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Is the Tapering Talk Set to Begin?

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What’s in Today’s Report:

  • Is the Tapering Talk Set to Begin?

Futures are little changed following a quiet night as markets wait for the latest reading on inflation via this morning’s CPI report.

Economic data was mixed overnight.  UK Industrial Production was better than feared (-4.2% vs. (E) -5.1%) while the German ZEW Economic Sentiment slightly missed expectations (70.7 vs. (E) 77.0) but neither number is moving markets.

Today there are two notable events and both pertain to Treasury yields.  First, we get Core CPI (E: 0.2% m/m, 1.6% y/y) and later this afternoon there is a 30 year Treasury auction.  If CPI comes in hot and there’s tepid demand at the auction, Treasury yields will likely rise and that should be a headwind on stocks.  Conversely, if CPI is tame and the auction is solid, yields will likely be little changed, and stocks should be able to grind higher.

We also have several Fed speakers today:  George, Daly, Harker, Barkin (12:00 p.m. ET) and Bostic (3:15 p.m. ET) but unless they give us more insight into tapering requirements (like Bullard did yesterday) they shouldn’t move markets.

Global Bond Yields Are Rising Too (And That’s Important)

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What’s in Today’s Report:

  • Global Bond Yields Are Rising Too (And That’s Important)

Futures are modestly lower following a quiet night of news as global bond yields remained buoyant.

Bond yields were slightly higher earlier this morning and  they are holding this weeks’ gains, and absent any other notable news that weighed on global stocks and futures.

There was no notable economic data other than the Australian Labour Force Survey which met expectations.

Today economic will be in focus and if the data comes in better than expectations, look for the 10 year yield to rise further (and that could put a headwind on stocks and tech especially).  The key reports today are: Jobless Claims (E: 757K), Philadelphia Fed Manufacturing Index (E: 20.0) and Housing Starts (E: 1.650M). We also get two Fed speakers, Brainard (8:00 a.m. ET) and Bostic (10:00 a.m. ET) but we don’t expect them to move markets.

What Could Go Wrong?

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What’s in Today’s Report:

  • Another Look at What Could Go Wrong
  • Weekly Economic Cheat Sheet: February Data in Focus

U.S. equity futures are trading solidly higher with international markets this morning thanks to positive COVID-19 headlines and mostly encouraging economic data overnight.

New coronavirus cases in the U.S. fell below 100K/day for the first time in months over the weekend while Biden is expected to speak about the new stimulus package today.

Economically, the Q4 Eurozone GDP Flash and details of the German ZEW Survey both topped estimates overnight which is helping support risk-on money flows this morning.

Looking into today’s session, there is one economic report ahead of the bell: Empire State Manufacturing Index (E: 5.7), and just one Fed official scheduled to speak in the afternoon: Daly (3:00 p.m. ET).

Bottom line, as long as the Empire data, which is importantly a February report, does not disappoint and Biden maintains a very accommodative tone regarding the new stimulus package, stocks should be able to continue higher to start the week today.

Inflation Update

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What’s in Today’s Report:

  • Inflation Update (Why the Soft CPI Is Likely Understating Inflation)

Futures are modestly lower mostly on digestion of the week’s rally, but also on some incrementally negative COVID policy headlines.

Over the past 24 hours headlines of possible COVID related travel bans to Florida and negative COVID testing requirements for interstate air travel weighed on sentiment.  Both would be economically negative (and the later a total disaster for airlines).

Economically, the only notable data was UK GDP and UK Industrial Production, and the results were mixed.  But, neither number is moving markets.

Focus today will be on any incremental COVID policy headlines, and if there’s traction on the any travel bans to states or it looks like people will need negative COVID tests to fly, that will hit stocks.  Away from COVID policy, we get Consumer Sentiment (E: 80.9) and have two Fed speakers: Williams (10:00 a.m. ET) and Daly (3:00 p.m. ET) but unless there’s a major surprise, they shouldn’t move markets.

Why Stocks Faded Yesterday (and Why They Are Down This Morning)

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What’s in Today’s Report:

  • Why Stocks Faded Yesterday (And Why They Are Down This Morning)

Futures are moderately lower on disappointing economic data and as optimism on stimulus fades slightly.

On stimulus, the political reality of Washington is starting to impact markets, and it’s becoming more unclear when Democrats’ ambitious stimulus goals will become law.

Economically, global flash PMIs were bad.  Japanese, EU and British PMIs all fell further below 50 and there was significant deterioration across the board from the December readings, implying that the coronavirus lockdowns are having a negative impact on global growth (and slowing global growth isn’t priced into stocks).

Today the key number will be the Flash Composite PMI (E: 55.5).  Markets will be looking for stability and for the U.S. to avoid the slowing of activity that we saw in the global data earlier this morning, because again a material slowing in growth is not priced into stocks at these levels.  We also get Existing Home Sales (E: 6.540M) later this morning.

Finally, earnings season remains in full swing, and some reports we’ll be watching today include:  ALLY ($ 1.05), SLB ($ 0.18) KSU ($1.91).

Economic Breaker Panel: January Update

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What’s in Today’s Report:

  • Sevens Report Economic Breaker Panel: January Update

Stock futures are trading higher as investors digest strong earnings and look ahead to the inauguration of Joe Biden as the 46th President today.

NFLX is up 13%+, testing record highs in premarket trade after the company released strong Q4 results yesterday.

Economically, European inflation data was largely inline with expectations and not moving markets this morning.

There will be a lot of moving pieces in the market today as investors focus on the inauguration ceremonies for incoming President Joe Biden, however there are multiple other catalysts on the calendar.

On the economic front, there is one report due to be released this morning: Housing Market Index (E: 86) while no Fed officials are scheduled to speak today.

Turning to earnings, there are several notable releases ahead of the bell including: PG ($1.51), UNH ($2.39), FAST ($0.33), and MS ($1.29), while UAL (-$6.37) AA ($0.12), and DFS ($2.27) will all report after the close.

Bottom line, barring any materially negative surprises from earnings or economic data today, optimism surrounding the stimulus plans of the incoming administration should help markets maintain this week’s risk-on tone into the back half of the holiday-shortened week.

Are Investors Expecting Too Much from This Market?

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What’s in Today’s Report:

  • Are Investors Expecting Too Much from This Market?

Futures are modestly lower following a generally quiet night as Biden’s stimulus plan met market expectations.

President Elect Biden’s $1.9 trillion stimulus plan is being met by a “sell the news” reaction as markets already priced in most of what was included, while easy passage of the bill is not guaranteed (this could still take months to become law).

Economically, UK Industrial Production missed estimates, while EU Exports were in line with expectations but neither number is moving markets.

Today focus will be on economic data, as we get the first data point from January via the  Empire State Manufacturing Index (E: 6.0) and markets will want to see stability in the data to imply that the recovery isn’t losing too much momentum. Other notable reports include Retail Sales (E: -0.1%), Industrial Production (E: 0.5%) and PPI (E: 0.4%).  There’s also one Fed speaker, Kashkari at 11:30 a.m. ET, but he shouldn’t move markets.

Finally, earnings season begins today with results from JPM (E: $2.72), WFC (E: $0.59) and C (E: $1.35).

Why 2021 Could Start With a Bang (In Stock and Bond Markets)

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What’s in Today’s Report:

  • Why 2021 Could Start With a Bang (In Stock and Bond Markets)

Futures are slightly higher following a generally quiet night of news.

Economically, the only notable report was the Chinese December Manufacturing PMI, which declined from November but slightly beat estimates at 51.9 vs. (E) 51.5.

On the stimulus front, despite the recent drama of the last few days, the payouts to people in the stimulus bill will not be increased to $2000.  However, if Democrats win the Senate, expect this issue to come up again in early 2021.

Today focus will be on Jobless Claims (E: 830K) and markets will want to see continued improvement in that weekly data to imply the economic recovery has not lost meaningful momentum.  Outside of that and some year-end positioning, today should be a generally quiet day (although markets will get busy again starting next week).

Another Positive for Banks

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What’s in Today’s Report:

  • Another Positive for Financials
  • Nasdaq Hits Fresh Record (Chart)

Futures declined overnight after President Trump threatened to veto the recently passed stimulus bill but markets have since stabilized as hopes for fiscal aid remain strong and investors look ahead to a slew of economic data today.

Late Tuesday, Trump said he hoped Congress would increase the amount of direct payments to individual American from $600 to $2,000 and remove unnecessary spending in the package however the bill is still likely to become law given the overwhelming Congressional support which is easing market angst this morning.

Today, there is a long list of economic data due to be released including Durable Goods Orders (E: 0.6%), Jobless Claims (E: 875K), Core PCE Price Index (E: 1.5%), New Home Sales (E: 989K), and Consumer Sentiment (E:81.0).

If the data is better than expected, that could help lift equity markets after several days of heavy trading while the impact of disappointing data will be limited given the optimism of the new aid package in the works.

Beyond the data, investors will be continuing to watch coronavirus statistics and lockdown measures as the latest surge in cases and hospitalizations remains a risk to the economic recovery and any negative developments could weigh on risk assets in thinning holiday trade.

Dollar Outlook (This Matters to Stocks)

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What’s in Today’s Report:

  • Dollar Outlook (This Matters to Stocks)

Futures are little changed following a quiet night as markets digest the week’s rally.

Economic data beat estimates overnight, as UK Retail Sales fell less than expected (-3.8% vs. (E) -4.2%) while German Ifo Business Expectations also beat estimates (92.8 vs. 91.8).

Stimulus talks continued, and while a deal isn’t likely today (a mild disappointment), one is still expected in the next few days.

Today we get one notable economic report, Leading Indicators (E: 0.4%) and two Fed speakers, Evans (11:00 a.m. ET), Brainard (11:10 a.m. ET).  But, none of that should move markets.

Instead, markets will be on “stimulus watch” and right now the expectation is for a $900 billion-ish stimulus deal to be approved in the next few days (definitely before Christmas).  Anything that confirms that expectation will help stocks rally today, and anything that implies it might not happen will cause a stock decline. Finally, today is Quadruple Witching options expiration so expect some big volumes and potential volatility into the close.