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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.

Market Outlook in A Divided Government

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What’s in Today’s Report:

  • Market Outlook in a Divided Government
  • Macro Landscape Beyond Politics (It’s Getting More Positive)
  • FOMC Preview

Futures are sharply higher again thanks to momentum from Wednesday’s rally, combined with more than expected QE from the Bank of England.

The Bank of England will increase its QE program by 150 billion Pounds, larger than the expected 100 billion, underscoring that global central banks are become more active in supporting their economies.

Politically, markets expect Biden to reach 270 electoral votes today with the official call of Nevada (which would put him exactly at 270).  The market is viewing the election as largely decided despite what will be a myriad of legal challenges.

Today the big event is the FOMC Announcement (2:00 p.m. ET) and Fed Chair Press Conference (2:30 p.m. ET).  I’d expect the Fed will keep a lower than normal profile given the election uncertainty, but the market’s focus will be any commentary that implies it’s open to more QE (if they don’t mention it, we could see mild disappointment like we saw in September).

Beyond the Fed and election headline watching, we also get weekly Jobless Claims (E: 745K) and markets will want to see that number continue to decline.

Election Roadmap Update (What’s It Means for Markets?)

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It’s been a very late night and a very early morning and much of this analysis has been changing by the hour, and as such hasn’t been edited.  Please forgive any excessive typos.

What’s in Today’s Report:

  • Election Roadmap Update (It’s All About Tier 3 Now)
  • Three Key Takeaways from Last Night’s Election (No Blue Wave But Maybe a Contested Election)
  • What’s Next:  When We Can Expect Results From the Six Remaining States

Futures have gyrated wildly throughout the night on the shifting election outlook but as of this writing they are  marginally higher.

In the Presidential election numerous (seven) states remain undecided and the Presidential race is very close.

Republicans have outperformed in Senate races and are now favored to hold the majority, likely yielding a divided government.

Today focus will remain on the election and specifically when the remaining six states (NC/GA/PA/MI/WI/NV) are called.

Outside of the election, we also get the ADP Employment Report (E: 600K) and the ISM Services Index (E: 57.6), but while important reports, they’ll be overshadowed by the election headlines, and we need to be prepared for a lot of “noise” and intra-day volatility.

Election Roadmap

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What’s in Today’s Report:

  • Election Roadmap

Stock futures are rising with global shares this morning as the U.S. election comes into focus after a mostly quiet night of news.

There were no notable economic reports or market-moving COVID-19 developments overnight leaving investors focus almost exclusively on today’s election.

There are two economic reports today: Motor Vehicle Sales (E: 16.5M) and Factory Orders (E: 0.6%) but neither should move markets and no Fed officials are scheduled to speak ahead of this week’s FOMC meeting.

There are a few notable earnings releases to watch today that could influence sector trading: MCK ($3.87), HUM ($2.86), SYY ($0.20), and PRU ($2.69) but none of the quarterly reports are likely to have a significant impact on the broader market.

Today, the election will clearly be in the forefront of investor focus, specifically how close the races in key swing states turn out to be. Ultimately, the markets want clarity, and the main threat to risk assets this week is the emergence of a contested election, so if races are tight enough for campaigns to sue to halt or extend recounts, expect a reversal of this morning’s rally and potentially significant risk-off money flows in the sessions ahead.

Three Events That Would Make This Pullback Worse

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What’s in Today’s Report:

  • Three Events That Would Make This Pullback Worse
  • The One Underlying Reason for the Decline Yesterday

Futures are bouncing modestly from Wednesday’s drop following a generally quiet night.

There was no new coronavirus related news overnight as infection numbers continue to rise in Europe and the U.S.

Politically, polls are tightening but the market still expects a Biden victory, while the Senate remains a toss-up.

Today will be a busy day as it is the most important day of Q3 earnings, and we also get important economic reports.

First, on the earnings front, several of the most important tech stocks for the entire market report after the close, including:  AMZN ($7.30), AAPL ($0.69), FB ($1.94), GOOGL ($11.39), TWTR ($0.06).

Also this morning, we get two potentially important economic and central bank events.  First, weekly jobless claims need to hold last week’s gains (and stay under or close to 800k, which would reassure market the recovery is still ongoing).  Second, the ECB decision is this morning, and no change is expected to policy.  But, during the press conference, which starts at 8:45 a.m., markets will want to see ECB President Lagarde strongly hint more easing coming soon.

Finally, the financial media will likely highlight the Preliminary Q3 GDP which will likely set a record at 30.9%.  But, that number won’t move markets.  First, Q2 GDP fell by 31% (also a record), so that’s important context.  Second, it’s an “stale” number and the market is only interested in current looks at the economy, which is why weekly claims are the more important economic reading this morning.

Four Reasons Stocks Dropped Yesterday

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What’s in Today’s Report:

  • Four Reasons Stocks Dropped Yesterday (And Whether It Keeps Going)

Stock futures are bouncing modestly this morning following yesterday’s steep selloff amid rising COVID-19 cases globally and continued gridlock on stimulus in Washington.

There were no market-moving economic reports overnight leaving the focus on the latest resurgence in coronavirus cases as new infection rates test record highs across many of the world’s “hot spots.”

Today, there are two key economic reports to watch: Durable Goods Orders (E: 0.4%) and Consumer Confidence (E: 102.0) as well as two releases on the housing market: Case-Shiller House Price Index (E: 0.4%) and FHFA House Price Index (E: 0.7%).

There are no Fed officials scheduled to speak today but earnings season remains very busy with releases from: PFE ($0.70), MMM ($2.25), CAT ($1.15), RTX (0.48), and JBLU (-$1.91) due out ahead of the bell, and MSFT ($1.53) and AMD ($2.56) after the close.

Beyond those few potential catalysts, markets will remain keenly focused on the stimulus negotiations in Washington as hopes for a deal continue to fade which has weighed heavily on stocks in recent sessions. And if optimism for a pre-election aid deal continues to dwindle, that will likely remain a significant headwind on risk assets given the recent rise in COVID-19 cases globally.

What Happens to Markets If Trump Wins?

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What’s in Today’s Report:

  • What Happens To Markets If Trump Wins?
  • Oil Update and EIA Analysis

Futures are marginally weaker following negative stimulus headlines overnight.

President Trump tweeted that stimulus talks had again hit an impasse, implying there would be no deal before the election.  This has always been the base case for the market, but as we and others have said, as long as the market expects the $1.5T-$2.0T in stimulus before year-end, the breakdown in negotiations isn’t a major headwind on stocks.

Today, stimulus headlines will continue to move the tape in the short term, but we’ve also got an important economic report via weekly Jobless Claims (E: 868k) and if that number breaks above 900k, we’ll see concern start to rise the economic recovery is starting to slip.

Other notable events today include Existing Home Sales (E: 6.2M) and three Fed speakers: Barkin & Daly (1:10 p.m. ET), Kaplan (6:00 p.m. ET).

Finally, earnings season is starting to head up, and while stimulus talks are dominating the headlines, earnings are still important.  Some report to watch today include:  KO ($0.45), AAL (-$5.62), T ($0.77), LUV (-$2.44), UNP ($2.03), INTC ($1.10), COF ($1.99), STX ($0.98).