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Equity Risk Premium Hits 2007 Levels

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What’s in Today’s Report:

  • Equity Risk Premium at 2007 Levels
  • February Composite PMI Flash Takeaways
  • Why Are Rising Rates Causing Stocks to Drop Now?
  • S&P 500 Chart: Trend Support From the October Lows In Focus

U.S. equity futures are little changed this morning following yesterday’s steep losses as Treasuries have stabilized ahead of today’s Fed meeting minutes release.

Economically, German CPI met estimates at 8.7% y/y but that remains a historically very high reading which continues to warrant aggressive policy from the ECB in the months ahead.

Looking into today’s session, there are no notable economic reports which will leave investors primarily focused on the FOMC meeting minutes release (2:00 p.m. ET). Before that release, the Treasury will hold a 5-Yr Note auction at 1:00 p.m. ET which could move bond markets, and if we see new highs in yields, expect additional pressure on stocks.

Finally, the Fed’s Williams speaks after the close at 5:30 p.m. ET and his comments could move markets in after-hours trading if he is materially hawkish.

ECB Preview (The Most Important Catalyst of the Week)

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What’s in Today’s Report:

  • ECB Preview
  • The Threat to Oil Prices and the Potential Effect on Bonds

S&P futures are down 10 points this morning after the U.S. DOJ announced an antitrust probe into big tech firms late yesterday while EU economic data badly missed estimates.

The EU PMI Composite Flash for July was 51.5 vs. (E) 52.1 but the German Manufacturing component was especially weak at 43.1 vs. (E) 45.2 rekindling fears of a further, and potentially accelerating, slowdown in the global economy.

In today’s U.S. session, there are two economic reports to watch: The PMI Composite Flash (E: 51.2) and New Home Sales (E: 655K) while no Fed officials are scheduled to speak ahead of next week’s FOMC Meeting.

There is a 5-Yr Note Auction by the Treasury at 1:00 p.m. ET today and the results could have an impact on the yield curve which could ultimately move stocks (like we saw with yesterday’s 2-Yr Auction).

Earnings season is continuing to pick up and today will be a very busy day of releases with BA (-$0.56), T ($0.89), CAT ($3.12), UPS ($1.93), NOC ($4.64), GD ($2.68), FCX (-$0.05), and NSC ($2.77) due to report before the open, and FB ($1.90), TSLA (-$0.52), PYPL ($0.73), and F ($0.30) will hit after the bell.