Posts

Short and Long Term Implications of the Fed Meeting

/in /by

What’s in Today’s Report:

  • Short and Long Term Implications of the Fed’s “Hawkish” Decision
  • The sector winners (and the biggest loser) after the Fed decision
  • Oil/Energy market update

Futures are bouncing marginally as markets digest the Fed’s “hawkish cut” rate decision.

Economic data overnight was not as bad as feared, although it wasn’t good, either.  EU (46.5 vs. (E) 46.4), British (48.0 vs. (E) 47.7) and Chinese (49.9 vs. (E) 49.5) July manufacturing PMIs all beat estimates, although they also remain below 50, signaling contraction.

Today we have an important economic report, ISM Manufacturing Index (E: 51.9) and we also get weekly Jobless Claims (E: 213K), and those numbers (especially the former) could move markets.  But, beyond the data, and following the Fed’s “hawkish” decision, the keys to focus on will be the U.S. Dollar and the Treasury yield curve.  If the dollar continues to grind higher and the yield curve flattens, that will be another headwind on stocks.  Yesterday’s lows in the S&P 500 at 2959 are an important support level to watch if this market rolls over mid-day.

ECB Preview (The Most Important Catalyst of the Week)

/in /by

What’s in Today’s Report:

  • ECB Preview
  • The Threat to Oil Prices and the Potential Effect on Bonds

S&P futures are down 10 points this morning after the U.S. DOJ announced an antitrust probe into big tech firms late yesterday while EU economic data badly missed estimates.

The EU PMI Composite Flash for July was 51.5 vs. (E) 52.1 but the German Manufacturing component was especially weak at 43.1 vs. (E) 45.2 rekindling fears of a further, and potentially accelerating, slowdown in the global economy.

In today’s U.S. session, there are two economic reports to watch: The PMI Composite Flash (E: 51.2) and New Home Sales (E: 655K) while no Fed officials are scheduled to speak ahead of next week’s FOMC Meeting.

There is a 5-Yr Note Auction by the Treasury at 1:00 p.m. ET today and the results could have an impact on the yield curve which could ultimately move stocks (like we saw with yesterday’s 2-Yr Auction).

Earnings season is continuing to pick up and today will be a very busy day of releases with BA (-$0.56), T ($0.89), CAT ($3.12), UPS ($1.93), NOC ($4.64), GD ($2.68), FCX (-$0.05), and NSC ($2.77) due to report before the open, and FB ($1.90), TSLA (-$0.52), PYPL ($0.73), and F ($0.30) will hit after the bell.

A Game of Multiples

/in /by

What’s in Today’s Report:

  • A Game of Multiples
  • Why the ECB Decision Is the Most Important Event this Week

S&P futures are climbing this morning, tracking gains in overseas markets as investors digest positive trade war headlines from Monday and better-than-feared earnings to kick off a very busy week of the Q2 reporting season.

There were no notable economic reports overnight and macro news was limited.

Looking into today’s session, focus will be on the micro as earnings season picks up however there are two economic data points on the housing market: FHFA House Price Index (E: 0.3%) and Existing Home Sales (E: 5.340M). Meanwhile there are no Fed officials scheduled to speak.

In the bond market, there is a 2-Year T-Note Auction today at 1:00 p.m. ET which could affect the yield curve. If we see the curve flatten further as it did last week, that could weigh on stocks again but contrarily, if we see the 10s-2s widen back out towards 30 basis points, that should support stocks broadly.

Earnings remain in the spotlight this week with notable reports coming from: KO ($0.62), LMT ($4.74), BIIB ($7.58), UTX ($2.04), JBLU ($0.57), and TRV ($2.32) ahead of the bell, while SNAP (-$0.10) and V ($1.33) will report after the close.

 

Key Levels To Watch in the Yield Curve

/in /by

What’s in Today’s Report:

  • Signals from the “Smart Market” – Good, Bad, and Ugly Scenarios

Stock futures are flat to slightly higher this morning as investors continue to digest mixed earnings reports, incremental progress between the U.S. and China on trade, and yesterday’s very dovish Fed chatter.

U.S. and Chinese officials held phone conversations last night and it appears more face-to-face meetings are likely in the near term, underscored by a near 2% rally in copper this morning.

Looking into today’s session, there is one economic report to watch: Consumer Sentiment (E: 98.6) and two Fed officials are scheduled to speak: Bullard (11:05 a.m. ET) and Rosengren (4:30 p.m. ET).

Earnings will remain in focus as there are several notable companies releasing Q2 results before the bell: BLK ($6.52), KSU ($1.61), AXP ($2.05), and SYF ($0.96), but yesterday’s rally was all about dovish Fed expectations so investors will be watching for any further clues as to whether the Fed will cut by 25 or 50 basis points at the July FOMC meeting.

The Four Key Influences on this Market

/in /by

What’s in Today’s Report:

  • The Four Key Influences on this Market (and How to Easily Monitor Them)
  • EIA Analysis and Oil Update

Futures are modestly lower this morning as the market digests several disappointing earnings releases (notably CSX and NFLX) while U.S.-China trade concerns linger after multiple negative news articles were released overnight.

Economically, U.K. Retail Sales beat (1.0% vs. E: -0.3%), which is helping the pound recover from fresh 2019 lows.

News flow will remain steady today with two economic reports to watch: Jobless Claims (E: 215K) and Philadelphia Fed Business Outlook Survey (E: 4.5) while there is one Fed official scheduled to speak: Williams (2:15 p.m. ET).

Over the last 24-36 hours, earnings became a more significant driver of the broader stock market so today’s corporate results will be important to watch. Before the bell UNH ($3.46), MS ($1.13), HON ($2.08), and UNP ($2.12) all release results and MSFT ($1.21), and COF ($2.84) will report after the bell.

Economic Breaker Panel: July Update

/in /by

What’s in Today’s Report:

  • Economic Breaker Panel – July Update

Futures are trading modestly higher this morning as investors digest the mixed set of corporate earnings releases so far this week after an otherwise quiet night of macro news.

Eurozone inflation was 1.3% vs. (E) 1.2% year/year in June, but the slightly firmer than expected print was not enough to alter the outlook for ECB policy (the euro is flat).

Today, there is one economic report to watch: Housing Starts (E: 1.260M) and one Fed official scheduled to speak: George (12:30 ET).

With news-flow considerably slower today than yesterday, investor focus will remain on earnings as the reporting season continues to pick up.

Notable releases today include: BAC ($0.70), PNC ($2.83), USB ($1.07), BK ($0.94) before the open, and NFLX ($0.56), IBM ($3.06), EBAY ($0.62), AA (-$0.34), KMI ($0.23) after the close.

How Much Is Too Much?

/in /by

What’s in Today’s Report:

  • How Much Is Too Much?
  • Weekly Economic Outlook

S&P futures are modestly higher this morning while overseas markets were little changed overnight as mixed economic data was digested ahead of a busy week of earnings.

Chinese GDP slowing to 6.2% vs. (E) 6.3% initially caught investors’ attention but Fixed Asset Investment, Industrial Production, and Retail Sales all solidly beat expectations, helping Chinese shares recover 1.5%+ to close with a modest gain.

Looking into today’s session, there is one economic report to watch: Empire State Manufacturing Survey (E: 0.5) and one Fed official is scheduled to speak: Williams (8:50 a.m. ET).

Meanwhile, market focus is shifting to earnings as the Q2 reporting season gets underway this week. Today, there are just two notable reports with C (E: $1.78) ahead of the bell and JBHT (E: -$0.08) after the close.

Finding Attractive Risk/Reward in This Market

/in /by

What’s in Today’s Report:

  • Why Powell Was Dovish
  • Where Can We Find Attractive Risk/Reward?  Emerging Market Bonds
  • Energy Outlook (Slightly Positive)

Futures are marginally higher thanks to continued momentum from yesterday’s dovish rally.

Economic data was sparse overnight as the only notable number was German CPI, which met expectations at 1.6% yoy.

Today will be a busy day.  First, we get the 2nd half of Powell’s testimony in front of the Senate Banking Committee at 10:00 a.m. ET, but that shouldn’t yield any surprises as it’s mostly a repeat of yesterday.

The ECB Minutes will be released at 7:30 a.m. ET and if they hint at a re-start of QE (which they probably will) then we might see an extensions of this “dovish” rally.

On the data front, CPI (E: 0.0%) and Jobless Claims (E: 216K) both get released later this morning but given the flood of dovishness inundating markets right now from global central banks, it’d take a very strong CPI and very high jobless claims to hit stocks.

Finally, there are multiple Fed speakers today besides Powell, but they are all generally overshadowed by the comments yesterday so the market should largely ignore their speeches.  Today’s roster includes: Williams (11:00 a.m., 1:30 p.m. ET), Quarles (1:30 p.m. ET), Kashkari (5:00 p.m. ET).

Powell Preview

/in /by

What’s in Today’s Report:

  • Powell Testimony Preview
  • “This Week’s Sign the Apocalypse is Upon Us”
  • NFIB Small Business Optimism Index Analysis

Futures are lower with most international markets as investors look ahead to Powell’s testimony while another EU company, PageGroup, issued a profit warning overnight.

Economically, Chinese June CPI was inline but PPI dropped from 0.6% to 0.0% vs. (E) 0.2% which rekindled deflationary concerns and underscored pressures on the Chinese manufacturing sector.

Today, there are no economic reports but even if there were, focus would be primarily on the Fed anyway.

Powell’s Testimony before Congress is clearly the main event as investors look for further clues on the future of monetary policy. His written comments are due out at 8:30 a.m. ET before he begins to speak at 10:00 a.m. ET.

Bullard also speaks at 1:30 p.m. ET today and the June FOMC Meeting Minutes will hit the wires at 2:00 p.m. ET.

Lastly, there is a 10 Year T-Note Auction at 1:00 p.m. ET and depending on the results (demand metrics and yields) a reactive move in the bond market could influence stock trading in the midst of all the Fed events.

Jobs Day

/in /by

What’s in Today’s Report:

  • Why Collapsing Bond Yields Are Boosting Stocks (For Now)
  • Oil Market Update/EIA Analysis

Futures are marginally lower as markets digest Wednesday’s new highs ahead of the jobs report.

Trading Thursday was quiet globally as there was no notable news, and most foreign indices were little changed.

Economic data continued to disappoint, as German Factory Orders became the latest manufacturing reading to badly miss estimates (-2.2% vs. (E) 0.2%).

Today focus will be on the Employment Situation Report and estimates are as follows: Jobs (E): 165k, Unemployment Rate (E): 3.6%, Wages (E): 3.2%.  As we saw on Wednesday (and really all week) slightly disappointing or better than expected data will likely result in the S&P 500 trading above 3000, while a very strong or very weak number will likely hit stocks.

For now, markets are convinced collapsing global bond yields are just reflective of impending dovish central bank policies, and until data gets bad enough to cause worries about the economy, those lower yields will be a short term tailwind on stocks (but longer term problem, according to history).