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Why Economic Data is Stronger Than it Appears

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What’s in Today’s Report:

  • Why Economic Data Is Stronger Than It Appears

Futures are drifting slightly higher following a mostly quiet night of news.

COVID headlines were mixed as Los Angeles reimposed an indoor mask mandate (negative) while President Biden said the U.S. could ease travel restrictions from Europe soon (positive).  Bottom line, concerns about the Delta variant are a market influence (mild headwind) but at this point, it’s not enough to cause a material pullback.

Economic data was minimal as EU HICP met expectations (0.3% m/m and 1.9% y/y).

Today, focus will be on economic data, specifically Retail Sales (E: -0.4%) and the inflation expectations component in Consumer Sentiment (E: 87.0).  As has been the case, markets will want “Goldilocks” results for both retail sales and inflation expectations (so strong, but not too strong).  There is also one Fed speaker, Williams (9:00 a.m. ET), but he shouldn’t move markets.

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.

Two Major Market Risks

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What’s in Today’s Report:

  • What Could Go (Really) Wrong? Two Candidates
  • Consumer Confidence Takeaways

U.S. equity futures are trading lower with most international markets while bond yields are falling amid growing concerns about the Delta variant of COVID-19.

The Stoxx 600 Travel and Leisure sector is down more than 5% WTD, underscoring market fears of new lockdowns or travel restrictions in Europe due to the Delta variant outbreak.

There was a slew of economic data from China to Europe released overnight however all of it largely met estimates and therefore is not materially moving markets this morning.

Today, focus will be on any new developments regarding the latest uptick in COVID-19 cases, fueled by the Delta variant, as well as the first look at the June jobs data via the ADP Employment Report (E: 533K) due out ahead of the bell.

There is also a report on Pending Home Sales (E: -1.0%) and two Fed speakers: Bostic (8:00 a.m. ET) and Barkin (1:00 p.m. ET), but unless there are any major surprises none of those should materially move markets.

Sevens Report Co-Editor Tyler Richey Quoted in Market Watch on June 28, 2021

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Oil prices end at a more than a 1-week low on demand concerns, OPEC+ output uncertainty

There’s a resurgence in COVID-19 fears as case counts are rising sharply in parts of Asia, while the ‘Delta variant’ of the virus is…said Tyler Richey, co-editor at Sevens Report Research. Click here to read the full article.

Important Economic Data This Week

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What’s in Today’s Report:

  • Weekly Market Preview:  Is the Recovery Losing Momentum?
  • Weekly Economic Cheat Sheet:  Jobs Report Friday, Global PMIs Thursday (Two Important Reports)

Futures are slightly lower following a weekend of mixed macro-economic news.

On infrastructure, President Biden reaffirmed his support for the bipartisan bill, reversing Friday’s stance that he’d only sign it as part of a larger infrastructure program.  But, at this point, the entire process remains fluid, and markets don’t expect any final bills anytime soon (although we should prep for more “corporate tax hike” headlines, although that remains ultimately unlikely).

COVID trends deteriorated slightly over the weekend with Australia and South Africa re-implementing lockdowns following an increase in cases of the “delta” variant but so far this isn’t an issue in the U.S. (so it’s not directly impacting markets).

Today there are no notable economic reports but there are three Fed speakers including Williams (9:00 a.m.ET), Harker (11:00 a.m. ET) and Quarles (1:10 p.m. ET), and if their comments are more hawkish than expected it will be a slight headwind on stocks.  On infrastructure, expect more headlines but again the market doesn’t expect anything passing anytime soon, so they won’t be material influences on the markets.

Why Did Cyclicals Collapse Yesterday?

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What’s in Today’s Report:

  • Why Did Cyclicals Collapse Yesterday? (Reflation vs. No-Flation)

Futures are slightly lower following a generally quiet night of news.

Economic data was mixed overnight as UK Retail Sales missed estimates (-1.4% vs. (E) 1.8%) while both Japanese and German inflation metrics (CPI and PPI) slightly beat estimates.

The Bank of Japan made no change to policy and extended its COVID lending programs by 6 months (as expected).

Today there are no Fed speakers and no notable economic reports so focus will be on the “micro-economic” and whether we see a continuation of the large tech outperformance from yesterday. Also, there is a quadruple witching options expiration today which will cause large volumes (and possibly volatility) into the close.

Tom Essaye Quoted in Yahoo Finance on June 10, 2021

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Stock market news live updates: Stocks rise, S&P 500 hits record despite hotter-than-expected inflation data

In the past two months, everything the market priced in has essentially happened. COVID is effectively over here in the United States, we’re not getting…Tom Essaye, president of Sevens Report Research, told Yahoo Finance on Wednesday. Click here to read the full article.

Tom Essaye Quoted in Nasdaq on March 17, 2021

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Already Up 130%, This ETF Is Set to Soar Post-COVID

“Now, with COVID ending and the labor market improving, it stands to reason that people who receive a check but that also might now be experiencing financial hardship will…” said Tom Essaye, editor of the Sevens Report. Click here to read the full article.