocks Rally

Futures are slightly lower following a generally quiet night of news as markets look ahead to today’s jobs report.

Economic data from Europe underwhelmed as Euro Zone Services PMI declined to 56.1 vs. (E) 56.3 while Euro-Zone Retail Sales missed estimates, falling –1.3% vs. (E) 0.4%.

Elon Musk made cautious comments saying he had a “super bad” feeling about the economy in a Reuters interview.

Today’s focus will be on the Jobs Report and expectations are as follows: Job Adds (E: 325k), UE Rate (E: 3.5%), Wages (E: 0.4% m/m & 5.3% y/y).  As long as data shows “moderation” in the labor market (so a positive number but in the lower part of the range) then stocks can extend Thursday’s rally.  Other data today includes  ISM Services PMI: 56.3, and we get one Fed speaker:  Brainard (10:30 a.m. ET).

Jobs Report Preview

What’s in Today’s Report:

  • Jobs Report Preview
  • Is Good Economic Data Bad for Markets?

Futures are modestly higher following a soft EU inflation reading and on reports, OPEC members may increase oil production.

Euro Zone PPI undershot expectations (1.2% vs. (E) 2.3%) offering some hope that inflation in the EU is peaking.

Oil is down 2.5% after Saudi Arabia said it may increase oil production to make up for any Russian shortfall.

Today’s focus will be on the economic and inflation data including, in order of importance: ADP Employment Report (E: 240k), Unit Labor Costs (E: 11.6%), and Jobless Claims (E: 210k).  If the data is “Goldilocks” then this early rally can continue.  Finally, there are two Fed speakers today, Logan (12:00 p.m. ET) and Mester (1:00 p.m. ET), with the latter more important (and if she’s hawkish that will weigh on sentiment).

Are Semiconductors A Buy?

What’s in Today’s Report:

  • Are Semiconductors A Buy?

Futures are little changed following a quiet night of news.

Economic data was mixed as final May manufacturing PMIs were in-line with expectations for the EU and UK, although German Retail Sales missed estimates (–5.4% vs. (E) -0.1%).

On the Fed front, Bostic said his comments about a “pause” on rate hikes shouldn’t be interpreted that the Fed will help rescue volatile markets.

Today focus will be on economic data and Fed speak via the ISM Manufacturing PMI (E: 54.5), JOLTS (E: 11.40M) and comments by Williams (11:30 a.m. ET) and Bullard (1:00 p.m. ET).  Bottom line, the ideas of slowly moderating (but not collapsing) growth and the possibility for a Fed “pause” in rate hikes in late summer/early fall have helped stocks rally, and as long as today’s data and Fed speak don’t refute those possibilities, stocks can extend the recent rally.

Three Keys to a Bottom Update

What’s in Today’s Report:

  • Three Keys to a Bottom: Update
  • Weekly Economic Cheat Sheet: Are Growth and Inflation Both Peaking?
  • Weekly Market Preview: Jobs Data in Focus

Stock futures are moderately lower this morning, tracking losses in EU shares amid renewed inflation concerns.

German CPI jumped to 7.9% vs. (E) 7.5% and the Eurozone HICP Flash rose to 8.1% vs. (E) 7.7% in May. Additionally, the EU agreed to a partial ban on Russian energy imports which has sent oil to multi-month highs, compounding inflation fears this morning.

Looking into today’s session, there are three economic reports due to be released: Case-Shiller Home Price Index (E: 2.2%), FHFA HPI (E: 1.9%), and Consumer Confidence (E: 104.0). Investors will want to see the latter report at least meet estimates as the health of the U.S. consumer has become less certain in the face of lofty inflation pressures.

Finally, there are no Fed officials speaking today but Powell is set to meet with Biden at the White House at 1:15 p.m. ET. And following Waller’s more hawkish comments about suggesting 50 bp hikes until inflation is back at 2% from yesterday, any insight to the Fed’s policy plans after the summer rate hikes, which are solidly priced in, will move markets (more aggressive policy expectations could hit stocks today).

Tom Essaye Quoted in Barron’s on May 26th, 2022

The Dow Rose, and What Else Is Happening in the Stock Market Today

This two-day rally in the market is mostly built on the premise that the Fed may ‘pause’ rate hikes after the two 50-bps adjustments this summer…wrote Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

Bounce or Bottom? A Key Level to Watch

What’s in Today’s Report:

  • Bounce or Bottom?  A Key Level to Watch

Futures are slightly higher following a night of mixed earnings and continued reopening in China.

Shanghai continued to reopen and Beijing is still avoiding the most draconian lockdowns and that’s helping broader market sentiment.

Economic data was sparse as the only notable report was Euro Zone M3 (6.2% vs. (E) 6.3%) but that’s not moving markets.

Today the key report is the Core PCE Price Index (E: 0.3%, 4.9%) and if it underwhelms vs. expectations and furthers the idea that inflation has peaked, look for a continuation of this week’s rally.  We also get Consumer Sentiment (E: 59.1) and the key there will be the five-year inflation expectations.  If they drop below 3.0%, that’ll be an additional positive for stocks today.

Sector Trends: Relative Strength to the S&P 500

What’s in Today’s Report:

  • Sector Trends:  Relative Strength to the S&P 500
  • EIA Analysis and Oil Market Update

Futures are slightly higher as incrementally positive macro news offset more disappointing tech earnings.

Nvidia earnings underwhelmed and the stock fell 5% after hours, and that is weighing on tech this morning.

But, not as hawkish as feared in FOMC minutes and the continued reopening of Shanghai offset the soft NVDA earnings.

Today’s focus will be on economic data via the Revised Q1 GDP (-1.4%), Jobless Claims (E: 208K), and Pending Home Sales (E: -1.3%).  Given the recent weakness in other economic data, the market will want to see stability in the numbers to continue to push back on stagflation concerns.

Bad Things Happen Fast (Part II)

What’s in Today’s Report:

  • Bad Things Happen Fast, Part II
  • Composite PMI Flash Data Takeaways
  • New Home Sales Plunge – Chart
  • 10-Year Yield Breaking a 15 Year Downtrend – Chart

Stock futures are little changed this morning, well off the overnight highs after a mostly quiet night of news as investors look ahead to the release of the latest Fed meeting minutes.

Economically, the German GfK Consumer Climate Index met expectations of -26.0 while German GDP came in at 3.8% vs. (E) 3.7% but today’s data is not materially impacting markets.

Looking into today’s session, there is one economic report to watch early: Durable Goods Orders (E: 0.5%) and the Treasury will hold an auction for 5-Year Notes at 1:00 p.m. ET. Markets will want to see data that shows healthy demand and steady trade in fixed income markets if stocks are to stabilize further.

As far as the Fed goes, Vice-Chair Brainard is scheduled to speak at 12:15 p.m. ET before the day’s main event, the release of the FOMC Meeting Minutes will hit at 2:00 p.m. ET. If Brainard and the minutes are less hawkish that could support a continuation of the latest attempt at a relief rally. At the same time, any more-hawkish leaning rhetoric or verbiage could lead to a resurgence in volatility as news flow has been decidedly negative over the last week.

Are Bonds a Buy?

What’s in Today’s Report:

  • If a Recession Is Imminent, Are Bonds a Buy?

Stock futures are down more than 1% this morning following more negative earnings news in the tech sector.

SNAP is down 30% this morning after issuing a profit warning late yesterday, citing a quickly deteriorating macroeconomic environment that is weighing on tech broadly.

Economically, Composite Flash PMI data slightly missed estimates in Europe overnight, but notably remained comfortably in expansion territory, easing some concerns about a looming recession.

Looking into today’s session, focus will be on economic data early with the PMI Composite Flash (E: 55.5) and New Home Sales (E: 748K) due to be released and the market will be looking for fresh signs that the economy is in good shape and not significantly losing momentum right now. There is also a 2-Yr Treasury Note auction at 1:00 p.m. ET today which could move yields on the short end of the curve, and in turn, impact equity trading.

Focus will turn to monetary policy midday with Fed Chair Powell scheduled to speak at 12:20 p.m. ET. Any hints at a less aggressive approach to policy tightening in the months ahead will be welcomed by investors and could help the latest attempt at a relief rally regain its footing. However, the combination of soft data in the morning and a hawkish-leaning Powell could send stocks lower.