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Market Multiple Table: November Update

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What’s in Today’s Report:

  • Market Multiple Table: November Update

Stock futures pulled back overnight following the release of the Fed’s Financial Stability Report, which noted stretched asset prices, but markets have since stabilized as new domestic inflation data comes into focus.

Economically, the German ZEW Survey was mixed (Current Conditions missed, Economic Sentiment beat) while the NFIB report was mildly underwhelming however neither report materially moved markets in pre-market trade.

Looking into today’s session, earnings season continues with a lot of smaller cap companies reporting however focus this morning will be on economic data with the October PPI report due before the bell (E: 0.6% M/M, 8.6% Y/Y).

Then the Fed speaker circuit also remains active today with Bullard (7:50 a.m. ET), Powell (9:00 a.m. ET), Kashkari (1:30 p.m. ET) all speaking over the course of the session and the market will be looking for further confirmation that rate hikes will not commence before late 2022 otherwise we could see a hawkish reaction from markets.

Finally, there is a 10-Yr Treasury Note Auction at 1:00 p.m. ET that could move bonds and subsequently trigger a reaction from stocks.

Near-Term Macro Calm (But Risks Building for 2022)

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What’s in Today’s Report:

  • Near Term Macro Calm (But Risks Building for 2022)
  • Weekly Market Preview (Risks of An Accelerated Taper?)
  • Weekly Economic Cheat Sheet (Key Inflation Data This Week)

Futures are little changed following a quiet weekend outside of the passage of the physical infrastructure bill.

On Friday the House passed the physical infrastructure bill but it’s only $550 billion of new spending over 10 years, and that’s not going to have a big impact on the economy.

The broader $1.75 trillion spending bill remains under debate as Democrat infighting continues, but a deal is expected by year-end.

Today there are no economic reports, but there are numerous Fed speakers and the market will be looking for insight into the possibility of an accelerated taper beyond December.  Powell (10:30 a.m.) is the headliner today but he’s only making opening remarks and shouldn’t offer any insights on policy.  Vice Chair Clarida (9:00 a.m.) will speak on policy, so his interview is probably the most important one to watch today.  Other Fed speakers include Montgomery (10:00 a.m.), Harker (12:00 p.m.) and Evans (1:50 p.m.) but they shouldn’t move markets.

ECB Decision Takeaways (Not as Dovish as Hoped)

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What’s in Today’s Report:

  • ECB Decision Takeaways (Not as Dovish as Hoped)

Futures are moderately lower following disappointing AAPL and AMZN earnings combined with hotter than expected headline inflation from Europe.

On earnings, AAPL and AMZN both underwhelmed investors and those stocks fell 3% and 5% after hours and the sheer weight of those names in the S&P 500 is weighing on the entire index.

On inflation, EU HICP rose to 4.1% vs. (E) 3.7%, a nearly 20-year high.

Focus today will be on inflation, as we get the Fed’s preferred inflation gauge via the Core PCE Price Index (E: 0.2%, 3.7%) and the Employment Cost Index (E: 0.9%).  Both numbers will be high, but markets will want to see hints of a plateau in inflation.  We also get Consumer Sentiment (E: 71.4) and the inflation expectations component will also be closely monitored.

On the earnings front, focus will be on the following results: XOM ($1.57), CVX ($2.21), CL ($0.79).

Earnings and Tax Clarity but Fed Uncertainty?

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What’s in Today’s Report:

  • Earnings and Tax Clarity but Fed Uncertainty?
  • Weekly Economic Cheat Sheet:  Key Inflation Data on Friday
  • Weekly Market Preview:  The Most Important Week for Earnings

Futures are slightly higher following a quiet weekend and ahead of the most important week of earnings season.

Regarding Fed tapering, Powell’s comments on Friday were taken as slightly hawkish, but the consensus outlook remains a November taper at $15 bln/month.

There was no notable news/progress from Washington over the weekend on the debt ceiling/spending bill.

Today there are no notable economic reports or Fed speakers (they’re entering the “quiet period” ahead of next week’s meeting).  So, focus will be on any updates from Washington on whether or not we get tax hikes and on earnings, although the vast majority of the biggest companies report later in the week.  Some reports to watch today include  FB ($3.20), LOGI ($1.14), OTIS ($0.73), and KMB ($1.66).

Why the Fed Could Hike Rates Sooner than Expected

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What’s in Today’s Report:

  • Economic Breaker Panel – Why The Fed Could Hike Rates Sooner than Expected
  • Oil Market Update and EIA Analysis

Futures are modestly lower as markets digest the recent bounce following disappointing earnings overnight.

Earnings overnight were negative on balance as IBM missed on revenues while TSLA, LVS, and PPG also posted disappointing results and saw selling afterhours.

Today focus will be on economic data and earnings.  On the data front, the key reports will be Jobless Claims (E: 300K), Philly Fed Manufacturing Index (E: 25.0), and Existing Home Sales (E: 6.030M), and markets will want to see stability in the data (so not too hot and not too cold).  We also get two Fed speakers, Waller (9:00 a.m. ET) and Williams (9:00 p.m. ET).

On the earnings front, results have become more mixed lately so markets will continue to focus closely on earnings.  Some reports we’re watching today include: T ($0.78), AAL (-$1.04), FCX ($0.78), LUV (-$0.27), SNAP ($0.08), INTC ($1.11) and WHR ($6.16).  As has been the case, strong margins amid rising costs will be the key metric in the results.

Tom Essaye Quoted in Bolly Inside on October 18, 2021

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US stocks rise, bonds fall on inflationary bets

The issues that caused the pullback have quieted over the past…wrote Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter. Click here to read the full article.

Inflation Update

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What’s in Today’s Report:

  • Inflation Update
  • Inflation Expectations Chart

Stock futures are slightly higher this morning while global shares were mixed overnight ahead of fresh U.S. inflation data and the unofficial start to the Q3 earnings season.

Economically, German CPI met expectations while Eurozone Industrial Production beat estimates, which is helping ease recent stagflation concerns this morning.

Looking into today’s session, focus will be on inflation data with the September CPI report due at 8:30 a.m. ET (E: 0.3%, 5.3%) as well as the start of Q3 earnings season with JPM ($3.00) and DAL ($0.15) reporting results before the open.

Then in the afternoon, we will get the FOMC Meeting Minutes (2:00 p.m. ET) and multiple Fed speakers: Brainard (3:30 p.m. ET), Bowman (8:00 p.m. ET).

Finally, there is a 30-Yr Treasury Bond auction at 1:00 p.m. ET that could impact yields and ultimately move equity markets (especially if yields make new highs).

Focus Turns to Earnings and Yields

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What’s in Today’s Report:

  • Focus Turns to Earnings and Yields (And Away from Washington, For Now)
  • Weekly Market Preview:  Will Earnings Results Ease Market Anxiety?
  • Weekly Economic Cheat Sheet:  Key Inflation and Growth Data this Week

Futures are modestly lower on a resumption of the commodity rally following an otherwise quiet weekend.

Energy prices (oil, natural gas, coal) are all rallying again (up 2% – 3%) and that’s increasing global inflation anxiety, which is weighing moderately on futures.

Global bond yields are also rising as two hawkish Bank of England members warned of a possible rate hike this year, although that is not the consensus expectation (although a rate hike from the BOE in early 2022 is looking more likely).

Today is Columbus Day and the U.S. bond markets are closed and there are no economic reports today, although there is one Fed speaker: Evans (6:00 p.m. ET).  So, commodity prices are Treasury yields should drive trading today.  The more they rise, the stronger the headwind on stocks will become.

As Tech Goes, So Goes the SPY (And Tech Is Facing Headwinds)

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What’s in Today’s Report:

  • As Tech Goes, So Goes the SPY (And Tech Is Facing Headwinds)

Futures are enjoying a modest bounce following yesterdays’ declines after a generally quiet night of news.

Economic data was solid overnight as both EU (56.2 vs. (E) 56.1) and UK (54.9 vs. (E) 54.1) September Composite PMIs beat estimates, reflecting stability in the global economic recovery.

On inflation, Euro Zone PPI rose 1.1% vs. (E) 1.3%, implying inflation pressures could be starting to ease.

Today focus will be on economic data and specifically the ISM Services PMI (E: 60.0).  Markets will want to see stability in this number to further confirm the COVID spike in July/August didn’t have a lasting impact on the recovery.  We also get two Fed speakers today, Barkin (10:30 a.m. ET) and Quarles (1:15 p.m. ET), and markets will continue to be on the lookout for any signs of a compromise on the reconciliation/debt ceiling bill (although nothing material is expected today).

Politics and Markets

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What’s in Today’s Report:

  • Politics and Markets (An Important Week)
  • Weekly Market Preview:  Can the Rebound Continue?
  • Weekly Economic Cheat Sheet:  Important Growth and Inflation Data on Friday

Futures are slightly higher following a quiet weekend as the market’s focus turns to politics this week.

Democrats must pass a “Continuing Resolution” by Thursday to avoid a government shutdown, and while markets expect it will pass, there was little actual progress on that front over the past several days.

Economic data was sparse overnight and isn’t moving markets.

Today we get Durable Goods (E: 0.6%) and there are two Fed speakers, Evans at 8:00 a.m. ET and Williams at 9:00 a.m. ET & 12:00 p.m. ET, but really the market’s focus will be on Washington.  Despite the lack of progress from Democrats so far on passing a “Continuing Resolution” to fund the government before the deadline on Thursday night, markets fully expect that “CR” will pass by then.  But, if it becomes apparent it not might not pass by then, that will cause more stock market volatility.