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What the Government Shutdown Means for Markets

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What’s in Today’s Report:

  • What the Government Shutdown Means for Markets
  • JOLTS & Case Shiller HPI Takeaways

Markets are trading with a risk-off tone this morning as stock futures are lower, bonds are steady and gold broke out to record highs above $3,900 after the government shutdown for the first time since 2018 at midnight.

Economically, the final Eurozone Manufacturing PMI for September edged up to 49.8 vs. (E) 49.5 while the EU’s Core CPI Flash met estimates at 2.3% y/y but the data is not materially impacting markets with the government shutdown news dominating headlines.

While the implications of the government shutdown will remain top of news, there are multiple important economic reports today including the ADP Employment Report (E: 50K), ISM Manufacturing PMI (E: 49.0), and Construction Spending (E: -0.1%). There is also one Fed official scheduled to speak: Barkin (12:15 p.m. ET).

Some late season earnings to watch include reports from CAG ($0.33) and RPM ($1.87), however, the government shutdown is likely to continue to dominate the newswires today so any signs of progress towards some sort of spending agreement in Congress would likely spark a relief rally while rising political tensions that could prolong the shutdown could prompt further losses in risk assets.

 

The Sector Winner from a “Run-Hot” Economy

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What’s in Today’s Report:

  • The Sector Winner From a “Run-Hot” Economy
  • Pending Home Sales Takeaways

Futures are lower and bonds are rallying modestly amid the growing threat of a government shutdown this week.

Economically, China’s official Manufacturing PMI edged up 0.4 points to 49.8 vs. (E) 49.6 in September.

Today kicks off jobs week with the August JOLTS report (E: 7.100 million) due out shortly after the bell. The closer the headline is to estimates, the better as a too-hot or too-cold print could weigh on already shaky markets amid the government shutdown worries.

Additionally, Consumer Confidence (E: 96.0), the Case-Shiller Home Price Index (E: -0.2%), the FHFA House Price Index (E: 6.7%), and Chicago PMI (E: 43.5) will all be released today.

There are a handful of Fed speakers today: Collins (9:00 a.m. ET), Goolsbee (1:30 p.m. ET), and Logan (7:10 p.m. ET), and the more dovish their tone, the better for markets as two more rate cuts in 2025 are still largely priced in.

Finally, there are a few late-season earnings releases to watch: PAYX ($1.21), UNFI ($-0.22), NKE ($0.28).

 

Credit Spreads Are More Elevated Than You Think

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What’s in Today’s Report:

  • Credit Spreads: More Elevated Than You Think
  • Case-Shiller Home Price Index Points to Cooling Inflation
  • JOLTS Decline But Top Estimates

Futures are modestly higher this morning as traders digest yesterday’s pullback ahead of today’s Fed decision.

Economically, Eurozone GDP rose +1.4% y/y vs. (E) +1.2% which is supporting the tentative risk-on price action this morning.

Today, focus will be on economic data early with the ADP Employment Report (E: 75K), Advanced Q2 GDP (E: 2.5%),  and Pending Home Sales (E: 0.2%) all due to be released.

Attention will then turn to the Fed meeting with the FOMC Announcement at 2:00 p.m. ET and Fed Chair Powell’s Press Conference at 2:30 p.m. ET with traders most focused on the prospects of a September rate cut.

Finally, earnings season continues as well and the following companies results have the potential to move markets, particularly the Mag-7 names reporting today: KHC ($0.64), HUM ($6.32), META ($5.83), MSFT ($3.35), CVNA ($1.10), QCOM ($2.72), ADP ($2.22), HOOD ($0.31).

 

A Four Way Assault on the Bullish Mantra

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A Four Way Assault on the Bullish Mantra: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Did Stocks Drop and What’s It Mean for Markets? (Four Reasons)
  • JOLTS Data Takeaways – “Solid Enough” for Now
  • Chart: The S&P 500 Violated It’s 2024 Uptrend Yesterday
  • Chart: The “Short-Vol Trade” Is Beginning to Unravel (More to Come)

Stock futures are lower again this morning as the hawkish money flows of early Q2 continue with the 10-Yr yield at YTD highs ahead of Powell’s speech on the economy today.

Economically, China’s Composite PMI met estimates at 52.7 while the EU’s “Narrow Core HICP” (their Core-CPI equivalent) favorably fell from 3.1% to 2.9% vs. (E) 3.0%.

Today, there are two important economic reports due out: The ADP Employment Report (E: 150K) before the open and then the ISM Services Index (E: 52.7). Good economic news has been bad for markets lately, so softening growth numbers and low/falling inflation metrics in today’s data are the best case scenario for stocks today.

Beyond the data this morning, there are several Fed officials scheduled to speak: Bowman (9:45 a.m. ET), Goolsbee (12:00 p.m. ET), Powell (12:10 p.m. ET), and Barr (1:10 p.m. ET).

Powell’s speech at Standford shortly after 12:00 p.m. (ET) will get the most attention as traders look for him to reiterate the key takeaways from the March FOMC meeting (likely summer rate cut, three cuts in 2024 expected). Any hints at “higher for longer” will add to the hawkish money flows that have been weighing on stocks so far in Q2.

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Is It Time to Buy Gold

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What’s in Today’s Report:

  • Is It Time to Buy Gold? Bull Case vs. Bear Case
  • ISM Services Index Takeaways – Still Healthy Readings But Cracks Emerge
  • JOLTS Plunge Below Pre-Pandemic Trend

U.S. equity futures are tracking global stocks higher this morning. More underwhelming economic data overseas is helping bolster the case for rate cuts from the world’s biggest central banks in the first quarter of 2024.

Economically, German Manufacturer’s Orders fell -3.7% vs. (E) +0.5% in October. Eurozone Retail Sales edged up just +0.1% vs. (E) +0.3%. This is helping drive a bid in bond markets amid dovish money flows across asset classes today.

Looking into today’s session, focus will be on economic data early. The ADP Employment Report (E: 123K), International Trade in Goods and Services (E: -$64.1B) and Productivity and Costs (E: +4.8%, -0.9%) data will release before the bell.

Finally, there are no Fed officials scheduled to speak today. So the market will be looking for a still healthy but not “hot” ADP print, steady trade data, and a continued decline in unit labor costs (wage inflation) to help support soft-landing hopes and extend the November rally.

Is It Time to Buy Gold

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What Are GLP-1 Drugs and Why Do They Matter to Markets?

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What’s in Today’s Report:

  • What Are GLP-1 Drugs and Why Do They Matter to Markets?

U.S. equity futures are trading lower this morning as a credit downgrade of China’s debt is overshadowing mostly good Composite PMI data overseas.

Overnight, Moody’s cut their outlook for Chinese debt to negative. This weighed on Asian shares and EM stocks, as well as domestic equity futures.

Economically, China’s Composite PMI favorably rose to 51.6 vs. (E) 50.1 in November. While the Eurozone Composite PMI remained in contraction, but notably firmed to 47.6 vs. (E) 47.1 last month.

Two key economic reports to watch today: JOLTS (E: 9.4 million job openings) and the ISM Services Index (E: 52.4). Investors will want to see more evidence that supports a soft landing in the data.

Finally, there is one Fed economist speaking today: Gibson (10:00 a.m. ET) but his comments should not materially move markets.

What Are GLP-1 Drugs and Why Do They Matter to Markets?

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Why Are Yields Rising?

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What’s in Today’s Report:

  • Why Are Yields Rising?
  • What the Removal of Speaker McCarthy Means for Markets (We Didn’t Need This Right Now)
  • JOLTS Data Takeaways
  • OPEC+ (JMMC) Meeting Preview

U.S. stock futures are rebounding from overnight losses as European markets turn positive following mixed economic data while yields are stabilizing after this week’s rapid rise.

Markets are continuing to digest the implications of the removal of McCarthy as Speaker of the House. Yields were initially higher overnight, likely on worries of a more pronounced threat of a government shutdown next month. They have since stabilized and are only little changed in morning trade, helping support steady stock futures in the pre-market.

Economically, the September EU Composite PMI came in at 48.7 vs. (E) 48.4, while Retail Sales fell -1.2% vs. (E) -0.2% in August and PPI fell a steep -11.5% vs. (E) -11.7%. On balance, the data was not a reason for the ECB to become more hawkish. Which is helping global bond markets (and equities) stabilize this morning.

Today, focus will be on economic data early with the ADP Employment Report (E: 150K), ISM Services Index (E: 53.5), and Factory Orders (E: 0.2%). The “hot” JOLTS headline roiled markets yesterday so markets are likely to welcome any cooling labor market indicators and look for easing price measures in the ISM release as those developments could help bonds bounce back and stocks recover some of this week’s losses.

Later, the focus will turn to central bank speak with several Fed officials scheduled to speak including: O’Neill Paese, Schmidt, Bowman, and Goolsbee. A lot of hawkish rhetoric has been digested in recent sessions. So any more dovish-leaning commentary would also be welcomed by stocks and other risk assets.

Why Are Yields Rising

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What the Near Government Shutdown Means for Markets

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Government Shutdown Means for Markets: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • What the Near Government Shutdown Means for Markets (Higher Yields)
  • ISM Manufacturing Index Takeaways – Better Than Feared

Futures are little changed this morning. More evidence of cooling inflation was offset by global central bankers continuing to threaten more rate hikes.

Economically, Swiss CPI came in at 1.7% vs. (E) 1.8% y/y in September. The Core figure fell to 1.3% from 1.5% previously which was the latest report to confirm the ongoing trend of global disinflation.

The RBA held policy rates steady at 4.10% overnight. But joined the growing chorus of ECB and Fed officials who have reiterated future hikes on the table. Global yields edged higher in early trade which is keeping a lid on equity futures this morning.

Looking into today’s session, we will receive data on Motor Vehicle Sales (E: 15.3 million). But more importantly, jobs week kicks off with today’s JOLTS release which is expected to show 8.9 million job openings.

An inline or modestly lower-than-expected JOLTS headline would be welcomed as it would help dial back some of the recent hawkish money flows. While an unexpected increase could spark a continued rise in yields, adding pressure to equity markets.

Finally, there is a 52-Wk Treasury Bill auction at 11:30 a.m. ET and while we typically do not monitor Bill auctions too closely, stocks came for sale and yields rose right at 11:30 a.m. yesterday. When the results of a 3-Month and 6-Month Bill auction hit the wires with higher yields than previous (hawkish). So if we see weak demand and higher yields in the late morning auction today, that could be a drag on equities and other risk assets.

What the Near Government Shutdown Means for Markets (Higher Yields)

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Jobs Report Preview

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What’s in Today’s Report:

  • Jobs Report Preview
  • Oil Market Update & EIA Analysis

Futures are little changed following a busy night of mixed economic data.

Positively, the August Chinese PMIs were better than feared, rising to 50.3 vs. (E) 50.1 and helping to slightly reduce China recession worries.

Negatively, the EU flash HICP (their version of CPI) was hot on the headline (5.3% vs. (E) 5.1%) but in-line on core (5.3% y/y), underscoring that inflation is sticky in the EU.

Focus today will be on economic data, specifically Jobless Claims (E: 238K) and the Core PCE Price Index (E: 0.2% m/m, 4.2% y/y).  For stocks to extend the week’s gains (and continue to bounce back from the broader pullback) investors won’t want any surprises.  In the case of jobless claims, that means no big jump in claims that hints at economic weakness, nor a further drop that might make the Fed more hawkish.  On the core PCE Price Index, an in-line to slightly below reading would be positive as it’d further pressure Treasury yields and likely lift stocks.

Finally, there is one Fed speaker today, Collins at 9:00 a.m. ET, but she shouldn’t move markets.

Why Could CPI Be Poised to Drop Further?

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What’s in Today’s Report:

  • Why Could CPI Be Poised to Drop Further?
  • Chart: Zillow Observable Rent Index

U.S. stock futures are slightly higher this morning, tracking modest gains in global shares thanks to news that China is considering deeper rate cuts on deposits and mortgages while important economic data due later in the week remains in focus.

Economically, the German GfK Consumer Climate Index for September fell to -25.5 vs. (E) -24.3 underscoring widely held concerns about the future of the Eurozone economy.

Looking into today’s session, there are three economic reports due out this morning: Case-Shiller Home Price Index (E: 1.1%), Consumer Confidence (E: 116.5), JOLTS (E: 9.559M).

Markets will be looking for easing, but still healthy consumer confidence readings and a declining, but not collapsing JOLTS figure to support the thesis that the economy is slowing at a pace consistent with a soft landing. Data that is too strong or too weak will likely weigh on equities.

Additionally, there is a 3-Yr Treasury Note auction at 1:00 p.m. ET and if the outcome is weak pushing rates higher, that will create a headwind on risk assets.

Finally, there is one Fed official scheduled to speak today: Barr (3:00 p.m. ET). Considered a centrist, his comments will be closely scrutinized for any clues of a shift in policy expectations following Powell’s Jackson Hole speech Friday.