What Market Bulls Are Assuming

What’s in Today’s Report:

  • What Market Bulls Are Assuming
  • Weekly Market Preview
  • Weekly Economic Cheat Sheet (Are Jobless Claims About to Rise Again?)

Futures are sharply higher thanks mostly to momentum from a big rally in Chinese stocks.

The Shanghai Composite surged nearly 6% on Monday, despite the lack of a discernable, positive catalyst.  Growing confidence in the economic recovery combined with a flood of retail investment fueled the stock gains.

In the U.S., coronavirus cases continued to rise over the weekend, although there was no material acceleration from the pace of the past several days.

Today the key economic report is the June ISM Non-Manufacturing PMI (E: 49.0), and if that can break above 50 that will be further confirmation that the economic recovery is happening faster than most thought possible (and it should be a tailwind on stocks).  Additionally, the White House has teased an announcement today of positive developments in treatment of the coronavirus, although the exact timing of this announcement, and what exactly it entails, is unclear.

Are There New Tailwinds for Stocks?

What’s in Today’s Report:

  • Are There New Tailwinds for Stocks?
  • Weekly Economic Cheat Sheet

U.S. equity futures are trading higher with global markets today amid investor optimism for reopenings and reports of further progress on COVID-19 treatments/vaccines.

Novavax was the latest company to begin human testing for its coronavirus vaccine over the weekend which is helping drive risk-on money flows this morning.

Today, there are several economic reports due to be released: S&P Corelogic Case-Shiller HPI (E: 0.3%), FHFA House Price Index (E: 0.6%), Consumer Confidence (E: 88.3), and New Home Sales (E: 495K).

Additionally, there is one Fed official scheduled to speak: Kashkari (1:00 p.m. ET) and the Treasury will hold a 2-Yr T-Note auction at 1:00 p.m. ET.

Beyond those potential catalysts, investor focus will remain on the economic reopening process around the globe and any additional information regarding potential COVID-19 vaccines or treatments.

Why Are Stocks So Resilient (And Can It Continue?)

What’s in Today’s Report:

  • Why Are Stocks So Resilient (And Can It Continue?)
  • Weekly Market Preview:  More re-openings and stimulus this week?
  • Weekly Economic Cheat Sheet:  Claims still key, but Friday’s data is also important.

Futures are modestly lower following a quiet weekend as markets digest last week’s gains.

Economic data from China continued to come in better than feared, as New Yuan Loans grew 11.5% vs. (E) 10.3% while auto sales declined just –5.5% in April compared to –40% in March.

The Chinese data continues to sew hopes for a relatively quick, “V” shaped economic recovery in the U.S., and that expectation is helping to support stocks.

Today there are no notable economic reports and just one Fed speaker, Evans (3:30 p.m. ET), so headlines on economic re-openings and a potential additional stimulus bill should drive markets (if the re-opening headlines are good and prospects for another stimulus bill continue to rise, markets should be able to continue to digest the recent rally).

Normal Pullback or Something Bigger?

What’s in Today’s Report:

  • Normal Pullback or Something Bigger?
  • Weekly Market Preview
  • Weekly Economic Cheat Sheet (Three Big Reports This Week)

Futures are bouncing modestly following Friday’s selloff.  The weekend was a quiet one from a market standpoint.

The Wuhan virus situation didn’t change (the virus continues to spread) but there are reports that existing anti-viral drugs are helping to treat the disease (a small positive).

Economically, The EU and British manufacturing PMIs slightly beat estimates, but still remain weak on an absolute basis (47.9 and 50.0 respectively).

Today the key economic report is the January ISM Manufacturing PMI (E: 48.7), and following Friday’s bad Chicago PMI, the market needs a decent number to help reassure investors the U.S. economic remains on solid footing.  There’s also one Fed speaker, Bostic at 4:30 p.m. ET, but he shouldn’t move markets.

Regarding any Wuhan headlines, the key remains whether they will add more pressure to global growth.  If we hear about more plant closures/flight & travel restrictions, etc. that will pressure stocks.

The First Two Important Events of the Year (Both This Week)

What’s in Today’s Report:

  • The First Two Important Events of 2020 (Both This Week)
  • Weekly Market Preview
  • Weekly Economic Cheat Sheet (Important Updates on Growth)

Futures are moderately higher following a quiet weekend and ahead of two important events this week:  Phase one signing ceremony (Wed) and the start of earnings season.  Futures are essentially recouping Friday’s losses.

U.S./China trade optimism is helping stocks rally as the U.S. and China will resume semi-annual meetings, something that was done in the Bush/Obama administrations.   This doesn’t impact trade directly, but just like in 2019, any generically positive U.S./China headline will result in at least a mild rally.

Economic data was soft as British GDP (-0.3% vs. (E) 0.0%) and manufacturing (-1.7% vs. (E) -0.3%) both missed estimates, although the soft data is only weighing on the Pound.

Today there are no notable economic reports and just two Fed speakers, Rosengren (10:00 a.m. ET) and Bostic (12:40 a.m. ET), and they won’t move markets.  So, investors will be looking for any hints as to what will be released at the U.S./China phase one signing ceremony on Wednesday, and the more specifics, the better.

Was the Jobs Report an “All Clear” on the Economy?

What’s in Today’s Report:

  • Was the Strong Jobs Report an “All Clear” on the Economy?
  • Weekly Market Preview:  What Happens on December 15th?
  • Weekly Economic Cheat Sheet:  A Busy Week or Reports (They Start on Wednesday)

Futures are slightly lower as markets digest Friday’s big rally following a generally quiet weekend.

On U.S./China trade, there was no new news, although China released a statement saying it wanted to make a deal “as soon as possible.”

Economic data was again mixed, as Chinese exports missed estimates (1.3% vs. (E) 1.9%) while German exports beat expectations (1.2% vs. (E) -0.3%.  But, neither number is moving markets.

Today there are no notable economic reports and no Fed speakers (they are in their blackout period ahead of Wednesday’s decision) so focus will again be on any updates on U.S./China trade.

The December 15th tariff increases are the last “big” event of 2019 and markets fully expect those to be delayed, so any confirmation of that should be a mild tailwind on stocks.  Conversely, any hints the tariffs might go into effect will hit markets, potentially hard.

Why Markets Are Still So Resilient

What’s in Today’s Report:

  • Why Markets Remain So Resilient
  • Weekly Market Preview (Still All About U.S./China Trade)
  • Weekly Economic Cheat Sheet (Wednesday is the Key Day This Week)

Futures are modestly higher on more positive U.S./China trade chatter.

China increased the penalties for Intellectual Property (IP) theft, addressing part of a key U.S. trade demand, while the Global Times (a state-run Chinese paper) said the sides were “very close” to a deal.

Economically, data was mixed but better than October.  German IFO Business Expectations rose to 92.1 vs. (E) 92.5, while British Distributive Trades rose to –3 vs. (E) –10.

Today there are no notable economic reports so the focus will remain on U.S./China trade.  Any incremental positive chatter will be a tailwind for stocks, although the Hong Kong democracy bill remains a wildcard.  If Trump signs it (which he’s expected to do), that could temporarily hit U.S./China trade sentiment, although it’s not a material negative.

Finally, Fed Chair Powell speaks at 7:00 p.m. ET but he’s not expected to say anything too incremental.

An Analogy To Explain This Market (Investors Loved It)

What’s in Today’s Report:

  • An Analogy to Help Explain This Market (Investors Loved It)
  • Weekly Market Preview (Trade and Data Remain the Focus)
  • Weekly Economic Cheat Sheet (Global Growth Updates This Week)

Futures are modestly higher as global markets extended Friday’s jobs report and trade-driven rally.

On trade, U.S. and Chinese officials again repeated that substantial progress has been made on Phase One, while Wilbur Ross downplayed chances of auto tariffs (something that wasn’t ever priced into the market but was a peripheral risk).

Economically, EU and British manufacturing PMIs slightly beat estimates but remained in contraction territory (45.9 and 44.2 respectively).

Today there is one economic report, Factory Orders (E: -0.5%), and normally I don’t follow it, but it’ll give us greater insight into the current state of business spending, so a better than expected reading there will be a positive.  Additionally, there is one Fed speaker, Daly (3:05 p.m. ET) but she won’t move markets as Clarida and Powell made future Fed policy very clear last week – they’re done cutting barring an economic rollover.

What the U.S./China Trade Deal Means for Markets

What’s in Today’s Report:

  • What the U.S./China Trade Deal Means for Markets
  • Weekly Market Preview (All About Earnings)
  • Weekly Economic Cheat Sheet (Important Growth Data This Week)

Futures are modestly lower following reports that China wants “more talks” before signing phase one of Friday’s “deal.”

More broadly, there is some disappointment with Friday’s announcement as it does not provide material tariff relief or trade clarity (more on that in the issue).

Economically, Chinese exports missed estimates falling –3.2% vs. (E) -3.0% and that’s also weighing on sentiment as markets still need global growth to stabilize.

Today is the Columbus Day holiday so there are no economic reports or Fed speakers while banks and the bond markets are closed.  Given that, we can expect any U.S./China trade related headlines to again drive markets until the focus shifts to earnings tomorrow.

Is It Too Late for a Trade Truce?

What’s in Today’s Report:

  • Is It Too Late for a Trade Truce?
  • Weekly Market Preview (All About U.S./China trade)
  • Weekly Economic Cheat Sheet

Futures are modestly lower on digestion following Friday’s big rally, although there was also more soft economic data and a slightly negative U.S./China trade article.

German Manufacturers’ Orders missed expectations, falling -0.6% vs. (E) -0.4% and it’s yet another disappointing global manufacturing datapoint.

A Bloomberg article Sunday afternoon was a mild negative as it lowered expectations for a broad trade deal at this week’s talks, but there was no new news revealed.  To that point, we need to all brace for an avalanche of U.S./China trade headlines as we approach the Thursday start of senior-level talks, but cutting past the noise, the expectation is for a “Trade Truce” so anything that contradicts that expectation will be a negative for markets.

Today there is no notable economic data and two Fed speakers: Kashkari (10:20 a.m. ET) and Powell (1:00 p.m. ET).  Powell is clearly the more important of the two, but he’s giving opening remarks at a movie screening about the Fed (seriously) so I don’t think he’ll say anything market moving.