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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.

What Caused Last Week’s Rally (And Can It Continue?)

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What’s in Today’s Report:

  • Justification For Last Week’s Rally?
  • Market Internals – Not As Strong As You’d Think
  • Weekly Market Preview
  • Weekly Economic Cheat Sheet

Futures are only slightly lower despite disappointing U.S./China trade headlines over the weekend and more underwhelming global economic data.

The South China Morning Post reported that a Trump/Xi trade summit (to end the trade war) might not happen until June, later than the current April expectation, as talks on key issues continue to drag out.

Global economic data remained underwhelming as Japanese exports missed expectations, falling –1.2% vs. (E) 0.7%.

Today there is only one economic report, Housing Market Index (E: 63.0), and no Fed speakers (they’re in the blackout period ahead of Wednesday’s meeting) so unless we get a surprise U.S./China trade headline (and chatter there seems to be rising following the weekend) I’d expect digestion of last week’s big rally.

A Glass Half Full Market

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What’s in Today’s Report:

  • Why This Is a Glass Half Full Market (For Now)
  • Why GE and Chinese Economic Data Were Important Yesterday

Our regular editor is out today so my apologies for any uptick in typos.

Futures are modestly higher following more optimistic chatter on U.S./China trade and Chinese economic growth.

Chinese officials again reiterated support for their economy overnight and that, combined with renewed optimism for a U.S./China trade deal, sent futures higher.  But, I do want to point out that nothing materially new happened overnight – it was jus more of the same commentary we’ve seen for the past month or so.

There were no notable economic reports overnight.

Today focus will be on economic data as we get our first look at March activity via the Empire State Manufacturing Survey (E: 10.0) along with Industrial Production (E: 0.4%), Consumer Sentiment E: 95.0) and January JOLTS (E: 7.155M).  Again, the stronger the data, the better for stocks.

Finally, today is “Quadruple Witching” options expiration so don’t be surprised by some volatility, especially into the close.

Seven Ifs Updated

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What’s in Today’s Report:

  • Seven “Ifs” That Will Move This Market Updated (Not Much Progress)
  • Weekly Market Preview (All About China)
  • Weekly Economic Cheat Sheet (Important Numbers This Week, Starting Today)

Futures are slightly higher following a generally busy weekend of economic, geo-political and Fed related news.

Economic data was mixed as CN New Yuan Loans slightly missed estimates (885 bln vs. (E) 950bln), as did German IP (-0.8% vs. (E) 0.5%) while German exports beat estimates.

On trade, the Trump/Xi summit appears to have been delayed till April, although a trade deal is still expected so this delay isn’t a negative for markets, yet.

Fed Chair Powell was on 60 Minutes Sunday night but didn’t say anything new so it’s having no impact on markets.

Today markets will be focused on the Retail Sales (E: 0.0%) report, in part because Powell specifically cited it as something he’d be watching in the 60 Minutes interview.  The key to this number, as always, is the “Control” group which is retail sales less gas, autos and building materials, and the market estimate is 0.7%.  A beat of that estimate will provide a boost of confidence for the economy, while a miss will exacerbate fears of a potential slowdown.

Another Reason to Buy China

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What’s in Today’s Report:

  • A New Positive for Chinese Stocks
  • A Theory on the Copper Rally

Stock futures are modestly lower this morning after another mostly quiet night of news as investors look ahead to the remaining catalysts this week including US jobs data.

The only economic report overnight was Australian GDP which missed expectations (0.2% vs. E: 0.3%) and hit the Aussie dollar (-0.76%).

Oil prices are down over 1% this morning after the API reported a weekly build of +7.3M bbls late yesterday vs. (E) +1.6M bbls. A build of this size would largely offset last week’s bullish draw and could pressure the energy space (and drag risk assets lower too) if confirmed by this morning’s EIA report (10:30 a.m. ET).

Today, we get our first look at February jobs data with the ADP Employment Report (E: 180K) due out ahead of the bell. Then, International Trade figures will be released shortly thereafter (E: -$57.6B). Either release could move markets as growth concerns and the trade war remain two of the biggest influences on stocks right now.

Other than the weekly EIA report mid-morning, there are two Fed officials scheduled to speak over the lunch hour: Mester (12:00 p.m. ET) and Williams (E: 12:10 p.m. ET).

Market Multiples Explained

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What’s in Today’s Report:

  • Market Multiples Explained
  • Real Interest Rates and Gold

Futures are up modestly while international markets were mixed in quiet trade overnight as investors eyed the benign start of China’s NPC where 2019 forecasts largely met expectations while economic data was mixed.

China’s General Services PMI fell from 53.6 to 51.1 in February while Composite PMI data in Europe was better than expected which is helping EU shares outperform this morning.

Today, there are two Fed officials speaking early: Rosengren (7:30 a.m. ET) and Kashkari (9:30 a.m. ET), before a few notable economic reports are due to be released shortly after the bell: New Home Sales (E: 590K) and ISM Non-Manufacturing Index (E: 57.2). Beyond those potential catalysts, focus will remain on U.S. – China trade.

A Make Or Break Month Ahead

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What’s in Today’s Report:

  • Why March Will Be A Make Or Break Month For The 2019 Rally
  • The Q4 GDP Report – Why It Wasn’t As Strong As It Seemed

Futures are moderately higher thanks to strength in Asia and generally in-line economic data.

Chinese shares are up 1% because index firm MSCI announced it will increase the weighing for mainland Chinese stocks to 20% from the current 5%.

Economically, global Feb manufacturing PMIs largely met estimates as the EU number rose to 49.3 vs. (E) 49.2. while the British reading was in-line at 52.0.

Today focus will be on data as we get two important economic reports.  First, the Fed’s preferred measure of inflation, the Core PCE Price Index (E: 0.2% m/m, 1.9% y/y) is released, and that year over year number needs to stay around 2% to continue the “dovish Fed” narrative.  Later, we get the Feb. ISM Manufacturing PMI (E: 55.0) and it needs to meet expectations to help offset some of the poor data from February (retail sales, etc.).

Two Important Takeaways from Yesterday’s Testimonies

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What’s in Today’s Report:

  • Yesterday’s Most Important Testimony (It Wasn’t Cohen)
  • Is All the Good News Priced in Already? (Two Important Observations)
  • Why Did Treasury Yields Surge Yesterday?

Futures are modestly lower again this morning following more disappointing Chinese economic data and the collapse of the U.S./North Korea summit.

Global growth remains a concern as the Chinese Feb. manufacturing PMI missed estimates, dropping to 49.2 vs. (E) 49.4.  Japanese IP and Retail Sales also missed estimates.

The U.S./North Korea summit ended early and without a substantive agreement, and while that’s not a direct impact on stocks, it’s adding to the generally negative mood this morning.

Today there will be focus on the Preliminary Q4 GDP (E: 2.2%) but keep in mind that’s now a very old number.  Tomorrow’s global manufacturing PMIs are a much more important number for the markets going forward.  Today we also get Jobless Claims (E: 225k) which have been trending higher lately, and markets will want to see that trend reversed.