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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.

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.