“Economically, global service PMIs were mixed as the euro zone service PMI missed expectations, while the U.K. and Chinese service PMIs were in-line,” noted Tom Essaye, the founder of Sevens Report Research. Click here to read the full article.
The potential fallout from the U.S. debt-ceiling debacle and rising odds of a June interest-rate hike both “weighed on oil as the former influence would be a broader riskoff market event, while the latter would further reduce already waning optimism for a soft economic landing this year,” analysts at Sevens Report Research wrote in Wednesday’s newsletter. Click here to read the full article.
What’s in Today’s Report:
Futures are little changed as markets digest the Thursday/Friday rally amidst a mostly quiet weekend of news.
Oil prices are solidly higher (Brent crude up 1.7%) after Saudi Arabia announced a voluntary 1M bpd production cut for the next month, although that’s not seen as a sustainable bullish catalyst.
Economically, global service PMIs were mixed as the Euro Zone Service PMI missed expectations (55.1 vs. (E) 55.9) while the UK and Chinese service PMIs were in-line.
Today focus will be on the ISM Services Index (E: 52.0.) and specifically the price index in this report. Last week, a sharp drop in the ISM Manufacturing PMI Prices Paid Index ignited the rally, and if we see a similar drop in the services price index, it’ll help extend the rally as markets will get more confident disinflation is accelerating.
What’s in Today’s Report:
Futures are slightly higher mostly on momentum from Wednesday’s rally and despite more disappointing earnings, this time from Cisco (CSCO).
CSCO orders underwhelmed and that’s weighing on the stock (down 4% after hours) and limiting gains in futures.
There was no new news on the debt ceiling but optimism remains high and a deal is expected before the “X” date.
Focus today will be on economic data, because beyond any short-term debt ceiling drama (or resolution) the bigger issue for this market remains hard vs. soft landing. Key reports today include (in order of importance): Jobless Claims (E: 255K), Philly Fed (E: -20.0) and Existing Home Sales (E: 4.295M). As has been the case, stability remains the key for stocks to extend the rally.
We also have two Fed speakers, Jefferson (9:05 a.m. ET) and Logan (10:00 a.m. ET), but they shouldn’t move markets.
What’s in Today’s Report:
Futures are modestly higher following some potentially small progress on debt ceiling negotiations.
The debt ceiling meeting today was postponed to early next week as staffers needed more time to work on potential areas of compromise, and that’s being taken as a mild sign of progress.
Economically, UK manufacturing was stronger than expected (0.7% vs. (E) -0.1%) but that’s not moving markets.
Today focus will be on the University of Michigan Inflation Expectations Survey, and specifically the five-year inflation expectations. The farther they fall from 3.0%, the better for markets as it reinforces inflation is not yet a longer-term problem. There are also three Fed speakers today: Daly (2:20 p.m. ET), Bullard & Jefferson (7:45 p.m. ET), but even if they’re hawkish they shouldn’t move markets.
What’s in Today’s Report:
Stock futures are lower this morning after soft economic data overseas and growing angst about the debt ceiling.
Chinese merchandise trade data for April revealed a -7.9% drop in imports vs. (E) -0.2% which has poured some cold water on hopes for a strong recovery in the world’s second largest economy.
In the U.S., the NFIB Small Business Optimism Index came in at 89.0 vs. (E) 89.7 for the month of April but the release is not materially moving markets this morning. There are no additional economic reports today.
There are two Fed officials scheduled to speak today: Jefferson (8:30 a.m. ET) and Williams (12:05 p.m. ET) as well as a 3-Yr Treasury Note auction at 1:00 p.m. ET, all of which have the potential to impact markets in intraday trade.
With increasing focus on the debt ceiling, investors will be keenly focused on today’s meeting between President Biden and Congressional leadership as hopes for a delay to September are building and any disappointment of those hopes could result in volatility across asset classes.
What’s in Today’s Report:
Futures are slightly higher following a mostly quiet weekend of news as markets look ahead to Wednesday’s CPI.
News was slightly positive on the debt ceiling over the weekend, as reports indicate the White House will try to negotiate a short term debt ceiling extension (to the end of September). However, it remains uncertain if even this short-term deal can get done before the “X” date.
Economically, German Industrial Production missed estimates (-3.4% vs. (E) -1.5%) but that’s not moving markets.
Today there are no notable economic reports but there is a potentially important release at 2:00 p.m. via the Bank Senior Loan Office Survey. Markets (and the Fed) are nervous the regional bank stress will curtail lending and put a bigger headwind on the economy. If the loan officer survey reflects that reality (a drop in bank lending) it could cause volatility as that would increase the chances of a potential hard landing.
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What’s in Today’s Report:
Stock futures are tracking global equity markets lower while bonds rally thanks to disappointing bank earnings.
FRC, which has been in focus since the banking turmoil began in March, is trading lower by more than 20% in the premarket after reporting that deposits fell more than 40% in Q1 to just $104.5B vs. (E) $145B while the bank plans to cut as much as 25% of staff in Q2. The lower than expected deposit levels rekindled worries about the health of the banking system and financials are dragging the broader market lower this morning.
Today, there are a few economic releases to watch: Case-Shiller Home Price Index (E: -0.4%), Consumer Confidence (E: 104.2), and New Home Sales (E: 635K) but unless there are any material surprises, investors will remain focused on earnings as we will begin to get some of the big tech companies’ results after the close today.
On the earnings front we will hear from UPS ($2.19), VZ ($1.19), GM ($1.58), MCD ($2.30), GE ($0.13), PEP $1.37), and MMM ($1.60) before the open, and MSFT ($2.22), GOOGL ($1.07), V ($1.97), and TXN ($1.76) after the close. Investors will be looking for good top and bottom line results but potentially more importantly, solid guidance given the uncertain market backdrop right now.
What’s in Today’s Technical Report:
S&P 500 futures are little changed to start the week this morning. Last week’s pullback paused at a longer standing, multi-week uptrend line leaving the broader equity at a tipping point. How the market trades today will very likely decide if the S&P will continue to bleed lower or break last week’s downtrend and retest the recent highs.
The Nasdaq has been a notable outperformer this year but there are cracks emerging in the rally and we outline key levels to watch this week within the Report.
Among the sectors, we view five sectors as trending higher, four as market neutral, and two as trending lower.
In the currency and bond markets, both the dollar and multiple benchmark Treasury Notes have pulled back to critical price support zones and whether those levels hold or not will have a varying impact on all asset classes.
Commodities as an asset class have been fluctuating in a tight range in 2023 with gold outperforming and oil underperforming, but there are signs that oil is poised to take the lead in the complex and gold may be losing upside momentum.
Finally, the VIX is still deeply under pressure which is confusing many investors but we dive into the specific reasons for the movement in the index and what to look for in the weeks and months ahead as we continue to navigate this historically difficult market backdrop amid very uncertain macroeconomic dynamics.
What’s in Today’s Report:
Futures are slightly lower following Thursday’s steep afternoon selloff and as nervous investors look ahead to the jobs report.
Economically German CPI met expectations (8.7% y/y).
Silicon Valley Bank (SIVB), which is now at the heart of the crypto/VC bank turmoil, fell farther overnight and that stock needs to stabilize for markets to recoup yesterday’s losses.
Today there are two important events to watch.
The first is the jobs report, and expectations are as follows: E: 215K Job Adds, 3.4% Unemployment Rate, 0.3% m/m/4.7% yoy Wages. Especially after yesterday’s selloff, markets need a “Just Right” number to reduce rate hike expectations. Second, markets will be looking for a business update from SIVB about their capital raise and sustainability going forward, and if the bank shored up its finances, that would likely create a solid rally in stocks.