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Bounce or Bottom? A Key Level to Watch

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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.

Are Bonds a Buy?

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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.

Bullish If/Bearish If Scenarios

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What’s in Today’s Report:

  • Bottom Line:  Bullish If/Bearish If Scenarios
  • Weekly Market Preview:  More Earnings and Growth Data This Week
  • Weekly Economic Cheat Sheet:  Is Growth Rolling Over?

Futures are moderately higher mostly on momentum from Friday’s rebound following a generally quiet weekend.

COVID news from China remains mixed as Shanghai continues to relax lockdowns although Beijing is seeing a continued increase in cases (keeping the threat of more lockdowns alive).

The dollar is down one percent after ECB President Lagarde signaled two rate hikes were likely in the 3rd quarter (this was a bit more hawkish than expected).

Today there are no notable economic reports and just one Fed speaker, Bostic (12:00 p.m. ET).  If Bostic echoes Bullard’s slightly less hawkish than feared commentary from Friday afternoon, then stocks can extend Friday’s rebound.

Dow Theory Update (Bearish)

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What’s in Today’s Report:

  • Dow Theory Update (Bearish)
  • VIX Analysis Update

Futures are moderately higher following positive China COVID news.

Chinese authorities said they hoped to end all lockdowns in Shanghai by May 20th as cases continue to fall.  If the Chinese economy can fully reopen in the coming weeks that will remove a big headwind from stocks.

Economically, EU Industrial Production wasn’t as bad as feared, as IP fell –1.8% vs. (E) -2.0%.

Today the focus will be on the inflation expectations contained in the Consumer Sentiment (E: 63.7) report and if five-year inflation expectations can decline from 3%, that will be another anecdotal signal that inflation pressures have likely peaked (and it should add incrementally to this morning’s rally).     We also get two Fed speakers, Kashkari (11:00 a.m. ET) and Mester (12:00 p.m. ET), but we don’t expect them to move markets (look for them to reiterate the current Fed mantra of two more 50 bps hikes).

Update on the Three Headwinds on Stocks

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What’s in Today’s Report:

  • Update on the Three Headwinds on Stocks
  • Weekly Market Preview:  Is Inflation Finally Peaking?
  • Weekly Economic Cheat Sheet:  All About Inflation (CPI Wednesday)

Futures are sharply lower following new COVID lockdowns in China.

COVID cases in Shanghai are rising again, prompting new restrictions on movement and work.  Meanwhile, Beijing continues to suffer from limited lockdowns and this is compounding worries about global economic growth.

Geo-politically, Victory Day in Russia offered no notable news and there remains no end in sight to the Ukraine war.

Today there are no economic reports and just one Fed speaker, Bostic at 8:45 a.m. ET.  So, we should expect technicals to dominate trading and if last week’s intra-day lows are broken in the S&P 500 and we don’t get any positive news on 1) Fed hawkishness, 2) Chinese lockdowns or 3) Russia/Ukraine, we should not be shocked if the S&P 500 move closer to a test of support at 4,000.

Is the Fed’s Bark Worse than Its Bite?

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What’s in Today’s Report:

  • What the FOMC Decision Means for Markets (Is the Fed’s Bark Worse than Its Bite?)
  • EIA Analysis and Oil Outlook Update

Futures are moderately lower as markets digest Wednesday’s big post-Fed rally following a night of underwhelming economic data.

The April Chinese services PMI plunged to 36.2 vs. (E) 41.1, reflecting the economic damage from lockdowns.  In Europe, data was mixed as German Manufacturers’ Orders missed estimates while UK Services PMI beat expectations.

There are multiple Fed speakers today on financial media outlets (there are no official speeches scheduled) and don’t be surprised if they sound hawkish and push back on the post FOMC rally yesterday (this is especially true for Bullard, whose doing interviews today).

Today’s focus will be on the aforementioned Fed speakers, and again don’t be shocked if they sound “hawkish” and that causes some giveback from yesterday’s rally (but a hawkish tone won’t undo the positives from Powell’s press conference, either).

Economically, there is a BOE Rate decision and they are expected to hike 25 bps.  Domestically, the key report today is Unit Labor Costs (E: 6.8%) as that will give us a good look at total wage inflation (and if it’s higher than estimates that will be a negative).  We also get Jobless Claims (E: 178K) but that shouldn’t move markets.

Four Questions for the Selloff

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What’s in Today’s Report:

  • 4 Questions for the Selloff: Why Have Stocks Dropped to the March Lows, What’s Holding Up Best, What Makes This Stop, and How Bad Can It Get?

S&P futures are up 1% this morning as yesterday’s steep declines are digested amid upbeat earnings and guidance out of MSFT after the close yesterday (MSFT is up 5%).

Economic data was net negative overnight as Australian CPI was hotter than expected while U.K. CBI Distributive Trades and the German GfK Consumer Climate Index both badly missed estimates, however, investors are shrugging off the data as the focus is on earnings this morning.

Looking into today’s session, there are two economic reports: International Trade in Goods (E: -$105.0B) and Pending Home Sales (E: -1.1%) but neither should move markets and no Fed officials are scheduled to speak.

There is a 5-Yr Treasury Note auction at 1:00 p.m. ET that could move the bond market as yields have pulled back considerably since last week’s highs and a reversal back higher could become a headwind on stocks again, especially growth names.

Finally, the market’s main focus at the moment is earnings and we will get results from: BA (-$0.26) and HOG ($1.52) before the bell and then FB ($2.58), F ($0.39), PYPL ($0.89), QCOM ($2.91), and DFS ( $3.58) after the close. If earnings, especially by big tech companies can top estimates, a relief rally could play out as stocks are near-term oversold, however, momentum through yesterday’s close has been decidedly negative and the price action remains heavy.

Technical Update

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What’s in Today’s Report:

  • Technical Update – Bearish Price Patterns and Dow Theory Threatens to Turn Bearish

Futures are modestly lower this morning after a quiet night of news as yesterday’s big intraday reversal higher is being digested.

Today is lining up to be a busy one with a slew of economic data due to be released, in order of importance: Durable Goods (E: 1.0%), Consumer Confidence (E: 106.8), Case-Shiller Home Price Index (E: 1.5%), FHFA House Price Index (E: 1.6%), and New Home Sales (E: 772K). Investors will want to see solid data that contradicts the growing fear that the Fed is getting more aggressive with policy into an economic slowdown.

There are no Fed speakers today but there is a 2-Yr Treasury Note auction at 1:00 p.m. ET that could move the bond market and ultimately impact stocks in the early afternoon.

The market’s main focus today will be on earnings with: UPS ($2.87), PEP ($1.24), GE ($0.20), MMM ($2.33), and JBLU (-$0.85) reporting ahead of the bell while MSFT ($2.18), GOOGL ($25.63), GM ($1.57), V ($1.65), and COF ($5.39) are all scheduled to release results after the close.

Bottom line, for yesterday’s late day reversal higher in equity markets to continue today, we need to see good economic data, steady or falling bond yields, and most importantly favorable earnings, especially out of big tech names like GOOGL and MSFT.

Why Stocks Dropped Last Week (And What It Means for Markets)

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What’s in Today’s Report:

  • Why Stocks Dropped Last Week
  • Weekly Market Preview:  A Key Earnings Week (Results Need to be Good)
  • Weekly Economic Cheat Sheet (Inflation in Focus Again this Week)

Futures are moderately lower on concerns about economic growth as COVID cases rose again in China while hopes for a diplomatic solution in Ukraine have all but faded.

China is continuing with its “zero COVID” policy and with cases rising again markets are fearing more shutdowns, perhaps in Beijing, which is a negative for global growth.

Russian President Putin essentially eliminated a diplomatic solution to the war, ensuring a further drawn-out conflict, which will also be a headwind on global growth.

Today there are no economic reports and no notable Fed speakers, but worries about global growth are the reason stocks dropped last week, so markets need some positive news on growth to stabilize in the near term.

On the earnings front, this is a very important week and while the most important reports don’t come out until later this week, two reports we’ll be watching today are KO ($0.58) and WHR ($4.90).

Have the Real Headwinds on Stocks Even Started Yet?

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What’s in Today’s Report:

  • Have the Real Headwinds on Stocks Even Started Yet?
  • Weekly Market Preview:  Is Economic Growth Stable?
  • Weekly Economic Cheat Sheet:  Jobs Report Friday

Futures are little changed following a quiet weekend of news as investors await key economic data later this week.

Geo-politically, in-person peace talks between Russia and Ukraine will resume on Tuesday in Turkey and there remains some cautious optimism for progress towards a cease-fire.

Economically there were no notable reports overnight, although Shanghai is entering a two-phased COVID lockdown that weighed on oil and Chinese shares overnight (as that’s negative for economic growth and oil demand).

Today there are no notable economic reports and no scheduled Fed speakers, so focus will remain on oil (do the early declines continue?) and geo-politics, as any more hints of a cease fire will put a tailwind on stocks.