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What Yesterday’s Sell Off Means for Markets

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What’s in Today’s Report:

  • What Yesterday’s Selloff Means for Markets
  • TGT Earnings – Not as Negative as it Seemed but Bad Things Happen Fast
  • EIA Analysis and Oil Update

Futures are sharply lower following more disappointing earnings and on momentum from Wednesday’s collapse.

Cisco (CSCO) missed earnings after the close and the stock is down 12% after hours.  The company blamed Chinese lockdowns for the earnings miss and made positive comments about overall demand, but in this market, that nuance doesn’t matter, and the results weighed on futures.

Today’s focus will turn back towards economic data and specifically the Philadelphia Fed Manufacturing Index (E: 16.1).  If it plunges like Empire did on Monday, that will increase anxiety about stagflation and further weigh on stocks.  Other notable data includes Jobless Claims (E: 197K) and Existing Home Sales (E: 5.650M) and we get two Fed speakers, Michael Barr (10:00 a.m. ET) and Kashkari (4:00 p.m. ET) but they shouldn’t move markets.

Jobs Report Preview (Why It’s the Most Important Jobs Report of the Year)

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What’s in Today’s Report:

  • Jobs Report Preview (Why It’s the Most Important Jobs Report of the Year)
  • EIA Analysis and Oil Market Update

Futures are moderately higher following a very quiet night of news as investors position for tomorrow’s jobs report.

Euro Zone PPI was much hotter than expected, rising 2.3% vs. (E) 1.2%, and that is the second consecutive strong inflation number from the EU.

There were no new infrastructure or COVID headlines overnight, and investors continue to add exposure ahead of an anticipated “Goldilocks” jobs report.

Today’s focus will be on economic data, especially Jobless Claims (E: 350K) and Unit Labor Costs (which is contained in Productivity & Costs).  Unit Labor Costs are expected to rise 1.0% but if the number comes in decidedly higher than that, it will add to inflation fears (and could be a mild headwind on stocks today).

What the Fed Decision Means for Markets

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What’s in Today’s Report:

  • What the More Hawkish Than Expected Fed Decisions Means for Markets
  • EIA Analysis and Oil Market Update

Futures are modestly lower as markets digest yesterday’s more hawkish than expected FOMC meeting.

The U.S. dollar is surging this morning off the more hawkish than expected Fed and gold is getting hit hard as currency markets re-price for a less dovish Fed.

Economically the only notable number was the Australian Labour Force Survey, which handily beat expectations (115k job adds vs. (E) 30k), reflecting the global nature of the economic recovery.

Today there are two notable economic reports, Jobless Claims (E: 364K) and Philadelphia Fed manufacturing Index (E: 30.8) but unless either number is a substantial surprise, they shouldn’t move markets.  Instead, markets will be watching the dollar and Treasury yields for reaction to the Fed.  If both rally hard throughout the day, that will pressure stocks further as it erodes some of the “dovish Fed” support that’s helped the S&P 500 rally to recent highs.

Market Multiple Chart

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What’s in Today’s Report:

  • Market Multiple Chart
  • EIA Analysis and Oil Update
  • What Yesterday’s Jobs Numbers Mean for Today’s Report (and the Market Reaction)

Futures are little changed ahead of this morning’s jobs report and following a mostly quiet night of news.

Economic data was mixed overnight as the UK Construction PMI beat estimates while Euro Zone Retail Sales missed, but neither number is moving markets.

Infrastructure “chatter” about a potential $1 trillion compromise is getting louder, but markets remain skeptical about an infrastructure deal anytime soon.

Focus today will be on the Jobs Report and expectations are as follows: Job Adds 645K, UE Rate 5.9%, Wages 0.2% m/m).  Thursday’s strong employment data (ADP and claims) makes the market more sensitive to a “Too Hot” report (and potentially less dovish Fed) than it was on Wednesday, but the bottom line is that a number near either extreme (900k or 300k) will likely cause at least a temporary market headwind.

Also, Fed Chair Powell is speaking at a Bank of International Settlements Climate panel right now, but that shouldn’t move markets.

New Highs From a Leading Indicator

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What’s in Today’s Report:

  • Jobs Report Preview
  • New Highs From a Leading Indicator
  • EIA Analysis & Oil Market Update
  • Update on Global Growth (Better, But Not Good)

Futures are slightly lower despite more positive U.S./China headlines as markets digest this week’s rally.

The WSJ reported a U.S./China trade deal is now very close, with an announcement of a signing ceremony possibly coming as early as today.  But, the reason this headline didn’t cause a rally is because it’s been expected for some time.  The key going forward is how quickly tariffs are reduced, and the sooner, the better for stocks.

Economic data was sparse but German Factory Orders dropped –4.2% vs. (E) 0.3% but that number isn’t enough to offset the other good data this week.

Today is generally quiet on the data front as we only get Jobless Claims (E: 216K).  There are three Fed speakers today: Williams (9:00 a.m. ET), Harker (1:00 p.m. ET), Mester (1:00 p.m. ET) but unless they say something surprising they shouldn’t move markets.

So, absent any other catalysts, China headlines will likely be the main influence on stocks today as an official headline about a signing ceremony could cause a very short term algo-led rally, but until we find out when tariffs will be rescinded, the U.S./China news likely won’t be enough to power the market materially higher from here.