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Did Anything Change Last Week?

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What’s in Today’s Report:

  • Did Anything Change Last Week?

U.S. futures are trading lower (Nasdaq 100 down more than 2%) as tensions between the U.S. and China rose over the weekend while economic data mostly beat estimates.

In a press conference yesterday, President Trump mentioned interest in economically “decoupling” from China with a focus on bringing jobs back to the U.S.

Economically, EU GDP was not as bad as feared while the U.S. NFIB Small Business Optimism Index was 100.2 vs. (E) 98.9 in August which is bolstering small caps this morning.

Looking into today’s session, there are no economic reports and no Fed officials are scheduled to speak.

From a catalyst standpoint, the quiet calendar will leave investors looking for any developments on the next stimulus bill or further commentary on the uptick in U.S.-China tensions from the weekend while, based on the pre-market price action, big cap tech shares are likely to continue leading the broad market today.

Jobs Day

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What’s in Today’s Report:

  • Why Did Stocks Drop Yesterday?
  • How the VIX and Stocks Rose Together in August

Futures are seeing a marginal oversold bounce after Thursday’s big sell off, as newswires were quiet overnight.

Economic data again disappointed, as German Manufacturers’ Orders rose 2.8% vs. (E) 6.2%, while the UK Construction PMI fell to 54.6 vs. (E) 58.5.

Both reports, combined with other lack luster data this week, are limiting the size of the bounce this morning.

Today the focus will be on the Employment Situation Report and the expectations are as follows:  Jobs Adds: 1.413M, UE Rate: 9.9%.  As mentioned, the “best” outcome for this report is a strong number towards 2 MM job adds, but not so strong that it relieves pressure on Congress to pass a stimulus bill.  A very soft number (less than 1MM job adds) likely adds to yesterday’s downside.

Jobs Report Preview

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What’s in Today’s Report:

  • Jobs Report Preview
  • EIA Data and Oil Update

Futures are moderately lower on digestion of Wednesday’s rally and some disappointing economic data.

EU Retail Sales badly missed estimates (-1.3% vs. (E) 1.5%) which is slightly increasing concern about the EU economic recovery.

Global August service and composite PMIs (China/EU) were generally in-line with expectations while the British service PMI slightly missed estimates (58.8 vs. (E) 60.1).  Bottom line, the numbers weren’t great, but they weren’t awful either and generally speaking they won’t change the current market outlook.

Today there are two important economic reports, Jobless Claims (E: 977K) and the ISM Non-Manufacturing PMI (E: 56.8), and the market will want to see the actual data close to or better than both numbers to reinforce the economic recovery is ongoing.  There’s also one Fed speaker today, Evans at 1:00 p.m. ET.

Finally, it’s important to note that vaccine “chatter” is getting louder and the chance we get a vaccine announcement before the election (November 3rd) is rising.  Yesterday the CDC formally notified all 50 states to be ready to distribute a vaccine by late October/early November, so I want everyone to be aware of that, as a vaccine announcement would be another positive for stocks.

Don’t Fight The Fed (and the Fed Wants Inflation)

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What’s in Today’s Report:

  • Fed Chair Powel’s Speech Preview (All About Inflation)
  • Oil Market Update (Inventories and Hurricane Laura)

Futures are marginally weaker following a quiet night of news as markets digest Wednesday’s rally ahead of weekly jobless claims and Fed Chair Powell’s speech.

Economic data was sparse overnight as Eurozone Money Supply was the only notable economic report and it beat estimates, rising 9.5% vs. (E) 9.1%, but that’s not moving markets.

Today the two key events are weekly Jobless Claims (E: 987K), and Fed Chair Powell’s speech (9:10 a.m.).  The market will be looking for claims below 1MM and for Powell to hint at a new average inflation target, and disappointment on either will likely cause some selling in stocks, especially given this week’s rally.

Other notable events today include Revised Q2 GDP (E: -32.9%), Pending Home Sales Index (E: 1.5%) and another Fed speaker, Barkin (12:30 p.m. ET), but they shouldn’t move markets.

The Current Market Equation (How Investors Justify New All Time Highs)

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What’s in Today’s Report:

  • The Current Market Equation (How Investors Justify New All Time Highs)
  • Weekly Market Preview:  More Dovish Commitments from the Fed This Week?
  • Weekly Economic Cheat Sheet:  Important Inflation Data on Friday.

Futures are moderately higher on COVID-19 treatment optimism following the FDA’s authorization of plasma treatment for severely ill COVID patients.

President Trump announced on Sunday that the FDA has granted “Early Use Authorization” (EUA) for use of plasma from recovered COVID patients on severely ill patients.  The EUA will increase the availability of this treatment.

While the EUA for plasma is clearly a positive, from a market standpoint a vaccine remains a true “silver bullet” that could super charge a rally.  So, while positive, the plasma news is not a bullish gamechanger (although it does add to the feeling of FOMO (fear of mission out)).

Outside of the plasma news it was a quiet weekend, as there was no economic data nor any progress on stimulus.

Today will be a generally quiet day as there are no economic reports and no notable Fed speakers (the Jackson Hole conference is later in the week), so focus will remain on COVID treatment optimism.

Why Doesn’t the Market Care There’s No Stimulus?

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What’s in Today’s Report:

  • Why Doesn’t This Market Care That There’s No Stimulus?
  • Weekly Market Preview:  Watching Washington and the Data
  • Weekly Economic Cheat Sheet:  August Flash PMIs on Friday – Can the Data Hold Up?

Futures are marginally higher following some potentially positive headlines from Washington over the weekend.

Speaker Pelosi is calling the House back into session to address Postal Service funding (this was a major sticking point in the larger stimulus bill).  The hope is that if there’s a compromise on that issue, the larger stimulus bill becomes much easier to pass.

There was no notable economic data overnight.

Today’s focus will be on Washington and specifically if there’s any hint that negotiations may re-open on the larger stimulus bill.  If that’s the case, then we’ll likely see new all-time highs today in the S&P 500.

Economically, the Empire Manufacturing Index (E: 17.0) is the key report today, and the market will want to see continued progress from July (especially because the stimulus payments have stopped).  We also get the  Housing Market Index (E: 72), although that shouldn’t move markets.

Is Inflation Coming Back? (It Better Not Be)

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What’s in Today’s Report:

  • Is Inflation Coming Back?  (It Better Not Be)
  • An Inquiry on Gold

Futures are modestly lower following a night of disappointing economic data and more signs coronavirus is rebounding in Europe.

Chinese Industrial Production (4.8% vs. (E) 5.1%) and Retail Sales (-1.1% vs. (E) 0.3%) both missed estimates, while EU Flash GDP met very low estimates (-12.1%).

Britain added France to its list of quarantine countries, underscoring the steady rebound of coronavirus in Europe (although levels of the virus in Europe are still very low compared to the U.S.).

Today there are three notable economic reports:  Retail Sales (E: 1.8%), Industrial Production (E: 3.0%) and Consumer Sentiment (E: 71.9).  Consumer Sentiment is the most important number because it’s the most recent, although solid numbers in retail sales and IP will help reinforce the idea that economic recovery is still on-going (and hasn’t paused) and will help limit any downside in equities today.  There’s also one Fed speaker today, Kaplan at 10:00 a.m. ET, but he shouldn’t move markets.

Jobs Report Preview (Recovery On/Recovery Pause/Recovery Stall)

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What’s in Today’s Report:

  • Jobs Report Preview:  Recovery On/Recovery Pause/Recovery Stall

Futures are moderately lower following lack of progress on the stimulus bill, combined with further escalation of U.S./China tech tensions.

Markets were hoping for a stimulus deal by today, but there’s been no progress on negotiations for two days.  So while the market still fully expects a deal by next week, there is disappointment that it likely won’t get done by the end of this week.

U.S./China geo-political tensions continue to rise as President Trump issued an executive order banning U.S. transactions with the parent companies of TikTok and WeChat.

Focus today will be on the Employment Situation report and expectations are as follows:   Job Adds: (E) 2.0M, Unemployment Rate: (E) 10.5%.

Bottom line, the strong economic data from earlier this week has made this jobs report more important than it was going to be, as this morning’s number now has the chance to signal the economic recovery is still on (a positive for stocks) or increase concern it’s stalling (which will be a headwind on equities, especially at these levels).

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What’s in Today’s Report:

  • Market Multiple Levels:  S&P 500 Chart
  • Is the Jobs Market Rolling Over? (ADP Data was Deceiving)

Futures are little changed as solid economic data is offsetting mildly negative stimulus headlines.

Regarding stimulus, the headlines over the last 12 hours were slightly negative (more sticking points are emerging) but the market still expects a deal within the next few days and for that deal to be at the upper end of expectations (the weekly unemployment payments are looking to be $400/week into year-end, which is higher than market expectations).

Economic data was solid as German Manufacturers’ Orders (27.9% vs. (E) 9.6%) and the British Construction PMI (58.1 vs. (E) 57.0) both beat estimates.

Today the focus will be on the weekly Jobless Claims (E: 1.442M), and simply put the market does not want to see any further increases in weekly claims as that implies the recovery is pausing.  A number above 1.5MM will likely put a headwind on stocks today (unless there’s positive stimulus headlines).  There’s also one Fed speaker, Kaplan (E: 10:00 a.m. ET), but he shouldn’t move markets.

What the Fed Decision Means for Markets (Positive but not a Silver Bullet)

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What’s in Today’s Report:

  • What the Fed Decision Means for Markets (Positive, But Not a Silver Bullet)

Futures are lower following disappointing headlines on U.S. stimulus progress, combined with profit taking ahead of multiple important market catalysts coming today.

U.S. stimulus bill talks were said to be at an “impasse” late Wednesday, and that’s weighing on sentiment (although this drama is to be expected, as we cautioned last week, and a deal is still very much expected by mid- August).

Economically, German Q2 GDP missed estimates (-10.1% vs. (E) -9.4%), which is a reminder just how much damage was inflicted on the global economy in Q2.

As mentioned, one of the reasons futures are weaker this morning is book squaring ahead of several important economic and earnings events today.

First, the most important economic report of the day is Jobless Claims (E: 1.38M).  We address this more in the Report, but there are growing signs the U.S. economic recovery is pausing or stalling, and that’s not priced into stocks above 3200 in the S&P 500.  If we see another notable increase in weekly claims (say through 1.5M) that will amplify fears the recovery is stalling and likely weigh on stocks.

Then, on the earnings front, we get four of the most important stocks in the market announcing results after the close: AMZN (E: $1.75), AAPL (E: $1.99), FB (E: $1.44), GOOGL (E: $8.43).  The earnings results will be “fine” but these stocks have had huge runs, and if they disappoint vs. elevated expectations, just due to these stocks weights in the S&P 500, it could pressure markets after hours.

Finally, today we will get the initial look at Q2 GDP, and it will be historic as it’s estimated to be -35% seasonally adjusted annual rate (remember GDP is usually around 2% saar).  I never in my life thought we’d see such a number, and I hope we don’t ever see it again.  But, today history will be made as the worst GDP print ever.