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Reopened vs. Normal

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What’s in Today’s Report:

  • What’s Next for the Economy:  Reopened vs. Normal
  • Oil Inventory Analysis

Futures are slightly lower as markets digest Wednesday’s rally and, so far, ignore very soft economic data.

April global flash PMIs were horrible and worse than feared.  The EU composite PMI collapsed to 13.5 vs. (E) 26, the British composite PMI imploded to 12.9 vs. (E) 32, and the Japanese composite dropped to 27.8 vs. the prior 36.2.

The weak PMIs show the scope of the economic damage, and it’s bad, but hope remains for a rebound in the coming months given trend in the virus data, and that’s why these historically bad numbers aren’t causing a deeper sell off this morning.

Focus today will be on economic data, via Jobless Claims (E: 4.000MM) and the U.S. April Composite Flash PMIs (E: 37.5).  If both numbers are not as bad as feared, and combined with the chatter of economic “reopening,” then stocks can extend yesterday’s rally. We also get New Home Sales (E: 632K), although that shouldn’t move markets.

How Much Good News Is Already Priced In?

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What’s in Today’s Report:

  • How Much Good News Is Already Priced In?
  • Weekly Market Preview:  Focus remains on the global economic re-opening
  • Weekly Economic Cheatsheet:  Flash PMIs on Thursday are a big report

Futures are down more than 1% mostly on digestion of last week’s big rally, as the weekend was relatively quiet from a news standpoint.

WTI crude oil is down nearly 30% (not a typo) but that decline is about logistics, as there are fears of not enough storage in the U.S. for looming oil imports.  Conversely, Brent crude is down only 3%.  Point being, the declines are being driven by a logistical issue, not a fresh reduction in demand (i.e. lower than expected economic growth).

Economic data was sparse overnight, as German PPI fell slightly more than expected (-0.8% vs. (E) -0.7%).

Today there are no economic reports so focus will remain on “reopening” news, as the pace of normalization of the U.S. and global economy will decide whether stocks can hold last week’s gains.

The History of Bear Market Rallies

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What’s in Today’s Report:

  • A Look into the History of Bear Market Rallies
  • Economic Data Breakdown
  • EIA Analysis and Oil Update

Futures are cautiously higher this morning but international markets were mostly lower overnight as investors weigh the effectiveness of COVID-19 containment strategies against their longer term impact on the global economy.

Economically, Eurozone Industrial Production was the only release overnight (-0.1% vs. E: -0.1%) but it was a February number and therefor largely dismissed by the markets.

This morning, focus will be on what will likely be the most important economic release of the week: Jobless Claims (E: 5.50M) as a larger than expected number of claims will point to further deterioration in the labor market while a smaller number will suggest the government stimulus efforts are beginning to work in supporting the U.S. jobs market.

There are two other economic reports to watch: Housing Starts (E: 1.32M) and the Philadelphia Fed Business Outlook Survey (E: -29.5) while no Fed officials are scheduled to speak.

Beyond economic data, investors will be sifting through more Q1 earnings releases including results from: BLK ($6.69), ABT ($0.58), TSM ($0.66), and BK ($0.90), as well as any new developments on the broader COVID-19 situation.

Economic Breaker Panel: April Update

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What’s in Today’s Report:

  • Sevens Report Economic Breaker Panel – April Update

Futures are decidedly lower with global markets this morning as optimism for a V-shaped economic recovery fades ahead of key economic data and more important earnings today.

Additionally, Trump cut funding to the WHO, raising tensions with China while WTI crude oil prices fell to fresh 18-year lows, below $20/barrel, overnight as a complete lack of demand continues to weigh on the broader energy markets right now.

Looking into today’s session, it is lining up to be a busy one from a potential catalyst standing.

First, there are several important economic reports due to be released including: Retail Sales (E: -7.0%), Empire State Manufacturing Survey (E: -35.0), Industrial Production (E: -4.2%), and the Housing Market Index (E: 60) while there is one Fed official schedule to speak: Bostic (1:00 p.m. ET).

Earnings will also be a major focus today with Q1 results due out from: BAC ($0.65), C ($1.83), GS ($2.83), PNC ($2.24), USB ($0.87), PGR ($1.44), and BBBY ($0.21).

Stocks have become near-term overbought over the last few weeks so any notably negative news flow regarding economic data, earnings, or the coronavirus pandemic could cause a potentially volatile wave of profit taking.

Technical Update (Important Support and Resistance)

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What’s in Today’s Report:

  • Technical Update (Important Support and Resistance)
  • Jobs Report Preview (It’s Going to be Ugly)

Futures are moderately lower as markets digest Thursday’s rally ahead of today’s jobs report.

Economically, global service PMIs were worse than expected and the drops were historic.  The EU service PMI plunged to 26.4 vs. (E) 28.4, down from 52.6 in Feb.

The Chinese service PMI rebounded strongly in March, rising to 43.0 from 26.5, confirming that their economy is seeing a strong bounce back in activity.  This is mildly encouraging because the Chinese data implies that once the coronavirus pandemic has passed (against sooner than later) we should see a strong bounce back in the economy.

Today focus will be on the jobs report, and the estimate are as follows: Jobs:  -150K, UE:  3.9%,  Wages:  0.2%.  But, the “worst case” estimate we saw was for -1.25 million jobs, so don’t be shocked if the number is much worse than the estimate.  Also, we get the March ISM Non-Manufacturing PMI (E: 43.0).  If that can beat that low estimate, that will be a small moral victory.

Valuation Update (Cheap, Fairly Valued, or Still Expensive?)

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What’s in Today’s Report:

  • Market Valuation Update:  Cheap, Fairly Valued, or Still Expensive?
  • Oil Update (Weekly Inventory Data)

Futures are seeing a moderate rally/bounce as the Fed acted, again, and oil bounced on comments from Trump.

The Fed said it will exclude Treasury holdings and deposits from certain leverage ratios (that essentially allows banks to lend more money which should help the economy).

On oil, Trump said he expected a Russia/Saudi oil deal within “days” but gave no specifics as to how that might happen (although it would be a positive if it does).

Today the key report is Jobless Claims (E: 3.350M), although we also get Motor Vehicle Sales (E: 14.3M) and International Trade (E: -$39.5B).

But, in reality, the real driver of markets right now is coronavirus headlines.  They were more positive in tone last week, but have turned more negative this week and that’s why stocks dropped so hard yesterday.  Any good news on 1) A pharma solution (vaccine/antibody treatment/trials) or 2) Slowing of the spread will help make this early bounce more sustainable.

What to Make of This Rally

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What’s in Today’s Report:

  • What To Make Of The Rally.
  • Coronavirus Update – Is Italy Peaking?

Futures are sharply lower (down about 2%) following a generally quiet night as markets digest the big three day rally.

The U.S. passed China in total number of coronavirus cases on Thursday, although there is some hope emerging that the spread of the virus is peaking in Italy.

Politically, there was no notable news overnight and passage of the stimulus bill will happen later today.

Today the key event is the passage of the stimulus bill in the House, but that is universally expected.  Outside of that, the key economic report will be Consumer Sentiment (E: 92.0), because that will give us some preliminary insight into how bad consumer spending might be in the coming months.  We also get the Fed’s preferred measure of inflation,  Core PCE Price Index (E: 1.8%), but at this point that number will be ignored as no one is worried about high inflation right now.

How Much Will The Stimulus Help?

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What’s in Today’s Report:

  • How Much Will the Stimulus Help?
  • Cash is King

Futures are down around 1% despite the Senate passing the stimulus bill, as markets digest the past two day’s rally.

The Senate passed the stimulus bill last night and the House has indicated it will pass the bill tomorrow, removing any lingering uncertainty.

Economic data was disappointing as German GfK Consumer Climate missed estimates (2.7 vs. (E) 7.7), as did British Retail Sales (-0.3% vs. (E) 0.2%).

Today there are two important events, both of which come early in the day.

First, Fed Chair Powell will appear on the Today Show at 7:05 a.m. ET, and while he won’t reveal any new policies, markets will be watching for a generally positive tone.

Second, the most important economic number of the week comes this morning via weekly jobless claims, which are estimated to be 1 million.  That is a figure I never thought I would see, considering claims peaked below 700k at the depths of the financial crisis.  If claims blast through that 1 MM estimate and move towards 2 MM that could be a headwind, while anything below 1MM will be a mild positive.

Additional Fed QE Takeaways

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What’s in Today’s Report:

  • Additional Fed QE Takeaways

Futures are limit up this morning and money flows were decidedly risk-on overnight as several sources, including individual Senators, suggested that the near $2T stimulus package will be passed today.

Additionally, the spread of the coronavirus showed signs of slowing in the last 24 hours while economically, global Flash PMI data was not as bad as feared overnight with manufacturing components universally topping estimates.

Today, there are two economic reports due to be released: PMI Composite Flash (E: 44.2) and New Home Sales (E: 743K), and one Fed official scheduled to speak: Bullard (9:45 a.m. ET). There is also a 2-Yr Treasury Note Auction at 1:00 p.m. ET.

With two of the three “keys to market stabilization” either accomplished (Fed stimulus) or in progress (slowing spread of the virus), all eyes will remain on Capitol Hill today. And if the massive economic stimulus package passes a vote in the Senate, expect a relief rally to follow as investor sentiment should become decidedly less gloomy.

Corporate Bond Market Update

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What’s in Today’s Report:

  • Corporate Bond Market Update

Futures are sharply higher this morning as global governments move forward with more economic stimulus.

The Senate formally released the third economic stimulus bill, valued over 1 trillion (and likely rising).  While not a done deal yet, the speed at which Washington is operating has quickened this week and markets are reacting positively to that change.

On the coronavirus front, all of California is now under a “stay at home” order as cases continue to rise.

Today all eyes will remain on Washington and any positive commentary on the stimulus bill will further help stocks, while signs of a political battle will likely reverse these early gains.  Economically, there’s one report,  Existing Home Sales (E: 5.50M) and today is a “Quad Witch” quarterly options expiration so watch for big volumes on the close.