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Bad Things Happen Fast (Part II)

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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.

Why Have Stocks Dropped?

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What’s in Today’s Report:

  • Why Have Stocks Dropped?
  • A Story From the Past to Explain My Caution on the Future Economy
  • Chart: 10-Year Yield Approaches Key Downtrend Line

Futures declined overnight as the 10-year topped 2.80% with a focus on today’s CPI report but yields have since pulled back and futures are trading effectively unchanged.

Economically, the Japanese PPI was hot (9.5% vs. E: 9.3%) and the U.S. NFIB Small Business Optimism Index missed estimates (93.2 vs. E: 95.0), neither of which are helping trader sentiment today.

Geopolitically, Russia was accused of using chemical weapons in Ukraine, which would be a significant escalation if true, but that information has not been substantiated yet.

Looking into today’s session, focus will be on economic data early with CPI (E: 1.1%) due out ahead of the bell. If the core number comes in below estimates, that could offer the market some relief and spark a reversal higher.

Then attention will turn to the Fed as Brainard speaks over the lunch hour (12:10 p.m. ET) and Barkin is scheduled to speak after the close (5:30 p.m. ET). Brainard’s comments will be closely watched as her hawkishness last week caused rates to surge higher and stocks to selloff.

Finally, there is a 10-Yr Treasury Note auction at 1:00 p.m. ET which will offer some fresh insight to demand for Treasuries amid the latest surge in yields. And if the auction is solid, that could also help yields pullback and stocks rebound.

Takeaways from Proctor and Gamble Earnings

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What’s in Today’s Report:

  • Best Broad Natural Resource ETF: GNR vs. GUNR
  • Takeaways from Proctor & Gamble Earnings
  • Charts: Copper Breakout and 10-Yr. Yield Into Resistance

Stock futures are little changed this morning as investors digest recent gains and await more important earnings results.

On the inflation front, German PPI ran hot (2.3% vs. E: 1.0%), but EU HICP (their CPI) met estimates of 0.5% which is helping ease some price related concerns this morning (yields are off the overnight highs).

Looking into today’s session, there are no notable economic reports but multiple Fed speakers including: Bostic (12:00 p.m. ET), Kashkari (12:00 p.m. ET), Evans (12:00 p.m. ET), Quarles (1:00 p.m. ET), Bullard (1:45 p.m. ET), and Daly (8:35 p.m. ET).

Looking to earnings, focus will be on: VZ ($1.36), WGO ($1.98), and ABT ($0.92) reporting pre-market and then TSLA ($1.49), IBM ($2.49), PPG ($1.56), and DFS ($3.38) releasing results after the close.

Earnings in Focus

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What’s in Today’s Report:

  • Bottom Line – Earnings in Focus
  • Charts: 10-Year Yield Meets Resistance, Global Inflation on the Rise

U.S. stock futures are pointing to a higher open today as bond markets remain largely steady and investors continue to focus on the solid start to Q3 earnings season.

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

Looking into today’s session, there is one economic report to watch: Housing Starts (E: 1.621M) and several Fed officials are scheduled to speak: Daly (8:00 a.m. ET), Harker (8:50 a.m. ET), and Bostic (1:00 p.m. & 2:50 p.m. ET). But as long as there are no major, hawkish shifts in tone by the Fed speakers, the market impact should be limited with the focus increasingly on earnings.

On the earnings front, we will get results from JNJ ($2.37), PG ($1.59), BK ($1.02), TRV ($2.04), SYF ($1.43) ahead of the bell, and then NFLX ($2.56), and UAL (-$1.65) after the close. The important thing investors will be looking for is any new insight on the impact of inflation and margin compression on earnings and importantly forward guidance.

Tom Essaye Quoted in ETF Trends on September 28, 2021

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Treasury Bond ETFs Slide as Traders Anticipate Tighter Monetary Policy

If economic and inflation data is solid this week, and the 10-year yield can breakthrough the mid-1.50% range…Tom Essaye of the Sevens Report said in a note. Click here to read the full article.

Tom Essaye Quoted in CNBC on August 30, 2021

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Treasury yields fall slightly as investors await key jobs report

The 10-year yield continues to build upside momentum, and Powell’s dovish tone on Friday won’t…Tom Essaye of the Sevens Report said in a note on Monday. Click here to read the full article.

Market Multiple Levels: S&P 500 Chart

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What’s in Today’s Report:

  • Market Multiple Levels: S&P 500 Chart
  • May JOLTS Report Takeaways

Stock futures are sharply lower along with most international equity markets this morning while bond yields are extending recent declines amid new COVID-19 concerns.

Japanese Prime Minister, Yoshihide Suga, issued a state of emergency for Tokyo overnight and the latest reports suggest spectators will be banned from the summer Olympics which is weighing heavily on investor sentiment today.

10-Year yields are down another 7 basis points in early trade while travel and leisure shares are leading markets lower in the pre-market, underscoring concerns about the state of the economic recovery and emerging concerns surrounding the Delta variant of COVID-19.

Today, there is just one economic report: Jobless Claims (E: 353K) and no Fed officials are scheduled to speak.

Investors will be looking for a continued drop in the weekly jobless claims data but focus will likely be on COVID-19 trends and the latest lockdown developments as the health of the economic recovery is reassessed.

A Market Driven by the 10 Year Yield

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What’s in Today’s Report:

  • Why This Market is Still All About the 10 Year Treasury Yield
  • Weekly Market Preview:  Does the 10 Year Yield Hit 1.75% or Higher?
  • Weekly Economic Cheat Sheet:  Flash PMIs are the Big Report This Week

Futures are little changed following a generally quiet weekend as markets digest last week’s rise in global bond yields.

The 10 year Treasury yield is actually down five basis points this morning thanks to 10% drop in the Turkish Lira after the head of the central bank was surprisingly fired. That surprise news has put a mild (but likely temporary) safety bid into U.S. Treasuries.

Regarding COVID, fears of a 3rd wave in Europe are also weighing slightly on global bond yields as some lockdowns are being extended.

Today the key events are Fed commentary, and we have multiple Fed speakers today including Powell (9:00 a.m. ET), (Barkin (10:30 a.m. ET), Daly (1:00 p.m. ET) and Quarles (1:30 p.m. ET).  Bottom line, the markets want more acknowledgement of the threat of rising yields, and the hint of Operation Twist or maturity extensions in QE.  As was the case last week, if they markets don’t get that from the Fed commentary today, expect the 10 year yield to creep higher from current levels (and stocks to roll over).    There’s also one economic report today, Existing Home Sales (E: 6.50M), but it shouldn’t move markets.

Jobs Day

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What’s in Today’s Report:

  • Trade Update – What’s the Latest?
  • Key Levels to Watch in the Dollar and 10 Year Yield
  • OPEC Update – Positive or Negative for Oil?

Futures are modestly higher again as markets ignore more soft economic data and instead focus on incrementally positive U.S./China trade headlines.

China reduced import tariffs on U.S. soybeans and pork and that’s being interpreted as a mild positive in the negotiations, and that’s the reason futures are higher.

Economic data again disappointed as Japanese Household Spending and German IP (-1.7% vs. (E) 0.2%) both missed.

Today the key event on the calendar is the jobs report, (E: Jobs: 180K, UE Rate: 3.6%, Wages: 0.3%) and again the stronger the number, the better.  We also get Consumer Sentiment (E: 96.8) this morning, and given the focus on consumer spending, that number is more important than usual.  Like the jobs report, the stronger the number, the better for stocks.

Finally, regarding trade, Larry Kudlow will speak on CNBC at 9:30 so we’ll likely get another non-specific, yet positive, update on the U.S./China trade “mood music,” so don’t be surprised if you see a temporary pop in stocks right at the open.