Data released this week suggests that inflation may have peaked, allowing the Federal Reserve to be less aggressive when boosting interest rates…Tom Essaye, founder of Sevens Report Research said Friday that the S&P 500’s current level reflects that growing sentiment. Click here to read the full article.
What’s in Today’s Report:
Futures are modestly lower after Chinese economic data missed estimates and the Chinese central bank cut rates in response.
Chinese economic data was soft as Industrial Production (3.8% vs. (E) 4.3%) and Retail Sales (2.7% vs. (E) 4.9%) both missed estimates. In response, China’s central bank announced a surprise 10 bps rate cut, a move that signals economic concern but also doesn’t offer a lot of help (a 10 bps cut won’t make a difference as long as “Zero COVID” is an in-force policy).
Focus today will be on the August Empire Manufacturing Survey (E: 5.0) and specifically the price index within the report. The sharp drop in that price index kicked off the “peak inflation” rally of the last month, so markets will be looking for continued signals that growth is stable (so a solid headline reading) and inflation is falling (another drop in the price index).
We also get the July Housing Market Index (E: 55.0) and we have one Fed speaker, Waller (10:50 a.m. ET), but they shouldn’t move markets.
What’s in Today’s Report:
Futures are slightly higher as comments by San Francisco Fed President Daly are being interpreted as slightly dovish. San Francisco Fed President Daly spoke after the close Thursday and said that Wednesday’s CPI was a “welcome sign” that could lead to a “slowing” in the pace of rate hikes (to 50 bps in September, not 75 bps).
Economic data was better than expected as both UK and EU Industrial Production slightly beat estimates.
Today focus will be on the University of Michigan 5-Year Inflation Expectations (E: 2.9%) as that’s the first inflation reading in August, and if it drops below expectations we should see a continued tailwind on stocks.
The economy still has to digest all this tightening, and that will materially slow things, wrote Tom Essaye, a former Merrill Lynch trader who founded The Sevens Report newsletter. Click here to read the full article.
What’s in Today’s Report:
Futures are slightly higher on mildly positive geo-political news and ahead of the CPI report.
China ended the military exercises around Taiwan and while that was always expected it’s still a mild positive as it reduces the chances of any accidental conflict.
Economically, the Chinese CPI rose 2.7% vs. (E) 2.9% allowing China to continue to actively stimulate its economy.
Today’s focus will be on the CPI report and expectations are as follows: Headline CPI: 0.2% m/m, 8.7% y/y. Core CPI: 0.5% m/m, 6.1% y/y. Markets remain in a “glass half full” mood on inflation so unless the numbers are solidly above expectations, we’d expect stocks to weather the number with only modest declines (while a soft number will likely spur an additional rally).
We also get two Fed speakers, Evans (11 a.m. ET) and Kashkari (2 p.m. ET) but they shouldn’t move markets.
What’s in Today’s Report:
Futures are slightly higher thanks to solid Chinese economic data and following a mostly quiet weekend.
Chinese exports rose more than expected (18% vs. (E) 14.1%) and that’s helping to slightly improve global economic sentiment.
Politically, Senate Democrats passed the Inflation Reduction Act over the weekend as expected and it should become law this week. But, markets don’t expect any meaningful impact on corporate earnings in the n
Today there are no notable economic reports and most of the focus will be on the specific implications of the Inflation Reduction Act, which should pass the House this week. But, this bill does not appear to have any meaningful macro-economic implications. So, markets will look ahead to Wednesday’s all-important CPI report, and with stocks still extended, it needs to be better than expectations to support the rally.
What’s in Today’s Report:
Futures are flat ahead of today’s jobs report and following a generally quiet night of news.
The only notable economic report was German Industrial Production and it beat estimates rising 0.4% vs. (E) -0.4%.
Geo-politically, China suspended military, climate, and drug enforcement communications with the U.S in retaliation for the Pelosi visit to Taiwan. But, unless retaliation from China impacts U.S./China trade or commodities prices, markets will largely ignore it.
Today the focus will be on the jobs report and the key for markets is that it shows easing wage pressures and moderation in the labor market. So, a mildly underwhelming reports vs expectations (E: 250K job adds, 3.6% UE Rate, 5.0% y/y wage growth) is the best outcome for stocks.
There’s also one Fed speaker today, Barkin at 8:00 a.m. ET, but he shouldn’t move markets.
What’s in Today’s Report:
Futures are slightly higher on momentum from Wednesday’s rally and as the market again ignored soft economic data.
Economic data from Europe was again disappointing as German Manufacturers’ Orders slightly missed estimates (-9.0% vs. (E) -8.9%) as did the UK Construction PMI (48.9 vs. (E) 52.0).
Geo-politically, China began massive military drills around Taiwan, although they were previously announced.
Today focus will be on the Bank of England rate decision (E: 50 bps hike) and on weekly Jobless Claims (E: 260K). Specifically, markets will want to see if the BOE implies more 50 bps hikes are ahead (if so that’s a mild negative for the region). On jobless claims, will they continue to move methodically towards 300k? (That would be a mild positive as it implies slowing in the labor market, which the Fed needs to get to peak hawkishness).
From a Fed speak standpoint, Mester speaks at 12:00 p.m. ET.
What’s in Today’s Report:
Stock futures are trading cautiously higher this morning as geopolitical angst is easing after Pelosi’s departure from Taiwan while economic data was mostly positive overnight.
Chinese and EU Composite PMIs for July topped estimates while Eurozone PPI was no worse than feared and that data is helping some of the hawkish fears from Tuesday unwind.
Looking into today’s session, earnings season is beginning to wind down but there are still a few notable reports due out today: MRNA ($4.50), CVS ($2.16), YUM ($1.08), HOOD (-$0.36), EBAY ($0.89), and MGM ($0.24).
However, the market’s main focus will be on economic data today with ISM Services Index (E: 53.0) and Factory Orders (E: 1.1%) both due out shortly after the open while there is one Fed speaker: Harker (10:30 a.m. ET).
Investors will want to see still solid growth numbers in the data, further easing in inflation readings, and hopefully a less hawkish tone out of the Fed if the July relief rally is going to extend into August.
What’s in Today’s Report:
Stock futures are lower and the 10-year yield fell to a 4-month low overnight amid heightened tensions between the U.S. and China over Speaker Pelosi’s trip to Taiwan.
Speaker Pelosi is scheduled to land in Taiwan later this morning despite repeated and stern warnings from China about a potential military response to the visit and the elevated tensions are resulting in equity market weakness and rising demand for safe havens assets such as Treasuries.
Looking beyond geopolitics, there are a few other potential catalysts to watch today including two economic reports: Motor Vehicle Sales (E: 13.5M) and JOLTS (11.0M), as well as two Fed officials scheduled to speak: Evans (9:00 a.m. ET) and Bullard (6:45 p.m. ET).
Earnings season also continues today with results from CAT ($3.00), JBLU (-$0.11), MAR ($1.59), TSEM ($0.52), AMD ($1.03), PYPL ($0.85), and SBUX ($0.77).
Bottom line, markets are trading with a risk-off tone due to the U.S.-China tensions surrounding Taiwan however a meaningful escalation including military action between the U.S. and China remains very unlikely, and as such the pressure on equities is not expected to deepen or last very long and market focus is likely to turn back to Fed policy later in the week as the July jobs report is due out on Friday.
