Why Did Stocks Drop to Multi-Month Lows?

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What’s in Today’s Report:

  • Why Did Stocks Drop To Multi-Month Lows? (A New Reason)
  • Will the Election of a Speaker of the House Provide Any Relief for Investors?

Futures are solidly lower and are extending Wednesday’s losses following more disappointing earnings reports.

Earnings results this week have not been good and that continued overnight with disappointing guidance from META, WPP and Canadian Pacific (CP).

Today will be a busy day on both macro and micro economic fronts.

First, there’s an ECB Rate Decision but no hike is expected.  Economically, key reports today include, in order of importance, Jobless Claims (E: 208K), Durable Goods (E: 1.0%), Preliminary Q3 GDP (4.2%) and Pending Home Sales (-1.0%).  As has been the case, “Goldilocks” data that shows solid, but not very strong, activity will be welcomed by markets.

On the earnings front, there are multiple important reports today highlighted by AMZN ($0.58) after the close.  Other notable reports today include: UPS ($1.53), MRK ($1.94), LUV ($0.38), MA ($3.21), INTC ($0.19), and CMG ($10.46).  Bottom line, disappointing earnings are becoming a new headwind on markets and solid results today will help stabilize sentiment (while more disappointing reports will add to headwinds).

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Jobs Report Preview

What’s in Today’s Report:

  • Jobs Report Preview

Futures are moderately lower following a disappointing night of tech earnings and more hot inflation data.

AAPL, AMZN, and GOOGL all reported earnings overnight and the results underwhelmed.  Each stock is down between 2% and 5% pre-market.

Economically, EU PPI rose 1.1% vs. (E) -0.7% and became the third inflation number this week to hint at a rebound.

Focus today will be on the Employment Situation Report and expectations are as follows: Job Adds 185K, UE Rate 3.6%, Wages 0.3% m/m, 4.5% y/y).  Financial media focus will be on the headline job adds number but thanks to Powell’s less hawkish speech it’ll take a big number (300k or more) to be “Too Hot.”  Instead, focus on wages as they are directly related to services inflation, which remains sticky.  If wages are strong, that’ll be a negative.  The other notable economic report today is the ISM Services Index (E: 49.6) and markets will want to see stability in the data (no not worse than expectations).

How Far Could This Relief Rally Run?

What’s in Today’s Report:

  • Technical Support for a Near Term Bottom and How Far This Relief Rally Could Run
  • Chart: 10-Yr Note Futures Test Trend Resistance
  • Housing Market Update

Stock futures are trading lower this morning as soft tech earnings are overshadowing a continued bounce in bonds.

MSFT and GOOGL both fell roughly 6% overnight after delivering disappointing quarterly results yesterday afternoon which is dragging the broader tech sector lower in premarket trading.

Today, there are two economic reports to watch in the morning: International Trade in Goods (E: -$87.8B) and New Home Sales (E: 585K), while there is a 5-Yr Treasury Note auction in the early afternoon (1:00 p.m. ET).

Earnings will remain in focus today with BA (-$0.01), BMY ($1.83), HLT ($1.25), KHC ($0.55), and HOG ($1.45) reporting before the bell, and META ($1.88), F ($0.31), and CP ($0.77) releasing results after the close.

Bottom line, soft earnings out of mega-cap tech are weighing on the market this morning however stable bond markets are limiting losses. If we see Treasuries roll over today and yields begin to climb again, expect pressure on equities to pick up as both earnings expectations and multiple compression will weigh on stocks broadly.