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Are Higher Taxes a Risk to the Rally?

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What’s in Today’s Report:

  • What the Capital Gains Tax Headline Means for Markets

WatFutures are modestly higher thanks to better than expected global economic data.

Economic data was good overnight as global flash manufacturing PMIs beat estimates in Japan (53.3 vs. (E) 52.7), the EU (63.3 vs. (E) 62.3) and the UK (60.7 vs. (E) 59.1).  Additionally, UK Retail Sales also beat expectations (7.2% vs. (E) 4.2%), and in sum the data implies the global economic recovery is gaining momentum (which is a positive).

Today the key report will be the April Flash Composite PMI (E: 59.5), but markets will also be looking for more clarity on proposed tax increases from the Biden administration.  We also get New Home Sales (E: 887K) but that shouldn’t move markets.

On the earnings front, some reports we’re watching today include:  AXP ($1.68), SLB ($0.19), HON ($1.80).

April Economic Breaker Panel: Is the Economy Set to Overheat?

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What’s in Today’s Report:

  • April Economic Breaker Panel: Is the Economy Set to Overheat?
  • EIA Analysis and Oil Update

Futures are moderately higher following a solid start to earnings season (GS/WFC/ABB/TSMC/LVMH all posted good results) and ahead of a lot of economic data later today.

Speaking of today’s data, the key reports to watch today are (in order of importance):  Jobless Claims (E: 695K), Empire State Manufacturing Index (E: 17.0), Philadelphia Fed Manufacturing Index (E: 43.0), Retail Sales (E: 5.6%) and Industrial Production (E: 2.8%).  As has been the case, markets will want to see solid activity to imply the economic recovery is on-going, but also no hints of building inflation pressures.

There are also several Fed speakers including Bostic (11:30 a.m. ET), Daly (2:00 p.m. ET) and Mester (4:00 p.m. ET).  Yesterday Vice Chair Clarida got more forcefully dovish, so we’ll see if that sentiment is echoed by other Fed members today.

Finally, earnings season continues to roll on and we get several notable reports this morning including: BAC ($0.65), C ($2.56), TSM ($0.95), PEP ($1.12), UNH ($4.41), DAL (-$2.94), AA ($0.48), PPG ($3.67).

Election Roadmap

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What’s in Today’s Report:

  • Election Roadmap

Stock futures are rising with global shares this morning as the U.S. election comes into focus after a mostly quiet night of news.

There were no notable economic reports or market-moving COVID-19 developments overnight leaving investors focus almost exclusively on today’s election.

There are two economic reports today: Motor Vehicle Sales (E: 16.5M) and Factory Orders (E: 0.6%) but neither should move markets and no Fed officials are scheduled to speak ahead of this week’s FOMC meeting.

There are a few notable earnings releases to watch today that could influence sector trading: MCK ($3.87), HUM ($2.86), SYY ($0.20), and PRU ($2.69) but none of the quarterly reports are likely to have a significant impact on the broader market.

Today, the election will clearly be in the forefront of investor focus, specifically how close the races in key swing states turn out to be. Ultimately, the markets want clarity, and the main threat to risk assets this week is the emergence of a contested election, so if races are tight enough for campaigns to sue to halt or extend recounts, expect a reversal of this morning’s rally and potentially significant risk-off money flows in the sessions ahead.

Tom Essaye Quoted in SwissInfo.ch on October 22, 2020

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“Earnings are heating up and they are generally coming in healthy and better than expected. But with the stimulus saga dragging on and the election…” Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter, wrote in a note. Click here to read the full article.

Tom Essaye

A Familiar Question: 1998 or 2000?

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What’s in Today’s Report:

  • Stimulus Negotiations Update
  • A Familiar Question: 1998 or 2000? (Yield Curve Update)

Stock futures are flat after wavering between gains and losses overnight as investors hold out hope for a last minute stimulus bill while COVID-19 cases continued to rise around the globe.

There were no notable economic releases overnight and no major data points are due to be released today.

Looking into today’s session the lack of economic data will leave investors interested in Fed chatter with several officials speaking over the course of the day: Brainard (8:50 a.m. ET), Mester (10:00 a.m. ET), Kaplan, Daly, & Kashkari (12:00 p.m. ET), Barkin (1 p.m. ET).

Earnings will also continue to be closely watched with multiple notable reports due to be released today: VZ ($1.22), WGO ($0.90), AN ($1.63), TSLA ($0.58), CMG ($3.44), CSX ($0.93), and DFS ($1.63).

While the aforementioned factors will continue to be monitored by investors today, stimulus remains by far the most important influence on markets right now and any progress towards a sizeable, market friendly deal that is actually passable in the near term could trigger a big rally in stocks. Conversely, if talks fall apart and the timeline for a deal is pushed back, we could see stocks begin a potentially steep pullback on the news.

Tom Essaye Interviewed with TD Ameritrade Network on August 24, 2020

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Tom Essaye interviewed with Ben Lichtenstein from TD Ameritrade Network to discuss consumer-oriented earnings, treasury, stocks, and more…Click here to watch the full interview.

The Yield Curve Is Still Bullish on Stocks

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What’s in Today’s Report:

  • ISM Manufacturing Index Takeaways
  • The Yield Curve Is Still Bullish on Stocks

U.S. equity futures are churning lower this morning after a mostly quiet night of news as investors digest yesterday’s strong start to the month of August and continue to wait for details regarding the next stimulus package.

Economically, eurozone PPI rose 0.7% vs. (E) 0.5% in June helping support a modest bounce in the euro vs. the dollar this morning.

Today, there are two economic data points due to be released: Motor Vehicle Sales (14.0M) and Factory Orders (E: 5.2%) while no Fed officials are scheduled to speak today.

On the earnings front, there are a few notable reports today including: BP (-$0.99), BYND (-$0.01), ALL ($1.41), and PRU ($1.72) but none of those should materially move markets as investors will remain focused on the stimulus talks on Capitol Hill while the July labor market statistics, which begin to hit tomorrow, are also coming into focus.

What the Fed Decision Means for Markets (Positive but not a Silver Bullet)

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What’s in Today’s Report:

  • What the Fed Decision Means for Markets (Positive, But Not a Silver Bullet)

Futures are lower following disappointing headlines on U.S. stimulus progress, combined with profit taking ahead of multiple important market catalysts coming today.

U.S. stimulus bill talks were said to be at an “impasse” late Wednesday, and that’s weighing on sentiment (although this drama is to be expected, as we cautioned last week, and a deal is still very much expected by mid- August).

Economically, German Q2 GDP missed estimates (-10.1% vs. (E) -9.4%), which is a reminder just how much damage was inflicted on the global economy in Q2.

As mentioned, one of the reasons futures are weaker this morning is book squaring ahead of several important economic and earnings events today.

First, the most important economic report of the day is Jobless Claims (E: 1.38M).  We address this more in the Report, but there are growing signs the U.S. economic recovery is pausing or stalling, and that’s not priced into stocks above 3200 in the S&P 500.  If we see another notable increase in weekly claims (say through 1.5M) that will amplify fears the recovery is stalling and likely weigh on stocks.

Then, on the earnings front, we get four of the most important stocks in the market announcing results after the close: AMZN (E: $1.75), AAPL (E: $1.99), FB (E: $1.44), GOOGL (E: $8.43).  The earnings results will be “fine” but these stocks have had huge runs, and if they disappoint vs. elevated expectations, just due to these stocks weights in the S&P 500, it could pressure markets after hours.

Finally, today we will get the initial look at Q2 GDP, and it will be historic as it’s estimated to be -35% seasonally adjusted annual rate (remember GDP is usually around 2% saar).  I never in my life thought we’d see such a number, and I hope we don’t ever see it again.  But, today history will be made as the worst GDP print ever.

What’s Next for the Oil Market?

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What’s in Today’s Report:

  • Oil Market Outlook: Supply, Demand, and COVID-19
  • Economic Data Takeaways

Stock futures are modestly higher this morning while international markets were mixed overnight as investors weigh a fresh record number of new coronavirus cases in the U.S. against economic data that was mostly upbeat this week.

NFLX is notably down 7% in pre-market trade after the company reported disappointing Q2 results yesterday.

Economically, Eurozone HICP met expectations in June, rising 0.3% but the report did not materially move markets overnight.

Today,  investor focus will be on earnings early with three more notable financial companies reporting before the bell: ALLY ($0.33), BLK ($6.90), and CFG ($0.17).

Then there are two economic reports due out this morning: Housing Starts (E: 1.190M), and Consumer Sentiment (E: 79.3) while no Fed officials are scheduled to speak.

Bottom line, markets began to trade with a more cautious tone over the course of the week but for now, upbeat economic data has been able to offset rising new cases of COVID-19 in the U.S. and as long as underlying sentiment remains largely optimistic, stocks should be able to maintain or extend gains into the weekend today.

Economic Breaker Panel: July Update

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What’s in Today’s Report:

  • Economic Breaker Panel: July Update
  • Industrial Production and Empire State Manufacturing Survey Takeaways

Stock futures are trading lower today as new COVID-19 cases approached a record high Wednesday threatening the prospects for a continued global economic recovery.

Economically, Chinese data was mostly upbeat overnight with GDP, FAI, and Industrial Production all topping estimates however the nation’s June Retail Sales report missed expectations, causing a 4.5% pullback in the Shanghai Composite Index and general risk-off money flows around the globe.

Today, investors will be focused on Q2 earnings early with: BAC ($0.28),  MS ($1.17), JNJ ($1.50), and TSM ($0.73) all due to report before the bell while NFLX ($1.84), PPG ($0.72), and JBHT ($0.84) will all release quarterly results after the close.

Following the morning wave of earnings reports, focus will shift to economic data with: Jobless Claims (E: 1.323M), the Philadelphia Fed Survey (E: 20.0), Retail Sales (E: 5.3%), and Housing Market Index (E: 60) all scheduled to be released today (the first two reports will receive the most attention).

Beyond earnings and economic data, there are two Fed officials speaking today: Williams (11:10 a.m. ET) and Evans (1:30 p.m. ET) while the market will remain very sensitive to any news regarding rollbacks in the reopening process (bearish) as well as positive vaccine developments (bullish).