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December Economic Breaker Panel (Stronger Than Expected)

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What’s in Today’s Report:

  • Economic Breaker Panel
  • Why Stocks Dropped on Wednesday
  • EIA and Oil Analysis

Futures are slightly higher following Wednesday’s tech-driven declines as markets wait for the ECB decision and more clarity on stimulus and Brexit trade negotiations.

Economic data was sparse overnight, as the only notable report was UK Industrial Production which beat estimates (1.3% vs. (E) 0.3%).

There was no notable news or progress on stimulus (still no deal) or Brexit (still no trade deal) overnight, although the “deadlines” for both events were either moved, or about to be moved, implying that negotiations on both stimulus and Brexit will continue for the coming days (this is what the market expected and already priced in).

Today could be a sneakily busy day with the ECB Announcement (E: € 500 bln Increase in QE), CPI (E: 0.1%/1.1%) and Jobless Claims (E: 724K) all coming today.

Regarding the ECB, the risk here is of a “not dovish enough” outcome as they’ve allowed expectations to get pretty high, and if that happens look for mild stock losses and higher yields global bond yields (including Treasuries).

CPI should stay tame at this point, but we’ll be watching this closely going forward.  Finally, weekly jobless claims are “noisy” right now because of the Thanksgiving holiday, but the bottom line is markets want to see claims moving lower, and a break below 700k would be a tailwind on stocks.

Inflation and Yields in 2021

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What’s in Today’s Report:

  • Inflation and Yields in 2021

S&P futures are trading at all-time highs this morning amid renewed stimulus hopes and more vaccine optimism.

Secretary Mnuchin presented a $916B coronavirus relief plan late Tuesday that satisfied demands from both sides of the aisle in Congress, upping chances for a yearend deal.

Vaccine news remains positive as the U.K. began administering the Pfizer vaccine yesterday and the FDA may approve the same vaccine in the U.S. as soon as tomorrow.

Looking into today’s session there is one economic report to watch: October JOLTS (E: 6.40M) due out shortly after the bell while no Fed officials are scheduled to speak.

There is a 10-Yr Treasury Note Auction at 1:00 p.m. ET which could impact the bond market and ultimately equities if the moves are significant enough however investor focus is likely to largely remain on stimulus talks and the next steps in the vaccine roll-out process.

Market Multiple Levels: S&P 500 Chart

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Today’s Report is attached as a PDF.

Futures are lower with most overseas markets today amid negative COVID-19 trends, no reported progress on stimulus and fading vaccine optimism.

Distribution of Pfizer’s coronavirus vaccine is beginning today in the U.K. but reports suggest far fewer doses will be available than initially thought (as little as half) while hospitalizations continue to hit new highs.

On U.S. stimulus, a stop-gap bill will be voted on tomorrow to buy time to reach an aid package as political gridlock remains.

Looking into today’s session, there is one lesser-followed economic report due to be released: Productivity and Costs (E: 4.9%, -8.9%) which will leave investors largely focused on U.S. stimulus negotiations, Brexit talks, and COVID-19 case/hospitalization trends. If there is disappointment on any of those topics, expect some profit taking in risk-assets as the market remains largely priced-to-perfection.

Market Multiple Table (Updated)

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What’s in Today’s Report:

  • Market Multiple Table:  December Update
  • EIA and Oil Market Analysis

Futures are little changed as overnight markets digested the week’s rally amidst better than expected economic data and more stimulus chatter.

Economic data was solid overnight as Chinese (57.8 vs. (E) 56.8), EU (41.7 vs. (E) 41.3) and British (47.6 vs. (E) 45.8) service sector PMIs all best estimates.

On stimulus, Democrat leader Pelosi and Schumer said the current $990 bln stimulus bill was a good “starting point.”

Today focus will be on economic data, especially Jobless Claims (E: 770K) because if they rise close to or above 800k, that will be more evidence the recovery is losing momentum.  We also get the ISM Services Index (E: 56.1).  Finally, stimulus chatter continues to heat up, and markets will embrace any further hints at negotiations (although a near-term deal still is very unlikely).

Why Stocks Rallied

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What’s in Today’s Report:

  • Why Stocks Rallied Yesterday

Futures are modestly lower this morning as yesterday’s record highs are digested while more positive vaccine news is being offset by yesterday’s mixed stimulus headlines.

News broke overnight that the U.K. approved Pfizer’s COVID-19 vaccine for emergency use as early as next week, although the market reaction was limited as vaccine hopes are already largely priced in with stocks at or near records.

Economic data was mostly upbeat overnight with German Retail Sales and Eurozone Unemployment both beating estimates however the stimulus stalemate continues to weigh on the global growth outlook right now.

Today, there are two economic reports to watch as the ADP Employment Report (E: 420K) kicks off jobs week while Motor Vehicle Sales (E: 16.1M) will be released later in the morning.

There are multiple Fed speakers today including: Quarles (9:00 a.m. ET), Williams (9:00 a.m. ET & 1:00 p.m. ET), and Powell (10:00 a.m. ET) with the bulk of the focus remaining on the Fed chair’s second day of testimony before Congress.

Bottom line, investors are focused on stimulus right now, underscored by the fact that there was not a more pronounced reaction to the Pfizer vaccine approval news overnight, so until we gain more clarity on the size and scope of the next coronavirus aid package, it may be difficult for stocks to continue to grind to new record highs in the very near term.

A Busy and Important Week for Markets

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What’s in Today’s Report:

  • There Are Still Risks to the Rally
  • Weekly Market Preview:  How Strong is the Economic Recovery?
  • Weekly Economic Cheat Sheet:  A Busy and Important Week

Futures are modestly lower following a quiet weekend as markets digest last week’s rally.

Chinese November PMIs were solid (manufacturing PMI 52.1 vs. (E) 51.5 and Services PMI 56.4 vs. (E) 56.2) implying the economic recovery is on going, which is a general positive for global growth.

Coronavirus cases and the amount/intensity of lockdowns appear to be leveling off in the near term, although at very elevated and stringent levels (and there are fears of a post-Thanksgiving spike in infections over the coming weeks).

Today there is just one economic report, Pending Home Sales (E: 2.0%) and no Fed speakers, so we can expect markets to focus on any headlines regarding the two key macro variables:  Stimulus (when and how much?) and Lockdowns (will there be more?).

Are Lockdowns Starting to Outweigh Vaccine Optimism?

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What’s in Today’s Report:

  • Are Lockdowns Starting to Outweigh Vaccine Optimism?
  • EIA and Oil Outlook (Updated)
  • Why Are Treasury Auctions Suddenly Going Badly?  (And What It Could Mean for Markets)

Futures are modestly lower on momentum from Wednesday’s COVID/lockdown related late day fade.

Negative COVID headlines/increased economic lockdowns (especially in NYC and LA County) are starting to offset vaccine optimism, and that’s weighing on stocks.

Economic data was sparse overnight, but Australian Unemployment met expectations, as did UK Industrial Trends.

Today, with lockdowns increasing and near term economic anxiety rising, Jobless Claims (E: 710K) and the Philadelphia Fed Manufacturing Index (E: 24.5) will be two important reports, and markets will want to see stability in both to show the economic recovery is not losing momentum.  If those two readings are weak, expect more selling.

We also get Existing Home Sales (E: 6.47M) and there are two Fed speakers, Mester (8:30 a.m. ET) and Bowman (12:35 p.m. ET), but none of that should move markets.

Economic Breaker Panel (November Update)

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What’s in Today’s Report:

  • Economic Breaker Panel (November Update)
  • The Two Reasons Stocks Dropped Yesterday
  • EIA Analysis and Oil Update

Futures are moderately higher as markets bounce from Thursday’s declines following a night of strong earnings.

DIS, CSCO and AMAT all posted stronger than expected earnings, and commentary was upbeat (especially from CSCO) and that’s helping to offset COVID concerns.

Economic data was slightly better than estimates as Euro Zone flash GDP and Exports both slightly beat estimates.

Today we have two economic report, PPI (E: 0.2%) and Consumer Sentiment (E: 82.0) and two Fed speakers, Williams (7:00 a.m. ET) and Bullard (8:30 a.m. ET) but none of that should move markets unless there’s a big surprise lurking.

Instead, focus will remain on any new lockdowns in the U.S. and on stimulus negotiation updates.  Incremental updates yesterday were negative on both topics, and if that happens again don’t be surprised to see these early gains given back (although it’s important to remember that the longer term outlook for COVID got materially better this week – it’s just going to be a bit bumpy in the near term).

Market Multiple Levels: S&P 500 Chart

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What’s in Today’s Report:

  • Market Multiple Levels: S&P 500 Chart
  • Growth vs. Value: A Lower-Risk Way to Play the RotationU.S. equity futures are trading comfortably higher this morning as vaccine optimism continues to offset a resurgence in the COVID-19 pandemic and big cap tech stocks are showing signs of stabilizing in pre-market trade.

Daily new cases of the coronavirus hit a new high of over 135,000 in the U.S. yesterday while hospitalizations also hit record levels however investors continue to hold out hope that a vaccine will halt the spread in the coming months and the economy will be quick to normalize.

There are no economic reports today and no Fed officials are scheduled to speak which will leave investors focused on the timeline for the widespread availability of a vaccine and more importantly how quickly it will result in economic normalization.

The election remains a secondary influence on the market as well with Biden having declared victory over the weekend while Trump continues to file lawsuits in swing states about alleged voter fraud. Any further clarity or resolution on the election should act as a tailwind for markets in the near term as it will pull forward the timeline for the next coronavirus aid package.

Jobs Report Preview

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What’s in Today’s Report:

  • Jobs Report Preview
  • Why Is the Dollar Dropping So Sharply (Hint:  It’s Not the Election)
  • FOMC Reaction

Futures are moderately lower mostly on digestion of this week’s massive rally, although the political news over the last 24 hours was a slight negative for markets.

Biden continued to move closer to securing 270 Electoral College votes and is now leading in Georgia, Arizona, and Nevada, and some of those states may be called today.

However, both Georgia Senate races appear headed to a runoff in early January, and that could delay stimulus into early 2021 (this is the “reason” for the weakness in futures, other than just digestion).

Today focus will remain on the election as several states could be called, effectively ending the election (court cases will continue but as of yet none appear powerful enough to overturn the apparent result).

Economically, the jobs report will be in focus and the expectations are as follows: Job Adds: 600K, Unemployment Rate: 7.7%.  A number moderately better than expectations (that’s strong enough to reflect a good recovery but not so strong that the amount of expected stimulus starts to move lower) is the best outcome for stocks.