The S&P 500 is nearing a bull market. But Morgan Stanley analysts are predicting a 16% earnings drop for S&P 500 companies. Ben Laidler, Global Markets Strategist at eToro, and Tom Essaye, Sevens Report Research Founder and President, give their takes on what lies ahead for the market. Click here to watch the full interview.
What’s in Today’s Report:
Futures are slightly higher on momentum from last week’s rally, as it was a very quiet weekend of actual news and investors are looking ahead to multiple important market catalysts this week.
Economically, the only notable number was Japanese PPI which rose 5.1% y/y vs. (E) 5.7% y/y in what is the latest sign of global disinflation.
Oil declined more than 2% overnight on over supply concerns as Russia is largely ignoring its production quota.
Today there are no notable economic reports nor any Fed speakers, so barring any major surprises markets should be relatively calm ahead of tomorrow’s CPI report, Wednesday’s FOMC decision and Thursday’s important economic data.
What’s in Today’s Report:
Futures are slightly lower as markets digest Thursday’s rally following a very quiet night of news.
Economically, the only notable report overnight was Chinese PPI, which feel –4.6% vs. (E) -4.2% and provided the latest sign that global disinflation is potentially accelerating.
Politically, former President Trump was federally indicted for illegally retaining classified documents, although that shouldn’t impact markets.
Today there are no economic reports and no Fed speakers, so near term technicals should drive trading with all eyes focused in whether the S&P 500 can break above 4,300 for the first time in over a year.
What’s in Today’s Report:
Futures are little changed despite more economic stimulus from China.
The Chinese government cut bank deposit rates and encouraged lending to boost auto sales in the latest effort to stimulate the economy, although the moves were already expected so this isn’t a new, positive surprise.
Economic data was sparse overnight with Japanese and EU GDPs the only notable releases, and neither number moved markets.
Today the only notable economic report is Jobless Claims (E: 235K) and markets will want to see stability in the data (so no sudden jump higher), but more broadly markets remain in a temporary “holding pattern” with the CPI report and Fed decision now both looming less than a week away.
What’s in Today’s Report:
Stock futures are little changed in premarket trade indicating this week’s digestive churn sideways could continue today following mixed economic data overnight.
Chinese exports dropped -7.5% vs. (E) +1.0% year-over-year in May adding to worries about the health of the recovery in the world’s second largest economy.
Conversely, in Europe, German Industrial Production jumped 1.8% vs. (E) 1.4% y/y helping ease some worries about the health of the EU economy.
Looking into today’s session, the list of potential catalysts remains light as there are just two economic reports to watch: International Trade in Goods and Services (E: -$76.0B) and Consumer Credit (E: $21.0B) while there are no Fed officials scheduled to speak.
That will leave focus on market internals and whether or not the early June money flows into cyclicals and small cap stocks can continue. If so, the improving breadth in the market with the S&P 500 sitting just under YTD highs will add to the case that the 2023 rally is sustainable.
“Economically, global service PMIs were mixed as the euro zone service PMI missed expectations, while the U.K. and Chinese service PMIs were in-line,” noted Tom Essaye, the founder of Sevens Report Research. Click here to read the full article.
The potential fallout from the U.S. debt-ceiling debacle and rising odds of a June interest-rate hike both “weighed on oil as the former influence would be a broader riskoff market event, while the latter would further reduce already waning optimism for a soft economic landing this year,” analysts at Sevens Report Research wrote in Wednesday’s newsletter. Click here to read the full article.
“Republican Representatives have said this morning that they have the votes to pass it. If that comes to fruition, that should remove a headwind from risk assets and open the door to a continued move higher in equity markets,” writes Tom Essaye, the founder of Sevens Report Research. Click here to read the full article.
What’s in Today’s Report:
Futures are little changed as markets digest the Thursday/Friday rally amidst a mostly quiet weekend of news.
Oil prices are solidly higher (Brent crude up 1.7%) after Saudi Arabia announced a voluntary 1M bpd production cut for the next month, although that’s not seen as a sustainable bullish catalyst.
Economically, global service PMIs were mixed as the Euro Zone Service PMI missed expectations (55.1 vs. (E) 55.9) while the UK and Chinese service PMIs were in-line.
Today focus will be on the ISM Services Index (E: 52.0.) and specifically the price index in this report. Last week, a sharp drop in the ISM Manufacturing PMI Prices Paid Index ignited the rally, and if we see a similar drop in the services price index, it’ll help extend the rally as markets will get more confident disinflation is accelerating.
What’s in Today’s Report:
Futures are higher and global markets rallied overnight on rising hopes for a rapid decline in inflation.
Inflation metrics on Thursday hinted at accelerating disinflation (ISM Prices Paid and Unit Labor Costs were yesterday’s bullish catalysts) and that was reinforced this morning by a decline in Korean CPI.
Chinese stocks surged overnight thanks to a Bloomberg article that raised hopes for more government stimulus.
Today focus will be on the jobs report and estimates are as follows: 180K job adds, 3.5% Unemployment Rate and 0.3% m/m & 4.4% y/y wage gains. Given yesterday’s momentum, if the jobs report shows solid job gains and underwhelming wage growth, the rally should continue. However, if the jobs report comes in “Too Hot” on the headline or wages, don’t be surprised if markets give back part of yesterday’s rally.