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Earnings Preview: Good, Bad, Ugly

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What’s in Today’s Report:

  • Earnings Season Preview: The Good, the Bad, and the Ugly

Futures are drifting higher this morning while overseas markets were mixed during a quiet night of trading as investors look ahead to a busy calendar of events today.

There were a few economic releases o/n but none materially moved markets with international focus on this morning’s ECB Announcement (7:45 a.m. ET) and Draghi’s press conference afterwards where he is expected to shed light on TLTRO plans.

Looking into the U.S. session today, it is shaping up to be a busy one. In chronological order, there is one economic report ahead of the open: CPI (E: 0.3%, 0.2%), weekly EIA data is due out at 10:30 a.m. ET, and the Fed’s Quarles is schedule to speak at 11:50 a.m. ET.

Moving to the afternoon, there is a 10-Year Treasury Note Auction at 1:00 p.m. ET and if the outcome moves yields materially, stocks will likely follow. Then, the FOMC March Meeting Minutes are due out at 2:00 p.m. ET and the Fed’s Kaplan speaks later this evening: 7:00 p.m. ET.

With so many moving parts today, it will be important to keep an eye on yields as the bond market will offer the best read of how investors are digesting all of the day’s events.

Specifically, the 10 year yield has stabilized at 2.50% recently and if it can move higher, stocks could grind higher as well, however, if yields begin to drop like they did two weeks ago, volatility is likely to rise again, potentially significantly.

Can The S&P 500 Breakthrough 2900?

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What’s in Today’s Report:

  • The Next Positive Catalyst For Stocks (Potentially)
  • Weekly Market Preview
  • Weekly Economic Cheat Sheet (Chinese Exports The Big Number This Week)

Futures are slightly weaker following a generally quiet weekend as markets digest last week’s rally.

Economic data was mixed and is putting mild pressure on stocks this morning as German exports missed expectations (-1.3% vs. (E) 0.1%), reminding markets the global economy isn’t healed yet.

U.S./China trade talks ended last week without an announcement of a deal but talks will continue this week via video-conference and a deal is still widely expected.

Today there are no economic reports and no Fed speakers, so focus will remain on any U.S./China headlines (again a deal could be announced any minute).  But, barring any surprises today should be generally quiet as the big events of the week (FOMC Minutes, Chinese data, bank earnings) happen Wed-Friday.

The Right Sectors To Own If There’s A Rebound In Growth

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Today’s Report is attached as a PDF.

What’s in Today’s Report:

  • The Right Sectors To Own If There’s A Rebound In Growth

Futures are slightly higher following a generally quiet night as markets wait for this morning’s jobs report.

President Trump said he hoped the U.S./China trade deal would be done in the next four weeks, which again generally meets markets expectations.

Economic data was sparse but German Industrial Production rose 0.7% vs. (E) 0.5%, somewhat offsetting Thursday’s disappointing German Manufacturers’ Orders report.

Today the focus will be on the jobs report and the expectations are as follows:  Jobs Adds 170K, UE Rate 3.8%,  Wages 3.4% yoy.

The best outcome for stocks today would be a jobs number in the mid 100k range (not too strong, but not too weak), positive revisions to the February data and a wage number below 3.5% yoy.  That outcome likely can spark a further rally.  Conversely, any extremes on the job adds (very good or very bad) along with another hot wage number may lead to profit taking in stocks on fears of slowing growth or a more hawkish Fed.

Tom Essaye Quoted in Barron’s on April 2, 2019

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“Futures are flat and international shares were mildly higher overnight as yesterday’s sizeable rally in the U.S. was…” Click here to read the full article.

Economic Data Takeaways

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What’s in Today’s Report:

  • Bottom Line – “Pump the Breaks”
  • Retail Sales and ISM Manufacturing Takeaways

Futures are flat and international shares were mildly higher overnight as yesterday’s sizeable rally in the U.S. was digested amid a slight pullback in bond yields.

The Reserve Bank of Australia was the latest central bank to note downside risks in the global economy overnight.

Economically, Eurozone PPI was a mild miss: 0.1% vs. (E) 0.2% in February but inflation has been subdued and the report does not change the outlook for ECB policy.

Today, Motor Vehicle Sales (E: 16.8M) will begin to come in over the course of the morning while there is one notable economic report ahead of the open: Durable Goods Orders (E: -1.8%). There are no Fed speakers today.

With a lack of material catalysts between now and Friday’s jobs report, macro focus will be on U.S. – China trade negotiations and the bond market. If Treasury yields revisit last week’s lows, stocks will have a hard time holding the strong gains of the last few sessions, so watch bonds closely.

Another Bad Signal From the Bond Market

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What’s in Today’s Report:

  • Why Another Bond Auction Caused Yesterday’s Decline
  • The Next Catalyst for Markets (Coming This Sunday)

Futures are slightly higher following a positive U.S/China trade article and better than expected EU economic data.

EU Money Supply (M3) rose 4.1% vs. (E) 3.9%, delivering the first upside economic surprise in Europe in some time.  And, while M3 isn’t exactly a widely followed report, at this point we’ll take what good data we can get from Europe.

On trade, a Reuters article stated Chinese officials have made new concessions on IP rights and tech transfers which represents an incrementally positive step, although other issues still need to be resolved before there is a an official deal.

Today there are some notable economic reports including Final Q4 ‘18 GDP (E: 2.2%), Jobless Claims (E: 225K), and Pending Home Sales (E: -1.0%) but none of them should move markets unless there are major surprises.  Similarly, there are numerous Fed speakers, Quarles (7:15 a.m. ET), Clarida (9:30 a.m. ET), Bowman (10:00 a.m. ET), Bostic (11:30 a.m. ET) and Bullard (6:20 p.m. ET), but again they shouldn’t move markets, either.

So, we’ll be watching bond yields as the key to whether stocks can resume the rally.  If bond yields (Treasury yields and Bund yields) can move higher today, then likely so can stocks

New Earnings Risks

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What’s in Today’s Report:

  • Why the Stronger Dollar and Commodity Prices Matter to Stocks
  • Housing Market Data Update
  • More Evidence a Rate Cut Might Be Coming

S&P futures have turned negative in pre-market trading as bond yields continue to bleed lower with the benchmark 10-yr yield hitting fresh lows in the mid-2.30% range overnight.

Economically, Chinese Industrial Profits were down -14.0% YTD, falling from -1.9% in December.

The Reserve Bank of New Zealand was the latest central bank to turn decidedly dovish overnight citing concerns about the global economy while Brexit angst also persists amid new votes in Parliament today.

The list of catalysts in the Wall Street session is a short one today with only one economic report due out: International Trade (E: -$57.4B) and just one Fed speaker later in the evening: George (7:00 p.m. ET).

That will again leave the market primarily focused on the bond market and to a lesser degree the dollar. Recession fears are front and center right now with Fed funds futures pricing in more than 80% odds of a rate cut in the next 10 months as of this writing.

Bottom line, without a rebound in yields and at least a steady dollar (a pullback would be more favorable) then it will be very difficult for stocks to mount any sort of rally today.

Why Stocks Dropped

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What’s in Today’s Report:

  • Why Stocks Dropped Friday
  • Weekly Market Preview (All About Growth)
  • Weekly Economic Cheat Sheet

Futures are slightly lower thanks to continued momentum from Friday’s sell off.  Outside of politics, it was a generally quiet weekend.

Economically, we got an upside surprise from German IFO Business Expectations, which rose to 95.6 vs. (E) 94.0 and that offsets a small part of last week’s bad PMIs (but not nearly enough to address growth concerns).

Politically, the release of the Mueller report dominated headlines over the weekend, but as has been the case for nearly two years, this topic is not an influence on markets.

There are no economic reports today and no material Fed commentary, so focus today will be on whether the S&P 500 can stabilize and hold 2800.  The Mueller report will continue to dominate media coverage, but again this simply isn’t an influence on stocks, Treasuries or the dollar.

Never Fight the Fed

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What’s in Today’s Report:

  • Never Ever Fight the Fed

Stock futures, the dollar, and Treasuries are all little changed this morning while international markets were mixed overnight as investors focus on the Fed today.

There were no market moving economic reports o/n although rising trade tensions between the U.S. and China and several bad earnings reports citing slowing global trade (especially FDX) have become a growing headwind for risk assets since yesterday’s close.

With focus on the Fed this afternoon, it is likely to be a quiet morning with price action dictated by positioning into the announcement. The one release that could move markets this morning is the Weekly EIA Inventory Report which will print at 10:30 a.m. ET (E: +800K bbls).

Turning to the Fed, the FOMC Meeting Announcement and Forecasts will hit at 2:00 p.m. ET and then Fed Chair Powell’s Press Conference is scheduled for 2:30 p.m. ET.

To recap, the two key developments to look for from the Fed are balance sheet reductions and fewer rate hikes in 2019 (the dot plot). The market’s expectations of a very dovish Fed are extremely high right now, so there is not much room for error by the FOMC today and any sort of disappointment could spark a wave of volatility across asset classes.

FOMC Preview

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What’s in Today’s Report:

  • FOMC Preview

U.S. futures are higher this morning as trader focus turns to the Fed meeting while good economic data in Europe helped drive gains in international markets overnight.

U.K. unemployment fell to a multi-decade low of 3.9% in February according to the latest Labour Market report while the Business Expectations component of the German ZEW Survey was –3.6 vs. (E) -11.0 underscoring a less pessimistic outlook on the economy by analysts.

A sense of “Fed paralysis” has already begun to fall over markets this week as the FOMC meeting begins today and trader focus has largely shifted to tomorrow’s announcement and press conference.

As far as catalysts go today, there is one economic report: Factory Orders (E: 0.1%) but the single data point’s influence on the market is likely to be limited with the Fed looming tomorrow.