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Deteriorating Economic Data

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What’s in Today’s Report:

  • Economic Breaker Panel – Deterioration in June

S&P futures are down roughly 10 points as the recent melt-up rally continues to be digested ahead of key inflation data in the U.S. while trade headlines were negative overnight.

Trade sentiment deteriorated over the last 12 hours as expectations of a G20 deal are fading while protests in Hong Kong over an extradition bill pressured the Hang Seng to fall nearly 2%.

Economically, Chinese CPI and PPI met estimates overnight while Japanese Machine Orders rose 5.2% vs. (E) 0.5% helping the Nikkei outperform with a loss of just 0.35%.

Today’s focus will be on inflation data due out ahead of the bell: CPI (E: 0.1%). There are no other notable reports due to be released and no Fed officials are scheduled to speak today.

The digestive tone will likely continue as the blistering rally of the last week was overdone however the “pain trade” remains higher and if the CPI print is soft, we could see another run back to and potentially through 2900 in the S&P today.

Trade War Update (After Tariff Increases)

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What’s in Today’s Report:

  • Tariff/Trade War Update

Futures are marginally weaker as the U.S. increased tariffs on Chinese imports, as expected.

Positively, the trade talks will continue today, and the consensus market outlook remains that a deal does get done, likely in the next few weeks.

Away from trade, economic data was solid.  Japanese Household Spending, British GDP and UK Industrial Production all beat estimates.

Today most of us will spend the day watching for any trade related headlines, and there are likely to be plenty.  But, barring a total breakdown in negotiations, trade shouldn’t be too big of a negative on markets today.

Away from trade, we also get the most important economic data point of the week:  CPI (E: 0.4%).  PPI was more firm than it seemed, and if CPI is also firm then that will reduce the possibility of a preventative Fed rate cut, which will be another headwind on stocks.  Finally, there are multiple Fed speakers today: Brainard (8:30 a.m. ET), Bostic (9:05 a.m. ET), Williams (10:00 a.m. ET) but none should move markets.

Tom Essaye Quoted in Barron’s on April 3, 2019

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The Dow Rose 39 Points After a Late Comeback

Economic data clearly remain soft on an absolute level, wrote Tom Essaye of Sevens Report on Wednesday. “There is now a laundry list of economic indicators that are flashing their worst readings since 2016…” Click here to read the full article.

The Right Sectors To Own If There’s A Rebound In Growth

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Today’s Report is attached as a PDF.

What’s in Today’s Report:

  • The Right Sectors To Own If There’s A Rebound In Growth

Futures are slightly higher following a generally quiet night as markets wait for this morning’s jobs report.

President Trump said he hoped the U.S./China trade deal would be done in the next four weeks, which again generally meets markets expectations.

Economic data was sparse but German Industrial Production rose 0.7% vs. (E) 0.5%, somewhat offsetting Thursday’s disappointing German Manufacturers’ Orders report.

Today the focus will be on the jobs report and the expectations are as follows:  Jobs Adds 170K, UE Rate 3.8%,  Wages 3.4% yoy.

The best outcome for stocks today would be a jobs number in the mid 100k range (not too strong, but not too weak), positive revisions to the February data and a wage number below 3.5% yoy.  That outcome likely can spark a further rally.  Conversely, any extremes on the job adds (very good or very bad) along with another hot wage number may lead to profit taking in stocks on fears of slowing growth or a more hawkish Fed.

Bigger Picture on Economic Data

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What’s in Today’s Report:

  • Bigger Picture on Economic Data

Futures are solidly higher this morning, tracking gains in international markets led by Chinese shares thanks to strong economic data and more progress on trade.

Several news outlets reported overnight that up to 90% of a trade deal is done as China’s vice premier Liu He travels to D.C. to continue mid-high level trade talks today.

Economically, the Caixin Chinese Service PMI beat expectations jumping to 54.4 in March, a 14 month high, while the EU Service PMI rose to 53.3 vs. (E) 52.7. Both releases helped ease concerns about recently underwhelming economic data.

Looking into today’s session, there are a few catalysts to watch for. First, the ADP Employment Report (E: 165K) will be releases ahead of the open, kicking off “jobs week” in the U.S. and then the ISM Non-Manufacturing Index (E: 58.0) will hit shortly after the bell. Investors will look for both of these numbers to track the encouraging releases overseas last night.

Additionally, there is one Fed speaker before the open: Bostic (8:30 a.m. ET) and Kashkari will speak after the close (5:00 p.m. ET). Lastly, with U.S.-China trade optimism driving a good portion of the pre-market gains, any news out of Washington will have the potential to materially move markets today.

Economic Data Takeaways

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What’s in Today’s Report:

  • Bottom Line – “Pump the Breaks”
  • Retail Sales and ISM Manufacturing Takeaways

Futures are flat and international shares were mildly higher overnight as yesterday’s sizeable rally in the U.S. was digested amid a slight pullback in bond yields.

The Reserve Bank of Australia was the latest central bank to note downside risks in the global economy overnight.

Economically, Eurozone PPI was a mild miss: 0.1% vs. (E) 0.2% in February but inflation has been subdued and the report does not change the outlook for ECB policy.

Today, Motor Vehicle Sales (E: 16.8M) will begin to come in over the course of the morning while there is one notable economic report ahead of the open: Durable Goods Orders (E: -1.8%). There are no Fed speakers today.

With a lack of material catalysts between now and Friday’s jobs report, macro focus will be on U.S. – China trade negotiations and the bond market. If Treasury yields revisit last week’s lows, stocks will have a hard time holding the strong gains of the last few sessions, so watch bonds closely.

A Glass Half Full Market

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What’s in Today’s Report:

  • Why This Is a Glass Half Full Market (For Now)
  • Why GE and Chinese Economic Data Were Important Yesterday

Our regular editor is out today so my apologies for any uptick in typos.

Futures are modestly higher following more optimistic chatter on U.S./China trade and Chinese economic growth.

Chinese officials again reiterated support for their economy overnight and that, combined with renewed optimism for a U.S./China trade deal, sent futures higher.  But, I do want to point out that nothing materially new happened overnight – it was jus more of the same commentary we’ve seen for the past month or so.

There were no notable economic reports overnight.

Today focus will be on economic data as we get our first look at March activity via the Empire State Manufacturing Survey (E: 10.0) along with Industrial Production (E: 0.4%), Consumer Sentiment E: 95.0) and January JOLTS (E: 7.155M).  Again, the stronger the data, the better for stocks.

Finally, today is “Quadruple Witching” options expiration so don’t be surprised by some volatility, especially into the close.

A Make Or Break Month Ahead

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What’s in Today’s Report:

  • Why March Will Be A Make Or Break Month For The 2019 Rally
  • The Q4 GDP Report – Why It Wasn’t As Strong As It Seemed

Futures are moderately higher thanks to strength in Asia and generally in-line economic data.

Chinese shares are up 1% because index firm MSCI announced it will increase the weighing for mainland Chinese stocks to 20% from the current 5%.

Economically, global Feb manufacturing PMIs largely met estimates as the EU number rose to 49.3 vs. (E) 49.2. while the British reading was in-line at 52.0.

Today focus will be on data as we get two important economic reports.  First, the Fed’s preferred measure of inflation, the Core PCE Price Index (E: 0.2% m/m, 1.9% y/y) is released, and that year over year number needs to stay around 2% to continue the “dovish Fed” narrative.  Later, we get the Feb. ISM Manufacturing PMI (E: 55.0) and it needs to meet expectations to help offset some of the poor data from February (retail sales, etc.).

Sector Value and Performance

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What’s in Today’s Report:

  • Sector Valuations and Performance Since the Breakdown

Stock futures are trading higher again this morning thanks to ongoing improvement in US-China trade war sentiment as Brexit drama and the threat of a potential US government shutdown continue to be largely shrugged off.

Huawei’s CFO was released on bail in Canada which was a market positive and Trump also told Reuters he may intervene in the case if it would help with a trade deal.

Economic data overnight was mixed but did not move markets as focus remained on trade.

Looking into today’s Wall Street session, focus will be on U.S. inflation data early with CPI due out ahead of the bell (E: 0.0%).

Beyond that release, the list of scheduled catalysts is thin as there are no Fed officials speaking or other economic reports which will leave traders focused on any further trade war developments.

Updated Market Outlook Post Pullback

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What’s in Today’s Report:

  • Putting the Pullback In Context (We’ve Seen Something Similar Twice This Year)
  • Weekly Market Preview (All About Earnings and Data)
  • Weekly Economic Cheat Sheet (Market Needs a Confidence Boost)

Futures are moderately lower following a generally quiet weekend, as markets digest Friday’s bounce.

Nothing outright negative occurred over the weekend to cause the resumption of selling. But, there was no improvement in any macro headwinds either and as such markets are digesting Friday’s gains.

There were no notable economic reports overnight.

Today focus will turn towards economic data and we get two important reports: Retail Sales (E: 0.6%) and Oct. Empire Manufacturing Survey (E: 19.3).  Strong readings will give the market a needed boost of confidence as they’ll remind investors the economic remains strong.

On the earnings front, activity picks up starting tomorrow but there are two notable reports today:  BAC (E: $0.62), SCHW (E: $0.64).