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Economic Breaker Panel: June Update

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What’s in Today’s Report:

  • Economic Breaker Panel: June Update
  • NFIB Small Business Optimism Index Takeaways

S&P futures wavered between gains and losses overnight amid mixed economic news and an uptick in new COVID-19 cases across parts of the U.S. while focus turns to the Fed.

In their latest update, the Paris-based OECD now expects a 6.0%-7.6% contraction in the global economy in 2020, the worst in 100 years.

Economically, both China’s CPI and PPI readings for May were well below estimates with the latter pointing to a concerning increase in deflationary pressures (-3.7% YoY) as a result of the coronavirus pandemic.

Looking into today’s session, there is one economic report due out ahead of the bell: CPI (E: 0.0%) before investors will look ahead to the FOMC Meeting Announcement (2:00 p.m. ET) and Fed Chair Press Conference (2:30 p.m. ET) in the afternoon.

Specifically, the Fed’s new economic projections and any clarity on QE plans will be most closely watched items this afternoon and have the most potential to move markets into the close.

Market Multiple Levels: S&P 500

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What’s in Today’s Report:

  • Market Multiple Levels: S&P 500 Chart
  • What Do Protests Mean for Markets

S&P futures are once again up by double digits today as more stimulus chatter by global central banks and good economic data offset intensifying civil unrest in the U.S.

Economically, global Composite PMI data for May was mostly upbeat with Chinese and EU figures coming in ahead of expectations while the EU Unemployment Rate in April was not as bad as feared at 7.3% vs. (E) 8.2%.

Looking into the U.S. session, focus will be on economic data early with three notable reports due to be released: ADP Employment Report (E: -8.663M), Factory Orders (E: -14.0%), and ISM Non-Manufacturing Index (E: 44.0).

There are no Fed officials scheduled to speak today so investor focus will likely turn back to the protests across much of the country as well as the simmering geopolitical tensions between the U.S. and China after this morning’s economic data.

Bottom line, if economic data in the U.S. largely confirms the upbeat data from overseas, the rally could extend higher towards 3,100 in the S&P 500 however the market is becoming near-term overextended and due for a breather.

Market Multiple Update

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What’s in Today’s Report:

  • Market Multiple Table – June Update
  • ISM Manufacturing Index Takeaways

Futures are solidly higher today, rising with international markets thanks to easing geopolitical tensions offsetting COVID-19 worries and historic civil unrest in the U.S.

Chinese firms reportedly purchased multiple shipments of U.S. soybeans on Monday, contradicting earlier headlines that the government had broadly halted ag orders. The positive trade activity is acting as a tentative tailwind this morning.

There were no economic reports overnight but oil prices are up nearly 3% as OPEC+ (including Russia) is expected to extend current policy and output cuts beyond June.

Today, Motor Vehicle Sales (E: 10.0M) is the only economic data due to be released while there are no Fed officials scheduled to speak. That will leave investors largely focused on the simmering trade tensions between the U.S. and China as well as the ongoing, in some cases violent, protests across much of the U.S.

China Press Conference Preview (A New Headwind?)

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What’s in Today’s Report:

  • China Press Conference Preview (A New Market Headwind?)
  • EIA and Oil Market Update

Futures are modestly lower as markets digest the week’s gains ahead of the China press conference and Powell speech.

Economic data was mixed overnight as German Retail Sales beat estimates (-5.3% vs. (E) -11%), while Japanese IP and Retail Sales both missed expectations.

U.S./China tensions continue to tick higher as China said it would retaliate to any sanctions over the Hong Kong law.

Today the big event is the Trump/China press conference, and the key is this:  As long as there’s no reason for the markets to think the “trade truce” is in jeopardy, any market fallout from more sanctions on China should be relatively modest.

Away from China, we get two notable economic reports today, Core PCE Price Index (E: -0.3%) and Consumer Sentiment (E: 73.9) and a speech by Fed Chair Powell (11:00 a.m. ET).  But, that’s unlikely to move markets unless there’s a surprise revealed (and that’s not likely as Fed policy is pretty well known at this point).

Bullish Developments on Equity Index Charts

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What’s in Today’s Report:

  • Bullish Developments on the Equity Index Charts
  • Is There A Finally a Rival to Treasuries?  If So, What Are the Short and Long Term Implications?

Futures are little changed following a generally quiet night of news.

China’s legislature approved new security legislation for Hong Kong, further escalating tensions with the U.S. But, for now, markets are ignoring it.

Economically, the only notable number was EU Economic Sentiment which missed expectations (67.5 vs. (E) 70.5).

Today focus will be on economic data as we get multiple important reports including, in order of importance: Jobless Claims (E: 2.050M), Durable Goods Orders (E: -18.5%), Revised Q2 GDP (E: -4.8%), and Pending Home Sales Index (E: -15.5%).   We also get one Fed speaker: Williams (11:00 a.m. ET).

Finally, the administration keeps teasing a “response” to China passing the Hong Kong security legislation, and while markets have been able to ignore the uptick in U.S./China tension, that won’t last forever if tensions continue to rise.

Global Economic Stimulus Playbook (Repeat of ’08-’14?)

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What’s in Today’s Report:

  • Is This Just a Big Replay of ’08-’14?

S&P futures are up well over 1% this morning as newly proposed economic stimulus plans in Europe and Japan, which total nearly $2T, are offsetting U.S.-China tensions.

The European Commission announced plans for another 750B euro economic recovery package overnight while Japan is planning $1.1T  in new stimulus to help stabilize growth.

Hong Kong protests due to China’s proposed national security laws weighed on Asian shares overnight and stoked concerns of rising tensions between the U.S. and China.

Today, there are no notable economic reports due to be released in the U.S. and just one Fed speaker to watch midday: Bullard (12:30 p.m. ET).

There is a 5-Yr Treasury Note Auction at 1:00 p.m. ET which could move rates, impact the curve and ultimately affect stocks but the market’s primary focus will remain on coronavirus treatment/vaccine development, economic reopening progress, and simmering U.S.-China trade tensions.

The Yield Curve and Recessions

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What’s in Today’s Report:

  • Yield Curve Update: Historically Speaking

U.S. equity futures are up more than 1% this morning, recovering the bulk of yesterday’s late afternoon declines amid continued hopes for a looming economic recovery.

Economically, Japanese Machine Orders for March declined -0.4% after rising 2.3% in February while inflation statistics in Europe were on the soft side, but none of the data materially moved markets overnight.

There are no notable economic reports today however the Treasury will hold a 20-Year Bond Auction at 1:00 p.m. ET, and as we have seen so far this year, any resulting move in yields (specifically the curve) could influence equity market trading.

There are also a few potential Fed catalysts today with two speakers on the schedule: Bostic (10:00 a.m. ET) and Bullard (12:00 p.m. ET), and the release of the FOMC meeting minutes at 2:00 p.m. ET.

The market remains primarily focused on the still very fluid coronavirus outbreak situation and economic reopening process, as well as any further developments about vaccines or treatments. Any positive headlines, specifically regarding the latter, could help power stocks to fresh multi-week highs today, while contrarily, negative news could see a repeat of yesterday’s late day selloff.

A Bullish Gamechanger?

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What’s in Today’s Report:

  • What Would Be a Bullish Gamechanger?

Futures are modestly lower this morning as yesterday’s sizeable stock market gains are digested amid simmering tensions between the U.S. and China after President Trump threatened to cut funding to the WHO late yesterday.

Economically, the German ZEW Survey’s Current Conditions Index fell to -93.5 vs. (E) -87.8 while Business Expectations firmed to 51.0 vs. (E) 33.5, underscoring both the economic fallout from the COVID-19 pandemic as well as the broad hopes for a swift recovery.

Today, there is one economic report due out: Housing Starts (E: 968K) but investor focus will be on Capitol Hill where Fed Chair Powell and Secretary Mnuchin are set to testify at 10:00 a.m. ET regarding the stimulus efforts to support the economy in the aftermath of the coronavirus pandemic.

Later in the afternoon, there is one other Fed speaker to watch: Rosengren (2:00 p.m. ET) but things should be relatively quiet following the Powell and Mnuchin’s testimony this morning.

Is the Easy Part of the Rally Behind Us?

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What’s in Today’s Report:

  • Is the “Easy” Part of the Rally Behind Us?
  • Weekly Market Preview
  • Weekly Economic Cheat Sheet:  Global PMIs Thursday will be very important.

Futures are sharply higher as economic reopening continued across the U.S. over the weekend, with more states announcing reopening and easing social restrictions.

The reopening headlines over the weekend were numerous, but there wasn’t any new news that implied the economic might return to normal sooner than expected, and beyond the short term, when the economy returns to normal remains the key unknown for this market.

Fed Chair Powell gave an interview on 60 Minutes that was cited as “positive” but he didn’t say anything new that wasn’t already communicated in his comments last week.

Economic data was sparse and isn’t moving markets.

Today there are no economic reports and no market moving Fed speakers, so headlines on economic reopening, U.S./China relations and the coronavirus should move markets.

Technical Update: Headwinds Building?

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What’s in Today’s Report:

  • Technical Update:  Headwinds Building?

Futures are modestly lower following mixed Chinese economic data as markets digest Thursday’s rebound.

Chinese economic data was mixed but not worse than feared, as Industrial Production beat estimates (3.9% vs. (E) 1.5%) while Retail Sales and Fixed Asset Investment both declined sharply (-7.5% and –3.8% respectively) but no worse than expected.  In sum the data was “good enough” to keep hope alive that the U.S. economy can see a substantial economic rebound in the coming months, assuming no “second wave” of virus infections.

Today will be an important day for economic data, and the reports we’re watching today (in order of importance) are: Empire State Manufacturing Survey (E: -65.0), Retail Sales (E: -11.2%), Consumer Sentiment (E: 66.0), Industrial Production (E: -11.5%), and JOLTS (E: 5.900MM).

Empire Manufacturing Report and Consumer Sentiment are May reports, so markets will want to see hints of improvement to confirm the economic “worst” will soon be behind us.  If that happens, stocks can hold Thursday’s gains.