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Are Negative Rates Coming to the U.S.?

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What’s in Today’s Report:

  • What Negative Rates Could Mean for Markets
  • Jobs Day

Futures are modestly higher following positive headlines regarding U.S./China trade discussions.

The U.S. and China held a trade call Thursday night and stated that “good progress” was being made towards implementing phase one of the trade deal, and that headline is helping to improve sentiment towards recent coronavirus related U.S./China tension.

Economic data was light and did not moving markets as focus is on this morning’s jobs report.

Today focus will be on the jobs report and the expectations are as follows: Jobs: -21.25MM, UE Rate:  16.3%, Wages:  0.3%).  As long as the numbers are close to those estimates, stocks will be able to look past the historically awful jobs report and continue the rally.

Jobs Report Preview (Can the Market Look Past 20 Million Job Losses)?

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What’s in Today’s Report:

  • Jobs Report Preview (Could the Market Look Past 20 Million Job Losses?)
  • Why Are Treasury Yields Rising?
  • EIA Analysis and Oil Update

Futures are sharply higher thanks to better than expected Chinese export data.

Chinese exports rose 3.5% vs. (E) -11%, sparking hope that their economy is quickly getting back to “normal.”

But, in reality, data was more mixed than good as Chinese service PMIs remained weak (44.4) while German Industrial Production missed estimates –9.2% vs. (E) -6.4%.  Additionally, the better than expected Chinese export data was due in part to a surge in medical supply exports, something that’s hopefully not needed for much longer.

Today focus will be on Jobless Claims (E: 2.991MM) and has been the case for the past few weeks, continued declines from the previous week will give the market hope that the economic “worst” is behind us.

Finally, there are multiple Fed speakers today including Bostic (8:30 a.m. ET), Kashkari (12:00 p.m. ET) and Harker (E: 4:00 p.m. ET), but none of them should move markets.

Market Multiple Levels: S&P 500

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What’s in Today’s Report:

  • Market Multiple Levels S&P 500 Chart

U.S. equity futures are tracking European shares higher this morning thanks to ongoing hopes that the global economy will reopen and normalize quickly amid coordinated efforts while economic data was not quite as bad as feared overnight

Economically, the EU Composite PMI was 13.6 vs. (E) 13.5 in April while March Retail Sales declined -11.2% vs. (E) -12.0%. Both figures were considerably better than some analysts had feared helping boost risk assets.

Looking into today’s session, focus will be on the first look at April payrolls data in the U.S. in the form of the ADP Employment Report, for which the consensus analyst estimate is for a staggering drop of 20 million in private payrolls. Later in the day, Atlanta Fed President, Bostic, will speak at 1:30 p.m. ET.

While investors are primarily concerned with the economy reopening, Q1 earnings continue to roll in with several notable releases that could move markets today: SHOP (-$0.19), CVS ($1.63), GM ($0.18), SQ ($0.13), PYPL ($0.76), LYFT (-$1.08), and WYNN (-$1.05).

Current Market Catalysts (They Changed Last Week)

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What’s in Today’s Report:

  • Current Market Catalysts:  From Reopening and Remdesivir to Normalization and Nationalism
  • Weekly Market Preview
  • Weekly Economic Cheat Sheet (Jobs Report This Friday)

Futures are moderately lower as U.S./China tensions rise while markets begin to shift their focus towards when the economy will return to normal.

U.S./China tension over the origin of the coronavirus rose over the weekend as Secretary of State Pompeo said there was “enormous” evidence that suggests the virus was created in a lab.

Economically, the EU manufacturing PMI slightly missed expectations, coming in at 33.4 vs. (E) 33.6.

Today there are no notable economic reports nor any Fed speakers, so markets will trade off any U.S./China coronavirus tension headlines, along with any hints of when the economy might return to some semblance of “normal” as those two issues have now become the main drivers of stocks in the near term.

Gold Update: What It Needs to Keep Rallying

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What’s in Today’s Report:

  • ECB Meeting Takeaways:  Why We Still Prefer Broad U.S. Stock Exposure Over International Right Now
  • Gold Update:  What It Needs to Keep Rallying

Futures are sharply lower mostly on continuation from yesterday’s selling as markets digest the recent rally, although AAPL & AMZN earnings were mildly disappointing.

Economic data was soft again as the Japanese Manufacturing PMI (41.9 vs. (E) 44.8) and British manufacturing PMI (32.6 vs. (E) 32.9) both missed estimates.

On earnings, AAPL & AMZN numbers weren’t bad, but AAPL didn’t provide updated guidance while AMZN cited a significant coronavirus expense increase in Q2.

Today the key report will be the ISM Manufacturing Index (E: 39.0) and the key here is that it isn’t too much worse than estimates (if it is, that’ll increase concern about how deep the economic hole has become).  Additionally, today is “May Day” and many of the world’s markets (EU, Hong Kong, China) are closed, so there will be a lack of volume/liquidity and that could exacerbate today’s volatility and any declines.

What Yesterday’s Fed Decision Means for Markets

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What’s in Today’s Report:

  • FOMC Takeaways:  The Fed Put Is Alive And Well
  • How Bad Was Q1 GDP?
  • Oil Update & Inventory Analysis

Futures are little changed as strong tech earnings are helping markets digest yesterday’s big rally.

Economically, the Chinese manufacturing PMIs were “ok.”  The government number was again above 50 (50.4) while the research firm Ciaxin’s manufacturing PMI was a slight disappointment at 49.4 vs. (E) 50.1.  Bigger picture, while it would have been nice to see a stronger recovery this month, it is still encouraging to see activity returning to “normal” just a few months after the height of the outbreak.

Facebook and MSFT earnings were strong after hours and commentary was cautiously positive (activity is stabilizing in April after sharp declines in March).

Today the key report is again Jobless Claims (E: 3.5MM) and as has been the case, any significant decline from the previous week will a marginal positive despite the absolute numbers still being historically high.

Other events today include the Fed’s preferred measure of inflation, the Core PCE Price Index (E: -0.1%) and an ECB Rate Decision (7:45 a.m. ET).  The ECB may increase its QE program, but that is already expected at some point this year, so even if they do later today it shouldn’t move markets too much.

Seizing Long Term Opportunities in Energy

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What’s in Today’s Report:

  • Seizing Long Term Opportunities in Energy

Futures are higher this morning while international equity markets are mixed as strong tech earnings offset soft economic data ahead of the FOMC Announcement today.

GOOGL is up 8% in pre-market trade after reporting strong Q1 results after the close yesterday while the European Commission’s Economic Sentiment Index fell more than expected, down to 67.0 vs. (E) 75.0 as the fallout from the coronavirus pandemic has weighed heavily on business activity.

Today, there are two economic reports to watch: GDP (E: -3.8%) and Pending Home Sales Index (E: -5.4%) but the main focus during the primary session will be on the FOMC Meeting Announcement (2:00 p.m. ET) followed up by Fed Chair Powell’s Press Conference (2:30 p.m. ET).

Earnings season also remains in full swing with: BA (-$2.04), MA ($1.72), HUM ($4.84), NOC ($5.42), YUM $0.64), SHW ($4.01), and VLO (-$0.19) all reporting ahead of the bell while MSFT ($1.27), FB ($1.72), QCOM ($0.80), and TSLA (-$0.53) release their Q1 results after the close.

The main thing investors are looking for today is reassurance from the Fed, specifically that they remain committed to doing “whatever it takes” to support the economy through the COVID-19 pandemic and are focused on restoring the economy to its previous state as quickly as possible.

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.