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Why the Bullish Argument Got Slightly Weaker Last Week

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What’s in Today’s Report:

  • Why the Bullish Argument Got Slightly Weaker Last Week
  • Weekly Market Preview:  Does Goldilocks Data Keep the Rally Going?
  • Weekly Economic Cheat Sheet:  The “Big Three” Monthly Economic Reports this Week

Futures are solidly higher following a quiet weekend and despite no progress on averting a government shutdown.

Chances of a partial government shutdown starting Wednesday are rising and if that occurs, the biggest impact for markets will be via delayed data (possibly including Friday’s jobs report).

There were no material economic reports overnight.

Today focus will be on any progress on averting a shutdown (a shutdown wouldn’t be a material market negative, but it’s definitely something the market could do without).

Economically, the only notable report is Pending Home Sales (E: 0.2%) while there are several Fed speakers:  Hammack (8:00 a.m. ET), Musalem & Williams (1:30 p.m. ET).  Bottom line, solid data and dovish Fed speak is what the market needs not just today, but all week, to rebound from last week’s declines.

 

CPI Preview, October 13, 2017

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Looking to today’s CPI report, the preference here is for a slightly “Too Hot” number in headline and core CPI while a worst case scenario for stocks is a soft number, but keep in mind there will be impacts from the Hurricanes so the details in the report will be important.

Bottom line, I’ve said consistently for months that the only way I can see stocks moving materially higher is if they are driven by a reflationary rally. We got a glimpse of that in September, but for the reflation rally to continue, we need more Goldilocks data starting with today’s CPI.

Disconcertingly, if we don’t get that Goldilocks data, then the onus is going to be totally on earnings season to support stocks, and ensure this September rally doesn’t reverse. In that scenario, it’s an awful lot of pressure to put on continued growth in corporate earnings this late in an economic cycle.

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