Posts

Second Half Outlook

/in , /by

What’s in Today’s Report:

  • Second Half Outlook
  • Weekly Economic Cheat Sheet

Stock futures are little changed with investors focused on OPEC+’s failure to reach a new output policy agreement yesterday while economic data was mixed overnight.

OPEC+ called off a follow-up meeting yesterday after the UAE would not agree to extending production cuts through 2022 which drove oil to new multi-year highs in overnight trading as current cuts will remain in place by default, deepening supply deficit expectations for the second half of the year.

Economically, Final Composite PMI reports were mostly as expected while EU Retail Sales topped estimates but none of the data materially moved markets overnight.

Today, there is just one notable economic report to watch: ISM Services Index (E: 63.5), and no Fed officials are scheduled to speak. That will leave investors focused on the oil market in the wake of the OPEC+ developments as well as awaiting any news on infrastructure as the calendar is otherwise fairly quiet as we start the holiday-shortened trading week today.

Why Did Cyclicals Collapse Yesterday?

/in , /by

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.

Why Treasury Yields Keep Falling

/in , /by

What’s in Today’s Report:

  • Why Treasury Yields Keep Falling

Futures are slightly higher on some mild infrastructure optimism.

A group of 10 bipartisan Senators reached a compromise on an infrastructure bill worth about $1T total that includes $600 billion of new spending over 5-8 years and contains no corporate tax hikes.   But, this compromise is still very unlikely to ever become law, mainly because the spending is paid for via an increase in the gas tax, which Democrats have previously been against.

Economic data underwhelmed as UK Industrial Production (1.3% vs. (E) 1.2%) and UK GDP both missed estimates.

Today focus will be on Consumer Sentiment (E: 84.0) and specifically inflation expectations, and if we see a big rise in the one and five year inflation expectations that could cause a rally in Treasury yields, which would pressure stocks.  However, barring that event, the path of least resistance for markets right now is higher.

A Market Still In Search of a Catalyst

/in , /by

What’s in Today’s Report:

  • Why This Market Still Needs A Positive Catalyst
  • Weekly Market Preview (Fed anticipation and Inflation)
  • Weekly Economic Cheat Sheet (Inflation Thursday and Employment Data Are Key)

Futures are slightly lower on underwhelming economic data and as markets digest last week’s rally.

Economic data was slightly disappointing as Chinese exports missed expectations (27.9% vs. (E) 32.1%) as did German Manufacturers’ Orders (-0.2% vs. (E) 1.0%).

The G-7 agreed in principle to a global minimum corporate tax and that is weighing slightly on global markets.  But, investors view implementation of the tax as taking a very, very long time (if it ever actually happens).

Today there are no notable economic reports and no Fed speakers so focus will be on any apparent infrastructure progress, although at this point any infrastructure deal likely won’t be big enough to provide material stimulus to the economy (and push markets higher).

Too Much Stimulus?

/in , /by

What’s in Today’s Report:

  • Is There Such a Thing As Too Much Stimulus?
  • Is the Market Starting to Price in a Future Less-Dovish Fed?

Stock futures are flat and bond markets are trading in an orderly manner this morning as investors await details on President Biden’s infrastructure plan amid end of month and quarter positioning money flows.

Economic data was mostly positive overnight as China’s CFLP Manufacturing PMI came in at 51.9 vs. (E) 51.0 while German Unemployment met estimates at 6.0% and the Eurozone HICP Flash for March was 1.3% vs. (E) 1.3%.

Today, we will get our first look at March jobs data via the ADP Employment Report (E: 500K) and the market will be looking for a number that is not “too hot” to cause another leg higher in bond yields which would weigh on tech stocks but not too underwhelming to suggest the recovery in the labor market is beginning to lose momentum.

There is one other second tiered economic report: Pending Home Sales Index (E: -3.0%) and one Fed official scheduled to speak: Bostic (10:45 a.m. ET) but neither should move markets.

The main focus of the market today will be Biden’s two-part infrastructure plan which is expected to top $4T total and how the Administration and Congress plan to pay for it (higher taxes). If the plans push yields higher, expect some pressure on equities with tech underperforming however stocks are also susceptible to volatility linked to end of month/quarter positioning today.

Stimulus Update (Why The Market Still Expects It to Pass)

/in , /by

What’s in Today’s Report:

  • Stimulus Update (Why the Market Still Ultimately Expects It to Pass)
  • Economic Data – A Mixed Picture
  • EIA Analysis and Oil Market Update

Futures are marginally higher following a mostly quiet night, as the fate of the stimulus bill remains unresolved.

The stimulus bill remains up in the air as Trump has neither vetoed nor signed the bill, but while that could result in a temporary government shutdown on Monday, ultimately markets expect the bill to pass.

Regarding Brexit, the EU and UK are expected to formally announce a post Brexit trade deal later today, although as we and others have consistently said, this was always the expected outcome and as such it’s not generating much markets reaction.

There are no economic reports today and no Fed officials are scheduled to speak, so stimulus headlines will drive trading (anything that implies passage of the bill will be positive, while no news or negative news will obviously be a short term negative).

Finally, stock markets will close at 1:00 p.m. today.  Please have a safe and joyous holiday weekend.

Is Stimulus the New QE?

/in , /by

What’s in Today’s Report:

  • Is Stimulus the New QE?
  • Economic Data:  Jobless Claims Hit a Low for the Recovery

Futures are moderately lower following a disappointing night of earnings.

Super cap tech earnings were fine in general but didn’t meet lofty expectations, and AAPL, AMZN, FB and TWTR all dropped after posting results after the close.  GOOGL was the only major tech stock to rally after earnings, and that tech weakness is why futures are lower this morning.

Politically, it was a quiet night and according to the polls the Blue Wave remains the likely election outcome.

Today there are a few notable economic reports, including Core PCE Price Index (E: 1.7%), which is the Fed’s preferred measure of inflation, as well as Employment Cost Index (E: 0.6%) and Consumer Sentiment (E: 81.2).  But, they shouldn’t move markets unless there’s a major surprise in the inflation data.

Instead, focus today will remain on the latest polls (does the race tighten?  If so that will weigh on stocks modestly) and coronavirus response (do we get more lockdowns?).

Market Multiple Table: August Update

/in , /by

What’s in Today’s Report:

  • Market Multiple Table: August Update

Futures are rallying on optimistic comments from Secretary Mnuchin about a new stimulus deal being reached by the end of the week as well as upbeat economic data.

Composite PMIs were mostly in line with expectations overnight but EU Retail Sales notably rose 1.3% vs. (E) 0.2% Y/Y in June, a recovery to pre-pandemic levels that is rekindling hopes for a V-shaped economic recovery.

This morning, investor focus will be on economic data early as we get the first look at July jobs data via the ADP Employment Report (E: 1.888M) ahead of the bell while International Trade (E: -$50.3B) and the ISM Non-Manufacturing Index (E: 55.0) will both be released after the open.

Earnings season is still in full swing as well with several companies due to report Q2 results today including: CVS ($1.93), MRNA (-$0.36), HUM ($10.34), ROKU (-$0.55), MET ($0.96), ADT ($0.27).

Beyond economic data and earnings, the market’s main focus is clearly the stimulus bill and any news of further progress will be a tailwind for stocks while any new “roadblocks” will likely trigger some risk-off money flows across asset classes.

The Yield Curve Is Still Bullish on Stocks

/in /by

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.

Has There Been A Positive Change?

/in /by

What’s in Today’s Report:

  • Has There Been A Positive Change in Markets?
  • Jobs Day

Futures are solidly higher thanks mostly to continued momentum following Wednesday’s rally.

Economic data was sparse overnight, as the only notable report was the Eurozone Unemployment Rate, which slightly beat estimates (7.4% vs. (E) 7.7%).

Coronavirus cases continued to rise in the U.S. and hit a new daily record above 50k.

Today the focus will be on the Employment Situation Report, and the expectations are as follows: Job Adds: 3.000M, UE Rate: 12.4%, Wages: -0.8%).  As long as the number isn’t a major disappointment (say below 2.5MM) it likely won’t interrupt this week’s lift in markets.

We also get Jobless Claims (E: 1.400M) this morning, and while it’ll be overshadowed by the monthly jobs report, claims are actually more important, and if they can continue to decline towards 1MM (and beat expectations) that will be an additional tailwind on stocks.  Conversely, if claims start to move higher, that could offset even a better than expected monthly jobs report.