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Was the Jobs Report an “All Clear” for Markets?

What’s in Today’s Report:

  • Was the Jobs Report An “All Clear” for Markets?
  • Is a “V” Shaped Recovery Happening?
  • Weekly Market Preview:  Fed Meeting Wednesday
  • Weekly Economic Cheat Sheet:  Jobless Claims Remain the Key Report

Futures are modestly higher thanks to momentum as markets extend Friday’s rally following a quiet weekend.

Economic data was mixed overnight as Chinese exports were better than expected (-3.3% vs. (E) -6.5%) while German Industrial Production missed estimates (-17.9% vs. (E ) -16.2%).  But, neither number was bad enough to turn the bullish momentum.

Protests continued across the U.S. and were mostly peaceful, but this remains largely a non-issue for markets.

Today there are no economic reports and no Fed speakers so re-opening headlines and virus trends will drive trading, and as long as there isn’t any materially negative news on either front, the bulls will likely remain in charge.

Technical Update (Important Support and Resistance)

What’s in Today’s Report:

  • Technical Update (Important Support and Resistance)
  • Jobs Report Preview (It’s Going to be Ugly)

Futures are moderately lower as markets digest Thursday’s rally ahead of today’s jobs report.

Economically, global service PMIs were worse than expected and the drops were historic.  The EU service PMI plunged to 26.4 vs. (E) 28.4, down from 52.6 in Feb.

The Chinese service PMI rebounded strongly in March, rising to 43.0 from 26.5, confirming that their economy is seeing a strong bounce back in activity.  This is mildly encouraging because the Chinese data implies that once the coronavirus pandemic has passed (against sooner than later) we should see a strong bounce back in the economy.

Today focus will be on the jobs report, and the estimate are as follows: Jobs:  -150K, UE:  3.9%,  Wages:  0.2%.  But, the “worst case” estimate we saw was for -1.25 million jobs, so don’t be shocked if the number is much worse than the estimate.  Also, we get the March ISM Non-Manufacturing PMI (E: 43.0).  If that can beat that low estimate, that will be a small moral victory.

Was the Jobs Report an “All Clear” on the Economy?

What’s in Today’s Report:

  • Was the Strong Jobs Report an “All Clear” on the Economy?
  • Weekly Market Preview:  What Happens on December 15th?
  • Weekly Economic Cheat Sheet:  A Busy Week or Reports (They Start on Wednesday)

Futures are slightly lower as markets digest Friday’s big rally following a generally quiet weekend.

On U.S./China trade, there was no new news, although China released a statement saying it wanted to make a deal “as soon as possible.”

Economic data was again mixed, as Chinese exports missed estimates (1.3% vs. (E) 1.9%) while German exports beat expectations (1.2% vs. (E) -0.3%.  But, neither number is moving markets.

Today there are no notable economic reports and no Fed speakers (they are in their blackout period ahead of Wednesday’s decision) so focus will again be on any updates on U.S./China trade.

The December 15th tariff increases are the last “big” event of 2019 and markets fully expect those to be delayed, so any confirmation of that should be a mild tailwind on stocks.  Conversely, any hints the tariffs might go into effect will hit markets, potentially hard.

Jobs Day

What’s in Today’s Report:

  • Trade Update – What’s the Latest?
  • Key Levels to Watch in the Dollar and 10 Year Yield
  • OPEC Update – Positive or Negative for Oil?

Futures are modestly higher again as markets ignore more soft economic data and instead focus on incrementally positive U.S./China trade headlines.

China reduced import tariffs on U.S. soybeans and pork and that’s being interpreted as a mild positive in the negotiations, and that’s the reason futures are higher.

Economic data again disappointed as Japanese Household Spending and German IP (-1.7% vs. (E) 0.2%) both missed.

Today the key event on the calendar is the jobs report, (E: Jobs: 180K, UE Rate: 3.6%, Wages: 0.3%) and again the stronger the number, the better.  We also get Consumer Sentiment (E: 96.8) this morning, and given the focus on consumer spending, that number is more important than usual.  Like the jobs report, the stronger the number, the better for stocks.

Finally, regarding trade, Larry Kudlow will speak on CNBC at 9:30 so we’ll likely get another non-specific, yet positive, update on the U.S./China trade “mood music,” so don’t be surprised if you see a temporary pop in stocks right at the open.

Technical Update (Key Support and Resistance Levels)

What’s in Today’s Report:

  • Technical Update (Key Support and Resistance Levels to Watch)
  • Jobs Report Preview (Still a Very Important Report)
  • EIA/Oil Market Update

Futures are modestly higher mostly on momentum from Wednesday’s rally, following a quiet night of news.

On trade, China’s Ministry of Commerce said the two sides remained in close communication, but we already knew that and there were no new/notable trade headlines overnight.

Economic data was notably bad.  EU Retail Sales, German Manufacturers’ Orders, Australian Exports and Australian Retail sales all badly missed expectations, and while you wouldn’t know it according to stocks, the outlook for the global economy remains uncertain.

Today there is just one economic report to watch, Jobless Claims (E: 220K) and one Fed speaker: Quarles (10:00 a.m. ET).  So, as has been the case all week, markets will trade-off any new U.S./China trade commentary or headlines.  But barring negative news, the path of least resistance for stocks today appears higher once again.

Tom Essaye Quoted in Yahoo Finance on October 3, 2019

“Bottom line, worries about the economy spiked this week, and the last thing this market needs is a soft jobs number to reinforce the idea that any trade truce next week between the U.S. and Chins is ‘too late’ to help manufacturing sentiment. So, it’s not often the case, but the stronger this jobs report, the better, as a strong report will help calm any…” says Sevens Report Research founder Tom Essaye. Click here to read the full article.

New York Stock Exchange Traders

What the Strong Jobs Report Means for Markets

What’s in Today’s Report:

  • What Friday’s Jobs Report Means for the Markets
  • Weekly Market Preview (Powell’s testimony is the big event this week)
  • Weekly Economic Cheat Sheet (Fed Minuets and CPI)

Futures are slightly lower this morning following a quiet weekend of news, as markets digest what Friday’s jobs report means for future Fed rate cuts.

Following the jobs report, investors still expect a rate cut this month, but what’s now in doubt is whether we see additional cuts after that, something the market is assuming and has already priced in.  Doubts over the number of future cuts is why stocks dipped Friday and are marginally lower this morning.

Economic data was again underwhelming as Japanese Machine Orders (-7.3% vs. (E) -3.0%) and German Industrial Production (-3.7% vs. (E) -3.2%) missed estimates, while German exports were slightly better (-1.1% vs. (E) -0.9%).

The important events this week come Wednesday via Fed Chair Powell’s testimony before Congress (will he telegraph a rate cut?), the FOMC Minutes (also out Wednesday – is there consensus for a cut?) and CPI (out Thursday).  So, today should be generally quiet as there are no economic reports or notable Fed speakers, although U.S.-China trade negotiations will re-start, so we’ll have to watch for any headlines from there.

Why The Dovish ECB Isn’t Good For Stocks

What’s in Today’s Report:

  • Why The Dovish ECB Decision Isn’t Good for Stocks

Futures are modestly lower following more disappointing economic data.

Chinese exports badly missed expectations at –20.7% vs. (E) -6.5%, although that number was likely skewed by the Lunar New Year, so it’s not as bad as it looks.  German Manufacturers’ Orders also missed (-2.6% vs. (E) 0.5%).  So, the data overnight is just adding to the growth worries that came from the ECB projections yesterday and that’s why stocks are down again.

Today the key will be the Employment Situation Report.  Estimates are:  Jobs: 178K, UE: 3.9%, Wages: 3.4% yoy), and thankfully the range for a “Just Right” number is wide, as we said in our Jobs Report Preview.  But, given the recent soft global economic data, while the range for a “Just Right” number is wide, the penalty for a number being “Too Cold” and causing growth concerns or “Too Hot” and resulting in a hawkish Fed will be extreme, and if either one of those outcomes occur, it’ll likely be a painful day in stocks.

Outside of the jobs report we also get Housing Starts (E: 1.17M) and two Fed Speakers:  Daly (10:00 a.m. ET) and Powell (10:00 p.m. ET).

ECB Preview (Why It’s Important For U.S. Stocks)

What’s in Today’s Report:

  • ECB Preview (This is more important to U.S. stocks than it seems)
  • Jobs Report Preview

Futures are drifting slightly lower following a quiet night as markets await the ECB decision later this morning.

Economic data generally met expectations overnight as Euro Zone Q4 GDP was 1.1% vs. (E) 1.2% while Chinese FX reserves were in line at $3.09T.

Today the key event will be the ECB Decision at 7:45 a.m. ET and then the ECB Press Conference at 8:30 a.m. ET.  For this to meet dovish expectations (and not be a disappointment for stocks) we’ll need to see 1) An extension of the promise not to raise rates until 2020 and 2) A strong hint more TLTROs are coming.  This decision will have direct impacts on Treasuries and stocks (more inside the report).

Away from the ECB we also get Jobless Claims (E: 223K) and Q4 Productivity and Costs (E: 1.6%, 1.8%) plus there’s one Fed speaker:  Brainard (12:15 p.m. ET).

Sevens Report’s Tom Essaye quoted in MarketWatch

Sevens Report’s Tom Essaye quoted in MarketWatch on February 1, 2019.

“Under normal circumstances we would have had a negative reaction to this number, because it would cause the market to expect more rate hikes. But this won’t change the Fed’s calculus. Also, jobs are a really…” Read the full article here.