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Stimulus Update (Why The Market Still Expects It to Pass)

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What’s in Today’s Report:

  • Stimulus Update (Why the Market Still Ultimately Expects It to Pass)
  • Economic Data – A Mixed Picture
  • EIA Analysis and Oil Market Update

Futures are marginally higher following a mostly quiet night, as the fate of the stimulus bill remains unresolved.

The stimulus bill remains up in the air as Trump has neither vetoed nor signed the bill, but while that could result in a temporary government shutdown on Monday, ultimately markets expect the bill to pass.

Regarding Brexit, the EU and UK are expected to formally announce a post Brexit trade deal later today, although as we and others have consistently said, this was always the expected outcome and as such it’s not generating much markets reaction.

There are no economic reports today and no Fed officials are scheduled to speak, so stimulus headlines will drive trading (anything that implies passage of the bill will be positive, while no news or negative news will obviously be a short term negative).

Finally, stock markets will close at 1:00 p.m. today.  Please have a safe and joyous holiday weekend.

Don’t Fight The Fed (and the Fed Wants Inflation)

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What’s in Today’s Report:

  • Fed Chair Powel’s Speech Preview (All About Inflation)
  • Oil Market Update (Inventories and Hurricane Laura)

Futures are marginally weaker following a quiet night of news as markets digest Wednesday’s rally ahead of weekly jobless claims and Fed Chair Powell’s speech.

Economic data was sparse overnight as Eurozone Money Supply was the only notable economic report and it beat estimates, rising 9.5% vs. (E) 9.1%, but that’s not moving markets.

Today the two key events are weekly Jobless Claims (E: 987K), and Fed Chair Powell’s speech (9:10 a.m.).  The market will be looking for claims below 1MM and for Powell to hint at a new average inflation target, and disappointment on either will likely cause some selling in stocks, especially given this week’s rally.

Other notable events today include Revised Q2 GDP (E: -32.9%), Pending Home Sales Index (E: 1.5%) and another Fed speaker, Barkin (12:30 p.m. ET), but they shouldn’t move markets.

Stimulus Update (Progress Is Being Made)

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What’s in Today’s Report:

  • Stimulus Update
  • Weekly EIA/Oil Market Update (Can the Rally Continue?)

Futures are modestly higher thanks to stronger than expected earnings and progress on the stimulus front.

TSLA earnings beat lofty expectations and the stock rallied after hours, while the rest of the major earnings reports (MSFT/CMG) were generally in-line (i.e. no disasters).

Republicans apparently reached a consensus on their version of next stimulus bill, so progress continues and a new stimulus bill is expected in the next few weeks.

Today the key number will be weekly jobless claims.  There are rising fears that the U.S. economy is plateauing after the recovery in May/June, and if weekly claims move back towards, or through 1.5M, that will likely spook markets and imply that the recovery is stalling.  Regarding earnings, the two reports we’re watching are T ($0.78), AAL (-$6.40), but earnings shouldn’t move markets toda

A New Real Time Economic Indicator

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What’s in Today’s Report:

  • A New, Real Time Economic Indicator
  • EIA and Oil Market Update
  • Why The U.S. Dollar Is Near Multi-Month Lows Again

Futures are slightly lower following a generally quiet night of news as markets digest Wednesday’s afternoon rally.

Economic data was mixed as Japanese Machine Orders beat estimates (1.7% vs. (E) -9.0%), but German Exports missed expectations (rising just 9.0% vs. (E) 14%).

The U.S. set another record for new coronavirus cases (61k) although markets continue to take the surge in stride, for now (more on that in tomorrow’s Report)

Today focus will be on weekly Jobless Claims (E: 1.375M) and if they bounce back towards 2 million, that will be a headwind on stocks as it will imply the economic recovery is stalling.

We also have one Fed speaker, Bostic (12:00 p.m. ET), and presumptive Democratic nominee Biden will give his first major economic policy speech, but neither event should move markets.

The History of Bear Market Rallies

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What’s in Today’s Report:

  • A Look into the History of Bear Market Rallies
  • Economic Data Breakdown
  • EIA Analysis and Oil Update

Futures are cautiously higher this morning but international markets were mostly lower overnight as investors weigh the effectiveness of COVID-19 containment strategies against their longer term impact on the global economy.

Economically, Eurozone Industrial Production was the only release overnight (-0.1% vs. E: -0.1%) but it was a February number and therefor largely dismissed by the markets.

This morning, focus will be on what will likely be the most important economic release of the week: Jobless Claims (E: 5.50M) as a larger than expected number of claims will point to further deterioration in the labor market while a smaller number will suggest the government stimulus efforts are beginning to work in supporting the U.S. jobs market.

There are two other economic reports to watch: Housing Starts (E: 1.32M) and the Philadelphia Fed Business Outlook Survey (E: -29.5) while no Fed officials are scheduled to speak.

Beyond economic data, investors will be sifting through more Q1 earnings releases including results from: BLK ($6.69), ABT ($0.58), TSM ($0.66), and BK ($0.90), as well as any new developments on the broader COVID-19 situation.

If There’s No Trade Deal Should We Rotate to Value?

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What’s in Today’s Report:

  • If There’s No U.S./China Trade Deal, Should We Rotate to Value?  No.  Here’s Why.
  • EIA/Oil Market Update

Futures are flat following conflicting U.S./China trade headlines as the “noise” on this topic reaches a peak as senior-level talks begin today.

Positively, the Trump administration appears ready to grant permanent waivers for U.S. companies to send non-sensitive components to Huawei.

Negatively, the South China Morning Post said the lower-level talks earlier this week didn’t go well.

The U.S./China headlines will dominate markets today and tomorrow.  Broadly speaking, a trade “truce” that results in no more additional tariffs (and hopefully removes the tariffs expected to go into effect) is still the market expectation.  Regarding the conflicting headlines, the easiest way to cut through the noise is this: If the Chinese delegation leaves before Friday night, that’s bad.  If they leave after, that’s good.